Exhibit 10.3
AMENDED AND RESTATED OPERATING AGREEMENT OF
EVERFLOW MANAGEMENT LIMITED, LLC
AN OHIO LIMITED LIABILITY COMPANY
THIS AMENDED AND RESTATED OPERATING AGREEMENT (the “Agreement”) is made and
entered into effective as of the 31st day of December, 2008, by and among
Everflow Management Corporation, an Ohio corporation (“EMC”), Thomas L. Korner,
an individual (“Korner”), Richard M. Jones, an individual (“Jones”), William A.
Siskovic, an individual (“Siskovic”), Brian A. Staebler, an individual
(“Staebler”), and Sykes Associates, LLC, a New York limited liability company
(“Sykes”) (EMC, Korner, Jones, Siskovic, Staebler and Sykes are collectively
referred to herein as the “Members”).
RECITALS
WHEREAS, the Members have organized Everflow Management Limited, LLC, an Ohio
limited liability company (the “Company”), to engage in any lawful acts or
activities for which limited liability companies can be formed under the laws of
the State of Ohio;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. Certain capitalized words and phrases used in this Agreement
shall have the meanings set forth on Exhibit 1 attached hereto and incorporated
herein by reference.
ARTICLE II
ORGANIZATION OF THE COMPANY
2.1 Organization. On March 8, 1999, the Company was organized upon the execution
and delivery of Articles of Organization to the Secretary of State of Ohio in
accordance with and pursuant to the Ohio Act.
2.2 Name. The name of the Company is Everflow Management Limited, LLC.
2.3 Principal Place of Business. The principal place of business of the Company
shall be located at 585 West Main Street, Canfield, Ohio 44406 or at such other
location as shall be determined from time to time by the Manager.
2.4 Statutory Agent. The name and address of the agent for service of process in
Ohio shall be William A. Siskovic, 585 West Main Street, Canfield, OH 44406.
2.5 Term. The term of the Company shall commence on the date of filing of the
Articles of Organization with the Secretary of State of Ohio and shall continue
until terminated in accordance with the terms of this Agreement.

 

 

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ARTICLE III
PURPOSES OF THE COMPANY
The purpose for which the Company is organized and the powers which it may
exercise, all being in furtherance of and not in limitation of the general
powers conferred upon limited liability companies by the laws of the State of
Ohio, are to act as the general partner of Everflow Eastern Partners, L.P., a
Delaware limited partnership (“Everflow”), and manage the business and affairs
of Everflow; and to take all such actions which may be necessary, appropriate or
incidental thereto as the Manager may determine from time to time. The Company
shall have the power and authority to incur indebtedness, to invest Company
funds and to enter into joint ventures, partnerships and other business
arrangements to achieve the purposes of the Company, and shall have all other
rights and powers not expressly prohibited to limited liability companies under
the laws of the State of Ohio.
ARTICLE IV
NAMES AND ADDRESSES OF MEMBERS
The names and addresses of the Members are as set forth on Schedule A attached
to this Agreement and incorporated herein by reference.
ARTICLE V
MANAGEMENT OF THE COMPANY
5.1 Manager. Everflow Management Corporation, an Ohio corporation, is the
Manager of the Company (the “Manager”).
5.2 Authority of the Manager. Except as specifically reserved to the Members in
Section 6.7 or elsewhere in this Agreement, the Manager shall have all power and
authority to manage, and direct the management of, the business and affairs of
the Company. Any action taken by the Manager shall constitute the act of and
serve to bind the Company. In dealing with the Manager acting on behalf of the
Company, no person shall be required to inquire into the authority of the
Manager to bind the Company. Persons dealing with the Company are entitled to
rely conclusively on the power and authority of the Manager as set forth in this
Agreement.
5.3 Powers of the Manager. Subject to the limitation imposed by the Ohio Act and
this Agreement, the Manager shall exercise all powers necessary or convenient
for the management and operation of the Company and shall use its best efforts
to further the interests of the Company.

 

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5.4 Restrictions on Authority. With respect to the Company and its property, the
Manager shall have no authority to perform any act in violation of the Ohio Act
or any other applicable laws or regulations thereunder, nor shall the Manager
have any authority, except as expressly provided in this Agreement, to:

  (a)  
withdraw as the general partner of Everflow;

  (b)  
take any action which could result in the dissolution of Everflow;

  (c)  
do any act in contravention of limited partnership agreement of Everflow;

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

  (e)  
do any act which would make it impossible to carry on the ordinary business of
the Company;

  (f)  
possess Company property or assign the right of the Company in specific Company
property for other than a Company purpose;

  (g)  
guarantee in the name or on behalf of the Company the payment of money or the
performance of any contract or other obligation of any person; and

  (h)  
without having received the prior written consent of a Majority-in-Interest of
the Members, assign Company property in trust for creditors or on the assignee’s
promise to pay the debts of the Company, consent to a judgment against the
Company or submit a Company claim or liability to arbitration.

5.5 Standard of Care. At all times the Manager will have a fiduciary
relationship to the Company and to each Member. In performing its duties under
this Agreement, the Manager shall act in good faith and on a fair dealing basis
with the Company and each of the Members.
5.6 Time Devoted. The Manger shall devote such time to the business of the
Company as, in the Manager’s sole discretion, the Manager deems to be necessary
to conduct the Company’s affairs properly.
5.7 Compensation. The Manager shall not be entitled to receive any compensation
for its services pursuant to this Agreement. The Company shall reimburse the
Manager for any expenses it incurs in connection with the business and affairs
of the Company and shall cause Everflow to reimburse the Manager for any
expenses it incurs in connection with the business and affairs of Everflow.
5.8 Termination of Manager. The Members may terminate all management powers,
duties and responsibilities of the Manager by a vote of the Members owning
seventy-one percent (71%) or more of the aggregate Percentage Interests. In the
event the Members terminate and replace the Manager in accordance with the
foregoing provision, such Members owning such Percentage Interests shall have
the right to elect and name a replacement to the Manager who shall become the
successor Manager and be entitled to all powers, duties and responsibilities of
the Manager as set forth in this Agreement.

 

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ARTICLE VI
RIGHTS AND POWERS OF THE MEMBERS
6.1 No Commitments. In dealing with third parties with respect to the Company’s
business or on behalf of the Company, the Members shall act in accordance with
the policies established by the Manager or by consent of the
Majority-in-Interest of the Members. No Member shall, in the name of or on
behalf of the Company, sign or execute any contract, instrument or document,
perform any other act, engage in any transaction, commit or bind the Company to
any act, contract, instrument or document, or incur any debt, except as
expressly permitted by this Agreement or with the written concurrence of a
Majority-in-Interest of the Members or the Manager.
6.2 New Members. Notwithstanding anything to the contrary contained in this
Agreement, no person shall be admitted as an additional Member or Substituted
Member of the Company without the prior written consent of all of the Members.
6.3 Meetings of the Members. Any Member may call a meeting of the Members upon
fifteen (15) days notice in writing (which may be facsimile), which notice shall
specify the date, time and purpose or purposes of the meeting. Meetings of the
Members shall be held at the Company’s principal executive offices, unless a
Majority-in-Interest of the Members agree to meet at another location. Members
may be present at any meeting of the Members by telephone, provided that each
Member can hear all other present Members. A Majority-in-Interest of the Members
shall constitute a quorum of the Members for the transaction of business at any
meeting.
6.4 Decisions of the Members. Except as expressly provided otherwise herein,
decisions of the Members shall be made by a Majority-in-Interest of the Members.
6.5 Actions of the Members Without a Meeting. Any action which may be taken by
the Members at a meeting may be taken by written action without a meeting signed
by all of the Members, provided that the writing setting forth such action shall
be kept with the minutes of the meetings of the Members.
6.6 Waiver of Notice. Notice of any meeting of the Members may be waived by a
Member by a waiver of the notice in writing, signed by the Member entitled to
the notice, whether before, at or after the time stated for the meeting.
Attendance of a Member at any meeting, whether in person, by proxy or by
telephone as provided above, shall constitute waiver of notice of such meeting.
Any waiver of notice of a meeting by a Member hereunder shall be equivalent to
the giving of such notice.

 

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6.7 Rights of the Members. Each Member shall be entitled to (i) have the Company
books kept at the principal place of business of the Company, and at all times,
during reasonable business hours, inspect and copy any of them; (ii) have a list
of all the Members kept at the principal place of business of the Company, and
at all times, during reasonable business hours, inspect and copy such list;
(iii) have on demand true and full information of all matters affecting the
Company and a formal account of Company affairs whenever circumstances render it
just and reasonable; (iv) have dissolution and winding up of the Company as
provided by this Agreement; and (v) have such additional rights as are elsewhere
provided in this Agreement.
Notwithstanding anything to the contrary elsewhere in this Agreement, the
Manager shall not have the right to undertake any of the following actions
without the prior written approval of Members owning at least seventy-one
percent (71%) of the aggregate Percentage Interests:

  (a)  
admit a person or persons as Members;

  (b)  
withdraw as general partner of Everflow;

  (c)  
take any action which could result in the dissolution of Eveflow;

  (d)  
propose any amendment to the partnership agreement of Everflow;

  (e)  
vote its interest as a general partner of Everflow on any matter put to a vote
of the limited partners of Everflow; and

  (f)  
effect a dissolution of the Company.

6.8 Limitations on the Rights of Members. No Member shall have the right:

  (a)  
to have his capital contribution repaid except to the extent provided in this
Agreement, to demand property other than cash in payment of his capital
contribution or to receive interest on his capital contribution;

  (b)  
to require partition of Company property or to compel any sale or appraisement
of Company assets or sale of a deceased Member’s Interest therein,
notwithstanding any provisions of law to the contrary;

  (c)  
to sell or assign his Member Interest or to constitute the vendee or assignee
thereunder a substituted Member, except as provided in Article 11; or

  (d)  
to withdraw as a Member except as provided in Article 11.

 

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ARTICLE VII
LIMITATION OF LIABILITY; INDEMNIFICATION
7.1 Proof of Failure to Satisfy Standard of Conduct. A Member, a Manager or an
officer, director, shareholder, employee, agent or Affiliate of the Manager
shall not be deemed to have violated any standard of conduct under this
Article 7 unless such violation is proved by clear and convincing evidence, in
an action brought against such Person. The termination of any action, suit or
proceeding by judgment, order, settlement or upon a plea of nolo contendre or
its equivalent shall not of itself constitute proof or create a presumption that
the appropriate standard of conduct has been violated.
7.2 Limitation of Liability. Neither the Manager, nor any officer, director,
shareholder, employee, agent or Affiliate of the Manager, nor any Member is to
be held liable for damages to the Company or any Member with respect to claims
relating to his, her or its conduct for or on behalf of the Company, except that
any of the foregoing persons is to be liable to the Company for damages to the
extent that it is proved by clear and convincing evidence (i) that his, her or
its conduct was not taken (A) in good faith, (B) in a manner reasonably believed
to be in or not opposed to the best interests of the Company, or (C) with the
care that an ordinarily prudent person in a like position would use under
similar circumstances; or (ii) with respect to any criminal action, proceeding,
or investigation, that he, she, or it had no reasonable cause to believe his,
her or its conduct was unlawful.
7.3 Indemnification of Members and the Manager. The Company agrees to indemnify
each Member and the Manager, its officers, directors, shareholders, employees,
agents and Affiliates acting in good faith (each an “Indemnified Party”), to the
fullest extent permitted by law, and to save and hold each Indemnified Party
harmless from, and in respect of, all (1) fees, costs and expenses incurred in
connection with or resulting from any claim, action or demand against such
Indemnified Party or the Company that arise out of or in any way relate to the
Company, its properties, business or affairs, and (2) such claims, actions or
demands, and any losses or damages resulting from such claims, actions and
demands, including amounts paid in settlement or compromise (if recommended by
attorneys for the Company) of any such claim, action or demand; provided,
however, that this indemnification shall apply only so long as the Indemnified
Party has acted in good faith on behalf of the Company, in a manner reasonably
believed by him or her to be within the scope of his or her authority under this
Agreement and in the best interests of the Company, and only if such action or
failure to act did not constitute willful misconduct, fraud or gross negligence.
Expenses, including attorneys’ fees, incurred by an Indemnified Party in
defending any proceeding referred to in this Section 7.3, shall be paid by the
Company, in advance of the final disposition of such proceeding, upon receipt of
an undertaking by or on behalf of the Indemnified Party to repay such amount, if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Company as authorized in this Section 7.3.

 

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ARTICLE VIII
CAPITAL CONTRIBUTION
8.1 Initial Capital Contribution. Upon the execution of this Agreement, the
Members shall have contributed initially to the capital of the Company the sum
of money or the gross fair market value of property set forth opposite each
Member’s name on Exhibit A attached hereto in full payment of his Capital
Contribution.
8.2 Additional Capital Contributions. Except as otherwise specifically provided
in this Agreement, no Member shall be required to make any other contributions
to the capital of the Company.
8.3 Interest. No Member shall be entitled to receive any interest on the
Member’s Capital Account.
8.4 Capital Accounts
(a) A separate capital account (“Capital Account”) for each Member shall be
established on the books of the Company and maintained throughout the term of
the Company. As funded and adjusted in accordance with this Agreement, the
Capital Accounts of the Members shall reflect the underlying economic
arrangements of the Members.
(b) In the event any 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 Interest.
(c) The foregoing provisions and the other provisions of this Agreement relating
to the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event the Manager shall determine that it is
prudent to modify the manner in which the Capital Accounts (or any debits or
credits thereto) are computed in order to comply with such Regulations, the
Manager may make such modification, provided that it shall not have a material
effect on the amounts distributable to any Member pursuant to Article 9 or
Article 12 hereof.
ARTICLE IX
ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS
9.1 Profits and Losses. Except as provided in Section 9.2 below, Profits and
Losses shall be allocated among the Members in proportion to each Member’s
respective Interest in the Company. All Profits and Losses allocated to the
Members shall be credited or charged, as the case may be, to their respective
Capital Accounts.

 

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9.2 Tax Allocation
(a) In accordance with Code Section 704(c) and the Regulations thereunder,
income, gain, loss and deduction with respect to any property contributed to the
capital of the Company shall, solely for tax purposes, be allocated among the
Members so as to take account of any variation between the adjusted basis of
such property to the Company for federal income tax purposes and its initial
gross fair market value (as reflected on Exhibit A attached hereto).
(b) Any elections or other decisions relating to such allocations shall be made
by the Manger in any manner that reasonably reflects the purpose and intention
of this Agreement. Allocations pursuant to this Section 9.2 are solely for the
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
Profits, or other items or distributions pursuant to any provision of this
Agreement.
9.3 Other Allocation Rules
(a) For purposes of determining Profits, Losses or any other items allocable to
any period, Profits, Losses and any such other item shall be determined on a
daily, monthly or other basis, as determined by the Manager using any
permissible method under Code Section 706 and the Regulations thereunder.
(b) Except as otherwise provided in this Agreement, all items of Company income,
gain, loss, deduction and any other allocations not otherwise provided for shall
be among the Members in the same proportions as they share Profits and Losses,
as the case may be, for each fiscal year.
9.4 Distributions
(a) General. From time to time, the Manager may determine the amount of Cash
Flow, if any, of the Company available for distribution to the Members.
Distributions of Cash Flow shall be made to the Members, when, as, and if
determined by the Manager; provided, however, that the Company shall distribute
Cash Flow to the Members in amounts and at the times necessary to cover the
Members’ Federal, state and local income and franchise taxes attributable to the
Company’s operations.
(b) Distribution of Cash Flow. All Cash Flow distributable other than in
connection with the dissolution of the Company (as to any Member) or the
termination and winding up of the Company (as to all of the Members) shall be
distributed in proportion to their respective aggregate Capital Contribution to
the Company.
(c) Distributions Upon Winding Up. Cash available for distribution in connection
with the liquidation, termination and winding up of the Company shall be
distributed in accordance with the provisions of Article 12.
(d) No Withdrawal. No Member shall be entitled to withdraw or obtain a return of
all or any part of his Capital Contribution, except upon liquidation,
termination and winding up of the Company or upon unanimous prior approval of
the other Members.

 

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ARTICLE X
BOOKS, RECORDS, REPORTS AND BANK ACCOUNTS
10.1 Books and Records. The Manager shall maintain full and accurate books at
its principal office or such office as shall be designated for such purpose by
the Members with respect to the operations of the Company. The books shall be
closed and balanced at the end of each calendar year and annual statements
showing (i) cash, receipts and disbursements; (ii) Company profits and losses
for the calendar year, and (iii) profits and losses for each Member for income
tax purposes shall be prepared by the accountants for the Company and
distributed to all Members within a reasonable time after the close of each
calendar year. Accounts shall also be maintained showing the basis for federal
income tax purposes of each Member’s Interest and the Members shall be advised
of such basis annually.
10.2 Reports. The Manager shall deliver to each Member within ninety (90) days
after the end of its fiscal year, tax information necessary for the preparation
of the Members’ Federal income tax returns.
10.3 Tax Matters Member. The Manager shall be the designated party to receive
all notices from the Internal Revenue Service which pertain to the tax affairs
of the Company. The Manager shall be the “tax matters partner” as such term is
defined in Section 6231(a)(7) of the Code with respect to operations conducted
by the Company pursuant hereto and in accordance therewith take such actions and
execute and file all statements and forms on behalf of the Company which may be
permitted or required by the applicable provisions of the Code or Regulations.
10.4 Bank Accounts. The Manager shall cause one or more accounts to be
maintained in a bank (or banks) which is (are) a member(s) of the Federal
Deposit Insurance Corporation, which accounts shall be used for the payment of
the expenditures incurred by the Company in connection with its business and in
which shall be deposited any and all Company monies. All such amounts shall be
and remain the property of the Company and will be received, held and disbursed
by the Manager for only such purposes as are specified in this Agreement. There
shall not be deposited in any of such accounts any funds other than funds
belonging to the Company, and no other funds shall in any way be commingled with
such funds. The Manager may invest such funds, as it may deem appropriate, in
short term certificates of deposit, government obligations, or prime grade
commercial paper. All Company checks written upon and any withdrawals from any
such bank account or accounts may be made by the Manager.
10.5 Fiscal Year. The fiscal year of the Company shall be the calendar year.

 

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ARTICLE XI
TRANSFER OF INTERESTS; EFFECT OF WITHDRAWAL EVENTS
11.l Transfer of Interests. No Member shall be entitled to sell, mortgage,
hypothecate, transfer, pledge, assign, donate, create a security interest in or
lien on, encumber, give, place in trust (voting or other) or otherwise dispose
of, including any involuntary transfer or transfer by operation of law upon
divorce, in bankruptcy or by way of execution, seizure or sale by legal process
(hereinafter “transfer”), all or any portion of his, her or its Interest or any
portion thereof unless the applicable provisions of this Article 11 are complied
with in full. Any attempted transfer of a Member’s Interest other than in
accordance with the preceding sentence shall be null and void and be of no force
or effect. Each Member hereby further agrees to hold the Company and each Member
(and each Member’s successors and assigns) wholly and completely harmless from
any cost, liability or damage (including without limitation liabilities for
income taxes and costs of enforcing this indemnity) incurred by any such
indemnified persons as a result of a transfer or an attempted transfer in
violation of this Agreement.
11.2 Requirements of Transfer
(a) In the event a Member seeks to withdraw from the Company and transfer his
Interest (“Withdrawing Member”), he shall first be required to obtain the
approval of a majority of the then-remaining Members (on a per capita basis). If
such approval is granted, the Withdrawing Member shall then be required to
transfer such Interest pro rata to all of the then-remaining Members. Each such
remaining Member shall be obligated to acquire from such Withdrawing Member that
portion of such Withdrawing Member’s Interest equal to the amount obtained by
multiplying such Withdrawing Member’s Interest by a fraction, the numerator of
which is the Interest of the Member acquiring the Withdrawing Member’s Interest
and the denominator of which is all of the Interests in the Company less the
Withdrawing Member’s Interest.
(b) The consideration to be paid by the then-remaining Members to the
Withdrawing Member for such Interest shall be Units of Everflow. The value of
the Withdrawing Member’s Interest shall be equal to the percentage interest such
Withdrawing Member’s Interest represents in Everflow. Accordingly, such value
shall be calculated as a percentage interest in Everflow and be paid to the
Withdrawing Member in such number of Units (which also represent a percentage
interest in Everflow) as shall equal the indirect percentage interest of the
Withdrawing Member in Everflow. In the event any of the then-remaining Members
has insufficient Units of Everflow as consideration to the Withdrawing Member,
such deficiency shall be paid in cash within 90 days of the event of the
Withdrawing Member’s withdrawal, as determined as follows: One hundred
thirty-five percent (135%) of the most recent year end Repurchase Price per Unit
calculation per the terms of the Limited Partnership Agreement of Everflow; less
any interim distributions paid per Unit since the most recent year end (“Cash
Consideration Price”). The cash consideration is then calculated by multiplying
the Cash Consideration Price per Unit by the number of Units that would have
been paid to the Withdrawing Member.

 

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(c) The provisions of Subsection 11.2(a) and (b) notwithstanding, no Member
shall be able to withdraw and transfer his Interest to another Member pursuant
to this Agreement, if the effect of any such withdrawal or transfer would be to
reduce the number of Members to fewer than three (3) Members. In such event, a
Member shall only be able to withdraw as a Member and transfer his Interest to a
substitute Member acceptable to all of the then remaining Members in their
absolute discretion and otherwise comply with the provisions of Section 11.2(e).
(d) In the event the provisions of Section 11.2(c) prevent a Member from
withdrawing from the Company, such a Member shall be entitled to withdraw from
the Company only upon compliance with the provisions of Section 11.2(e).
(e) Upon the prior written approval of all then-remaining Members, a substitute
Member may acquire such Withdrawing Member’s Interest pursuant to the provisions
of Section 11.2(b) (i.e. such substitute Member shall pay the Withdrawing Member
for such Withdrawing Member’s Interest in Units of Everflow and such Interest
shall be valued equal to such Interest’s indirect percentage in Everflow). In
the event such substitute Member does not own any Units or sufficient Units to
acquire such Withdrawing Member’s Interest, the then-remaining Members, on a pro
rata basis, shall be obligated to acquire such Withdrawing Member’s Interest by
payment to such Withdrawing Member of such number of Units as shall be equal to
such Interest’s indirect percentage interest in Everflow. Upon the occurrence of
the events described in the previous sentence, the substitute Member shall still
be admitted to the Company but shall be obligated to make such capital
contribution to Everflow as the Manager shall determine (any such transfer as
heretofore described in this Section 11.2(e) shall also be deemed a “Permitted
Transfer” for purposes of this Article VIII). In addition, such proposed
substitute Member shall have agreed to assume, perform and discharge all of the
duties and obligations of a Member hereunder.
(f) In addition to the requirements of subsections 11.2(a) through (e), no sale,
exchange, assignment or transfer by a Member may be made (i) if the Interests
sought to be sold, exchanged, assigned or transferred, when added to the total
of all other Interests sold, exchanged, assigned or transferred within the
period of twelve (12) months prior thereto, would result in the termination of
the Company under Section 708 of the Code, or any successor section thereto;
(ii) except pursuant to an effective registration statement under all applicable
federal and state securities laws or in a transaction which is exempt from
registration under such laws; and (iii) (if the Manger shall request) unless the
transferor Member delivers to the Manager an opinion, in form and substance and
issued by counsel acceptable to the Manager, covering such securities laws, tax
and other aspects of the proposed transfer as the Manager may request.
(g) Any Member who sells, assigns or otherwise transfers all or any portion of
his Interest in strict compliance with the terms and provisions of this
Agreement shall promptly notify the Manager of such transfer and furnish the
Manager the name and address of the transferee and such other information as
might be required under Section 650K of the Code and the Regulations.

 

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11.3 Effect of Employment Termination, Death or Disability. Notwithstanding
anything to the contrary herein, in the event any Member (i) who is an employee
of the Company, Everflow, EEI or EMC, has such employment involuntarily
terminated by the Company, Everflow, EEI or EMC, as the case may be, (ii) dies
or (iii) becomes permanently disabled, any such Member shall be obligated to
sell and all the then-remaining Members shall be obligated to acquire, the
Interest of such Member as if such purchase and sale were a Permitted Transfer
pursuant to the provisions of Section 11.2, and all the terms and conditions of
Section 11.2 shall apply to such purchase and sale.
11.4 Substitute Member. The assignee or successor in interest of a Member in a
Permitted Transfer may become a substitute Member only when:
(a) the Manager shall have consented thereto, and such consent may be withheld
by the Manager in its sole discretion;
(b) the assignee shall have expressed his intention to become a substitute
Member and accepts and adopts all of the terms and provisions of this Agreement
and any amendments hereto (including, without limitation, the restrictions
imposed under this Article VIII) by becoming a party to this Agreement by
executing a Substitute Member Counterpart Signature Page;
(c) such certificates or instruments as are required by law shall have been
executed and filed; and
(d) the assignor or the assignee shall have paid or obligated himself to pay all
reasonable expenses (as the Manger may determine) connected with such admission
or substitution.
11.5 Restrictions of Substitute Member. Notwithstanding anything to the contrary
herein, a Member’s Interest or any portion thereof shall not be assigned or
transferred to any person who is insane, incompetent or has not attained the age
of majority, or to a person or entity not lawfully empowered to own such
Interest, and any assignment or transfer directly to a person or entity under
such disability may be disregarded by the Company, in its discretion.
11.6 Time of Transfer. Any transfer of an Interest to a third party by a Member
permitted under this Article 11 shall be effective as of midnight of the last
day of the calendar month in which it is made, or, at the election of a
Majority-in-Interest of the remaining Members, as of 7:00 A.M. the day following
the date of the transfer (the “Effective Transfer Date.”).
11.7 Distributions and Allocations in Respect of Transferred Interest. If any
Interest is transferred during any accounting period to a third party or to a
Member in compliance with the provisions of this Article 11, 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 in accordance
with Article 9 hereof and Code Section 706(d), using the Effective Transfer Date
as the date upon which the change in ownership of the Interest occurred, and
using any conventions permitted by law and selected by a Majority-in-Interest of
the remaining Members. All distributions on or before the Effective Transfer
Date shall be made by the transferor and all distributions thereafter shall be
made to the transferee. Neither the Company nor any Manager or Member shall
incur any liability for making allocations and distributions in accordance with
the provisions of this Section 11.7, whether or not any of them has knowledge of
any transfer of ownership of any Interest.

 

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11.8 Effect of Withdrawal Events
(A) No Resignation. No Member shall be entitled to resign as a Member, except in
connection with a transfer of such Member’s entire Member’s Interest in the
Company in compliance with the terms and conditions of this Article 11 and, in
the case of a resigning Member, with respect to which his or her transferee has
been admitted as a substitute Member in accordance with Section 11.4.
(B) Death, Dissolution, Adjudication of Incompetency. If the Company is
continued in accordance with Section 12.1 below following the death, dissolution
or adjudication of incompetency of a Member, such Member’s Interest shall not be
terminated or repurchased and the successor-in-interest or legal representative
of such Member shall be substituted as a Member upon compliance with the terms
and conditions of Section 11.4.
(C) Bankruptcy Event. If the Company is continued in accordance with
Section 12.1 below following the occurrence of a Bankruptcy Event with respect
to a Member, then (1) his or her Member Interest shall be immediately converted
into an Economic Interest only and such Member shall be immediately removed as a
Member and shall thereafter have only the rights of an Economic Interest Owner;
(2) unless the call option provided under clause (3) below is exercised by the
Company, such Member shall not withdraw or resign from the Company, have his or
her Member Interest repurchased or have any right to compel any payment by the
Company for his or her Member Interest; and (3) the Company shall have the
option, but not the obligation, to repurchase such Member’s Interest in its
entirety, which such option shall be exercisable by the delivery to such Member
of written notice to such effect within 180 days after a Majority-in-Interest of
the remaining Members have elected to continue the Company. The price for such
Member’s Interest in connection with a purchase and sale hereunder shall be the
Appraised Price. Such purchase and sale shall be consummated not more than
ninety (90) days after the date the Company elects to exercise its option
hereunder, by the payment of the purchase price by the Company in cash or by
certified check against the delivery by such Member (or its successors) of
written representations and warranties with respect to his or its good and
marketable title to the Member Interest, free and clear of adverse claims, his
or its full capacity and legal right to transfer the Interest to the Company and
his or its right to transfer the Member Interest to the Company without the
consent or action of any third party.
(D) No Other Withdrawal. Except as expressly provided in this Section 11.8 and
in Section 12.2 in connection with the termination and winding up of the
Company, the Company shall not be obligated to repurchase the Member’s Interest
of any Member, nor shall a Member be entitled to receive any other payment or
distribution in connection with his or her withdrawal from the Company.

 

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ARTICLE XII
TERMINATION, LIQUIDATION AND WINDING UP
12.1 Termination of the Company. The Company shall terminate upon the first to
occur of: (a) the unanimous written agreement of the Members; (b) the occurrence
of a Withdrawal Event as to any Member, unless a Majority-in-Interest of the
remaining Members agree to continue the Company within ninety (90) days after
the occurrence of such Withdrawal Event. Except as specifically stated in this
Section 12.1, no event that would cause a dissolution under the Act causes a
dissolution of the Company.
12.2 Method of Distribution Upon Winding Up. Upon termination of the Company
pursuant to Section 12.1 above, the assets of the Company and proceeds of any
liquidation shall be applied and distributed in the following manner and order
of priority:
(a) to the payment and discharge of all of the Company’s debts and liabilities
and expenses of liquidation and dissolution;
(b) to the setting up of any reserves reasonably necessary for any contingent or
unforeseen liabilities or obligations of the Company;
(c) to the payment of the balance, if any, of the respective Capital Accounts of
the Members (after making the allocations required under the provisions of
Article IX), but if the amount available for such payment shall be insufficient,
then pro rata among all of the Members according to the respective positive
balances of their Capital Accounts at such time; and
(d) the remainder, if any, to the Members in accordance with their respective
balances.
12.3 Winding Up and Liquidation. As soon as possible following the occurrence of
any event of termination, the Company shall execute and file as provided in the
Ohio Act a statement of intent to dissolve in such form as shall be prescribed
by the Secretary of State of Ohio or which otherwise complies with the Act. Upon
the filing of such statement of intent to dissolve with the Secretary of State
of Ohio, the Company shall cease to carry on its business, except insofar as may
be necessary for the winding up of its affairs, but its separate existence shall
continue until a certificate of dissolution has been filed with the Secretary of
State of Ohio or until a decree dissolving the Company has been entered by a
court of competent jurisdiction. The filing of the statement of intent to
dissolve shall not affect the limited liability of the Members. A reasonable
time shall be allowed for the orderly liquidation of the assets of the Company
and the discharge of liabilities to creditors so as to enable the Members to
minimize the normal losses attendant upon a liquidation.

 

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ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Notices. Any notice or communication required or permitted to be given by
any provision of this Agreement shall be deemed to have been given and received
for all purposes when delivered personally to the party to whom the same is
directed or when mailed or sent by overnight delivery service, charges prepaid,
addressed to the party to whom the same is directed at the address set forth in
this Agreement, or such other address as the Company has received written notice
from time to time.
13.2 Governing Law. The Company, this Agreement and the rights of the Members
hereunder shall be governed by the laws of the State of Ohio.
13.3 Waiver of Action for Partition. Each Member irrevocably waives any right
that he, she or it may have to maintain any action for partition with respect to
the property of the Company.
13.4 Amendments. The Agreement may be amended from time to time by a writing
executed by the Majority-in-Interest of the Members; provided, however, that
(i) Schedule A may be modified from time to time by the Manager to reflect any
change in the Members or in their respective interests, (ii) no amendment shall
reduce a Member’s percentage interest unless the writing is executed by him,
(iii) no amendment shall effect any change in this section unless the writing is
executed by all of the Members, and (iv) no amendment shall effect any change in
any provision of this Agreement providing for action to be taken by a specified
percentage of Interests in the Company unless the writing is executed by Members
whose aggregate Interests at least equal the percentage specified in the
provision to be changed.
13.5 Construction. Whenever the singular is used in this Agreement and when
required by the context, the same shall include the plural and vice versa, and
the masculine gender shall include the feminine and neuter genders and vice
versa. The headings in this Agreement are for convenience only and are in no way
intended to describe, interpret, define or limit the scope, extent or intent of
this Agreement or any of its provisions.
13.6 Entire Agreement. This Agreement contains the entire understanding among
the parties with respect to the subject matter hereof and supersedes any prior
understandings and agreements, whether written or oral, with respect to such
subject matter.
13.7 Severability. If any provision of this Agreement or its application to any
person or circumstance shall, for any reason and to any extent, be invalid,
illegal or unenforceable, the remainder of this Agreement and the application of
such provision to other persons or circumstances shall not be affected thereby,
but rather shall be enforceable to the fullest extent permitted by law.
13.8 Heirs, Successors and Assigns. Each and all of the covenants, terms,
provisions and agreements contained in this Agreement shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors and
assigns.

 

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13.9 Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.
13.10 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
13.11 Federal Income Tax Election. In the event of a transfer of all or any
portion of the Interest of any Member, the Company shall elect pursuant to
Section 754 of the Code to adjust the basis of assets of the Company upon
written request of the transferee.
13.12 Injunctive Relief. Each Member acknowledges that it will be impossible to
measure in money the damage to the Company and to the other Members if there is
a failure to comply with this Agreement. It is therefore agreed that the Company
or any other Member, in addition to any other rights or remedies which they may
have, shall be entitled to immediate injunctive relied and to specific
performance to enforce this Agreement and that if any action or proceeding is
brought in equity to enforce it, no party will urge, as a defense, that there is
an adequate remedy at law.
[The remainder of this page is intentionally left blank.]

 

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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as of
the date first above written.

            EVERFLOW MANAGEMENT CORPORATION
      By:   /s/ William A. Siskovic         Its: Vice President     
SYKES ASSOCIATES, LLC
      By:   /s/ Robert F. Sykes         Robert F. Sykes, Co-Managing Member     
SYKES ASSOCIATES, LLC
      By:   /s/ David F. Sykes         David F. Sykes, Co-Managing Member       
    /s/ Thomas L. Korner       Thomas L. Korner            /s/ William A.
Siskovic       William A. Siskovic            /s/ Richard M. Jones       Richard
M. Jones            /s/ Brian A. Staebler       Brian A. Staebler   

 

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SCHEDULE A
MEMBERS’ NAMES, CAPITAL CONTRIBUTION
AND PERCENTAGE INTERESTS

                      Capital     Percentage       Account     Interest  
 
               
Everflow Management Corporation
585 West Main Street
Canfield, OH 44406
  $ 9,602       1 %
 
               
Sykes Associates, LLC
60 Brookside Drive
Rochester, NY 14618
  $ 475,335       49.501476 %
 
               
Thomas L. Korner
4200 W. Middletown Road
Canfield, OH 44406
  $ 158,440       16.500000 %
 
               
William A. Siskovic
3745 Fawn Drive
Canfield, OH 44406
  $ 158,440       16.500000 %
 
               
Richard M. Jones
6591 Thornbriar Street NW
Canton, OH 44718
  $ 79,213       8.249262 %
 
               
Brian A. Staebler
544 Beechwood Lane
Painesville, OH 44077
  $ 79,213       8.249262 %

 

 

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EXHIBIT 1
DEFINITIONS
Certain capitalized words and phrases used in this Agreement shall have the
following meanings:
(A) “Affiliate” means with respect to another person, (i) any person who
directly or indirectly owns, controls or holds, with power to vote, five percent
(5%) or more of the outstanding voting securities of such other person, (ii) any
person with respect to which five percent (5%) or more of the outstanding voting
securities are directly or indirectly owned, controlled or held, with power to
vote, by such other person, (iii) any person directly or indirectly controlling,
controlled by or under common control with such other person, (iv) any officer,
director or partner of such other person, and (v) if such other person is an
officer, director or partner, any company, partnership, association or other
entity or organization for which such person acts in any such capacity.
(B) “Agreement” means this Amended and Restated Operating Agreement of Everflow
Management Limited, LLC, as originally executed and as amended from time to time
in accordance with Section 13.4 hereof.
(C) “Appraised Price” means the price determined by a qualified appraiser
selected by the Manager.
(D) “Articles of Organization” mean the Articles of Organization of the Company
as filed with the Secretary of State of Ohio on March 8, 1999, as the same may
be amended from time to time in accordance with the Ohio Act.
(E) “Bankruptcy Event” means, with respect to any Member:

  (1)  
the making of an assignment for the benefit of creditors;

  (2)  
the filing of a voluntary petition in bankruptcy;

  (3)  
the adjudication of bankruptcy or insolvency, or the entry of an order for
relief, in any bankruptcy or insolvency proceeding;

  (4)  
the filing of a petition or answer seeking for the Member any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any statute, law or regulation;

  (5)  
the filing of an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against the Member in any proceeding of
a nature described in (1) — (4) above;

 

 

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  (6)  
seeking, consenting to or acquiescing in the appointment of a trustee, receiver
or liquidator of the Member or of all or any substantial part of his or its
properties; or

  (7)  
the passage of 120 days after the commencement of any proceeding against the
Member seeking reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any statute, law or
regulations, if the proceeding has not been dismissed, or the passage of 90 days
after the appointment without his or its consent or acquiescence of a trustee,
receiver or liquidator of the Member or of all or any substantial part of his or
its properties, if the appointment is not vacated or stayed, or the passage of
90 days after the expiration of any such stay, if the appointment is not
vacated.

(F) “Capital Account” means, with respect to any Member, the Capital Account
maintained for such Person pursuant to the provisions of Section 8.4 of this
Agreement, which shall be determined and adjusted as follows:

  (1)  
To each Member’s Capital Account, there shall be credited the following:
(a) such Member’s Capital Contributions; and (b) such Member’s allocations of
Profits; and

  (2)  
To each Member’s Capital Account there shall be debited the following: (a) the
amount of cash distributed to such Member pursuant to any provision of this
Agreement; and (b) such Member’s allocation of Losses.

(G) “Capital Contribution” means the amount in cash or agreed-upon value of
property contributed by each Member (or its or his/her predecessors in interest)
to the capital of the Company for its or his/her Interest, as set forth on
Schedule A attached hereto.
(H) “Cash Flow” means the excess of all cash received by the Company (whether
from the sale of Company assets or otherwise), over amounts applied to the
payment of the obligations and expenses incurred by the Company and any reserves
deemed necessary and prudent by the Manager for future operations of the
Company.
(I) “Code” means the Internal Revenue Code of 1986, as amended, or corresponding
provisions of succeeding federal revenue laws.
(J) “Company” means Everflow Management Limited, LLC.
(K) “Economic Interest” means the interest in the Company’s Profits, Losses and
distributions owned by a Person who is not a Member.

 

 

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(L) “Economic Interest Owner” means any Person who owns an Economic Interest but
who is not a Member.
(M) “Effective Transfer Date” is defined in Section 11.6.
(N) “Everflow” means Everflow Eastern Partners, L.P., a Delaware limited
partnership.
(O) “Gross Asset Value” means, with respect to any asset, the asset’s adjusted
basis for federal income tax purposes, except as follows:

  (1)  
The Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values as of the following times: (a) the
acquisition of an additional Member’s Interest or Economic Interest (other than
pursuant to Section 8.1 hereof) by any new or existing Member in exchange for
more than a de minimis Capital Contribution; (b) the distribution by the Company
to a Member of more than a de minimis amount of Company property (including
cash) as consideration for an Interest, if the Manager reasonably determines
that such adjustment is necessary or appropriate to reflect the relative
economic interests of the Members in the Company; and (iii) the liquidation of
the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g).

  (2)  
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
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Regulation Section 1.704-1(b)(2)(iv)(m); provided, however, that Gross Asset
Values shall not be adjusted pursuant to this paragraph (O)(2) to the extent the
Manager shall determine that an adjustment pursuant to paragraph (O)(1) is
necessary or appropriate in connection with a transaction that would otherwise
result in an adjustment pursuant to this paragraph (O)(2).

(P) “Interests” means the interest in the Company’s Profits, Losses and
distributions owned by a Member.
(Q) “Majority-in-Interest”, when used with respect to the Members, means Members
holding more than 71% of the Percentage Interests held in the aggregate by all
Members.
(R) “Manager” means Everflow Management Corporation, an Ohio corporation.

 

 

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(S) “Member” means (1) any Person whose name is set forth on Schedule A attached
hereto under the caption “Member,” or (2) any Person who has been admitted as a
additional or substituted Member pursuant to the terms of this Agreement;
provided, that, if a Member transfers all of his or its interest in the
Company’s Profits, Losses and distributions, from and after the date of such
transfer such transferor shall no longer be a Member and shall thereafter have
none of the other rights associated with his or its Member’s Interest. “Members”
means all such Persons.
(T) “Member’s Interest” means the entire interest in the Company owned by a
Member, including such Member’s (1) interest in the Company’s Profits, Losses
and distributions, (2) rights with respect to the management and administration
of the Company, (3) access to or rights to demand or require any information or
account of the Company or its affairs, and (4) rights to inspect the books and
records of the Company.
(U) “Ohio Act” means the Ohio Limited Liability Company Act, Ohio Revised Code
Sections 1705.01 et seq., as amended from time to time (or any corresponding
provisions of succeeding law).
(V) “Percentage Interest” means the Members’ relative shares of the Company’s
Profits, Losses and interim distributions, as set forth from time to time on
Schedule A attached hereto.
(W) “Person” has the meaning set forth in Section 1705.01(K) of the Ohio Revised
Code, as amended from time to time (or any corresponding provisions of
succeeding law).
(X) “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) (for this purpose, all items
of income, gain, loss or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:

  (1)  
Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to this
paragraph (X) shall be added to such taxable income or loss.

  (2)  
Any expenditures of the Company described in Code Section 705(a)(2)(B) or
treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations
Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing
Profits or Losses pursuant to this paragraph (X), shall be subtracted from such
taxable income or loss.

 

 

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  (3)  
At any time the Gross Asset Value of any Company property is adjusted pursuant
to paragraph (O)(1), the amount of such adjustment shall be taken into account
as gain or loss from the disposition of such property for purposes of computing
Profits or Losses.

  (4)  
Gain or loss resulting from the disposition of any Company asset 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.

(Y) “Regulations” means the regulations promulgated under the Code, as the same
may be amended from time to time, including corresponding provisions of any
succeeding regulations.
(Z) “Withdrawal Event” means the death, dissolution, adjudication of
incompetency, occurrence of a Bankruptcy Event or resignation (except as
expressly permitted by this Agreement) of or with respect to a Member.