**Exhibit 3.4**

 

**EXECUTIONCOPY**

 

 

**AMENDED ANDRESTATED**

 

**LIMITEDLIABILITY COMPANY AGREEMENT**

 

**OF**

 

**HILANDPARTNERS GP, LLC,**

 

**A DELAWARELIMITED LIABILITY COMPANY**

 

**DATED AS OF**

 

**FEBRUARY 15,2005**

 

 

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**TABLEOF CONTENTS**

 
| ** ** | **ARTICLE 1**                                     | ** ** |
|------------|--------------------------------------------------------|------------|
| ** ** | **DEFINITIONS AND CONSTRUCTION**                       | ** ** |
| ** ** | ** **                                             | ** ** |
| 1.1        | Definitions                                            |       |
| 1.2        | Rules of Construction                             |       |
|       |                                                   |       |
| ** ** | **ARTICLE 2**                                     | ** ** |
| ** ** | **ORGANIZATION**                                       | ** ** |
| ** ** | ** **                                             | ** ** |
| 2.1        | Formation of the Company                               |       |
| 2.2        | Company Name                                           |       |
| 2.3        | Term                                                   |       |
| 2.4        | Purposes and Powers                                    |       |
| 2.5        | Place of Business, Agent and Office of the  Company    |       |
| 2.6        | Title to Company Assets                                |       |
|       |                                                   |       |
| ** ** | **ARTICLE 3**                                     | ** ** |
| ** ** | **CAPITAL AND CAPITAL ACCOUNTS**                       | ** ** |
| ** ** | ** **                                             | ** ** |
| 3.1        | Membership Interests and Units                         |       |
| 3.2        | Initial Capital Contributions                          |       |
| 3.3        | Subsequent Transfer                                    |       |
| 3.4        | Members of the Company at the Effective  Date          |       |
| 3.5        | Transfer of Units and Admission of  Substitute Members |       |
| 3.6        | Issuance of Additional Units                           |       |
| 3.7        | Subsequent Capital Contributions                       |       |
| 3.8        | Loans to the Company                                   |       |
| 3.9        | Capital Accounts                                       |       |
| 3.10       | General Provisions Regarding Capital  Contributions    |       |
| 3.11       | Limitation on Liability                                |       |
|       |                                                   |       |
| ** ** | **ARTICLE 4**                                     | ** ** |
| ** ** | **DISTRIBUTIONS**                                      | ** ** |
| ** ** | ** **                                             | ** ** |
| 4.1        | Distributions Generally                                |       |
| 4.2        | Operating Distributions                                |       |
| 4.3        | Tax Liability Distributions                            |       |
| 4.4        | Distributions on Dissolution and Winding Up            |       |
| 4.5        | Limitation on Distributions                            |       |
| 4.6        | Withholding of Taxes                                   |       |
|       |                                                   |       |
| ** ** | **ARTICLE 5**                                     | ** ** |
| ** ** | **ALLOCATIONS**                                        | ** ** |
| ** ** | ** **                                             | ** ** |
| 5.1        | Allocations of Profit and Loss                         |       |
| 5.2        | Allocations of Liquidating Gain and Loss               |       |
| 5.3        | Transfers                                              |       |
| 5.4        | Additional Allocations                                 |       |
| 5.5        | Income Tax Allocations                                 |       |
| 5.6        | Negative Capital Accounts                              |       |

 

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| ** ** | **ARTICLE 6**                                       | ** ** |
|------------|----------------------------------------------------------|------------|
| ** ** | **MEETINGS OF MEMBERS**                                  | ** ** |
| ** ** | ** **                                               | ** ** |
| 6.1        | Time and Place                                           |       |
| 6.2        | Annual Meeting                                           |       |
| 6.3        | Special Meeting                                          |       |
| 6.4        | Record Date for Determination of Membership              |       |
| 6.5        | Notice to Members                                        |       |
| 6.6        | Waiver                                                   |       |
| 6.7        | Quorum                                                   |       |
| 6.8        | Voting Rights                                            |       |
| 6.9        | Voting and Proxies                                       |       |
| 6.10       | Action by Consent of the Members                         |       |
| 6.11       | Telephonic Meetings                                      |       |
| 6.12       | Compensation of Members                                  |       |
|       |                                                     |       |
| ** ** | **ARTICLE 7**                                       | ** ** |
| ** ** | **MANAGEMENT**                                           | ** ** |
| ** ** | ** **                                               | ** ** |
| 7.1        | Management of the Company’s Affairs                 |       |
| 7.2        | Number; Qualification; Election; Tenure                  |       |
| 7.3        | Notice                                                   |       |
| 7.4        | Regular Meetings                                         |       |
| 7.5        | Special Meetings                                         |       |
| 7.6        | Action by Consent of the Board                           |       |
| 7.7        | Telephonic Meetings                                      |       |
| 7.8        | Quorum; Voting Requirement                               |       |
| 7.9        | Committees                                               |       |
| 7.10       | Vacancies; Increases in the Number of  Directors         |       |
| 7.11       | Removal                                                  |       |
| 7.12       | Compensation of Directors                                |       |
|       |                                                     |       |
| ** ** | **ARTICLE 8**                                       | ** ** |
| ** ** | **OFFICERS**                                             | ** ** |
| ** ** | ** **                                               | ** ** |
| 8.1        | Elected  Officers                                        |       |
| 8.2        | Election and Term of Office                              |       |
| 8.3        | Chairman of the Board                                    |       |
| 8.4        | President and Chief Executive Officer                    |       |
| 8.5        | Vice  Presidents                                         |       |
| 8.6        | Chief Financial Officer and Assistant  Treasurers        |       |
| 8.7        | Secretary and Assistant Secretaries                      |       |
| 8.8        | Removal                                                  |       |
| 8.9        | Vacancies                                                |       |
| 8.10       | Compensation                                             |       |
| 8.11       | Powers of Attorney                                       |       |
| 8.12       | Delegation of Authority                                  |       |
|       |                                                     |       |
| ** ** | **ARTICLE 9**                                       | ** ** |
| ** ** | **STANDARDS OF CONDUCT, LIABILITY AND  INDEMNIFICATION** | ** ** |
| ** ** | ** **                                               | ** ** |
| 9.1        | Standards of Conduct and Fiduciary Duties                |       |

 

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| 9.2        | Liability and Exculpation                                                                |       |
|------------|------------------------------------------------------------------------------------------|------------|
| 9.3        | Indemnification                                                                          |       |
|       |                                                                                     |       |
| ** ** | **ARTICLE 10**                                                                      | ** ** |
| ** ** | **TAXES**                                                                                | ** ** |
| ** ** | ** **                                                                               | ** ** |
| 10.1       | Tax  Returns                                                                             |       |
| 10.2       | Tax  Elections                                                                           |       |
| 10.3       | Tax Matters Member                                                                       |       |
|       |                                                                                     |       |
| ** ** | **ARTICLE 11**                                                                      | ** ** |
| ** ** | **TRANSFER OF UNITS;**                                                                   | ** ** |
| ** ** | **ADMISSION OF SUBSTITUTE MEMBERS**                                                      | ** ** |
| ** ** | ** **                                                                               | ** ** |
| 11.1       | Restrictions on Transfers of Units                                                       |       |
| 11.2       | Rights of Certain Class A Members and Class B  Members to Transfer Units       |       |
| 11.3       | Substitute Members                                                                       |       |
| 11.4       | Assignees                                                                                |       |
| 11.5       | Requirements Applicable to All Transfers                                                 |       |
| 11.6       | Release of Transferor’s Liability                                                   |       |
| 11.7       | Prohibition Against Hypothecation                                                        |       |
| 11.8       | Option to Repurchase Units Assigned by  Operation of Law in Violation of Article 11 |       |
| 11.9       | General Provisions relating to Transfer of  Units                                        |       |
| 11.10      | Further Admissions of Additional Members                                                 |       |
|       |                                                                                     |       |
| ** ** | **ARTICLE 12**                                                                      | ** ** |
| ** ** | **PURCHASE OF CLASS B UNITS**                                                       | ** ** |
| ** ** | ** **                                                                               | ** ** |
| 12.1       | Put Right Upon Certain Events                                                            |       |
| 12.2       | Call Right Upon Certain Events                                                           |       |
| 12.3       | Termination of Class A Units                                                        |       |
| ** ** | **ARTICLE 13**                                                                      | ** ** |
| ** ** | **CO-SALE OBLIGATIONS**                                                                  | ** ** |
| 13.1       | Notice of Certain Sales                                                                  |       |
| 13.2       | Co-Sale Obligations and Rights                                                           |       |
| 13.3       | Delivery of Documents to Effectuate  Transfer                                            |       |
| 13.4       | Consummation of Transfer                                                                 |       |
| 13.5       | Exempt  Transfers                                                                        |       |
| 13.6       | Termination of Rights Conferred in this Article 13                                  |       |
|       |                                                                                     |       |
| ** ** | **ARTICLE 14**                                                                      | ** ** |
| ** ** | **PREEMPTIVE RIGHTS**                                                                    | ** ** |
| ** ** | ** **                                                                               | ** ** |
| 14.1       | Grant of Preemptive Rights                                                               |       |
| 14.2       | Definition of Class A Equivalent  Membership Interests                              |       |
| 14.3       | Definition of “New Membership Interests”                                       |       |
| 14.4       | Terms of the Preemptive Rights Offering                                                  |       |
|       |                                                                                     |       |
| ** ** | **ARTICLE 15**                                                                      | ** ** |
| ** ** | **BOOKS OF ACCOUNT, RECORDS AND REPORTS**                                                | ** ** |
| ** ** | ** **                                                                               | ** ** |
| 15.1       | Preparation and Maintenance of Books and  Records                                        |       |
| 15.2       | Company Documentation Requirements                                                       |       |
| 15.3       | Fiscal  Year                                                                             |       |

 

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| 15.4       | Company  Funds                                 |       |
|------------|------------------------------------------------|------------|
| 15.5       | Statements                                     |       |
|       |                                           |       |
| ** ** | **ARTICLE 16**                            | ** ** |
| ** ** | **DISSOLUTION AND TERMINATION OF THE COMPANY** | ** ** |
| ** ** | ** **                                     | ** ** |
| 16.1       | Dissolution                                    |       |
| 16.2       | Winding Up and Liquidation                     |       |
| 16.3       | No  Recourse                                   |       |
| 16.4       | No Deficit Contribution Obligation             |       |
|       |                                           |       |
| ** ** | **ARTICLE 17**                            | ** ** |
| ** ** | **AMENDMENTS; POWER OF ATTORNEY**              | ** ** |
| ** ** | ** **                                     | ** ** |
| 17.1       | Amendments Generally                           |       |
| 17.2       | Power  of Attorney                             |       |
|       |                                           |       |
| ** ** | **ARTICLE 18**                            | ** ** |
| ** ** | **MISCELLANEOUS**                              | ** ** |
| ** ** | ** **                                     | ** ** |
| 18.1       | No Registration of Units                       |       |
| 18.2       | Exhibits                                       |       |
| 18.3       | Severability                                   |       |
| 18.4       | Successors and Assigns                         |       |
| 18.5       | Governing  Law                                 |       |
| 18.6       | Counterparts                                   |       |
| 18.7       | No Third Party Beneficiaries                   |       |
| 18.8       | Notices                                        |       |
| 18.9       | Spouses                                        |       |
| 18.10      | Entire Agreement; Interpretation               |       |

 
| Schedules and Exhibits:                              |   |
|------------------------------------------------------|--------|
|                                                 |   |
| SCHEDULE A – Schedule of Members      |   |
|                                                 |   |
| EXHIBIT A – Form of Unit  Certificate |   |
|                                                 |   |
| EXHIBIT B – Vesting                        |   |

 

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**AMENDED ANDRESTATED**

 

**LIMITEDLIABILITY COMPANY AGREEMENT**

 

**OF**

 

**HILANDPARTNERS GP, LLC,**

 

**A DELAWARELIMITED LIABILITY COMPANY**

 

This AMENDED AND RESTATEDLIMITED LIABILITY COMPANY AGREEMENT (this “*Agreement*”)of HILAND PARTNERS GP, LLC (the “*Company*”)is made and entered into as of February 15, 2005 (the “*Effective Date*”), by and among each Personlisted as a member of the Company on the Schedule of Members attachedhereto as Schedule A, and such other holders of Units who becomeparties hereto from time to time.

 

**ARTICLE 1**DEFINITIONS AND CONSTRUCTION

 

1.1                                 Definitions.  The following definitions shall be applicableto the terms set forth below as used in this Agreement:

 

“*Act*” means the Delaware Limited LiabilityCompany Act (Delaware General Corporations Code Sections 18-101, et seq.),as it may be amended from time to time, and any corresponding provisions ofsucceeding law. All references in this Agreement to provisions of the Act shallbe deemed to refer, if applicable, to their successor statutory provisions tothe extent appropriate in light of the context herein in which such referencesare used.

 

“*Additional Member*” has the meaning setforth in Section 3.6(b).

 

“*Adjusted Capital Account*” means theCapital Account maintained for each Member as of the end of each fiscal year ofthe Company, adjusted as follows:

 

(a) increased by anyamounts that such Member is obligated to restore under the standards set byTreasury Regulations Section 1.704-1(b)(2)(ii)(c) (or is deemed obligatedto restore under Treasury Regulations Sections 1.704-2(g) and 1.704-2(i)(5));and

 

(b) decreased by (i) theamount of all losses and deductions that, as of the end of such fiscal year,are reasonably expected to be allocated to such Member in subsequent yearsunder Sections 704(e)(2) and 706(d) of the Code and Treasury Regulations Section 1.751-1(b)(2)(ii),and (ii) the amount of all distributions that, as of the end of such fiscalyear, are reasonably expected to be made to such Member in subsequent years inaccordance with the terms of this Agreement or otherwise to the extent theyexceed offsetting increases to such Member’s Capital Account that arereasonably expected to occur during (or prior to) the year in which suchdistributions are reasonably expected to be made (other than increases as aresult of a minimum gain chargeback pursuant to Sections 5.4(a) or 5.4(b).

 

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The foregoing definitionof Adjusted Capital Account is intended to comply with the provisions ofTreasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpretedconsistently therewith

 

“*Affiliate*” means, with respect to anyperson or entity, any other person or entity that directly or indirectlycontrols, or is controlled by, or is under common control with, such firstPerson. For the purposes of this definition, “*Control*”when used with respect to any Person means the power to direct the managementand policies of such Person, directly or indirectly, whether through theownership of voting securities, by contract or otherwise; and the terms “controlling”and “controlled” have meanings correlative to the foregoing.

 

“*Agreed Allocations*” means any allocation,other than a Required Allocation, of an item of income, gain, deduction or losspursuant to Article V.

 

“*Agreement*” has the meaning set forth inthe preamble hereof, as the same may be amended from time to time in accordancewith the terms hereof.

 

“*Assignee*” means any party to whom Units havebeen Transferred in a manner permitted under this Agreement, but who has notbeen admitted as a Substitute Member and thus has only the rights set forth in Section 11.4.

 

“*Audit Committee*” has the meaning set forthin Section 7.9(b).

 

“*Board*” has the meaning set forth in Section 7.1(a).

 

“*Business Day*” means any day, other than aSaturday, Sunday, or federal or Oklahoma legal holiday.

 

“*Capital Account*” means the capital accountmaintained by the Company with respect to each Member in accordance with thecapital accounting rules described in Article 3.

 

“*Capital Account Gross Income*” and “*Capital Account Deduction*” means,respectively, items of gross income and deduction of the Company determined inaccordance with Section 703(a) of the Code (including all items of income,gain, loss or deduction required to be stated separately pursuant to Section 703(a)(1)of the Code), with the following adjustments:

 

(a)                                  Anyincome of the Company that is exempt from federal income tax shall be takeninto account as Capital Account Gross Income;

 

(b)                                 Anyexpenditures of the Company described in Section 705(a)(2)(B) of the Codeshall be taken into account as Capital Account Deductions;

 

(c)                                  Inthe event the book value of any Company asset as determined for Capital Accountpurposes is adjusted pursuant to Section 3.9(b) or Section 3.9(c),the amount of such adjustment shall be taken into account as an item of CapitalAccount Gross Income or Capital Account Deduction; and

 

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(d)                                 Withrespect to property reflected in the Capital Accounts at a book value differentfrom its adjusted basis, items of depreciation, amortization and gain or lossshall be computed in the same manner as such items are computed for federalincome tax purposes, except that the computation shall be made with referenceto such property’s book value as determined for purposes of maintaining theCapital Accounts instead of its adjusted tax basis, in accordance with TreasuryRegulations Section 1.704-1(b)(2)(iv)(g).

 

“*Capital Contribution*” means the amount ofmoney and/or the fair market value of any property (net of any liabilitiesencumbering such property that the Company is considered to assume or takesubject to under Code Section 752) contributed to the capital of theCompany by any Member.

 

“*Certificate of Formation*” means thecertificate of formation for the Company as originally filed in the Office ofthe Secretary of State of the State of Delaware, as such certificate may beamended from time to time.

 

“*Change of Control*” means, and shall bedeemed to have occurred upon the occurrence of one or more of the followingevents: (i) any sale, lease, exchange or other transfer or disposition (inone transaction or a series of related transactions) of all or substantiallyall of the assets of the Partnership or the Company to any Person and/or itsAffiliates, other than to the Hamm Parties, the Partnership, the Company and/orany of their Affiliates; (ii) the consolidation, reorganization, merger orother transaction involving the Company, or a Transfer of Class A Units bythe Hamm Parties, in either case pursuant to which (a) less than 35% ofthe outstanding Class A Units, on a fully diluted basis, are beneficiallyowned (as beneficial ownership is defined in Rule 13d-3 of the ExchangeAct) by the Hamm Parties or any of their Affiliates or (b) any “person” or“group,” within the meaning of Section 13(d) or 14(d)(2) of the ExchangeAct, (other than the Hamm Parties or any of their Affiliates) becomes theultimate beneficial owner (as beneficial ownership is defined in Rule 13d-3under the Exchange Act) of more of the outstanding Class A Units than arebeneficially owned by the Hamm Parties or any of their Affiliates; or(iii) the Company (or an Affiliate thereof) ceases to be the generalpartner of the Partnership.

 

“*Class A Members*” means the holders ofClass A Units that have been admitted as Members of the Company.

 

“*Class B Members*” means the holders ofClass B Units that have been admitted as Members of the Company.

 

“*Class A Units*” has the meaning setforth in Section 3.1.

 

“*Class B Units*” has the meaning setforth in Section 3.1.

 

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“*Class B Valuation Price*” means theprice obtained for a Class B Unit by reference to the following formula:

 

Class B UnitPrice = ((A ÷ B) x C)

 

Where:

 

“A” means the total distributions paid by thePartnership to the Company with respect to the quarter in which the measurementdate occurs;

 

“B” means the total number of outstanding Class BUnits; and

 

“C” means the average closing price of the Partnership’sCommon Units for the twenty trading days preceding the measurement date dividedby the total distributions to be paid by the Partnership on each Common Unit ofthe Partnership during the quarter in which the measurement date occurs.

 

For purposes of determining the total distributions to be paid by thePartnership to the Company or on each Common Unit of the Partnership during aparticular quarter, reference shall be made to the distribution that ispublicly announced to be paid by the Partnership during the quarter or, if thePartnership has not made such a public announcement, reference shall be made tothe distribution that was paid during the immediately preceding quarter.

 

“*Code*” means the Internal Revenue Code of1986, as amended. All references in this Agreement to provisions of the Codeshall be deemed to refer, if applicable, to their successor statutoryprovisions to the extent appropriate in light of the context herein in whichsuch references are used.

 

“*Common Units*” has the meaning set forth inthe Partnership Agreement.

 

“*Company*” means the limited liabilitycompany continuing under this Agreement, notwithstanding changes in itsmembership.

 

“*Company Minimum Gain*” means the amountdetermined in accordance with the principles of Treasury Regulations Section 1.704-2(d).

 

“*Compensation Committee*” has the meaningset forth in Section 7.9(c).

 

“*Conflicts Committee*” has the meaning setforth in Section 7.9(d).

 

“*Continental Holdings*” means ContinentalGas Holdings, Inc., a Delaware corporation.

 

“*Continental LP*” means Continental GasOperating, LP, an Oklahoma limited partnership and any successor thereto.  Continental Gas, Inc., an Oklahomacorporation, is the predecessor to Continental LP prior to its conversion to alimited partnership.

 

“*Contribution Agreement*” means that certainContribution, Conveyance and Assumption Agreement, of even date herewith, amongthe Company, the Partnership, the Operating

 

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Company, HilandPartners, LLC, Hiland GP, LLC, Hiland LP, LLC, Continental Holdings, HilandEnergy Partners, LLC, Equity Financial Services, Inc., Harold Hamm, theHamm Trusts, Equity Financial, Randy Moeder, Ken Maples and Continental LP.

 

“*Director*” or “*Directors*” has the meaning set forth in Section 7.2(a).

 

“*Dissolution Event*” has the meaning setforth in Section 16.1.

 

“*Economic Risk of Loss*” has the meaning setforth in Treasury Regulations Section 1.752-2(a).

 

“*Effective Date*” has the meaning set forthin the preamble to this Agreement.

 

“*Equity Financial”* means Equity FinancialServices, Inc., an Oklahoma corporation.

 

“*Excess Nonrecourse Liabilities*” has themeaning set forth in Section 5.4(g).

 

“*Exchange Act*” means the SecuritiesExchange Act of 1934, as amended, or any successor statute.

 

“*General Partner Interest*” has the meaningset forth in the Partnership Agreement.

 

“*Group Member*” has the meaning set forth inthe Partnership Agreement.

 

“*Hamm Holdings*” means HH GP Holding, LLC,an Oklahoma limited liability company.

 

“*Hamm Parties*” means Harold Hamm, the HammTrusts, any other trust primarily for the benefit of Harold Hamm and/or hisfamily, Continental Holdings and Hamm Holdings.

 

“*Hamm Trusts*” means the Harold Hamm DSTTrust and the Harold Hamm HJ Trust, collectively.

 

“*Incentive Plans*” means any plan orarrangement pursuant to which the Company or the Partnership may compensate itsdirectors, officers, employees, consultants or service providers.

 

“*Indemnitee*” means (a) any Person who is orwas an Affiliate of the Company, (b) any Person who is or was an officer,Director, fiduciary or trustee of the Company or any Affiliate of the Company,(c) any Person who is or was serving at the request of the Board as an officer,director, member, partner, fiduciary or trustee of another Person; *provided*, that a Person shall not be anIndemnitee by reason of providing, on a fee-for-services basis, trustee,fiduciary or custodial services; and (d) any Person the Board designates as an “Indemnitee”for purposes of this Agreement.

 

“*Independent Director*” means a Director whois not (a) a security holder, officer or employee of the Company, (b) anofficer, director or employee of any Affiliate of the Company or (c) a holderof any ownership interest in the Partnership Group other than Common Units andwho also meets the independence standards required of directors who serve on anaudit committee of a board of directors established by the Securities ExchangeAct of 1934, as

 

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amended, and the rules andregulations of the Commission thereunder and by the Nasdaq Stock Market or anyNational Securities Exchange on which the Common Units are listed.

 

“*Involuntary Transfer*” has the meaning setforth in Section 11.8.

 

“*Involuntary Transfer Date*” has the meaningset forth in Section 11.8.

 

“*Liquidating Gains*” and “*Liquidating Losses*” means taxable incomeor loss of the Company as determined by taking into account only items ofCapital Account Gross Income and Capital Account Deduction that arise from thesale or deemed sale of all or substantially all of the assets of the Company.

 

“*Liquidator*” has the meaning set forth in Section 16.2.

 

“*Management Members*” means each of RandyMoeder and Ken Maples.

 

“*Member Nonrecourse Debt*” has the meaningset forth in Treasury Regulations Section 1.704-2(b)(4).

 

“*Member Nonrecourse Debt Minimum Gain*” hasthe meaning set forth in Treasury Regulations Section 1.704-2(i)(2).

 

“*Member Nonrecourse Deductions*” means anyand all items of loss, deduction or expenditure (including, without limitation,any expenditure described in Section 705(a)(2)(B) of the Code) that, inaccordance with the principles of Treasury Regulations Section 1.704-2(i),are attributable to a Member Nonrecourse Debt.

 

“*Members*” means collectively, and as of anydate of reference, all Persons who as of such date are identified as a memberof the Company on Schedule A attached hereto and shall include anyPerson admitted to the Company as an Additional Member or a Substitute Memberin accordance with the provisions of this Agreement, in each case in suchPerson’s capacity as a Member of the Company. The term “Member” may be usedherein to refer individually to any of such Members.  For purposes of any provision of thisAgreement relating to Capital Accounts or allocations or distributions to theMembers, the terms “Member” or “Members” shall be deemed to include anAssignee.

 

“*Membership Interest*” means the propertyinterest, as opposed to the personal interest, of a Member in the Company andas a holder of Units, including rights to distributions (liquidating orotherwise), allocations, information, all other rights, benefits and privilegesenjoyed by that Member (under the Act, this Agreement or otherwise) by virtueof the Units, whether vested or unvested, held by such Member; and allobligations, duties and liabilities imposed on that Member (under the Act, thisAgreement, or otherwise) by virtue of the Units, whether vested or unvested,held by such Member.

 

“*Nonrecourse Deductions*” means any and allitems of loss, deduction or expenditures (described in Section 705(a)(2)(B)of the Code) that, in accordance with the principles of Treasury Regulation Section 1.704-2(b),are attributable to a Nonrecourse Liability.

 

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“*Nonrecourse Liability*”**has the meaning set forth in TreasuryRegulation Section 1.752-1(a)(2).

 

“*Officers*” has the meaning set forth in Section 8.1.

 

“*Omnibus Agreement*” means that certainOmnibus Agreement, dated as of the Closing Date (as defined in the PartnershipAgreement), among Harold Hamm, Continental Resources, Inc., thePartnership, the Company, Hiland Partners, LLC and Continental Holdings.

 

“*Operating Company*” means Hiland Operating,LLC, a Delaware limited liability company, and any successor thereto.

 

“*Partnership*” means Hiland Partners, LP, aDelaware limited partnership, of which the Company is the general partner.

 

“*Partnership Agreement*” means the Amendedand Restated Agreement of Limited Partnership of the Partnership, as the samemay be amended, supplemented or restated from time to time.

 

“*Percentage Interest*” means, as of any dateof determination (a) as to any Member or Assignee holding Class A Units,the quotient obtained by dividing the number of Class A Units held by suchMember or Assignee by the total number of all outstanding Class A Units,expressed as a percentage and (b) as to any Member or Assignee holding Class BUnits, the quotient obtained by dividing the number of Class B Units heldby such Member or Assignee by the total number of outstanding Class BUnits, expressed as a percentage.

 

“*Person*” means an individual or acorporation, limited liability company, partnership, joint venture, trust,unincorporated organization, association, government agency or politicalsubdivision thereof or other entity.

 

“*Pro Rata*” means apportioned among allholders of Units of a designated class in accordance with their relativePercentage Interests of such class.

 

“*Profits*” and “*Losses*” means, for each fiscal year or other period, anamount equal to the Company’s net income or loss for such year or period,determined by taking into account only items of Capital Account Gross Incomeand Capital Account Deduction, and excluding Liquidating Gain and LiquidatingLoss.

 

“*Required Allocations”* means any allocation(or limitation imposed on any allocation) of an item of income, gain, deductionor loss pursuant to Sections 5.4(a)-(h), such allocations being directly orindirectly required by the Treasury Regulations promulgated under section 704(b)of the Code.

 

“*Securities Act*” has the meaning set forthin Section 18.1.

 

“*Spouse*” means the spouse by marriage,whether statutory or common law, of a Member.

 

“*Subordinated Units*” has the meaning setforth in the Partnership Agreement.

 

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“*Subsequent Capital Contribution*” means anyCapital Contribution subsequent to a Member’s initial Capital Contribution.

 

“*Substitute Member*” means a Transferee whois admitted as a Member of the Company pursuant to Section 11.3.

 

“*Tax Liability Distribution*” has themeaning set forth in Section 4.3.

 

“*Tax Matters Member*” has the meaning setforth in Section 10.3(a).

 

“*TerminationEvent*” means, with respect to any Management Member, any of thefollowing:

 

(a)                                  thetermination of such Management Member’s employment by reason of a disabilitythat entitled such Management Member to benefits under the Company’s long-termdisability plan;

 

(b)                                 thedeath of such Management Member while in the employ of the Company; or

 

(c)                                  thetermination of such Management Member’s employment for any reason other thanfor Cause (as determined by the Company in accordance with its employmentpolicies).

 

“*Transfer*” (and related words) means anysale, assignment, gift (outright or in trust), hypothecation, pledge,encumbrance, mortgage, exchange or other disposition, whether voluntary orinvoluntary, by operation of law or otherwise, of any Units.

 

“*Transferee*” means a person who receivesUnits by means of a Transfer.

 

“*Transferor*” means a Member whose Units arethe subject of a Transfer in whole or in part.

 

“*Treasury Regulations*” means the federalincome tax regulations as promulgated by the U.S. Treasury Department, as suchregulations may be in effect from time to time. All references in thisAgreement to provisions of the Treasury Regulations shall be deemed to refer,if applicable, to their successor regulatory provisions to the extentappropriate in light of the context herein in which such references are used.

 

“*Unit*” has the meaning set forth in Section 3.1

 

“*Unvested Class B Units*” means Class BUnits that are issued as unvested Class B Units and have not vested inaccordance with the terms of Exhibit B to this Agreement.

 

“*Vested Class BUnits*” means Class B Units that are not Unvested Class BUnits.

 

1.2                                 Rules ofConstruction.  The followingprovisions shall be applied wherever appropriate herein:

 

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(a)                                  termsdefined in Section 1.1 have the meanings assigned to them in that Section forpurposes of this Agreement;

 

(b)                                 “herein,”“hereby,” “hereunder,” “hereof,” “hereto” and other equivalent words shallrefer to this Agreement as an entirety and not solely to the particular portionof this Agreement in which any such word is used;

 

(c)                                  “including”means “including without limitation” and is a term of illustration and not oflimitation;

 

(d)                                 alldefinitions set forth herein shall be deemed applicable whether the wordsdefined are used herein in the singular or the plural;

 

(e)                                  unlessotherwise expressly provided, any term defined herein by reference to any otherdocument shall be deemed to be amended herein to the extent that such term issubsequently amended in such document;

 

(f)                                    referencesherein to other documents and agreements means such documents and agreements asamended and restated from time to time;

 

(g)                                 whereverused herein, any pronoun or pronouns shall be deemed to include both thesingular and plural and to cover all genders;

 

(h)                                 neitherthis Agreement nor any other agreement, document or instrument referred toherein or executed and delivered in connection herewith shall be construedagainst any Person as the principal draftsperson hereof or thereof;

 

(i)                                     thesection headings appearing in this Agreement are inserted only as a matterof convenience and in no way define, limit, construe or describe the scope orextent of such Section, or in any way affect this Agreement; and

 

(j)                                     anyreferences herein to a particular Section, Article, Exhibit or Schedule (otherthan in connection with the Code, the Regulations or the Act) means a Section orArticle of, or an Exhibit or Schedule to, this Agreement unlessanother agreement is specified.

 

**ARTICLE 2**ORGANIZATION

 

2.1                                 Formationof the Company.  Pursuant to andunder the Act, the Company was formed as a Delaware limited liability companyunder the laws of the State of Delaware by the filing of the Certificate ofFormation with the Office of the Secretary of State of Delaware. The rights andliabilities of the Members shall be determined pursuant to the Act and thisAgreement. To the extent that the rights or obligations of any Member aredifferent by reason of any provision of this Agreement than they would be inthe absence of such provision, this Agreement shall, to the extent permitted bythe Act, control.

 

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2.2                                 CompanyName.  The name of the Company shallbe “*Hiland Partners GP, LLC*.”  The business of the Company shall be conductedunder such name or under such other name or names as the Board may determinefrom time to time.

 

2.3                                 Term.  The term of the Company commenced on October 18, 2004, which was the date of filingof the Certificate of Formation and, unless and until the Company is dissolvedor merged out of existence, shall continue indefinitely.

 

2.4                                 Purposesand Powers.

 

(a)                                  Thepurposes of the Company are to act as the general partner of the Partnership asdescribed in the Partnership Agreement and to engage in any lawful business oractivity related to the foregoing as the Board shall determine.  The Company shall possess and may exerciseall the powers and privileges granted by the Act, by any other law or by thisAgreement, together with any powers incidental thereto, including such powersand privileges as are necessary or appropriate to the conduct, promotion orattainment of the business, purposes or activities of the Company.

 

(b)                                 TheMembers hereby specifically consent to and approve the execution and deliveryby the appropriate Officers on behalf of the Company of all loan agreements,guarantees, notes, security agreements or other documents or instruments, ifany, as required by any lender providing funds to the Company, the Partnershipor the Operating Company and ancillary documents contemplated thereby.

 

2.5                                 Placeof Business, Agent and Office of the Company.  The principal business office of the Companyshall be at 205 West Maple, Suite 1100, Enid, Oklahoma 73701. The Boardmay at any time and from time to time (i) establish a different principalbusiness office for the Company within or outside of the State of Oklahoma and(ii) establish such additional offices of the Company within or outsidethe State of Oklahoma as it may from time to time determine to be necessary orappropriate for the conduct of the Company’s or the Partnership’s business andaffairs. The Company shall establish a registered office in the State ofDelaware, and shall register as a foreign limited liability company and takesuch other actions as the Board determines to be necessary or appropriate toallow the Company to conduct business in such jurisdictions as the Boarddetermines to be necessary or appropriate. The Company shall designate initialagents for the service of process in the State of Delaware and such otherjurisdictions as the Board determines to be necessary or appropriate, and shallmaintain the names and business addresses of such agents in the books andrecords of the Company. The Company may from time to time change the designationof any such party who is to serve as such agent and may provide for additionalagents for service in such other jurisdictions as the Board determines to benecessary or appropriate.

 

2.6                                 Titleto Company Assets.  Title to theCompany’s assets, whether real, personal or mixed and whether tangible orintangible, shall be deemed to be owned by the Company as an entity, and noMember, individually or collectively, shall have any ownership interest in suchCompany assets or any portion thereof. Title to any or all of the Company’s assets may be held in the name ofthe Company or one or more of its Affiliates or one or more nominees, as theBoard may determine.  All Company assetsshall be recorded as the property of the Company in

 

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its books and records, regardless of the name in which record title tosuch Company assets is held.

 

**ARTICLE 3**CAPITAL AND CAPITAL ACCOUNTS

 

3.1                                 MembershipInterests and Units.  The MembershipInterests in the Company shall be divided into, and represented by, two classesof units (“*Units*”) that arereferred to herein as *“Class A Units”*and *“Class B Units,”* witheach such class having the rights, powers and privileges as set forth in thisAgreement.  Ownership of Units shall beevidenced by one or more Unit certificates in the form of Exhibit Aattached hereto, but the status of a holder of Units as a Member of the Companyshall be exclusively evidenced and determined by entry in the books and recordsof the Company.

 

3.2                                 InitialCapital Contributions.  ContinentalLP, the Hamm Trusts, Equity Financial, Hamm Holdings, Randy Moeder and KenMaples have made the initial capital contribution to the Company as describedin and set forth in the Contribution Agreement. Following such initial capital contributions, the Company (a) issued 940Class A Units to Hamm Holdings, 40 Class A Units to Randy Moeder and20 Class A Units to Ken Maples and admitted such Persons as Class AMembers and (b) issued 6,141 Class B Units to Continental LP, 1,956 Class BUnits to the Harold Hamm DST Trust, 1,303 Class B Units to the Harold HammHJ Trust, 330 Class B Units to Randy Moeder, 200 Class B Units to KenMaples and 70 Class B Units to Equity Financial and admitted such Personsas Class B Members.

 

3.3                                 SubsequentTransfer.  Pursuant to theContribution Agreement, Continental LP distributed 6,141 Class B Units toContinental Holdings (on behalf of Hiland GP LLC (0.0614 Class B Units)and Hiland LP LLC (6,140.9386 Class B Units)).

 

3.4                                 Membersof the Company at the Effective Date. Schedule A reflects the Members’ ownership of the Units asof the Effective Date.

 

3.5                                 Transferof Units and Admission of Substitute Members.  Units may be Transferred and SubstituteMembers may be admitted to the Company only in accordance with Article 11.

 

3.6                                 Issuanceof Additional Units.

 

(a)                                  Subjectto the approval of the holders of at least 50% of the outstanding Class AUnits and subject to Article 14, the Company may issue an unlimited numberof additional Class A Units or Class B Units to any Person at anytime for such consideration as the Board deems appropriate.

 

(b)                                 Ifany additional Units are issued hereunder to any Person who is not already aMember, any such Person (and such Person’s spouse, as applicable) shall, as acondition to admission as an additional Member (an “*Additional Member*”), execute and acknowledge suchinstruments as the Board determines to be necessary or appropriate to effectthe admission of such Person as an Additional Member, including, withoutlimitation, the written agreement by such Person (and such Person’s spouse, asapplicable) to become a party to, and be bound by, the

 

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provisions of this Agreement.  Upon the admission of any Additional Member,the Schedule of Members attached hereto as Schedule A shall beamended to reflect the admission of such Additional Member.

 

3.7                                 SubsequentCapital Contributions.  Except as maybe required under applicable law, no Member shall be required to make anySubsequent Capital Contribution to the Company.

 

3.8                                 Loansto the Company.  Any Member, directlyor through an Affiliate, may at any time or from time to time lend funds to theCompany with the consent of the Board. Any such loan shall be repayable by theCompany to the Member (or its Affiliate, if applicable) at such date or datesas they may agree, and shall bear interest and carry such other terms as theymay agree at a fair market interest rate and terms for similar loans betweenunaffiliated parties. The Members expressly agree and acknowledge that nothingin this Section 3.8 shall be deemed to require or otherwise obligate anyMember to make any such loan to the Company. A loan by a Member to the Companyshall not increase the interest of the lending Member in the capital of theCompany and shall not entitle such Member to any increased share in the Company’scapital, Profits or Losses.

 

3.9                                 CapitalAccounts.

 

(a)                                  ACapital Account shall be established for each Member and shall be determinedand maintained in accordance with the provisions of Code Section 704 andthe Treasury Regulations thereunder.  AMember that has more than one class or series of Units shall have a singleCapital Account that reflects all such classes or series of Units and regardlessof time or manner in which such Units were acquired.  In addition to such other adjustments as maybe required under this Agreement or pursuant to such Treasury Regulations, eachMember’s Capital Account shall be (a) increased by (i) such Member’sCapital Contribution to the Company, plus (ii) the amount of any Profitsand Liquidating Gains allocated to such Member and items of Capital AccountGross Income specially allocated to such Member pursuant to Article 5, and(b) decreased by (i) the amount of any Losses and Liquidating Lossesallocated to such Member and items of Capital Account Deduction speciallyallocated to such Member pursuant to Article 5, (ii) the amount ofany cash or other assets distributed to such Member by the Company, and(iii) the fair market value, as determined by the Board, of any propertydistributed, or deemed hereunder to be distributed, to such Member by theCompany (net of any liabilities that such Member is considered to assume ortake subject to under Code Section 752 upon any such distribution ofproperty).

 

(b)                                 Inaccordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(e),immediately prior to the actual or deemed distribution of any Company asset inkind, the Capital Accounts of all Members and the Company’s book carrying valueof such Company asset shall be adjusted upward or downward to reflect anyunrealized gain or unrealized loss attributable to such Company asset as ifsuch unrealized gain or unrealized loss had been recognized upon an actual saleof such Company asset immediately prior to such distribution and had beenallocated to the Members at such time pursuant to Article 5.  For purposes of determining such unrealizedgain or unrealized loss, the fair market value, as determined by the Board, ofCompany assets shall be used.

 

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(c)                                  Uponany event described in Treasury Regulation Section 1.704-1(b)(2)(iv)(f)(5),the Board may determine to restate the Capital Accounts in connection with arevaluation of the assets of the Company in order to reflect the manner inwhich the unrealized income, gain, loss, or deduction inherent in such property(that has not been reflected in the Capital Accounts previously) would beallocated among the Members if there were a taxable sale of such assets fortheir fair market value as determined by the Board.

 

(d)                                 Uponany Transfer of Units, the Transferee shall be credited on the Company’s bookswith the portion of the Transferor’s Capital Account that corresponds to theTransferred Units.

 

3.10                           GeneralProvisions Regarding Capital Contributions. Except as otherwise expressly provided in this Agreement (a) noMember shall have the right to demand or receive a return of its CapitalContribution, (b) under circumstances requiring hereunder a return of anyCapital Contribution, no Member shall have the right to demand or receiveproperty other than cash, and (c) no Member shall receive any interest,salary or draw with respect to its Capital Contribution or its Capital Account.An unrepaid Capital Contribution is not a liability of the Company or of anyMember.  No Member shall be required tocontribute or to lend any cash or property to the Company to enable the Companyto return the Capital Contribution of any Member.

 

3.11                           Limitationon Liability.  Except as otherwiserequired under the Act, the debts, obligations and liabilities of the Company,whether arising in contract, tort or otherwise, shall be solely the debts,obligations and liabilities of the Company, and no Member or Assignee shall bepersonally liable for or otherwise obligated with respect to any such debt,obligation or liability of the Company by reason of being a Member orAssignee.  The Members and Assigneesagree that the rights, duties and obligations of the Members and Assignees intheir capacities as such are only as set forth in this Agreement and asotherwise arise under the Act. Furthermore, the Members and Assignees agreethat the existence of any rights of a Member or Assignee, or the exercise orforbearance from exercise of any such rights shall not create any duties orobligations of the Member or Assignees in their capacities as such, nor shallsuch rights be construed to enlarge or otherwise alter in any manner the dutiesand obligations of the Members or Assignees.

 

**ARTICLE 4**DISTRIBUTIONS

 

4.1                                 DistributionsGenerally.  Except as provided inSections 4.3 or 4.4, distributions to the Members shall be made only to Class BMembers and shall be made on a *Pro Rata*basis; *provided, however*, thatany loans from Class B Members pursuant to Section 3.8 that are thendue and payable shall be repaid prior to any distributions to Class BMembers. Except as provided in Sections 4.3 or 4.4, holders of Class AUnits shall not be entitled to the payment of distributions in respect of Class AUnits. Any distributions by the Company will be made only to Persons who,according to the books and records of the Company, were the holders of recordof Units on the date determined by the Board as of which the holders of Unitsare entitled to the distribution in question. The Company shall be entitled to treat the record holder of any Units asthe beneficial owner thereof, and shall incur no liability for distributionsmade in good faith to such holder.

 

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4.2                                 OperatingDistributions.  Distributions, otherthan distributions payable in accordance with Section 4.4, shall be madeat such times and in such amounts equal to all distributions of any naturereceived by the Company from the Partnership, except for such amountsdetermined by the Board to be retained for the necessary expenses of theCompany and for the reasonable and necessary reserves as determined from timeto time by the Board.

 

4.3                                 TaxLiability Distributions.  The Companyshall make cash distributions on or prior to April 15th of each year toeach Member in an amount intended to enable such Member (or any Person whosetax liability is determined by reference to the income of such Member) todischarge its United States federal, state and local income tax liabilitiesarising from the allocations made pursuant to Article 5 with respect tothe Company’s operations in the preceding year (a “*Tax Liability Distribution*”).  The amount of any such Tax LiabilityDistribution shall be equal to 40% of the amount of net taxable income and gainallocated to such Member pursuant to Article 5 with respect to the yearfor which the amount of any Tax Liability Distribution is being determined; *provided, however*, that if the Company hasmade any distributions pursuant to Section 4.2 with respect to the yearfor which the amount of any Tax Liability Distribution is being determined, theamount of such Tax Liability Distribution shall be reduced by the amount ofsuch distributions.

 

4.4                                 Distributionson Dissolution and Winding Up.  Uponthe dissolution and winding up of the Company, the proceeds of liquidationafter the payment of creditors as specified in Section 16.2 shall bedistributed to all of the Members in accordance with their positive CapitalAccount balances as properly adjusted through the time of such distribution.

 

4.5                                 Limitationon Distributions.  Notwithstandingany other provision to the contrary in this Agreement, the Company shall notmake a distribution to any Member if such distribution would violate the Act orother applicable law.

 

4.6                                 Withholdingof Taxes.  The Company will withholdtaxes from distributions to the extent required to do so by applicable law. Anyamounts so withheld and paid or required to be paid to a taxing authority willbe treated as if they had been distributed to the Member from whosedistribution the amount was withheld.

 

**ARTICLE 5**ALLOCATIONS

 

5.1                                 Allocationsof Profit and Loss.  Profit and Lossfor a taxable year of the Company, and each item thereof, shall be allocatedamong the Class B Members, *Pro Rata*.  No Profit or Loss for any taxable year of theCompany, nor any item thereof, shall be allocated to the Class A Members.

 

5.2                                 Allocationsof Liquidating Gain and Loss. Liquidating Gains and Liquidating Losses shall be allocated among the Class BMembers, Pro Rata.  No Liquidating Gainsor Liquidating Losses shall be allocated to the Class A Members.

 

5.3                                 Transfers.  In the event of a Transfer of Units during ataxable year, the Company shall make an interim closing of its books (or, atthe election of the applicable Transferor and Transferee and with the consentof the Board, utilize any other method permitted under

 

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Section 706 of the Code) for purposes of determining theallocations and distributions required under this Agreement.

 

5.4                                 AdditionalAllocations.  Notwithstanding anyother provisions of this Section 5.4, the following special allocationsshall be made for each taxable period:

 

(a)                                  Notwithstandingany other provision of this Section 5.4, if there is a net decrease inCompany Minimum Gain during any Company taxable period, each Member shall beallocated items of Company income and gain for such period (and, if necessary,subsequent periods) in the manner and amounts provided in Treasury RegulationSections 1.704-2(f)(6),(g)(2), and (j)(2)(i). For purposes of this Section 5.4(a), each Member’s Capital Accountshall be determined and the allocation of income or gain required hereundershall be effected, prior to the application of any other allocations pursuantto this Section 5.4 with respect to such taxable period.  This Section 5.4(a) is intended tocomply with the Company Minimum Gain chargeback requirement in TreasuryRegulation Section 1.704-2(f) and shall be interpreted consistentlytherewith.

 

(b)                                 Notwithstandingthe other provisions of this Section 5.4 (other than (a) above), if thereis a net decrease in Member Nonrecourse Debt Minimum Gain during any Companytaxable period, any Member with a share of Member Nonrecourse Debt Minimum Gainat the beginning of such taxable period shall be allocated items of Companyincome and gain for such period (and, if necessary, subsequent periods) in themanner and amounts provided in Treasury Regulation Sections 1.704-2(i)(4) and(j)(2)(ii).  For purposes of this Section 5.4(b)each Member’s Adjusted Capital Account balance shall be determined, and theallocation of income and gain required hereunder shall be effected, prior tothe application of any other allocations pursuant to this Section 5.4,other than Section 5.4(a) above, with respect to such taxable period.  This Section 5.4(b) is intended tocomply with the Member Nonrecourse Debt Minimum Gain chargeback requirement inTreasury Regulation Section 1.704-2(i)(4) and shall be interpretedconsistently therewith.

 

(c)                                  Exceptas provided in (a) and (b) above, in the event any Member unexpectedly receivesany adjustments, allocations or distributions described in Treasury RegulationSections 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of Company income and gainshall be specially allocated to such Member in an amount and manner sufficientto eliminate, to the extent required by such Treasury Regulation, the deficitbalance, if any, in its Adjusted Capital Account created by such adjustments,allocations or distributions as quickly as possible unless such deficit balanceis otherwise eliminated pursuant to (a) or (b) above.

 

(d)                                 Inthe event any Member has a deficit balance in its Adjusted Capital Account atthe end of any Company taxable period, such Member shall be specially allocateditems of Company gross income and gain in the amount of such excess as quicklyas possible; provided, that an allocation pursuant to this Section 5.4(d)shall be made only if and to the extent that such Member would have a deficitbalance in its Adjusted Capital Account after all other allocations provided inthis Section 5.4 have been tentatively made as if this Section 5.4(d)were not in this Agreement.

 

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(e)                                  NonrecourseDeductions for any taxable period shall be allocated to the Class BMembers, *Pro Rata.*

 

(f)                                    MemberNonrecourse Deductions for any taxable period shall be allocated 100% to theMember that bears the Economic Risk of Loss with respect to the MemberNonrecourse Debt to which such Member Nonrecourse Deductions are attributablein accordance with Treasury Regulation Section 1.704-2(i).  If more than one Member bears the EconomicRisk of Loss with respect to a Member Nonrecourse Debt, Member NonrecourseDeductions attributable thereto shall be allocated between or among suchMembers in accordance with the ratios in which they share such Economic Risk ofLoss.

 

(g)                                 NonrecourseLiabilities.  For purposes of TreasuryRegulations Section 1.752-3(a)(3), the Members agree that “*Excess Nonrecourse Liabilities*” of theCompany, as defined in Treasury Regulations Section 1.752-3(a)(3), shallbe allocated 100% to the Class B Members, *ProRata*.

 

(h)                                 Tothe extent an adjustment to the adjusted tax basis of any Company assetpursuant to Sections 734(b) or 743(b) of the Code is required, pursuant toTreasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into accountin determining Capital Accounts, the amount of such adjustment to the CapitalAccounts shall be treated as an item of gain (if the adjustment increases thebasis of the asset) or loss (if the adjustment decreases such basis), and suchitem of gain or loss shall be specially allocated to the Members in a manner consistentwith the manner in which their Capital Accounts are required to be adjustedpursuant to such provisions.

 

(i)                                     Notwithstandingany other provision of this Section 5.4 other than the RequiredAllocations, the Required Allocations shall be taken into account in making theAgreed Allocations so that, to the extent possible, the net amount of items ofincome, gain, loss and deduction allocated to each Member pursuant to theRequired Allocations and Agreed Allocations, together, shall be equal to the netamount of such items that would have been allocated to each such Member underthe Agreed Allocations if the Required Allocations had not otherwise beenprovided for in this Section 5.4.

 

5.5                                 IncomeTax Allocations.

 

(a)                                  Exceptas provided in this Section 5.5, each item of income, gain, loss anddeduction of the Company for federal income tax purposes shall be allocatedamong the Members in the same manner as such items are allocated for bookpurposes under Sections 5.1 and 5.2.

 

(b)                                 TheMembers recognize that with respect to any property contributed to the Company,there may be a difference between the basis of the property to the Company forfederal income tax purposes and its fair market value at the time of thecontribution.  In such case, all items oftax depreciation, cost recovery, amortization, and gain or loss with respect tosuch properties shall be allocated among the Class B Members to take intoaccount such disparities in accordance with the provisions of sections 704(b)and 704(c) of the Code and the Treasury Regulations under those sections.

 

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(c)                                  Fortax purposes, recapture of tax deductions arising out of a disposition ofproperty shall, to the extent consistent with the allocations for tax purposesof the gain or amount realized giving rise to such recapture, be allocated tothe Members in the same proportions as the recaptured deduction was originallyallocated.

 

(d)                                 Allitems of income, gain, loss, deduction and credit allocated to the Class BMembers in accordance with the provisions hereof and basis allocationsrecognized by the Company for federal income tax purposes shall be determinedwithout regard to any election under Section 754 of the Code which may bemade by the Company; *provided, however*,such allocations, once made, shall be adjusted as necessary or appropriate totake into account the adjustments permitted by Sections 734 and 743 of theCode.

 

5.6                                 NegativeCapital Accounts.  In no event shallany Member be obligated to pay to the Company, any other Member or any creditorof the Company any deficit balance in its Capital Account.

 

**ARTICLE 6**MEETINGS OF MEMBERS

 

6.1                                 Timeand Place.  Any meeting of theMembers may be held at such time and place, within or outside the State of Oklahoma,as may be fixed by the Board or as shall be specified in the notice or waiverof notice of the meeting. If the place for a meeting is not fixed by the Board,such meeting shall be held at the Company’s principal office.

 

6.2                                 AnnualMeeting.  The annual meeting shall beheld on the date and at the time and place fixed from time to time by theBoard. The annual meeting shall be for the purpose of electing a board ofdirectors and transacting such other business as may properly be brought beforethe meeting.

 

6.3                                 SpecialMeeting.  A special meeting for anypurpose or purposes may be called by the Board and shall be called by the Boardupon the written request of Class A Members holding at least 50% of theoutstanding Class A Units.

 

6.4                                 RecordDate for Determination of Membership. In order that the Board may determine the Members (i) entitled to noticeof or to vote at any meeting of Members, (ii) entitled to express consent toaction in writing without a meeting, (iii) entitled to exercise any rights in respectof any change, conversion, or exchange of Units (iv) entitled to receive adistribution with respect to any Units, or (v) for the purpose of any otherlawful action, the Board may fix, in advance, a record date, which record dateshall not precede the date upon which the resolution fixing the record date isadopted by the Board. The record date for determining the Members entitled tonotice of or to vote at any meeting of the Members or any adjournment thereofshall not be more than 60 nor less than 10 days before the date of suchmeeting. The record date for determining the Members entitled to consent toaction in writing without a meeting pursuant to Section 6.10 shall not bemore than 10 days after the date upon which the resolution fixing the recorddate is adopted by the Board. The record date for any other action shall not bemore than 60 days prior to such action. If no record date is fixed,(a) the record date for determining Members entitled to notice of or tovote at any meeting shall be at the close of

 

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business on the day immediately preceding the day on which notice isgiven or, if notice is waived by all Members, at the close of business on theday immediately preceding the day on which the meeting is held, (b) therecord date for determining Members entitled to express consent to action inwriting without a meeting, when no prior action by the Board is required, shallbe the first date on which a signed written consent setting forth the actiontaken or to be taken is delivered to the Company and, when prior action by theBoard is required, shall be at the close of business on the day on which theBoard adopts the resolution taking such prior action, and (c) the recorddate for determining Members for any other purpose shall be at the close ofbusiness on the day on which the Board adopts the resolution relating to suchother purpose. A determination of the Members of record entitled to notice ofor to vote at a meeting of Members is effective for any adjournment of themeeting unless the Board fixes a new record date, which the Board shall do ifthe meeting is adjourned to a date more than 120 days after the date fixed forthe original meeting.

 

6.5                                 Noticeto Members.  Written notice statingthe place, date, and hour of the meeting and, in case of a special meeting, thepurpose or purposes for which the meeting is called, shall be given not lessthan 10 nor more than 60 days before the date of the meeting, except asotherwise required by the Act. If an annual or special meeting of Members isadjourned to a different date, time, or place, notice need not be given of thenew date, time or place if the new date, time or place is announced at themeeting before adjournment; *provided,however*, that, if a new record date for the adjourned meeting isfixed pursuant to Section 6.4, notice of the adjourned meeting shall begiven to persons who are Members as of the new record date.

 

6.6                                 Waiver.  Attendance of a Member, either in person orby proxy, at any meeting, whether annual or special, shall constitute a waiverof notice of such meeting, except where a Member attends a meeting for theexpress purpose of objecting, at the beginning of the meeting, to thetransaction of any business because the meeting is not lawfully called orconvened. A written waiver of notice of any such meeting signed by a Member orMembers entitled to such notice, whether before, at or after the time fornotice or the time of the meeting, shall be equivalent to notice. Neither thebusiness to be transacted at, nor the purpose of, any meeting need be specifiedin any written waiver of notice.

 

6.7                                 Quorum.  The holders of a majority of the outstanding Class AUnits entitled to vote at a meeting, present in person or represented by proxy,shall constitute a quorum at all meetings of the Members for the transaction ofbusiness, except as otherwise provided by the Act; *provided, however,* that at any meeting at which a matter ispresented for which the Class B Members are entitled to vote, theestablishment of a quorum shall also require the presence in person or by proxyof the holders of a majority of the outstanding Class B Units entitled tovote on such matter.  If, however, such aquorum shall not be present at any meeting of Members, the Chairman of theBoard or a majority of the Class A Members entitled to vote, present inperson or represented by proxy, shall have the power to adjourn the meetingfrom time to time, without notice if the time and place are announced at themeeting, until a quorum shall be present. At such adjourned meeting at which aquorum shall be present, any business may be transacted which might have beentransacted at the original meeting. If the adjournment is for more than 30 daysor if after the adjournment a new record date is fixed for the adjournedmeeting, a notice of the adjourned meeting shall be given to each Member ofrecord entitled to vote at the meeting.

 

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6.8                                 VotingRights.

 

(a)                                  Exceptas otherwise provided by this Agreement or applicable law, only the Class AMembers shall have the right and power to vote on matters on which the Membersare entitled to vote. Each Class A Member shall be entitled to a number ofvotes equal to the number of Class A Units held by such Member.

 

(b)                                 Exceptas otherwise provided by this Agreement or applicable law, the Class BMembers shall have no right or power to vote on any matter.  On any matter for which the Class BMembers are entitled to vote, each Class B Member shall be entitled to anumber of votes equal to the number of Class B Units held by such Member.

 

(c)                                  Notwithstandingthe foregoing, the Company shall not take any of the following actions withoutthe approval of holders of a majority of the outstanding Class A Units andholders of a majority of the outstanding Class B Units, in each caseentitled to vote thereon:

 

(i)                                     anyconsolidation or merger of the Company with or into any other Person;

 

(ii)                                  anyliquidation, dissolution or winding-up of the Company; or

 

(iii)                               anysale by the Company of all or substantially all of its assets.

 

6.9                                 Votingand Proxies.  At every meeting of theMembers, each Member that is entitled to vote at such meeting shall be entitledto vote in person or by proxy, but no proxy shall be voted after three yearsfrom its date unless the proxy provides for a longer period. When a quorum ispresent at any meeting, the vote of the holders of a majority of theoutstanding Units of each class present in person or represented by proxy that areentitled to vote on a question shall decide any such question brought beforesuch meeting, unless the question is one upon which, by express provision ofthe Act or this Agreement, a different vote is required, in which case suchexpress provision shall govern.

 

6.10                           Actionby Consent of the Members.  Anyaction required or permitted to be taken at a meeting of the Members, includingat the annual meeting, may be taken without a meeting if a written consentsetting forth the action so taken is signed by Members holding the number ofUnits, as applicable, as is required by the Act or this Agreement for approvalof the action in question. Such consent may be in one instrument or in severalinstruments, and shall have the same force and effect as a vote of the Membersat a meeting duly called and held.

 

6.11                           TelephonicMeetings.  Members may participate inany meeting of the Members through the use of any means of conferencetelephones or similar communications equipment as long as all personsparticipating can hear one another.  AMember so participating shall be deemed to be present in person at the meeting.

 

6.12                           Compensationof Members.  Except as expresslyprovided in any written agreement between the Company and a Member, no Membershall receive any compensation from the Company for services provided to theCompany in its capacity as a Member.

 

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**ARTICLE 7**MANAGEMENT

 

7.1                                 Managementof the Company’s Affairs.

 

(a)                                  Asprovided in this Agreement, all management powers over the business and affairsof the Company shall be vested exclusively in a board of directors (the “*Board*”) and, subject to the direction ofthe Board, the Officers. The Directors shall constitute “managers” of theCompany within the meaning of the Act.

 

(b)                                 NoMember or Assignee, in its capacity as such, shall have any management powerover the business and affairs of the Company or actual or apparent authority toenter into contracts on behalf of, or to otherwise bind, the Company.

 

(c)                                  Except as otherwise specifically provided inthis Agreement, the authority and functions of the Board on the one hand and ofthe Officers on the other shall be identical to the authority and functions ofthe board of directors and officers, respectively, of a corporation organizedunder the General Corporation Law of the State of Delaware.  Thus, except as otherwise specificallyprovided in this Agreement, the business and affairs of the Company shall bemanaged under the direction of the Board, and the day-to-day activities of theCompany shall be conducted on the Company’s behalf by the Officers, who shallbe agents of the Company.

 

7.2                                 Number;Qualification; Election; Tenure.

 

(a)                                  Thenumber of directors (each a “*Director*”and collectively, the “*Directors*”)constituting the Board shall be fixed from time to time pursuant to aresolution adopted by a majority of the Directors. A Director need not be aMember. Each Director shall serve as a member of the Board until the earlier ofhis resignation, death or removal from office or until his or her successor isduly elected and qualified. The number of Directors constituting the initialBoard shall be five and the initial Directors shall be the followingindividuals:

 

Harold Hamm

Michael L. Greenwood

Edward D. Doherty

Randy Moeder

Ken Maples

 

(b)                                 Ateach annual meeting of the Class A Members, the successor to each Directorshall be elected to hold office for a term expiring at the next annual meetingof Class A Members.  To be electedas a Director, a natural person must (i) be chosen in accordance with Section 7.10or (ii)(A) have been properly nominated for a position as a Director inaccordance with Section 7.2(c) and (B) receive a plurality of thevotes cast for the position at a meeting of Members held for such purpose atwhich a quorum is present in Person or by proxy.  The Class A Members shall be entitled toelect all of the members of the Board.

 

(c)                                  Beforea meeting of the Members at which an election of Directors is to be held, theBoard shall nominate its slate of persons to be presented for election at suchmeeting.  Other nominations for Directorsmay be made by any Class A Member that holds more than 10% of the

 

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outstanding Class A Units, but anyMember nominations must be in writing, in proper form and delivered to theSecretary of the Company not less than ten days prior to the meeting of Membersat which the nominee is to be elected. To be in proper form, such Member nomination must set forth in writingas to each person whom such Member proposes to nominate for election orre-election as a Director all information relating to such person as isrequired to be disclosed in solicitations of proxies for election of Directors,or is otherwise required, in each case pursuant to Regulation 14A under theSecurities Exchange Act of 1934, as amended, and Rule 14a-11 thereunder(or any successor rule promulgated thereunder).

 

7.3                                 Notice.  Written notice of all regular meetings of theBoard must be given to all Directors at least five calendar days prior to theregular meeting of the Board and two business days prior to any special meetingof the Board. Neither the business to be transacted at, nor the purpose of, anyregular or special meeting of the Board need be specified in the notice of suchmeeting. A meeting may be held at any time without notice if all the Directorsare present or if those not present waive notice of the meeting either beforeor after such meeting.

 

7.4                                 RegularMeetings.  The board shall meet atleast quarterly, and a regular meeting of the Board shall be held withoutnotice other than this Section 7.4 immediately after, and at the sameplace as, the annual meeting of the Members. The Board may, by resolution,provide the time and place for the holding of additional regular meetingswithout other notice than such resolution.

 

7.5                                 SpecialMeetings.  Special Meetings of theBoard may be called at any time at a request of the Chairman or of any threeDirectors.

 

7.6                                 Actionby Consent of the Board.  Any actionrequired or permitted to be taken at a meeting of the Board, including at theannual meeting, may be taken without a meeting if a written consent settingforth the action so taken is signed by the number of Directors as is requiredby this Agreement for approval of the action in question. Such consent may bein one instrument or in several instruments, and shall have the same force andeffect as a vote of the Directors at a meeting duly called and held.

 

7.7                                 TelephonicMeetings.  Directors may participatein any meeting of the Board through the use of any means of conferencetelephones or similar communications equipment as long as all personsparticipating can hear one another. A Director so participating shall be deemedto be present in person at the meeting.

 

7.8                                 Quorum;Voting Requirement.  A majority ofthe Directors, present in person or participating in accordance with Section 7.7,shall constitute a quorum for the transaction of business, but if at anymeeting of the Board there shall be less than a quorum present, a majority ofthe Directors present may adjourn the meeting from time to time without furthernotice. Except as otherwise provided in this Agreement, an act by the majorityof the Directors present at a meeting at which a quorum is present shall be theact of the Board. The Directors present at a duly organized meeting maycontinue to transact business until adjournment, notwithstanding the withdrawalof enough Directors to leave less than a quorum.

 

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7.9                                 Committees.

 

(a)                                  TheBoard may establish committees of the Board. Any such committee, to the extentprovided in the resolution of the Board or in this Agreement, shall have andmay exercise all powers and authority of the Board in the management of thebusiness and affairs of the Company; but no such committee shall have the poweror authority in reference to the following matters:  (i) approving or adopting, orrecommending to the Members, any action or matter expressly required by thisAgreement or the Act to be submitted to the Members for approval; or(ii) adopting, amending or repealing any provision of this Agreement.

 

(b)                                 TheBoard shall have an audit committee (the “*AuditCommittee*”) comprised of Independent Directors. The Audit Committeeshall establish a written audit committee charter in accordance with the rules andregulations of the NASDAQ National Market or any National Securities Exchangeon which the Common Units are listed from time to time, and the Securities andExchange Commission, as amended from time to time. The Audit Committee shallreview the financial statements of the Company and the Partnership, review theexternal financial reporting of the Partnership, recommend engagement of thePartnership’s independent auditors, review procedures for internal auditing andthe adequacy of the Partnership’s internal accounting controls and perform suchother related functions as may be directed by the Board from time to time.  Each member of the Audit Committee shallsatisfy the rules and regulations of the NASDAQ National Market or anyNational Securities Exchange on which the Common Units are listed from time totime and the Securities and Exchange Commission, as amended from time to time,pertaining to qualification for service on an audit committee.

 

(c)                                  TheBoard shall have a compensation committee (the “*Compensation Committee*”) comprised of Independent Directors.The Compensation Committee shall be charged with such matters pertaining to thecompensation of Directors, Officers and other personnel of the Company, thereview, approval and administration of any Incentive Plans put in place by theCompany or the Partnership and such other related matters as may be directed bythe Board from time to time.

 

(d)                                 TheBoard may have a conflicts committee comprised of no fewer than two Directors(the “*Conflicts Committee*”), allof whom shall be Independent Directors. The Conflicts Committee may review, andapprove or disapprove, transactions in which a potential conflict of interestexists or arises between the Company, or any of its Affiliates (other than aGroup Member), on the one hand, and any Group Member, any Partner (as definedin the Partnership Agreement, all in accordance with the applicable provisionsof the Partnership Agreement.  Any matterapproved by the Conflicts Committee in accordance with the provisions, andsubject to the limitations, of the Partnership Agreement, shall not be deemedto be a breach of any fiduciary or other duties owed by the Board or anyDirector to the Company or the Members.

 

(e)                                  Atevery meeting of a committee, the presence of a majority of all the membersthereof shall constitute a quorum and the affirmative vote of a majority of themembers present shall be necessary for the adoption by the committee of any resolution.  The chairman of the committee or a majorityof the members of the committee may fix the time and place of its meetingsunless the Board shall otherwise provide. Notice of such meetings shall be given to each member of the committeein the manner provided for in Section 7.3. The Board shall have power at any time to fill vacancies in, to changethe membership of, or to dissolve any committee. Nothing herein shall be deemedto prevent the Board from appointing one or more

 

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committees consisting in whole or in part ofpersons who are not Directors; *provided*,*however*, that no such committeeshall have or may exercise any authority of the Board.

 

7.10                           Vacancies;Increases in the Number of Directors. Unless otherwise provided by this Agreement, vacancies and newly createddirectorships resulting from any increase in the authorized number of Directorsmay be filled by a majority of the Directors then in office, although less thana quorum, or a sole remaining Director; and any Director so chosen shall holdoffice until their successor shall be duly elected and qualified or until theirearlier death, resignation or removal.

 

7.11                           Removal.  Any Director may be removed, with or withoutcause, by the holders of a majority of the outstanding Class A Units thenentitled to vote at an election of Directors.

 

7.12                           Compensationof Directors.  Except as expresslyprovided in any written agreement between the Company and a Director or byresolution of the Board, no Director shall receive any compensation from theCompany for services provided to the Company in its capacity as a Director,except that each Director shall be compensated for attendance at Board meetingsat rates of compensation as from time to time established by the Board; *provided, however*,**that the Directors who are also employeesof the Company or any Affiliate thereof shall receive no compensation for theirservices as Directors or committee members. In addition to the foregoing, the members of the Conflicts Committeeshall receive such additional compensation as from time to time established bythe Board.  All the Directors shall beentitled to be reimbursed for out-of-pocket costs and expenses incurred in thecourse of their service as Directors.

 

**ARTICLE 8**OFFICERS

 

8.1                                 ElectedOfficers.  The officers of theCompany (the “*Officers*”) shall beselected by, and serve at the pleasure of, the Board.  The Officers shall carry on the day to dayactivities of the Company and shall have such other authority and dutiesdelegated to each of them, respectively, by the Board from time to time.  The Officers shall be a Chairman of theBoard, a President and Chief Executive Officer, a Chief Financial Officer, aSecretary and such other officers (including Executive Vice Presidents, SeniorVice Presidents and Vice Presidents) as the Board from time to time may electin accordance with this Article 8. The Chairman of the Board shall be chosen from among the Directors.  All Officers shall each have such powers andduties as generally pertain to their respective offices, subject to thespecific provisions of this Article 8. Any Person may be selected by theBoard to hold multiple offices. The Board may from time to time elect suchother officers (including one or more Vice Presidents, Controllers, AssistantSecretaries and Assistant Treasurers) as it determines to be necessary orappropriate for the conduct of the business of the Company. Such other officersand agents shall have such duties and shall hold their offices for such termsas shall be provided in this Agreement or as may be prescribed by the Board.

 

8.2                                 Electionand Term of Office.  The Officers ofthe Company shall be elected annually by the Board at the regular meeting ofthe Board held after the annual meeting of the Members.  If the election of Officers shall not be heldat such meeting, such election shall be

 

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held as soon thereafter as convenient. Each Officer shall hold officeuntil such person’s successor shall have been duly elected and shall havequalified or until such person’s death or until he shall resign or be removedpursuant to Section 8.8.

 

8.3                                 Chairmanof the Board.  The Chairman of theBoard shall preside at all meetings of the Members and of the Board. The Boardmay also elect a Vice Chairman to act in the place of the Chairman upon hisabsence or inability to act. The Chairman of the Board shall have the power toenter into binding contracts on behalf of the Company.

 

8.4                                 Presidentand Chief Executive Officer.  ThePresident and Chief Executive Officer shall be responsible for the generalmanagement of the affairs of the Company and shall perform all dutiesincidental to such person’s office that may be required by law and all such otherduties as are properly required of him by the Board. He shall make reports tothe Board and the Members and shall see that all orders and resolutions of theBoard and of any committee thereof are carried into effect. The President andChief Executive Officer, if he is also a Director, shall, in the absence of orbecause of the inability to act of the Chairman of the Board or any ViceChairman elected by the Board, perform all duties of the Chairman of the Boardand preside at all meetings of Members and of the Board.

 

8.5                                 VicePresidents.  Each Executive VicePresident and Senior Vice President and any other Vice President shall havesuch powers and shall perform such duties as shall be assigned to him by theBoard.

 

8.6                                 ChiefFinancial Officer and Assistant Treasurers. The Chief Financial Officer shall act as the Chief Financial Officer ofthe Company and shall exercise general supervision over the receipt, custodyand disbursement of corporate funds.  TheChief Financial Officer shall cause the funds of the Company to be deposited insuch banks as may be authorized by the Board, or in such banks as may bedesignated as depositories in the manner provided by resolution of theBoard.  The Chief Financial Officer shall,in general, perform all duties incident to the office of the Chief FinancialOfficer and shall have such further powers and duties and shall be subject tosuch directions as may be granted or imposed from time to time by the Board.Assistant Treasurers shall have such of the authority and perform such of theduties of the Chief Financial Officer as may be provided in this Agreement orassigned to them by the Board or the Chief Financial Officer.  Assistant Treasurers shall assist the ChiefFinancial Officer in the performance of the duties assigned to the ChiefFinancial Officer, and in assisting the Chief Financial Officer, each AssistantTreasurer shall for such purpose have the powers of the Chief FinancialOfficer.  During the Chief FinancialOfficer’s absence or inability to act, the Chief Financial Officer’s authorityand duties shall be possessed by such Assistant Treasurer or AssistantTreasurers as the Board may designate.

 

8.7                                 Secretaryand Assistant Secretaries.  TheSecretary shall keep or cause to be kept, in one or more books provided forthat purpose, the minutes of all meetings of the Board, the committees of theBoard and the Members. The Secretary shall see that all notices are duly givenin accordance with the provisions of this Agreement and as required by law;shall be custodian of the records and the seal of the Company and affix andattest the seal to all documents to be executed on behalf of the Company underits seal; and shall see that the books, reports, statements, certificates andother documents and records required by law to be kept and filed are

 

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properly kept and filed; and in general, shall perform all the dutiesincident to the office of Secretary and such other duties as from time to timemay be assigned to the Secretary by the Board. Assistant Secretaries shall havesuch of the authority and perform such of the duties of the Secretary as may beprovided in this Agreement or assigned to them by the Board or the Secretary.Assistant Secretaries shall assist the Secretary in the performance of theduties assigned to the Secretary, and in assisting the Secretary, eachAssistant Secretary shall for such purpose have the powers of the Secretary.During the Secretary’s absence or inability to act, the Secretary’s authorityand duties shall be possessed by such Assistant Secretary or AssistantSecretaries as the Board may designate.

 

8.8                                 Removal.  Any Officer elected by the Board may beremoved by the affirmative vote of a majority of the Board. No elected Officershall have any contractual rights against the Company for compensation byvirtue of such election beyond the date of the election of such person’ssuccessor, such person’s death, such person’s resignation or such person’sremoval, whichever event shall first occur, except as otherwise provided in anemployment contract or under an employee deferred compensation plan.

 

8.9                                 Vacancies.  A newly created elected office and a vacancyin any elected office because of death, resignation or removal may be filled bythe Board for the unexpired portion of the term at any meeting of the Board.

 

8.10                           Compensation.  The Officers shall receive such compensationfor their services as may be designated by the Compensation Committee.  In addition, the Officers shall be entitledto be reimbursed for out-of-pocket costs and expenses incurred in the course oftheir service hereunder.

 

8.11                           Powersof Attorney.  The Company may grantpowers of attorney or other authority as appropriate to establish and evidencethe authority of the Officers and other Persons.

 

8.12                           Delegationof Authority.  Unless otherwiseprovided by this Agreement or by resolution of the Board, no Officer shall havethe power or authority to delegate to any Person such Officer’s rights andpowers as an Officer to manage the business and affairs of the Company.

 

**ARTICLE 9**STANDARDS OF CONDUCT, LIABILITY AND INDEMNIFICATION

 

9.1                                 Standardsof Conduct and Fiduciary Duties.

 

(a)                                  Incausing the Company to make a determination or take or decline to take anyaction in its capacity as the general partner of the Partnership as opposed toin its individual capacity, an Indemnitee shall act in accordance with Article VIIof the Partnership Agreement and shall not be subject to any other or differentstandards imposed by this Agreement or any other agreement contemplated herebyor under the Act or any other law, rule or regulation.

 

(b)                                 Incausing the Company to make a determination or take or decline to take anyaction in its individual capacity as opposed to in its capacity as the generalpartner of the Partnership, then, unless another express standard is providedfor in this Agreement, an

 

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Indemnitee shall act in good faith and shallnot be subject to any other or different standards imposed by this Agreement,any other agreement contemplated hereby or under the Act or any other law, rule orregulation. In order for a determination or other action affecting the Companyto be in “good faith” for purposes of this Agreement, an Indemnitee mustreasonably believe that the determination or other action is in the bestinterests of the Company, unless the context otherwise requires.

 

(c)                                  Tothe extent that, at law or in equity, an Indemnitee has duties (includingfiduciary duties) and liabilities relating thereto to the Company, to thePartnership, or to any Member, an Indemnitee acting under this Agreement shallnot be liable to the Company, the Partnership or to any Member for its goodfaith reliance on the provisions this Agreement. The provisions of thisAgreement, to the extent that they restrict the duties and liabilities of anIndemnitee otherwise existing at law or in equity, are agreed by the partieshereto to replace such other duties and liabilities of such Indemnitee.

 

9.2                                 Liabilityand Exculpation. 

 

(a)                                  Notwithstandinganything to the contrary set forth in this Agreement, no Indemnitee shall beliable for monetary damages to the Company, the Partnership, the Members or anyAssignee, for losses sustained or liabilities incurred as a result of any actor omission of an Indemnitee unless there has been a final and non-appealablejudgment entered by a court of competent jurisdiction determining that, inrespect of the matter in question, the Indemnitee acted in bad faith or engagedin fraud, willful misconduct or, in the case of a criminal matter, acted withknowledge that the Indemnitee’s conduct was criminal.

 

(b)                                 AnIndemnitee shall be fully protected in relying in good faith upon the books andrecords of the Company, the books and records of the Partnership, and upon suchinformation, opinions, reports or statements presented to the Company by anyPerson as to matters the Indemnitee believes are within such other Person’sprofessional or expert competence, including information, opinions, reports orstatements as to the value and amount of the assets, liabilities, profits,losses or any other facts pertinent to the existence and amount of assets fromwhich distributions to Members might properly be paid.

 

9.3                                 Indemnification.

 

(a)                                  Tothe fullest extent permitted by law but subject to the limitations expresslyprovided in this Agreement, all Indemnitees shall be indemnified and heldharmless by the Company from and against any and all losses, claims, damages,liabilities, joint or several, expenses (including legal fees and expenses),judgments, fines, penalties, interest, settlements or other amounts arisingfrom any and all claims, demands, actions, suits or proceedings, whether civil,criminal, administrative or investigative, in which any Indemnitee may beinvolved, or is threatened to be involved, as a party or otherwise, by reasonof its status as an Indemnitee; *provided*,that the Indemnitee shall not be indemnified and held harmless if there hasbeen a final and non-appealable judgment entered by a court of competentjurisdiction determining that, in respect of the matter for which theIndemnitee is seeking indemnification pursuant to this Section 9.3, theIndemnitee acted in bad faith or engaged in fraud, willful misconduct or, inthe case of a criminal matter, acted with knowledge that the Indemnitee’sconduct was unlawful.

 

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(b)                                 Tothe fullest extent permitted by law, expenses (including legal fees andexpenses) incurred by an Indemnitee who is indemnified pursuant to this Section 9.3in defending any claim, demand, action, suit or proceeding shall, from time totime, be advanced by the Company prior to a determination that the Indemniteeis not entitled to be indemnified upon receipt by the Company of anyundertaking by or on behalf of the Indemnitee to repay such amount if it shallbe determined that the Indemnitee is not entitled to be indemnified asauthorized in this Section 9.3.

 

(c)                                  TheCompany may purchase and maintain insurance, to the extent and in such amountsas the Company determines to be reasonable, on behalf of Indemnitees and suchother Persons as the Company shall determine, against any liability that may beasserted against or expenses that may be incurred by any such Indemnitees orother Persons in connection with the activities of the Company or suchIndemnitees. The Company may enter into indemnity contracts with Indemnitees orother Persons and adopt written procedures pursuant to which arrangements aremade for the advancement of expenses and the funding of obligations andcontaining such other procedures regarding indemnification as the Boarddetermines are necessary or appropriate.

 

(d)                                 Theindemnification provided by this Section 9.3 shall be in addition to anyother rights to which an Indemnitee may be entitled under any agreement,pursuant to any vote of the Members, as a matter of law or otherwise, both asto actions in the Indemnitee’s capacity as an Indemnitee and as to actions inany other capacity, and shall continue as to an Indemnitee who has ceased toserve in such capacity and shall inure to the benefit of the heirs, successors,assigns and administrators of the Indemnitee.

 

**ARTICLE 10**TAXES

 

10.1                           TaxReturns.  The Tax Matters Membershall prepare and timely file (on behalf of the Company) all federal, state andlocal tax returns required to be filed by the Company. Each Member shallfurnish to the Company all pertinent information in its possession relating tothe Company’s operations that is necessary to enable the Company’s tax returnsto be timely prepared and filed. The Company shall bear the costs of thepreparation and filing of its tax returns.

 

10.2                           TaxElections.

 

(a)                                  TheCompany shall make the following elections on the appropriate tax returns:

 

(i)                                     toadopt the calendar year as the Company’s fiscal year;

 

(ii)                                  toadopt the accrual method of accounting;

 

(iii)                               tomake the election under Section 754 of the Code in accordance withapplicable Treasury Regulations thereunder, subject to the reservation of theright to seek to revoke any such election upon the Tax Matters Member’sdetermination that such revocation is in the best interests of the Members;

 

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(iv)                              toelect the remedial method under Treasury Regulations Section 1.704-3(d)for purposes of Section 704(d) of the Code; and

 

(v)                                 anyother election the Board determines to be necessary or appropriate.

 

(b)                                 Neitherthe Company nor any Member shall make an election for the Company to be excludedfrom the application of the provisions of subchapter K of chapter 1 of subtitleA of the Code or any similar provisions of applicable state law and noprovision of this Agreement shall be construed to sanction or approve such anelection.

 

10.3                           TaxMatters Member.

 

(a)                                  HammHoldings, or such other Member selected by the Board, shall act as the “*tax matters partner*” of the Companypursuant to Section 6231(a)(7) of the Code (the “*Tax Matters Member*”). The Tax MattersMember shall take such action as may be necessary to cause to the extentpossible each Member to become a “*noticepartner*” within the meaning of Section 6223 of the Code. TheTax Matters Member shall inform each Member of all significant matters that maycome to its attention in its capacity as Tax Matters Member by giving noticethereof on or before the fifth business day after becoming aware thereof and,within that time, shall forward to each Member copies of all significantwritten communications it may receive in that capacity.

 

(b)                                 TheTax Matters Member shall take no action without the authorization of the Board,other than such action as may be required by applicable law. Any cost orexpense incurred by the Tax Matters Member in connection with its duties,including the preparation for or pursuance of administrative or judicialproceedings, shall be paid by the Company.

 

(c)                                  TheTax Matters Member shall not enter into any extension of the period oflimitations for making assessments on behalf of the Members without firstobtaining the consent of the Board. The Tax Matters Member shall not bind anyMember to a settlement agreement without obtaining the consent of such Member.Any Member that enters into a settlement agreement with respect to any Companyitem (as described in Section 6231(a)(3) of the Code) shall notify theother Members of such settlement agreement and its terms within 90 days fromthe date of the settlement.

 

(d)                                 NoMember shall file a request pursuant to Section 6227 of the Code for anadministrative adjustment of Company items for any taxable year without firstnotifying the other Members. If the Board consents to the requested adjustment,the Tax Matters Member shall file the request for the administrative adjustmenton behalf of the Members. If such consent is not obtained within 30 days fromsuch notice, or within the period required to timely file the request foradministrative adjustment, if shorter, any Member may file a request foradministrative adjustment on its own behalf. Any Member intending to file apetition under Sections 6226, 6228 or other Section of the Code withrespect to any item involving the Company shall notify the other Members ofsuch intention and the nature of the contemplated proceeding. In the case wherethe Tax Matters Member is intending to file such petition on behalf of theCompany, such notice shall be given within a reasonable period of time to allowthe Members to participate in the choosing of the forum in which such petitionwill be filed.

 

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(e)                                  Ifany Member intends to file a notice of inconsistent treatment under Section 6222(b)of the Code, such Member shall give reasonable notice under the circumstancesto the other Members of such intent and the manner in which the Member’sintended treatment of an item is (or may be) inconsistent with the treatment ofthat item by the other Members.

 

**ARTICLE 11**TRANSFER OF UNITS;ADMISSION OF SUBSTITUTE MEMBERS

 

11.1                           Restrictionson Transfers of Units.

 

(a)                                  Exceptas otherwise provided in this Agreement, no Member or Assignee may Transfer anyUnits held by such Member or Assignee to any other Person without obtaining theapproval of holders of a majority of the Class A Units.  Any attempted Transfer of a Unit in violationof this Article 11 shall be, and is hereby declared, null and void *ab initio*, and the purported Transfereeshall (a) not be admitted as a Member, (b) not be deemed to be anAssignee of the Units purported to be Transferred, and (c) have no rightsto share in Profits or Losses, to receive any distributions, or to receive anyallocations of income, gain, loss, deduction or credit or other similar itemswith respect to the Units purported to be Transferred.  If, notwithstanding the prohibition hereunder,applicable law requires that a Transfer of Units in violation of this Article 11must be given effect, the Transferee of such noncomplying Transfer shall haveonly the rights of an Assignee, the Units so Transferred shall be subject tothe repurchase provisions of Section 11.8, and shall also be subject tosuch legal and equitable remedies as may be available to the Company and theother Members.

 

(b)                                 TheMembers acknowledge and understand that interests in the Company cannot bereadily purchased or sold in the open market, and that each of the Members hasentered into this Agreement in substantial reliance upon the strict enforcementof the covenants and conditions of this Agreement.  Because of such limited marketability ofinterests, such substantial reliance on the covenants and conditions hereof,and the unique relationship that exists among Members entering into a commonbusiness venture, among other reasons, it is expressly agreed and acknowledgedthat the Members will be irreparably damaged in the event that this Agreementis not specifically enforced.  Should anydispute arise concerning the Transfer of Units, an injunction may be issuedenjoining such Transfer pending the determination of such controversy.  Such remedy shall, however, be cumulative andnot exclusive, and shall be in addition to any other remedy which the partiesmay have at law or in equity.

 

11.2                           Rightsof Certain Class A Members and Class B Members to Transfer Units.  Notwithstanding any other provision in thisAgreement to the contrary, each of the Hamm Parties and any other Class AMember or Class B Member who, together with its Affiliates, holds at least50.1% of the outstanding Class A Units shall have the right to transferUnits to any Person without the approval of the Board or any other Member.  The transferee of such Units shall beadmitted as a Substitute Member.

 

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11.3                           SubstituteMembers.

 

(a)                                  Ifa Member Transfers any of its Units to a Transferee who is not already aMember, the Board shall have the right and authority (but, except as providedin this Section 11.3, not the obligation) to cause the Transferee to beadmitted as a Member, subject to the requirements of this Section 11.3.

 

(b)                                 NoMember shall have the right to substitute a Transferee as a Member in his placeunless:

 

(i)                                     theTransferor gives the Transferee such right in writing;

 

(ii)                                  exceptfor Transfers pursuant to Section 11.2 hereof, for which no Board approvalshall be required, the admission of the Transferee as a Substitute Member isapproved by the Board; and

 

(iii)                               theTransferee and the Transferor execute and deliver such instruments, in form andsubstance satisfactory to the Company, as the Company may deem necessary ordesirable to effect such substitution and to confirm the agreement of theTransferee to be bound by all of the terms and provisions of this Agreement.

 

(c)                                  ATransferee who has been admitted as a Substitute Member in accordance with thisSection 11.3 shall have all the rights and powers and be subject to allthe restrictions and liabilities of a Member holding the same class of Unitsunder this Agreement and shall become a signatory hereto.

 

(d)                                 TheCompany and the Members shall be entitled to treat the record owner of anyUnits as the absolute owner thereof in all respects, and shall incur noliability for distributions of cash or other property made in good faith tosuch owner until such time as a written assignment of such Units has beenreceived, accepted and approved by the Company and recorded on the books of theCompany.

 

11.4                           Assignees.  Unless admitted as a Substitute Member, noTransferee, whether by a voluntary Transfer, by operation of law or otherwise,shall have any rights hereunder, other than the rights of an Assignee asprovided in this Section 11.4.  AnAssignee shall be entitled to all the rights of an assignee of a Member’sinterest under the Act, including the right to receive distributions from theCompany and the share of Profits and Losses attributable to the UnitsTransferred to such Assignee, and the right to transfer the Units as providedin this Article 11, but shall not be deemed to be a holder of Units forany other purpose under this Agreement and shall not be entitled to vote orconsent with respect to such Units on any matter presented to the Members forapproval (such power and right to so vote and consent remaining with theTransferor).  In the event any Assigneedesires to further Transfer any Units, such Assignee shall be subject to allthe provisions of this Article 11 to the same extent and in the samemanner as any Member desiring to make a Transfer of Units.

 

11.5                           RequirementsApplicable to All Transfers.  AnyTransfer of Units under this Article 11 and any admission of an Assigneeas a Substitute Member shall also be subject to the following requirements, andsuch Transfer shall not be effective unless such requirements are satisfied; *provided*, *however*,that the Board may waive any of the following requirements:

 

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(a)                                  Thefollowing documents must be delivered to the Board and must be satisfactory, inform and substance, to the Board:

 

(i)                                     Acopy of the instrument pursuant to which the Transfer is effected;

 

(ii)                                  Aninstrument, executed by the Transferor and the Transferee, containing the followinginformation and agreements, to the extent they are not contained in theinstrument described in Section 11.5(a)(i):

 

(A)                              thenotice address of the Transferee;

 

(B)                                theclass and amount of Units transferred to the Transferee;

 

(C)                                ifthe Transferee is not already a Member, the Transferee’s request to become aSubstitute Member and an agreement by the Transferee (and such Transferee’sspouse, if applicable) to become a party to and to be bound by the terms andconditions of this Agreement;

 

(D)                               representationsand warranties by the Transferor and Transferee that the Transfer is being madein accordance with this Article 11 and applicable laws; and

 

(iii)                               Suchopinions of counsel regarding tax and securities law matters as the Board mayrequire.

 

(b)                                 TheTransferor and Transferee shall pay, or reimburse the Company for, allreasonable costs and expenses incurred by the Company in connection with theTransfer and, if applicable, admission of the Transferee as a Member, includingthe legal fees incurred in connection with the legal opinions referred to in Section 11.5(a)(iii)and any costs incurred in amending this Agreement.

 

(c)                                  AnyTransferee, whether or not admitted as a Substitute Member, shall take theTransferred Units subject to the obligations of the Transferor.

 

11.6                           Releaseof Transferor’s Liability.  NoTransfer (other than pursuant to a statutory merger or consolidation whereinall obligations and liabilities of the Transferor are assumed by a successorentity by operation of law) shall relieve the Transferor of any of itscontinuing obligations under this Agreement without the approval of the Board.

 

11.7                           ProhibitionAgainst Hypothecation.  No Unitsshall be subject to the claims of any creditor or to the legal process, and maynot be voluntarily or involuntarily alienated or encumbered except (a) asmay be authorized by the Board or (b) with respect to security interest orother claims in favor of the Company or any of its Affiliates.  Any attempted grant of a security interest inany Units by a Member in violation of this Agreement shall be a breach of thisAgreement and such attempted grant shall be, and is hereby declared, null andvoid *ab initio*.

 

11.8                           Optionto Repurchase Units Assigned by Operation of Law in Violation of Article 11.  If, notwithstanding the prohibition set forthin Section 11.1, applicable law requires

 

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that a Transfer of Units in breach of this Article 11 must begiven effect (an “*Involuntary Transfer*”),the Company shall have, for a period of five years following the effective dateof such Transfer (the “*Involuntary**Transfer Date*”), the right topurchase from the Transferee of such Units any Units so Transferred.  The purchase price for each such Unit shallbe (1) the Class B Valuation Price for each Vested Class B Unit soTransferred, (2) $1.00 multiplied by a fraction, the numerator of which is theaggregate number of Unvested Class B Units so Transferred and thedenominator of which is the aggregate number of Unvested Class B Unitsthen outstanding, for each Unvested Class B Unit so Transferred, and (3)$1.00 multiplied by a fraction, the numerator of which is the aggregate numberof Class A Units so Transferred and the denominator of which is theaggregate number of Class A Units then outstanding, for each Class AUnit so Transferred.  The Class BValuation Price shall be calculated as of the Involuntary Transfer Date.  If the Company exercises the right torepurchase Units pursuant to this Section 11.8, the purchase price shallbe paid by the Company in cash to such Transferee within 60 days aftergiving notice to the Transferee of its election to repurchase such Units.

 

11.9                           GeneralProvisions relating to Transfer of Units.

 

(a)                                  NoMember may withdraw from the Company, other than (i) as a result of aTransfer of all of such Member’s Units in accordance with this Article 11with respect to which the Transferee becomes a Substitute Member in place ofthe Transferor or (ii) upon the purchase of all of a Member’s Mandatory SaleUnits in the case of a Terminating Holder. Except as otherwise provided in this Agreement, any Member who Transfersall of the Units held by such Member in a Transfer permitted pursuant to this Article 11where the Transferee is admitted as a Substitute Member or pursuant to aMandatory Sale shall automatically cease to be a Member as of the date ofconsummation of such Transfer.

 

(b)                                 Subjectto Section 11.1, all distributions and allocations with respect to whichthe record date is before the effective date of any Transfer shall be made tothe Transferor, and all distributions and allocations thereafter shall be madeto the Transferee.

 

(c)                                  Inaddition to any other restrictions on Transfer contained herein, in no eventmay any Transfer or assignment of Units by any Member be made (i) to anyPerson who lacks the legal right, power or capacity to own Units, or(ii) in violation of applicable law.

 

11.10                     FurtherAdmissions of Additional Members. Subject to Article 14, the Company may authorize the issuance ofadditional Units to any Person at any time for such consideration as theCompany deems appropriate.  The issuanceof additional Units to any Person who is not then a Member shall be subject tothe approval of the holders of at least 51% of the Class A Units thenoutstanding.  If Units are issuedhereunder to any Person who is not already a Member, any such new Member shall,as a condition to admission, execute and acknowledge such instruments as theCompany determines to be necessary or advisable to effect the admission of suchPerson as a Member, including, without limitation, the written acceptance andadoption by such Person of the provisions of this Agreement.

 

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**ARTICLE 12**PURCHASE OF CLASS B UNITS

 

12.1                           PutRight Upon Certain Events.  If aManagement Member suffers a Termination Event, then the affected ManagementMember (or the estate or legal representative of such Management Member, asapplicable), may make an election, during the Put Period (as defined below), tocause the Company to purchase all, but not less than all, of such ManagementMember’s (1) Vested Class B Units (after giving effect to the impacton vesting of the Termination Event), if any, at a price per Vested Class BUnit equal to the Class B Valuation Price, (2) Unvested Class BUnits (after giving effect to the impact on vesting of the Termination Event),if any, at an aggregate price equal to $1.00 multiplied by a fraction, thenumerator of which is the aggregate number of Unvested Class B Unitsbeneficially owned by such Management Member and the denominator of which isthe aggregate number of Unvested Class B Units then outstanding, and(3) Class A Units at an aggregate price equal to $1.00 multiplied bya fraction, the numerator of which is the aggregate number of Class AUnits beneficially owned by such Management Member and the denominator of whichis the aggregate number of Class A Units then outstanding (collectively,the “*Put Price*”) and on the PutTerms.  For purposes of Article 11and 12, Randy Moeder’s Units will also include any Units owned by EquityFinancial.

 

(a)                                  Electionsby a Management Member (or his estate or legal representative) to sell all ofsuch Member’s Management Units (a “*PutElection*”) may be made during the period beginning on the date ofthe applicable Termination Event and ending on the date that is 120 days afterthe Termination Event (the “*Put Period*”).  A Management Member (or his estate or legalrepresentative) who elects to sell his Units (a “*Selling Holder*”) shall provide notice of such election tothe Company within the Put Period.

 

(b)                                 TheClass B Valuation Price shall be calculated as of the date of theTermination Event.

 

(c)                                  TheCompany shall purchase the Selling Holder’s Units in the following manner (the “*Put Terms*”):

 

(i)                                     ThePut Price shall be paid to a Selling Holder in cash by wire transfer ofimmediately available funds within 30 days of the Company’s receipt of the PutElection;

 

(ii)                                  TheSelling Holder shall, as a condition to receiving the Put Price, deliver suchinstruments to the Company, in form and substance satisfactory to the Company,as the Company determines to be necessary or desirable to effect the purchaseof the Selling Holder’s Units; and

 

(iii)                               TheCompany shall pay all of the costs reasonably incurred by the Selling Holder inconnection with this Section 12.1.

 

12.2                           CallRight Upon Certain Events.

 

(a)                                  Ifa Management Member (a “*Terminating Holder*”)ceases to be an officer or employee of the Company, whether voluntarily orinvoluntarily, (a *“Mandatory Sale Event*”)

 

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then, at the election and option of theCompany, the Terminating Holder shall sell to the Company (a “*Mandatory Sale*”) all, but not less thanall, of such Terminating Holder’s (i) Vested Class B Units, if any, (aftergiving effect to the impact on vesting of the Mandatory Sale Event) at a priceper Vested Class B Unit equal to the Class B Valuation Price, (ii)Unvested Class B Units, if any, (after giving effect to the impact onvesting of the Mandatory Sale Event) at an aggregate price equal to $1.00multiplied by a fraction, the numerator of which is the aggregate number ofUnvested Class B Units beneficially owned by such Management Member andthe denominator of which is the aggregate number of Unvested Class B Unitsthen outstanding and (iii) Class A Units at an aggregate price equalto $1.00 multiplied by a fraction, the numerator of which is the aggregatenumber of Class A Units beneficially owned by such Management Member andthe denominator of which is the aggregate number of Class A Units thenoutstanding (collectively, the “*MandatorySale Price*”) and on the Mandatory Sale Terms.  The Company shall have the right to effect aMandatory Sale for a 12-month period following the date of the relevantMandatory Sale Event (the “*Mandatory SaleDate*”).  To exercise thisright, the Company must provide a written notice to that effect to theTerminating Holder (a “*Mandatory Sale Notice*”).

 

(b)                                 Ifthe Company has elected to effect a Mandatory Sale, the Terminating Holdershall sell the Terminating Holder’s Units (the “*Mandatory Sale Units*”) in the following manner (the “*Mandatory Sale Terms*”):

 

(i)                                     TheMandatory Sale Price shall be paid to a Terminating Holder in cash by wiretransfer of immediately available funds within 30 days of the Mandatory SaleDate;

 

(ii)                                  TheTerminating Holder shall, as a condition to receiving the Mandatory Sale Price,deliver such instruments to the Company, in form and substance satisfactory tothe Company, as the Company determines to be necessary or desirable to effectthe purchase of the Mandatory Sale Units; and

 

(iii)                               TheCompany shall pay all of the costs reasonably incurred by the TerminatingHolder in connection with a Mandatory Sale.

 

12.3                           Terminationof Class A Units.  Upon theTransfer by a Management Member of all, but not less than all, of his Class BUnits, the Class A Units held by such Management Member shall beautomatically canceled.

 

**ARTICLE 13**CO-SALE OBLIGATIONS

 

13.1                           Noticeof Certain Sales.  If one or more of the Class B Members(the *“Selling Class B Members”*)proposes to Transfer Class B Units representing 50% or more of theoutstanding Class B Units in one or more related arms’-length transactionsto any Person that is not an Affiliate of any of the Selling Class BMembers, then the Selling Class B Members shall give written notice (the *“Co-SaleNotice”*) to the Company and to each of the Class BMembers that is not a Selling Class B Member (the *“Non-Selling Members”*) at least 30calendar days prior to the closing of such Transfer.  The Co-Sale Notice shall describe inreasonable detail

 

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(i) the identification of the Selling Class B Members, (ii) theSelling Class B Member to which the Non-Selling Members shall direct allnotices pursuant to this Article 13 (the *“SellingClass B Members Representative”*) and (iii) the proposedTransfer including, without limitation, the nature of such Transfer, theproposed closing date of such Transfer, the consideration to be paid, whethersuch consideration is to be paid in one lump sum or installments, the name andaddress of each prospective Transferee (the “*Co-SaleTransferee*”), and the other material terms of the Transfer (the *“Co-SaleTerms”*).

 

13.2                           Co-SaleObligations and Rights.

 

(a)                                  Ifin the Co-Sale Notice the Selling Class B Members elect to require each ofthe Non-Selling Members to participate in the proposed Transaction (the “*Drag-Along Election*”), upon delivery ofthe Co-Sale Notice, each Non-Selling Member shall be required to participate insuch Transfer by Transferring Class B Units on the same terms andconditions specified in the Co-Sale Notice (the *“Co-Sale Obligation”*).

 

(b)                                 Ifthe Selling Class B Members do not make a Drag-Along Election in theCo-Sale Notice, each Non-Selling Member shall have the right to elect, byproviding written notice to the Selling Class B Members Representative atleast 20 calendar days prior to the projected closing date of the applicableTransfer as set forth in the Co-Sale Notice, to sell to the Co-Sale Transfereea number of Class B Units equal to the product of (i) the aggregate numberof Class B Units proposed to be Transferred to the Co-Sale Transferee and(ii) a fraction, the numerator of which is the number of Class B Unitsheld by such Non-Selling Member and the denominator of which is the aggregatenumber of outstanding Class B Units.

 

13.3                           Deliveryof Documents to Effectuate Transfer. Each Non-Selling Member participating in the Transfer shall effect itsparticipation in the Transfer by promptly delivering to the Selling Class BMembers Representative such instruments, in form and substance satisfactory tothe Selling Class B Members Representative, as the Selling Class BMembers Representative may deem necessary or desirable to effect the Transferspecified in the Co-Sale Notice.

 

13.4                           Consummationof Transfer.  Concurrently with theconsummation of the Transfer specified in the Co-Sale Notice, the Selling Class BMembers Representative shall remit or cause to be remitted to each Non-SellingMember that portion of the Transfer consideration to which such Non-SellingMember is entitled by reason of his participation in such Transfer.

 

13.5                           ExemptTransfers.  Notwithstanding theforegoing, the provisions of this Article 13 shall not apply to (i) anypledge of Class B Units made pursuant to a bona fide loan transaction thatcreates a mere security interest or (ii) any bona fide gift.

 

13.6                           Terminationof Rights Conferred in this Article 13**. **The provisions of this Article 13shall terminate upon the closing of the Company’s sale of all or substantiallyall of its assets or the acquisition of the Company by another entity by meansof a merger or consolidation resulting in the exchange of Units for securitiesor consideration issued, or caused to be issued, by the acquiring entity or itssubsidiary.

 

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**ARTICLE 14**PREEMPTIVE RIGHTS

 

14.1                           Grantof Preemptive Rights**.** The Company hereby grants to (a) each Class AMember the right on the terms and conditions set forth in this Article 14to purchase such Class A Member’s *ProRata* share of Class A Equivalent Membership Interests that theCompany may, after the date hereof, from time to time, propose to sell andissue for cash consideration and (b) each Class B Member the right on theterms and conditions set forth in this Article 14 to purchase such Class BMember’s *Pro Rata*share of New MembershipInterests that the Company may, after the date hereof, from time to time,propose to sell and issue for cash consideration.

 

14.2                           Definitionof Class A Equivalent Membership Interests.  “*Class A EquivalentMembership Interests*” shall mean any newly authorized and not thenissued Class A Units or other Membership Interests that have substantiallythe same rights and obligations as the Class A Units.

 

14.3                           Definitionof “New Membership Interests”.  “*New Membership Interests*”shall mean any newly authorized and not then issued Membership Interests; *provided however*, that the term *“New Membership Interests”*does not include:

 

(a)                                  MembershipInterests issued to financial institutions as consideration for or inconnection with any credit facilities obtained by the Company or thePartnership;

 

(b)                                 MembershipInterests issued in order to ensure compliance with any of the Company’s or thePartnership’s debt instruments or credit agreements;

 

(c)                                  MembershipInterests issued or to be issued to Directors, employees or officers of, orconsultants or advisors to the Company or the Partnership pursuant to stockpurchase or equity option plans or other arrangements that are approved by theBoard;

 

(d)                                 MembershipInterests issued upon the conversion or exercise of options or other rightsthat were issued in compliance with this Article 14;

 

(e)                                  MembershipInterests issued to new Members in compliance with Section 11.10; or

 

(f)                                    Class A Equivalent MembershipInterests.

 

14.4                           Termsof the Preemptive Rights Offering.** **If the Companyproposes to undertake an issuance of Class A Equivalent MembershipInterests or New Membership Interests, it shall give the Class A Membersor the Class B Members, as applicable, written notice of such proposaldescribing the type of Class A Equivalent Membership Interests or NewMembership Interests, the cash consideration to be paid for the Class AEquivalent Membership Interests or the New Membership Interests and the generalterms upon which the Company proposes to issue the Class A EquivalentMembership Interests or the New Membership Interests, as applicable.  Each of the applicable Members shall havethirty (30) days from the date of receipt of the notice to agree to purchase upto its *pro rata* share of such Class AEquivalent Membership Interests or

 

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the New Membership Interests, as applicable, for the cash considerationand upon the general terms specified in the notice by giving written notice tothe Company that states the quantity of Class A Equivalent MembershipInterests or the New Membership Interests, as applicable, to be purchased.  If any Member elects to purchase less thanits *pro rata* share of the Class AEquivalent Membership Interests or the New Membership Interests, as applicable,so offered, the *pro rata* share of such Member notso purchased may be purchased within such period by Hamm Holdings in respect ofClass A equivalent Membership Interests and by Continental Holdings inrespect of New Membership Interests.

 

**ARTICLE 15**BOOKS OF ACCOUNT, RECORDS AND REPORTS

 

15.1                           Preparationand Maintenance of Books and Records. The Company shall prepare and maintain records and books of accountcovering such matters relative to the Company’s business as are usually enteredinto records and books of account maintained by limited liability companies engagedin businesses of like character. The Company’s books and records shall bemaintained in accordance with partnership accounting practices and proceduresand shall incorporate such method of tax accounting as the Board determines ispermissible and would be in the best interests of the Company.

 

15.2                           CompanyDocumentation Requirements.  TheCompany shall keep at its principal office the following:

 

(a)                                  Acurrent list of the full name and last known business or residence address ofeach Member and Assignee (if any) set forth in alphabetical order together withthe capital contribution of each Member and Assignee;

 

(b)                                 Copiesof the Company’s federal, state and local income tax or information returns andreports, if any, for the six most recent taxable years;

 

(c)                                  Acopy of the Certificate of Formation and all amendments thereto;

 

(d)                                 Copiesof this Agreement and all amendments thereto;

 

(e)                                  Thebooks and records of the Company as they relate to the business affairs andoperations of the Company for the current and the four most recent fiscalyears; and

 

(f)                                    Anyother books and records that the Company is required to maintain under the Actor other applicable law.

 

15.3                           FiscalYear.  The Fiscal Year of the Companyshall be the calendar year.

 

15.4                           CompanyFunds.  The funds of the Companyshall be deposited in such bank account or accounts, or invested in suchinterest-bearing or non-interest-bearing investments, as shall be designated bythe Board. All withdrawals from any such bank accounts shall be made by theduly authorized agent or agents of the Company.

 

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15.5                           Statements.

 

(a)                                  TheCompany shall cause to be prepared at least annually, at Company expense, theinformation related to the Company’s business activities necessary for thepreparation of each Members’ federal and state income tax returns, and upon thewritten request of a Member, the Company shall send or cause to be sent suchinformation relevant for such Member to each requesting Member within 90 daysafter the end of each taxable year, unless the Company reasonably determinesthere is good reason to defer the sending of such information, but in no eventshall such information be sent to such Member later than 180 days after the endof the taxable year. If the Company deems it required or desirable, a copy ofthe Company’s federal, state and/or local income tax or information returns forthat year shall also be sent to such Member along with such information.

 

(b)                                 TheCompany shall provide to the Members such annual or other periodic reports onits business and financial affairs as may be required under the Act, otherapplicable law, or as otherwise deemed appropriate by the Board.

 

(c)                                  Inaddition to the information, reports and statements furnished to the Memberspursuant to subsections 15.5(a) and (b), the Company shall obtain anannual audit of the Company certified to by an independent certified publicaccountant, which shall be transmitted by the Company to each requesting Memberwithin three months after the close of each fiscal year, containing, at aminimum:

 

(i)                                     abalance sheet of the Company as of the beginning and close of such fiscal year;

 

(ii)                                  astatement of Company Profits and Losses for such fiscal year; and

 

(iii)                               astatement of such Member’s Capital Account as of the close of such fiscal year,and changes therein during such fiscal year.

 

**ARTICLE 16**DISSOLUTION AND TERMINATION OF THE COMPANY

 

16.1                           Dissolution.  The death, dissolution, bankruptcy, expulsionor removal of a Member shall not cause the dissolution of the Company, and uponany such event the business of the Company shall continue to be conductedpursuant to the terms of this Agreement. The Company shall be dissolved and itsaffairs wound up on the happening of any of the following events (herein each a“*Dissolution Event*”):

 

(a)                                  Byan election by the Members holding at least 66 2/3% of the outstanding Class AUnits to dissolve the Company;

 

(b)                                 Theentry of a decree of judicial dissolution of the Company pursuant to Section 18-802of the Act; or

 

(c)                                  Theoccurrence of any event that makes it unlawful for the business of the Companyto be carried on or for the Members to carry on such business in a limitedliability company form.

 

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16.2                           WindingUp and Liquidation.  Upon theoccurrence of a Dissolution Event, the Class A Member holding the greatestnumber of Class A Units (the “*Liquidator*”)shall cause a full accounting of the assets and liabilities of the Company tobe taken and shall cause the assets to be liquidated and the business of theCompany to be wound up as promptly as possible. To the extent permitted by theAct, the proceeds of such liquidation shall be applied, first, to creditors insatisfaction of liabilities of the Company (whether by payment or by making ofreasonable provision for payment), including any loans to the Company byMembers, and any remaining assets of the Company shall be distributed inaccordance with Section 4.4. The holders of Units shall continue to sharedistributions, profits, losses and allocations during the period of liquidationin accordance with Articles 3, 4 and 5. Except as otherwise authorized by theBoard, the Liquidator shall not be entitled to any special compensation forserving as the liquidator of the Company.

 

16.3                           NoRecourse.  A Member shall look solelyto the assets of the Company for the return of its Capital Contributions, andif the assets remaining after the payment and discharge of Company debts andliabilities are insufficient to provide for the return of its CapitalContributions, a Member shall have no recourse against any other Member. Noholder of an interest in the Company shall have any right to demand or receiveproperty other than cash upon dissolution, winding up and termination of theCompany.

 

16.4                           NoDeficit Contribution Obligation.  NoMember shall have any obligation, upon a liquidation, to make any CapitalContribution for purposes of eliminating or diminishing any negative balance insuch Member’s Capital Account.

 

**ARTICLE 17**AMENDMENTS; POWER OF ATTORNEY

 

17.1                           AmendmentsGenerally.  Except as otherwiseprovided in this Agreement, any provision of this Agreement may be amendedpursuant to any amendment that is approved by Class A Members holding atleast 50% of the total Class A Units then outstanding.  In addition to the approvals required by theimmediately preceding sentence, any amendment to this Agreement that (a)materially and adversely affects the then existing rights, duties, obligationsor restrictions of the Class B Members shall require the approval of Class BMembers holding at least 50% of the total Class B Units then outstandingor (b) materially and adversely affects the then existing rights, duties,obligations or restrictions of a Management Member that is not generallyapplicable to all Class B Units shall require the approval of suchManagement Member.

 

17.2                           Powerof Attorney.  Each Member herebyirrevocably appoints the Class A Member holding the greatest number of Class AUnits as its true and lawful attorney-in-fact, with full power and authority,on behalf and in the name of such Member, to execute, acknowledge, swear to andfile pertinent instruments (a) in connection with any amendment to thisAgreement approved in accordance with this Article 14, (i) to admitadditional or Substitute Members as authorized by this Agreement, and(ii) in any other respect, provided there has been compliance with thisAgreement with respect to the amendment in question, and (b) required ofthe Company by applicable law.

 

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**ARTICLE 18**MISCELLANEOUS

 

18.1                           NoRegistration of Units.  Each Memberagrees that the Units being issued hereunder to the Members may be securitiesand that such Units have been issued without registration under the SecuritiesAct of 1933, as amended (the “*Securities Act*”),or registration or qualification under any state securities or “*Blue Sky*” laws, in reliance on exemptionsfrom those registration and qualification provisions. Each Member representsand warrants to the Company that it has acquired or is acquiring its Units forinvestment purposes only and without any view toward or intent to dispose of ordistribute such Units or any interest therein. Each Member also agrees that, inthe absence of an applicable exemption from registration and qualification,neither the Units, nor any interest therein may be transferred withoutregistration under the Securities Act and registration or qualification underapplicable state securities or “*Blue Sky*”laws.

 

18.2                           Exhibits.  Each of the Exhibits attached to thisAgreement are incorporated herein by reference and expressly made a part ofthis Agreement for all purposes. References to any Exhibit in thisAgreement shall be deemed to include this reference and incorporation.

 

18.3                           Severability.  If any provision of this Agreement or portionthereof, or the application of such provision or portion thereof to any Personor circumstance, shall be held invalid, the remainder of this Agreement, or theapplication of such provision or portion thereof to Persons or circumstancesother than those to which it is held invalid, shall not be affected thereby.

 

18.4                           Successorsand Assigns.  Except as otherwiseherein provided, this Agreement shall be binding upon and inure to the benefitof the parties hereto, their respective heirs executors, administrators andsuccessors, and all other persons hereafter having or holding an interest inthis Company, whether as Assignees, Transferees, Substitute Members, AdditionalMembers or otherwise.

 

18.5                           GoverningLaw.  This Agreement and the rightsof the parties hereunder shall be governed by and construed in accordance withthe internal laws, and not the laws pertaining to choice or conflict of laws,of the State of Delaware.  Each Memberconsents to the exclusive jurisdiction of the federal and state courts locatedin Wilmington, Delaware with respect to any litigation arising under or relatedto this Agreement.

 

18.6                           Counterparts.  This Agreement may be executed by original orfacsimile signature in one or more counterparts, each of which shall be deemedan original and all of which taken together shall constitute one and the sameinstrument.

 

18.7                           NoThird Party Beneficiaries.  Theprovisions of this Agreement shall not be for the benefit of, nor shall they beenforceable by, any Person who is not an Assignee or a party to this Agreement.

 

18.8                           Notices.  Except as expressly provided otherwise inthis Agreement, all notices, requests, or consents provided for or permitted tobe given under this Agreement must be in writing and must be given either bydepositing that writing in the United States mail, addressed to the Person,postage prepaid, and registered or certified with return receipt requested, orby

 

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delivering that writing to the Person in person, by courier, or byfacsimile transmission. If mailed or delivered by courier, such notice shall bedeemed to be given when deposited in the United States mail, postage prepaid,or when deposited with a reputable overnight courier, addressed to the Personat its address as it appears in the records of the Company. If given byfacsimile transmission, such notice shall be deemed to be given when uponreceipt of confirmation of a successful facsimile transmission to the facsimilenumber of the Person as it appears in the records of the Company. If givenpersonally or otherwise than by mail, courier or facsimile transmission, suchnotice shall be deemed to be given when either handed to the Person ordelivered to the Person’s address as it appears in the records of the Company.All notices, requests, and consents to be given to a Member must be sent ordelivered to the address given for that Member as reflected in this Agreementor such other address as that Member may specify by written notice to theCompany and to the other Members. Whenever any notice is required to be givenby law or this Agreement, a written waiver thereof, signed by the Personentitled to notice, whether before or after the time stated therein, shall bedeemed equivalent to the giving of such notice.

 

18.9                           Spouses.  The Spouses signatory hereto herebyacknowledge that they are fully aware of, understand, and fully consent andagree to the provisions of this Agreement and its binding effect on anyinterest that each Spouse may have by reason of marriage to a Member in anyUnits held by that Member.  Anyobligation of a Member or his estate or legal representative to sell of offerto sell his Units under the terms of this Agreement includes an obligation onthe part of that Spouse to sell or offer to sell any interest she may have inthe same manner.

 

18.10                     EntireAgreement; Interpretation.  ThisAgreement contains the entire understanding between the parties with respect tothe subject matter hereof and supersedes any prior understandings between themwith respect to said subject matter, and specifically, but without limiting theforegoing, supercedes and replaces that certain Limited Liability CompanyAgreement of Hiland Partners GP, LLC dated as of October 18, 2004. Thereare no representations, agreements, arrangements or understandings, oral orwritten, between and among the parties hereto relating to the subject matter ofthis Agreement that are not fully expressed herein. This Agreement is not to beinterpreted for or against any Member or the Company, and no Person will bedeemed the draftsperson of this Agreement.

 

(SIGNATUREPAGES FOLLOW)

 

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IN WITNESS WHEREOF, theparties hereto have executed this Amended and Restated Limited LiabilityCompany Agreement effective as of the Effective Date.

 
|   | **HILAND PARTNERS GP, LLC**         |
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|   | ** **                          |
|   |                                |   |
|   | By:                                 |  /s/  RANDY MOEDER |   |
|   | Name:                               | Randy Moeder |
|   | Title:                              | Chief  Executive Officer and President |
|   |                                |   |
|   |                                |   |
|   | **CLASS A MEMBERS:**           |
|   |                                |   |
|   | **HH GP HOLDING, LLC**              |
|   |                                |   |
|   |                                |   |
|   |   /s/  HAROLD HAMM        |   |
|   | Name:                               | Harold Hamm |
|   | Title:                              | Chief  Executive Officer |
|   |                                |   |
|   |                                |   |
|   |   /s/  RANDY MOEDER       |   |
|   | **RANDY MOEDER**                    |
|   |                                |   |
|   |                                |   |
|   | **EQUITY FINANCIAL SERVICES, INC.** |
|   |                                |   |
|   |                                |   |
|   |   /s/  RANDY MOEDER       |   |
|   | Name:                               | Randy Moeder |
|   | Title:                              | Chief  Executive Officer |
|   |                                |   |
|   |                                |   |
|   |   /s/  KEN MAPLES         |   |
|   | **KEN MAPLES**                      |
|        |                                     |  |  |  |  |

 

*[SignaturePage to the GP LLC Agreement]*

 

----

 
|   | **CLASS B MEMBERS:**           |
|--------|-------------------------------------|
|   |                                |   |
|   | **CONTINENTAL GAS HOLDINGS, INC.**  |
|   |                                |   |
|   |                                |   |
|   |   /s/  HAROLD HAMM        |   |
|   | Name:                               | Harold Hamm |
|   | Title:                              | President |
|   |                                |   |
|   |                                |   |
|   | **EQUITY FINANCIAL SERVICES, INC.** |
|   |                                |   |
|   |                                |   |
|   |   /s/  RANDY MOEDER       |   |
|   | Name:                               | Randy Moeder |
|   | Title:                              | Chief  Executive Officer |
|   |                                |   |
|   |                                |   |
|   | **HAROLD HAMM DST TRUST**           |
|   |                                |   |
|   |                                |   |
|   |   /s/  BERT MACKIE        |   |
|   | Name:                               | Bert Mackie |
|   | Title:                              | Trustee |
|   |                                |   |
|   |                                |   |
|   | **HAROLD HAMM HJ TRUST**            |
|   |                                |   |
|   |                                |   |
|   |   /s/  BERT MACKIE        |   |
|   | Name:                               | Bert Mackie |
|   | Title:                              | Trustee |
|   |                                |   |
|   |                                |   |
|   |   /s/  RANDY MOEDER       |   |
|   | **RANDY MOEDER**                    |
|   |                                |   |
|   |                                |   |
|   |   /s/  KEN MAPLES         |   |
|   | **KEN MAPLES**                      |
|        |                                     |  |  |  |

 

*[SignaturePage to the GP LLC Agreement]*

 

 

----

 

**SCHEDULE A**

 

SCHEDULE OFMEMBERS

 
| **Name & Address**           | ** ** | **Number of  Class A Units** | ** ** | **Number of  Class B Units** | ** ** |
|---------------------------------------|------------|-----------------------------------|------------|-----------------------------------|------------|
|                                  |       |                              |       |                              |       |
| Continental  Gas Holdings, Inc.  |       | 0                                 |       | 6,141                             |       |
|                                  |       |                              |       |                              |       |
| Equity  Financial Services, Inc. |       | 0                                 |       | 70                                |       |
|                                  |       |                              |       |                              |       |
| Harold Hamm  DST Trust                |       | 0                                 |       | 1,956                             |       |
|                                  |       |                              |       |                              |       |
| Harold Hamm  HJ Trust                 |       | 0                                 |       | 1,303                             |       |
|                                  |       |                              |       |                              |       |
| Ken Maples                            |       | 20                                |       | 200                               |       |
|                                  |       |                              |       |                              |       |
| Randy Moeder                          |       | 40                                |       | 330                               |       |
|                                  |       |                              |       |                              |       |
| HH GP  Holding, LLC                   |       | 940                               |       | 0                                 |       |

 

----

 

**EXHIBIT A**

 

**NON-NEGOTIABLEUNIT CERTIFICATE FORUNITS IN HILAND PARTNERS GP, LLC**

 

“This Certificate and the Units representedhereby are subject to a certain Amended and Restated Limited Liability CompanyAgreement dated as of February 15, 2005, and any amendment thereto, a copyof which agreement is on file at the principal place of business of theCompany, and, except as otherwise provided in said agreement, any sale, gift,pledge, assignment, bequest, transfer, transfer in trust, mortgage, alienation,hypothecation, encumbering or disposition of Units in any manner whatsoever,voluntarily or involuntarily, including, without limitation, any attachment,assignment for the benefit of creditors or transfer by operation of law orotherwise, or any transfer as a result of any voluntary or involuntary legalproceedings, execution, sale, bankruptcy, insolvency, or otherwise of thisCertificate or the Units represented hereby in violation of said agreementshall be invalid.”

 
| Certificate No. |   |   | Class **[**   **]** Units |
|-----------------|--------|--------|------------------------------------------|

 

Hiland Partners GP, LLC, a Delaware limitedliability company (the “Company”), hereby certifies that                          (the “Holder”) is the registered owner of the above referenced Units in theCompany.  This Certificate is issuedpursuant to the Amended and Restated Limited Liability Company Agreement of theCompany, dated as of February 15, 2005, as the same may be amended,modified or supplemented from time to time (the “Limited Liability CompanyAgreement”). The rights, powers, preferences, restrictions and limitations ofthe Units represented hereby are set forth in, and the Certificate and theUnits represented hereby are issued and shall in all respects be subject to,the terms and provisions of, the Limited Liability Company Agreement. THE UNITSREPRESENTED BY THIS CERTIFICATE ARE NONTRANSFERABLE EXCEPT AS EXPRESSLYPROVIDED IN THE LIMITED LIABILITY COMPANY AGREEMENT. By acceptance of thisCertificate for the above referenced Units, and as a condition to beingentitled to any rights and/or benefits with respect to the Units evidencedhereby, the Holder hereof (including any transferee hereof) is deemed to haveagreed, whether or not such Holder is admitted to the Company as a Member ofthe Company with respect to the Units evidenced hereby, to comply with and bebound by all the terms and conditions of the Limited Liability CompanyAgreement.

 

 
| Date:  |   |                                   | Hiland  Partners GP, LLC |
|--------|--------|----------------------------------------|--------------------------|
|   |   |
|   |   |
|   | By:    |                                   |                     |
|   | Name:  | Randy Moeder                           |
|   | Title: | President  and Chief Executive Officer |
|   |   |                                   |
|   | By:    |                                   |                     |
|   | Name:  | Ken Maples                             |
|   | Title: | Secretary                              |
|        |        |                                        |                          |  |  |  |

 

----

 

**EXHIBIT B**

 

**VESTING**

 

The following special provisions apply to 330 Class B Units ownedby Randy Moeder and 200 Class B Units owned by Ken Maples, which as of thedate of the Agreement constitute Unvested Class B Units and arecollectively referred to herein as the “*InitialUnvested Class B Units*.”

 

1.1                                 **Defined Terms****. **Capitalizedterms defined in this Exhibit shall have the meanings given to them onlyfor purposes of this Schedule, as the same terms may be differently definedelsewhere in the Agreement (including the Schedules, Attachments and Exhibitsthereto).  Capitalized terms used in thisSchedule that are not defined herein shall have the meanings given theretoin the Agreement (excluding the Schedules made a part thereof).

 

1.2                                 **Vesting**.

 

(a)                                  TheInitial Unvested Class B Units have been granted by the Company to provideincentive compensation to the Management Members.  Each Management Member acknowledges andagrees that an integral component of such compensation includes the vesting andforfeiture provisions set forth in this Exhibit B and in theAgreement and, absent these vesting and forfeiture provisions, the Companywould not have issued such Class B Units to such individuals.

 

(b)                                 TheInitial Unvested Class B Units shall vest in accordance with this Section 1.2(b).

 

(i)                                     TheInitial Unvested Class B Units held by a particular Management Membershall vest in equal annual amounts over three years as follows:

 

(A)                              One-thirdof the total number of Initial Unvested Class B Units issued to eachManagement Member shall vest on the first anniversary of the date of theAgreement.

 

(B)                                Anadditional one-third of the total number of Initial Unvested Class B Unitsissued to each Management Member shall vest on the second anniversary of thedate of the Agreement.

 

(C)                                Anadditional one-third of the total number of Initial Unvested Class B Unitsissued to each Management Member shall vest on the third anniversary of thedate of the Agreement.

 

(ii)                                  Uponthe occurrence of a Termination Event in respect of a Management Member, theInitial Unvested Class B Units held by such Management Member that havenot previously vested shall become fully vested.

 

(iii)                               Uponthe occurrence of a Change of Control, the Initial Unvested Class B Unitsthat have not previously vested shall become fully vested.

 

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