EXHIBIT 10.2

 

 

 
 

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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
 
OF
 
TNR HOLDINGS LLC
 
Dated as of December 20, 2013
 

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TABLE OF CONTENTS
 
 
 

   
Page
ARTICLE 1 FORMATION AND ORGANIZATION
1
Section 1.1
Formation
1
Section 1.2
Basic Rights of Members
1
Section 1.3
Name
1
Section 1.4
Term
2
Section 1.5
Business
2
Section 1.6
Principal Place of Business; Registered Office and Agent
2
Section 1.7
No Liability
2
    ARTICLE 2 UNITS AND CAPITAL CONTRIBUTIONS
2
Section 2.1
Units
2
Section 2.2
Additional Capital Contributions; Dilution
4
Section 2.3
Return of or on Capital Contributions
4
Section 2.4
No Liability; No Deficit Restoration
4
Section 2.5
Waiver of Other Rights
5
    ARTICLE 3 DISTRIBUTIONS
5
Section 3.1
Distributions of Available Cash
5
Section 3.2
Tax Distributions
6
Section 3.3
Withholding
7
    ARTICLE 4 MANAGEMENT OF COMPANY
7
Section 4.1
Management Committee
7
Section 4.2
Approval over Major Decisions
9
Section 4.3
Action by Written Consent
10
Section 4.4
Member Voting Rights
10
Section 4.5
Member and Manager Liability
10
Section 4.6
Coral Reef Consulting Agreement
11
    ARTICLE 5 REPRESENTATIONS OF MEMBERS
11
Section 5.1
Representations of each Member
11
Section 5.2
Securities Laws Representations
12
    ARTICLE 6 TRANSFERS OF MEMBERSHIP INTERESTS AND INTERESTS IN MEMBERS
12
Section 6.1
General Restriction
12
Section 6.2
Transfer of Membership Interests
12
Section 6.3
Right of First Refusal
13
Section 6.4
Transfer Requirements Regarding Membership Interest
14
Section 6.5
Compelled Sale Right
15
Section 6.6
Co-Sale Rights
16
Section 6.7
General Rules
16
    ARTICLE 7 OBLIGATIONS OF MEMBERS
16

 
 
 

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Section 7.1
No Partition
16
Section 7.2
No Right to Act
17
Section 7.3
Investment Opportunities
17
Section 7.4
Confidential Information and Materials
17
    ARTICLE 8 INDEMNIFICATION
19
Section 8.1
Indemnification by Company
19
Section 8.2
Advancement of Expenses
19
Section 8.3
Contract with the Company
20
Section 8.4
Indemnification of Employees and Agents
20
Section 8.5
Nonexclusivity of Rights
20
Section 8.6
Insurance
20
Section 8.7
Savings Clause
20
    ARTICLE 9 FINANCIAL AND ACCOUNTING MATTERS
20
Section 9.1
Books and Records
20
Section 9.2
Bank Accounts
21
Section 9.3
Financial Statements
21
    ARTICLE 10 TAX MATTERS
21
Section 10.1
Taxation as Partnership
21
Section 10.2
Capital Accounts; Tax Allocations
21
Section 10.3
Tax Matters Member
22
Section 10.4
Tax Returns; Tax Elections
22
    ARTICLE 11 DISSOLUTION AND WINDING UP
23
Section 11.1
Events Resulting in Dissolution
23
Section 11.2
Procedure
23
    ARTICLE 12 NOTICES
24
Section 12.1
Notices
24
Section 12.2
Addresses for Notices
24
    ARTICLE 13 MISCELLANEOUS
24
Section 13.1
Entire Agreement
24
Section 13.2
Amendments
24
Section 13.3
Successors and Assigns
25
Section 13.4
No Third Party Beneficiaries
25
Section 13.5
Governing Law
25
Section 13.6
Jurisdiction; Choice of Forum
25
Section 13.7
Waiver of Jury Trial
25
Section 13.8
Severability
25
Section 13.9
Captions
26
Section 13.10
Further Assurances
26
Section 13.11
Counterparts
26
Section 13.12
Herrick, Feinstein LLP
26

  
 
 

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SCHEDULES AND EXHIBITS
 
Schedule A
List of Members
Schedule B
Permitted Indebtedness
Exhibit A
Definitions
Exhibit B
Joinder Agreement
Exhibit C
Capital Accounts; Tax Allocations

 
 

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AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
 
of
 
TNR HOLDINGS LLC
 
This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this “Agreement”)
is dated as of December 20, 2013 (“Effective Date”) and is made by and among the
members set forth on Schedule A attached hereto, and each other person who
hereafter is admitted to the Company as a Member (as defined herein) in
accordance with the terms hereof.  Exhibit A to this Agreement sets forth the
definitions of capitalized words and phrases used in this Agreement.
 
R E C I T A L S
 
WHEREAS, the Company was formed as a limited liability company under the
Delaware Act by the filing on December 16, 2013 of the Certificate of Formation
of the Company in the office of the Secretary of State of Delaware; and
 
WHEREAS, the Company is a party to that certain Limited Liability Company
Agreement (the “Original LLC Agreement”), effective as of December 16, 2013,
between the Company and Mesa Energy, Inc., a Nevada corporation;

WHEREAS, in connection with the execution of the Unit Purchase Agreement, the
parties hereto desire to enter into this Agreement to amend and restate the
Original LLC Agreement to set out in this Agreement their respective rights,
obligations and duties with respect to the Company and its business, management
and operations.
 
NOW, THEREFORE, in consideration of the terms, covenants and conditions
contained herein, the parties hereby agree as follows:
 
ARTICLE 1
 
FORMATION AND ORGANIZATION
 
Section 1.1 Formation.  The Company was formed as a Delaware limited liability
company pursuant to the Delaware Act by the filing on December 16, 2013 of the
Certificate of Formation (the “Certificate”) of the Company with the Secretary
of State of Delaware.
 
Section 1.2 Basic Rights of Members.  The Members intend and agree that this
Agreement is for all purposes the “limited liability company agreement” of the
Company as defined in the Delaware Act.
 
Section 1.3 Name.  The business of the Company shall be conducted under the name
“TNR Holdings LLC” or such other name as the Management Committee may hereafter
determine.
 
 
 

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Section 1.4 Term.  The existence of the Company commenced on the date of filing
its Certificate and shall continue until dissolved in accordance with Article 11
of this Agreement or upon the entry of a decree of judicial dissolution under
Section 18-802 of the Delaware Act.
 
Section 1.5 Business.  The business of the Company is to (a) engage in the
exploration, development and production of oil and gas properties directly or
through its subsidiaries, (b) do any and all other acts or things that may be
incidental or necessary to carry on the business of the Company as described in
clause (a) above and all things that the Management Committee may deem
necessary, desirable, advisable, expedient, convenient for, incidental or
appropriate to the furtherance and accomplishment of the foregoing purposes, and
(c) to engage in any activity for which a limited liability company may be
organized pursuant to the Delaware Act.  The Company is not authorized to and
shall not engage in any business other than as described in this Section.
 
Section 1.6 Principal Place of Business; Registered Office and Agent.  The
principal place of business of the Company shall be located at 71683 Riverside
Drive, Covington, Louisiana 70433, or at such other location as shall be
determined by the Management Committee.  The registered office of the Company
required by the Delaware Act to be maintained in the State of Delaware is the
office of the initial registered agent named in the Certificate or such other
office as the Management Committee may designate from time to time in the manner
provided by law.  
 
Section 1.7 No Liability.  Except as otherwise provided in the Delaware Act, or
as specifically otherwise provided in this Agreement or in any other written
agreement executed by such Member, no Member, as such, shall have any personal
liability whatsoever to the Company, any of the other Members or any of the
creditors of the Company for the debts, liabilities, contracts or other
obligations of the Company (whether arising in contract, tort or otherwise) or
any of the Company’s losses beyond, with respect to a Member, such Member’s
Capital Contribution actually made.
 
ARTICLE 2
 
UNITS AND CAPITAL CONTRIBUTIONS
 
Section 2.1 Units.  Membership Interests in the Company shall be represented by
“Units” as set forth on Schedule A, as amended from time to time in accordance
with this Agreement.  Units shall not be represented by certificates.  Units
shall be in one of two Classes consisting of “Class A Units” and “Class B
Units”, and all Units of a Class shall have identical rights in all respects as
all other Units of such Class, except as otherwise set forth in this Agreement.
 
(a) Class A Units.  Class A Units shall not entitle the holder(s) thereof to
voting rights unless expressly provided under this Agreement or the Delaware
Act.  It is intended by the Members that the Class A Units shall entitle the
holders thereof to share in the income, gains, losses, deductions, credit, or
similar items of, and to receive distributions from, the Company as set forth in
this Agreement.  On or prior to the date hereof, each of the holders of Class A
Units shall have made the Capital Contribution to the Company set forth opposite
such holder’s name on Schedule A.
 
 
 

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(b) Class B Units.  The Class B Units shall not entitle the holder(s) thereof to
voting rights unless expressly provided under this Agreement or the Delaware
Act.  It is intended by the Members that the Class B Units shall entitle the
holders thereof to share in the income, gains, losses, deductions, credit, or
similar items of, and to receive distributions from, the Company as set forth in
this Agreement.  On or prior to the date hereof, each of the holders of Class B
Units shall have made the Capital Contribution to the Company set forth opposite
such holder’s name on Schedule A.
 
(c) Member Listing.  In the event Units shall be issued to or transferred to any
Person and such Person shall be admitted as a Member in accordance with the
terms of this Agreement, the Company shall amend Schedule A accordingly.
 
(d) Issuance of Units.
 
(1) Subject to the terms of this Section 2.1, the Company, subject to the
approval of the Management Committee and the holders of a majority of the
outstanding Class A Units, may issue additional Units to one or more Persons in
such amounts and on as such terms as the Management Committee shall
determine.  Notwithstanding anything to the contrary contained herein, as a
condition to the receipt of any such additional Units, any such Person that is
not already party to this Agreement shall be required to execute a Joinder
Agreement in the form attached hereto as Exhibit B.
 
(2) Preemptive Rights. In the event the Company proposes to undertake an
issuance or sale of additional Units (“New Units”), the Company shall provide
written notice (the “Preemptive Right Notice”) to each Member of such intention,
describing the number and terms of the New Units proposed to be issued or sold,
the price per New Unit and the general terms upon which the Company proposes to
issue or sell the New Units.  Each Member shall have thirty (30) days from the
date the Preemptive Right Notice is received to give the Company written notice
of such Member’s election to purchase all or any portion of such Member’s share
of such New Units for the price and upon the terms specified in the Preemptive
Right Notice.  Such Member’s notice shall state the quantity of New Units such
Member desires to purchase.  Any Member who does not provide such notice to the
Company within such thirty (30) day period shall be deemed to have waived such
Member’s preemptive rights under this Section 2.1(d)(2) with respect to such New
Units, provided the Company consummates the issuance thereof within one hundred
twenty (120) days after it provides the Preemptive Right Notice to the Members
at a price equal to or higher than the price specified in the Preemptive Right
Notice given to the Members by the Company under this Section 2.1(d)(2).  Each
Member so electing to purchase New Units pursuant to this Section 2.1(d)(2)
shall be entitled to purchase his or its pro rata share of the number of New
Units specified in the Preemptive Right Notice based on such electing Member’s
Ownership Percentage relative to the aggregate Ownership Percentage of all
electing Members.  If any New Units remain after the application of the
preceding sentence, the Company shall notify the Members properly electing to
purchase the entire share of the New Units that they were entitled to purchase
pursuant to this Section 2.1(d)(2) and such Members shall be entitled, for a
period of ten (10) days thereafter, to purchase such remaining New Units pro
rata in accordance with their relative Ownership Percentage.  Any New Units
remaining thereafter may be issued by the Company within one hundred twenty
(120) days after it provides the Preemptive Right Notice to the Members on terms
no less favorable than those contained in the Preemptive Right Notice.  This
Section 2.1(d)(2) shall not apply to Class A Units issued pursuant to Section
1.3 or Section 1.4 of the Unit Purchase Agreement.
 
 
 

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(e) Units as Securities.  The Units shall constitute “securities” for purposes
of Article 8 of the Uniform Commercial Code as the same may, from time to time,
be in effect in the State of Delaware and “investment property” for purposes of
Article 9 thereof.
 
(f) Non-Redeemable.  Except as expressly provided in this Agreement, Units shall
not be redeemable.
 
Section 2.2 Additional Capital Contributions; Dilution.
 
(a) Except for amounts paid by Gulfstar for additional Units pursuant to
Sections 1.3 and 1.4 of the Unit Purchase Agreement, which amounts shall be
deemed to be additional Capital Contributions by Gulfstar hereunder, the Members
shall be liable only to make their initial Capital Contributions pursuant to
Section 2.1, and no Member shall be required to lend any funds to the Company or
to make any additional capital contributions to the Company.
 
(b) If Gulfstar exercises any of its rights pursuant to Section 5.1 of the Unit
Purchase Agreement to cure a default, remove a lien, or make a payment in
connection with that certain reserve-based loan facility pursuant to the Loan
Agreement dated July 22, 2011 among Mesa Energy, Inc, Mesa Energy Holdings,
Inc., Tchefuncte Natural Resources, LLC, Mesa Gulf Coast, LLC, and The F&M Bank
& Trust Company (the “F&M Facility”), then any funds extended by Gulfstar in
connection therewith shall be treated as a Capital Contribution by Gulfstar to
the Company as follows: (i) additional Class A Units shall be issued to Gulfstar
in an amount equal to (w) the amount of cash (including expenses) extended by
Gulfstar pursuant to Section 5.1 of the Unit Purchase Agreement divided by (x)
the F&M Payment Unit Price (as hereinafter defined); and (ii) for each Class A
Unit issued under this Section 2.2(b), a Class B Unit shall be cancelled.  For
purposes of calculating the number of Class A Units issued and Class B Units
cancelled pursuant to this Section 2.2(b), the “F&M Payment Unit Price” shall be
equal to (y) $8,222,693 divided by (z) 11,932.
 
Section 2.3 Return of or on Capital Contributions.  Except as expressly provided
in this Agreement, (a) no Member shall receive any return or distribution of its
Capital Contributions, (b) no Member shall receive any interest or other return
on or with respect to its Capital Contributions, and (c) no Member shall be
entitled to withdraw any part of its Capital Contributions.
 
Section 2.4 No Liability; No Deficit Restoration.  The Members shall not be
bound by, nor be personally liable for, the expenses, liabilities, indebtedness
or obligations of the Company (unless otherwise agreed to by such Member in
writing) or of any other Member.  The Members intend and agree that no Member
shall be obligated to pay any deficit in its Capital Account to or for the
account of the Company or any creditor of the Company.
 
 
 

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Section 2.5 Waiver of Other Rights.  The Members have (i) no right under
Section 18-604 of the Delaware Act to withdraw or resign and receive the fair
value of their Membership Interests, (ii) no right to demand or receive any
distribution from the Company in any form other than cash and in accordance with
the provisions of this Agreement concerning distributions, and (iii) no right
under Section 18-606 of the Delaware Act to pursue rights as a creditor of the
Company with respect to any entitlement to receive distributions hereunder.
 
ARTICLE 3
 
DISTRIBUTIONS
 
Section 3.1 Distributions of Available Cash.
 
(a) Timing; Certain Distributions Pursuant to the Unit Purchase Agreement.
 
(1) Distributions of Available Cash from Operations shall be made to the Members
only after the Company has paid all Company Costs then due, paid all amounts
then due for principal, interest, fees and other amounts required under any
indebtedness of the Company then currently due and established all reserves
which shall be approved or determined by the Management Committee in its sole
and absolute discretion.  Distributions of Available Cash from Operations, if
any, shall be made at such times as the Management Committee shall determine.
 
(2) Distributions of Net Proceeds from a Capital Event shall be made to the
Members at such time as the Management Committee shall determine.
 
(3) Notwithstanding anything to the contrary herein, any disbursement by the
Company of amounts paid by Gulfstar for Units pursuant to Sections 1.2, 1.3, or
1.4 of the Unit Purchase Agreement in accordance with the use of proceeds set
forth in Section 1.5 of the Unit Purchase Agreement, and Exhibit A, B or C
thereto (including any changes thereto made in accordance with the terms
thereof), whether directly or indirectly by distribution to Mesa or contribution
to a subsidiary of the Company, shall not be subject to the provisions of
Sections 3.1 and 3.2 hereof.
 
(b) Distribution Priority.  Except as may otherwise be provided pursuant to
Section 3.1(a)(3), all distributions of Available Cash from Operations shall be
made as follows:
 
(1) First, to the holders of Class A Units, pro rata, in accordance with the
amounts due and unpaid pursuant to this Section 3.1(b)(1), until each holder of
Class A Units has received cumulative aggregate distributions pursuant to this
Section 3.1(b)(1) and Section 3.1(c)(1) in an amount equal to a cumulative eight
percent (8%) annual return, compounded annually, on its Unreturned Capital
Contributions;
 
 
 

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(2) Second, to the holders of Class B Units and the Class A Units pro rata in
proportion to their respective Ownership Percentages.
 
Provided that, notwithstanding anything to the contrary contained in this
Section 3.1(b), all distributions made pursuant to this Section 3.1(b) on or
prior to June 30, 2014 shall be made pursuant to Section 3.1(b)(2) and shall not
be deemed a return of Capital Contributions.
 
(c) Except as may otherwise be provided pursuant to Section 3.1(a)(3), all
distributions of Net Proceeds from a Capital Event shall be made as follows:
 
(1) First, to the holders of Class A Units, pro rata, in accordance with the
amounts due and unpaid pursuant to this Section 3.1(c)(1), until each holder of
Class A Units has received cumulative aggregate distributions pursuant to this
Section 3.1(c)(1) and Section 3.1(b)(1) in an amount equal to a cumulative eight
percent (8%) annual return, compounded annually, on its Unreturned Capital
Contributions;
 
(2) Second, to the holders of Class A Units, pro rata, in accordance with the
amounts due and unpaid pursuant to this Section 3.1(c)(2), until each holder of
Class A Units has received cumulative aggregate distributions pursuant to this
Section 3.1(c)(2) equal to its Unreturned Capital Contributions;
 
(3) Third, to the holders of Class B Units, pro rata in proportion to their
respective Ownership Percentage, until the holders of Class B Units have
received cumulative aggregate distributions pursuant to this Section 3.1(c)(3)
equal to the difference between (x) a number determined by dividing (i) the
aggregate Capital Contributions made by holders of the Class A Units by (ii) the
aggregate Ownership Percentage (expressed as a decimal) of the holders of the
Class A Units and (y) the aggregate Capital Contributions made by holders of the
Class A Units; and
 
(4) Fourth, to the holders of Class B Units and Class A Units, pro rata in
proportion to their respective Ownership Percentages.
 
Section 3.2 Tax Distributions.  The Company shall distribute to each Member, to
the extent that distributions have not otherwise been made to such Member
pursuant to Section 3.1(b) or Section 3.1(c), on a quarterly basis (or at such
earlier times and in such amounts as determined by Gulfstar to be appropriate to
enable the Members to pay their estimated income tax liabilities (or the
Members’ members, as applicable), an amount equal to, for such fiscal quarter
after adjusting for the Members’ allocable share of the Company’s tax losses
carried to such fiscal quarter, fifty percent (50%) of the net taxable income
allocated to each Member for such quarter pursuant to Exhibit C.  Any amounts
distributed under this Section 3.2 to a Member shall constitute an advance
against future distributions from the Company to such Member and, shall be taken
into account in computing subsequent distributions to the Member under
Sections 3.1(b) and 3.1(c) so that the net amount of distributions to the
Members under Sections 3.1(b), 3.1(c), 3.2 and 3.3 shall be equal to the net
distributions that would have been made had there been no distributions pursuant
to this Section 3.2.  The distributions contemplated by this Section 3.2 shall
only be made by the Company from cash on hand and the Company shall not be
required to borrow or raise capital to fund such distributions.  In addition,
the Company shall not be required to make any such distributions to the extent
that the Company is subject to any loan agreement that prohibits such
distributions.
 
 
 

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Section 3.3 Withholding.  Notwithstanding anything herein to the contrary, the
Company shall, if required by law, withhold any federal, state, local or foreign
tax with respect to any Member’s allocable share of Company income or profits,
or share of distributions or otherwise.  Such withheld amounts shall be treated
as distributed to such Member hereunder.  The Company shall be authorized to
take such other actions as shall be necessary or appropriate for the Company to
comply with its obligations under federal, state, local and foreign tax
laws.   To the extent that any amount deemed distributed hereunder exceeds the
amount otherwise distributable during the Fiscal Year in which the withholding
is made, the Member shall return such excess to the Company within ten days of
the written demand by the Company.  The Members’ obligation to return any excess
deemed distribution hereunder shall constitute an unsecured, personal obligation
of the respective Members, and such Members shall indemnify the Company for any
costs and expenses the Company incurs in connection with the recovery of the
excess deemed distribution.  Further, any such excess amount shall accrue
interest at the rate of 10 percent per annum, compounded annually, beginning 10
days after the written demand is made by the Company.  The Company is authorized
to take such actions as shall be necessary or appropriate for the Company to
recoup any such excess distribution.
 
ARTICLE 4
 
MANAGEMENT OF COMPANY
 
Section 4.1 Management Committee.
 
(a) Authority of Management Committee.  The operations and related contractual,
financial and other affairs of the Company shall be managed and conducted under
the direction of managers (each a “Manager”), who will act collectively as a
“Management Committee.”  No individual Manager shall have the authority to act
on behalf of the Company, or to bind the Company, except as expressly provided
by the Management Committee acting pursuant to this Agreement.  Any action,
approval or determination required to be taken by the Management Committee may
only be taken by affirmative vote of a majority of the Managers then appointed,
unless the vote of a greater number is required by this Agreement; provided,
however, that if there is a vacancy on the Management Committee, no action,
approval or determination may be taken unless the Member or Members entitled to
fill such vacancy are given at least five days’ notice and an opportunity to
fill such vacancy.  In all Management Committee votes, each Manager shall have
one vote.  Managers need not be employees or Members of the Company.
 
(b) Appointment of Management Committee Members.  The initial Management
Committee shall consist of three (3) Managers.  The Managers of the Management
Committee shall be designated as follows: (i) Gulfstar, or its Transferee if
such Transferee becomes a Member pursuant to Article 6, shall have the right to
designate one (1) Manager, which initial designee shall be Mr. Marceau
Schlumberger; (ii) Mesa Energy, Inc., or its Transferee if such Transferee
becomes a Member pursuant to Article 6, shall have the right to designate one
(1) Manager, which initial designee shall be Randy M. Griffin, and (iii) one (1)
Manager shall be the President of the Company or, in the absence of a President,
such other member of senior management designated by the Management Committee in
good faith, which initial Manager shall be David Freeman.  Upon the consummation
of the purchase of additional Class A Units by Gulfstar as contemplated by
Section 1.3 of the Unit Purchase Agreement, the number of Managers on the
Management Committee shall increase to five (5) and Gulfstar, or its Transferee
if such Transferee becomes a Member pursuant to Article 6, shall have the right
to designate two (2) additional Managers (for the avoidance of doubt, the other
three (3) Managers shall be designated as set forth in the previous
sentence).  Each Manager will hold office until the earliest to occur of the
following events: (i) such Manager’s (A) death or Disability, (B) written
resignation as a Manager, or (C) removal by written notice of the Member or
Members that designated such Manager, (ii) a Transfer of all Units owned
(beneficially or otherwise) by the Member that designated such Manager or (iii)
a Transfer of any Units by the Member that designated such Manager in violation
of this Agreement. If a Manager elected in accordance with this Section 4.1(b)
ceases to be a Manager for any reason other than the reasons set forth in
clauses (ii) or (iii) of the immediately preceding sentence, then, the Member or
Members that designated such Manager shall designate a successor Manager. Each
Manager shall serve until his or her successor shall have been elected and
qualified.
 
 
 

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(c) Management Committee Observer Rights.  Gulfstar, or its Transferee if such
Transferee becomes a Member pursuant to Article 6, shall have the right to
designate a Management Committee observer (the “Management Committee Observer”),
which initial designee shall be Peter Meyers.  The Management Committee Observer
may not vote at meetings of the Management Committee, but shall be provided with
the same notice of meetings of the Management Committee provided to the
Managers, shall be provided with any materials provided to the Managers in
connection with meetings of the Management Committee, and shall be entitled to
all other rights of Managers, including without limitation, the right to
indemnification pursuant to Article 8, and all rights of the Managers pursuant
to Section 7.3.
 
(d) Meetings of the Management Committee.  Any Manager may call a meeting of the
Management Committee upon five (5) days’ notice by mail or forty-eight (48)
hours’ notice delivered personally, by facsimile, telephone or email.  Delivery
of notice by mail is complete upon delivery in the United States Postal System
by 5:00 p.m.  The notice need not indicate the purpose for which the meeting is
called.  Notice of a meeting need not be given to any Manager who executes a
waiver of notice or consents to the holding of the meeting, whether before or
after the meeting or who attends the meeting without objecting to the lack of
notice prior to the commencement thereof or who approves the minutes of the
meeting.  All such waivers, consents or approval shall be filed with the Company
and be made a part of the minutes of the meeting but they need not indicate the
purpose for which the meeting was called.
 
(e) Authorized Persons.  The Management Committee shall have the power and
authority to appoint persons with the authority to act on behalf of the Company
(each, an “Authorized Person”) who shall serve at the pleasure of the Management
Committee and may be removed at any time by the Management Committee for any
reason or for no reason.
 
(f) Proof of Authority.  In dealing with a Manager or Authorized Person acting
on behalf of the Company, no Person shall be required to inquire into the
authority of that Manager or Authorized Person to bind the Company.  Persons
dealing with the Company are entitled to rely conclusively on the power and
authority of each Manager and each Authorized Person as set forth in this
Agreement or in any power of attorney, resolution or other document delivered by
a Manager or Authorized Person.  This Section shall not, however, relieve a
Manager or any Authorized Person of any obligation to the Company or any Member
resulting from or arising out of any action by a Manager or Authorized Person
without any approval of the Management Committee required under this Agreement.
 
 
 

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Section 4.2 Approval over Major Decisions.  Neither the Management Committee nor
any Manager shall take any of the following actions (each, a “Major Decision”)
without the prior written approval of the holders of a majority of the Class A
Units:
 
(a) File, consent to, or otherwise cause any Bankruptcy Proceeding;
 
(b) Cause a dissolution, liquidation, merger, consolidation, reorganization or
sale of all or substantially all assets of the Company or any subsidiary;
 
(c) Cause the Company or any subsidiary to issue any new Membership Interest,
Voting Interest, Economic Interest, or other equity interest, except as may be
provided pursuant to the Unit Purchase Agreement;
 
(d) Cause the Company or any subsidiary to solicit or accept additional capital
contributions from Members, except as may be provided pursuant to the Unit
Purchase Agreement;
 
(e) Cause the Company or any subsidiary to incur any indebtedness for borrowed
money, incur any obligation evidenced by notes, bonds, debentures or similar
instruments, enter into any capital lease obligations or directly or indirectly
guarantee the indebtedness of another, except in each case for Permitted
Indebtedness;
 
(f) Issue, redeem or repurchase any Units of the Company or any equity interests
of any subsidiary, except as may be provided pursuant to the Unit Purchase
Agreement;
 
(g) Convert the Company or any subsidiary into another form of entity;
 
(h) Take any action in contravention of this Agreement, or which would make it
impossible or commercially impractical to carry on the ordinary business of the
Company;
 
(i) Amend, modify or waive any provision of the Certificate; or
 
(j) Adopt a budget for the Company or any of its subsidiaries;
 
(k) Make any capital or drilling expenditures that, in the aggregate, exceed
$1,000,000 in any Fiscal Year with respect to the Company or any subsidiary;
 
 
 

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(l) Assign any leases;
 
(m) Appoint an operator in connection with the operations of the Company or any
subsidiary, or remove Mesa Gulf Coast, LLC as operator;
 
(n) Appoint or remove officers and upper management personnel, including,
without limitation, the President of the Company; or
 
(o) Cause the Company or any subsidiary to enter into a new line of business.
 
Section 4.3 Action by Written Consent.  Any action permitted or required by the
Delaware Act or this Agreement to be taken at a meeting of the Management
Committee or Members may be taken without a meeting if a consent in writing,
setting forth the action to be taken, is signed by not less than the minimum
number of Managers or Members that would be necessary to take such action at a
meeting at which all Managers or Members were present and voted.  Such consent
shall have the same force and effect as a vote at a meeting and may be stated as
such in any document or instrument filed with the Secretary of State of
Delaware, and the execution of such consent shall constitute attendance or
presence in person at a meeting of the Managers or Members.  Prompt notice of
the taking of any action without a meeting by less than unanimous written
consent will be given to those Managers or Members who did not consent in
writing to such action.  Subject to the requirements of the Delaware Act and
this Agreement for notice of meetings, the Managers and Members may participate
in and hold a meeting of the Managers or Members by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in such
meeting shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting is
not lawfully called or convened.  Notwithstanding anything to the contrary
contained herein, advanced notice of any action of the Management Committee
proposed to be taken without a meeting, setting forth the action proposed to be
taken, shall be sent in writing or by email by the Manager or Managers proposing
such action to all other members of the Management Committee at least five (5)
days prior to the effectiveness of such proposed action; provided that in the
event of an emergency, the Manager or Managers proposing an action without a
meeting shall only be obligated to give such advanced notice, if any, of such
proposed action as is practicable under the circumstances.
 
Section 4.4 Member Voting Rights.  Except for those matters for which Member
consent is expressly required by this Agreement, the Members shall have no
voting, approval or consent rights.
 
Section 4.5 Member and Manager Liability.  It is agreed and understood that the
Members and Managers, and their respective principals and Affiliates, may have
interests, and may have fiduciary obligations to persons that have interests, in
actions taken or not taken by the Company, including interests that may
potentially conflict with the interests of one or more Members.  It is expressly
agreed that the Members and Managers are permitted to consider and to pursue
such interests when acting as Members and Managers, and no Member or Manager
shall be liable to the Company or any Member for considering or pursuing such
interests when proposing, voting or consenting to an action to be taken or not
to be taken by the Company.
 
 
 

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Section 4.6 Coral Reef Consulting Agreement.  The Company’s retention of Coral
Reef as a consultant of the Company pursuant to the Coral Reef Consulting
Agreement shall be deemed to be an approved act of the Company.  The Company’s
Authorized Persons and officers shall be empowered and authorized to execute,
deliver and perform the obligations of the Company under the Coral Reef
Consulting Agreement, including, without limitation, the payment of the annual
consulting fee contemplated thereunder.
 
ARTICLE 5
 
REPRESENTATIONS OF MEMBERS
 
Section 5.1 Representations of each Member.  Each Member hereby represents and
warrants that:
 
(a) If such Member is a corporation, limited liability company, partnership or
other entity, (i) such Member has been duly organized and is validly existing
under the laws of the State of its formation with full power and authority and
legal right to be a Member of the Company and to carry on its business in the
manner and in the locations in which such business has been and is now being
conducted by it, to execute and deliver this Agreement and to perform its
obligations hereunder; and (ii) the execution and delivery of this Agreement has
been duly authorized by such Member, this Agreement has been duly executed and
delivered by such Member and this Agreement constitutes the valid and binding
obligation of such Member, enforceable against it in accordance with its terms.
 
(b) If such Member is an individual, (i) such Member has all requisite right,
power and authority and full legal capacity to execute and deliver this
Agreement; and (ii) this Agreement has been duly executed and delivered by such
Member and this Agreement constitutes the valid and binding obligation of such
Member, enforceable against it in accordance with its terms.
 
(c) Such Member has all permits, licenses and approvals necessary for it to
perform its obligations under this Agreement.
 
(d) Except as set forth in Schedule 5.1(d) hereto, no consent of or approval or
permission by any Third Party is required as a condition to the entering into of
this Agreement by such Member or any constituent Member, partner or shareholder
of such Member.
 
(e) Assuming any consent of or approval or permission by any Third Party set
forth in Schedule 5.1(d) hereto has been obtained, neither the execution and
delivery of this Agreement nor compliance with its terms will (whether before or
after any applicable notice, cure or grace period) result in any breach or
violation of the terms, conditions or provisions of, or conflict with or
constitute a default under, or result in the creation of any Lien upon any
property or assets of such Member pursuant to the terms of any indenture,
mortgage, deed of trust, note, evidence of indebtedness, agreement or other
instrument or contract to which such Member may be party or by which their or
any of their properties or assets may be bound, or violate any provision of law
or any applicable order, writ, injunction, judgment or decree of any court, or
any order or other public regulation of any governmental commission, bureau or
administrative agency.
 
 
 

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(f) Such Member is a “United States person” for United States Federal income tax
purposes.
 
Section 5.2 Securities Laws Representations.  To the extent that the Membership
Interest held by a Member is deemed to be a “security,” such Member hereby
represents and warrants that:
 
(a) Such Member is aware of the Company’s business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire a Membership Interest in the
Company.  Such Member is acquiring a Membership Interest for investment for such
Member’s own account only and not with a view to, or for resale in connection
with, any “distribution” thereof within the meaning of the Securities Act of
1933, as amended (the “Securities Act”).
 
(b) Such Member acknowledges and understands that Membership Interests
constitute “restricted securities” under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom.  Such Member further understands that Membership Interests must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available.  Such Member further
acknowledges and understands that the Company is under no obligation to register
Membership Interests.
 
(c) Such Member (i) is an “accredited investor” as defined in Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act,
(ii) has such knowledge and experience in business and financial matters that it
is able to evaluate the merits and risks of investment in the Company and (iii)
is able to bear the economic risk of loss of its entire investment.
 
ARTICLE 6
 
TRANSFERS OF MEMBERSHIP INTERESTS
 
AND INTERESTS IN MEMBERS
 
Section 6.1 General Restriction.  No direct or indirect Transfer of all or part
of a Membership Interest in the Company shall be made or become effective unless
the Transfer is permitted under this Article.  Any Transfer in violation of this
Article shall be invalid, ineffective and not enforceable for any purpose.
 
Section 6.2 Transfer of Membership Interests.  Units held by any Member may only
be Transferred upon the prior written consent of the holders of a majority of
the Class A Units, which consent shall be deemed to be given in connection with
a transfer pursuant to Section 2.2(b) hereof, a co-sale pursuant to Section 6.6,
a Compelled Sale, and the exercise of the right of first refusal by the Company
or a Member pursuant to Section 6.3, and in accordance with the requirements set
forth in Section 6.4.
 
 
 

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Section 6.3 Right of First Refusal.
 
(a) If at any time a Member proposes to Transfer all or any part of his, her or
its Units (the “Offered Securities”) pursuant to a bona fide written offer (the
“Offer”) from a third party (a “Proposed Transferee”), such Member shall so
notify in writing the Company of the offer of such Offered Securities and the
terms of said Offer, including the identity of the Proposed Transferee, the
amount of Offered Securities proposed to be Transferred to the Proposed
Transferee, and the proposed terms and conditions, including price, of the
Transfer of the Offered Securities (the “Member Sale Notice”).  The Member Sale
Notice shall further state that the Company shall have the rights to acquire all
or any of such Offered Securities in accordance with this Section.  Upon
delivery of the Member Sale Notice, the Company shall thereupon have the right,
on the terms and conditions set forth in the Offer, to purchase some or all of
the Offered Securities.
 
(b) If the Company shall desire to purchase all or any of the Offered
Securities, the Company shall communicate in writing (“Response Notice”) its
election to purchase to such Member, which communication shall state the number
of Offered Securities the Company desires to purchase and shall be delivered by
the Company to such Member within 30 days following the delivery of the Member
Sale Notice (the “Response Notice Deadline”).  Such communication shall, when
taken in conjunction with the Member Sale Notice, be deemed to constitute a
valid, legally binding and enforceable agreement for the sale and purchase of
such Offered Securities.
 
(c) If the Company does not elect to purchase all of the Offered Securities,
then any Offered Securities that remain unsold (for purposes of this Section
6.3, “Remaining Securities”) shall be offered by the Transferring Member to the
other Members and the Transferring Member shall notify in writing the other
Members of the offer of such Offered Securities, the terms of said Offer,
including the identity of the Proposed Transferee, the amount of Remaining
Securities proposed to be Transferred to the Proposed Transferee, and the
proposed terms and conditions, including price, of the Transfer of the Remaining
Securities (the “Second Member Sale Notice”).  Upon delivery of the Second
Member Sale Notice, each Member who is not a Transferring Member shall thereupon
have the right, on the terms and conditions set forth in the Offer, to purchase
that portion of the Remaining Securities equal to the product of (i) the total
number or amount of Remaining Securities and (ii) a fraction, the numerator of
which shall be the total number of Units which such Member owns at such time,
and the denominator of which shall be the total number of Units then issued and
outstanding (not including the Offered Securities).
 
(d) If a Member shall desire to purchase all or any of such Member’s portion of
the Remaining Securities, such Member shall communicate in writing its election
to purchase to the Transferring Member and the Company, which communication
shall state the number of Remaining Securities the Member desires to purchase
and shall be delivered by the Member to the Transferring Member within 15 days
following the delivery of the Second Member Sale Notice (the “Second Response
Notice”).  Such communication shall, when taken in conjunction with the Second
Member Sale Notice, be deemed to constitute a valid, legally binding and
enforceable agreement for the sale and purchase of such Remaining Securities.
 
 
 

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(e) If the Company and the Members who are not Transferring Members elect not to
purchase all of the Offered Securities and upon the approval of the holders of
the Class A Units in accordance with Section 6.2, then any Offered Securities
that remain unsold may be sold by the Transferring Member at any time within 90
days after the date the Offer was made.  Any such sale shall be at a price not
less than the price, and upon other terms and conditions, if any, not more
favorable to the Proposed Transferee than those specified in the Offer.  The
balance of any Offered Securities not sold within such 90-day period shall
continue to be subject to the requirements of a prior offer pursuant to this
Section 6.3.
 
(f) Sales of Offered Securities to be sold to the Company or Members pursuant to
this Section 6.3 shall be made, subject to regulatory approvals when necessary,
within 45 days following delivery of the Response Notice or the Second Response
Notice, as applicable (or if such 45th day shall not be a business day, then on
the next succeeding business day).
 
Section 6.4 Transfer Requirements Regarding Membership Interest.  If a Member
proposes to Transfer its Membership Interest to another Person as permitted by
this Article, the Transfer shall not be completed or effective until all of the
requirements stated below have been satisfied:
 
(a) the Transferee has prepared, signed and delivered to the Company and each
other remaining Member an agreement (subject to such reasonable modification as
requested by the Transferee) in which (1) the Transferring Member assigns all or
a portion of its Membership Interest in the Company to the Transferee, (2) the
Transferee assumes all obligations of the Transferring Member under the
Agreement from and after the effective date of the Transfer relating to the
Transferred Units, and (3) the Transferring Member and the Transferee agree to
pay all costs and expenses (including reasonable attorney’s fees) incidental to
the Transfer, which were incurred by the Company and/or any non-Transferring
Member;
 
(b) the Transferring Member and/or the Transferee shall be deemed to have
represented to the Company and the remaining Member(s) that (1) the Transfer
will not cause the Company to be treated as an association taxable as a
corporation for Federal income tax purposes, and (2) the Transfer will not cause
the Company to be treated as a “publicly traded partnership” within the meaning
of Section 7704 of the Code;
 
(c) upon the Transfer of its entire Membership Interest in the Company and the
admission of such Member’s Transferee as a substitute Member pursuant to this
Article 6, a Member shall be deemed to have withdrawn from the Company;
 
(d) distributions payable on and after the date of the Transfer shall be payable
solely to the Transferee and the Transferring Member shall have no claim to such
distributions (unless otherwise provided in any contract or agreement between
the Transferor and Transferee) even if all or a portion of such amount relates
to a period prior to the Transfer; provided, however, that until notice from the
Transferor and the Transferee to the Company and each non-Transferring Member
that all distributions and other amounts payable under the Agreement should be
paid to the Transferee and until the Transferor has satisfied all of the
requirements set forth in this Section 6.4, the Company and each
non-Transferring Member shall be entitled to (i) pay all distributions or other
amounts payable under this Agreement to the Transferor and any such payment
shall fully discharge any obligation owed to the Transferee with respect
thereto, and (ii) deal solely with the Transferor with respect to all actions
required to be taken pursuant to this Agreement, and any and all decisions,
actions or inactions made or taken by the non-Transferring Member and the
Transferor shall be binding on the Company and the Transferee; and
 
 
 

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(e) the Transferee shall deliver to the Transferor an opinion of counsel in form
and substance reasonably satisfactory to the Transferor and its counsel and
covering the due authorization, execution and delivery by the Transferee of the
documents and consents evidencing and authorizing the Transfer of the Membership
Interest in the Company.
 
Section 6.5 Compelled Sale Right.
 
(a) If a proposal for a sale of all or substantially all of the Company’s
securities to, or a merger with or into another person for a specified price
payable in cash, securities or any other consideration and on specified terms
and conditions (a “Sale Proposal”), shall have been approved by (x) Members
holding a majority of the aggregate amount of Units, (y) the holders of a
majority of the Class A Units, and (z) the Management Committee, then Members
holding a majority of the aggregate amount of Units (such Members being, the
“Requesting Members”), may require all of the Members to sell all of the Units
held by them to the party or parties whose Sale Proposal was accepted as
hereinabove provided on the terms and conditions provided in this Section 6.5.
 
(b) The Company, if instructed in writing by the Requesting Members, shall send
a written notice (the “Compelled Sale Notice”) of the exercise of the rights of
the Requesting Members pursuant to this Section 6.5 to each of the Members
setting forth the consideration to be paid pursuant to the Sale Proposal and the
other terms and conditions of the transaction.
 
(c) Each Member, upon receipt of the Compelled Sale Notice, shall be obligated
to (i) if applicable, vote in favor of such Sale Proposal at any meeting of
Members of the Company called to vote on or approve such Sale Proposal, (ii)
sell all of its Units and participate in the transaction (the “Compelled Sale”)
contemplated by the Sale Proposal and (iii) otherwise take all necessary action,
including, without limitation, expressly waiving any dissenter’s rights or
rights of appraisal or similar rights, providing access to documents and records
of the Company, entering into an agreement reflecting the terms of the Sale
Proposal, surrendering stock certificates, giving any customary and reasonable
representations and warranties given by any other Member and executing and
delivering any certificates or other documents, reasonably requested by the
Requesting Members and their counsel, to cause the Company and the Requesting
Members to consummate such Compelled Sale.  Any such Compelled Sale Notice may
be rescinded by the Requesting Members by delivering written notice thereof to
all of the Members.
 
 
 

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(d) Upon the consummation of the Compelled Sale, all of the Members shall
receive the same proportion of the aggregate consideration from such Compelled
Sale as such Member would have received if the net proceeds from such Compelled
Sale had been distributed by the Company pursuant to Section 3.1(c).
 
Section 6.6 Co-Sale Rights.  If at any time a Member proposes to Transfer all or
any part of his, her, or its Units pursuant to an Offer from a Proposed
Transferee, then the Transferring Member shall deliver a Member Sale Notice to
the other Members and shall not sell the Offered Securities to the Proposed
Transferee unless the other Members are given the opportunity to add all or any
part of their respective Units to the sale of the Offered Securities to be sold
to the Proposed Transferee at the same price and on the same terms and
conditions as are involved in such sale by the Transferring Member.  Each
non-Transferring Member desiring to sell any or all of its Units (each, a
“Co-Sale Participant”) shall communicate the same in writing to the Transferring
Member within ten (10) business days following delivery of the Member Sale
Notice (the “Co-Sale Notices”).  Within three (3) business days prior to the
sale to the Proposed Transferee, the Transferring Member shall be obligated to
notify the Proposed Transferee in writing of the availability of any additional
Units available for sale by the Co-Sale Participants.  In the event that the
Proposed Transferee is not willing to purchase all of the Units offered by the
Transferring Member and the Co-Sale Participants, each of the Transferring
Member and the Co-Sale Participants will have the right to sell the amount of
Units offered equal to the product obtained by multiplying (x) the aggregate
amount of Units which the Proposed Transferee is willing to purchase by (y) the
Ownership Percentage of such Transferring Member or Co-Sale Participant, as
applicable.
 
Section 6.7 General Rules.
 
(a) Any purported Transfer of a Membership Interest (or ownership or beneficial
interest in a Member, whether direct or indirect) that is not permitted or
authorized pursuant to this Agreement or otherwise consented to in writing by
the non-Transferring Member(s) shall be null and void ab initio and of no effect
whatsoever.
 
(b) Any Person which is an assignee of all or any portion of the Membership
Interest of a Member but which is not admitted as a substitute member in
accordance with this Agreement (i) shall have only those rights specifically
provided for such an assignee in the Delaware Act, and (ii) shall be subject to
all the provisions of this Agreement to the same extent and in the same manner
as any Member desiring to make a Transfer of a Membership Interest, if such
Person desires to make a further Transfer of such Membership Interest.
 
ARTICLE 7
 
OBLIGATIONS OF MEMBERS
 
Section 7.1 No Partition.  Each Manager and Member hereby irrevocably waives any
and all right that it may have to maintain any action for partition of all or
any portion of the Company, its assets or properties, or file a complaint or
institute any proceeding at law or in equity to have the Company, its assets or
properties partitioned, and each Manager and Member for itself, its successors,
representatives, and assigns, hereby waives any right to proceed under any
applicable law or otherwise to partition the Company, its assets or
properties.  Any creditor of a Manager or Member shall have recourse only
against such Manager’s or Member’s Membership Interest, if any, in the Company,
but such creditor shall not have any recourse against the property of the
Company.
 
 
 

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Section 7.2 No Right to Act.  No Member, as such, has the authority or power to
act for or on behalf of the Company, to do any act that would be binding on the
Company, to manage the business or affairs of the Company, to direct that any
action be taken by the Company or any of its Authorized Persons, officers,
employees, or agents, or to make any expenditures on behalf of the Company,
unless such specific authority has been expressly granted to and not revoked
from such Person by the Management Committee.
 
Section 7.3 Investment Opportunities.  Each Member and Manager (other than a
Manager who is also an employee of the Company), at any time and from time to
time may engage in and own interests in other business ventures of any and every
type and description, independently or with others (including ones in
competition with the Company) with no obligation to offer to the Company or any
other Member or Manager the right to participate therein.  The Members expressly
acknowledge that, (i) the other Members, and their respective Affiliates, are
permitted to have, and may presently or in the future have, investments or other
business relationships with entities that compete with the Company (an "Other
Business"), (ii) the other Members, and their respective Affiliates, have and
may develop a strategic relationship with businesses that are and may be
competitive with the Company, (iii) none of the other Members, or any of their
respective Affiliates (including their respective representatives serving on the
Management Committee) will be prohibited by virtue of their investments in the
Company or their service on the Management Committee from pursuing and engaging
in any such activities, (iv) none of the other Members, or any of their
respective Affiliates (including their respective representatives serving on the
Management Committee) will be obligated to inform the Company, or any Member or
Manager, of any such opportunity, relationship or investment, (v) neither the
Company nor any other Member or Manager will acquire or be entitled to any
interest or participation in any Other Business as a result of the participation
therein of any of other Member, or any of their respective Affiliates, and (vi)
the involvement of the other Members, or any of their respective Affiliates
(including their respective representatives serving on the Management
Committee), in any Other Business will not constitute a conflict of interest by
such Persons with respect to the Company or its Members.
 
Section 7.4 Confidential Information and Materials.
 
(a) For purposes of this Section 7.4, “Confidential Information” shall include,
but is not limited to any information including plans, research, know-how, trade
secrets, methodologies, techniques and strategies, product development,
distribution plans, contractual arrangements, profits, sales, pricing policies,
budget, forecasts, projections, operational methods, technical processes, other
business affairs and methods, plans for future developments and other technical
and business information, including all intellectual property rights therein,
which is not publicly available and can be communicated by any means whatsoever,
including, without limitation, oral, visual, written and electronic
transmission, that relates to the Company’s:
 
 
 

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(1) business operations, products and services;
 
(2) existing and potential partnerships, strategic alliances or joint ventures;
 
(3) employment and compensation agreements and arrangements;
 
(4) business policies, practices and contracts with others;
 
(5) information received from others that the Company is obligated to treat as
confidential or proprietary; or
 
(6) proprietary information of the Company, whether of a technical nature or
otherwise.
 
Confidential Information shall not include that information defined as
Confidential Information above that such Manager or Member can conclusively
establish by documentary evidence: (x) entered the public domain without its
breach of any obligation owed to the Company; or (y) was conclusively
established to be independently developed by such Manager Member or became known
by or available to such Manager Member from a source other than the Company
subsequent to the Company's disclosure of such information to such Manager
Member, without any breach of any obligation of confidentiality owed to the
Company.
 
(b) For purposes of this Section 7.4, “Confidential Materials” shall mean all
tangible materials containing Confidential Information, including without
limitation written or printed documents and computer disks or tapes whether
machine or user readable.
 
(c) Each Manager and Member acknowledges that Confidential Information was
developed and will continue to be developed, or acquired and will continue to be
acquired, by the Company at great expense and constitutes trade secrets of the
Company, and that irreparable injury will result to the Company from
unauthorized disclosure of Confidential Information.  Each Manager and Member
also recognizes that the Company has received and in the future will receive
confidential or proprietary information from third parties subject to a duty on
the Company's part to maintain the confidentiality of such information and to
use it only for certain limited purposes and this is also considered
Confidential Information.  Each Manager and Member agrees to hold all
Confidential Information and Confidential Materials in strict confidence and not
to disclose it to third parties.  The obligation to keep Confidential Materials
and Confidential Information confidential as provided in this Section 7.4 shall
continue so long as Manager or Member is a Manager or Member of the Company and
shall continue for a period of three years from the date such Manager or Member
ceases to be a Manager or Member of the Company.
 
(d) The provisions of Section 7.4(c) shall not apply to the disclosure of
Confidential Information or Confidential Materials (i) approved in writing for
disclosure by both Members or (ii) required to be disclosed by Armada Oil, Inc.
pursuant to its reporting requirements pursuant to the Securities Exchange Act
of 1934 or other applicable law or regulation (including the rules of any
securities exchange applicable to the Company).
 
 
 

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ARTICLE 8 
 
INDEMNIFICATION
 
Section 8.1 Indemnification by Company.  Subject to the limitations and
conditions as provided in this Article 8, each Person who was or is made a party
or is threatened to be made a party to or is involved in any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative, arbitrative (hereinafter a "Proceeding"), or any appeal in such
a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact that he or she, or a Person of whom he or she
is the legal representative, is or was a Manager or Member or while a Manager or
Member is or was serving at the request of the Company as a manager, director,
officer, partner, member, venturer, proprietor, trustee, employee, agent,
Authorized Person or similar functionary of another foreign or domestic limited
liability company, corporation, partnership, joint venture, sole proprietorship,
trust, employee benefit plan or other enterprise shall be indemnified by the
Company to the fullest extent permitted by the Delaware Act, as the same exists
or may hereafter be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Company to provide broader
indemnification rights than said law permitted the Company to provide prior to
such amendment) against judgments, penalties (including excise and similar taxes
and punitive damages), fines, settlements and reasonable expenses (including,
without limitation, attorneys' fees) actually incurred by such Person (or one or
more of such Person's direct or indirect equity holders) in connection with such
Proceeding, and indemnification under this Article 8 shall continue as to a
Person who has ceased to serve in the capacity that initially entitled such
Person to indemnity hereunder; provided that no such Person shall be indemnified
for any judgments, penalties, fines, settlements or expenses (i) to the extent
attributable to such Person's gross negligence, willful misconduct, or
intentional violation of law (or, if the Delaware Act is hereafter amended or
interpreted to permit indemnification for conduct constituting a higher standard
of culpability, to the extent not in violation of such higher standard), (ii)
for any present or future breaches of any representations, warranties or
covenants by such Person contained in this Agreement or in any other agreement
with the Company, or (iii) in any action (except an action to enforce
indemnification rights set forth in this Section 8.1) brought by such
Person.  It is expressly acknowledged that the indemnification provided in this
Article could involve indemnification for negligence or under theories of strict
liability.
 
Section 8.2 Advancement of Expenses.  In connection with the right to
indemnification conferred upon Members and Managers in this Article 8 pursuant
to Section 8.1, the Company shall pay or reimburse the reasonable, necessary,
and proper expenses incurred by such a Person in the event such Person was or is
threatened to be made a named defendant or respondent in a Proceeding; provided,
that the payment of such expenses incurred by such Person in advance of the
final disposition of a Proceeding shall be made only upon delivery to the
Company of a written affirmation by such Person of its good faith belief that
he, she, or it has met the standard of conduct necessary for indemnification
under Article 8 and a written undertaking, by or on behalf of such Person, to
repay all amounts so advanced if it shall ultimately be determined that such
Person is not entitled to be indemnified under this Article 8 or otherwise.    
 
 
 

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Section 8.3 Contract with the Company.  The rights granted pursuant to this
Article 8 may, at the discretion of the applicable Person claiming
indemnification, be deemed to be contract rights.
 
Section 8.4 Indemnification of Employees and Agents.  The Company, upon the
written approval of the Management Committee, may indemnify and advance expenses
to any employees or agents of the Company who are not or were not Members or
Managers of the Company but who are or were serving at the request of the
Company as a manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent, Authorized Person or similar functionary of another foreign or
domestic limited liability company, corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise against
liabilities and expenses asserted against such Person and incurred by such
Person in such a capacity or arising out of their status as such a Person, to
the same extent that it may indemnify and advance expenses to Members under this
Article 8.
 
Section 8.5 Nonexclusivity of Rights.  The right to indemnification and the
advancement and payment of expenses conferred in this Article 8 shall not be
exclusive of any other right that a Member, Manager, or other Person indemnified
pursuant to Section 8.1 may have or hereafter acquire under any law (common or
statutory), provision of the Certificate or this Agreement, other agreement,
vote of Members or otherwise.
 
Section 8.6 Insurance.  The Company may purchase and maintain insurance, at its
expense, to protect itself and any Person who is or was serving as a Manager,
officer, Authorized Person or agent of the Company or is or was serving at the
request of the Company as a manager, director, officer, partner, venturer,
proprietor, trustee, employee, agent, Authorized Person or similar functionary
of another foreign or domestic limited ability company, corporation,
partnership, joint venture, sole proprietorship, trust, employee benefit plan or
other enterprise against any expense, liability or loss, whether or not the
Company would have the power to indemnify such Person against such expense,
liability or loss under this Article 8.
 
Section 8.7 Savings Clause.  If this Article 8 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify and hold harmless each Manager and Member
or any other Person indemnified pursuant to this Article 8 as to costs, charges
and expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement with respect to any action, suit or proceeding, whether civil,
criminal, administrative or investigative to the full extent permitted by any
applicable portion of this Article 8 that shall not have been invalidated and to
the fullest extent permitted by applicable law.
 
ARTICLE 9
 
FINANCIAL AND ACCOUNTING MATTERS
 
Section 9.1 Books and Records.  An Authorized Person shall maintain or cause to
be maintained, at the expense of the Company, office records, books and accounts
(which shall be and remain the property of the Company) in which shall be
entered fully and accurately each and every financial and other transaction with
respect to the operations of the Company.  Any Member may inspect and review the
books and records of the Company (including, for the avoidance of doubt, the
books and records of any subsidiaries of the Company) and may, at the Member’s
expense, have the Company make copies of all or any portion of the books and
records of the Company.  Unless the Company agrees otherwise, all Member access
to the books and records of the Company must take place during the Company’s
regular business hours.  The Company may impose additional reasonable conditions
and restrictions on Members’ access to the books and records of the Company,
including specifying the amount of advance notice a Member must give and the
charges imposed for copying.
 
 
 

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Section 9.2 Bank Accounts.  An Authorized Person shall deposit and maintain one
or more separate depositary accounts established in the name of the Company and
its subsidiaries by an Authorized Person (each, an “Account”).  Each Account
shall be solely in the name of the Company or the applicable subsidiary.  In no
event shall any Account be commingled with any accounts of any Authorized Person
or any other Person, and shall be used strictly for Company purposes.
 
Section 9.3 Financial Statements.  As soon as practicable (but in no event later
than one hundred and twenty (120) days after the end of each Fiscal Year during
the term of this Agreement), the Management Committee shall arrange for and
furnish to the Members annual financial statements, and as soon as practicable
(but in no event later than sixty (60) days after the end of each fiscal quarter
during the term of this Agreement), the Management Committee shall arrange for
and furnish to the Members quarterly financial statements (each, a “Financial
Statement”) for such period accurately reflecting the financial condition and
the results of operation of the Company, including statements and calculations
of Available Cash from Operations, Net Proceeds from a Capital Event, and
Company Costs; provided that such Financial Statement need not be audited.  All
annual and quarterly Financial Statements of the Company and its subsidiaries
shall be reviewed by an independent public accounting firm.
 
ARTICLE 10
 
TAX MATTERS
 
Section 10.1 Taxation as Partnership.  The Members intend that the Company shall
be treated as a partnership and that the Members shall be taxed as partners for
federal, state and local income tax purposes.  No Party shall take any action
that would result in the Company being taxed as a corporation.  The Company
shall not file any election pursuant to Treasury Regulation
Section 301.7701-3(c) to be treated as an association taxable as a corporation
for Federal income tax purposes.  The Company shall not elect, pursuant to Code
Section 761(a) to be excluded from the provisions of Subchapter K of the
Code.  The Company shall prepare and file with the IRS and other necessary
taxing authorities all documents, if any, necessary to elect, confirm and
maintain its status as a partnership.  This characterization is intended solely
for income tax purposes and the Company, its Members and their Affiliates shall
not be treated or deemed to be partners or a partnership for any other purpose.
 
Section 10.2 Capital Accounts; Tax Allocations.  Exhibit C attached to this
Agreement provides for the maintenance of Capital Accounts for each Member and
allocation of profits, losses and other tax items to the Members, and is
incorporated into this Agreement by this reference.
 
 
 

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Section 10.3 Tax Matters Member.
 
(a) Tax Matters Member.  Gulfstar is hereby designated as the tax matters
partner within the meaning of Section 6231(a)(7) of the Code (“Tax Matters
Member”).  In such capacity, the Tax Matters Member shall have all of the
rights, authority and power, and shall be subject to all of the obligations, of
a tax matters partner to the extent provided in the Code and the Treasury
Regulations.  Consistent with the requirements of the Code and the Treasury
Regulations, the Tax Matters Member shall inform the other Members of any
decision or actions taken as the Tax Matters Member.
 
(b) State and Local Tax Law.  If any state or local tax law provides for a tax
matters partner or Person having similar rights, powers, authority or
obligations, the Tax Matters Member shall also serve in such capacity.  In all
other cases, the Tax Matters Member shall represent the Company in all tax
matters to the extent allowed by law and to the maximum extent not prohibited by
law.
 
(c) Expenses of the Tax Matters Member.  Expenses reasonably incurred by the Tax
Matters Member shall be borne by the Company as Company Costs.  Such expenses
shall include, without limitation, reasonable fees of attorneys and other tax
professionals, accountants, appraisers and experts, filing fees and reasonable
out of pocket costs.
 
(d) Effect of Certain Decisions by Tax Matters Member.  Any decisions made by
the Tax Matters Member concerning whether or not to settle or contest any tax
matter, whether or not to extend the period of limitations for the assessment or
collection of any tax and the choice of forum for such contest shall be made in
the Tax Matters Member’s reasonable discretion.
 
Section 10.4 Tax Returns; Tax Elections.
 
(a) Tax Returns. The Management Committee shall cause to be prepared and filed
all applicable income, franchise, gross receipts, payroll and other tax returns
that the Company is obligated to file.  Copies of Schedule K 1 of the Company’s
tax return (Form 1065) shall be distributed to all Members as soon as
practicable after the Partnership’s Fiscal Year.
 
(b) Elections by Company.  Except as provided in Section 10.1 hereof, relating
to the tax classification of the Company, the Tax Matters Member shall have the
exclusive right to make any determination whether the Company shall make
available elections (including any election pursuant to Section 754 of the Code
relating to certain adjustments to the basis of the Company’s assets or
properties) for federal, state or local income tax purposes.  All decisions and
other matters concerning the computation and allocation of items of income,
gain, loss, deduction and credits among the Members, and accounting procedures
not specifically and expressly provided for by the terms of this Agreement shall
be determined by the Tax Matters Member.  Any determination made pursuant to
this Section 10.4(b) by the Tax Matters Member shall be conclusive and binding
on all Members.  The Tax Matters Member shall be absolved from all liability for
any and all consequences to any previously admitted or subsequently admitted
Members resulting from its making or failing to make any such election.
 
 
 

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(c) Elections by Members.  The Management Committee shall have the sole
discretion to consent to any tax election that a Member may request.  In the
event any Member makes any tax election that requires the Company to furnish
information to such Member to enable such Member to compute its own tax
liability, or requires the Company to file any tax return or report with any tax
authority, in either case that would not be required in the absence of such
election made by such Member, the Company, acting through the Tax Matters
Member, may, as a condition to furnishing such information or filing such return
or report, require such Member to pay to the Company any incremental expenses
incurred in connection therewith.
 
ARTICLE 11   
 
DISSOLUTION AND WINDING UP
 
Section 11.1 Events Resulting in Dissolution.  The Company shall dissolve
pursuant to the Delaware Act only if one or more of the following events occurs:
 
(a) The sale of all or substantially all of the Company, its assets or
properties, provided, however, that if such sale is made on the terms that the
Company takes a note or other indebtedness or securities of the purchaser for
part of the purchase price, no dissolution shall occur until such time as the
Company ceases to be the holder of such securities, such note or indebtedness or
such note or the indebtedness evidenced by such note has been paid in full.
 
(b) The agreement in writing by the Management Committee and Members holding a
majority of the Units.
 
(c) Any judicial entry of an order of dissolution of the Company under the
Delaware Act.
 
 
The Company shall not be dissolved or terminated by reason of the bankruptcy,
removal, withdrawal, dissolution or admission of any Member.
 
Section 11.2 Procedure.
 
(a) Upon the dissolution of the Company, the Managers shall wind up the affairs
of the Company.  The Members shall continue to receive allocations of Net Profit
and Net Losses and distributions of Available Cash from Operations during the
period of liquidation of the Company in the same manner and proportion as though
the Company had not dissolved.  Any sale or sales of the Company, its assets or
properties pursuant to such liquidation must still be approved by the Members as
a Major Decision.
 
(b) Following the payment of all debts and liabilities of the Company and all
expenses of liquidation, and subject to any reserves which may be approved by
the Members as a Major Decision for the payment of contingent or unforeseen
obligations of the Company (including indemnification obligations), which will
continue after the sale of the Company, its assets or properties, the proceeds
of the liquidation and any other funds of the Company shall be distributed in
accordance with Section 3.1.
 
 
 

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(c) Except as approved by the Members as a Major Decision, no Member shall have
the right to demand or receive property other than cash upon liquidation.
 
(d) Upon the completion of the liquidation of the Company and the distribution
of all Company funds, the Company shall terminate and the Managers shall have
the authority to execute and record a certificate of cancellation of the Company
as well as any and all other documents required to complete the dissolution and
termination of the Company.
 
ARTICLE 12
 
NOTICES
 
Section 12.1 Notices.  All notices, consents, requests for approval, approvals,
demands, waivers or other communications required to be sent or otherwise
applicable under this Agreement (each, a “Notice”) shall be in writing and shall
be sent to each applicable Party, its or their legal counsel at the addresses
set forth below.  A Notice that complies with the requirements of this Section
12.1 shall be deemed to have been duly given and received:  (a) when delivered
personally; (b) one (1) Business Day after being delivered to a reputable
overnight courier service, marked for next day delivery and with delivery
charges prepaid by the sender; or (c) on the first Business Day after receipt,
if delivered by facsimile transmission to the facsimile number of the addressee
shown below, if (1) receipt is confirmed in writing by the sending facsimile
machine and (2) the Notice is also sent by any means described in clause (a) or
(b) above.
 
Section 12.2 Addresses for Notices.  All notices must be addressed to a Manager
or Member at the Manager’s or Member’s last known street address on the records
of the Company.  A notice to the Company must be addressed to the Company’s
principal office.  Any party may designate, by notice to all of the others,
substitute addresses or addressees for notices.
 
ARTICLE 13
 
MISCELLANEOUS
 
Section 13.1 Entire Agreement.  This Agreement, together with all Exhibits and
Schedules, constitutes the entire agreement among the Parties pertaining to its
subject matter.  This Agreement supersedes any prior agreement or understanding
among the Parties with respect to its subject matter, but shall not amend,
modify, supersede or in any way affect any other agreement or understanding
among the Members or their respective Affiliates that do not relate to the
subject matter of this Agreement.
 
Section 13.2 Amendments.  No provision of this Agreement may be amended,
supplemented or waived except in a written instrument approved by the Management
Committee, Members holding at an Ownership Percentage of at least fifty percent
(50%), and holders of a majority of Class A Units; provided that an Authorized
Person may amend Schedule A attached hereto to reflect the addition or removal
of Members, the issuance of Units or changes to Ownership Percentages effected
in accordance with the terms of this Agreement; and further provided that, in
the event any amendment, supplement or waiver to this Agreement has or will have
the effect of eliminating any economic or voting rights of the holders of Class
A Units or Class B Units, then such amendment, supplement or waiver will require
the written consent of the holders of a majority of such affected Units.
 
 
 

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Section 13.3 Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Members and their permitted successors and assigns.
 
Section 13.4 No Third Party Beneficiaries.  The terms and provisions of this
Agreement are for the sole and exclusive benefit of the Parties and their
permitted successors and assigns and shall not be deemed to create any rights
for the benefit of any other Person.
 
Section 13.5 Governing Law.  This Agreement and the rights of the Parties shall
be governed by, interpreted and enforced in accordance with the internal laws of
the State of Delaware without regard to principles of conflicts of laws.
 
Section 13.6 Jurisdiction; Choice of Forum.  Each Party hereby irrevocably
(a) submits to the exclusive jurisdiction of any New York state or federal court
sitting in the County of New York (New York), in any action or proceeding
arising out of or relating to this Agreement, the relations between the Parties
and any matter, action or transaction described in this Agreement, whether in
contract, tort or otherwise, (b) agrees that such courts shall have exclusive
jurisdiction over such actions or proceedings, (c) waives the defense that New
York is an inconvenient forum to the maintenance and continuation of such action
or proceeding, (d) consents to the service of any and all process in any such
action or proceeding by the mailing of copies (certified mail, return receipt
requested and postage prepaid) of such process to them at their addresses
specified in Article 12 and (e) agrees that a final and non-appealable judgment
rendered by a court of competent jurisdiction in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.  In the event that an action or
proceeding is initiated in one of the courts referenced above and is pending,
the Parties agree, for the convenience of the parties and subject to any
limitations on subject matter jurisdiction of the court, to initiate any
counterclaims or related actions in the same proceeding (as opposed to a
separate proceeding in any of the other courts specified above).
 
Section 13.7 Waiver of Jury Trial.  EACH MANAGER AND MEMBER, FOR ITSELF AND ON
BEHALF OF ITS AFFILIATES, HEREBY WAIVES ITS RIGHT TO TRIAL BY JURY IN ANY
ACTION, LAWSUIT OR PROCEEDING RELATING TO ANY DISPUTE ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION DESCRIBED IN THIS AGREEMENT OR
DISPUTE BETWEEN THE PARTIES (INCLUDING DISPUTES WHICH ALSO INVOLVE OTHER
PERSONS).
 
Section 13.8 Severability.  If any provision of this Agreement or the
application of such provision to any Party or circumstance shall be held invalid
or unenforceable, the remainder of this Agreement or the application of that
provision to another Party or circumstance shall not be affected thereby.
 
 
 

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Section 13.9 Captions.  The captions and headings used in this Agreement are for
convenience only and do not in any way affect, limit, amplify or modify the
terms and provisions hereof.
 
Section 13.10 Further Assurances.  Each Member shall execute and deliver any
additional documents and instruments and perform any additional acts that may be
reasonably necessary or appropriate to effectuate and perform the provisions of
this Agreement and the transactions contemplated herein.
 
Section 13.11 Counterparts.  This Agreement may be executed in several
counterparts.  If so executed, each of such counterparts shall be deemed an
original for all purposes and all counterparts shall, collectively, constitute
one agreement.  In making proof of this Agreement, it shall not be necessary to
produce or account for more than one such counterpart and photocopies may be
used.
 
Section 13.12 Herrick, Feinstein LLP.  The Members (i) acknowledge and agree
that Herrick, Feinstein LLP is acting as the attorney for Gulfstar, Coral Reef
and certain of their respective Affiliates, (ii) acknowledge and agree that the
Herrick, Feinstein LLP has explained to them the conflicts of interest which
could arise as a result of its representation of Gulfstar, Coral Reef and
certain of their respective Affiliates, (iii) consent to the Herrick, Feinstein
LLP’s representation of Gulfstar, Coral Reef and certain of their respective
Affiliates in connection with any on-going and future transactions involving
Gulfstar, Coral Reef and certain of their respective Affiliates and (iv) waive
any and all claims each of them may have against the Herrick, Feinstein LLP
arising out of any potential conflicts of interest that may result from any of
the facts described herein or the foregoing representations.  Herrick, Feinstein
LLP shall not be disqualified from representing Gulfstar, Coral Reef or any of
their respective Affiliates in any action to enforce or interpret, or arising
out of, this Agreement by reason of Herrick, Feinstein LLP having acted as
counsel to Gulfstar, Coral Reef or any of their respective Affiliates in
connection herewith, or by reason of any of its attorneys being witnesses in
such litigation.
 
 [Remainder of Page Intentionally Left Blank; Signature Pages Follows]
 
 
 
 
 

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SIGNATURE PAGE TO THE
Amended and Restated Limited Liability Company Agreement of TNR Holdings LLC

IN WITNESS WHEREOF, the undersigned has entered into and executed the Amended
and Restated Limited Liability Company Agreement of TNR Holdings LLC.

GULFSTAR RESOURCES LLC

By: Gulfstar Manager LLC, its
Managing Member

By:                                                      
     Name:
     Title:
 
 
 

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SIGNATURE PAGE TO THE
Amended and Restated Limited Liability Company Agreement of TNR Holdings LLC

IN WITNESS WHEREOF, the undersigned has entered into and executed the Amended
and Restated Limited Liability Company Agreement of TNR Holdings LLC.

MESA ENERGY, INC.

By:                                                      
     Name:
     Title:
 
 
 

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SCHEDULE A
 
MEMBERS
 

Name and Address
Capital Contributions
Class A Units
Class B Units
Ownership Percentage
         
Gulfstar Resources LLC
757 Third Avenue
Suite 1703
New York, NY 10017
 
$6,250,000
6,250
-
34.375%
Mesa Energy, Inc.
5220 Spring Valley Road, Suite 615
Dallas, TX 75254
100% limited liability company interests in each of Tchefuncte  Natural
Resources, LLC, and Mesa Gulf Coast, LLC
-
11,932
65.625%
         

 
 
 
 

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SCHEDULE B
 
PERMITTED INDEBTEDNESS
 

1.  
All loans and letter of credit reimbursement obligations outstanding under the
F&M Facility     

 
2.  
Automobile Lease dated September 1, 2011, between David L. Freeman  and Mesa
Energy, Inc.

 
3.  
GMAC Smartlease Agreement dated August 17, 2011, between Bryan Chevrolet and
Mesa Energy, Inc. (36C PC REA4B6324904)

 
4.  
GMAC Smartlease Agreement dated August 17, 2011, between Bryan Chevrolet and
Mesa Energy, Inc. (3GCPCREA58G327570)

 
5.  
GMAC Smartlease Agreement dated September 24, 2011, between Bryan Chevrolet and
Mesa Energy, Inc. (3GCPCREA5BG3553G7)

 
6.  
Equipment Lease dated April 4, 2011, between Regional Office Supply & Equipment
Company and Tchefuncte Natural Resources, LLC

7.  
AFCO Commercial Premium Finance Agreement for annual boat policy dated 4/19/13

Total Premium - $40,837.50
Total Financed - $37,348.29
Insured is Mesa Gulf Coast, LLC and affiliated parties
 
8.  
AFCO Commercial Premium Finance Agreement for annual liability policy dated
7/22/13

Total Premium - $148,793.04
Total Financed - $129,465.06
Insured is Mesa Energy, Inc. and affiliated parties
 

 
 

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EXHIBIT A

 
DEFINITIONS
 
As used in this Agreement, the following terms shall have the following
meanings:
 
“Additional Member” means each Member of the Company other than the Members on
the date hereof and their respective successors and assigns.
 
“Affiliate” means as to any specified Person (1) any officer, director,
employee, shareholder, partner or member of such Person or any Person for which
the specified Person serves as an officer, director, employee, shareholder,
partner or member or (2) any Person Controlling, Controlled by or under common
Control with such Person.
 
“Available Cash from Operations” means cash from any source, other than Net
Proceeds from a Capital Event.
 
“Bankruptcy Proceeding” means (1) the filing by a specified Person of a petition
for its bankruptcy or reorganization under the U.S. Bankruptcy Code or the laws
of any state of the United States, (2) the commencement against a specified
Person with or without its consent or approval of any proceeding seeking its
bankruptcy, liquidation or reorganization, appointment of a receiver or trustee
of its assets, or comparable relief, which proceeding has not been dismissed or
discontinued within ninety (90) days after its filing, (3) the conversion at any
time of an involuntary proceeding of the type described in clause (2) into a
voluntary proceeding with the consent of a specified Person, (4) the entry by a
court of competent jurisdiction of a final and non-appealable order granting any
relief of the type described in clause (1) or (2) above, (5) the admission in
writing by a specified Person of its inability to pay its debts generally as
they become due and (6) the making by a specified Person of a general assignment
for the benefit of its creditors.
 
“Business Day” means Monday through Friday of each week, unless such day is a
day on which national banks in New York, New York are not open for business.
 
 “Capital Contribution” means with respect to any Member, the aggregate amount
of such Member’s Capital Contributions, including without limitation any
additional capital contributions made pursuant to Section 2.2.
 
“Capital Event” means: (i) any refinancing, sale, exchange, transfer,
condemnation or other disposition of all or a portion of a property, facility,
business, subsidiary or division of the Company, including any debt or equity
interest therein; (ii) a sale of all or substantially all of the Company’s
assets; or (iii) proceeds generated from the sale by the Company of equity
interests or acceptance of Capital Contributions, including the sale of equity
interests in any subsidiary or in connection with the formation of a joint
venture.
 
 “Class” refers to the distinction among Class A Units and the Class B Units as
set forth in this Agreement.
 
“Code” means the Internal Revenue Code of 1986, as amended from time to time (or
any succeeding law).
 
 
C-1

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“Company” means the limited liability company formed pursuant to this Agreement.
 
“Company Costs” means all of the costs and expenditures of any kind and payments
thereof actually made by or on behalf of the Company in cash during any period
with respect to its operations.
 
“Control”, “Controlling” and “Controlled by” means, when used with respect to
any specified Person, the ability, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, to direct or cause the
direction of, alone or in concert with others, the management and policies of a
Person.
 
“Coral Reef” means Coral Reef Capital LLC, having offices located at 757 Third
Avenue, Suite 1703, New York, New York 10017.
 
“Coral Reef Consulting Agreement” means that certain management agreement to be
entered into between Coral Reef and the Company on or about the date hereof, as
such agreement may be amended from time to time.
 
“Delaware Act” means the Delaware Limited Liability Company Act, as it may be
amended from time to time, and any successor to that act.
 
 “Disability” means when a Manager suffers from a physical or mental ailment or
condition that causes the Manager to be incapable of making decisions for the
Company and otherwise unable to carry out the management duties of the Company,
which ailment or condition shall have existed for a period of 120 consecutive
days or for a total of 180 days during any twelve (12) consecutive month period.
 
 “Economic Interest” means a Member’s right to share in the income, gains,
losses, deductions, credit, or similar items of, and to receive distributions
from, the Company as set forth in this Agreement, but excludes any other rights
of a Member, including, without limitation, the right to vote or to participate
in management, or, except as may be provided in the Delaware Act, any right to
information concerning the business and affairs of the Company.
 
“Fiscal Year” of the Company means the 12-month period ending December 31 of
each year, or any other period which constitutes the Company’s taxable year for
Federal income tax purposes.
 
“GAAP” shall mean generally accepted accounting principles in the United States.
 
“Gulfstar” means Gulfstar Resources LLC, having offices located at 757 Third
Avenue, Suite 1703, New York, New York 10017
 
“Indemnitor” means the Company, obligated to indemnify, defend and hold harmless
an Indemnitee pursuant to Article 8.
 
“Indemnitee” means either a Manager, Member or other Person that an Indemnitor
is obligated to indemnify, defend and hold harmless pursuant to Article 8 as
well as all present and former directors, officers, shareholders, partners,
members, employees, agents (including accountants, consultants, attorneys and
other professional advisers) and other Affiliates of the specified Indemnitee.
 
 
C-2

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 “IRS” means the U.S. Internal Revenue Service or any successor agency or
department with primary responsibility for adopting, interpreting and enforcing
provisions of the Code.
 
 “Lien” means any lien, mortgage, charge, restriction, option, contractual
restriction on transfer, security interest, tax lien, pledge, encumbrance,
conditional sale or title retention arrangement, or any other claim of any kind
or nature securing any obligation, indebtedness, or any agreement to create or
confer any of the foregoing, in each case whether arising by agreement or under
any statute or law or otherwise.
 
 “Members” means the members set forth on Schedule A and any members of the
Company subsequently admitted as members in accordance with this Agreement and
the Delaware Act.
 
“Membership Interest” means the entire ownership interest of a Member in the
Company at any particular time, including, without limitation, the Voting
Interest, Economic Interest, the right of such Member to any and all benefits to
which a Member may be entitled as provided in this Agreement and under law, and
the obligations of such Member to comply with all of the terms and provisions
set forth in this Agreement and under applicable law.
 
“Net Proceeds From a Capital Event” means the proceeds to the Company from a
Capital Event, after (i) deducting costs and expenses related to such Capital
Event, (ii) the creation of any reserves, and (iii) the satisfaction of any
indebtedness being refinanced or discharged concurrently with such Capital
Event, regardless of whether such indebtedness involves assets related to such
Capital Event.
 
 “Ownership Percentage” means, as to each Member, the percentage reflecting the
ratio which the aggregate amount of Units held by such Member bears to the
aggregate amount of Units held by all Members.  The Ownership Percentage of each
Member is set forth opposite such Member’s name and under the heading “Ownership
Percentage” in Schedule A hereto, as amended from time to time.
 
 “Parties” means the Members who have signed the Agreement.
 
“Permitted Indebtedness” means (i) indebtedness, capital leases obligations, or
guarantees existing on the date hereof as set forth on Schedule B hereto and not
including, for the avoidance of debt, any amendments, extensions, or
modifications of the foregoing made after the date hereof and (ii) indebtedness
secured by purchase money security interests in, or capital leases of, real
property, improvements thereto or equipment hereafter acquired (or, in the case
of improvements, constructed), provided that such security interests are
incurred, and the indebtedness secured thereby is created, within 90 days after
such acquisition (or construction) and the indebtedness secured thereby does not
exceed the lesser of the cost or the fair market value of such real property,
improvements or equipment at the time of such acquisition (or construction), in
an aggregate amount outstanding not to exceed $50,000.
 
 
C-3

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 “Person” means an individual or a general partnership, limited partnership,
corporation, professional corporation, limited liability company, limited
liability partnership, joint venture, trust, business trust, cooperative or
association or any other legally-recognized entity.
 
 “Third Party” means any Person who is not a Party to this Agreement and not an
Affiliate of a Party to this Agreement.
 
“Transfer” and related usages of that term means any sale, transfer, assignment,
pledge, hypothecation, granting of a Lien, or other disposal, directly or
indirectly, of all or any part of a Membership Interest (including economic
interests) or any direct or indirect (and no matter how remote) ownership
interest in a Member or granting any rights to distributions or proceeds from a
Membership Interest in any manner, including any agreement to do so, whether
directly or indirectly; voluntarily or involuntarily by operation of law or
otherwise or by means of any swap, derivative, or similar transaction or by any
of the foregoing with respect to all or a portion of any type of equity,
profits, distribution or other ownership interest, and shall include the ability
to approve or have any right to vote on, consent to or veto any decision or
matter set forth in this Agreement and a right to receive (directly or
indirectly) any share or portion of payments of dividends, distributions or
profits, and the issuance of any new shares or other equity interests.
 
“Treasury Regulations” means the Income Tax Regulations and Procedures and
Administration Regulations promulgated under the Code, as amended from time to
time.
 
“Unit Purchase Agreement” means that certain Unit Purchase Agreement of even
date herewith by and among, the Company, Gulfstar, Mesa Energy, Inc. and Armada
Oil, Inc.
 
 “Unreturned Capital Contributions” means, with respect to each Member, each
such Member’s Capital Contributions less all distributions made to such Member
pursuant to Section 3.1(c)(2), or treated as made pursuant to such Section under
the second sentence of Section 3.2.
 
“Voting Interest” means, with respect to each Member, the right, if any, of such
Member to vote or to participate in management under this Agreement and the
Delaware Act.
 
The following terms have the meanings defined for such terms in the Sections set
forth below:
 

 
Term
Section
 
Account
9.2
 
Agreement
Preamble
 
Assets
4.7
 
Authorized Person
4.1(c)
 
Capital Account
Exhibit C
 
Certificate
1.1
 
Class A Units
2.1(a)
 
Class B Units
2.1(b)

 
 
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Compelled Sale
6.5(c)
 
Compelled Sale Notice
6.5(b)
 
Confidential Information
7.4(a)
 
Confidential Materials
7.4(b)
 
Co-Sale Notices
6.6
 
Co-Sale Participant
6.6
 
Effective Date
Preamble
 
F&M Facility
2.2(b)
 
F&M Payment Unit Price
2.2(b)
 
Financial Statement
9.3
 
Major Decision
4.2
 
Management Committee
4.1(a)
 
Management Committee Observer
4.1(c)
 
Manager
4.1(a)
 
Member Sale Notice
6.3
 
New Unit
2.1(d)(2)
 
Notice
    12.1
 
Offered Securities
6.3
 
Original LLC Agreement
Recitals
 
Other Business
7.3
 
Preemptive Right Notice
2.1(d)(2)
 
Proceeding
8.1
 
Proposed Transferee
6.3
 
Remaining Securities
6.3(c)
 
Response Notice
6.3(b)
 
Response Notice Deadline
6.3(b)
 
Second Member Sale Notice
6.3(c)
 
Second Response Notice
6.3(d)
 
Tax Matters Member
10.3(a)
 
Units
2.1

 
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EXHIBIT B
 
JOINDER AGREEMENT
 

Date: ____________________________

Reference is made to that Amended and Restated Limited Liability Company
Agreement of TNR Holdings LLC, dated as of December 20, 2013 (as the same may be
amended from time to time, the “LLC Agreement”), among the several members named
on Schedule A thereto.  A copy of the LLC Agreement is attached hereto as
Exhibit A and such LLC Agreement is made part hereof and incorporated herein by
reference.  Terms used in this Joinder Agreement, but not defined herein, are
used herein as defined in the LLC Agreement.
 
(i) In accordance with the provisions of Section 2.1(d) of the LLC Agreement,
the undersigned has reviewed, and hereby joins in, the LLC Agreement, for
purposes of evidencing its consent and agreement to be bound by the terms and
provisions of the LLC Agreement under the LLC Agreement of, including the rights
and obligations applicable to, an Additional Member and holder of  [Class [A]
[B]] Units.
 
(ii) The undersigned, as an Additional Member, hereby confirms that the
representations and warranties contained in Article 5 are true and correct with
respect to the undersigned as of the date hereof as if set forth herein.
 
IN WITNESS WHEREOF, the parties hereto have caused this Joinder Agreement to be
executed this _________ day of ___________, _____________.
 

________________________________________

[ADDITIONAL MEMBER]

Date: ________________, ______________

Agreed and accepted:

TNR HOLDINGS LLC

By: ______________________________
      Name:
      Title:

 
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EXHIBIT C
 
TAX ALLOCATIONS
 
I.           Purpose.
 
This Exhibit C (this “Exhibit”) is attached to, and constitutes a part of, the
Agreement for the purpose of setting forth the rules governing the maintenance
of the Capital Account required to be maintained for each Member under the
Agreement and the rules governing the allocation of the Company’s items of Net
Profit and Net Loss, other items of income, gain, loss, deduction and credit,
and taxable income, gain, loss, deduction, and credit.
 
II.           Certain Definitions.
 
1.  
Certain Additional Definitions

 
Unless otherwise provided in this Exhibit, all capitalized terms used in this
Exhibit shall have the meanings assigned to them in the Agreement of which this
Exhibit is a part.  In addition, the following definitions shall be for all
purposes applied to the terms used in this Exhibit.
 
“Adjusted Capital Account” means the Capital Account maintained for each Member
as of the end of each Fiscal Year (i) increased by any amounts which such Member
is obligated to restore pursuant to any provision of this Agreement or is deemed
to be obligated to restore pursuant to the penultimate sentences of Regulations
Sections 1.704-2(g)(1) and 1.704-2(i)(5) and (ii) decreased by the items
described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).  The foregoing definition
of Adjusted Capital Account is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
 
“Adjusted Capital Account Deficit” means, with respect to any Member, the
deficit balance, if any, in such Member’s Adjusted Capital Account as of the end
of the relevant Fiscal Year.
 
“Adjusted Property” means any property the Carrying Value of which has been
adjusted pursuant to this Exhibit.
 
“Agreed Value” means (i) in the case of any Contributed Property, the 704(c)
Value of such property as of the time of its contribution to the Company,
reduced by any liabilities either assumed by the Company upon such contribution
or to which such property is subject when contributed; and (ii) in the case of
any property distributed to a Member by the Company, the Company’s Carrying
Value of such property at the time such property is distributed, reduced by any
indebtedness either assumed by such Member upon such distribution or to which
such property is subject at the time of distribution as determined under
Section 752 of the Code and the Regulations thereunder.
 
“Book-Tax Disparities” means, with respect to any item of Contributed Property
or Adjusted Property, as of the date of any determination, the difference
between the Carrying Value of such property and the adjusted basis thereof for
federal income tax purposes as of such date.  A Member’s share of the Company’s
Book-Tax Disparities in all of its Contributed Property and Adjusted Property
shall be reflected by the difference between such Member’s Capital Account
balance as maintained pursuant to this Exhibit and the hypothetical balance of
such Member’s Capital Account computed as if it had been maintained, with
respect to each such Contributed Property or Adjusted Property, strictly in
accordance with federal income tax accounting principles.
 
 
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“Capital Account” has the meaning set forth in Section 2.
 
“Carrying Value” means (i) with respect to a Contributed Property, the 704(c)
Value of such property, (ii) with respect to an Adjusted Property that was
initially a Contributed Property, the 704(c) Value of such property adjusted
(but not below zero) pursuant to provisions of this Exhibit including Section
2.D(2) and taking into account all Depreciation with respect to such Adjusted
Property charged to the Members’ Capital Accounts, (iii) with respect to an
Adjusted Property that was not initially a Contributed Property, the adjusted
basis of such property for federal income tax purposes as adjusted (but not
below zero) pursuant to provisions of this Exhibit including Section 2.D(2) and
taking into account all Depreciation with respect to such Adjusted Property
charged to the Members’ Capital Accounts and (iv) with respect to any other
Company property, the adjusted basis of such property for federal income tax
purposes, all as of the time of determination.  The Carrying Value of any
property shall be adjusted from time to time in accordance with this Exhibit,
and to reflect changes, additions or other adjustments to the Carrying Value for
dispositions and acquisitions of Company properties, as otherwise provided in
this Exhibit, or as deemed appropriate by the Management Committee.
 
“Company Minimum Gain” shall mean “partnership minimum gain” as set forth in
Regulations Section 1.704-2(b)(2), and the amount of Company Minimum Gain, as
well as any net increase or decrease in Company Minimum Gain, for a Fiscal Year
shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).
 
“Contributed Property” means each property or other asset contributed to the
Company, in such form as may be permitted by the Delaware Act, but excluding
cash contributed or deemed contributed to the Company.  Once the Carrying Value
of a Contributed Property is adjusted pursuant to this Exhibit, such property
shall no longer constitute a Contributed Property for purposes of this Exhibit,
but shall be deemed an Adjusted Property for such purposes.
 
“Depreciation” means, for each Fiscal Year, an amount equal to the federal
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any other reasonable method
selected by the Management Committee in its reasonable discretion subject to
other provisions of this Exhibit.
 
 
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“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse
Debt, equal to the Company Minimum Gain that would result if such Member
Nonrecourse Debt were treated as a Nonrecourse Liability, determined in
accordance with Regulations Section 1.704-2(i)(3).
 
“Member Nonrecourse Debt” shall mean “partner nonrecourse debt” as set forth in
Regulations Section 1.704-2(b)(4).
 
“Member Nonrecourse Deductions” shall mean “partner nonrecourse deduction” as
set forth in Regulations Section 1.704-2(i)(2), and the amount of Member
Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal
Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(i)(2).
 
“Net Profit” or “Net Loss” shall mean for each Fiscal Year the Company taxable
income or taxable loss for such Fiscal Year, determined in accordance with this
Exhibit.
 
“Nonrecourse Built-in Gain” means, with respect to any Contributed Properties or
Adjusted Properties that are subject to a mortgage or negative pledge securing a
Nonrecourse Liability, the amount of any taxable gain that would be allocated to
the Members pursuant to Sections 5.B.(1)(a) and 5.B.(2)(a)(i) of this Exhibit
hereto if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
 
“Nonrecourse Deductions” has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Fiscal
Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
 
“Nonrecourse Liability” has the meaning set forth in Regulations
Section 1.752-1(a)(2).
 
“Partially Adjusted Capital Account” means, with respect to any Member for any
Fiscal Year or other period, the Capital Account balance of such Member at the
beginning of such period, adjusted as set forth in Section 2 of this Exhibit for
all contributions and distributions during such period and all special
allocations pursuant to Section 4 of this Exhibit with respect to such period,
but before giving effect to any allocation with respect to such period pursuant
to Section 3 of this Exhibit.
 
“Recapture Income” means any gain recognized by the Company (computed without
regard to any adjustment required by Sections 734, 743, and 754 of the Code)
upon the disposition of any property or asset of the Company, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
 
“Regulations” means the federal income tax regulations issued by the U.S.
Department of Treasury in their proposed, temporary and final forms, as amended
from time to time.
 
“Residual Gain” or “Residual Loss” means any item of gain or loss, as the case
may be, of the Company recognized for federal income tax purposes resulting from
a sale, exchange or other disposition of Contributed Property or Adjusted
Property, to the extent such item of gain or loss is not allocated pursuant to
Sections 5.B.(1)(a) or 5.B.(2)(a) of this Exhibit to eliminate Book-Tax
Disparities.
 
 
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“704(c) Value” means with respect to any Contributed Property the fair market
value of such property at the time of contribution as determined under this
Agreement.  Subject to this Exhibit, the Management Committee shall elect to use
such method as it reasonably deems appropriate to allocate the aggregate of the
704(c) Values of Contributed Properties in a single or integrated transaction
among each separate property on a basis proportional to their fair market
values.
 
“Target Capital Account” means, with respect to any Member for any Fiscal Year
or other period, an amount (which may be either a positive or negative balance)
equal to the difference between (i) the hypothetical distribution (if any) such
Member would receive if all Company assets, including cash, were sold for cash
equal to their Carrying Value (taking into account any adjustments to Carrying
Value for such period), all Company liabilities were satisfied in cash according
to their terms (limited, with respect to each nonrecourse liability of the
Company, to the Carrying Value of the assets securing such liability), and the
net proceeds to the Company of such sale (after satisfaction of said
liabilities) were distributed in full pursuant to Article III and other
applicable provisions, if any, of the Agreement on the last day of such period,
minus (ii) the sum of such Member’s share of Company Minimum Gain and Member
Minimum Gain, determined as provided in Section 4 of this Exhibit immediately
prior to such deemed sale.
 
“Unrealized Gain” means, with respect to any item of Company property as of any
date of determination, the excess, if any, of (i) the fair market value of such
property (as determined under this Exhibit) as of such date, over (ii) the
Carrying Value of such property (prior to any adjustment to be made pursuant to
this Exhibit for the applicable Fiscal Year or other period) as of such date.
 
“Unrealized Loss” means, with respect to any item of Company property as of any
date of determination, the excess, if any, of (i) the Carrying Value of such
property (prior to any adjustment to be made pursuant to this Exhibit) as of
such date, over (ii) the fair market value of such property (as determined under
this Exhibit for the applicable Fiscal Year or other period) as of such date.
 
2.  
Capital Accounts of the Members

 
A. The Company shall maintain for each Member a separate “capital account”
(“Capital Account”) in accordance with the rules of Regulations
Section 1.704-1(b)(2)(iv).  Such Capital Account shall be increased by (i) the
amount of cash contributed or deemed contributed or the Agreed Value of all
actual and deemed contributions of property made by such Member to the Company
pursuant to this Agreement and (ii) all items of Company income and gain
(including income and gain exempt from tax) computed in accordance with
Section 2.B hereof and allocated to such Member pursuant to Section 3 or
Section 4 hereof, and decreased by (x) the amount of cash distributed or deemed
distributed or the Agreed Value of all actual and deemed distributions of cash
or property made to such Member pursuant to this Agreement and (y) all items of
Company deduction and loss computed in accordance with Section 2.B hereof and
allocated to such Member pursuant to Section 3 or Section 4 hereof.
 
B. For purposes of computing the amount of Net Profit or Net Loss to be
reflected in the Members’ Capital Accounts, the determination, recognition and
classification of any item of income, gain, deduction or loss shall be the same
as its determination, recognition and classification for federal income tax
purposes determined in accordance with Section 703(a) of the Code (for this
purpose all items of income, gain, loss or deduction required to be stated
separately pursuant to Section 703(a)(1) of the Code shall be included in
taxable income or loss), with the following adjustments:
 
 
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(1)  
Except as otherwise provided in Regulations Section 1.704-1(b)(2)(iv)(m), the
computation of all items of income, gain, loss and deduction shall be made
without regard to any election under Section 754 of the Code which may be made
by the Company, provided that the amounts of any adjustments to the adjusted
bases of the assets of the Company made pursuant to Section 734 of the Code as a
result of the distribution of property by the Company to a Member (to the extent
that such adjustments have not previously been reflected in the Members’ Capital
Accounts) shall be reflected in the Capital Accounts of the Members in the
manner and subject to the limitations prescribed in Regulations
Section 1.704-1(b)(2)(iv) (m)(4).

 
(2)  
The computation of all items of income, gain, and deduction shall be made
without regard to the fact that items described in Sections 705(a)(1)(B) or
705(a)(2)(B) of the Code are not includable in gross income or are neither
currently deductible nor capitalized for federal income tax purposes.

 
(3)  
Any income, gain or loss attributable to the taxable disposition of any Company
property shall be determined as if the adjusted basis of such property as of
such date of disposition were equal in amount to the Company’s Carrying Value
with respect to such property as of such date.

 
(4)  
In lieu of the depreciation, amortization, depletion, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year.

 
(5)  
In the event the Carrying Value of any Company asset is adjusted pursuant to
Section 2.D hereof, the amount of any such adjustment shall be taken into
account as gain or loss from the disposition of such asset.

 
(6)  
Any items specially allocated under Section 4 hereof shall not be taken into
account.

 
C. Generally, a transferee of an interest in the Company shall succeed to a pro
rata portion of the Capital Account of the transferor.
 
D.  
(1)Consistent with the provisions of Regulations Section 1.704-1(b)(2)(iv)(f),
and as provided in Section 2.D(2) hereof, the Carrying Values of all Company
assets shall be adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Company property, as of the times of the
adjustments provided in Section 2.D(2) hereof, as if such Unrealized Gain or
Unrealized Loss had been recognized on an actual sale of each such property and
allocated pursuant to Section 3 hereof.

 
 
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(2)
Such adjustments shall be made as of the following times: (a) immediately prior
to the acquisition of an additional interest in the Company by any new or
existing Member in exchange for more than a de minimis capital contribution; (b)
immediately prior to the distribution by the Company to a Member of more than a
de minimis amount of property as consideration for an interest in the Company;
and (c) immediately prior to the liquidation of the Company within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(g), provided however that adjustments
pursuant to clauses (a) and (b) above shall be made only if the Management
Committee reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members in the
Company.

 
 
(3)
In accordance with Regulations Section 1.704- 1(b)(2)(iv)(e), the Carrying Value
of Company assets distributed in kind shall be adjusted upward or downward to
reflect any Unrealized Gain or Unrealized Loss attributable to such Company
property, as of the time any such asset is distributed.

 
 
(4)
In determining Unrealized Gain or Unrealized Loss for purposes of this Exhibit,
the aggregate cash amount and fair market value of all Company assets (including
cash or cash equivalents) shall be determined by the Management Committee using
such reasonable method of valuation as it may adopt.  The Management Committee
shall allocate such aggregate fair market value among the assets of the Company
in such manner as it determines in its reasonable discretion to arrive at a fair
market value for individual properties.

 
E. The provisions of this Agreement (including this Exhibit) 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 Management Committee shall reasonably
determine that it is prudent to modify the manner in which the Capital Accounts,
or any debits or credits thereto (including, without limitation, debits or
credits relating to liabilities which are secured by contributed or distributed
property or which are assumed by the Company or the Members) are computed in
order to comply with such Regulations, the Management Committee may make such
modification it reasonably deems appropriate, provided that it is not likely to
have a material effect on the amounts distributable to any Member pursuant to
the Agreement upon the dissolution of the Company.  The Management Committee
also shall (i) make any adjustments that are necessary or appropriate to
maintain equality between the Capital Accounts of the Members and the amount of
Company capital reflected on the Company’s balance sheet, as computed for book
purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and
(ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations
Section 1.704-1(b).
 
 
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3.  
General Allocation Rules

 
After giving effect to the special allocations set forth in Section 4 of this
Exhibit, all Net Profit and Net Loss (and to the extent necessary, as set forth
in clauses (i), (ii) and (iii) of this Section 3, items of gross income, gain,
expense and loss) of the Company shall be allocated among the Members as
follows:
 
(1)  
If the Company has a Net Profit for any Fiscal Year (determined prior to giving
effect to this clause (1)), each Member whose Partially Adjusted Capital Account
is greater than its Target Capital Account shall be allocated items of Company
expense or loss for such Fiscal Year equal to the difference between its
Partially Adjusted Capital Account and Target Capital Account.  If the Company
has insufficient items of expense or loss for such Fiscal Year to satisfy the
previous sentence with respect to all such Members, the available items of
expense or loss shall be divided among such Members in proportion to such
difference.

 
(2)  
If the Company has a Net Loss for any Fiscal Year (determined prior to giving
effect to this clause (2)), each Member whose Partially Adjusted Capital Account
is less than its Target Capital Account shall be allocated items of Company gain
or income for such Fiscal Year equal to the difference between its Partially
Adjusted Capital Account and Target Capital Account.  If the Company has
insufficient items of income or gain for such Fiscal Year to satisfy the
previous sentence with respect to all such Members, the available items of
income or gain shall be divided among such Members in proportion to such
difference.

 
(3)  
Any remaining Net Profit or Net Loss (as computed after giving effect to clauses
(1) and (2) of this Section 3) (and to the extent necessary to achieve the
purposes hereof, items of income, gain, loss and deduction) shall be allocated
among the Members so as to reduce, proportionately, the differences between
their respective Partially Adjusted Capital Accounts and Target Capital Accounts
for the period under consideration.  To the extent possible, each Member shall
be allocated a pro rata share of all Company items allocated pursuant to this
clause (3).

 
4.  
Special Allocation Rules

 
Notwithstanding any other provision of the Agreement or this Exhibit, the
following special allocations shall be made in the following order:
 
A. Minimum Gain Chargeback.  If there is a net decrease in Company Minimum Gain
during any Fiscal Year, each Member shall be specially allocated items of
Company income and gain for such year (and, if necessary, subsequent years) in
an amount equal to such Member’s share of the net decrease in Company Minimum
Gain, as determined under Regulations Section 1.704-2(g).  Allocations pursuant
to the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Member pursuant thereto.  The items to be so
allocated shall be determined in accordance with Regulations
Section 1.704-2(f)(6).  This Section 4.A is intended to comply with the minimum
gain chargeback requirements in Regulations Section 1.704-2(f) and shall be
interpreted consistently therewith solely for purposes of this Section 4.A, each
Member’s Adjusted Capital Account Deficit shall be determined prior to any other
allocations pursuant to Section 3 of this Exhibit with respect to such Fiscal
Year and without regard to any decrease in Member Minimum Gain during such
Fiscal Year.
 
 
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B. Member Minimum Gain Chargeback.  Notwithstanding any other provision of the
Agreement or this Exhibit (except Section 4.A hereof), if there is a net
decrease in Member Minimum Gain attributable to a Member Nonrecourse Debt during
any Fiscal Year, each Member who has a share of the Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be specially allocated items of Company
income and gain for such year (and, if necessary, subsequent years) in an amount
equal to such Member’s share of the net decrease in Member Minimum Gain
attributable to such Member Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5).  Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Member pursuant thereto.  The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(i)(4).  This
Section 4.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this Section 4.B, each Member’s Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 3 of this Exhibit with respect to such Fiscal Year, other
than allocations pursuant to Section 3.A hereof.
 
C. Qualified Income Offset.  In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
and after giving effect to the allocations required under Sections 4.A and 4.B
hereof with respect to such Fiscal Year, such Member has an Adjusted Capital
Account Deficit, items of Company income and gain (consisting of a pro rata
portion of each item of Company income, including gross income and gain for the
Fiscal Year) shall be specially allocated to such Member in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.  This Section 4.C is intended to
constitute a “qualified income offset” under Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
 
D. Gross Income Allocation.  In the event that any Member has an Adjusted
Capital Account Deficit at the end of any Fiscal Year (after taking into account
allocations to be made under the preceding paragraphs hereof with respect to
such Fiscal Year), each such Member shall be specially allocated items of
Company income and gain (consisting of a pro rata portion of each item of
Company income, including gross income and gain for the Fiscal Year) in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit.
 
E. Excess Percentage Depletion.  Excess percentage depletion deductions with
respect to depletable property shall be allocated to the Members in accordance
with the allocation of gross income from the property from which such deductions
are derived. The term “excess percentage depletion” shall mean the excess, if
any, of deductions for percentage depletion as determined for tax purposes over
the adjusted basis of the depletable property
 
 
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F. Nonrecourse Deductions.  Nonrecourse Deductions for any Fiscal Year shall be
allocated to the Members in accordance with the respective percentage interest
of such Members.  If the Management Committee determines in its good faith
discretion that the Company’s Nonrecourse Deductions must be reasonably
allocated in a different ratio to satisfy the safe harbor requirements of the
Regulations promulgated under Section 704(b) of the Code, the Management
Committee is authorized, upon notice to the Members, to revise the prescribed
ratio for such Fiscal Year to the numerically closest ratio which would satisfy
such requirements.
 
G. Member Nonrecourse Deductions.  Any Member Nonrecourse Deductions for any
Fiscal Year shall be specially allocated to the Member who bears the economic
risk of loss with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Regulations Sections
1.704-2(b)(4) and 1.704-2(i).
 
H. Code Section 754 Adjustments.  To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code
is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m), to be taken
into account in determining Capital Accounts, the amount of such adjustment to
the Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis), and such item of gain or loss shall be specially allocated to the
Members in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such section of the Regulations.
 
5.  
Allocations for Tax Purposes

 
A. Except as otherwise provided in this Section 5, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Members in the same manner as its correlative item of “book” income, gain,
loss or deduction is allocated pursuant to Sections 3 and 4 of this Exhibit.
 
B. In an attempt to eliminate Book-Tax Disparities attributable to a Contributed
Property or Adjusted Property, items of income, gain, loss, and deduction shall
be allocated for federal income tax purposes among the Members as follows:
 
(1)  
In the case of a Contributed Property

 
(a) such items attributable thereto shall be allocated among the Members
consistent with the principles of Section 704(c) of the Code to take into
account the variation between the 704(c) Value of such property and its adjusted
basis at the time of contribution (taking into account Section 5.C of this
Exhibit); and
 
(b) any item of Residual Gain or Residual Loss attributable to a Contributed
Property shall be allocated among the Members in the same manner that its
correlative item of “book” gain or loss is allocated pursuant to Sections 3 and
4 of this Exhibit.
 
 
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(2)  
In the case of an Adjusted Property, such items shall

 
(a) first, be allocated among the Members in a manner consistent with the
principles of Section 704(c) of the Code to take into account the Unrealized
Gain or Unrealized Loss attributable to such property and the allocations
thereof pursuant to Section 2 hereof;
 
(b) second, in the event such property was originally a Contributed Property, be
allocated among the Members in a manner consistent with Section 5.B(1) of this
Exhibit; and
 
(c) any item of Residual Gain or Residual Loss attributable to an Adjusted
Property shall be allocated among the Members in the same manner that its
correlative item of “book” gain or loss is allocated pursuant to Sections 3 and
4 of this Exhibit.
 
In administering this Section 5.B, the Company shall use the “traditional
method” with curative allocations as described in Regulations Section
1.704-3(b), unless such time as the Management Committee elects another method
available under Regulations Section 1.704-3.
 
C. If any interest is transferred during a Fiscal Year, allocations made in this
Exhibit for such Fiscal Year shall be allocated, using any permissible method
selected at the reasonable discretion of the Management Committee.
 
 
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