Exhibit 10.1

FIRST AMENDED AND RESTATED

OPERATING AGREEMENT

OF

NAUTILUS POPLAR, LLC

THIS FIRST AMENDED AND RESTATED OPERATING AGREEMENT is made and entered into
effective as of October 14, 2009 by and among NAUTILUS TECHINICAL GROUP, LLC, a
Colorado limited liability company (“Nautilus”), WHITE BEAR, LLC, a Montana
limited liability company “White Bear”), YEP I, SICAV-FIS, a Luxembourg entity
(the “Fund”) and EASTERN RIDER, LLC, a Colorado limited liability company
“Eastern”), (each a “Member” and collectively, the “Members”).

RECITALS:

A. The Members formed a limited liability company under the Montana Limited
Liability Company Act (the “Act”) known as Nautilus Poplar, LLC (the “Company”)
by causing Articles of Organization to be filed with the Montana Secretary of
State on December 29, 2006. The Company was formed for the purpose of carrying
on certain businesses and activities permitted for limited liability companies
by the laws of the State of Montana.

B. White Bear, Nautilus and Eastern executed an Operating Agreement for the
Company as of January 1, 2007, as amended by six amendments (“Original Operating
Agreement”).

C. Prior to the date of this Agreement, White Bear assigned a portion of its
Membership Interest in the Company to the Fund and the Fund was admitted as a
Member of the Company.

D. The Members now desire to amend and restate the Original Operating Agreement
in the form of this Amended and Restated Operating Agreement to fully set forth
their agreements and understandings regarding the Company and to own and operate
the Company in accordance with the terms of this Agreement.

IN CONSIDERATION of the foregoing Recitals and the mutual covenants and
agreements contained herein, the parties agree as follows:

ARTICLE 1

DEFINITIONS

The following terms used in this Agreement shall have the following meanings:

1.1 “Act” means the Montana Limited Liability Company Act, as amended from time
to time.

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1.2 “Affiliate” means, with respect to any Person: (a) any Person directly or
indirectly controlling, controlled by or under common control with such Person;
(b) any Person owning or controlling fifty percent or more of the outstanding
voting interests of such Person; (c) any officer, director, general partner or
manager of such Person; or (d) any Person who is an officer, director, general
partner, manager, trustee or holder of fifty percent or more of the voting
interests of any Person described in clauses (a), (b) or (c).

1.3 “Agreement” means this Amended and Restated Operating Agreement of the
Company, as it may be amended from time to time.

1.4 “Approval” of or “Approved by the Members” means except as otherwise
specifically set forth herein, the approval of the holders of more than fifty
percent of the Membership Interests.

1.5 “Articles of Organization” means the Articles of Organization of the
Company, as filed with the Secretary of State of the State of C Montana, as the
same may be amended from time to time.

1.6 “Bankruptcy” means any case, proceeding or other action: (a) seeking
reorganization or rearrangement (under any Chapter of Title 11 of the United
States Code or like provision of any other or succeeding law); (b) where
insolvency is determined by court proceedings; (c) concerning any other
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of a debtor or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors; or (d) commenced by the filing of a
petition to accomplish any of the foregoing.

1.7 “Capital Account” means, with respect to any Member, the Capital Account
maintained for such Member in accordance with the following provisions:

(a) To each Member’s Capital Account there shall be credited such Member’s
Capital Contributions and such Member’s distributive share of income and gain.

(b) From each Member’s Capital Account there shall be debited the amount of cash
and the net fair market value of any property distributed to such Member
pursuant to any provision of this Agreement and such Member’s distributive share
of Losses.

(c) If any Membership Interest in the Company 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 definition and the other provisions of this Agreement relating to the
maintenance of Capital Accounts are intended to comply with Treasury Regulations
in order to give substantial economic effect to all transactions, and shall be
interpreted and applied in a manner consistent with such Treasury Regulations.
If the Manager shall determine that it is prudent to modify the manner in which
the Capital Accounts, or any debits or credits thereto (including, without
limitations, debits or credits relating to liabilities that are secured by
contributed or distributed property or that are assumed by the Company or the
Members), are computed in order to comply with Treasury Regulations, the Manager
may make such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Interest Owner upon the dissolution
of the Company.

 

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1.8 “Capital Contributions” means, with respect to any Member, the amount of
money and the initial net fair market value of any property (other than money)
contributed or required to be contributed to the Company with respect to the
Membership Interests held by such Member. The value of any property other than
money that is contributed to the Company shall be agreed upon in writing by the
contributing Member and the Manager on behalf of the Company; provided, however,
that if the Manager is the contributing Member or an Affiliate of the
contributing Member, then the value shall be determined by the holders of more
than fifty percent of the Membership Interests of the remaining Members. The
Capital Account of the contributing Member will be credited with the amount of
the contribution, net of liabilities encumbering the property at the time of the
contribution.

1.9 “Code” means the Internal Revenue Code of 1986, as amended from time to time
(or any corresponding provisions of succeeding law).

1.10 “Commencement Date” means the date the Articles of Organization were filed
with the Secretary of State of the State of Montana.

1.11 “Company” means Nautilus Poplar, LLC, a limited liability company formed
under the Act.

1.12 “Default Interest Rate” means an annual interest rate equal to five percent
over the Prime Rate or 18 percent per annum whichever is greater.

1.13 “Economic Interest” means the share of Profits or other compensation by way
of income and return of contributions to which an Economic Interest Owner is
entitled to receive pursuant to this Agreement and the Act, but shall not
include any right to participate in the management of the business and affairs
of the Company, including the right to vote on, consent to or otherwise
participate in any decision of the Members.

1.14 “Economic Interest Owner” means the owner of an Economic Interest who is
not a Member.

1.15 “Entity” means any general or limited partnership, corporation, trust,
business trust, limited liability company, joint venture, cooperative,
association or any other entity.

1.16 “Interest” means an Economic Interest or a Membership Interest.

1.17 “Interest Owner” means the owner of an Economic Interest or a Membership
Interest.

1.18 “Manager” means any Person who is Approved by the Members to manage the
business and affairs of the Company on the terms provided in this Agreement and
has not ceased to be a Manager pursuant to the terms of this Agreement.

 

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1.19 “Member” means each of the parties who executes a counterpart of this
Agreement as a Member and each of the parties who hereafter becomes a Member. If
a Person is a Member immediately prior to the purchase or acquisition by such
Person of an Economic Interest, such Person shall have all the rights of a
Member with respect to such acquired Membership Interest or Economic Interest,
as the case may be.

1.20 “Membership Interest” means a Member’s entire interest in the Company,
including the Economic Interest of a Member and such other rights and privileges
that the Member may enjoy by virtue of being a Member, as granted pursuant to
the Articles of Organization, this Agreement or the Act. The Membership
Interests of each of the Members shall be stated as a percentage as provided in
Section 5.1 of this Agreement.

1.21 “Net Cash Flow” means the gross receipts of the Company, less (i) expenses
of earning such receipts, other than depreciation and other non-cash expenses,
(ii) capital expenditures, (iii) payments with respect to any Company
indebtedness in accordance with established payment schedules and loan
agreements, (iv) payment of Company accounts payable or expenses, and (v) any
reasonable Reserves established by the Manager.

1.22 “Permitted Businesses” shall have the meaning set forth in Section 2.3 of
this Agreement.

1.23 “Person” shall have the meaning assigned to it in the Act, and shall
include any natural person and any Entity.

1.24 “Prime Rate” means an annual rate of interest announced as the “prime rate”
by the bank at which the Company from time to time maintains its operating
account (adjusted as of the first day of each calendar quarter) and if such rate
is no longer announced, such other comparable rate as the Manager may reasonably
select; provided, however, in no event shall the Prime Rate or any rate of
interest to be charged under this Agreement which is based upon the Prime Rate
(including, but not limited to, the Default Interest Rate) exceed the maximum
rate of interest permitted by law.

1.25 “Profits” and “Losses” means, for each fiscal year or other period, an
amount equal to the Company’s taxable income or loss for such year or period,
determined in accordance with Code Section 703(a), including all items required
to be separately stated under Code Section 702(a), and specifically including
any tax exempt income or gain and any gain or loss resulting from any
revaluation of assets as permitted by the Treasury Regulations, or any gain or
loss with respect to property whose book value differs from its adjusted tax
basis.

1.26 “Reserves” means, with respect to any fiscal period, funds set aside or
amounts allocated during such period to Reserves which shall be maintained in
amounts deemed sufficient by the Manager for working capital or other costs or
expenses incident to the ownership or operation of the Company’s business.

1.27 “Sales” means the sale or other disposition of an asset of the Company
(other than in the ordinary course of business).

 

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1.28 “Securities Laws” means all applicable securities laws of the United States
or of any State.

1.29 “Sharing Ratio” means (a) with the respect to the Members, the ratio of the
percentage Membership Interest held by a Member to the aggregate percentage
Membership Interests outstanding held by all of the Members, (b) with respect to
the Economic Interest Owners, the ratio of the percentage Economic Interest held
by an Economic Interest Owner to the aggregate percentage Economic Interest
outstanding held by all of the Economic Interest Owners; and (c) with respect to
all Interest Owners, the ratio of the percentage Interest held by an Interest
Owner to the aggregate percentage of Interests held by all of the Interest
Owners.

1.30 “Substituted Member” means any Person admitted to the Company as a Member
in connection with the acquisition of another Member’s Membership Interest
pursuant to the terms of this Agreement.

1.31 “Transfer” means any voluntary or involuntary transfer, sale, pledge,
hypothecation, encumbrance or other disposition or to voluntarily or
involuntarily transfer, sell, pledge, hypothecate, encumber or otherwise dispose
of.

1.32 “Treasury Regulations” means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).

ARTICLE 2

FORMATION AND ORGANIZATION

2.1 Formation and Name of the Company. The parties hereby ratify and approve the
Articles of Organization forming the Company filed with the Montana Secretary of
State on the Commencement Date, and agree that the Company shall be organized
and operated pursuant to and in accordance with the Articles of Organization,
the provisions of this Agreement and the Act.

2.2 Name. The business of the Company shall be operated under the name Nautilus
Poplar, LLC, or such other trade name or names as may be selected by the
Manager, subject to applicable law.

2.3 Permitted Businesses. The business of the Company shall be:

(a) to acquire, own or operate, and from time to time dispose of, oil gas, or
real estate interests of any nature including but not limited to the oil and gas
properties described on Schedule B to this Agreement, and to explore for,
develop and produce oil or natural gas, and to conduct operations incident
thereto;

(b) to form, own and operate one or more limited liability companies or other
entities to carry out the businesses of the Company;

 

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(c) 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 assets;

(d) to exercise all other powers necessary to or reasonably connected with the
Company’s businesses which may be legally exercised by limited liability
companies under the Act; and

(e) to engage in all activities necessary, customary, convenient or incident to
any of the foregoing.

2.4 Principal Place of Business. The principal place of business of the Company
shall be located at 700 East 9th Avenue, Second Floor, Denver, CO 80203. The
Manager may change the principal place of the Company to any other place upon
written notice to the Members.

2.5 Term. The term of the Company commenced on the Commencement Date, and shall
continue until terminated as provided in this Agreement or by operation law.

ARTICLE 3

MEMBERS AND CONTRIBUTIONS

3.1 Members. The names and mailing addresses of the Members of the Company are
as follows:

Nautilus Technical Group, LLC 700

700 East 9th Avenue, Second Floor

Denver, CO 80203

White Bear, LLC

700 East 9th Avenue, Second Floor

Denver, CO 80203

Eastern Rider, LLC

700 East 9th Avenue, Second Floor

Denver, CO 80203

YEPI, SICAV-FIS

c/o YEP Management Sarl

7 rue Thomas Ediscon

L-1445 Strassen

Grand Duchy of Luxembourg

A Member may change its address for all purposes under this Agreement by giving
written notice of such change to the Company and to each of the Manager of the
Company.

 

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3.2 Initial Capital Contributions. The Members have made their initial Capital
Contributions to the capital of the Company as required by the Original
Operating Agreement. The Members Capital Accounts as of the date of this
Agreement are set forth on Schedule A of this Agreement.

3.3 Additional Capital. Upon the written request of the Manager and with the
Approval of the Members, the Members or the Economic Interest Owners may from
time to time be required to collectively make additional contributions of cash,
(the “Additional Contributions”). The Members or Economic Interest Owners shall
pay the Additional Contributions on a pro rata basis in accordance with their
Membership Interests or Economic Interests. The payment of the Additional
Contributions amounts by the Members or Economic Interest Owners shall be due 15
business days after the date that the written request is sent by the Manager to
the Members or Economic Interest Owners. In the event that a Member or Economic
Interest Owner fails to pay its share of an Additional Contribution (the
“Defaulting Owner”), another Member or Economic Interest Owner may elect to pay
such Defaulting Owner’s share of the Additional Contribution (the “Curing
Owner”). If more than one Member of the Company or Economic Interest Owner
elects to pay such Defaulting Owner’s share of the Additional Contribution, such
parties shall participate therein in proportion to their Membership Interests or
Economic Interests. Such Curing Owner or Owners shall be entitled to receive
from the Company out of distributions that would otherwise be paid to the
Defaulting Owner from the oil or gas, property or properties for which such
Additional Contribution is utilized, or if not utilized for a specific oil and
gas property or properties, from all distributions by the Company that would
otherwise be paid to the Defaulting Owner, an amount equal to three times the
amount that the Curing Owners paid on behalf of the Defaulting Owner (the
“Compensation Amount”). Once the Compensation Amount has been paid in full to
the Curing Owners, the Defaulting Owner shall be entitled to receive
distributions and other amounts payable to the Defaulting Owner pursuant to this
Agreement.

3.4 Loans by Members. A Member shall be permitted to make loans to the Company
for use in the Permitted Businesses upon such terms as agreed to by the Manager
and such Member and as approved by a majority in the Membership Interest of the
disinterested Members, provided, however, that in the event that all Members are
offered the opportunity to make loans to the Company on the same terms, pro rata
in accordance with their Membership Interests, the Manager shall be authorized
to borrow from the Members upon such terms as the Manager shall, in its
discretion, determine from time to time.

3.5 Allocations of Profits and Losses and Tax Items.

(a) Allocations. Except as otherwise provided in this Agreement, for each fiscal
year, Profits and Losses of the Company shall be allocated among the Members in
proportion to their respective Sharing Ratios.

(b) Definitions and Special Rules. For purposes of this Agreement, allocations
of income, gain, loss, deduction or credit (or cost of purchased assets or other
amount on which a tax credit is based) of the Company, shall include each
component if such item to be allocated, as determined for purposes of the
Company’s income tax reports and returns. Notwithstanding any other provision of
this Agreement, accounting for the Company’s capital and income, gain, loss,
deductions, credits and distributions shall comply with Section 704 of the Code
and the Treasury Regulations thereunder. Any Company income, gain, loss,
deduction or credit (or cost of

 

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purchased assets or other amount on which a tax credit is based), as initially
determined and allocated for any year, shall be redetermined and reallocated if
necessary to correct any errors, or to reflect the result of any tax audit, or
to take account of other pertinent factors.

(c) Contributed Property. For income tax purposes, and not for the purposes of
Capital Account maintenance, income, gain, loss and deduction with respect to
property contributed to the Company by a Member shall be allocated among the
Members as required by Section 704(c) of the Code and Treasury Regulations
thereunder.

ARTICLE 4

CAPITAL ACCOUNTS

4.1 Separate Capital Accounts. A separate Capital Account will be maintained for
each Member and Economic Interest Owner. Capital Accounts shall be maintained in
a manner corresponding to the capital of the Members and Economic Interest
Owners as reported by the Company for federal income purposes, and in accordance
with the requirements of Treasury Regulation 1.704-1(b)(2)(iv).

4.2 Transfer of Interest. In the event of a permitted sale or exchange of an
Interest in the Company, the Capital Account of the transferor shall become the
Capital Account of the transferee to the extent it relates to the transferee
Interest in accordance with Section 1.7041 (b)(2)(iv) of the Treasury
Regulations.

4.3 Compliance with Code. The manner in which Capital Accounts are to be
maintained pursuant to this Agreement is intended to comply with the
requirements of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder. If in the opinion of the Company’s accountants the
manner in which the Capital Accounts are to be maintained pursuant to this
Article should be modified in order to comply with Section 704(b) of the Code
and the Treasury Regulations, then notwithstanding anything to the contrary
contained in this Article, the method in which Capital Accounts are maintained
shall be so modified; provided, however, that any change in the manner of
maintaining Capital Accounts shall not materially alter the economic agreement
between or among the Members.

4.4 Deficit Balance. Except as otherwise required in the Act (and subject to the
terms of this Article), no Member or Economic Interest Owner shall have any
liability to restore any portion of a deficit balance in such Member’s or
Economic Interest Owners Capital Account.

4.5 Qualified Income Offset. Any Member or Economic Interest Owner who
unexpectedly receives an adjustment, allocation or distribution described in
Treasury Regulations section 1.704-1 (b)(2)(ii)(d)(4), (5) or (6) will be
allocated items of income and gain (consisting of a pro rata portion of each
item of Company income including gross income, and gain for such year) in an
amount and manner sufficient to eliminate any resulting deficit balance as
quickly as possible.

 

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4.6 Non-Recourse Debt. Notwithstanding any other provision of this Agreement, if
there is a net decrease in the Company’s minimum gain as defined in Treasury
Regulations §1.704-2(d) during a taxable year of the Company, then, the Capital
Accounts of each Member shall be allocated items of income (including gross
income) and gain for such year (and if necessary for subsequent years) equal to
that Member’s share of the net decrease in Company minimum gain. This subsection
is intended to comply with the minimum gain charge-back requirement of §1.704-2
of the Treasury Regulations and shall be interpreted consistently therewith. If
in any taxable year that the Company has a net decrease in the Company’s minimum
gain, if the minimum gain charge-back requirement would cause a distortion in
the economic arrangement among the Members and it is not expected that the
Company will have sufficient other income to correct that distortion, the
Members may in their discretion seek to have the Internal Revenue Service waive
the minimum gain charge-back requirement in accordance with Treasury Regulation
§1.704-2(f)(4).

4.7 Limitation on Return of Capital. Each Member or Economic Interest Owner
shall be entitled to recover the amount of such Member’s or Economic Interest
Owner’s Capital Account only at the time or times provided for herein and solely
from the assets of the Company. The Capital Accounts of the Members or Economic
Interest Owners shall not bear interest.

ARTICLE 5

OWNERSHIP AND DISTRIBUTIONS

5.1 Membership Interests. The Membership Interests of the Members are as
follows:

 

Member

   Membership
(Sharing) Interest  

Nautilus

   10.0000 % 

White Bear

   58.3086 % 

Fund

Eastern Rider

   25.1466

6.5448

% 

% 

          100.0000 % 

5.2 Distributions in General. Except for distributions made upon liquidation of
the Company, the Company shall make distributions to its Members at such times
and in such amounts as the Manager shall determine. Distributions shall be made
to Members in proportion to their respective Sharing Interests as of the date of
the distribution. All amounts withheld pursuant to the Code or any provisions of
state or local tax law with respect to any payment or distribution to the
Members from the Company shall be treated as amounts distributed to the relevant
Member pursuant to this Section. The Manager shall utilize its good faith best
efforts each year to make distributions which are not less than the Members’ and
Economic Interests Owners’ income tax liabilities with respect to the taxable
income of the Company for such year.

5.3 Limitation on Distributions. No Member has any right to demand or receive
distributions in any form other than cash. The Manager may, in its discretion,
make distributions in cash or in kind, or partially in each, provided that no
Member shall be compelled to accept a distribution of any asset in kind to the
extent that the percentage of the asset distributed to such Member exceeds the
Percentage Interest of such Member.

 

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5.4 Net Cash Flow. In determining whether to make a distribution and the amount
of any non-liquidating distribution, the Manager may consider, among other
relevant factors, the Company’s Net Cash Flow. The determination of Net Cash
Flow shall be made in accordance with the same accounting principles as are used
in keeping with the Company’s books and preparing its tax returns.

5.5 Restriction Upon Distributions. No distributions shall be declared and paid
unless, after the distribution is made, the assets of the Company are in excess
of all liabilities of the Company, excluding liabilities to Members and Economic
Interest Owners on account of their Capital Accounts.

ARTICLE 6

MEMBERS

6.1 Limitation of Liability. Each Member’s liability shall be limited as set
forth in this Agreement, the Act and other applicable law.

6.2 Company Debt Liability. Except as may be separately agreed, a Member will
not be personally liable for any debts or losses of the Company beyond its
respective Capital Contributions and any obligation of the Member under this
Agreement to make Capital Contributions, except as provided in Section 3.4
herein or as otherwise required by law.

6.3 Company Books. The Manager shall maintain and preserve, during the term of
the Company, and for five years thereafter, all accounts, books and other
relevant Company documents. Upon reasonable request, each Member and Economic
Interest Owner shall have the right during ordinary business hours, to inspect
and copy such Company documents at the expense of the requesting Member and
Economic Interest Owner.

6.4 Priority and Return of Capital. Except as may be expressly provided in this
Agreement, no Member shall have priority over any other Member, either as to the
return of Capital Contributions or as to Net Profits, Net Losses or any
distributions; provided that this Section shall not apply to loans (as
distinguished from Capital Contributions) which a Member may make to the
Company.

6.5 Liability of a Member to the Company. A Member who receives any distribution
is liable to the Company only to the extent now or hereafter provided by the
Act.

ARTICLE 7

MEETINGS

7.1 Annual Meeting. An annual meeting of the Members may be held at such time
and date as may be fixed by the Manager. The annual meeting of the Members shall
be held for the purpose of electing or reelecting the Manager and for the
transaction of such other business as may come before the meeting.

 

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7.2 Failure to Hold Annual Meeting. If any election of the Manager shall not be
held on the day designated by the Manager for any annual meeting of the Members
or at an adjournment thereof, then upon the call for such an election by any
Member, the Manager shall cause the annual meeting or election to be held at a
special meeting of the Members as soon thereafter as may be convenient. Failure
to hold the annual meeting or election at the designated time shall not work a
forfeiture or dissolution of the Company.

7.3 Special Meeting. Special meetings of the Members may be called by the
Manager or by Members owning not less than one-tenth of the votes entitled to
vote at the meeting.

7.4 Place of Meeting. The Manager may designate any place, either within or
outside Colorado, as the place for any annual meeting or for any special meeting
of Members. If no designation is made, or if a special meeting shall be called
otherwise than by a Manager, the place of meeting shall be the principal place
of business of the Company in Colorado.

7.5 Notice of Meeting. Written notice stating the place, day and hour of the
meeting, and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten nor more than fifty
days before the date of the meeting, either personally or by mail, by or at the
direction of the Manager or the Members calling the meeting, to each Member of
record entitled to vote at such meeting. If mailed, such notice shall be deemed
to be delivered as to any Member when deposited in the United States mail,
addressed to the Member at his address as it appears on the membership records
of the Company, with postage thereon prepaid, but if three successive letters
mailed to the last known address of any Member are returned as undeliverable, no
further notices to such Member shall be necessary until another address for such
Member is made known to the Company.

7.6 Quorum. The presence in person or by proxy of Members holding collectively
more than fifty percent of the Membership Interests entitled to vote shall
constitute a quorum of Members at any meeting of Members. In the absence of a
quorum at any such meeting, a majority of the Membership Interests present at
the meeting may adjourn the meeting for a period not to exceed sixty days at
anyone adjournment. At such adjourned meeting at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal of enough Members to leave less than a quorum.

7.7 Number of Votes. Except as may be set forth in the Act, each Member shall be
entitled to cast one vote for each of one percent Membership Interest in the
Company owned by such Member. Upon the Transfer of an Economic Interest separate
and apart from a Membership Interest, all voting rights that were previously
appurtenant to such Interest shall terminate.

7.8 Manner of Acting. If a quorum is present, the affirmative vote of Members
holding more then fifty percent of the Membership Interests shall be the
Approval of the Members, unless the vote of a greater or lesser proportion,
number or voting per capita or by classes is required by the Act.

 

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7.9 Consultation. Any Member which alone or together with its Affiliates holds
more than fifty percent of the Membership Interests shall make a reasonable
effort to consult with the other Members prior to approving any action which has
a material effect on the Company and its businesses.

7.10 Proxies. At all meetings of Members, a Member may vote by proxy executed in
writing by the Member or the Member’s duly authorized attorney-in-fact. Such
proxy shall be filed with any Manager before or at the time of the meeting. No
proxy shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.

7.11 Informal Action by Members. Any action required or permitted to be taken at
a meeting of the Members may be taken without a meeting if the action is
evidenced by one or more written consents, setting forth the action so taken,
signed by Members holding an aggregate amount of Membership Interests sufficient
to have approved such action at a meeting of Members. Such consent shall have
the same force and effect as a vote of the Members, and may be stated as such in
any document. Action taken under this Section shall be effective when all
Members have signed the consent, unless the consent specifies a different
effective date.

7.12 Waiver of Notice. When any notice is required to be given to any Member,
waiver thereof in writing signed by the party entitled to such notice, whether
before, at or after the time of the meeting stated in the notice, shall be
equivalent to the giving of such notice.

7.13 Voting by Entities and Successors.

(a) Corporations. Membership Interests standing in the name of a corporation may
be voted by such officer, agent or proxy as the bylaws of such corporation may
prescribe, or in the absence of such provision, as the board of directors of
such corporation may determine.

(b) Trusts. Membership Interests owned in the name of a trust may be voted by
any trustee of the trust, and Membership Interests in the name of a trustee may
be voted by such trustee or any successor.

(c) Limited Liability Companies and Partnerships. Membership Interests standing
in the name of a limited liability company or a partnership may be voted by such
manager or general partner, respectively, or agent as the operating agreement or
partnership agreement may prescribe, or in the absence of such provision, as the
Manager or partners, as the case may be determine.

(d) Joint Members. Membership Interests held jointly by more than one Person,
whether held as joint tenants, tenants in common or otherwise shall be voted by
anyone of the joint Members and, if there is a disagreement between the joint
Members, according to such instructions as previously given to the Company,
provided such instructions are in writing and signed by all of the joint
Members. Absent such instructions, in the event of a disagreement, the joint
Members will vote the jointly held Membership Interests proportionately.

(e) Successors. Except as provided in paragraph (c) above, no successor to any
Member’s Membership Interest, and no receiver or pledge or person holding a
security interest in or lien on a Membership Interest shall have any right or
standing to vote such interests, unless admitted as a Member of the Company.

 

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ARTICLE 8

MANAGER

8.1 General Powers. The business and affairs of the Company shall be managed by
its Manager. Subject only to the limitations provided in the Act, the Company’s
Articles of Organization or this Agreement, and subject to the right of the
holders of more than fifty percent of the Membership Interests to disapprove any
act, the Manager 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. If
there is more than one Manager, the Managers shall act by a majority of the
Managers then serving.

8.2 Authority of Manager. Without limiting the generality of Section 8.1, the
Manager shall have power and authority, on behalf of the Company.

(a) To purchase liability and other insurance to protect the Company’s property
and business;

(b) To hold and own any real and personal properties of the Company only in the
name of the Company;

(c) 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;

(d) With the Approval of the Members, to sell or otherwise dispose of all or
substantially all of the assets of the Company as part of a single transaction
or plan so long as such disposition is not in violation of or a cause of a
default under any other agreement to which the Company may be bound that is not
subject to and by payment of the proceeds of such transaction; provided,
however, that the Approval of the Members shall not be required with respect to
any sale or disposition of an immaterial portion of the Company’s assets in the
ordinary course of the Company’s business;

(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 or convenient, in the opinion of the Manager,
to the business of the Company;

(f) To employ accountants, legal counsel, managing agents or other experts to
perform services for the Company and to compensate them from Company funds;

 

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(g) To enter into any and all other agreements on behalf of the Company, with
any other Person for any purpose, in such forms as the Manager may approve;

(h) To file an election under Section 754 of the Code to apply the provisions of
Sections 734(b) and 743(b) of the Code with respect to the adjustment of the
Members’ basis; and

(i) To do and perform all other acts as may be necessary or appropriate to the
conduct of the Company’s business.

8.3 Restrictions on Authority of the Manager. No Manager shall have the
authority to, and each Manager covenants and agrees that it shall not take or do
any of the following acts without the Approval of the Members:

(a) Cause or permit the Company to engage in any activity that is not consistent
with the purposes of the Company as set forth in this Agreement;

(b) Obligate the Company to acquire any interest in any oil and gas properties
or any other real estate;

(c) Borrow money for the Company from banks, other lending institutions, the
Manager, Members, or Affiliates of the Manager or Members or in connection
therewith, to hypothecate, encumber and grant security interests in the assets
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 by the
Manager, 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 Manager;

(d) Knowingly do any act in contravention of this Agreement;

(e) Without the Approval of the Members, knowingly do any act which would make
it impossible to carry on the ordinary business of the Company, except as
otherwise provided in this Agreement;

(f) Confess a judgment against the Company in an amount in excess of $2,500.00;

(g) Possess property, or assign rights in specific property, for other than a
Company purpose;

(h) Without the Approval of the Members, knowingly perform any act that would
cause the Company to conduct business in a state which has neither enacted
legislation which permits limited liability companies to organize in such state
nor permits the Company to register to do business in such state as a foreign
limited liability company;

(i) Cause the Company to voluntarily take any action that would cause a
bankruptcy of the Company;

 

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(j) Cause the Company to acquire any equity or debt securities of any Member or
any of its Affiliates, or otherwise make loans to any Member or any of its
Affiliates;

(k) Cause the Company to admit any additional Members other than pursuant to the
terms of this Agreement;

(l) Cause the Company to incur any liabilities in any transaction in excess of
$100,000.00;

(m) Cause the Company to make any capital expenditure in any single transaction
in excess of $100,000.00; or

(n) Sell or otherwise dispose of all or substantially all of the Company’s
assets other than immaterial assets in the ordinary course of the Company’s
business, except for a liquidating sale in connection with the dissolution of
the Company.

8.4 Appointments of Agents. Unless authorized to do so by this Agreement or by
the Manager, 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 tender it liable pecuniarily for any purpose. No Member shall have any
power or authority to bind the Company in its capacity as a Member unless the
Member has been authorized by the Manager to act as an agent of the Company in
accordance with the previous sentence.

8.5 Number and Qualifications. Each Manager shall hold office until the next
annual meeting of Members, and thereafter until such Manager’s successor shall
have been elected and qualified. Notwithstanding anything to the contrary set
forth in this Agreement, by the Approval of the Members, preceded by
consultation as set forth in Section 7.9 above, any Manager may at any time be
removed as such and its successor elected.

8.6 Performance of Duties. The Manager shall perform its duties as a Manager in
good faith, in a manner reasonably believed 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. The Manager shall devote such time,
knowledge and skill to the business of the Company as the Manager deems
reasonably necessary to conduct the business of the Company.

8.7 Reliance on Advisors. In performing its duties, the Manager shall be
entitled to rely on information, opinions, reports or statements, including
financial statements and other financial data, in each case prepared or
presented by the following persons and group:

(a) One or more employees or other agents of the Company whom the Manager
reasonably believes to be reliable and competent in the matters presented;

(b) Any attorney, public accountant, or other person as to matters which the
Manager reasonably believes to be within such person’s professional or expert
competence;

Notwithstanding the foregoing, a Manager shall not be considered to be acting in
good faith if such Manager has knowledge concerning the matter in question that
would cause such reliance to be unwarranted.

 

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8.8 Vacancies. Any Manager vacancies occurring shall be filled by the Approval
of the Members.

8.9 Removal of Managers. At a meeting expressly called for that purpose, any
Manager may be removed, with or without cause, by the Approval of the Members.
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 termination as a Member.

8.10 Compensation. No Manager or Member shall be paid any compensation by the
Company except pursuant to a written agreement between such party and the
Company, which agreement is approved by Members.

8.11 Overhead. Nautilus shall be reimbursed for its general overhead costs in
acting as the Manager pursuant to the budget therefor set forth on Schedule B to
this Agreement.

8.12 Liability and Indemnification of Manager. The management, conduct and
operation of the Company’s business shall be at the expense and risk of the
Company and not at the expense or risk of any Manager. No Manager shall be
liable, responsible or accountable in damages or otherwise to the Company or any
Member for any action taken or failure to act (even if such action or failure to
act constitute simple negligence) on behalf of the Company within the scope of
the authority conferred on the Manager by this Agreement or by law, unless such
act or omission was performed or omitted fraudulently, in bad faith or
constituted gross negligence. The Manager shall be entitled to indemnification
by the Company from liabilities for damages to the maximum extent permitted
under the Act.

ARTICLE 9

ADMINISTRATION

9.1 Business Opportunity. Within the area of mutual interest described on
Schedule B hereto (the “Area of Mutual Interest”), no Manager, Member or
Economic Interest Owner shall be free or have the right to engage in and receive
the benefit of any and all other oil and gas and related business ventures of
any sort whatsoever, whether or not competitive with the business of the
Company, without obtaining the consent of the disinterested Members holding more
than fifty percent of the Membership Interests in the Company of such
disinterested Members. Upon the Approval of the Members, the Area of Mutual
Interest may be expanded, reduced or otherwise altered. Outside of the Area of
Mutual Interest, each Manager, Member or Economic Interest Owner shall have the
free and unrestricted right to engage in and receive the full benefit of any and
all other business ventures of any sort whatsoever, whether or not competitive
with the business of the Company, without consulting the others or inviting the
Company or other Members to participate therein. Outside of the Area of Mutual
Interest, (i) the Members acknowledge that each Member and Manager at this time
and from time to time hereafter is engaged on a continuous basis in other
business enterprises, both similar and dissimilar to those undertaken by the
Company and (ii) The legal doctrine of “business opportunity,” sometimes applied
to persons occupying a partnership, joint venture or other fiduciary status, so
as to prevent such persons from engaging in or enjoying the benefits of
competing ventures within the general scope of the business carried on by such
fiduciary for another, shall not be applied in the case of any activity, venture
or business enterprise of any Manager, Member or Economic Interest Owner of the
Company.

 

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9.2 Bank Accounts. The Manager shall have the right to establish Company bank
accounts on such signature or signatures as it deems to be in the best interests
of the Company. All funds of the Company not otherwise employed shall be
deposited from time to time to the credit of the Company in such depositories as
the Manager may select.

9.3 Accounting Period. The Company’s accounting period shall be the calendar
year.

9.4 Records and Reports. At the expense of the Company, the Manager shall
maintain records and accounts of all operations and expenditures of the Company.
The Company shall keep at .its principal place of business such records as
required pursuant to the Act together with all other business records of the
Company.

9.5 Returns and Other Elections. The Manager shall cause the preparation and
timely filing of all tax returns required to be filed by the Company pursuant to
the United States, state and local tax laws, and all other tax returns deemed
necessary and required in each jurisdiction in which the Company does business.
Copies of such returns or pertinent information therefrom shall be furnished to
the Members within a reasonable time after the end of the Company’s fiscal year.
All elections permitted to be made by the Company under any federal state or
local tax laws shall be made by the Manager as it shall deem to be in the best
interests of the Company, provided that the Manager shall in all events make any
tax election which has been approved by the Members.

9.6 Tax Matters Member. If required under the Code, Nautilus shall be the ‘tax
matters partner” of the Company, as defined in the Code, and shall be
indemnified and held harmless by the Company for acting in such capacity to the
maximum extent permitted under the Act.

ARTICLE 10

TRANSFER OF MEMBERSHIP INTERESTS

10.1 Prohibition Against Transfer. No Transfer of all or any portion of a
Membership Interest in the Company, whether by sale, gift, bequest, legacy,
devise, descent, assignment or otherwise, including Transfers by operation of
law and Transfers by reason of levy, sequestration, foreclosure, execution,
bankruptcy or otherwise, and whether made voluntarily, shall be valid or
effective unless made in accordance with the provisions of this Agreement.
Notwithstanding any provision of this Article 10, any Member may transfer all or
a portion of its Membership Interest to a parent or wholly-owned subsidiary
without the consent of any Member, free from the terms and conditions of this
Article 10 and any such transferee shall be admitted as a Member of the Company
(“Permitted Affiliate Transfer”).

10.2 Transfers to Non-Members. No Member may Transfer any part of such Member’s
interest in the Company to a person or entity that is not a Member immediately
prior to the Transfer and have the transferee admitted as a substituted Member
in respect of such interest without the prior approval of the disinterested
Members holding more than fifty percent of the Membership Interests held by such
Members. No additional Member shall be admitted to the Company except with the
prior approval of the Members.

 

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10.3 Conditions to Transfers. All Transfers of Membership Interests must comply
with all the following terms and conditions (the “Transfer Conditions”):

(a) except in the case of a Transfer resulting from an Involuntary Transfer (as
such term is hereinafter defined in Section 13.1), upon the request of the
Company, the transferor, at transferor’s expense, shall furnish to the Company
and opinion of counsel, which counsel and opinion shall be satisfactory to the
Company, that the Transfer will not cause the Company to terminate for federal
income tax purposes pursuant to Section 708 of the Code;

(b) the transferor and transferee shall furnish the Company with the
transferee’s taxpayer identification number and sufficient information to
determine the transferee’s initial tax basis in the Membership Interest
transferred;

(c) the transferor and the transferee comply with the terms of this Agreement
relating to Securities Laws; and

(d) except in the case of a Transfer of a Membership Interest resulting from an
Involuntary Transfer (as such term is hereinafter defined in Section 13.1)
either: (i) such Membership Interest shall be registered under any applicable
Securities Laws; or (ii) the transferor shall provide an opinion of counsel,
which opinion and counsel shall be satisfactory to the Company, to the effect
that such Transfer is exempt from all applicable registration requirements and
that such Transfer will not violate any applicable laws regulating the Transfer
of securities.

In no event shall all or any part of an Interest in the Company be transferred
to a minor or an incompetent. Notwithstanding the satisfaction of the Transfer
Conditions, a transferee shall not be admitted as a Substituted Member unless
all of the conditions to such admission as set forth in this Agreement are also
satisfied.

10.4 Prohibited Transfers. Any purported Transfer of Membership Interest that is
in contravention of any of the provisions of this Agreement or does not satisfy
all of the Transfer Conditions shall be null and void and of no effect whatever;
provided, however, that, if the Company is required to recognize a Transfer that
does not comply with the Transfer Conditions or if the Company in its sole
discretion elects to recognize a Transfer that does not comply with the Transfer
Conditions, the transferee shall be an Economic Interest Owner and not a Member.
The parties engaging or attempting to engage in a Transfer or attempted Transfer
of an Interest that does not comply with this Agreement, including, but not
limited to, the Transfer Conditions, shall indemnify and hold harmless the
Company and the other Members from all cost, liability, and damage, that any of
such parties may incur (including, without limitation, incremental tax liability
and reasonable attorney fees and expenses) as a result of such Transfer or
attempted Transfer and efforts to enforce the indemnity granted hereby.

 

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10.5 Admission of Transferees as Members. Subject to the other provisions of
this Article, a transferee of a Membership Interest may be admitted to the
Company as a Substituted Member only upon satisfaction of all of the following
conditions:

(a) Members holding more than fifty percent of the Membership Interests in the
Company held by the disinterested Members approve to such admission;

(b) The Membership Interest with respect to which the transferee is being
admitted was acquired by means of a Transfer which satisfied the Transfer
Conditions;

(c) The transferee becomes a party to this Agreement as a Member and executes
such documents and instruments as the Manager may reasonably request as
necessary or appropriate to confirm such transferee as a Member in the Company
and such transferee’s agreement to be bound by the terms and conditions of this
Agreement; and

(d) The transferee pays or reimburses the Company for all legal, filing, and
publication costs that the Company incurs in connection with the admission of
the transferee as a Member.

Upon the admission of the Substituted Member, the records of the Company shall
be amended to reflect the name and address of such Substituted Member and to
eliminate the name and address of the transferor Member.

10.6 Complete Assignment by Member. Any Member who shall assign all its Interest
in the Company shall cease to be a Member of the Company, and shall no longer
have any rights or privileges of a Member; provided that, unless and until the
transferee of such Member is admitted to the Company as a Substituted Member in
accordance with this Agreement, the assigning Member (a) shall retain the
statutory rights and be subject to the statutory obligations of a transferring
Member under the Act, and (b) shall continue to be liable for all of his
obligations hereunder, including the obligation to make contributions to the
Company which were required under this Agreement as of the date of the Transfer.

10.7 Distributions and Allocations. If any Interest is Transferred during any
accounting period in compliance with the provisions of this Agreement, Profits,
Losses and each item thereof, and all other items attributable to such Interest
for such period shall be divided and allocated between the transferor and the
transferee by taking into account their varying interests during the period,
using any conventions permitted by law and selected by the Manager. All
distributions on a before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Neither the Company nor the Manager shall incur any liability for making
allocations and distributions in accordance with the provisions of this Section,
whether or not the Manager, Member or the Company has knowledge of any Transfer
of ownership or any interest.

10.8 Representations. Each Member now or hereafter acquiring a Membership
Interest hereby covenants and agrees with the Company for the benefit of the
Company and all Members that (a) he is not currently making a market in
Membership Interests and will not in the future make a market in Membership
Interests; and (b) he will not Transfer any Membership Interest on an
established securities market or a secondary market (or the substantial
equivalent thereof) within the meaning of Code Section 7704(b) (and any

 

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regulations, proposed regulations, revenue rulings, or other official
pronouncements of the Internal Revenue Service or Treasury Department that may
be promulgated or published thereunder). Each Member further agrees that he will
not Transfer any Membership Interest to any Person unless such Person agrees in
writing to be bound by this Section and to Transfer such Membership Interest
only to Parties who agree in writing to be similarly bound.

10.9 Transfer by White Bear and the Fund. The Company and each Member hereby
consents to (i) the Transfer by White Bear and the Fund to Magellan Petroleum
Corporation or its Affiliate (“MPC”) of up to all of the Membership Interest
held by White Bear and the Fund and (ii) the admission of MPC as a Member of the
Company. Further, and without limitation of the foregoing, the Member and the
Company irrevocably waive any right of first refusal under this Agreement with
respect to the transfer of any Membership Interest by the fund or White Bear to
MPC.

ARTICLE 11

RIGHT OF FIRST REFUSAL

11.1 Third Party Offer. Except as provided in the last sentence of Section 10.1,
a Member (the “Selling Member”) may transfer all or any portion of his
Membership Interest to a third party only if (a) the Transfer is pursuant to a
bona fide written offer to purchase (“Third Party Offer”) from a third party,
(b) the purchase price is to be paid in all cash or part cash and the remainder
by a promissory note secured by the applicable Economic Interest, and (c) such
portion of the Selling Member’s Membership Interest is first offered to the
Company and the other Members on the terms and conditions set forth in this
Article.

11.2 Offer to the Company. If the Selling Member desires to accept such a Third
Party Offer, the Selling Member shall first make a written offer (the “Offer”)
to sell its Membership Interest to the Company on the same terms and conditions
on which the Selling Member proposes to Transfer its Membership Interest, which
Offer shall be accompanied by a copy of the Third Party Offer, which will state
the name of the proposed transferee (the “Transferee”) and all of the terms and
conditions of the proposed Transfer, including the price stated in dollars, to
be paid by the Transferee and the manner of payment.

11.3 Option to Purchase. The Company shall have the right for a period of thirty
days after receipt of the Offer to elect to purchase all, but not less than all,
of the Membership Interest so offered by the Selling Member by giving written
notice of this election to the Selling Member. In order for the Company to elect
to purchase the Selling Member’s Membership Interest, disinterested Members
holding more then fifty percent of the Membership Interests of such
disinterested Members must approve the purchase. In such event, the purchase
shall be closed and payment made on the same terms and conditions as set forth
in the Offer. If the Company declines to purchase the Selling Member’s
Membership Interest, the Selling Member shall be obligated to make the same
Offer to the remaining Members in accordance with the terms and provisions of
Section 11.2 of this Agreement. The remaining Members shall have the right for a
period of thirty days after receipt of the Offer to elect to purchase all, but
not less than all, of the Membership Interests so offered by the Selling Member
by giving written notice of such election to the Selling Member. In such event,
the purchase shall be closed and payment made on the same terms and conditions
as set forth in the Offer. Unless otherwise

 

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agreed, if more than one remaining Member elects to purchase, the remaining
Members so electing shall purchase the Selling Member’s Membership Interest in
proportion to their respective Sharing Ratios.

11.4 Right to Sell. If the Company and the remaining Members do not elect to
purchase all of the Selling Member’s Membership Interest offered, then they
shall be deemed to have elected to purchase none of the Membership Interest, and
the Selling Member may Transfer its Membership Interest to the Transferee on the
same terms and conditions as set forth in the Third Party Offer (except for
immaterial changes to the Offer which are no more favorable to the Transferee
than the terms set forth in the Offer). Any Transfer made to a Transferee shall
not be effective unless it also compiles with all of the other terms of this
Agreement relating to the Transfer of Membership Interests, and the Transferee
shall not become a Substituted Member unless so admitted pursuant to the terms
of this Agreement. If the Transfer to the Transferee is not made within sixty
days after the remaining Members’ right to purchase has terminated, and the
Selling Member desires to Transfer its Membership Interest, such Transfer shall
be made only after again complying with the terms of this Article.

11.5 Permitted Affiliate Transfer. Any Permitted Affiliate Transfer shall not be
subject to the terms of this Article 11.

ARTICLE 12

TRANSFERS OF ECONOMIC INTEREST

12.1 Restriction on Transfers -Generally. Economic Interest Owners shall be
subject to the same restrictions and conditions with respect to the Transfer of
the Economic Interests as are applicable to Members intending to Transfer
Membership Interests. All Transfers of Economic Interests must comply with all
of the Transfer Conditions, and any purported Transfer of an Economic Interest
that is in contravention of any of the provision of this Agreement or does not
satisfy all of the Transfer Conditions shall be null and void and of no effect
whatsoever.

12.2 Third Party Offer. An Economic Interest Owner (the “Selling Owner”) may
Transfer all or any portion of his Economic Interest to a third party only if:
(a) the transfer is pursuant to a bon fide written offer to purchase (“Bona Fide
Offer”) from a third party, (b) the purchase price is to be paid in all cash or
part cash and the remainder by a promissory note secured by the applicable
Economic Interest, and (c) such portion of the Selling Owner’s Economic Interest
is first offered to the Company and the other Members on the terms and
conditions set forth in this Article.

12.3 Offer to the Company. If the Selling Owner desires to accept such a Bona
Fide Offer, the Selling Owner shall first make a written offer (the “Written
Offer”) to sell its Economic Interest to the Company on the same terms and
conditions on which the Selling Owner proposes to Transfer its Economic
Interest, which Written Offer shall be accompanied by a copy of the Bona Fide
Offer which will state the name of the proposed transferee (the “Economic
Interest Transferee”) and all of the terms and conditions of the proposed
Transfer, including the price, stated in dollars to be paid by the Economic
Interest Transferee and the manner of payment.

 

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12.4 Option to Purchase. The Company shall have the right for a period of thirty
days after receipt of the Written Offer to elect to purchase all, but not less
than all, of the Economic Interest so offered by the Selling Owner by giving
written notice of this election to the Selling Owner. In order for the Company
to elect to purchase the Selling Member’s Economic Interest, disinterested
Members holding more then fifty percent of the Membership Interests of such
disinterested Members taken as a whole must consent to the purchase. In such
event, the purchase shall be closed and payment made on the same terms and
conditions as set forth in the Written Offer. If the Company declines to
purchase the Selling Member’s Economic Interest, the Selling Owner shall be
obligated to make the same Offer to the remaining Members in accordance with the
terms and provisions of Section 12.3 of this Agreement. The remaining Members
shall have the right for a period of thirty days after receipt of the Offer to
elect to purchase all, but not less than all, of the Economic Interests so
offered by the Selling Owner by giving written notice of this election to the
Selling Owner. In such event, the purchase shall be closed and payment made on
the same terms and conditions as set forth in the Written Offer. Unless
otherwise agreed, if more than on Member elects to purchase, the Members so
electing shall purchase the Economic Interest so offered in proportion to their
respective Sharing Ratios.

12.5 Right to Sell. If the Company and the remaining Members do not elect to
purchase all of the Selling Owner’s Economic Interest, then they shall be deemed
to have elected to purchase none of the Economic Interest, and the Selling Owner
may Transfer its Economic Interest to the Economic Interest Transferee on the
same terms and conditions as set forth in the Third Party Offer (except for
immaterial changes to the Offer which are no more favorable to the Transferee
than the terms set forth in the Offer). Any Transfer made to an Economic
Interest Transferee shall not be effective unless it also complies with all the
other terms of this Agreement relating to the Transfer of Economic Interests. If
the Transfer to the Economic Interest Transferee is not made within sixty days
after the remaining Members’ right to purchase has terminated, and the Selling
Owner desires to Transfer its Economic Interest, such Economic Transfer shall be
made only after again complying with the terms of this Article.

ARTICLE 13

DEATH, DISSOLUTION OR BANKRUPTCY

13.1 Involuntary Transfer Event. Upon the death, legal incapacity, bankruptcy,
dissolution of marriage or dissolution of a Member (the “Transferring Member”)
which results in any of the interest of the Transferring Member being
Transferred (hereinafter referred to as an “Involuntary Transfer”), the legal
representatives or other successor to such Transferring Member shall have the
same status as an assignee of the Member who is not a Member unless and until
the Members shall permit such legal representative or other successor to become
a Substituted Member on the same terms and conditions as herein provided for
assignees generally. The date an Involuntary Transfer occurs is referred to
herein as the “Transfer Date.” A natural person shall be deemed to be
incapacitated if it is judicially determined that the Person is under a legal
disability by reason of incapacity, insanity or incompetence. The occurrence of
an involuntary Transfer relating to a Member shall not dissolve the Company. The
dissolution of the marriage of a Member will be an Involuntary Transfer only if
the former spouse of the Member is awarded or otherwise obtains any Interest in
the Company.

 

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13.2 Mandatory Sale. Upon the occurrence of an Involuntary Transfer relating to
any Transferring Member, or upon the termination of a party’s status as the
Manager, the Company and then the other Members (the “Remaining Members”) shall
have the option, but not the obligation, to purchase all or any portion of the
Interest of the Transferring Member or the Manager on the terms and conditions
set forth in this Article. The term Transferring Member shall include the legal
representative of the estate of a deceased Member and any other successor to a
Transferring Member. If the Company declines to purchase all or a portion of the
Transferring Member’s or Manager’s Interest, the Remaining Members shall have
the right for a period of thirty days from the date of the Company’s election
not to purchase to elect to purchase all or such portion of the Interest of the
Transferring Member or the Manager by giving written notice of such election to
the Transferring Member or the Manager. Unless otherwise agreed, if more than
one Remaining Member elects to purchase, the Remaining Members so electing shall
purchase the Transferring Member’s or the Manager’s Interest in proportion to
their respective Sharing Ratios.

13.3 Purchase Price. The purchase price for the Interest of the Transferring
Member or the Manager (the “Purchase Price”) shall be equal to the fair market
value of the Company’s assets owned by, and attributable to, the Membership
Interest of the Transferring Member or the Manager as of the end of the fiscal
quarter of the Company immediately preceding the Transfer Date. The fair market
value of the Company’s assets shall be determined in accordance with the
following procedures: (i) proved developed producing oil and gas reserves shall
be valued by an independent engineering firm selected by the Manager using the
PV-10 methodology (future net revenues discounted to present value using a ten
percent interest rate); (ii) proved undeveloped and proved developed
non-producing oil and gas reserves shall be valued by the same independent
engineering firm using the same methodology with the result thereon being then
reduced by fifty percent; (iii) probable reserves shall not be assigned any
value; and (iv) the remainder of the Company’s assets, less liabilities, shall
be valued at their respective book values. In determining the Purchase Price to
be paid to the Transferring Member or the Manager the parties shall then apply
to the foregoing amounts the Transferring Member’s or the Manager’s Sharing
Ratio.

13.4 Payment of Purchase Price. The Purchase Price of the Member’s or the
Manager’s Membership Interest under this Article XIII shall be paid, commencing
thirty days following the determination of the Purchase Price, in equal
quarterly installments of principal and interest (using the Prime Rate
determined at the time of purchase) over a period of five years.

13.5 Actions at Closing. At the closing of the purchase and sale of the
Transferring Member’s or the Manager’s Interest which shall occur thirty days
after the determination of the Purchase Price, (a) the Transferring Member or
the Manager shall execute an assignment of such interest free and clear of all
items and encumbrances, and (b) the Company or the Remaining Members, as
applicable, shall execute a note payable to the Transferring Member or the
Manager evidencing the obligation to pay the Purchase Price. The obligation to
pay the Purchase Price shall be secured by a security interest granted in the
purchased Membership Interest. The parties shall execute a security agreement
and financing statement and take such other actions as may be necessary to
perfect such security interest.

 

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13.6 Company Decisions. All decisions on behalf of the Company under this
Article shall be made by the holders of more than fifty percent of the
Membership Interests held by the disinterested Members.

ARTICLE 14

COMPLIANCE WITH SECURITIES LAWS

14.1 No Registration. Each Interest Owner understands that the Interests
evidenced by this Agreement have not been registered under the Securities Laws
because the Company is issuing these Interests in reliance upon exemption from
the registration requirements of the Securities Laws providing for issuance of
securities not involving a public offering: the Company has relied upon the fact
that the Interests are to be held by each Member and Economic Interest Owner for
investment; and exemption from Securities Laws would not be available if the
Interests were acquired by an Interest Owner with a view to distribution.

14.2 Investment Representation. Each Interest Owner hereby confirms to the
Company that such Interest owner is acquiring the Interest for such own Interest
Owner’s account, for investment and not with a view to the resale or
distribution thereof. Each Interest Owner agrees not to transfer, sell or offer
for sale any portion of the Membership Interest or Economic Interest unless
there is an effective registration or other qualification relating thereto under
all applicable Securities Laws, or unless the Interest Owner delivers to the
Company a legal opinion from a law firm, and in a form, reasonably acceptable to
the Company stating that such registration or other qualification under the
securities Laws is not required in connection with such transfer, offer or sale.
Each Interest Owner understands that the Company is under no obligation to
register the Interests or to assist such Interest Owner or any transferee in
complying with any exemption from registration under Securities Laws if such
Interest Owner should, at a later date, wish to dispose of the Membership
Interest or any Economic Interest. Each Interest Owner acknowledges that the
membership Interests and Economic Interests are unlikely to qualify for
disposition under Rule 144 of the U.S. Securities and Exchange Commission unless
such Interest Owner is not an “affiliate” of the Company and the Membership
Interest or Economic Interest has been beneficially owned and paid for by such
Interest Owner for at least three years.

14.3 Right to Review. Prior to acquiring an Interest in the Company, each
Interest Owner shall confirm that it has made an investigation of the Company
and its business and that there has been made available to it all information
with respect to the Company and its business which such Interest Owner needed to
make an informed decision to acquire the Interest and that it considers itself
to be a Person possessing experience and sophistication as an investor which are
adequate for the evaluation of the merits and risks of such Interest Owner’s
investment in the Interest.

14.4 Confirmation. By executing this Agreement, each of the original Members
confirms its understanding and agreement as to the terms of this Article with
respect to its Membership Interest. By agreeing to be bound by this Agreement,
any Person acquiring any Interest in the Company shall be deemed to have
confirmed it understanding and agreement to be bound by all of the terms of this
Article with respect to the Interest being acquired.

 

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ARTICLE 15

RESIGNATION, CONTINUATION AND DISSOLUTION

15.1 Dissolution. The Company shall be dissolved upon the occurrence of any of
the following events:

(a) The Approval of the Members; or

(b) The sale of all of the assets of the Company with the Approval of the
Members, provided that if the Company receives any deferred or non-cash
consideration in conjunction with such sale, the Company shall not be dissolved
until the Manager determines that the continued existence of the Company is no
longer necessary to collect or hold such deferred non-cash consideration.

15.2 Dissolution. Upon the dissolution of the Company, the Members shall proceed
to. wind up the Company’s affairs within a reasonable time and shall file a
statement of intent to dissolve and articles of dissolution as required by the
Act. All the provisions of this Agreement shall continue to apply throughout the
dissolution process. Nothing herein is intended to limit the rights or remedies
of the Company or other Members against any Member wrongfully dissolving or
attempting to dissolve the Company.

15.3 Winding Up and Distribution of Assets. Upon dissolution, the Company shall
make an accounting of the accounts of the Company and the Company’s assets,
liabilities and operations through the date of dissolution, and the Manager
shall immediately proceed to wind up the affairs of the Company. If deemed
necessary by Members holding more than fifty percent of the Membership
Interests, the accounting will be undertaken by the Company’s independent
accountants. Throughout the dissolution process, all of the provisions of this
Agreement shall continue to apply, except as limited by the Act. If the Company
is dissolved and its affairs are to be wound up, the Manager shall sell or
otherwise liquidate all of the Company’s assets as promptly as practicable
(except to the extent the Manager may determine to distribute any assets to the
Members in kind), allocate any Profit or Loss resulting from such sales to the
Capital Accounts of the Members and Economic Interest Owners, as provided in
this Agreement, and distribute the remaining assets of the Company in the
following priority:

(a) First, to creditors, including Members and Economic Interest Owners who are
creditors, to the extent otherwise permitted by law, in satisfaction of
liabilities of the Company other than liabilities to Members and Economic
Interest Owners for distributions;

(b) Second, establish such Reserves as may be necessary to provide for
liabilities or contingent liabilities of the Company (for purposes of
determining the Capital Accounts of the Members and Economic Interest Owners,
the amounts of such Reserve shall be deemed to be an expense of the Company);
and

(c) Third, to the Members and Economic Interest Owners of the Company, first to
the payments of any positive balances in their respective Capital Accounts, and
any remaining amount, to the Members and Economic Interest Owners in proportion
to their Sharing Interests.

 

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The Company may offset damages for breach of this Agreement by a Member or
Economic Interest Owner against the amount otherwise distributable to such
Member or Economic Interest Owner. Any distributions to the Members or Economic
Interest Owners in respect of their Capital Accounts shall be made in accordance
with the time requirements set forth in Section 1.704-1(B)(2)(ii)(b)(2) of the
Treasury Regulations. During the winding up, liquidation and distribution of the
assets, the Manager shall at all times comply with the requirements of any
applicable law pertaining to the winding up of the affairs of the Company and
the final distribution of its assets.

15.4 Articles of Dissolution. When all the debts, liabilities and obligations of
the Company have been paid or discharged or adequate provisions have been made
therefore, and all the remaining property and assets have been distributed to
the Members and Economic Interest Owners as applicable, the Company shall be
deemed terminated and articles of dissolution shall be executed and filed with
the Montana Secretary of State in accordance with the Act.

15.5 Certificate of Dissolution. Upon the issuance of the certificate of
dissolution, the existence of the Company shall cease, except for the purposes
of suits, other proceedings and appropriate action as provided in the Act. The
Manager shall have authority to distribute any Company property discovered after
dissolution, convey real estate and take such other action as may be necessary
on behalf of and in the name of the Company as provided in the Act.

ARTICLE 16

ECONOMIC INTEREST OWNERS

16.1 Creation. An Economic Interest Owner is an Interest Owner who acquires his
Interest in the Company through a Transfer whereby: (a) a Member transfers all
or part of such Member’s Interest in the Company and there is not an Approval of
the Members for the transfer and the admission of the transferee as a
Substituted Member; (b) the Company is required to recognize a Transfer that
does not comply with the Transfer Conditions; (c) the Company, in its sole
discretion, elects to recognize a Transfer that does not comply with the
Transfer Conditions; (d) the Transfer is the Transfer of an Economic Interest;
or (e) any other Transfer creates an Economic Interest as provided in this
Agreement. Upon the Transfer of an Economic Interest separate and apart from a
Membership Interest, all voting rights that were previously appurtenant to such
Interest shall terminate.

16.2 Rights of Economic Interest Owner. An Economic Interest Owner shall be
entitled only to receive the share of Profits or other compensation by way of
income and the return of contributions to which the transferor Member under
which the Economic Interest was created would otherwise have been entitled with
respect to the interest transferred, and an Economic Interest Owner shall be
allocated the share of Company income, gain, loss, deduction and credit that
would otherwise be allocated to the transferor Member with respect to such
interest. An Economic Interest Owner shall periodically receive reasonable
amounts of information on the affairs of the Company; shall not be entitled to
vote on Company matters; and shall not have any of the other rights of a Member
under the Act or this Agreement.

 

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16.3 Distributions. If there are any Economic Interest Owners in the Company,
any provision of this Agreement for distributions to Members shall be deemed to
mean distributions to Interest Owners in proportion to their respective Sharing
Ratios.

16.4 Relation to Membership Interest. Each Economic Interest shall relate back
to the original Membership Interest from which it was created for purposes of
determining the rights and obligations of the Economic Interest Owner including,
but not limited to: (a) liability to the Company for the return of the Capital
Contribution of such Membership Interest as may be required under this
Agreement; and (b) the right of the Company to satisfy the debts, obligations or
liabilities for damages that the transferor or transferee of such Membership
Interest may have to the Company including, but not limited to, the right to
satisfy same through any allocations and distributions that would otherwise be
made with respect to the Membership Interest.

16.5 Liability to the Company. An Economic Interest Owner who rightfully
receives the return in whole or in part of a Capital Contribution, as defined in
the Act, may be liable to the Company for the return of the contribution, but
only to the extent now or hereafter provided by the Act.

ARTICLE 17

MISCELLANEOUS

17.1 Arbitration. Any unresolved dispute or controversy arising under or in
connection with this Agreement, shall be resolved by binding arbitration
administered by the Judicial Arbiter Group (“JAG”) and, except as expressly
provided in this Agreement, shall be conducted in accordance with the Commercial
Arbitration Rules of the JAG, as such rules may be amended from time to time
(the “Rules”). The hearing locale shall be Denver, Colorado. The arbitrator or
arbitrators ( the “Arbitrators”) shall be selected according to the Rules. The
Arbitrators’ decision (the “Decision”) shall be binding, and the prevailing
party may enforce the Decision in any court of competent jurisdiction. The
parties shall use their best efforts to cooperate with each other in causing the
arbitration to be held in as efficient and expeditious a manner as practicable,
including but not limited to providing such documents and making available such
of their personnel as the Arbitrators may request, so that the Decision may be
reached timely. The authority of the Arbitrators shall be limited to deciding
liability for, and the proper amount of, a claim, and the Arbitrators shall have
no authority to award punitive damages. The Arbitrators shall have such powers
and establish such procedures as are provided for in the Rules, so long as such
powers and procedures are consistent with this Agreement and are necessary to
resolve the arbitrated dispute within the time periods specified in this
Agreement. Notwithstanding the above, the Arbitrators shall award reasonable
attorney fees and costs to the prevailing party. The Arbitrators shall render a
Decision within thirty days after being appointed to serve as Arbitrator, unless
the parties otherwise agree in writing or the Arbitrators make a finding that a
party has carried the burden of showing good cause for a longer period, such as
need to obtain necessary documentation and other reasonable discovery.

17.2 Modification. No modification or amendment to this Agreement shall be
effective unless such modification or amendment shall be in writing and signed
by all of the Members.

 

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17.3 Benefit. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon, and inure to the benefit of, the Members and
Economic Interest Owners (if any), and their respective heirs, permitted
assigns, executors, administrators, and successors.

17.4 Applicable Law. This Agreement shall be deemed to be made under, and shall
be construed in accordance with, the laws of the State of Montana.

17.5 Waiver of Partition. Each of the Members hereby waives any right he may
have to partition any property now held or hereafter acquired by the Members.

17.6 Execution in Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all parties had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.

17.7 Time of the Essence. Time is of the essence under this Agreement.

17.8 Severability. Should any of the provisions of this Agreement to any extent
be held to be invalid or unenforceable, the remainder of this Agreement shall
continue in full force and effect to the full extent possible.

17.9 Entire Agreement. This Agreement embodies the entire understanding and
agreement among the parties relative to the matters contained herein, and
supersedes all prior negotiations, understandings or agreements in regard
thereto, whether written or oral.

17.10 Waiver. No provision of this Agreement may be waived, except by an
agreement in writing signed by all of the parties hereto. A waiver of any term
or provision shall not be construed as a waiver of any other term or provision.

17.11 Headings. The subject headings used in this Agreement are included for
purposes of reference only, and shall not affect the construction or
interpretation of any of its provisions.

17.12 Notices. All notices required or permitted by this Agreement shall be in
writing and shall be given by personal delivery or sent to the address of the
party set forth in this Agreement by registered or certified mail, postage
prepaid, return receipt requested, or by reputable overnight courier, prepaid,
receipt acknowledge. Notices shall be deemed received on the earlier of the date
of actual receipt or, in the case of notice by mail or overnight courier, the
date of receipt marked on the acknowledgement of receipt, rejection or refusal
to accept or the inability to deliver because of change of address of which no
notice was given shall be deemed to be received as of the date such notice was
deposited in the mail or delivered to the courier. Any party may change its
address to which notices should be sent to it by giving the Company and the
Members written notice of the new address in the manner set forth in this
paragraph.

17.13 Construction. Throughout this Agreement, the singular shall include the
plural, the plural shall include the singular, and all genders shall be deemed
to include other genders, wherever the context so requires.

17.14 Further Acts. Upon reasonable request from a party hereto, from time to
time, each party shall execute and deliver such additional documents and
instruments and take such other actions as may be reasonably necessary to give
effect to the intents and purposes of this Agreement

 

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17.15 Attorneys’ Fees. In the event of any litigation or arbitration proceedings
between the parties hereto concerning the subject matter of this Agreement, the
prevailing party in such litigation or proceeding shall be awarded, in addition
to the amount of any judgment or other award entered therein, the costs and
expenses, including reasonable attorneys’ fees, incurred by the prevailing party
in the litigation or proceeding.

17.16 Authority. Each of the parties hereto represents to the other that such
party has full power and authority to execute, deliver and perform this
Agreement, and that the individuals executing this Agreement on behalf of the
fully empowered and authorized to do so.

17.17 No Beneficiaries. No third parties (including but not limited to creditors
of Members and Economic Interest Owners) are intended to benefit by the
covenants, agreements, representations, warranties or any other terms or
conditions of this Agreement.

17.18 References to Laws, Rules and Regulations. All references in this
Agreement to laws, statutes, rules, regulations, ordinances and other
promulgations of governmental authorities shall refer to those in effect as of
the date of this Agreement or corresponding provisions of such promulgations.

17.19 Remedies. All rights and remedies set forth in this Agreement are intended
to be cumulative and not exclusive.

(Remainder of page left intentionally blank)

 

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THIS AGREEMENT is executed effective as of the day and year first above written.

 

MEMBERS: Nautilus Technical Group, LLC By:  

/s/ Roland E. Blauer

Name:   Roland E. Blauer Title:   Manager White Bear, LLC By:  

/s/ Nikolay V. Bogachev

Name:   Nikolay V. Bogachev Title:   Owner Eastern Rider, LLC By:  

/s/ J. Thomas Wilson

Name:   J. Thomas Wilson Title:   member - manager YEP I, SICAV-FIS By:  

        /s/ P. Hansen

Name:  

        P. Hansen

Title:  

        Director

By:  

        /s/ P. Kaufmann

Name:  

        P. Kauffman

Title:  

        Director

 

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