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EXHIBIT 10.10.1
OPERATING AGREEMENT
OF
OAK MOUNTAIN ENERGY, L.L.C.,
AN ALABAMA LIMITED LIABILITY COMPANY
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization .............................................. 7
Section 2.2 Registered Agent and Office................................ 7
Section 2.3 Principal Place of Business................................ 7
Section 2.4 Permitted Businesses ...................................... 7
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management ................................................ 8
Section 4.2 Number, Tenure and Qualifications.......................... 8
Section 4.3 Manager Voting ............................................ 8
Section 4.4 Certain Powers of Managers................................. 8
Section 4.5 Limitation on Powers of Managers........................... 9
Section 4.6 Liability for Certain Acts................................. 10
Section 4.7 Committees of the Managers................................. 10
Section 4.8 Officers .................................................. 10
Section 4.9 Managers Have No Exclusive Duty to Company................. 11
Section 4.10 Property .................................................. 11
Section 4.11 Bank Accounts ............................................. 11
Section 4.12 Records, Audits and Reports to be Maintained............... 11
Section 4.13 Access to Records ......................................... 11
Section 4.14 Reports to Members ........................................ 12
Section 4.15 Accounts .................................................. 12
Section 4.16 Records of Membership Units................................ 12
Section 4.17 Resignation ............................................... 12
Section 4.18 Removal ................................................... 12
Section 4.19 Vacancies ................................................. 12
Section 4.20 Salaries .................................................. 12
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Application of Article .................................... 12
Section 5.2 Meetings .................................................. 12
Section 5.3 Regularly Scheduled Meeting................................ 12
Section 5.4 Meeting of All Managers.................................... 13
Section 5.5 Record Date ............................................... 13
Section 5.6 Action by Managers Without a Meeting....................... 13
Section 5.7 Waiver of Notice .......................................... 13
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
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Section 6.1 Member Management Rights................................... 13
Section 6.2 Liability of Members to Third Parties...................... 13
Section 6.3 Approval of Sale of All of the Company's Property.......... 13
Section 6.4 Approval of Merger or Consolidation........................ 13
Section 6.5 Right of Withdrawal ....................................... 14
Section 6.6 Conflicts of Interest ..................................... 14
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings .................................................. 14
Section 7.2 Manner of Acting .......................................... 14
Section 7.3 Action by Members Without a Meeting........................ 14
Section 7.4 Waiver of Notice .......................................... 15
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Indemnification of Members, Managers, Etc.................. 15
Section 8.2 Determination of Meeting Applicable Standard............... 15
Section 8.3 Payment of Expenses in Advance of Disposition of Action.... 15
Section 8.4 Non-Exclusivity of Article................................. 15
Section 8.5 Insurance ................................................. 15
ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions.............................. 16
Section 9.2 Additional Capital Contributions........................... 16
Section 9.3 Maintenance of Capital Accounts............................ 16
Section 9.4 Sale or Exchange of Interest............................... 17
Section 9.5 Compliance with ss. 704(b) of the Code..................... 17
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.1 Net Profits ............................................... 17
Section 10.2 Net Losses ................................................ 18
Section 10.3 Company Minimum Gain Chargeback............................ 18
Section 10.5 Member Nonrecourse Deductions.............................. 18
Section 10.6 Member Minimum Gain Chargeback............................. 19
Section 10.7 Qualified Income Offset.................................... 19
Section 10.9 Tax Allocations: ss. 704(c) of the Code.................... 19
Section 10.10 Interim Distributions ..................................... 19
Section 10.11 Limitations on Distributions............................... 20
ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections ................................................. 20
Section 11.2 Taxes of Taxing Jurisdictions.............................. 20
Section 11.3 Tax Matters Partner ....................................... 20
Section 11.4 Method of Accounting ...................................... 21
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ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations ............................................... 21
Section 12.2 Consent, Etc. ............................................. 21
Section 12.3 Permitted Sales ........................................... 21
Section 12.4 Transfer Upon Dissociation of a Member (Other Than Death
or Incompetency)........................................... 22
Section 12.5 Transfer Upon Dissociation of a Member Due to Death or
Incompetency............................................... 22
Section 12.6 Company Redemption Right................................... 22
Section 12.7 Put Rights ................................................ 23
Section 12.8 Purchase Price ............................................ 23
Section 12.9 Certain Additional Permitted Transfers..................... 24
ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees ....................................... 24
Section 13.2 Admission of Substitute Members............................ 24
Section 13.3 Admission of Additional Members............................ 24
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation .............................................. 25
Section 14.2 Rights of Dissociating Member.............................. 25
Section 14.3 Dissolution ............................................... 25
Section 14.4 Distribution of Assets on Dissolution...................... 26
Section 14.5 Winding Up and Articles of Dissolution..................... 26
Section 14.6 Effect of Dissolution ..................................... 26
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified........................ 26
Section 15.2 Amendment or Modification of Operating Agreement........... 26
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement .......................................... 27
Section 16.2 Rights of Creditors and Third Parties...................... 27
Section 16.3 Changes in Applicable Law.................................. 27
Section 16.4 Interpretation ............................................ 27
Section 16.5 Governing Law ............................................. 27
Section 16.6 Execution of Additional Instruments........................ 27
Section 16.7 Construction of Terms ..................................... 27
Section 16.8 Captions .................................................. 27
Section 16.9 Waivers ................................................... 28
Section 16.10 Rights and Remedies Cumulative............................. 28
Section 16.11 Heirs, Successors and Assigns.............................. 28
Section 16.12 Counterparts .............................................. 28
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Operating Agreement
Of
Oak Mountain Energy, L.L.C.,
An Alabama Limited Liability Company
This Operating Agreement of Oak Mountain Energy, L.L.C., a limited
liability company organized pursuant to the Alabama Limited Liability Company
Act, shall be effective as of the Effective Date (as defined herein), by and
among the Persons executing this Operating Agreement as Members.
ARTICLE I
DEFINITIONS
The following terms used in this Operating Agreement shall have the
following meanings unless otherwise expressly provided herein:
Section 1.1 "Act" shall mean the Alabama Limited Liability Company Act, as
amended from time to time, and any successor thereto.
Section 1.2 "Additional Capital Contribution" shall mean any Capital
Contribution other than an Initial Capital Contribution and the Initial Delayed
Capital Contribution that a Member is obligated to make in accordance with
Section 9.2.
Section 1.3 "Additional Member" shall mean a Member, other than an Initial
Member or a Substitute Member, who has acquired a Membership Unit of the Company
and has become a Member in accordance with Section 13.3.
Section 1.4 "Adjusted Deficit" shall mean 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) Credit to such Capital Account any amounts which such Member is
obligated to restore pursuant to any provision of this Agreement or is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulation xx.xx. 1.704-2(g)(1) and 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in xx.xx.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
The foregoing definition of Adjusted Deficit is intended to comply with the
provisions of ss. 1.704-1(b)(2)(ii)(d) of the Regulations and shall be so
construed.
Section 1.5 "Affiliate" shall mean, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by, or under common
control with such Person, (ii) any Person owning or controlling ten percent
(10%) or more of the outstanding voting interests of such Person, (iii) any
member, manager, officer, director or general partner of such Person, or (iv)
any Person who is a member, manager, officer, director, general partner,
trustee, or a holder of ten percent (10%) or more of the voting interests of any
Person described in clauses (i) through (iii) of this sentence. For purposes of
this definition, the term "controls," "is controlled by" or "is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management policies of a person or entity,
whether through the ownership of voting securities, by contract or otherwise.
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Section 1.6 "Appraiser" means an unaffiliated and unrelated business
consultant or independent certified public accountant who is familiar with the
type of business in which the Company is involved and would qualify as an
"expert" for business appraisals in a court of law.
Section 1.7 "Articles" shall mean the Articles of Organization of the
Company, as amended from time to time.
Section 1.8 "Assignee" shall mean a transferee of an Economic Interest who
has not been admitted as a Substitute Member. Such transferee of a Membership
Unit shall be entitled to merely an Economic Interest in the Company until and
unless such Assignee is admitted as a Substitute Member in accordance with this
Operating Agreement.
Section 1.9 "Capital Account" shall mean the account maintained with
respect to a Member or Assignee determined in accordance with Article IX.
Section 1.10 "Capital Contribution" shall mean the amount of money and the
Gross Asset Value of Property (other than money) contributed to the Company by
or on behalf of a Member or Assignee.
Section 1.11 "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor thereto.
Section 1.12 "Company" shall mean the Oak Mountain Energy, L.L.C., an
Alabama limited liability company, and any successor limited liability company.
Section 1.13 "Company Minimum Gain" shall mean an amount determined by
first computing for each Company Nonrecourse Liability any gain the Company
would realize if it disposed of the Company Property subject to that liability
for no consideration other than full satisfaction of the liability, and then
aggregating the separately computed gains. The amount of Company Minimum Gain
includes such minimum gain arising from a conversion, refinancing, or other
change to a debt instrument, only to the extent a Member is allocated a share of
that minimum gain. For any Fiscal Year, the net increase or decrease in Company
Minimum Gain is determined by comparing the Company Minimum Gain on the last day
of the immediately preceding Fiscal Year with the Minimum Gain on the last day
of the current Fiscal Year. Notwithstanding any provision to the contrary
contained herein, Company Minimum Gain, and increases and decreases in Company
Minimum Gain, are intended to be computed in accordance with ss. 704 of the Code
and the Regulations issued thereunder, as the same may be issued and interpreted
from time to time.
Section 1.14 "Company Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent that no Member or Related Person bears
the economic risk of loss (as defined in ss. 1.752-2 of the Regulations) with
respect to the liability.
Section 1.15 "Company Property" shall mean any Property owned by the
Company.
Section 1.16 "Controlling Member" shall mean Shelby Energy Group or its
Assignees and their respective successors and assigns.
Section 1.17 "Depreciation" means, for each Fiscal Year, an amount equal
to the depreciation, amortization, or other cost recovery deduction allowable
with respect to an asset for such Fiscal Year, 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 Fiscal Year, 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 for such
Fiscal Year bears to such beginning adjusted tax basis; provided, however, that
if the adjusted basis for federal income tax purposes of an asset at the
beginning of such Fiscal Year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the Managers.
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Section 1.18 "Disability" shall mean, with regard to Xxxxx Xxxxxxxxx or
Xxxxxx Xxxx, as the case may be, a disability which would allow the Company to
terminate such employee under the employment agreement between such employee and
the Company when such employee first becomes an employee of the Company.
Section 1.19 "Disposition" ("Dispose") shall mean any sale, assignment,
transfer, exchange, mortgage, pledge, grant, hypothecation, or other transfer,
absolute or as security or encumbrance (including dispositions by operation of
law) of an Economic Interest or Membership Unit in the Company.
Section 1.20 "Dissociation (Dissociate)" shall mean any action or event
which causes a Person to cease to be Member of the Company as described in
Article XIV hereof.
Section 1.21 "Dissociation Event" shall mean an event, the occurrence of
which will result in the dissolution of the Company under Article XIV unless the
Members agree to the contrary.
Section 1.22 "Distribution" shall mean a transfer of Property made by the
Company to a Member or an Assignee on account of such Member's or Assignee's
Economic Interest or Membership Unit as described in Article X.
Section 1.23 "Economic Interest" shall mean a Member's or Assignee's share
of the Company's Net Profits, Net Losses, and Distributions of the Company's
Property pursuant to this Operating Agreement and the Act, but shall not include
any right to participate in the operation, management or affairs of the Company,
including the right to vote on, consent to, or otherwise participate in any
decision of the Members.
Section 1.24 "Effective Date" shall mean February ____, 1997.
Section 1.25 "Failure to Produce Event" shall mean either or both of the
following events: (i) the Company shuts down or closes all or substantially all
of its mines for a period exceeding one (1) year, or (ii) a Majority of the
Managers reasonably determines that the Company cannot operate its coal mining
operations with a reasonable level of profit.
Section 1.26 "Fiscal Year" shall mean (i) the period commencing on the
Effective Date of this Agreement and ending on December 31, 1997, (ii) any
subsequent twelve (12) month period commencing on January 1 and ending on
December 31, and (iii) any portion of the period described in clause (ii) for
which the Company is required to allocate Profits, Losses and other items of
Company income, gain, loss or deduction pursuant to Article X hereof.
Section 1.27 "Gross Asset Value" shall mean, with respect to any asset,
the asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
determined by the Managers, provided that the initial Gross Asset Values of the
assets contributed to the Company pursuant to Sections 9.1 and 9.2 hereof shall
be as set forth and determined in such sections;
(b) The Gross Asset Values of all Company assets shall be adjusted
to equal their respective gross fair market values, as determined by the
Managers, as of the following times: (i) the acquisition of an additional
Membership Interest or Membership Unit 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 Property as
consideration for a Membership Interest or Membership Unit; and (iii) the
liquidation of the Company within the meaning of Regulations ss.
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses
(i) and (ii) above shall be made only if the Managers reasonably determine that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
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(c) The Gross Asset Value of any Company asset distributed to any
Member shall be adjusted to equal the gross fair market value of such asset on
the date of distribution as determined by the Managers; and
(d) The Gross Asset Values of Company assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code ss. 734(b) or Code ss. 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation ss. 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset Values
shall not be adjusted pursuant to this Section 1.27(d) to the extent the
Managers determine that an adjustment pursuant to Section 1.27(b) hereof is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this Section 1.27(d).
If the Gross Asset Value of an asset has been determined or adjusted pursuant to
Section 1.27(a), Section 1.27(b), or Section 1.27(d) hereof, such Gross Asset
Value shall thereafter be adjusted by the Depreciation taken into account with
respect to such asset for purposes of computing Net Profits and Net Losses.
Section 1.28 "Initial Capital Contribution" shall mean the Capital
Contribution agreed to be made by the Members as described in Section 9.1 and
set forth on Exhibit A attached hereto.
Section 1.29 "Initial Delayed Contribution" shall mean the Initial Delayed
Contribution agreed to be made by the Initial Members as described in Section
9.1 and set forth on Exhibit B attached hereto.
Section 1.30 "Initial Members" shall mean those persons identified on
Exhibit A attached hereto who have executed this Operating Agreement as of the
Effective Date.
Section 1.31 "Judge of Probate" shall mean the Judge of Probate of
Xxxxxxxxxx County, Alabama.
Section 1.32 "Majority" shall mean those Members owning more than Fifty
Percent (50%) of the Membership Units in the Company; similarly, any reference
in this Agreement to any other specified percentage of the Members shall refer
to those Members holding, in the aggregate, the specified percentage of
Membership Units or Membership Interests in the Company and, for this purpose,
Assignees, transferees and other holders of Economic Interests who have not been
admitted as Members pursuant to Section 13.2 hereof shall be deemed to hold zero
Membership Units or Membership Interests.
Section 1.33 "Managers" shall mean the Person or other Persons designated
by the Members to manage the affairs of the Company under Article IV hereof.
Section 1.34 "Member" shall mean an Initial Member, Substitute Member or
Additional Member of the Company who has not ceased to be a Member.
Section 1.35 "Member Minimum Gain" shall mean an amount determined in
accordance with Regulations ss. 1.704-2(i) by first computing for each Member
Nonrecourse Liability any gain the Company would realize if it disposed of the
Company Property subject to that liability for no consideration other than full
satisfaction of the liability, and then aggregating the separately computed
gains. The amount of Member Minimum Gain includes such minimum gain arising from
a conversion, refinancing, or other change to a debt instrument, only to the
extent a Member is allocated a share of that minimum gain. For any Fiscal Year,
the net increase or decrease in Member Minimum Gain is determined by comparing
the Member Minimum Gain on the last day of the immediately preceding Fiscal Year
with the Member Minimum Gain on the last day of the current Fiscal Year.
Notwithstanding any provision to the contrary contained herein, Member Minimum
Gain and increases and decreases in Member Minimum Gain are intended to be
computed in accordance with ss. 704 of the Code and the Regulations issued
thereunder, as the same may be issued and interpreted from time to time.
Section 1.36 "Member Nonrecourse Deductions" shall mean the net increase
during the Fiscal Year, if any, in Member Minimum Gain, reduced (but not below
zero) by any distribution of proceeds that are attributable to a Member
Nonrecourse Liability and allocable to an increase in such Member Minimum Gain
under ss. 1.704-2(i) of the Regulations.
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Section 1.37 "Member Nonrecourse Liability" shall mean any debt or
obligation of the Company to the extent the liability is nonrecourse under state
law, and on which a Member or Related Person bears the economic risk of loss
under ss. 1.752-2 of the Regulations because, for example, the Member or Related
Person is the creditor or a guarantor.
Section 1.38 "Membership Interest" shall mean a Member's entire interest
in the Company including such Member's Economic Interest and the right of the
Member to participate in the management and operation of the business and
affairs of the Company, including, but not limited to, the right to vote on,
consent to, or otherwise participate in any decision, vote or action of or by
the Members granted pursuant to this Operating Agreement and the Act. In the
case of an Assignee, the term "Membership Interest" shall mean only the
Assignee's Economic Interest in the Company. A Member's Membership Interest
shall be equal to the number of Membership Units held by such Member, divided by
the total number of Membership Units outstanding.
Section 1.39 "Membership Unit" shall mean the numerical measure of the
size of a Membership Interest in the Company. In the case of an Assignee, the
term "Membership Unit" shall encompass only the Assignee's Economic Interest in
the Company with respect to such Membership Unit.
Section 1.40 "Net Profits" and "Net Losses" means, for each Fiscal Year,
an amount equal to the Company's taxable income or loss for such Fiscal Year,
determined in accordance with Code ss. 703(a) (for this purpose, all items of
income, gain, loss, or deduction required to be stated separately pursuant to
Code ss. 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Company that is exempt from federal income tax
and not otherwise taken into account in computing Net Profits or Net Losses
pursuant to this Section 1.40 shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Code ss.
705(a)(2)(B) or treated as Code ss. 705(a)(2)(B) expenditures pursuant to
Regulations ss. 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Net Profits or Net Losses pursuant to this Section 1.40, shall be
subtracted from such taxable income or loss;
(c) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to Section 1.27(b) or Section 1.27(c) hereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition
of such asset for purposes of computing Net Profits or Net Losses;
(d) Gain or loss resulting from any disposition of Property 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) In lieu of the depreciation, amortization, and 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, computed in
accordance with Section 1.17 hereof;
(f) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code ss. 734(b) or Code ss. 743(b) is required
pursuant to Regulations xx.xx. 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Member's Membership
Interest, the amount of such adjustment shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the asset and shall be
taken into account for purposes of computing Net Profits or Net Losses; and
(g) Notwithstanding any other provision of this Section 1.40, any
items which are specially allocated pursuant to Sections 10.3 through 10.9
hereof shall not be taken into account in computing Net Profits or Net Losses.
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The amounts of the items of Company income, gain, loss, or deduction available
to be specially allocated pursuant to Sections 10.3 through 10.9 hereof shall be
determined by applying rules analogous to those set forth in Sections 1.40 (a)
through 1.40(f) above.
Section 1.41 "Notice" shall be in writing. Notice shall be considered
given (a) on the date when delivered personally, (b) when transmitted by
telecopy (receipt confirmed), provided that a copy is mailed at the end of the
following business day by first class mail, postage prepaid, (c) on the third
day after mailing by first class mail postage prepaid, or (d) on the next
business day following deposit within a nationally recognized overnight delivery
service for next day delivery addressed to the Managers in care of the Company
at the address of the Company's Principal Place of Business, and if to a Member
at that Member's address as reflected in the Operating Agreement, unless the
Member has given the Company a Notice of a different address.
Section 1.42 "Offsettable Decrease" shall mean any allocation that
unexpectedly causes or increases an Adjusted Deficit in a Member's or Assignee's
Capital Account as of the end of the Fiscal Year to which the allocation relates
attributable to depletion allowances under ss. 1.704(b)(2)(iv)(k) of the
Regulations, allocations of loss and deductions under xx.xx. 704(e)(2) or 706 of
the Code or ss. 1.751-1 of the Regulations, or distributions that, as of the end
of the Fiscal Year, are reasonably expected to be made to the extent they exceed
the offsetting increases to such Member's or Assignee's Capital Account that
reasonably are expected to occur during or (prior to) the Fiscal Years in which
such distributions are expected to be made (other than increases pursuant to a
minimum gain chargeback pursuant to sections 10.3 and 10.6 hereof).
Section 1.43 "Operating Agreement" shall mean this Operating Agreement
including all amendments hereto adopted in accordance with Section 15.2 and the
Act.
Section 1.44 "Organization" shall mean any entity permitted to be a Member
of a limited liability company under the Act. The term "Organization" includes,
without limitation, corporations (both non-profit and other corporations),
partnerships (both limited and general), joint ventures, limited liability
companies, and unincorporated associations, but does not include joint tenancies
and tenancies by the entirety.
Section 1.45 "Person" shall include an individual, trust, estate, or any
Organization.
Section 1.46 "Principal Place of Business" shall mean the principal office
of the Company designated in Section 2.3, or any other place or places as the
Managers may from time to time deem advisable.
Section 1.47 "Property" shall mean any property real, personal or mixed,
tangible or intangible, including money and any legal or equitable interest in
such property, but excluding services and promises to perform services in the
future.
Section 1.48 "Regulations" shall mean the permanent, temporary, proposed,
or proposed and temporary regulations issued by the of Department of the
Treasury that are promulgated under the Code as amended.
Section 1.49 "Related Person" shall mean a Person having a relationship to
a Member that is described in ss. 1.752-4(b) of the Regulations.
Section 1.50 "Shelby Energy Group" shall mean Shelby Energy Group, L.L.C.,
a Delaware limited liability company.
Section 1.51 "Substitute Member" shall mean an Assignee who has been
admitted as a Member of the Company in accordance with Section 13.2. Upon
becoming a Member of the Company, such Assignee shall have all the rights of a
Member as are described more fully in Section 13.2 hereof.
Section 1.52 "Termination For Cause" shall mean, with regard to Xxxxx
Xxxxxxxxx or Xxxxxx Xxxx, as the case may, the termination of employment with
the Company upon any of the following events: (i) conviction of a felony under
any state or federal law, (ii) failure of such person to perform his duties
under any employment
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agreement with the Company in any material respect or the material breach by
such person of any of the terms of any such employment agreement, and such
person fails to cure such failure or breach within ten (10) days of receipt of
written notice to cure from the Company, and (iii) such person engages in
conduct which materially injures the Company's business or reputation or
materially and adversely affects the Company's interests.
Section 1.53 "Termination Without Cause" shall mean, with regard to Xxxxx
Xxxxxxxxx or Xxxxxx Xxxx, as the case may, the termination of employment by the
Company for any reason other than because of his Termination For Cause,
Disability or death.
Section 1.54 "Taxing Jurisdiction" shall mean the taxing jurisdiction of
the Federal Government and of any state, local, or foreign government that
collects tax, interest or penalties, however designated, on any Member's share
of the income or gain attributable to the Company.
ARTICLE II
FORMATION OF COMPANY
Section 2.1 Organization. On October 9, 1996, the initial Members
organized the Company pursuant to the provisions of the Act by executing and
filing the Articles with the Judge of Probate.
Section 2.2 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 Articles. The Managers may, from time to time, change the
registered agent or office through appropriate filings with the Secretary of
State. In the event the registered agent ceases to act as such for any reason or
the location of the registered office shall change, the Managers shall promptly
designate a replacement registered agent or file a notice of change of address
as the case may be.
Section 2.3 Principal Place of Business. The Principal Place of Business
of the Company is located at 0000 Xxx Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxx 00000. The
Company may locate its principal places of business at any other place or places
as the Managers may from time to time deem advisable.
Section 2.4 Permitted Businesses. The business of the Company shall be:
(a) To perform any and all business for which a limited liability
company may be organized under the Act, including, without limitation, mining,
processing, marketing and selling coal and related products.
(b) To accomplish any lawful business whatsoever or which shall at
any time appear conducive to or expedient for the protection or benefit of the
Company and its Property.
(c) To exercise all other powers necessary to or reasonably
connected with the Company's business which may be legally exercised by limited
liability companies under the Act or under the laws of any jurisdiction in which
the Company may conduct its business.
(d) To engage in all activities necessary, customary, convenient, or
incident to any of the foregoing.
ARTICLE III
NAMES AND ADDRESSES OF MEMBERS
The name and address of each Member and Assignee, and the Membership Units
of each such Member shall be listed on Exhibit A attached hereto. The Managers
shall update Exhibit A from time to time as necessary to accurately reflect the
information therein. Any amendment or revision to Exhibit A made in accordance
with this Agreement shall not be deemed an amendment to this Agreement for
purposes of requiring Member approval. Any reference in this Agreement to
Exhibit A shall be deemed to be a reference to Exhibit A as may be in effect
from time to time.
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ARTICLE IV
RIGHTS AND DUTIES OF MANAGERS
Section 4.1 Management. The management of the business and affairs of the
Company shall be vested in its Managers. Except for situations in which the
approval of the Members is expressly required by this Operating Agreement, or by
nonwaivable provisions of applicable law, the Managers shall have full and
complete authority, power and discretion to manage and control the business,
affairs and Properties of the Company, to make all decisions regarding those
matters and to perform any and all other acts or activities customary or
incident to the management of the Company's business.
Section 4.2 Number, Tenure, and Qualifications. The Company shall
initially have one (1) Manager. The number of Managers of the Company shall be
fixed from time to time by the affirmative vote or action of Members holding at
least a Majority of the Membership Units of the Company. Each Manager shall hold
office until such Manager's successor shall have been elected or designated and
qualified. A Manager need not be a resident of the State of Alabama or a Member
of the Company. The name and address of the initial Manager of the Company, are
as follows:
NAME ADDRESS
Shelby Energy Group, L.L.C. 0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000
Section 4.3 Managing Voting. With respect to all matters requiring the
vote of, action by, approval of or consent by "the Managers," the approval,
consent, vote or action by all of the Managers shall be required to take such
action, unless such other number of Managers is expressly required pursuant to
this Operating Agreement or nonwaivable provisions of the Act.
Section 4.4 Certain Powers of Managers. Except as otherwise required
pursuant to this Operating Agreement or by nonwaivable provisions of the Act,
including, without limitation, the provisions of Section 4.5 hereof, the
Managers shall have the power and authority, on behalf of the Company:
(a) To acquire Property from any Person and to hold and own Property
in the name of the Company;
(b) To invest any Company funds temporarily (by way of example but
not limitation) in time deposits, short-term governmental obligations,
commercial paper or other investments;
(c) To dispose of the Company's Property in the ordinary course of
the Company's business;
(d) To borrow money for the Company from banks, other lending
institutions, Managers, Members, or any Affiliate of the Managers or Members on
such terms as the Managers deem appropriate, and in connection therewith, to
hypothecate, encumber and grant security interests in the Property of the
Company to secure repayment of the borrowed sums. No debt shall be contracted or
liability incurred by or on behalf of the Company except as authorized by the
Managers, or to the extent permitted under the Act, by agents or employees of
the Company expressly authorized to contract such debt or incur such liability
by the Managers;
(e) To execute on behalf of the Company all instruments and
documents, including, without limitation, checks, drafts, notes and other
negotiable instruments, mortgages or deeds of trust, security agreements,
financing statements, documents providing for the acquisition, mortgage or
disposition of the Company's Property, assignments, bills of sale, leases,
partnership agreements, operating agreements of other limited liability
companies, and any other instruments or documents necessary to the business of
the Company;
(f) To purchase liability and other insurance to protect the
Company's Property and business;
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(g) To employ accountants, legal counsel, managing agents or other
experts to perform services for the Company and to compensate them from Company
funds;
(h) To enter into any and all other agreements on behalf of the
Company with any other Person for any purpose; and
(i) To do and perform any and all other acts as may be necessary or
appropriate to the conduct of the Company's business.
Unless authorized to do so by this Operating Agreement or by the Managers
of the Company, no attorney-in-fact, employee or other agent of the Company
shall have any power or authority to bind the Company in any way, to pledge its
credit or to render it liable pecuniarily for any purpose. No Member or Manager
shall have any power or authority to bind the Company unless the Member or
Manager has been authorized by the Managers to act as an agent of the Company in
accordance with the previous sentence.
Section 4.5 Limitation on Powers of Managers. Notwithstanding anything to
the contrary in this Article IV or elsewhere in the Operating Agreement or the
Articles, the Managers shall not have the power or authority to do any of the
following without the consent of the requisite number of Members or those
Members holding the requisite Membership Units in the Company:
(a) amend the Operating Agreement except in accordance with Article
III or Section 15.2 of this Operating Agreement;
(b) admit Assignees as Substitute Members except in accordance with
Section 13.2 of this Operating Agreement;
(c) admit Additional Members except in accordance with Section 13.3
of this Operating Agreement;
(d) continue the Company after a Dissociation Event except in
accordance with Section 14.3 of this Operating Agreement;
(e) Dispose of all or substantially all of the Company Property
except in accordance with Section 6.3 of this Operating Agreement;
(f) merge or consolidate the Company with or into one or more
limited liability companies or other entities except in accordance with Section
6.4 of this Operating Agreement;
(g) waive the requirement of the Members to make an Additional
Capital Contribution or Initial Delayed Capital Contribution except in
accordance with Sections 9.1 and 9.2 of this Operating Agreement;
(h) require the Members to make Additional Capital Contributions,
except in accordance with Section 9.2 of this Operating Agreement; or
(i) take any other action which requires the vote, approval or
consent of the Members under this Operating Agreement.
Section 4.6 Liability for Certain Acts. Each Manager shall perform its
duties as Manager in good faith, in a manner he reasonably believes to be in the
best interests of the Company, and with such care as an ordinarily prudent
person in a like position would use under similar circumstances. A Manager who
so performs the duties of Manager shall not have any liability by reason of
being or having been a Member of the Company. The Managers do not, in any way,
guarantee the return of the Members' Capital Contributions or a profit for the
Members from the operations of the Company. The Managers shall not be liable to
the Company or to any Member for any
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loss or damage sustained by the Company or any Member, unless the loss or damage
shall have been the result of fraud, deceit, gross negligence, willful
misconduct or a wrongful taking by the Manager.
Section 4.7 Committees of the Managers. The Managers may create one or
more committees. Any such committee, to the extent specified by the Managers,
may exercise the authority of the Managers in supervising the management of the
business affairs of the Company, except that a committee may not (i) authorize
distributions, except in accordance with a formula or method described by the
Managers; (ii) approve or propose to Members actions required by law to be
approved by the Members; (iii) fill vacancies of the Managers or any of its
committees; (iv) amend the Articles or the Operating Agreement or propose
amendments to the Articles or the Operating Agreement; (v) authorize any
Additional Capital Contributions; (vi) take any other actions which require the
approval of the Members under the Articles, the Operating Agreement or the Act;
or (vii) authorize the expenditure, or undertaking of an obligation, in excess
of $50,000.00.
Section 4.8 Officers. The officers of the corporation shall be elected by
the Managers and shall consist of a president and such other officers and
assistant officers as may be deemed necessary by the Managers. Any two or more
offices may be held by the same person. Each officer shall hold office at the
pleasure of the Managers or until such officer's death or such officer shall
resign or shall have been removed in the manner hereinafter provided. A vacancy
in any office may be filled by the Managers. The Managers may remove any officer
at any time with or without cause. The compensation of the officers shall be
fixed from time to time by the Managers, and no officer shall be prevented from
receiving such compensation by reason of the fact that such officer is also a
Manager of the Company. Officers and other employees of the Company need not be
Members or Managers of the Company. The officers of the Company, if and when
elected by the Managers of the Company, shall have the following duties:
(a) PRESIDENT. The president shall be the chief executive officer of
the Company and, subject to the direction of the Managers, shall have the
general and active management, supervision and control of the business and all
operations of the Company. The president may sign deeds, mortgages, bonds,
contracts, or other instruments on behalf of the Company, except where required
by law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Managers to some other
officer or agent of the Company. In general, the president shall perform all
duties incident to the office of president and such other duties as may be
prescribed by the Managers from time to time. If there is no secretary, the
president shall assume the authority and duties of the secretary.
(b) VICE-PRESIDENTS. In the absence of the president or in the event
of the president's death or inability to act, the vice-president (or in the
event there be more than one vice-president, the vice-presidents in the order
determined by the Managers) shall perform the duties of the president, and when
so acting, shall have all the powers of and be subject to all the restrictions
upon the president. Any vice-president shall perform such other duties as from
time to time may be assigned to the vice-president by the president or by the
Managers.
(c) SECRETARY. The secretary shall prepare and keep the minutes of
the proceedings of the Members and of the Managers in one or more books provided
for that purpose; have responsibility for authenticating records of the Company;
see that all notices are duly given in accordance with the provisions of the
Operating Agreement or as required by law; be custodian of the corporate records
and of the seal of the Company; see that the seal of the Company is affixed to
all documents, the execution of which on behalf of the Company under its seal is
duly authorized; keep a register of the post office address of each Member which
shall be furnished to the secretary by such Member; and in general perform all
duties incident to the office of secretary and such other duties as from time to
time may be assigned to the secretary by the president, any vice president or
the Managers. If there is no treasurer of the Company, the secretary shall
assume the authority and duties of treasurer.
(d) TREASURER. The treasurer shall have charge and custody of and be
responsible for all funds and securities of the Company, receive and give
receipts for moneys due and payable to the Company from any source whatsoever,
and deposit all such moneys in the name of the Company in such banks, trust
companies or other depositaries as may be designated by the Managers, and in
general perform all of the duties incident to the office of treasurer and such
other duties as from time to time may be assigned to the treasurer by the
president, any vice-
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president or the Managers. If required by the Managers, the treasurer shall give
a bond for the faithful discharge of such treasurer's duties in such sum and
with such surety or sureties as the Managers shall determine.
Section 4.9 Managers Have No Exclusive Duty to Company. No Manager shall
be required to manage the Company as such Manager's sole and exclusive function,
and any Manager may have other business interests and may engage in other
activities in addition to those relating to the Company. Neither the Company nor
any Member shall have any right, by virtue of this Operating Agreement, to share
or participate in such other investments or activities of a Manager or to the
income or proceeds derived therefrom. A Manager shall incur no liability to the
Company or to any of the Members as a result of engaging in any other business
or venture.
Section 4.10 Property. Any and all Company Property shall be held in the
name of the Company.
Section 4.11 Bank Accounts. The Managers may from time to time open bank
accounts in the name of the Company.
Section 4.12 Records, Audits and Reports to be Maintained. At the expense
of the Company, the Managers or the appropriate officer of the Company shall
maintain the records and accounts of all operations and expenditures of the
Company. The Company shall maintain the following records at the Principal Place
of Business:
(a) A current list of the full name and last known business or
residence address of each Member;
(b) A copy of the Articles and all amendments thereto, together with
executed copies of any powers of attorney pursuant to which any documents have
been executed;
(c) Copies of the Company's Federal, foreign, state and local income
tax returns and reports, if any;
(d) A copy of the Operating Agreement including all amendments
thereto;
(e) Copies of any financial statements of the Company for the three
(3) most recent years; and
(f) Any other records and accounts as the Members shall require the
Company to maintain.
Section 4.13 Access to Records. The records required to be maintained by
the Company in this Article IV, and any other books and records of the Company,
wherever situated, are subject to inspection and copying at the reasonable
request of, and at the expense of, any Member or the Member's agent or attorney
during regular business hours of the Company.
Section 4.14 Reports to Members. The Managers shall provide reports at
least annually to the Members, other than Assignees, at such time and in such
manner as the Managers may determine reasonable. The Managers shall also provide
all Members with those information returns required by the Code and the laws of
all applicable local and foreign governments.
Section 4.15 Accounts. The Managers shall maintain a record of Capital
Account for each Member and Assignee in accordance with Article IX.
Section 4.16 Records of Membership Units. The Managers shall maintain a
record of the Membership Units held by each Member, as such Membership Units
shall be increased or decreased from time to time in accordance with this
Operating Agreement.
Section 4.17 Resignation. Any Manager of the Company may resign at any
time by giving prior written notice to the Members of the Company. The
resignation of any Manager shall take effect upon the receipt
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of the notice or at such later time as shall be specified in the notice, and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective. The resignation of a Manager who is also a
Member shall not affect the Manager's rights as a Member and shall not
constitute the Dissociation of such Manager as a Member.
Section 4.18 Removal. Any Manager may be removed, with or without cause,
by any Member or Members holding at least a Majority of the Membership Units of
the Company. The removal of a Manager who is also a Member shall not affect the
Manager's rights as a Member and shall not constitute a Dissociation of such
Manager as a Member.
Section 4.19 Vacancies. Any vacancy occurring for any reason among the
Managers of the Company may be filled by any Member or Members holding at least
a Majority of the Membership Units of the Company.
Section 4.20 Salaries. The salaries and other compensation of the
Managers, in their capacities as Managers of the Company, shall be fixed from
time to time by an affirmative vote or action of a Member or Members holding at
least Majority of the Membership Units of the Company, and no Manager shall be
prevented from receiving such salary by reason of the fact that the Manager is
also a Member of the Company.
ARTICLE V
MEETINGS OF MANAGERS
Section 5.1 Application of Article. The following provisions of this
Article V shall apply only at times during which there is more than one Manager
of the Company. When there is only a single Manager, there shall be no
requirements or procedures for regular or special meetings of the Managers, nor
shall a meeting or any other form of consent be required for the Manager to
exercise the authority granted under this Agreement.
Section 5.2 Meetings. Meetings of the Managers, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by any Manager
or any Member. Except as provided in Section 5.3, 5.4, 5.6 or 5.7 of this
Article V, Notice of the place, day and hour of a meeting of the Managers and
the purpose or purposes for which the meeting is called shall be given not less
than seven (7) nor more than thirty (30) days before the date of the meeting by
or at the direction of the Manager or Member calling the meeting to each Manager
entitled to vote or act at such meeting. The Managers may designate any place,
either within or outside the State of Alabama, as the place of meeting for any
meeting of the Managers. If no designation is made, or if a special meeting is
called, the place of meeting shall be the Principal Office of Business of the
Company in the State of Alabama.
Section 5.3 Regularly Scheduled Meeting. On an annual or more frequent
basis, the Managers may adopt a schedule of regularly scheduled meetings setting
forth the date, time and location of such meetings and, upon approval, such
schedule shall be provided to each Manager in writing. Notice of the place, day,
hour or purpose of any such regularly scheduled meeting shall not be required.
Section 5.4 Meeting of All Managers. If all of the Managers shall meet at
any time and place, either within or outside of the State of Alabama, and
consent to the holding of a meeting at such time and place, such meeting shall
be valid without call or Notice and at such meeting any lawful action may be
taken.
Section 5.5 Record Date. For purposes of (i) determining those Managers
entitled to Notice of or to vote at any meeting of Managers, or any adjournment
thereof, or (ii) in order to make a determination of Managers for any other
purpose, the date on which Notice of the meeting is mailed shall be the record
date for such determinations with respect to the Managers. When a determination
of those Managers entitled to vote at any meeting of the Managers has been made
as provided in this Section 5.5, such determination shall apply to any
adjournment thereof.
Section 5.6 Action by Managers Without a Meeting. Action required or
permitted to be taken at a meeting of Managers may be taken without a meeting if
the action is evidenced by one or more written consents
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describing the action taken, signed by the requisite number of Managers required
to approve such action and delivered to the Company for inclusion in the minutes
or for filing with the Company records. Action taken under this section is
effective when the requisite number of Managers have signed the consent, unless
the consent specifies a different effective date. The record date for
determining Managers entitled to take action without a meeting shall be the date
the first Manager signs a written consent. If an action by Managers is taken
without a meeting under this Section 5.6, Notice to the Managers shall be
considered waived, provided however, that if action is taken hereunder by less
than all of the Managers, Notice of such action shall be provided to the
nonparticipating Managers. Failure to provide the Notice described in the
preceding sentence shall not invalidate or otherwise affect the validity of any
action properly taken by the requisite number of Managers.
Section 5.7 Waiver of Notice. When any Notice is required to be given to
any Manager, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF MEMBERS
Section 6.1 Member Management Rights. Unless otherwise provided in this
Operating Agreement or by nonwaivable provisions of the Act, all Members (other
than Assignees) who have not Dissociated shall be entitled to vote on any matter
submitted to a vote of the Members. Each Member shall be entitled to the number
of votes equal to the number of Membership Units held by such Member.
Section 6.2 Liability of Members to Third Parties. Unless otherwise
provided by the Act, no Member shall be liable under any judgment, decree, or
order of a court, or in any other manner, for any debt, obligation or liability
of the Company, whether arising in contract, tort or otherwise, or for the acts
or omissions of any Member, Manager, officer, agent or employee of the Company.
Section 6.3 Approval of Sale of All of the Company's Property. The
affirmative vote or action of a Member or Members holding at least a Majority of
the Membership Units of the Company shall be required to approve the sale,
exchange or other disposition of all, or substantially all, of the Company's
Property.
Section 6.4 Approval of Merger or Consolidation. The affirmative vote or
action of a Member or Members holding at least a Majority of the Membership
Units of the Company shall be required to approve the merger or consolidation of
the Company with or into one or more limited liability companies or other
entities formed or organized under the laws of the State of Alabama, any other
state, the United States or any foreign jurisdiction, with the Company or the
other business entity being the surviving entity.
Section 6.5 Right of Withdrawal. Except as otherwise provided herein, no
Member shall have the right to withdraw as a Member of the Company or otherwise
seek the partition of the Company's Property, without the prior written consent
of the other Members.
Section 6.6 Conflicts of Interest:
(a) Except as provided in a separate written agreement between a
Member and the Company or any other Member, any Member shall be entitled to
enter into transactions that may be considered to be competitive with, or a
business opportunity that would be beneficial to, the Company, it being
expressly understood that the Members may enter into transactions that are
similar to the transactions into which the Company may enter.
(b) No Member shall be deemed to have violated a duty or obligation
to the Company merely because the Member's conduct furthers such Member's own
interest. Any Member may lend money to and transact other business with the
Company. The rights and obligations of a Member who lends money to or transacts
business with the Company are the same as those of a person who is not a Member,
subject to the Act or other applicable law. No transaction with the Company
shall be voidable solely because a Member or an Affiliate of the Member has a
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direct or indirect interest in the transaction if (i) either the transaction is
fair to the Company or (ii) the disinterested Members, in either case knowing
the material facts of the transaction and the Member's interest, authorize,
approve, or ratify the transaction.
ARTICLE VII
MEETINGS OF MEMBERS
Section 7.1 Meetings. Meetings of the Members may be called by the
Managers or by any Member of the Company upon not less that seven (7) days nor
more than thirty (30) days prior written Notice to each Member of the Company.
Such notice shall set forth the time and place of the meeting and the purpose
for which it is called. If no place for the meeting is designated, the place of
meeting shall be the Principal Place of Business of the Company.
Section 7.2 Manner of Acting. The affirmative vote or action of a Member
or Members holding at least a Majority of the Membership Units of the Company
shall be the vote or action of the Members, unless the vote or action of a
greater or lesser proportion or number of the Members is otherwise required by
the Act, by the Articles or by this Operating Agreement. Unless otherwise
expressly provided herein or required under applicable law, Members who have an
interest (economic or otherwise) in the outcome of any particular matter upon
which the Members vote may vote upon any such matter and their vote shall be
counted in the determination of whether the requisite matter was approved by the
Members. Any Member may participate in any meeting of the Members by means of a
conference telephone or similar communications equipment by means of which all
persons participating in such meeting can hear each other, and participation in
a meeting pursuant to this Section 7.2 shall constitute presence in person at
such meeting.
Section 7.3 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting and
without Notice if the action is evidenced by one or more written consents
describing the action taken, signed by those Members or that Member having the
requisite number of Membership Units required to take such action at a meeting
of the Members and delivered to the Managers of the Company for inclusion in the
minutes or for filing with the Company records. Action taken under this section
is effective when the requisite number of Members entitled to vote have signed
the consent, unless the consent specifies a different effective date. If an
action by Members is taken without a meeting under this Section 7.3, Notice to
the Members shall be considered waived, provided however, that if action is
taken hereunder by less than all of the Members, Notice of such action shall be
provided to the nonparticipating Members. Failure to provide the Notice
described in the preceding sentence shall not invalidate or otherwise affect the
validity of any action properly taken by the requisite number of Members.
Section 7.4 Waiver of Notice. When any Notice is required to be given to
any Member, a waiver thereof in writing signed by the person entitled to such
Notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such Notice.
ARTICLE VIII
INDEMNIFICATION
The Company shall indemnify any Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed claim,
action, suit or proceeding, whether civil, criminal, administrative or
investigative, including appeals (including an action by or in the right of the
Company), by reason of the fact that such Person is or was a Member, Manager,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a member, manager, director, officer, partner, employee or
agent of another limited liability company, corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such Person in connection with such claim, action, suit or
proceeding if such Person acted in good faith and in a manner such Person
reasonably believed to be in or not opposed to the best
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interests of the Company, and, with respect to any criminal action or proceeding
had no reasonable cause to believe such Person's conduct was unlawful. The
termination of any claim, action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the Person did not act in good
faith and in a manner which such Person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that such Person's conduct
was unlawful.
Section 8.2 Determination of Meeting Applicable Standard. Any person
entitled to indemnification under Section 8.1 of this Article VIII shall be
deemed to have acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Company until such
person shall have been finally adjudged to have acted in bad faith and in a
manner such person reasonably believed to be against and not in the best
interests of the Company.
Section 8.3 Payment of Expenses in Advance of Disposition of Action.
Expenses (including attorneys' fees) incurred in defending a civil or criminal
claim, action, suit or proceeding shall be paid by the Company in advance of the
final disposition of such claim, action, suit or proceeding upon receipt of an
undertaking by or on behalf of the Member, Manager, officer, employee or agent
to repay such amount if and to the extent that it shall be ultimately determined
that such Person is not entitled to be indemnified by the Company as authorized
in this Article VIII.
Section 8.4 Non-Exclusivity of Article. The indemnification authorized in
and provided by this Article VIII shall not be deemed exclusive of and shall be
in addition to any other right to which those indemnified may be entitled under
any statute, rule of law, provision of articles of organization, operating
agreement, other agreement, vote or action of Members or by a Majority of the
Managers, or otherwise, both as to actions in such Person's official capacity
and as to actions in another capacity while holding such office, and shall
continue as to a Person who has ceased to be a Member, Manager, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a Person.
Section 8.5 Insurance. The Company may purchase and maintain insurance on
behalf of any Person who is or was a Member, Manager, officer, employee or agent
of the Company, or is or was serving at the request of the Company as a member,
manager, director, officer, partner, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such Person incurred by such
Person in any such capacity arising out of such Person's status as such, whether
or not the Company is required or permitted to indemnify such Person against
such liability under the provisions of this Article VIII or any statute.
ARTICLE IX
CONTRIBUTIONS AND CAPITAL ACCOUNTS
Section 9.1 Initial Capital Contributions. The Initial Capital
Contribution of (and Membership Units allocated to) each Member, as of the date
of this Agreement, is set forth on Exhibit A hereto. The Initial Capital
Contribution (to the extent not previously paid) shall be paid by each Member
upon execution of this Agreement in cash or its equivalent. The Initial Delayed
Contribution of each Member (if any) is set forth on Exhibit B hereto and shall
be paid by such Members contemporaneously with the closing of the transactions
contemplated by that certain Asset Purchase Agreement to be executed by and
among the Company, Oak Mountain Energy Corporation and certain other parties. If
no Closing occurs under the foregoing Asset Purchase Agreement, no Member shall
have any obligation to make any Initial Delayed Contribution.
Section 9.2 Additional Capital Contributions. In addition to the Initial
Capital Contributions and the Initial Delayed Contributions of the Members, in
the event a Member or Members holding at least a Majority of the Membership
Units of the Company or the Managers determine that Additional Capital
Contributions are reasonably necessary to facilitate the business needs of the
Company, including, without limitation, to meet the Company's operating
expenses, to fund the expansion of the Company's business, to acquire other
businesses or
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business entities and to purchase any Property reasonably necessary for the
operation of the Company, each Member shall be entitled, but not required, to
make such Additional Capital Contribution on a basis pro rata to such Member's
Membership Interest in the Company. Upon making such a determination, the
Company shall give Notice to each Member in writing at least fifteen (15) days
prior to the date on which the Additional Capital Contributions are due (the
"Company Contribution Notice"). Such Company Contribution Notice shall set forth
the amount of Additional Capital Contribution needed, the purpose for which the
contribution is needed, and the date by which the Member must contribute such
Additional Capital Contribution. Each Member who desires to make such Additional
Contribution shall provide Notice (the "Member Contribution Notice") to the
Company within fifteen (15) days of its receipt of the Company Contribution
Notice. In the event that one or more of the Members fails to provide the Member
Contribution Notice, the contributing Member or Members shall be entitled to
make such Additional Capital Contribution on a basis pro rata to such Members'
Membership Interest in the Company (calculated without taking into account the
Membership Units of the non-contributing Members). Contributing Members shall be
issued one additional Membership Unit for each $10 of Additional Capital
contributed by such Member. In the event that Xxxxx Xxxxxxxxx or Xxxxxx Xxxx
provides the Member Contribution Notice to the Company, Xxxxx Xxxxxxxxx and/or
Xxxxxx Xxxx, as the case may be, shall have sixty (60) days from receipt of the
Company Contribution Notice to obtain financing for their respective Additional
Capital Contribution and, if such person (i.e., Xxxxx Xxxxxxxxx or Xxxxxx Xxxx)
fails to obtain such financing or otherwise fails to contribute Additional
Capital Contribution within such sixty (60) day period, no Membership Units
shall be issued to such person in connection with such Additional Capital
Contribution and the Contributing Members shall be permitted to make such
Additional Capital Contribution pursuant to the procedure specified above. The
Company shall not be entitled to issue Membership Units to an affiliate of a
Member in order to avoid the rights of the other Members to make Additional
Capital Contributions in order to maintain such Member's Membership Interest in
the Company; provided, however, that nothing contained in this Section 9.2 shall
prevent or otherwise restrict the Company from issuing additional Membership
Units to any unaffiliated third party in return for capital contributions from
such unaffiliated third party on such terms and conditions as determined by the
Managers; provided further that the admission of any such unaffiliated third
party as a Member of the Company shall be subject to the requirements set forth
in Section 13.3 hereof.
Section 9.3 Maintenance of Capital Accounts. The Company shall establish
and maintain Capital Accounts for each Member and Assignee.
(a) To each Member's Capital Account there shall be credited: (i)
such Member's Capital Contributions (provided, however, that in the case of a
Capital Contribution made in the form of a promissory note of which the
contributing Member is the maker, such Member's Capital Account shall be
increased with respect to such promissory note only when there is a taxable
disposition of such note by the Company or when, and to the extent that, the
contributing Member makes principal payments on such note); (ii) such Member's
distributive share of Net Profits and any items in the nature of income or gain
which are specially allocated pursuant to Sections 10.3 through 10.7 hereof, and
(iii) the amount of any Company liabilities assumed by such Member or which are
secured by any Property distributed to such Member.
(b) To each Member's Capital Account there shall be debited: (i) the
amount of cash and the Gross Asset Value of any Property distributed to such
Member pursuant to any provision of this Agreement; (ii) such Member's
distributive share of Net Losses and any items in the nature of expenses or
losses which are specially allocated pursuant to Sections 10.3 through 10.7
hereof, 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.
(c) In the event all or a portion of a Membership Interest is
transferred in accordance with the terms of this Agreement, the transferee shall
succeed to the Capital Account of the transferor to the extent it relates to the
transferred Membership Interest. This Section 9.3(c) shall not be interpreted as
permitting the transfer of any Economic Interest, Membership Interest or
Membership Unit that is otherwise prohibited under Article XII hereof.
(d) In determining the amount of any liability for purposes of this
Section 9.3, there shall be taken into account Code ss. 752(c) and any other
applicable provisions of the Code and Regulations.
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The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations ss.
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Managers shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Member), are computed in order to comply with
such Regulations, the Managers may make such modification, provided that it is
not likely to have a material effect on the amounts distributable to any Member
pursuant to Section 14.4 hereof upon the dissolution of the Company. The
Managers also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Members and the amount
of Company capital reflected on the Company's balance sheet, as computed for
book purposes, in accordance with Regulations ss. 1.704-1(b)(2)(iv)(q), and (ii)
make any appropriate modifications in the event unanticipated events (for
example, the acquisition by the Company of oil or gas properties) might
otherwise cause this Agreement not to comply with Regulations ss. 1.704-1(b).
Section 9.4 Sale or Exchange of Interest. In the event of a sale or
exchange of some or all of a Member's or Assignee's Economic Interest in the
Company, the Capital Account of the transferring Member or Assignee shall become
the Capital Account of the Assignee acquiring such Interest, to the extent it
relates to the portion of the Economic Interest transferred.
Section 9.5 Compliance with ss. 704(b) of the Code. The provisions of this
Article IX as they relate to the maintenance of Capital Amounts are intended,
and shall be construed, and, if necessary, modified to cause the allocations of
profits, losses, income, gain and credit pursuant to Article X to have
substantial economic effect under the Regulations promulgated under ss. 704(b)
of the Code, in light of the Distributions made pursuant to Articles X and XIV
the Capital Contributions made pursuant to this Article IX. Notwithstanding
anything herein to the contrary, this Operating Agreement shall not be construed
as creating a deficit restoration obligation or otherwise personally obligate
any Member to make a Capital Contribution in excess of the Initial Capital
Contribution made by that Member.
ARTICLE X
ALLOCATIONS AND DISTRIBUTIONS
Section 10.1 Net Profits. Except as may be required by Sections 10.3
through 10.7 of this Article X, Net Profits shall be apportioned among the
Members in the following order and amounts:
(a) First, to and among the Members in amounts equal to the excess,
if any, of (i) the cumulative Net Losses allocated to the Members pursuant
to Section 10.2(c) hereof for all prior Fiscal Years, over (ii) the
cumulative Net Profits allocated to the Members pursuant to this Section
10.1(a) for all prior Fiscal Years; and
(b) The balance, if any, to and among the Members in proportion to
the Membership Units each Member holds as of the first day of the Fiscal
Year;
Section 10.2 Net Losses:
(a) Except as may be required by Sections 10.3 through 10.7 of this
Article X, Net Losses shall be apportioned to and among the Members in
proportion to the Membership Units each Member holds as of the first day
of the Fiscal Year;
(b) provided, however, that Net Losses shall not be allocated to any
Member pursuant to Section 10.2(a) to the extent that such allocation
would cause any Member to have an Adjusted Deficit at the end of such
Fiscal Year, and
(c) In the event some but not all of the Members would have Adjusted
Deficits as a consequence of an allocation of Net Losses pursuant to
Section 10.2(a), the limitation set forth in Section
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10.2(b) shall be applied on a Member-by-Member basis so as to allocate the
maximum permissible amount of Net Losses to each Member; and
(d) provided further that the limitation set forth in Section
10.2(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been
reduced to zero, and thenceforth Net Losses shall be allocated in
accordance with Section 10.2(a) hereof.
(e) Notwithstanding any other provisions of this Section 10.2, if
the number of Membership Units held by any Member changes during the
Fiscal Year, or if any Members are admitted during the Fiscal Year, the
Net Profits and Net Losses otherwise to be allocated shall be consistent
with Section 13.3.
Section 10.3 Company Minimum Gain Chargeback. If there is a net decrease
in Company Minimum Gain for a Fiscal Year, each Member must be allocated items
of income and gain for that Fiscal Year (and, if necessary, subsequent Fiscal
Years) equal to that Member's share of the net decrease in Company Minimum Gain.
A Member's share of the net decrease in Company Minimum Gain is the amount of
the total net decrease multiplied by the Member's percentage share of the
Company Minimum Gain at the end of the immediately preceding Fiscal Year. A
Member's share of any decrease in Company Minimum Gain resulting from a
revaluation of Company Property equals the increase in the Member's Capital
Account attributable to the revaluation to the extent the reduction in Company
Minimum Gain is caused by the revaluation. A Member is not subject to this
Company Minimum Gain chargeback requirement to the extent the Member's share of
the net decrease in Company Minimum Gain is caused by a guarantee, refinancing,
or other change in the debt instrument causing it to become partially or wholly
a recourse liability or a Member Nonrecourse Liability, and the Member bears the
economic risk of loss (within the meaning of ss. 1.752-2 of the Regulations) for
the newly guaranteed, refinanced, or otherwise changed liability.
Section 10.4 Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal
Year shall be specially allocated to the Members in proportion to the number of
Membership Units held by each Member.
Section 10.5 Member Nonrecourse Deductions. Any Member Nonrecourse
Deductions for any Fiscal Year shall be allocated to the Member who bears the
economic risk of loss with respect to the Member Nonrecourse Liability to which
such Member Nonrecourse Deductions are attributable in accordance with ss.
1.704-2(i) of the Regulations.
Section 10.6 Member Minimum Gain Chargeback. If during a Fiscal Year there
is a net decrease in Member Minimum Gain, any Member with a share of that Member
Minimum Gain (as determined under ss. 1.704-2(i)(5) of the Regulations) as of
the beginning of that Fiscal Year must be allocated items of income and gain for
that Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal to that
Member's share of the net decrease in the Member Minimum Gain. A Member's share
of the net decrease in Member Minimum Gain is determined in a manner consistent
with the provisions of ss. 1.704-2(g)(2) of the Regulations. A Member is not
subject to this Member Minimum Gain chargeback, however, to the extent the net
decrease in Member Minimum Gain arises because the liability ceases to be Member
Nonrecourse Liability due to a conversion, refinancing, or other change in the
debt instrument that causes it to become partially or wholly a Company
Nonrecourse Liability. The amount that would otherwise be subject to the Member
Minimum Gain chargeback is added to the Member's share of Company Minimum Gain.
In addition, rules consistent with those applicable to Company Minimum Gain and
Company Minimum Gain chargeback shall be applied to determine the shares of
Member Minimum Gain and Member Minimum Gain chargeback to the extent provided
under the Regulations issued pursuant to ss. 704(b) of the Code.
Section 10.7 Qualified Income Offset. In the event any Member, in such
capacity, unexpectedly receives an Offsettable Decrease, such Member will be
allocated items of income and gain (consisting of a pro rata portion of each
item of income and gain of the Company for the Fiscal Year) in an amount and
manner sufficient to offset such Offsettable Decrease as quickly as possible.
This Section 10.7 is intended to be in accordance with ss.
1.704-1(b)(2)(ii)(d)(4), (5) and (6) of the Regulations.
Section 10.8 Curative Allocations. The allocations set forth in Sections
10.3 through 10.7 hereof (the "Regulatory Allocations") are intended to comply
with certain requirements of the Regulations. To the extent
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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 10.8. Therefore,
notwithstanding any other allocation provision (other than the Regulatory
Allocations), the Managers shall make such offsetting special allocations of
Company income, gain, loss or deduction in whatever manner they may deem
appropriate so that each Member's Capital Account balance shall be, to the
maximum extent possible, equal to the Capital Account balance that each such
Member would have had if the Regulatory Allocations had not been part of this
Agreement, and all Company items were allocated pursuant to Sections 10.1 and
10.2 hereof. In exercising their discretion under this Section 10.8, the
Managers shall consider future Regulatory Allocations under Section 10.3 that,
although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 10.4 and 10.5.
Section 10.9 Tax Allocations: ss. 704(c) of the Code. In accordance with
Code ss. 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
(computed in accordance with Section 1.27(a) hereof). In the event the Gross
Asset Value of any Company asset is adjusted pursuant to Section 1.27(b) hereof,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code ss. 704(c) and the Regulations thereunder. Any elections or
other decisions relating to such allocations shall be made by the Managers in
any manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 10.9 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Net Profits, Net Losses,
other items, or distributions pursuant to any provision of this Agreement.
Section 10.10 Interim Distributions. From time to time, and subject to
Section 10.11 hereof, the Managers shall determine in their reasonable judgment
to what extent, if any, the Company's cash on hand exceeds the current and
anticipated needs for such moneys, including, without limitation, needs for
operating expenses, debt service, acquisitions, reserves, and mandatory
distributions, if any. To the extent such excess exists, a Majority of the
Managers may make Distributions to the Members in proportion to each Member's
Membership Units in the Company as of the date of such Distribution. An Interim
Distribution shall be in cash or Property (which need not be distributed
proportionately) or partly in both, as determined by the Managers. The Company
shall distribute cash to the Members, to the extent not previously distributed
during or with respect to a fiscal year, on or before ninety (90) days after the
end of each fiscal year, in an amount equal to the federal and state taxes
payable by the Members with respect to the income of the Company for the
preceding fiscal year, for the foregoing purpose, the members shall all be
assumed to be subject to the highest federal and the highest Alabama state
income tax rates for single individuals for the prior fiscal year.
Section 10.11 Limitations on Distributions.
(a) No Distribution shall be declared and paid unless, after the
Distribution is made, the Property of the Company is in excess of all
liabilities of the Company and the Company has sufficient working capital as
determined by the Managers, except liabilities to Members on account of their
Capital Accounts.
(b) No Distribution shall be made to a Member to the extent that
such Distribution would cause such Member to have an Adjusted Deficit at the end
of such Fiscal Year, provided that in the event some but not all of the Members
would have Adjusted Deficits as a consequence of a Distribution, the limitation
set forth in this Section 10.11(b) shall be applied on a Member-by-Member basis
so as to permit the maximum permissible amount of Distributions to be made to
each Member; and provided further that the limitation set forth in this Section
10.11(b) shall cease to apply at the point at which all Members' Capital
Accounts (adjusted in accordance with Section 1.4 hereof) have been reduced to
zero, and thenceforth Distributions may be made in accordance with Section
10.10.
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ARTICLE XI
CERTAIN TAX MATTERS
Section 11.1 Elections. The Managers may make any tax elections for the
Company allowed under the Code or the tax laws of any Taxing Jurisdiction.
Section 11.2 Taxes of Taxing Jurisdictions. To the extent that the laws of
any Taxing Jurisdiction so require, each Member requested to do so by the
Managers will submit an agreement indicating that the Member will make timely
income tax payments to the Taxing Jurisdiction and that the Member accepts
personal jurisdiction of the Taxing Jurisdiction with regard to the collection
of income taxes attributable to the Member's income, and interest and penalties
assessed on such income. If the Member fails to provide such agreement, the
Company may withhold and pay over to such Taxing Jurisdiction the amount of tax
penalties and interest determined under the laws of the Taxing Jurisdiction with
respect to such income. Any such payments with respect to the income of a Member
shall be treated as a distribution for purposes of Article X. The Managers may,
where permitted by the rules of any Taxing Jurisdiction, file a composite,
combined or aggregate tax return reflecting the income of the Company and pay
the tax, interest and penalties of some or all of the Members on such income to
the Taxing Jurisdiction, in which case the Company shall inform the Members of
the amount of such tax interest and penalties so paid.
Section 11.3 Tax Matters Partner. Shelby Energy Group is hereby designated
as the "Tax Matters Partner" of the Company, as such term is defined by ss.
6231(a)(7) of the Code. The Tax Matters Partner shall: (i) notify each Member of
all administrative and judicial proceedings for the adjustment of Company items
and shall periodically report to the Members on the status of such proceedings;
(ii) cause to be prepared and filed Company tax returns and tax elections and
determinations as are necessary, appropriate or desirable; (iii) use its best
efforts to deliver to each Person who was a Member of the Company at any time
during a Fiscal Year a copy of the Company's proposed federal income tax return
for such Fiscal Year at least 30 days prior to the due date (with extensions)
for filing such return; (iv) provide each Member with a copy of such return and
Schedule K-1 as filed. Each Member shall notify the Tax Matters Partner of its
intention to file a federal income tax return that is inconsistent with the
information or amounts included on the Member's Form K-1 or other forms or
attachments to the Company's U.S. Partnership Return of Income (Form 1065). The
Members shall provide the Tax Matters Partner with a copy of any Form 8082 filed
by the Member with respect to the Company's items. The Tax Matters Partner shall
take such action as may be necessary to cause each Member (other than a Member
who acts as the Tax Matters Partner) to become a notice partner within the
meaning of ss. 6223 of the Code. No Member who is designated Tax Matters Partner
may take any action contemplated by xx.xx. 6222 through 6232 of the Code without
the consent of a Member or Members holding at least a Majority of the Membership
Units of the Company.
Section 11.4 Method of Accounting. The records of the Company shall be
maintained on the method of accounting chosen by the Managers.
ARTICLE XII
DISPOSITION OF MEMBERSHIP UNITS
Section 12.1 Limitations. An Assignee of a Membership Unit under this
Article XII shall have only those rights of an Assignee as described more fully
in Section 13.1 hereof and shall have no right to become a Member of the Company
or to participate in the management of the business and affairs of the Company
unless such Assignee is admitted as a Substitute Member in accordance with
Section 13.2 of this Operating Agreement.
Section 12.2 Consent, Etc. No Member or Assignee may Dispose of all or a
portion of such Member's or Assignee's Membership Units, unless:
(a) Prior to the Disposition, the Company receives, unless waived by
the Members in writing, an opinion of counsel satisfactory to Members holding at
least a Majority of the Membership Units of the Company (which determination of
a Majority shall include the Membership Units held by, and the consent or vote
of, the transferring Member) that: (i) such Disposition is not subject to an
effective registration under, or exempt from the
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registration requirements of, the applicable state and federal securities laws,
and (ii) such Disposition, alone or when combined with other transactions, would
not result in a termination of the Company within the meaning of ss. 708 of the
Code (unless the Member disposing of its Membership Units agrees to indemnify
the Company and the other Members for any adverse consequences of such
termination);
(b) Prior to the Disposition, the Company receives from the
transferee the information and agreements that the Members may reasonably
require, including, but not limited to, any taxpayer identification number and
any agreement that may be required by the Taxing Jurisdiction; and
(c) The transferring Member or Assignee shall either:
(i) First obtain the written consent to such Disposition of a
Member or Members holding at least a Majority of the Membership Units of the
Company (which determination of a Majority shall include the Membership Units
held by, and the consent or vote of, the transferring Member); or
(ii) Comply with the provisions of Section 12.3 below.
Section 12.3 Permitted Sales. In the event a Member or Assignee (other
than the Controlling Member) shall have received and wishes to accept a bona
fide offer to sell or assign of all or any portion of such Member's or
Assignee's Membership Unit, but has not received the prior written consent
referred to in Section 12.2 above, such Member or Assignee may sell the same
only after offering it to the Company and the other Members in the following
manner:
(a) Such Member or Assignee (other than the Controlling Member)
desiring to sell all or part of such Membership Units shall serve Notice upon
the Company and the other Members (including the Controlling Member), stating
that the transferring Member or Assignee has received a bona fide offer for the
sale of such Member's or Assignee's Membership Units and setting forth the
following information:
(i) the portion of the transferring Member's or Assignee's
Membership Units proposed to be sold,
(ii) the name and address and business or occupation of the
Person offering to purchase such Membership Unit, and
(iii) the sales price and terms and conditions of such sale.
Such Notice shall also contain an offer by the transferring Member or Assignee
to sell such Membership Units to the Company and to the other Members at the
price and under the terms offered by such bona fide offeror.
(b) For a period of fifteen (15) days after the receipt of such
Notice, the Company shall have the option to purchase all of the Membership
Units so offered. If the Company fails to exercise said option, the Members, or
any one or more of them, on a basis pro rata to their respective Membership
Units in the Company (calculated without including the Membership Interest of
the Member or Assignee desiring to sell its Membership Units) or on such other
basis as the Members shall agree to, shall have the option to purchase for a
period of thirty (30) days after the termination of the Company's option, all of
such Membership Units offered for sale.
(c) In the event the Company or the Members, or any one or more of
the Members, shall exercise their option to purchase all of the Membership Units
offered in the Company under this Section 12.3, the Company or the Members
exercising such option to purchase, as the case may be, shall designate the
time, date and place of closing; provided, however, that the date of closing
shall be within sixty (60) days of the date that the Company or Members, as the
case may be, provide Notice to the transferring Member or Assignee of their
election to purchase such transferring Member's or Assignee's Membership Units.
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(d) In the event that neither the Company nor the Members shall
exercise their option to purchase, as provided herein, the transferring Member
or Assignee shall be free to transfer such Member's or Assignee's Membership
Units to the Person named in the aforesaid Notice at the price and upon the
terms and conditions set forth in such Notice, subject to the limitations
contained in Article XIII; provided, however, that such Disposition shall be
made within sixty (60) days following the termination of the last option of the
Members to purchase such Membership Units, subject to the limitations contained
in Article XIII. If such Disposition is not consummated within said sixty (60)
day period, the provisions of this Section 12.3 shall again be applicable to the
Member's or Assignee's Membership Units with respect to which the Member or
Assignee had received a bona fide offer.
Section 12.4 Transfer Upon Dissociation of a Member (Other Than Death or
Incompetency). In the event a Member shall Dissociate as a Member of the Company
for any reason (other than as a result of a Member's death or incompetency),
then the Company shall have the option to purchase (exercisable within twelve
months after such event of Dissociation), and the Dissociated Member shall be
obligated to sell to the Company, all of such Member's Membership Units in the
Company. The purchase price to be paid by the Company for such Membership Units
shall be determined and paid in accordance with the provisions of Section 12.8
below.
Section 12.5 Transfer Upon Dissociation of a Member Due to Death or
Incompetency. In the event a Member shall Dissociate as a Member of the Company
as a result of the death or incompetency of such Member, then the Company shall
have the obligation to purchase, and the Dissociated Member or the estate of the
Dissociated Member, as the case may be, shall be obligated to sell to the
Company, all of such Member's Units in the Company. The purchase price to be
paid by the Company for such Membership Units shall be determined and paid in
accordance with the provisions of Section 12.8 below. In the event of the death
or incompetency of a Member, any insurance proceeds payable to the Company as a
result of the death or incompetency of such Member shall not be included within
the determination of purchase price.
Section 12.6 Company Redemption Right. In addition to any other right of
purchase set forth in this Operating Agreement, the Company shall have the right
to purchase the Membership Units of Xxxxx Xxxxxxxxx and Xxxxxx Xxxx under the
following circumstances and under the following terms:
(a) Termination Without Cause, Disability. In the event of the
Termination Without Cause or the Disability of Xxxxx Xxxxxxxxx or Xxxxxx Xxxx,
then the Company shall have the obligation to purchase, and Xxxxx Xxxxxxxxx or
Xxxxxx Xxxx, as the case may be, shall be obligated to sell to the Company, all
of his Membership Units in the Company. The purchase price to be paid by the
Company for such Membership Units shall be determined and paid in accordance
with the provisions of Section 12.8 below.
(b) Termination For Cause. In the event of the Termination For Cause
of Xxxxx Xxxxxxxxx or Xxxxxx Xxxx, then the Company shall have the option to
purchase (exercisable within twelve months after the date of such Termination
For Cause), and Xxxxx Xxxxxxxxx or Xxxxxx Xxxx, as the case may be, shall be
obligated to sell to the Company, all of his Membership Units in the Company.
The purchase price to be paid by the Company for such Membership Units shall be
determined and paid in accordance with the provisions of Section 12.8 below.
(c) Failure to Produce. Upon the occurrence of any Failure to
Produce Event, then the Company shall have the obligation to purchase, and Xxxxx
Xxxxxxxxx and Xxxxxx Xxxx shall be obligated to sell to the Company, all of
their Membership Units in the Company. The purchase price to be paid by the
Company for such Membership Units shall be determined and paid in accordance
with the provisions of Section 12.8 below.
Section 12.7 Put Rights. At any time after attaining the age of fifty-five
(55) years, Xxxxx Xxxxxxxxx and Xxxxxx Xxxx shall each have the right to require
the Company to purchase all, but not less than all, of the Membership Units then
held by such Person, by delivering a Notice ("Put Notice") to the Company. Upon
receipt of the Put Notice, the Company will become obligated to purchase all,
but not less than all, of the Membership Units then held by the Person. The
Purchase price to be paid by the Company for such Membership Units shall be
determined and paid in accordance with the provisions of Section 12.8 below.
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Section 12.8 Purchase Price. The purchase price of a Membership Unit to be
purchased in accordance with the provisions of Sections 12.4, 12.5, 12.6, and
12.7 above shall be determined as follows:
(a) The purchase price of each Membership Unit purchased pursuant to
Sections 12.4, 12.5, 12.6 and 12.7 shall be determined as of the last day of the
month preceding the month during which the event giving rise to the purchase
obligation, and shall be the amount that would have been distributed to such
Member with respect to the Membership Interest to be purchased hereunder, in
liquidation of the Company pursuant to Section 14.4 hereof as if (i) all of the
Property of the Company had been sold for its fair market value (as determined
in accordance with Section 12.8(b) below), (ii) the Company paid its accrued but
unpaid liabilities and established reserves pursuant to Article XIV hereof for
the payment of reasonably anticipated contingent or unknown liabilities,
including amounts payable pursuant to Xxxxx Xxxxxxxxx'x and Xxxxxx Xxxx'x
employment agreements with the Company, (iii) all allocations and distributions
called for by this Agreement through the date of such determination were taken
into account, and (iv) the Company distributed the remaining proceeds to the
Members in liquidation, all as of such day.
(b) The determination of the purchase price under this Section 12.8
shall be determined as follows: (1) for the first thirty (30) days following the
exercise of an option to purchase or following the date of that the obligation
to purchase arises, the Company and the transferring Member shall negotiate in
good faith regarding the purchase price for the Membership Units being
transferred; (2) in the event that the Company and the transferring Member are
unable to agree on a purchase price within such thirty (30) day period, the
transferring Member and the Company shall, within fifteen (15) days after
expiration of such thirty (30) day period, select and agree upon an Appraiser to
determine such purchase price, and the appraisal of such Appraiser shall be
binding on the parties; and (3) in the event that the Company and the
transferring Member are unable to agree upon an Appraiser, (i) the Company and
the transferring Member shall each appoint within ten (10) days after the
expiration of the aforementioned thirty (30) and fifteen (15) day periods, an
Appraiser, and such Appraisers shall promptly appoint a third Appraiser, (ii)
each of such three Appraisers shall perform a separate written appraisal of the
Company, and (iii) the average of the two closest appraisals from such three
Appraisers shall be the purchase price and shall be binding upon the parties.
(c) The aggregate purchase price due under this Section 12.8 shall
be paid in the following manner:
(i) There shall first be credited against such purchase price
the amount of any indebtedness due and payable to the Company by such Member,
other than any indebtedness due under the promissory notes referred to in
Section 9.1.
(ii) There shall next be credited the amount of any expenses
or damages incurred by the Company as a result of Dissociation (other than
pursuant to Dissociation because of death or incompetency).
(iii) The balance of the purchase price shall be payable at
closing which shall occur within thirty (30) days following the latter of the
final determination of the purchase price or the exercise of the Company's
option to purchase; provided, however, upon the election of the Company, the
balance of the purchase price shall be payable in three (3) equal annual
installments, with interest at the then current prime rate quoted in the Wall
Street Journal plus two (2) percentage points, the first installment of which
shall be due within thirty (30) days following the latter of the final
determination of the purchase price or the exercise of the Company's option to
purchase. Such installment obligation shall be evidenced by a negotiable
promissory note of the Company, and shall be secured by a pledge of such
Membership Units transferred to the Company.
Section 12.9 Certain Additional Permitted Transfers. Notwithstanding
the provisions of Article XII or Article XIII, Controlling Member shall be
entitled to Dispose from time to time all or any portion of its Membership
Units, without giving rise to any rights of first refusals or options or
consent-requirement and, upon effectiveness of such Disposition, to the extent
set forth in the applicable instrument of Disposition, such transferee shall
become a Substitute Member and succeed to all of the rights and obligations
(including voting and other governance rights) of the Controlling Member with
regard to the Disposed Membership Units without any further action on the part
of the Members or the Company.
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ARTICLE XIII
ADMISSION OF ASSIGNEES AND ADDITIONAL MEMBERS
Section 13.1 Rights of Assignees. Notwithstanding anything to the
contrary contained in this Operating Agreement (other than pursuant to Section
12.9 hereof), the only rights, if any, which an Assignee of a Member shall have
are those rights associated with the Economic Interest received and such
Assignee shall not receive any right to participate in the management of the
business and affairs of the Company or to become a Member; provided, however,
that in the event an Assignee is an existing Member of the Company, such
Assignee shall receive all rights to participate in the management of the
business and affairs of the Company incident to the transferred Membership or
Economic Interest. An Assignee is only entitled to receive the Distributions and
return of capital, and to be allocated the Net Profits and Net Losses
attributable to a transferred Membership Economic Interest.
Section 13.2 Admission of Substitute Members. An Assignee of a
Membership Unit shall be admitted as a Substitute Member and entitled to all the
rights of the Member who initially assigned the Membership Units only with the
written approval of Members holding at least Eighty Percent (80%) of the
Membership Units. The Members may grant or withhold the approval of such
admission in their sole and absolute discretion. If so admitted, the Substitute
Member has all the rights and powers and is subject to all the restrictions and
liabilities of the Member originally assigning the Membership Units. The
admission of a Substitute Member, without more, shall not release the Member
originally assigning the Membership Units from any liability to the Company that
may have existed prior to the approval.
Section 13.3 Admission of Additional Members. From the date of
formation of the Company, any Persons acceptable to a Member or Members holding
at least Eighty Percent (80%) of the Membership Units of the Company, as
reflected by the written approval of such Member or Members, may become
Additional Members of the Company for such consideration as such Members shall
determine, subject to the terms and conditions of this Operating Agreement. No
Additional Member shall be entitled to any retroactive allocation of income,
gain, loss, deduction or credit by the Company. The Members may, at their
option, at the time the Additional Member is admitted, close the Company's books
(as though the Company's Fiscal Year had ended) or make pro rata allocations of
income, gain, loss, deduction or credit to the Additional Member for that
portion of the Company's Fiscal Year in which the Member was admitted in
accordance with the provisions of ss. 706(d) of the Code and the Regulations
promulgated thereunder. Upon admission of an Additional Member, this Operating
Agreement shall be amended in order to reflect such additional Member's
Membership Units in the Company.
ARTICLE XIV
DISSOCIATION, DISSOLUTION AND WINDING UP
Section 14.1 Dissociation. A Person shall cease to be a Member upon the
happening of any of the following Dissociation Events:
(a) the withdrawal of a Member with the consent of the other Members
holding at least a Majority of the remaining Membership Units;
(b) upon the Managers' receipt of notice with respect to a Member
who:
(i) makes an assignment for the benefit of creditors;
(ii) files a voluntary petition in bankruptcy;
(iii) files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation:
(iv) files an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the Member in
any proceeding in the nature of the proceedings listed in (iii); or
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(v) seeks, consents to or acquiesces in the appointment of a
trustee, receiver or liquidator of the Member of all or any substantial part of
the Member's properties:
(c) in the case of a Member who is a natural person, the death of
the Member or the entry of an order by a court of competent jurisdiction
adjudicating the Member incompetent to manage the Member's person or property.
Section 14.2 Rights of Dissociating Member. In the event a Member
Dissociates from the Company and such Dissociation causes a dissolution and
winding up of the Company under this Article, the Member shall be entitled to
participate in the winding up of the Company to the same extent as any other
Member except that any Distributions to which the Member would have been
entitled shall be reduced by damages sustained by the Company as a result of the
Dissolution and winding up.
Section 14.3 Dissolution. The Company shall be dissolved and its affairs
wound up prior to such date, upon the first to occur of the following events
(which, unless the Members agree to continue the business, shall constitute
Dissolution Events):
(a) the written consent of a Member or Members holding at least a
Majority of the Membership Units of the Company;
(b) the Dissociation of any Member as provided in Section 14.1 of
this Article, unless (i) there are at least two remaining Members or at least
one remaining Member and an Additional Member or Substitute Member is admitted
in accordance with Article XIII hereof and (ii) the legal existence and business
of the Company is continued with the consent of a Member or Members holding at
least Eighty Percent (80%) of the Membership Units within 90 days after such
Dissociation.
(c) the merger of the Company and the Company is not the successor
limited liability company in such merger or the consolidation of the Company
with one or more limited liability companies or other entities.
(d) The entry of a final decree of dissolution of the Company by a
court of competent jurisdiction.
(e) On October 9, 2026, unless the business of the Company is
continued with the vote, consent or action of a Member or Members holding at
least Eighty Percent (80%) of the Membership Units within ninety (90) days after
such date.
Section 14.4 Distribution of Assets on Dissolution. Upon the winding up of
the Company, Company Property shall be distributed in the following order:
(a) to creditors, including Members who are creditors, to the extent
permitted by law, in satisfaction of Company liabilities;
(b) to Members in accordance with positive Capital Account balances
taking into account all allocations, contributions, distributions, and Capital
Account adjustments for the Company's Fiscal Year in which the liquidation
occurs. Liquidation proceeds shall be paid within 60 days of the end of the
Company's Fiscal Year or, if later, within 90 days after the date of
liquidation. Such distributions shall be in cash or property (which need not be
distributed proportionately) or partly in both, as determined by a Majority of
the Managers.
Section 14.5 Winding Up and Articles of Dissolution. The winding up of the
Company shall be completed when all debts, liabilities, and obligations of the
Company have been paid and discharged or reasonably adequate provision therefor
has been made, and all of the remaining Property of the Company has been
distributed to the Members. Upon the completion of winding up of the Company,
articles of dissolution shall be delivered to the Judge of Probate. The articles
of dissolution shall set forth such information as is required by the Act.
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Section 14.6 Effect of Dissolution. Upon dissolution, the Company shall
cease carrying on, as distinguished from the winding up of, the Company
business, but the Company is not terminated, but continues until the winding up
of the affairs of the Company is completed and a certificate of dissolution with
respect to the Company, or the equivalent, has been issued by the Secretary of
State.
ARTICLE XV
AMENDMENT
Section 15.1 Operating Agreement May Be Modified. This Operating Agreement
may be modified as provided in this Article XV (as the same may from time to
time be amended). No Member or Manager shall have any vested rights in this
Operating Agreement.
Section 15.2 Amendment or Modification of Operating Agreement. This
Operating Agreement may be amended or modified from time to time only by a
written instrument adopted by a Member or Members holding at least a Majority of
the Membership Units of the Company; provided, however that the unanimous
consent or approval of the Members shall be required in order to make an
amendment affecting how distributions and allocations under Article X or Article
XIV will be made to the Members, an amendment affecting the rights or
obligations of the Members with respect to Additional Capital Contributions or
an amendment affecting the right of a member to transfer its Membership Units or
the purchase price payable for Membership Units under Article XII.
ARTICLE XVI
MISCELLANEOUS PROVISIONS
Section 16.1 Entire Agreement. This Operating Agreement constitutes the
entire agreement among the parties. No party shall be bound by any terms,
conditions, statements or representations, oral or written, not herein
contained. Each party hereby acknowledges that in executing this Operating
Agreement, such party has not been induced, persuaded or motivated by any
promise or representation made by any other party, unless expressly set forth
herein. All previous negotiations, statements and preliminary instruments by the
parties or their representatives are merged in this Operating Agreement.
Section 16.2 Rights of Creditors and Third Parties. This Operating
Agreement is entered into by and among the Members for the exclusive benefit of
the Company, its Members, and their successors and assignees. This Operating
Agreement is expressly not intended for the benefit of any creditor of the
Company or any other Person. Except and only to the extent provided by the Act
or other applicable statute, no such creditor or third party shall have any
rights under this Operating Agreement or any agreement between the Company and
any Member with respect to any Capital Contribution or otherwise.
Section 16.3 Changes in Applicable Law. In the event that any covenant,
condition, or other provision contained in this Agreement, or any part of the
business of the Company (whether or not conducted by the Company) is determined
to be invalid, void or illegal, the Members shall amend this Agreement, any
other affected agreements, and/or the manner in which the business of the
Company is conducted to comply with such laws. For purposes of this Section
16.3, a good faith determination of illegality by a Member based on an opinion
of counsel shall be sufficient to trigger the application of this Section. Any
decisions regarding the manner in which such illegality will be addressed shall
require the agreement of all of the Members.
Section 16.4 Interpretation. For and in consideration of the mutual
covenants herein contained and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Members executing
this Operating Agreement hereby agree to the terms and conditions contained
herein, as it may from time to time be amended according to its terms. It is the
express intention of the Members that this Operating Agreement and the Articles
shall be the sole source of agreement of the parties, and, except to the extent
a provision of the Operating Agreement expressly incorporates Federal income tax
rules by reference to sections (") of the Code or Regulations or is expressly
prohibited or ineffective under the Act, the Operating Agreement shall govern,
even
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when inconsistent with, or different than, the provisions of the Act or any
other law or rule. To the extent any provision of this Operating Agreement is
prohibited or ineffective under the Act, the Operating Agreement shall be
considered amended to the smallest degree possible in order to make the
agreement effective under the Act. In the event the Act is subsequently amended
or interpreted in such a way to make any provision of this Operating Agreement
that was formerly invalid valid, such provision shall be considered to be valid
from the effective date of such interpretation or amendment.
Section 16.5 Governing Law. This Operating Agreement, and the application
or interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Alabama, and specifically the Act, applied without respect
to any conflicts-of-law principles.
Section 16.6 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 laws, rules or regulations.
Section 16.7 Construction of Terms. Whenever used in this Agreement and
when required by the context, the singular number shall include the plural and
the plural the singular. Pronouns of one gender shall include all genders.
Section 16.8 Captions. The captions as to contents of particular articles,
sections or paragraphs contained in this Operating Agreement and the table of
contents hereto are inserted for convenience and are in no way to be construed
as part of this Operating Agreement or as a limitation on the scope of the
particular articles, sections or paragraphs to which they refer.
Section 16.9 Waivers. The failure of any party to seek redress for
violation of or to insist upon the strict performance of any agreement or
condition of this Operating Agreement shall not prevent a subsequent act, which
would have originally constituted a violation, from having the effect of an
original violation.
Section 16.10 Rights and Remedies Cumulative. The rights and remedies
provided by this Operating 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.
Section 16.11 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 Operating Agreement, their respective heirs, legal representatives,
successors and assigns.
Section 16.12 Counterparts. This Operating 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.
[The Remainder Of This Page Was Left Blank Intentionally]
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IN WITNESS WHEREOF, the parties hereto have executed this Operating
Agreement as of the 20th day of February, 1997.
MEMBERS:
SHELBY ENERGY GROUP, L.L.C.
By: /s/ Xxxx X. Xxxxxx
-------------------------------
As Its: Manager
/s/ Xxxxxx Xxxx
----------------------------------
Xxxxxx Xxxx
/s/ Xxxxx Xxxxxxxxx
----------------------------------
Xxxxx Xxxxxxxxx
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EXHIBIT A
Name, Address and Capital Contributions
Members Member Capital Contribution Initial Membership
------- and Value as of Effective Time Units
------------------------------ ------------------
Shelby Energy Group, Inc. $940.00 94
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxx Xxxxxxxx 00000
Xxxxxx Xxxx $50.00 5
0000 Xxx Xxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxx 00000
Xxxxx Xxxxxxxxx $10.00 1
0000 Xxx Xxxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxx, Xxxxxxx 00000
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EXHIBIT B
Name, Address and Initial Delayed Contribution
Additional
Member Initial Delayed Membership
Members Contribution and Value Units
------- ---------------------- -----
Shelby Energy Group, L.L.C. $20,000,000, consisting of (i) 2,000,000
0000 Xxxxxxxxx Xxxxxx the assignment of the Third
Xxxxxxxxxx, Xxxx Xxxxxxxx 00000 Amended and Restated Negotiable
time Promissory Note dated
January 21, 1997, of Oak
Mountain Energy Corporation to
Zither Mining to Company, Inc.
in the principal amount of
$8,000,000, as the same may be
hereafter increased from time
(the "Note"), and (ii) an amount
of cash equal to $20,000,000
less (A) the principal amount of
the Note assigned to the Company
under (i) above, (B) accrued but
unpaid interest under the Note,
and (C) all expenses incurred by
Oak Mountain Group, Inc., Shelby
Energy Group, Inc., their
respective parent corporations
and Affiliates in connection
with the Asset Purchase
Agreement executed
contemporaneously herewith, up
to a maximum of $439,000.
Xxxxxx Xxxx Promissory Note in the form of 106,383
0000 Xxx Xxxxxxxx Xxxxx Exhibit C to the Operating
X.X. Xxx 0000 Agreement in the principal
Xxxxxx, Xxxxxxx 00000 amount of $1,063,830.
Xxxxx Xxxxxxxxx Promissory Note in the form of 21,276
0000 Xxx Xxxxxxxx Xxxxx Exhibit C to the Operating
X.X. Xxx 0000 Agreement in the principal
Xxxxxx, Xxxxxxx 00000 amount of $212,760.
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EXHIBIT C
Form of Promissory Note
PROMISSORY NOTE
$_______________ Pelham, Alabama
_____________, 1997
FOR VALUE RECEIVED, ____________________________, an Alabama resident
("Maker"), promises to pay to the order of Oak Mountain Energy, L.L.C., an
Alabama limited liability company ("Holder"), the principal sum of
_________________ and No/100 Dollars ($___________________), together with
accrued interest thereon at the annual rate of __________ percent (__%) on or
before ___________, 19___. Interest shall be calculated on the basis of a
360-day year and the actual number of days elapsed.
Optional Prepayment. The Maker, at its option may prepay this Note in
whole or in part without premium or penalty at any time. Any partial prepayment
shall be applied against the principal amount outstanding and shall not postpone
the due date of any subsequent monthly installment or change the amount of such
installment, unless the Holder shall otherwise agree in writing.
Events of Default. Each of the following shall constitute a default (an
"Event of Default") hereunder: (a) Maker shall fail to make any payment(s) of
principal and/or interest as and when due hereunder, or shall fail to perform or
observe any other covenant or agreement of Maker set forth herein; (b) Maker
shall fail to pay any other sum owed to Holder under any other agreement or
instrument as and when due; (c) any breach by Maker of the terms and provision
of any bank loan agreement to which Maker is party; (d) Maker shall have an
order for relief entered with respect to it or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or shall consent to the entry of an order for relief in an involuntary
case, or to the conversion of an involuntary case to a voluntary case, under any
such law, or shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or any part of its property; (e)
Maker shall make an assignment for the benefit of creditors or the Board of
Directors of Maker (or any committee thereof) shall adopt any resolution or
otherwise authorizes any action to approve any of the foregoing; or (f) an
involuntary case shall be commenced against Maker and the petition shall not be
dismissed within sixty (60) days after commencement of the case, or a court
having jurisdiction in the premises shall enter a decree or order for relief in
respect of Maker in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or any similar
relief shall be granted under any applicable federal or state law; or a decree
or order of a court having jurisdiction in the premises for the appointment of a
receiver, liquidator, sequestrator, trustee, custodian or other officer having
similar powers over Maker, or over all or any part of the property of Maker,
shall be entered; or an interim receiver, trustee or custodian of Maker or of
all or any part of the property of Maker shall be appointed or a warrant of
attachment, execution or similar process against all or any part of the property
of Maker shall be issued and any such event shall not be stayed, dismissed,
bonded or discharged within sixty (60) days of entry, appointment or issuance.
Upon the occurrence of any one or more of the foregoing Events of Default,
the entire unpaid principal sum of this Note and all accrued but unpaid interest
and other charges thereon, shall become immediately due and payable without
notice to or demand upon the undersigned.
Late Penalty. Without in any way limiting (and in addition to) any other
rights or remedies of the Holder under this Note, if any scheduled payment or
installment under this Note is in default ten (10) days or more, Maker agrees to
pay a late charge equal to five percent (5%) of the amount of the payment which
is in default.
Waivers. The undersigned hereby waives as to this Note, and any renewal or
extension hereof, all rights of exemption hereof, all rights of exemption under
the Constitution and laws of Alabama, and of any other state, as to personal
property, and agrees to pay all costs of collecting or securing or attempting to
collect or secure this Note, including reasonable attorneys' fees. Each maker,
endorser, surety and guarantor of this Note severally waives
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notice, demand, dishonor, notice of dishonor, presentment, protest, suit and all
other requirements necessary to hold it or any of them obligated hereon, and
each of them severally agrees that the time of payment may be extended or a
renewal note taken or other indulgence granted without requirement of notice of,
or consent to, such action, and without affecting the obligations of any such
party hereon.
The Holder may accept late payments and partial payments without affecting
the existence of an Event of Default hereunder or its right to insist upon
strict compliance with the terms of this Note with respect to any other or
future payment. The Holder shall not by any act, delay, failure to act or
otherwise be deemed to have waived any of its rights or remedies, and no waiver
of any kind shall be valid unless in writing and signed by the Holder.
Setoff. The Maker shall have the right to setoff against any amounts owed
to the Holder under this Note any amounts for which the Holder is liable to the
Maker under the employment agreement between the Holder and Maker of even date
herewith.
Choice of Law; Severability; Parties Bound. This Note shall be governed by
and construed in accordance with the laws of the State of Alabama without regard
to principles of conflict of laws. Any provision of this Note which may be
unenforceable or invalid under any applicable law shall be void to the extent of
such unenforceability or invalidity without affecting the enforceability or
validity of any other provision hereof. The provisions of this Note are binding
on Maker, his heirs, legal or personal representatives, designees and assigns
and shall inure to the benefit of Holder, his heirs, legal or personal
representatives, designees and assigns.
IN WITNESS WHEREOF, the undersigned has executed this document on the date
first above written.
___________________________________
Name: ___________________
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