Document:

EX-10.3

Exhibit 10.3

SECOND AMENDED AND RESTATED

OPERATING AGREEMENT

OF

KYKUIT RESOURCES, LLC

     THIS SECOND AMENDED AND RESTATED OPERATING AGREEMENT (the “Agreement”) is entered into as of
this 29th day of May, 2008, by and between the undersigned Members of KYKUIT RESOURCES,
LLC, an Ohio Limited Liability Company (the “Company”). This Agreement supercedes and replaces all
the terms and conditions of the Operating Agreement of the Company entered into on May 8, 2007, the
Amended and Restated Operating Agreement entered into on October 24, 2007, and all amendments
thereto.

SECTION 1

DEFINITIONS

     For purposes of this Agreement, unless the context clearly indicates otherwise, (i) all of the
capitalized words in this Agreement shall have the meanings set forth in the Appendix attached
hereto, and (ii) all non-capitalized words defined in the Act shall have the meaning set forth
therein.

SECTION 2

FORMATION

     2.1 Name. The name of the Company shall be KYKUIT RESOURCES, LLC. The Company may do
business under that name and under any other name or names upon which the Managing Member desires.

     2.2 Organization. The Members are hereby organized and authorized for the formation
of the Company as an Ohio Limited Liability Company pursuant to the provisions of the Act and have
filed Organization/Registration of Limited Liability Company with the Ohio Secretary of State, in
the form attached hereto as Exhibit “A”.

     2.3 Purpose. The purpose for which this Company is formed is to acquire, own and
operate the mineral leasehold estate in a prospect known as “The Missouri Breaks” located in Fergus
County, State of Montana (the “Prospect”), as well as to engage in any lawful activity reasonably
related thereto for which a limited liability company may be formed under the laws of the State of
Ohio, including but not limited to constructing and maintaining the Pipeline System, and to do any
and all things reasonably determined by the Managing Member to be necessary, desirable, or
incidental to the foregoing purpose.

     2.4 Members. The names, present mailing addresses, and Unit Ownership of the Members
are set forth either in Exhibit “B”, attached hereto. Any Person executing a Joinder
Agreement in the form prescribed by the Company and who complies with the provisions of this
Agreement, including Section 9.2 hereof, and the Law, shall also become a Member, in which case,
Exhibit “B” shall be amended to reflect the new Member(s). All references in this

 

 

Agreement to “Units” or “Unit Ownership” or “proportion to Unit Ownership” or “Membership Interest”
shall refer to the allocation of Unit Ownership reflected in Exhibit “B”.

     2.5 Statutory Agent. The name and address of the Company’s Statutory Agent in the
State of Ohio shall be Gregory Osborne, 8500 Station Street, Suite 345, Mentor, Ohio, 44060. The
Managing Member may, from time to time, change the Agent by filing appropriate documents with the
Ohio Secretary of State. If the registered agent ceases to act as such for any reason the Managing
Member shall promptly designate a replacement Agent. The Managing Member shall promptly file with
the Ohio Secretary of State the documents required by the Act with respect to any change of the
registered Agent or his/her address. If the Managing Member shall fail to designate a replacement
registered agent or if the Managing Member or the Agent fail to file the appropriate notice of a
change of agent or his/her address, any Member may designate a replacement Agent or file a notice
of change of agent or his/her address.

     2.6 Principal Office. The principal office of the Company shall be located at 8500
Station Street, Suite 345, Mentor, Ohio, 44060.

     2.7 Title to Property. Title to all property contributed to or otherwise acquired by
the Company shall be held in the name of the Company.

     2.8 Term. The term of the Company shall begin upon the date of filing of the Articles
of Organization with the Ohio Secretary of State (the “Commencement Date”) and shall continue in
existence for a term ending December 31, 2099 unless its existence is sooner terminated pursuant to
Section 10 of this Agreement.

     2.9 No State Law Partnership. The Members intend that the Company not be a
partnership (including without limitation, a Limited Partnership), or joint venture, and that no
Member be a partner or joint venturer of any other Member for any purpose other than Federal and
State tax purposes and that this Agreement not be construed or interpreted to suggest otherwise.

SECTION 3

MEMBERS

     3.1 Liability of Members. No Member shall be liable as such for the debts,
obligations, or liabilities of the Company, including any liability under a judgment decree or
order of a court. The failure of the Company to observe any formalities or requirements relating
to the exercise of its powers or management of its business or affairs under this Agreement or the
Act shall not be grounds for imposing personal liability on the Members for liabilities of the
Company.

     3.2 Meetings of Members. The Members shall meet annually at such time as shall be
determined by resolution of the Members, commencing with the year 2007, for the purpose of
transacting such business as may come before the meeting; provided, however, the failure to hold an
annual meeting shall not be grounds for dissolution of the Company. Special meetings of the
Members, for any purpose or purposes, may be called by any Member, so long as notice is sent

2

 

to each Member as specified in Section 3.3 herein. The Members may designate any place, either
within or outside the State of Ohio, as the place of the annual meeting or special meeting of the
Members. If no designation is made the place of the meeting shall be the principal office of the
Company. Members may participate in any annual meeting or special meeting through the use of any
means of communication by which all of the Members may simultaneously hear each other during the
meeting. A Member participating in a meeting by this means is deemed to be present in person at
the meeting.

     3.3 Notice and Record Date of Meetings. Except as otherwise provided herein, written
notice stating the place, day and hour of a meeting and the purpose or purposes for which the
meeting is called shall be delivered at least fifteen (15) days but not more than ninety (90) days
before the date of the meeting, either personally, by certified or registered mail, postage
prepaid, or by facsimile or electronic mail to each Member. If mailed, such notice shall be deemed
to be delivered two (2) business days after being deposited in the United States mail, addressed to
the Member at his/her address as it appears on the books of the Company, with postage thereon
prepaid. If sent by facsimile or electronic mail, such notice shall be deemed to be delivered on
the date of delivery indicated on the facsimile or electronic mail delivery confirmation record.
Members may waive prior notice by attending the meeting or by executing a written waiver of notice
before or after the meeting. The date on which notice of the meeting is mailed shall be the record
date for determining Members entitled to notice of and/or to Vote at any meeting of the Members.

     3.4 Quorum. The Members owning at least fifty-one percent (51%) of the Units of the
Company represented in person or by proxy, shall constitute a quorum at any meeting of Members. A
Person disclosing a conflict at any meeting of the Members shall nonetheless be counted for
purposes of determining whether a quorum of the Members exists at such meeting.

     3.5 Voting. The Members shall have one (1) Vote for each Unit owned by them with
respect to any matters relating to the affairs of the Company for which the Member is entitled to
Vote. A Member may Vote in person or by a proxy executed in writing by the Member or by a duly
authorized attorney-in-fact. Such proxy shall be filed with the Member acting as Chairman of the
meeting, before or at the time of the meeting. No proxy shall be valid after eleven (11) months
from the date of its execution, unless otherwise provided in the proxy.

     3.6 Action by Members Without a Meeting. Any action required or permitted to be taken
at a meeting of Members may be taken without a meeting if the action is evidenced by one (1) or
more written consents describing the action taken, signed by the Members approving such action and
delivered to the custodian of the Company’s records for filing with the Company records. Any
action taken hereunder is effective when the Members have signed the consent, unless the consent
specifies a different effective date. A copy of any action taken by written consent of the Members
pursuant to this Section, along with any documents relevant and material thereto, shall be provided
to all of the Members within two (2) calendar days of the effective date thereof. The record date
for determining Members entitled to take action without a meeting shall be the date the first
Member signs a written consent.

3

 

SECTION 4

MANAGEMENT

     4.1 Management. The Members may from time to time, by a Vote of all Members pursuant
to Section 4.2, designate one (1) or more Member(s) to act as Managing Member(s) of the Company.
Any Member designated as a Managing Member hereunder shall serve until removed by unanimous Vote of
all Members, or until such person shall die, resign, cease to be a Member in the Company, or
otherwise become unable to act or to continue to act as a Managing Member. The Members hereby
designate John D. Oil and Gas Company (“JDO”) to act as Managing Member hereunder. Except as
otherwise set forth in Section 4.2 below, all Company business decisions shall be made by the
Managing Member acting on behalf of the Company, provided, however, that the Managing Member may
delegate certain decision making authority to other Members, or non-members in its sole and
absolute discretion. Such delegation shall not limit in any way, however, the Managing Member’s
fiduciary duties to the Members. In the event that JDO ceases to be Managing Member of the Company
for any reason, a substitute Managing Member shall be elected by a Vote of the Members pursuant to
Section 4.2 below.

     4.2 Voting by Members. All decisions made by the Managing Member shall be made in
good faith and shall be final and binding upon the Company. To the maximum extent provided by Ohio
law, the decisions of the Managing Member shall be deemed to satisfy the standards of conduct set
forth in Section 1705.09 of the Act. Any matter submitted to a Vote of the Members or requiring
approval of the Members shall be deemed to be passed if approved by the Members holding fifty-one
percent (51%) or more of the Units then held by all Members. Notwithstanding the foregoing, no
Member or Managing Member shall be permitted to take any of the following actions on behalf of the
Company without the approval of a majority of the Members, which approval shall not be unreasonably
withheld and shall be predicated upon reasonable business judgment:

	 	(i)	 	amending the Company’s Operating Agreement or other governing
documents;
	 
	 	(ii)	 	altering or changing the rights, privileges, preferences or
limitations of the Membership Interests;
	 
	 	(iii)	 	creating or issuing a senior class or series of membership
interests of the Company;
	 
	 	(iv)	 	increasing or decreasing the number of Managers;
	 
	 	(v)	 	merging or consolidating with another business or company;
	 
	 	(vi)	 	directly or indirectly adopting any plan or arrangement for the
bankruptcy, reorganization, dissolution or liquidation of the Company,
including the method of distribution thereunder;

4

 

	 	(vii)	 	selling, transferring, exchanging or otherwise disposing of
all or substantially all of the Company’s assets;
	 
	 	(viii)	 	borrowing money or incur an obligation in excess of Five Hundred Thousand
Dollars ($500,000.00);
	 
	 	(ix)	 	authorizing, approving or entering into any agreement to act as
a primary obligor, or to serve as a guarantor, surety or co-obligor with
respect to the indebtedness of any other party, or to borrow money from
third-party lenders;
	 
	 	(x)	 	disposing of the goodwill of the Company; and/or
	 
	 	(xi)	 	doing any other act that would make it impossible to carry on
the ordinary business of the Company.

     4.3 Compensation. The Members may elect, by a Vote of the Members pursuant to
Section 4.2 hereof, to pay the Managing Member(s) and/or the Officers an annual salary. The amount
of any such salary shall be approved by a Vote of the Members pursuant to Section 4.2 hereof.

     4.4 Other Business Interests of Members. Unless otherwise agreed in writing, Members
shall be permitted to engage in any other business, trade, or employment while serving as a Member
and/or Managing Member of the Company.

     4.5 Officers. The Managing Member may appoint one or more individuals who are
affiliates of Members to act as officers of the Company which may include (a) a President, (b) one
or more Vice Presidents; (c) a Secretary and/or one or more Assistant Secretaries; and (d) a
Treasurer and/or one or more Assistant Treasurers. Any two (2) or more offices may be held by the
same individual. Each officer shall hold his or her office for the term for which he or she was
appointed, or until such officer first dies, resigns, is unable to serve, or is removed by the
Managing Member, in the sole discretion of the Managing Member. Except as otherwise provided
herein, any officers appointed hereunder shall have no rights or powers with respect to the Company
above or beyond the rights granted and allocated herein by virtue of such officer being an
affiliate of a Member or a Managing Member of the Company. In the event that the Managing Member
determines not to appoint officers from time to time, then such decision shall not affect the
existence of the Company. The Managing Member may delegate a portion of its day-to-day management
responsibilities to any such officers or to any other Members, as determined by the Managing Member
from time to time. Such delegation shall not limit in any way, however, the Managing Member’s
fiduciary duties to the Members. The Members shall establish such rules and procedures relating to
meetings and notices of meetings as they deem necessary or appropriate. All officers appointed by
the Managing Member must be individuals who are affiliates of Members of the Company.

5

 

     4.6 Reliance on Acts of Members or Officers. No financial institution or any other
Person, firm or corporation dealing with the Company shall be required to ascertain whether the
Managing Member or any officer is acting in accordance with this Agreement but such financial
institution or such other Person, firm or corporation shall be protected in relying solely upon the
deed, transfer or assurance of, and the execution of such instrument or instruments by the Managing
Member or such officer.

     4.7 Special Approval of Certain Transactions. Notwithstanding any other provision of
this Agreement to the contrary, inasmuch as the purpose of the Company is limited to developing and
exploiting the Prospect, constructing the Pipeline System and actions reasonably related thereto,
any amendment to Section 2.3, “Purpose,” of this Agreement, or any agreement or action by the
Company inconsistent with Section 2.3, “Purpose,” of this Agreement shall be void and not binding
on the Company, its assets or its Members unless such specific agreement (and all of the terms and
conditions thereof) or specific action has, prior to entering into such agreement or taking any
such action, been expressly approved in writing by Energy West Resources, Inc.

SECTION 5

CONTRIBUTIONS, COMMITMENTS AND LOANS

     5.1 Capital Contributions.

	 	(a)	 	Member Capital Contributions. Each Member agrees to
make contributions to the capital of the company in cash from time to time
payable in United States Dollars, as follows:

	 	(i)	 	Initial Capital Contributions. Each
Member has previously contributed to the Company, as such Member’s
Initial Capital Contribution, the amounts described in Exhibit
“B” attached hereto;
	 
	 	(ii)	 	Additional Capital Contributions.
Within thirty (30) days after a Payment Notice from the Managing
Member, each Member shall contribute to the Company Additional Capital
Contributions in an amount equal to its pro rata share of anticipated
Operating Expenses and other expenses of the Company as determined by
the Managing Member in its sole discretion. The foregoing and any
other provisions of this Agreement notwithstanding, Member Energy West
Resources, Inc. (“EWST”) shall have no obligation to make any
Additional Capital Contributions after the date of this Amended and
Restated Operating Agreement in excess of $2,279,100, (the “EWST Cap”)
(unless EWST Board of Directors in its discretion authorizes Additional
Capital Contributions in excess of the EWST Cap) and EWST’s failure to
make Additional Capital Contribution in excess of the EWST Cap will not
result in a default of this Agreement by EWST, and EWST’s action in not
so providing Additional Capital Contribution in excess of EWST

6

 

	 	 	 	Cap shall not constitute an EWST Capital Deficiency or Payment
Deficiency, all as defined below, and the provision of Section 5.2
shall not apply to EWST in such case but, rather, EWST shall continue
to be designated a non-defaulting Member in good
standing.1 In such case EWST, as a non-defaulting Member
who has elected not to make an Additional Capital Contribution, shall
be diluted on a pro rata basis and the ownership interest of any
other non-defaulting Member who makes an Additional Capital
Contribution shall increase in proportion to that Member’s Additional
Capital Contribution.
	 
	 	(iii)	 	At the time that the Company has completed the
drilling of ten (10) wells, the Managing Member shall provide EWST with
financial projections for the Company in order for EWST to evaluate its
continued participation as a Member of the Company. In the event that
EWST determines in its reasonable discretion that there is not a
reasonable likelihood that it will receive a reasonable return on its
investment, EWST may deliver written notice to the Managing Member at
that time that it no longer desires to participate as a active Member
of the Company (the “Non-Participation Notice”), in which case EWST
shall have no further obligation to make any Additional Capital
Contributions after the date of the Non-Participation Notice and EWST’s
failure to make Additional Capital Contribution after that time shall
not result in EWST being declared in default of this Agreement and
shall not constitute an EWST Capital Deficiency or Payment Deficiency,
all as defined below, and the provision of Section 5.2 shall not apply
to EWST in such case but, rather, EWST shall continue to be designated
a non-defaulting Member in good standing. In such case EWST, as a
non-defaulting Member who has elected not to make an Additional Capital
Contribution, shall be diluted on a pro rata basis and the ownership
interest of any other non-defaulting Member who makes an Additional
Capital Contribution shall increase in proportion to that Member’s
Additional Capital Contribution.

	 	(b)	 	Funding Mechanics. The amount of each Capital
Contribution shall be specified by the Company in a written Payment Notice
delivered to each member at least thirty (30) days prior to the date on which
the amount is due. Capital Contributions shall be made by wire transfer or
immediately

 

			
	1	 	EWST’s capital contribution in connection with the
Company shall be capped at a total of $3,000,000.00. EWST has previously paid
its Initial Capital Contribution in the amount of $133,500, its first
Additional Capital Contribution in the amount of $587,400, a second Additional
Capital Contribution in the amount of $40,050, and a third Additional Capital
Contribution in the amount of $100,866.61, for a total contribution to date of
$$861,816.61. Consequently, subject to Section 5.1(a)(iii), EWST’s obligation
to make Additional Capital Contributions from and after the date of this Second
Amended and Restated Operating Agreement is $2,138,183.40 ($3,000,000 less
$861,816.61), unless EWST’s Board of Director’s authorizes Additional Capital
Contributions in excess of the EWST Cap or unless EWST delivers a
Non-Participation Notice pursuant to Section 5.1(a)(iii).

7

 

			
	 	 	available funds to the account specified in the respective Payment Notice or
by such other method as the Managing Member specifies in such Payment
Notice.

     5.2 Noncontributing Member. The following provisions are subject to the terms of
Section 5.1 hereof.

	 	(a)	 	Default. If any Member fails to make, when due, any
portion of a Capital Contribution required to be contributed by such Member
pursuant to this Agreement or to make any other payment required to be made by
it hereunder when required to be made (a “Noncontributing Member”), then the
Company shall promptly provide written notice of such failure to such
Noncontributing Member. If such Noncontributing Member fails to make such
Capital Contribution (a “Capital Deficiency”) or such other payment (a “Payment
Deficiency”) within ten (10) business days after receipt of such notice, then
the Managing Member may upon written notice to all other Members, give each of
the other Members the right to contribute (or cause the Company to contribute)
his/her pro rata share of the Capital Deficiency as additional Capital
Contribution to the Company. If one or more of the other Members elect not to
make the Additional Capital Contribution, the remaining Members (other than the
Noncontributing Member) shall be given the opportunity to make an additional
Capital Contribution in an amount equal to his/her pro rata share of the
shortfall. In the event that the Managing Member exercises the right under
this Section 5.2(a), then at the election of the Managing Member, either (1)
the Noncontributing Member’s ownership interest in the Company shall be diluted
on a pro rata basis, and the ownership interest of any of the other Members who
make an Additional Capital Contribution shall increase in proportion to that
Member’s Additional Capital Contribution, or (2) the Noncontributing Member’s
ownership interest in the Company shall not be diluted, but instead the
Noncontributing Member shall forego its right to receive any distributions from
the Company until such time as the distributions that the Noncontributing
Member would have been entitled to receive but for the default equal three
hundred percent (300%) of Capital Deficiency, and the other Members who make
additional Capital Contributions shall be entitled to receive three hundred
percent (300%) of the amount of his/her Additional Capital Contribution.
	 
	 	(b)	 	Rights Cumulative. No right, power or remedy
conferred upon the Managing Member or the Company in this Section 5.2 shall be
exclusive, and each such right, power or remedy shall be cumulative and in
addition to every other right, power or remedy whether conferred in this
Section 5.2 or now or hereafter at law or in equity or by statute or
otherwise.

8

 

	 	(c)	 	Lien on Units. Each Member grants to the other Members
a lien upon his/her Units to secure performance of each Member’s payment
obligations hereunder.

     5.3 Public Offering. Section 5.2 shall not apply to any Public Offering by the
Company. Should the Company elect to make a Public Offering of its securities each Member shall be
entitled to purchase additional Units or any other security issued by the Company on the open
market and no Member shall have any so-called preemptive rights with respect to such Public
Offering.

     5.4 No Interest on Capital Contributions. Members shall not be paid interest on their
Capital Contributions.

     5.5 Return of Capital Contributions. Except as otherwise provided in this Agreement,
no Member shall have the right to receive the return of any Capital Contribution.

     5.6 Capital Accounts. A separate Capital Account shall be maintained for each Member.

     5.7 Loans by Members. Any Member may, at any time, make or cause a loan to be made to
the Company in any amount on those terms upon which the Company and the Member agree.

SECTION 6

ALLOCATIONS AND DISTRIBUTIONS

OF PROFITS AND LOSSES

     6.1 Allocations of Profits. Except as may be required by Ohio law or by Section
1.704-1(b)(2)(iv)(f)(4) of the Regulations, all items of income and gain of the Company shall be
allocated among the Members in accordance with and in proportion to Actual Unit Ownership.

     6.2 Allocation of Losses. Except as may be required by Ohio law or by Section
1.704-1(b)(2)(iv)(f)(4) of the Regulations, all items of loss, deduction and credit of the Company
shall be allocated among the Members in accordance with and in proportion to Actual Unit Ownership

     6.3 Distribution of Cash Flow. Distributions may be declared from time to time by the
Members pursuant to Section 4.2 hereof, provided, however, that the Managing Manager shall
automatically cause the Company to distribute, on or before April 15 of each year, the amount
required to pay each Member’s estimated federal, state, and local tax liability arising from the
profits of the Company, which shall be calculated at forty percent (40%) of the Company’s profits
and shall be made in accordance with Actual Unit Ownership except that Distribution in anticipation
of a Dissolution Event or subsequent to a Dissolution Event shall be made as provided in Section
10.2 hereof.

     6.4 Allocation and Distribution to New Members and Assignees. If Units are
transferred or if additional Units are issued during any Fiscal Year, Profits and Losses for the

9

 

Fiscal Year shall be allocated in accordance with Section 706(d) of the Code, using any conventions
permitted by law and selected by a Vote of the Members pursuant to Section 4.2 hereof. All
Distributions on or before the date of a Transfer shall be made to the transferor, and all
Distributions thereafter shall be made to the transferee. If a Transfer does not comply with the
provisions of Section 8 of this Agreement, then any Distribution shall be allocated to the Person
who attempted to make the Transfer.

SECTION 7

TAXES

     7.1 Method of Accounting For Tax Purposes. The records of the Company shall be
maintained on the accrual method of accounting for federal income tax purposes.

     7.2 Tax Matters Member. The Managing Member shall be designated as the “tax matters
member” of the Company pursuant to Section 6231(a)(7) of the Code. The Managing Member shall take
such actions as are necessary to cause each other Member and Assignee to become a “notice partner”
within the meaning of Section 6223 of the Code.

SECTION 8

TRANSFERS OF UNITS AND WITHDRAWALS OF MEMBERS

     8.1 Permitted Transfers. Any Member may, during his/her lifetime, transfer all or any
part of his/her Membership Interest to a trust for the benefit of said Member or his/her spouse, or
his lineal descendants (hereinafter all said transferees shall be referred to as the “Permitted
Transferee(s)”). In such a case, the Permitted Transferee(s) shall receive and hold such
Membership Interest subject to all of the restrictions, terms, and conditions of this Agreement,
and there shall be no further transfer of such Shares except: (i) to the transferor; or (ii) in
accordance with the terms and conditions of this Agreement. A Member shall give the Company prior
written notice at least thirty (30) days in advance of any transfer of his/her Membership Interest
to a Permitted Transferee.

     8.2 Transfer or Sale of Units. Except for Permitted Transfers, no Member shall
Transfer all or any portion or any interest in his/her Units except in compliance with this
Agreement and unless the following conditions (the “Conditions of Transfer”) are satisfied:

	 	(i)	 	The Transfer will not require registration of the Units under any federal or
state securities laws;
	 
	 	(ii)	 	The transferee delivers to the Company a written instrument agreeing to be
bound by the terms of this Agreement;
	 
	 	(iii)	 	The Transfer will not result in the termination of the Company pursuant to
Code Section 708, or otherwise;
	 
	 	(iv)	 	The Transfer will not result in the Company being subject to the Investment
Company Act of 1940, as amended;

10

 

	 	(v)	 	The transferor or the transferee delivers the following information to the
Company: (i) the transferee’s taxpayer identification number; and (ii) the transferee’s
initial tax basis in the transferred Membership Interest; and
	 
	 	(vi)	 	The transferor complies with provisions set forth in Section 8.3 hereof.

     If the Conditions of Transfer are satisfied, then a Member may Transfer all or any portion of
that persons Units; provided, however, and except otherwise provided for in Section 8.3(f), the
transferee of the Units shall hold the Units as an unadmitted Assignee and shall have no right to:
(i) become a Member; (ii) exercise any Membership Rights other than those specifically pertaining
to ownership of a Membership Interest; or (iii) act as an agent of the Company.

     8.3 Right of First Refusal.

	 	(a)	 	If a Member (the “Transferor”) receives a bona fide offer (the
“Transferee Offer”) from any other Person (the “Transferee”) to purchase all or
any portion of or any interest or rights in the Member’s Units (the
“Transferor’s Interest”), then prior to any Transfer the Transferor shall give
written notice to all other Members containing each of the following:

	 	(i)	 	The Transferee’s identity;
	 
	 	(ii)	 	A true and complete copy of the Transferee’s
Offer; and
	 
	 	(iii)	 	The Transferor’s Offer (the “Offer”) to sell
the Transferor’s Units to all other Members other than the Transferor
(individually, a “Remaining Member,” and collectively, the “Remaining
Members”) for a total price equal to the price set forth in the
Transferee’s Offer (the “Transfer Purchase Price”), which shall be
payable on the terms of payment set forth in the Transferee’s Offer,
subject to the provisions of this Section.

	 	(b)	 	The Offer shall be and remain irrevocable for a period ending
at 11:59 p.m. local time at the Company’s principal office on the thirtieth
(30th) day following the date the Transfer Notice is given by the
Transferor to the Remaining Member(s) (the “Offer Period”). At any time during
the Offer Period, a Remaining Member may accept the Offer by notifying the
Transferor in writing (the “Acceptance Notice”) that the Remaining Member
intends to purchase all, but not less than all, of the Transferor’s Interest.
If two (2) or more Remaining Members desire to accept the Offer, then, in the
absence of an Agreement between or among them, each such Remaining Member shall
purchase the Transferor’s Interest in the proportion that his/her respective
percentage of Unit Ownership bears to the total percentages of all of the
Remaining Members who desire to accept the offer. If any Remaining Member(s)
accepts the Offer, then the

11

 

	 	 	 	Acceptance Notice shall fix a closing date (the “Transfer Closing Date”) for
the purchase, which date shall not be earlier than ten (10) or more than
ninety (90) days after the expiration of the Offer.
	 
	 	(c)	 	If any Remaining Member accepts the Offer, then the Transfer
Purchase Price shall be paid on the Transfer Closing Date, in accordance with
the payment terms set forth in the Transferee Offer unless otherwise agreed by
the parties involved in the transaction.
	 
	 	(d)	 	If no Remaining Member accepts the Offer within the time and in
the manner specified in this Section, then the Transferor may, for a period of
sixty (60) days after the expiration of the Offer Period (the “Free Transfer
Period”), Transfer the Transferor’s Interest to the Transferee, for the same or
greater price and on the same terms and conditions as set forth in the Transfer
Notice. The Transfer shall be subject, however, to the conditions of Transfer
set forth in Section 8.2 hereof. If the Transferor does not Transfer the
Transferor’s Interest within the Free Transfer Period, then the Transferor’s
right to Transfer the Transferor’s Interest pursuant to this Section, shall
cease and terminate.
	 
	 	(e)	 	Any Transfer by the Transferor after the last day of the Free
Transfer Period or without strict compliance with the terms, provisions, and
conditions of this Section and other terms, provisions, conditions of this
Agreement, shall be null and void and of no force or effect.
	 
	 	(f)	 	Notwithstanding, anything contained in Section 8.2 to the
contrary, if (i) the Transferor gives the Transferee the right to become a
Member in the Company; and (ii) the Remaining Members holding fifty-one percent
(51%) or more of the Units then being held by all Remaining Members agree in
writing to the Transferee becoming a Member, which consent shall not be
unreasonably withheld; and (iii) the Transferee executes and delivers such
documents as the Remaining Members and the Company may require to make the
Transferee a party to this Agreement; and (iv) the Transfer to the Transferee
otherwise strictly complies with the terms, provision, and conditions of this
Section and other terms, provisions, and conditions of this Agreement,
including, but without limitation, the Conditions of Transfer, then the
Transferee shall become and the Remaining Members shall admit, the Transferee
as a Member of the Company. Any Person who becomes a Member as a result of an
assignment of a Membership Interest shall assume all of the obligations of the
assignor, including liabilities unknown to the assignee at the time the
assignee became a Member.
	 
	 	(g)	 	Each Member hereby acknowledges the reasonableness of the
prohibition contained in this Section 8.3 in view of the purpose of the Company
and the relationship of the Members. The Transfer of any Membership Right

12

 

or Membership Interest in violation of the prohibition contained in Section
8.3 hereof shall be deemed invalid, null and void, and of no force or
effect. Any Person to whom a Membership Right is attempted to be
transferred in violation of this Section shall not be entitled to vote on
matters coming before the Members, participate in the management of the
Company, act as an agent of the Company, receive Distributions from the
Company, or have any other rights in or with respect to the Membership
Right.

     8.4 Requirements for Effectiveness of Transfer. As a condition to recognizing the
effectiveness of any proposed Transfer of Units, the Remaining Members may require the Transferor
and/or the proposed Transferee, to execute instruments of transfer, assignment and assumption and
other documents, and to perform all other acts which the Remaining Members may deem necessary or
desirable to:

	 	(a)	 	Preserve the Company’s status under the laws of each
jurisdiction in which the Company is qualified, organized or does business
after the Transfer;
	 
	 	(b)	 	Maintain the Company’s classification as a partnership for
federal income tax purposes; and
	 
	 	(c)	 	Assure compliance with any applicable state and federal laws
including securities laws and regulations.

     8.5 Withdrawal of a Member. No Member shall have the right or power to withdraw as a
Member of the Company without the unanimous prior written approval of the non-withdrawing Members
and, if such approval is obtained, the optional buy-out provisions contained in Section 10.3 shall
apply.

SECTION 9

ASSIGNMENTS AND ADDITIONAL MEMBERS

     9.1 Assignment of Units. Except as otherwise provided herein, a Member may not assign
the Member’s Interest in the Company. Any Person who becomes an unadmitted Assignee by operation
of this Agreement shall not become a Member of the Company and shall have no right to: (i) become a
Member; (ii) exercise any Membership Rights other than those specifically pertaining to ownership
of a Membership Interest; or (iii) act as an agent of the Company, except as otherwise provided in
Section 8.3(f) herein.

     9.2 Additional Members. Upon written approval of the Members holding fifty-one
percent (51%) or more of the Units then held by all Members, the Company may make a Person a Member
by the Company issuing Units for such consideration as the Members determine. In such event, (i)
Exhibit “B” to this Agreement shall be amended to reflect the issuance of Additional Units;
(ii) the new Members shall execute such documents as shall be required to reflect their acquisition
of Units in the Company and their agreement to be bound by the terms of the Articles and this
Agreement, and (iii) the Membership Interest of all existing Members shall be diluted
proportionally. Notwithstanding the provisions of this Section 9, all Members shall be

13

 

given the first option to purchase the Additional Units on a pro-rata basis before such Additional
Units are offered to any other Persons.

SECTION 10

DISASSOCIATION OF A MEMBER

     10.1 Disassociation. A Person ceases to be a Member upon the happening of any of the
following events:

	 	(i)	 	The withdrawal of the Member;
	 
	 	(ii)	 	A Member becoming a Bankrupt Member;
	 
	 	(iii)	 	In the case of a Member who is acting as a Member by virtue of being a trustee
of a trust, the termination of the trust (but not merely the substitution of a new
trustee);
	 
	 	(iv)	 	In the case of a Member that is an organization other than a corporation, the
dissolution and commencement of winding up of the organization;
	 
	 	(v)	 	In the case of a Member that is a corporation, the filing of a certificate of
dissolution, or its equivalent, for the corporation or the revocation of its charter if
not reinstated within ninety (90) days; or
	 
	 	(vi)	 	In the case of a Member who is a natural person, the adjudication of
incompetency or death of the Member.

     10.2 Rights of Disassociating Member. In the event any Member disassociates prior to
the dissolution and winding up of the Company, the disassociated Person shall have no right to
compel a liquidation of his/her Units and, except as otherwise provided in Section 10.3 hereof,
shall thereafter hold Units as an unadmitted Assignee.

     10.3 Optional Buy Out in the Event of the Disassociation of a Member Pursuant to
Section 10.1(i) through (v).

	 	(a)	 	In the event of the Disassociation of a Member pursuant to
Section 10.1(i), (ii), (iii), (iv) or (v), then, notwithstanding anything
contained herein to the contrary, the Disassociating Member shall be deemed to
have offered for sale (the “Buy Out Offer”) to the other Members (individually,
a “Remaining Member” and collectively, “Remaining Members”), or at the
Remaining Member’s election, to the Company, all of the Units owned of record
and beneficially by the Disassociating Member before the event causing the
Disassociation (the “Disassociating Member’s Interest”).
	 
	 	(b)	 	The Buy Out Offer shall be and remain irrevocable for a period
ending on the thirtieth (30th) day following the date the Remaining
Members elect to

14

 

	 	 	 	continue the Company (the “Buy Out Offer Period”). At any time during the
Buy Out Offer Period, a Remaining Member may accept the Buy Out Offer by
notifying the Disassociating Member in writing (the “Buy Out Acceptance”)
that the Remaining Member intends to purchase all, but not less than all, of
the Disassociating Member’s Units. If two (2) or more Remaining Members
desire to accept the Buy Out Offer, then, in the absence of an agreement
between or among them, each such Remaining Member shall purchase the
Disassociating Member’s Units in the proportion that his/her respective
Percentage of Unit Ownership bears to the total Percentages of all of the
Remaining Members who desire to accept the Buy Out Offer. Alternatively,
the Remaining Members may by a Vote of the Members elect to cause the
Company to purchase the Disassociating Member’s Units. If any Remaining
Member or the Company accepts the Buy Out Offer, then the Buy Out Acceptance
shall fix a closing date (the “Buy Out Closing Date”) for the purchase,
which date shall not be earlier than ten (10) or later than ninety (90) days
after the date that the Buy Out Purchase Price (hereinafter defined) is
determined.
	 
	 	(c)	 	If any Remaining Member accepts the Buy Out Offer, then the
Purchase Price for such sale shall be determined pursuant to Section 10.4
hereof (the “Buy Out Purchase Price”). The Buy Out Purchase Price shall be
paid in accordance with an unsecured promissory note(s) which shall: (i) be
dated as of the Buy Out Closing Date; (ii) provide for payment of the Buy Out
Purchase Price in thirty-six (36) equal monthly installments over a three (3)
year period, (iii) bear interest at a rate of six percent (6%) per annum, which
interest shall be payable monthly at the time installments of principal are due
and payable; and (iv) be subordinated to the Company’s payment obligations to
third party lenders. The Disassociated Member agrees to execute such
subordination agreements as the Company’s third party lenders may request.
	 
	 	(d)	 	If no Remaining Member accepts the Buy Out Offer, then the
Disassociating Member, upon expiration of the Buy Out Offer Period, shall
thereafter be treated as an unadmitted Assignee.

     10.4 Buy Out Purchase Price. If, within thirty (30) days after the acceptance of the
Buy Out Offer, the Manager and the Disassociating Member cannot agree on the amount of the Buy Out
Purchase Price, then the Manager and the Disassociating Member shall jointly appoint an independent
Appraiser, investment advisor or investment banking firm with reasonable experience in the oil and
gas industry to determine the value the Company as of the last day of the fiscal year prior to the
date of the Disassociation. The fees and other costs of the independent Appraiser, investment,
advisor or investment banking firm shall be shared equally by both parties.

15

 

     10.5 Disassociation Pursuant to Section 10.1(vi). In the event of a Disassociation of
a Member pursuant to Section 10.1(vi), that Member’s Units shall pass to the Member’s estate and to
his/her heirs, all of which shall be treated as an unadmitted Assignee, and the optional buy out
rights set forth in Section 10.3 shall not apply.

SECTION 11

DISSOLUTION AND WINDING UP

     11.1 Dissolution. The Company shall be dissolved and its affairs wound up, upon the
happening of any of the following events:

	 	(i)	 	When the period fixed for its duration in Section 2.8 has expired;
	 
	 	(ii)	 	Upon the unanimous Vote of the Members; or
	 
	 	(iii)	 	Upon entry of a decree of judicial dissolution.

     11.2 Procedure for Winding Up and Dissolution. If the Company is dissolved, the
remaining Members shall wind up its affairs. On winding up of the Company, the assets of the
Company shall be distributed, first, to creditors of the Company, in satisfaction of the
liabilities of the Company, then to the Interest Holders in accordance with positive Capital
Account balances taking into account all Capital Account adjustments for the Company’s taxable year
in which the liquidation occurs, and thereafter to Members in proportion to their respective Actual
Unit Ownership.

     11.3 Articles of Cancellation. If the Company is dissolved, the Members shall
promptly file a Certificate of Dissolution with the Ohio Secretary of State. If there are no
Remaining Members, the Certificate shall be filed by the last Person to be a Member; if there are
no Remaining Members, or a Person who last was a Member, the Certificate shall be filed by the
legal or personal representatives of the Person who last was a Member.

SECTION 12

ACCOUNTING, RECORDS AND BANK ACCOUNTS

     12.1 Records to be Maintained. The Company shall maintain the following records at
its principal office or at such other locations as the Manager(s) deem necessary and desirable:

	 	(i)	 	A current list of the full names, in alphabetical order, and last known
business or residence address of each Member;
	 
	 	(ii)	 	Copies of the Articles, all amendments thereto, and executed copies of any
powers of attorney pursuant to which the Articles or the amendments have been executed;

16

 

	 	(iii)	 	Copies of this Agreement, all amendments hereto, and executed copies of any
powers of attorney pursuant to which this Agreement and such amendments have been
executed;
	 
	 	(iv)	 	Copies of the Company’s federal, state, and local income tax returns and
reports, for the three (3) most recent years;
	 
	 	(v)	 	Copies of any financial statements of the Company for the three (3) most recent
years; and
	 
	 	(vi)	 	Any other agreements or documents required by the Act or this Agreement.

     12.2 Accounts. The Company shall maintain at its principal office books and records,
kept in accordance with generally accepted accounting principles. Each Member shall have the right
to inspect and copy any books and records of the Company during normal business hours. The
Managing Member shall provide each Member with (i) copies of the Company’s financial statements
within sixty (60) days of the end of each fiscal quarter and (ii) an estimate of the Company’s
required expenditures for the next fiscal quarter, as reasonably estimated by the Managing Member,
at least thirty (30) days prior to the start of the upcoming fiscal quarter.

     12.3 Bank Accounts. All funds of the Company shall be deposited in a bank account or
accounts opened in the Company’s name. The Manager shall determine the institution or institutions
at which the accounts will be opened and maintained, the types of accounts, and the Persons who
will have authority with respect to the accounts and the funds therein.

     12.4 Annual Accounting Period. The annual accounting period for the Company shall be
its taxable year. The Company’s taxable year shall be selected by the Members, subject to the
requirements and limitations of the Code.

SECTION 13

LIABILITY AND INDEMNIFICATION

     13.1 General. A Member shall not be liable, responsible, or accountable, in damages
or otherwise, to any other Member or to the Company for any act performed by the Member with
respect to Company matters, except for fraud, gross negligence, or breach of this Agreement. The
Company shall indemnify its Members, and only by a Vote of the Members cause to indemnify its
employees and agents, to the extent permitted by the Act or other applicable Ohio laws. The
indemnification provided in this Section shall not be deemed exclusive of, or in any way to limit
any other rights to which any Person seeking indemnification may be or may become entitled as a
matter of law, by the Articles of Organization, agreements, insurance, a Vote of Members, or
otherwise, with respect to action in his/her official capacity, and shall continue to a Person who
has ceased to be a Member, officer, or agent, and shall inure to the benefit of their heirs,
executors, and administrators of such a Person. Any Member who personally guarantees any
obligation of the Company or any obligation of the Company to a third party lender (a “Guaranteeing
Member”) shall be entitled to pro rata indemnification from

17

 

the other Members and from the Company in the event that the Guaranteeing Member pays the
obligation of the Company.

SECTION 14

REPRESENTATIONS AND WARRANTIES

     14.1 General. As of the date hereof, each Member for the benefit of each other Member
and the Company, hereby makes each of the representations and warranties applicable to such Member
as set forth in this Section 14, and such warranties and representations shall survive the
execution and delivery of this Agreement.

     14.2 Investment Purposes. Each Member hereby represents and covenants as follows:

	 	(a)	 	This Agreement constitutes the legal, valid, and binding
obligation of such Member.
	 
	 	(b)	 	Neither the execution, delivery or performance of this
Agreement or the consummation of the transactions contemplated hereby (i) will
conflict with, violate or result in a breach of any of the terms, conditions or
provisions of any law, regulation, order, writ, injunction, decree,
determination or award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator, applicable to such
Member or any of such Member’s affiliates; (ii) will conflict with, violate,
result in a breach of, or constitute a default under any of the terms,
conditions or provisions of any material agreement or instrument to which such
Member or any of that Member’s affiliates is a party or by which such affiliate
is or may be bound or to which any of its material properties or assets is
subject; (iii) will conflict with, violate, result in a breach or constitute a
default under (whether with notice or lapse of time or both), accelerate or
permit the acceleration of the performance required by, give to others any
material interests or rights or require any consent, authorization or approval
under any indenture, mortgage, lease agreement or instrument to which such
Member or any such Member’s affiliates is a party or by which such Member or
any of such affiliates is or may be bound; or (iv) will result in the creation
or imposition of any lien upon any of the material properties or assets of such
Member or any of such Member’s affiliates.
	 
	 	(c)	 	Any registration, declaration or filing with, or consent,
approval, license, permit or other authorization or order by, any governmental
or regulatory authority, domestic or foreign, that is required in connection
with the valid execution, delivery, acceptance and performance by such Member
of this Agreement or the consummation by such Member of any transaction
contemplated hereby has been completed, made or obtained on or before the
effective date of this Agreement.

18

 

	 	(d)	 	The Member acknowledges and agrees that: (i) the interest in
the Company hereunder is not registered under the Securities Act of 1933, as
amended, or any state securities laws, and is being issued in reliance upon
federal and state exemptions for transactions not involving any public
offering; (ii) the Membership interests being acquired are subject to
restrictions on transferability and resale and may not be transferred or sold
except as permitted by this Agreement and under the Securities Act of 1993, as
amended, and the applicable state securities laws pursuant to registration or
exception therefrom; (iii) the Member is acquiring said Membership Interest
solely for his/her own account for investment purposes and not with a view to
the distribution thereof; (iv) the Member has either consulted with its own
investment advisor, attorney or accountant about the investment and the
proposed purchase of the Membership Interest and its suitability, or chosen not
to do so, despite the recommendation of that course of action by the Managing
Member, and understands the risk of and other considerations relating got the
purchase of the Membership Interest; (v) the Member is knowledgeable and
experience with respect to financial, tax and business aspects of the ownership
of the Membership Interest and of the business contemplated by the Company, and
is capable of evaluating the risks and merits of purchasing said Membership
Interest and is further knowledgeable in making a decision to proceed with this
investment and has not relied upon any representations, warranties or
agreements other than those set forth in this Agreement, if any; (vi) the
Member can bear the economic risk of the proposed investment in the Company for
an indefinite period of time, and could afford to suffer the complete loss
thereof; (vii) each Member acknowledges that the Company has no operating
history, that the Membership Interest involves a substantial degree of risk of
loss and that there is no assurance of any income for each Member’s investment
and that any federal and/or state income tax benefits which may be available to
a Member may be lost through the adoption of new laws or regulations, to
changes of existing laws, and to changes to the interpretation of existing laws
and regulations; and (viii) each Member is a sophisticated and accredited
investor within the meaning of Rule 501(a) of the Regulations promulgated under
the Securities Act of 1933, as amended, with knowledge and experience in
business and financial matters.

SECTION 15

MISCELLANEOUS PROVISIONS

     15.1 Confidentiality. No Member shall disclose any confidential or proprietary
information or trade secrets of the Company (including, without limitation, the identity of the
Company’s clients or suppliers, or the prices at which the Company purchases products or services)
to any unauthorized third parties or use any such information to the detriment of the Company.

19

 

SECTION 16

GENERAL PROVISIONS

     16.1 Entire Agreement. This Agreement and the Articles represent the entire agreement
among the Members. It supersedes all prior written and oral statements, including any prior
representations, statements, conditions, or warranties. This Agreement may only be amended by a
written instrument approved pursuant to Section 4.2(i) hereof. Oral agreements which purport to
amend this Agreement shall not be enforceable.

     16.2 Assurances. Each Member shall execute all such certificates and other documents
and shall do all such filing, recording, publishing, and other acts required to comply with the Act
and with all other laws or for the formation and operation of the Company and to comply with any
laws, rules, and regulations relating to the acquisition, operation, or holding of the property of
the Company.

     16.3 Rights of Creditors and Third Parties under this Agreement. This Agreement is
entered into among the Members for the exclusive benefit of the Company, its Members, and their
successors and assignees. This Agreement is expressly not intended for the benefit of any creditor
of the Company or any other Person. Except and only to the extent provided by applicable statute,
no creditor or third party shall have any rights under this Agreement or any Agreement between the
Company and any Member with respect to any Capital Contribution or otherwise.

     16.4 Notices. Except as otherwise provided herein, any notice, demand, consent,
election, offer, approval, request, or other communication (“Notice(s)”) required or permitted by
this Agreement shall be in writing and delivered personally, sent by certified or registered mail,
postage prepaid, or by facsimile or electronic mail. A Notice shall be addressed to a Member at
the Member’s address as it appears on the records of the Company. Notice to the Company shall be
given to its principal office or personally delivered to the custodian of the Company’s records.
Notice sent by mail will be deemed given two (2) business days after being deposited in the United
States Mail. Notice sent by facsimile or electronic mail shall be deemed to be delivered on the
date of delivery indicated on the facsimile or electronic mail delivery confirmation record. Any
Member may designate, by a Notice to the Company, substitute addresses or addressees for Notices,
and Notices shall be directed to those substitute addresses or addressees thereafter.

     16.5 Specific Performance. The Members recognize that irreparable injury will result
from a breach of any provision of this Agreement and that money damages will be inadequate to fully
remedy the injury. Accordingly, in the event of a breach or threatened breach of one or more of
the provisions of this Agreement, any Member who may be injured, in addition to any other remedies
which may be available to that party, shall be entitled to one or more preliminary or permanent
orders (i) restraining and enjoining any act which would constitute a breach, or (ii) compelling
the performance of any obligation which, if not performed, would constitute a breach.

20

 

     16.6 Applicable Law. The laws of the State of Ohio, including the Act, shall govern
the validity of this Agreement, the construction of its terms, and the interpretation of the rights
and duties of the parties hereto.

     16.7 Section Titles. The headings herein are inserted as a matter of convenience only
and do not define, limit or describe the scope of this Agreement or the intent of the provisions
hereof.

     16.8 Binding Provisions. This Agreement is binding upon, and inures to the benefit
of, the parties hereto and their respective heirs, legatees, executors, administrators, personal
and legal representatives, successors, and permitted assigns.

     16.9 Terms. Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the Person may in the context require.

     16.10 Severability. Each provision of this Agreement shall be considered severable;
and if, for any reason, any provision or provisions herein are determined to be invalid and
contrary to any existing or future law, such invalidity shall not impair the operation of or affect
those portions of this Agreement which are valid.

     16.11 Conflicts of Interest. A Member, including, without limitation, the Managing
Member, or an officer of the Company (an “Interested Person”) shall not be disqualified from
dealing or contracting with the Company as a vendor, purchaser, employee, agent or otherwise,
provided that (i) the terms and conditions of any transaction between the Company and an Interested
Person shall be substantially similar to what is being charged in the open marketplace for the
goods and services being provided, and (ii) the nature of the transaction between the Company and
the Interested Person is disclosed to all Members. No transaction, contract or act of the Company (
an “Interested Transaction”) shall be void or voidable or in any way affected or invalidated by
reason of the fact that any Interested Person or any firm of which any Interested Person is a
shareholder, director, member, manager or trustee, or any trust of which any Interested Person is
trustee or beneficiary, is in any way interested in the transaction, contract or act, provided that
the requirements of both subsections (i) and (ii) above are satisfied. So long as the Interested
Transaction complies with the foregoing sentence of this Section, then no Interested Person shall
be accountable or responsible to the Company for, or in any respect to, any transaction, contract
or act of the Company in which he is interested for any gains or profits directly or indirectly
realized by him, her or it therefrom. The foregoing shall apply without regard to whether the
approval requirements set forth in Section 1705.31 of the Act have been satisfied. Without limiting
or qualifying the foregoing, if in any judicial or other inquiry, suit, cause or proceeding, the
question of whether an Interested Person has acted in good faith is material, then notwithstanding
any statute or rule of law or equity to the contrary, his, her or its good faith shall be presumed
in the absence of proof to the contrary by clear and convincing evidence.

     16.12 Counterparts. This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which, when taken

21

 

together, constitute one and the same documents. The signature of any party to any counterpart
shall be deemed a signature to, and may be appended to, any other counterpart.

     16.13 Representation. The Members of this Agreement acknowledge and agree that the
Company’s counsel, Dworken & Bernstein Co., L.P.A. and Jodi Tomaszewski and Melvyn E. Resnick
(collectively the “Attorneys”) prepared this Agreement on behalf of and in the course of the
Attorneys representation of the Company and that:

	 	(a)	 	The Members have been advised by the Attorneys that a conflict
of interest exists among their individual interest;
	 
	 	(b)	 	The Members have been advised by the Attorneys to seek the
advice of independent legal counsel;
	 
	 	(c)	 	The Members have had an opportunity to seek the advice of
independent legal counsel;
	 
	 	(d)	 	The Members have received no representations from the attorneys
about the tax consequences of this Agreement;
	 
	 	(e)	 	The Members have been advised by the Attorneys that this
Agreement may have tax consequences;
	 
	 	(f)	 	The Members have been advised by the Attorneys to seek the
advice of independent tax counsel; and
	 
	 	(g)	 	The Members have had the opportunity to seek the advice of
independent tax counsel.

SIGNATURES ON FOLLOWING PAGE

22

 

     IN WITNESS WHEREOF, this Second Amended and Restated Operating Agreement has been executed as
of this date first above written.

	 	 	 	 	 
	/s/

	 	Gregory J. Osborne	 	 
	 

	 	 	 	 
	John D. Oil and Gas Company	 	 
	By: Gregory J. Osborne	 	 
	Its: President and COO	 	 
	 
	 	 	 	 
	/s/

	 	James W. Garrett	 	 
	 

	 	 	 	 
	Energy West Resources, Inc.	 	 
	By: James W. Garrett	 	 
	Its: President and COO	 	 
	 
	 	 	 	 
	/s/

	 	Sam Petros	 	 
	 

	 	 	 	 
	Petros Development Co., LLC	 	 
	By: Sam Petros	 	 
	Its: Manager	 	 
	 
	 	 	 	 
	/s/

	 	Richard M. Osborne	 	 
	 

	 	 	 	 
	Richard M. Osborne, Trustee U/T/A 1-13-95	 	 
	 
	 	 	 	 
	/s/

	 	Steven A. Calabrese	 	 
	 

	 	 	 	 
	CCAG Limited Partnership	 	 
	By: TGF Corporation	 	 
	Its: General Partner	 	 
	 
	 	 	 	 
	By:

	 	/s/ Steven A. Calabrese	 	 
	 

	 	 	 	 
	Steven A. Calabrese, President of TGF Corporation	 	 
	 
	 	 	 	 
	/s/

	 	Eric M. Calabrese	 	 
	 

	 	 	 	 
	R.C. Enterprises & Development, LLC	 	 
	By: Eric M. Calabrese	 	 
	Its: Managing Member	 	 
	 
	 	 	 	 
	/s/

	 	Alfred I. Geis	 	 
	 

	 	 	 	 
	Geis Coyne Oil & Gas, LLC	 	 
	By: Alfred I. Geis	 	 
	Its: Member	 	 

23

 

APPENDIX

     “Act” means the Ohio Limited Liability Company Act, Ohio Revised Code Chapter 1705, as amended
from time to time.

     “Agreement” means this Operating Agreement as amended from time to time.

     “Articles” means the Articles of Organization of the Company as properly adopted and amended
from time to time by the Members and filed with the Ohio Secretary of State.

     “Assignee” means an assignee of Units who is not a Member at the time of the assignment and is
not admitted thereafter as a Member.

     “Bankrupt Member” means a Member who: (i) has become the subject of a decree or order for
relief under any bankruptcy, insolvency or similar law affecting creditors’ rights now existing or
hereafter in effect; or (ii) has initiated, whether in an original proceeding or by way of answer
in any state insolvency or receivership proceeding, an action for liquidation, arrangement,
composition, readjustment, dissolution, or similar relief.

     “Capital Account” means the amount of cash and fair market value of services or property (net
of any liabilities secured by contributed property that the Company is considered to assume or take
subject to under Section 752 of the Code) that a member or Assignee has contributed to the Company
as Capital Contributions pursuant to Section 5 hereof, adjusted as follows:

	 	(i)	 	The Capital Account shall be increased by all Profits allocated to such Person
pursuant to Section 6 hereof.
	 
	 	(ii)	 	The Capital Account shall be decreased by (a) the amount of cash and the fair
market value of all property distributed to such Person by the Company (net of
liabilities securing such distributed property that such Person is considered to assume
or take subject to under Section 752 of the Code), and (b) all Losses allocated to such
Person pursuant to Section 6 hereof.
	 
	 	(iii)	 	The Capital Account shall be credited in the case of an increase or debited in
the case of a decrease to reflect such Person’s allocable share of any adjustment to
the adjusted basis of Company assets pursuant to Section 734(b) of the Code to the
extent provided by Section 1.704-1(b)(2)(iv)(m) of the Regulations.
	 
	 	(iv)	 	The Capital Account shall be adjusted in any other manner required by Section
1.704-1(b)(2)(iv) of the Regulations or otherwise, in order to be deemed properly
maintained for federal income tax purposes.
	 
	 	(v)	 	Capital Accounts shall not bear interest.

 

 

	 	(vi)	 	The Transferee of Units shall succeed to the Capital Account attributable to
the Units transferred.

     “Capital Contribution” means any contribution of cash, property or services to the Company
made by or on behalf of a Member or Assignee pursuant to Section 5 hereof.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time.

     “Company” means the limited liability company organized pursuant to the Articles and this
Agreement, and any successor limited liability company.

     “Default Rate” means the maximum amount of interest allowed to be charged under the law of the
State of Ohio.

     “Distribution” means a transfer of cash or property to a Member or Assignee on account of
Units as described in Section 6 hereof.

     “Disassociation” means any action which causes a Person to cease being a Member as described
in Section 9 hereof.

     “Dissolution Event” means an event, the occurrence of which will result in the dissolution of
the Company under Section 9.1 hereof.

     “Fiscal Year” means the taxable year of the Company.

     “Interest Holder” means any Person who holds an interest in the Company, whether as a Member
or an unadmitted Assignee of a Member.

     “Member” means any Person who has signed this Agreement as a Member or who is hereafter
admitted as a Member of the Company pursuant to this Agreement.

     “Membership Interest” means an Interest Holder’s share of the Profits and Losses of, and the
right to receive Distributions from, the Company.

     “Membership Rights means all the rights of a Member in the Company, including a Member’s: (i)
Membership Interest, and (ii) the rights granted to the Member under this Agreement or under the
Act.

     “Operating Expenses” means all expenses relating to the operation of the Company, including
but not limited to the following:

	 	(i)	 	all expenses relating to managing and controlling the business
and affairs of the Company;
	 
	 	(ii)	 	all administrative expenses of the Company, including the cost
of the preparation of the annual audit, financial and tax returns and tax
reports

ii

 

	 	 	 	required for Members or the Company, cash management expenses and routine
legal and accounting expenses;
	 
	 	(iii)	 	all costs and expenses incurred in originating, investigating,
selecting, negotiating, acquiring, structuring, financing, operating,
monitoring, disposing of or abandoning the Prospect or transactions that, if
consummated, would be part of the Prospect;
	 
	 	(iv)	 	all third-party expenses in connection with the Prospect,
including any financing, legal, accounting, management and consulting fees or
expenses as well as any administrative expenses of the Prospect;
	 
	 	(v)	 	all premiums, deductibles and other costs associated with
obtaining and maintaining any insurance coverage with respect to the business
and activities of the Company;
	 
	 	(vi)	 	interest on and fees and expenses arising out of all borrowings
made by the Company, including the arranging thereof;
	 
	 	(vii)	 	costs of any litigation, director and/or officer liability or
other insurance and indemnification or extraordinary expense or liability
relating to the affairs of the Company;
	 
	 	(viii)	 	expenses of liquidating the Company;
	 
	 	(ix)	 	registration expenses and any taxes, fees or other governmental
charges levied against the Company and all expenses incurred in connection with
any tax audit, investigation, settlement or review of the Company;
	 
	 	(x)	 	expenses of any meetings of the Member; and
	 
	 	(xi)	 	expenses in connection with the formation and organization of
the Company and any related entities, including any related legal and
accounting fees.

     “Past Due Rate” means the maximum non-usurious rate of interest permitted by applicable law.

     “Payment Notice” means a written notice requiring Capital Contributions to the Company, which
notice shall (a) specify the amount required from the Member; (b) specify the purpose for which the
Capital Contribution is required to be made; and (c) the date by which the Capital Contribution
must be paid.

     “Percentage” means, as to a Member, the percentage set forth after the Member’s name on
Exhibit “B”, as amended from time to time, and as to an Interest Holder or unadmitted

iii

 

Assignee who is not a Member, the Percentage of the Member whose Membership Interest has been
acquired by such Interest Holder, to the extent the Interest Holder has succeeded to that Member’s
Membership Interest.

     “Person” means and includes an individual, corporation, partnership, association, limited
liability company, trust, estate or other entity.

     “Pipeline System” shall mean the pipeline system that will be developed and constructed for
purpose of gathering and transporting gas within and from the Prospect to market.

     “Profit” and “Loss” means, for each taxable year of the Company (or other period for which
Profit or Loss must be computed), the Company’s taxable income or loss determined in accordance
with Code Section 703(a), with the following adjustments:

	 	(i)	 	All items of income, gain, loss, deduction, or credit required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in computing taxable
income or loss;
	 
	 	(ii)	 	Any tax-exempt income of the Company, not otherwise taken into account in
computing Profit or Loss, shall be included in computing taxable income or loss;
	 
	 	(iii)	 	Any expenditures of the Company described in Code Section 705(a)(2)(B) [or
treated as such pursuant to Regulation Section 1.704-1(b)(2)(iv)(i)] and not otherwise
taken into account in computing Profit or Loss, shall be subtracted from taxable income
or loss;
	 
	 	(iv)	 	Gain or loss resulting from any taxable disposition of Company property shall
be computed by reference to the adjusted book value of the property disposed of,
notwithstanding the fact that the adjusted book value differs from the adjusted basis
of the property for federal income tax purposes;
	 
	 	(v)	 	In lieu of the depreciation, amortization, or cost recovery deduction allowable
in computing taxable income or loss, there shall be taken into account the depreciation
computed based upon the adjusted book value of the asset; and
	 
	 	(vi)	 	Notwithstanding any other provision of this definition, any items which are
specifically allocated pursuant to Section 6 hereof shall not be taken into account in
computing Profit or Loss.

     “Regulations” except where the context indicates otherwise, means the permanent, temporary,
proposed, or proposed and temporary regulations of Department of the Treasury under the Code as
such regulations may be changed from time to time.

     “Transfer” means, when used as a noun, any voluntary sale, hypothecation, pledge, assignment,
attachment or other transfer, and, when used as a verb, means voluntarily to sell, hypothecate,
pledge, assign, or otherwise transfer.

iv

 

     “Unit” means a fractional share of the membership interest of a Member or an Assignee in the
Company, the numerator of which is one (1) and the denominator of which is the total number of
Units outstanding from time to time. As of the date of this Agreement, the Company has 100 Units
outstanding, as reflected in Exhibit “B” attached hereto, which shall be amended in the
event that the Company issues additional Units or acquires any outstanding Units.

     “Vote” means each Member’s voting rights as provided for in Section 4 hereof. Unless stated
otherwise, any matter submitted to a Vote of the Members or requiring approval of the Members shall
be deemed to have passed if approved by the Members holding fifty-one percent (51%) or more of the
Units then held by all Members.

v

 

EXHIBIT “A”

Organization/Registration of Limited Liability Company

 

 

EXHIBIT “B”

UNIT OWNERSHIP OF MEMBERS 

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	INITIAL CAPITAL	 	 	 	 	 	PERCENTAGE OF
	MEMBERS	 	CONTRIBUTION	 	UNIT OWNERSHIP	 	UNIT OWNERSHIP
	John D. Oil and Gas Co.
	 	$	200,000	 	 	 	18.7653	 	 	 	18.7653	%
	8500 Station Street, #345

Mentor, OH 44060 
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Energy West Resources, Inc.
	 	$	133,500	 	 	 	19.8	 	 	 	19.8	%
	8500 Station St., #260

Mentor, OH 44060
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Petros Development Co., LLC
	 	$	33,250	 	 	 	7.276	 	 	 	7.276	%
	10474 Broadview Road

Broadview Hts., OH 44147
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Richard M. Osborne, Trustee U/T/A 1-13-95
	 	$	83,250	 	 	 	18.2173	 	 	 	18.2173	%
	8500 Station Street, #113

Mentor, OH 44060
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	CCAG Limited Partnership
	 	$	25,000	 	 	 	5.4707	 	 	 	5.4707	%
	1110 Euclid Avenue, #300

Cleveland, OH 44115
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	R.C. Enterprises & Development, LLC
	 	$	25,000	 	 	 	5.4707	 	 	 	5.4707	%
	1110 Euclid Avenue, #300

Cleveland, OH 44115
	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Geis Coyne Oil & Gas, LLC
	 	 	 	 	 	 	25	 	 	 	25.00	%
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	TOTAL
	 	$	500,000	 	 	 	100	 	 	 	100	%EX-10.4

Exhibit 10.4

PURCHASE AND SALE AGREEMENT

     THIS AGREEMENT dated this 11th day of June, 2008, (the “Effective Date”) is between
MACUM ENERGY, INC., a Montana corporation (“Macum”), with its offices located at 730 Main Street,
Suite 103, Billings, MT 59105; Harold & Eva Holden Living Trust dated 1995, Harold & Eva Holden,
Trustees, Box 1743, Billings, MT 59103; Winifred Gas Partnership, 3015 Stanford Drive, Billings, MT
59102; Goodridge Resources, Inc., 2049 Interlachen Drive, Billings, MT 59105; Vincent T. Larsen,
P.O. Box 2297, Billings, MT 59103; Dr. David T. Larsen, 4815 Cranbrook Drive East, Colleyville, TX
76034; Pic Productions, Inc., 3024 MacTavish Circle, Billings, MT 59101; Stanley & Beverly Stott
Living Trust dated 4/30/96, Stanley & Beverly Stott, Trustees, 211 Glenhaven Drive, Billings, MT
59105; and Faith Drilling Inc., P.O. Box 369 Chinook, MT 59523.(collectively referred to herein as
“Seller”), and KYKUIT RESOURCES, LLC, an Ohio corporation, or its nominee (“Buyer”), with its
offices located at 8500 Station Street, Suite 345, Mentor, Ohio 44060.

     WHEREAS, Seller desires to sell, and Buyer desires to purchase, upon the terms and conditions
hereinafter set forth, all of Seller’s right, title and interest in and to the following:

	 	(i)	 	All of Seller’s interest in, to and under approximately 34,971 acres of oil and
gas leases located in Blaine and Fergus Counties, Montana, including leasehold
interests, mineral fee interest, rights and interests attributable or allocable to the
oil and gas leases or leasehold interest by virtue of pooling, unitization,
communitization, and operating agreements, licensees, permits and other agreements, all
more particularly described on Exhibit “A” hereto, together with identical undivided
interests in and to all the property and rights incident thereto (collectively the
“Leases”), including, but not limited to, all rights in, to and under all agreements,
product purchase and sale contracts, including any and all past, present and future
take-or-pay claims, leases, permits, rights-of-way, easements, licenses, farmouts,
farmins, options, orders and other contracts or agreements of similar nature in any way
relating thereto;
	 
	 	(ii)	 	All of Seller’s interest attributable to the Leases in and to all of the wells
described on Exhibit “B” (the “Wells”), and all equipment, inventory, materials and
other personal property, fixtures and improvements on the Leases or relating to the
Wells as of the Closing Date, or used or obtained in connection with the Leases or the
Wells or with the production, treatment, sale or disposal of hydrocarbons or waste
produced therefrom or attributable thereto, and all other appurtenances thereunto
belonging (the “Equipment”);
	 
	 	(iii)	 	The pipeline facilities attributable to the Leases that are identified on
Exhibit “C” attached hereto (the “Pipelines”);
	 
	 	(iv)	 	All other leasehold interests, royalty and overriding royalty interest owned by
Seller in, to and under the Leases or attributable to production therefrom attributable
to the Leases as of the Closing Date (as hereinafter defined);

Page 1 of 18

 

	 	(v)	 	All unitization, communitization, pooling, operating or transportation
agreements, and the units created thereby which relate to the Leases, the Wells, or the
Pipelines attributable to the Leases, all of which are identified on Exhibit “D”
attached hereto;
	 
	 	(vi)	 	All rights to claim revenues or gas resulting from any underproduction
attributable to Seller’s interest in the Leases; and
	 
	 	(vii)	 	All lease files, land files, well files, oil and gas sales contracts files,
gas processing files, division order files, abstracts, title opinions, and all other
books, files, maps, logs and records, and all rights thereto, of Seller related to and
necessary to the realization of value by Buyer of any of the property purchased
hereunder (the “Records”). All of Seller’s interest in the assets described in
paragraphs (i) through (vi) above is hereinafter collectively referred to as the
“Interests”.

     The Interests sold and assigned under this Agreement do not include trade credits, accounts
and notes receivable, and adjustments or refunds (including without limitation transportation
tariff refunds, take-or-pay claims, and audit adjustments) attributable to the property with
respect to any period before the Closing Date.

     NOW, THEREFORE, in consideration of the above recitals and of the covenants and agreements
herein contained, Seller and Buyer agree as follows:

1. Purchase and Sale. Subject to an upon all of the terms and conditions herein set forth,
Seller shall sell, transfer, assign, convey and deliver the Interests to Buyer, and Buyer shall
purchase, receive, pay for an accept the Interests from Seller, effective as of 12:01 a.m. of the
day following the Closing Date (as hereinafter defined). Except as otherwise specifically provided
in this Agreement, all costs, expenses and obligations relating to the Interest which were incurred
or accrue prior to the Closing Date shall be paid and discharged by Seller; and all costs, expenses
and obligations relating to the Interests which were incurred or accrue after the Closing Date
shall be paid and discharged by Buyer.

2. Purchase Price.

	 	(a)	 	The purchase price for the Interests shall be Two Million Five Hundred
Thousand and 00/100 Dollars ($2,500,000.00) (the “Purchase Price”), subject to any
applicable purchase price adjustment as provided for herein;

Seller and Buyer agree that the Purchase Price has been calculated based upon a purchase
price for the Leases of Fifty Dollars ($50,00) per acre. In the event that, due to a due
diligence defect, Seller purchases more or less than 34,971 acres at Closing, the Purchase
Price shall be adjusted up or down accordingly.

	 	(b)	 	The Purchase Price, as adjusted, shall be paid by Purchaser as follows:

	 	(i)	 	Within five (5) business days after receiving a fully executed
copy of this Agreement from Seller, Buyer shall pay a deposit in the amount of
Fifty

Page 2 of 18

 

	 	 	 	Thousand and 00/100 Dollars ($50,000.00) (the “Initial Deposit”) to Seller
as an earnest money deposit, to be credited against the Purchase Price at
Closing. The Initial Deposit shall be nonrefundable except in the event of
a Seller’s Default, as defined herein, in which case Seller shall return the
Initial Deposit to Buyer within three (3) business days after Buyer notifies
Seller of its termination pursuant to Section 24(b) hereof.

	 	(ii)	 	The balance of the Purchase Price shall be paid in immediately
available funds to Seller on the Closing Date.

3. Definitions. As used herein, the term:

	 	(a)	 	“Defensible Title” shall mean, as to the Interest, such title held by Seller,
that subject to and except for Permitted Encumbrances (as hereinafter defined);

	 	(i)	 	Entitles Seller to receive not less than the “Net Revenue
Interest” as set forth in Exhibit “F” of all oil, gas and associated liquid and
gaseous hydrocarbons produced, saved and marketed from the Interests;
	 
	 	(ii)	 	Obligates Seller to bear costs and expenses relating to the
maintenance, development, and operation of all wells located on the Interests
in an amount not greater than the “Working Interests” set forth in Exhibit “F”;
and is free and clear of any and all encumbrances, liens and defects.

	 	(b)	 	The term “Permitted Encumbrances”, as used herein, shall mean:

	 	(i)	 	Lessors’ royalties, overriding royalties, and reversionary
interests if the net cumulative effect of such burdens does not operate to
reduce the Net Revenue Interest of any Interest to less than the Net Revenue
Interest set forth in Exhibit “F”;
	 
	 	(ii)	 	Sales contracts covering oil, gas or associated liquid or
gaseous hydrocarbons, all of which are identified on Exhibit “G” attached
hereto;
	 
	 	(iii)	 	Any required third party consents to assignments and similar
agreements with respect to which waivers or consents are obtained from the
appropriate parties, all of which are identified on Exhibit “H” attached
hereto;
	 
	 	(iv)	 	Liens for taxes or assessments not due or not delinquent on
Closing;
	 
	 	(v)	 	All rights to consent by, required notices to, filings with, or
other actions by governmental agencies in connection with the sale or
conveyance of oil and gas leases or interests therein or sale of production
therefrom if the same are prudently obtained subsequent to such sale or
conveyance;
	 
	 	(vi)	 	Easements, rights-of-way, servitudes, permits, surface leases,
and other rights of public record with respect of surface operations on or over
any of

Page 3 of 18

 

	 	 	 	the Interests which do not operate to interfere with current or proposed
operations on the Interests; and

	 	(vii)	 	Any Title Defects or other defects that are expressly waived
by Buyer pursuant to the terms of this Agreement.

	 	(c)	 	The term “Title Defect”, as used herein, shall mean:

	 	(i)	 	Any encumbrance, encroachment, irregularity, defect in or
objection to Seller’s title to the Interests (expressly excluding Permitted
Encumbrances) that renders Seller’s title to the Interests less than Defensible
Title;
	 
	 	(ii)	 	Seller is in default under some material provision of a lease,
farmout agreement or other contract or agreement affecting the Interests which
could interfere with the operation, value or use thereof, prevent Seller from
receiving the proceeds of production attributable to Seller’s interest therein;
or result in cancellation of Seller’s interest therein;
	 
	 	(iii)	 	Any provision or obligation affecting the Interests contained
in any contract or agreement disclosed in the Records which is not customary to
currently accept oil and gas industry standards and requires an extraordinary
expenditure in connection with the acquisition, exploration, development or
operation of the Interests or would materially diminish the Net Revenue
Interest set forth on Exhibit “F”, or materially increase the Working Interest
set forth on Exhibit “F”.

	 	(d)	 	The term “Due Diligence Defect” shall mean (i) any Title Defect(s), and (ii)
any other condition which Buyer discovers in its Due Diligence Review Period which
renders the Interests unfit for Buyer’s intended use for any reason whatsoever in
Buyer’s sole and absolute discretion.
	 
	 	(e)	 	The term “Environmental Defect” shall mean a violation (i) of any environmental
or work place safety statute, rule, regulation or order of any governmental agency
having jurisdiction over the Interests and (ii) to which remedial or corrective action
either is required or would be undertaken by a prudent operator.

4. Due Diligence Investigation. From and after the Effective Date of this Agreement and
continuing for a period of thirty (30) days (the “Original Due Diligence Review Period “), Seller
will make available to Buyer for examination and copying any of the Records as Buyer may request,
including, but not limited to, engineering and geological data, reports, maps, electric logs, mud
logs, production logs, well records relating to the Interests, files relating to claims against or
relating to the Interests, and information relating to the physical condition of the Interests and
the land adjoining the Interest, including, if any, results of any water or soil testing, NORM and
PCB evaluations, and all other records of Seller connected with the Interests which are necessary
or desirable in order for Buyer to conduct a due diligence review (the “Due Diligence
Investigation”). In the event that Seller fails to provide any documents requested by Buyer as
part of its due diligence review, then the Due Diligence Review Period shall be

Page 4 of 18

 

automatically extended by the number of days of Seller’s delay. Buyer may extend the Due Diligence
for an additional fifteen (15) days upon written notice to Seller delivered prior to the expiration
of the Original Due Diligence Period. If Buyer exercises its right to extend the Due Diligence
Period, then the Original Due Diligence Period and the fifteen (15) day extension period shall be
collectively referred to herein as the “Due Diligence Review Period”.

5. Due Diligence Defects and Remedies. Buyer shall notify Seller in writing of any Due
Diligence Defect within twenty (20) days after the end of the Due Diligence Review Period. Such
notice shall contain a detailed description of each due Diligence Defect. Any matters that may
otherwise constitute a Due Diligence Defect but that are not specifically and timely raised in
writing by Buyer shall be deemed to have been waived, provided, however, that Seller shall be
required to remove all monetary liens encumbering the Interests prior to Closing regardless of
whether Buyer timely objects to the same in writing.

     Upon receipt of such notice from Buyer, Seller shall have the right, but not the obligation,
to correct any Due Diligence Defect prior to Closing, other than monetary liens which must be
satisfied by Seller prior to Closing. In the event Seller determines it is unwilling to correct a
Due Diligence Defect, Seller shall so notify Buyer in writing within fifteen (15) days of receipt
of notice from Buyer of such Due Diligence Defect.

     In the event Seller declines to correct any Due Diligence Defect and that Due Diligence Defect
is not waived by Buyer, then the parties shall meet to attempt to determine a mutually agreeable
reduction in the Purchase Price to reflect the reduced value of the Interests as a result of the
Due Diligence Defect. In the event that, despite the parties’ good faith negotiations, no
agreement as to an adjustment to the Purchase Price can be reached, then either party may terminate
this Agreement as provided in Section 22 hereof.

6. Conditions of Closing by Buyer. The obligation of Buyer to close is subject to the
satisfaction of the following conditions:

	 	(a)	 	Buyer shall have completed its Due Diligence Investigation and shall not have
terminated this Agreement as a result of any Due Diligence Defect pursuant to Section 5
hereof;
	 
	 	(b)	 	Seller shall have obtained and delivered to Buyer all prerequisite waivers of
preferential rights of purchase and all necessary consents for transfer of the
Interests;
	 
	 	(c)	 	The representations of Seller contained in Section 8 shall be true on and as of
closing;
	 
	 	(d)	 	Seller shall have performed in all material respects all of its covenants and
agreements contained in this Agreement;
	 
	 	(e)	 	Prior to Closing, there shall not have been a material adverse change in the
Interests, in the reasonable opinion of Buyer, taken as a whole, excepting depletion
due to normal production and depreciation of equipment through ordinary wear and tear;

Page 5 of 18

 

	 	(f)	 	Prior to or at Closing, neither Seller nor Buyer shall have knowledge of any
bona fide suit, action or other proceeding or investigation before any court or before
any governmental agency or submission by any governmental agency of information
relating to the subject matter of the transaction contemplated under this Agreement or
any other bona fide material claim or demand, pending (1) in which the consummation of
this Agreement or the transaction contemplated hereby may be restrained, prohibited,
invalidated, set aside or delayed in whole or in part, or (2) in which damages are
sought in connection with the consummation of this Agreement. Buyer has specifically
acknowledges that it has been made aware of the following lawsuit: CV 00-039-6F-DWM;
	 
	 	(g)	 	All actions to be taken by Seller in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby will be satisfactory
in form and substance to Buyer; and
	 
	 	(h)	 	Prior to Closing, Buyer shall have obtained all material permits, licenses or
consents required by any governmental authority or other entity.

7. Conditions of Closing by Seller. The obligation of Seller to close is subject to the
satisfaction of the following conditions:

	 	(a)	 	[INTENTIONALLY OMITTED]
	 
	 	(b)	 	The representations of Buyer contained in Section 9 hereof are true on and as
of Closing.

8. Representations of Seller. Each Seller jointly and severally represents to Buyer that
to the best of his/her/its knowledge:

	 	(a)	 	Macum is a corporation validity existing and in good standing under the laws of
the State of Montana and is duly qualified to own its properties and assets and to
carry on its business as now being conducted;
	 
	 	(b)	 	Each Seller has the requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by each Seller and the consummation of the transactions
contemplated hereby have been duly authorized;
	 
	 	(c)	 	This Agreement has been duly executed and delivered by each Seller and
constitutes the valid and binding obligation of each Seller, enforceable against it in
accordance with the terms hereof, subject to the effects of bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors’ rights. No other act,
approval or proceeding on the part of any Seller or any other party is required to
authorize the execution and delivery of this Agreement by any Seller or the
consummation of the transactions contemplated hereby;

Page 6 of 18

 

	 	(d)	 	With regard to each Seller that is a corporation or other entity, this
Agreement, and the execution and delivery hereof by each such Seller, does not and the
consummation of the transactions contemplated hereby will not conflict with or result
in a breach of the charter or bylaws of any such Seller or any other governing
documents of any such Seller;
	 
	 	(e)	 	This Agreement, and the execution and delivery hereof by each Seller, does not
and the consummation of the transactions contemplated hereby will not violate, or
conflict with, or constitute a default under, or result in the creation or imposition
of any security interest, lien or encumbrance upon any property or assets of any Seller
under any mortgage, indenture or agreement to which it is a party or by which the
Interests are bound, which violation, conflict or default might adversely affect the
ability of any Seller to perform its obligation under this Agreement, or (ii) violate
and statute or law or any judgment, decree, order, writ, injunction, regulation or rule
of any court or governmental authority, which violation might adversely affect the
ability of any Seller to perform its obligations under this Agreement;
	 
	 	(f)	 	The Leases are in full force and effect, enforceable on their terms, and
comply with all regulatory requirements and laws, ordinances, statutes and regulations
and convey good and marketable title to the mineral rights described therein, and are
free and clear of all Title Defects except for the Permitted Encumbrances;
	 
	 	(g)	 	All material royalties, rentals and other payments due under the Leases have
been properly and timely paid, and all conditions necessary to keep such Leases
in force have been fully performed. No notices have been received by Seller of any
claim to the contrary;
	 
	 	(h)	 	No Seller is obligated to deliver hydrocarbons produced from the Interests at
some future time without receiving full payment therefore;
	 
	 	(i)	 	No entity has any call upon, right of first refusal, option to purchase or
similar rights under any agreement with respect to the Interests or to the production
therefrom;
	 
	 	(j)	 	There are no actions, suits, proceedings or governmental investigations or
inquiries pending or threatened, against any Seller or the Interests which might delay,
prevent or materially hinder the consummation of the transactions contemplated hereby
or materially adversely affect the title to or value of any of the Interests;
	 
	 	(k)	 	Seller holds all permits, licenses, consents and authorities issued and/or
required by any governmental authority having jurisdiction over the Interests or any
subdivision thereof, including without limitation, any governmental department,
commission, bureau, board or administrative agency which are necessary in relation to
Seller’s interest in the Leases and its ability to sell and transfer the Interests to
Buyer;

Page 7 of 18

 

	 	(l)	 	Each Seller has complied with all laws, ordinances, rules, regulations and
orders applicable to the Interests necessary for the conduct of legal operations of the
Interests;
	 
	 	(m)	 	There are no Title Defects with regard to the Interests;
	 
	 	(n)	 	All ad valorem, property, production, severance, excise and similar taxes and
assessments based on or measured by the ownership of property or the production of
hydrocarbons or the receipt of proceeds therefrom on the Interests that have become due
and payable and have been properly and timely paid;
	 
	 	(o)	 	Seller has incurred no liability, contingent or otherwise, for brokers’ or
finders’ fees relating to the transactions contemplated by this Agreement for which
Buyer shall have any responsibility whatsoever;
	 
	 	(p)	 	There are nonenvironmental hazards that will materially adversely effect the
Interests or the drilling of wells or transmission of oil and gas within the land
covered by the Leases. Seller has complied with all environmental laws, ordinances and
regulations pertaining to the Interests and the Leases;
	 
	 	(q)	 	The Interests will be conveyed to Buyer on the Closing Date free and clear of
all liens, encumbrances and unsatisfied judgments that negatively impact the Interests
or prevent Seller from having Defensible Title therein;
	 
	 	(r)	 	The Equipment shall be transferred to Buyer on the Closing Date in good working
condition, reasonable wear and tear excepted;
	 
	 	(s)	 	The information contained in the Exhibits attached hereto is accurate and
complete; and
	 
	 	(t)	 	Seller understands and agrees that Buyer has entered into this Agreement in
reliance on the representations and warranties in this Section 8.

9. Representations of Buyer. Buyer represents and warrants to each Seller that to the
best of its knowledge:

	 	(a)	 	Buyer is a corporation validly existing and in good standing under the laws of
the State of Ohio and is duly qualified to own its properties and assets and to carry
on its business as now being conducted;
	 
	 	(b)	 	Buyer has the requisite power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Buyer and the consummation of the transactions
contemplated hereby have been duly authorized;
	 
	 	(c)	 	This Agreement has been duly executed and delivered by Buyer and constitutes
the valid and binding obligation of Buyer, enforceable against it in accordance with
the terms hereof, subject to the effects of bankruptcy, insolvency,

Page 8 of 18

 

	 	 	 	reorganization moratorium, and similar laws affecting creditors’ rights. No other
act, approval or proceeding on the part of Buyer or any other party is required to
authorize the execution and delivery of this Agreement by Buyer or the consummation
of the transactions contemplated hereby;

	 	(d)	 	This Agreement, and the execution and delivery hereof by Buyer, does not and
the consummation of the transaction contemplated hereby will not (i) conflict with or
result in a breach of the charter or bylaws of Buyer or any other governing documents
of Buyer, or (ii) violate any statute or law or any judgment, decree, order, writ,
injunction regulation or rule of any court or governmental authority, which violation
might adversely affect the ability of Buyer to perform its obligations under this
Agreement; and
	 
	 	(e)	 	Buyer has incurred no liability, contingent or otherwise, for brokers’ or
finders’ fees relating to the transactions contemplated by this Agreement for which
Seller shall have any responsibility whatsoever.

10. Covenants of Seller. Seller covenants and agrees that from and after the Effective
Date and until Closing:

	 	(a)	 	Sales. Seller will not sell, transfer, assign, convey or otherwise
dispose of any Interest other than (i) oil, gas and other hydrocarbons produced, saved
and sold in the ordinary course of business, and (ii) personal property and equipment
which is replaced with property and equipment of comparable or better value and utility
in the ordinary and routine maintenance and operation of the Interests;
	 
	 	(b)	 	Encumbrances. Other than Permitted Encumbrances, Seller will not
create or permit the creation of any lien, security interest or encumbrance on any
interest, the oil or gas produced therefrom, or the proceeds thereof;
	 
	 	(c)	 	Operation of Interests. Seller agrees to:

	 	(i)	 	Cause the Interests to be developed, maintained and operated in
a prudent, good and workmanlike manner consistent with generally accepted
industry standards and practices and in accordance with applicable laws and
regulations and all applicable leases and other agreements maintain insurance
now in force with respect to the Interests, and pay or cause to be paid all
cost and expenses in connection therewith;
	 
	 	(ii)	 	Not drill any new well on the Interests without the advance
written consent of Buyer;
	 
	 	(iii)	 	Maintain and keep the Leases in full force and effect;
	 
	 	(iv)	 	Perform and comply with all of its obligations under all
agreements relating to or affecting the Interests;

Page 9 of 18

 

	 	(v)	 	Take no action which will cause any purchaser of production to
place in suspense any payment for production sold;
	 
	 	(vi)	 	Not enter into or assume any contract, agreement or commitment
which is not in the ordinary course of business as heretofore conducted or
which involves payments, receipts or potential liabilities with respect to the
Interests of more than One Thousand and 00/100 Dollars ($1,000.00); and
	 
	 	(vii)	 	Carry on its business with respect to the Interests in
substantially the same manner as it has heretofore, not introducing any new
method of management operation or accounting with respect to the Interests.

	 	(d)	 	Contracts and Agreements. Seller will not:

	 	(i)	 	Grant any preferential right to purchase or similar right or
agree to require the consent of any party to the transfer and assignment of the
Interests to Buyer;
	 
	 	(ii)	 	Enter into any gas sales contract or new crude oil sales or
supply contract with respect to the Interests which is not terminable without
penalty or detriment on notice of sixty (60) days or less;
	 
	 	(iii)	 	Incur or agree to incur any contractual obligation or
liability, absolute or contingent, with respect to the Interests;
	 
	 	(iv)	 	Enter into any transaction the effect of which, would be to
cause Seller’s ownership interest in any of the Interests to be altered from
its ownership interest as of the Effective Date; or
	 
	 	(v)	 	Enter into any settlement of or relinquish any outstanding
receivables (including, without limitation, the right to receive any
retroactive price adjustments, take-or-pay monies, FERC mandated refunds,
accounting adjustments, tax adjustments, and Minerals Management Service
refunds).

	 	(e)	 	Consents. If any approval or consent by any federal, state or local
government authority is required to vest good and Defensible Title to any of the
Interests in Buyer at Closing, Seller agrees to exercise its best efforts, as
reasonably requested by Buyer, to obtain all such required approvals or consents.
Seller will execute appropriate transfer orders covering the Interests submitted to it
for, execution designating Buyer as the appropriate party for payment, effective as of
the Closing Date;

	 	(f)	 	Notice of Defaults. Seller will give prompt written notice to Buyer of
any notice of default (or written threat of default, whether disputed or denied)
received or given by Seller under any instrument or agreement affecting the Interests
to which Seller is a party or by which it or any of the Interests is bound; and

Page 10 of 18

 

	 	(g)	 	Notice of Events and Proposals. If between the date hereof and Closing,
Seller becomes aware of (i) any action or occurrence which may materially affect any of
the Interest, (ii) any proposal from a third party to engage in any material
transaction with respect to any of the Interests, or (iii) any suit, action or other
proceeding before any court or governmental agency which relates to the Interests or
which might result in impairment or loss of the Seller’s title to any of the Interests
or the value thereof or which might hinder or impede the operation of the Interests, it
will give prompt written notice to Buyer of such action, occurrence or proposal.

11. Liabilities and Indemnities of Seller. In connection with the Sale, conveyance,
transfer, assignment and delivery of the Interests to Buyer, Buyer shall not assume or become
obligated in any way with respect to any liabilities of Seller that are not specifically assumed
hereunder, including but not limited to the following:

	 	(a)	 	Any cost, expense, liability or other obligation relating to the Interests
which accrued prior to the Closing Date unless specifically assumed by Buyer in Section
12 hereof;
	 
	 	(b)	 	Any litigation which affects the Interests, whether pending or threatened,
which is based upon omissions, events or occurrences prior to the Closing Date;
	 
	 	(c)	 	Any federal or state income tax or other tax liability of Seller arising by
reason of the transaction contemplated by this Agreement;
	 
	 	(d)	 	Any federal, state, county, municipal, ad valorem, production, windfall profits
        .or other tax liability attributable to Seller’s ownership or operation of any of the
Interests prior to the Closing Date except as to prepared taxes for the Current Tax
Period (as hereinafter defined);
	 
	 	(e)	 	Any claims arising out of the production or sale of hydrocarbons from the
Interests or the proper accounting or payment to parties for their interests therein,
prior to the Closing Date; and/or
	 
	 	(f)	 	Any other claim or demand against or liability or obligation of Seller arising
against, or liability or obligation of Seller arising from any act or omission
whatsoever of Seller, prior to the Closing Date, whether such claim, demand, liability
or obligation is fixed or contingent, and whether the same arises by contract, tort or
otherwise.

     Each Seller shall, jointly and severally and to the fullest extent permitted by law, protect,
defend, indemnify and hold Buyer and its affiliates, including its directors, officers, employees,
agents and representative of each of them, harmless from and against any and all claims, losses,
damages, costs, expenses, diminutions in value, suits, causes of action or judgments of any kind or
character with respect to any and all liabilities and obligations or alleged or threatened
liabilities and obligations, including, but not limited to, any interest, penalty and any
attorneys’ fees and other costs and expenses incurred in connection with investigating or defending
any claims or actions, whether or not resulting in any liability, attributable to or arising out of
(i)

Page 11 of 18

 

Seller’s ownership or operation of the Interests prior to the Closing Date, and/or (ii) the breach
by Seller of any of the covenants, representations and warranties contained in this Agreement.

12. Assumption of Obligations and Indemnities of Buyer. Buyer shall assume, as of the
Closing Date, only the contractual obligations of Seller related to the Interests which are set
forth in Exhibit “J” attached hereto (the “Assumed Liabilities”). Buyer shall, to the fullest
extent permitted by law, protect, defend, indemnify and hold Seller and its directors, officers,
employees, agents and representatives of each of them, harmless from and against any and all
claims, losses, damages, costs, expenses, diminutions in value, suits, causes of action or
judgments of any kind or character with respect to any and all of the Assumed Liabilities
including, but not limited to, any interest, penalty and any attorneys’ fees and other costs and
expenses incurred in connection with investigating or defending any claims or actions, whether or
not resulting in any liability, attributable to or arising out of (i) Buyer’s ownership or
operation of the Interests subsequent to the Closing Date, and (ii) the breach by Buyer of the
covenants, representations and/or warranties contained herein.

13. Indemnification Procedure for Third Party Claims. Any claim for indemnity shall be
made by written notice from the party seeking indemnification (the “Indemnified Party”) to the
party required to provide same (the “Indemnifying Party”), together with a written
description of the claim, stating the nature and basis of such claim and, if ascertainable, the
amount thereof. The Indemnifying Party shall have a period of thirty (30) days after receipt of
such notice within which to respond thereto or, in the case of a third-party claim which
requires a shorter time for response, within such shorter period as specified by the
Indemnified Party in such notice (the “Notice Period”). If the Indemnifying Party denies
responsibility or fails to respond to the notice within the Notice Period, the Indemnified Party
may defend or compromise the claim as it deems appropriate without prejudice to any of the
Indemnified Party’s rights hereunder, and the Indemnifying Party shall have no right to approve
or disapprove any actions taken in connection therewith by the Indemnified Party. If
the Indemnifying Party accepts responsibility, it shall so notify the Indemnified Party within the
Notice Period and elect either (a) to undertake the defense or compromise of such
third-party claim with counsel selected by the Indemnifying Party and reasonably approved by
the Indemnified Party or (b) to instruct the Indemnified Party to defend or compromise such
claim. If the Indemnifying Party undertakes the defense or compromise of such third-party
claim, the Indemnified Party shall be entitled, at its own expense, to participate in such
defense. No compromise or settlement of any third-party claim shall be made without reasonable
notice to the Indemnified Party and without the prior written approval of the Indemnified Party,
unless such compromise or settlement includes a general release of the Indemnified Party in
respect of the matter with no admission of liability on the part of the Indemnified Party and
no constraints on the future conduct of its business.

14. Closing. The Closing shall be held at 9:00 a.m., local time, on the date specified by
Buyer which date shall be no more than thirty (30) days following the expiration of the Due
Diligence Review Period (the “Closing” or the “Closing Date”).

15. Transactions at Closing. On the Closing Date:

	 	(a)	 	Seller shall execute, acknowledge and deliver to Buyer an Assignment and Bill
of Sale in a form satisfactory to Buyer (in sufficient counterparts to facilitate

Page 12 of 18

 

	 	 	 	recording in applicable counties and filing with the Bureau of Land Management or
other governmental authorities) conveying the Interests;

	 	(b)	 	Seller and Buyer shall execute and deliver a settlement statement that shall
set forth the purchase price and each adjustment and the calculation of such
adjustments used to determine such amount (the “Closing Amount”);
	 
	 	(c)	 	Unless Seller and Buyer otherwise agree, Buyer will prepare any closing
documents to be executed and delivered at Closing, subject to Seller’s review and
approval;
	 
	 	(d)	 	At Closing, Seller shall deliver to Buyer the originals or legible copies of
all lease, contract or well records relating to the property (the “Property Records”),
at a location designated by Buyer. Seller reserves the right to access and copy (at
its own expense) all Property Records for three years after the Closing Date, and Buyer
agrees to provide access to the Property Records to Seller during normal business
hours.
	 
	 	(e)	 	Buyer, within thirty (30) days after Closing, shall (i) record the Assignment
and Bill of Sale and all other instruments that must be recorded to effectuate the
transfer of the property; and (ii) file for approval with the applicable government
agencies all state and federal transfer and assignment documents for the property.
Buyer shall provide Seller a recorded copy of the Assignment and Bill of Sale and other
recorded instruments, and approved copies of the state and federal transfer and
assignment documents as soon as they are available.
	 
	 	(f)	 	Seller and Buyer shall execute, acknowledge and deliver transfer orders or
letters-in-lieu prepared by Seller, and approved by Buyer, directing all purchasers of
production to make payment to Buyer of proceeds attributable to production from the
Interests;
	 
	 	(g)	 	[INTENTIONALLY OMITTED]
	 
	 	(h)	 	Seller shall deliver to Buyer exclusive possession of the Interests; and
	 
	 	(i)	 	Buyer shall deliver to Seller a check payable to Seller and American State Bank
in the amount of the Purchase Price, as adjusted pursuant to the terms hereof, less the
Initial Deposit which shall be credited against the Purchase Price at Closing.

16. Post-Closing Adjustments. Within on hundred twenty (120) days after Closing, the
parties shall undertake to agree with respect to any adjustments or payments that were not finally
determined as of Closing (“Post-Closing Adjustments”). Seller shall provide Buyer access to such
of Seller’s records as may be reasonably necessary to a determination of Post-Closing Adjustments.
Payment of all Post-Closing Adjustments by Buyer or Seller shall be made in immediately available
funds within five (5) days of agreement. If the Post-Closing Adjustment has not been agreed upon
within the time period set forth herein, either party may seek to enforce any rights it claims
hereunder.

Page 13 of 18

 

17. Prorations.

	 	(a)	 	All ad valorem taxes, real property taxes, and similar obligations with respect
to the tax period in which the Closing Date occurs (the “Current Tax Period”) shall be
apportioned between Seller and Buyer as of the Closing Date based on an estimate of the
immediately preceding tax period assessment, and the purchase price shall be reduced at
Closing by the amount of such estimated taxes owed by Seller for that portion of the
Current Tax Period prior to the Effective Date.
	 
	 	(b)	 	All other taxes, including, but not limited to, excise taxes, state
severance taxes, and any other local, state, and/or federal taxes or assessments
relating to or arising out of the Interests prior to the Closing Date shall remain
Seller’s responsibility.
	 
	 	(c)	 	Seller shall pay all transfer, recording and registration fees and real estate
transfer, documentary stamp and similar transfer taxes imposed with respect to the
sale, conveyance and assignment of the Interests hereunder.
	 
	 	(d)	 	All rental payments due the lessors under the Leases shall be prorated as of
the Closing Date.

18. Proceeds of Production. Seller shall be entitled to all proceeds of production
attributable to the Interests and accruing to the period prior to the Closing Date, and Buyer shall
be entitled to all proceeds of production attributable to the Interests and accruing to the period
on and after the Closing Date.

19. Production Imbalances. The Purchase Price shall be adjusted upward or downward, as
appropriate, at the Closing to reflect the underproduction or overproduction of gas attributable to
Seller’s interests in gas produced from the property based on the price being received at the well
head at the Closing Date (net of any gathering, transportation, processing or other charges
downstream from the wellhead). If Buyer will be obligated under any applicable agreement currently
burdening the property to make cash payments to settle such imbalances after Closing, or to pay any
penalty as a result of imbalances, the adjustment to the Purchase Price shall reflect the adverse
economic effect of making such a cash payment or incurring the penalty as compared to balancing in
kind.

20. Notices. All communications required or permitted under this Agreement shall be in
writing and any communication or delivery hereunder shall be deemed to have been fully made if
actually deliver, or if mailed by registered or certified mail, postage prepaid, return receipt
requested, to the address as set forth below:

	 	 	 
	     SELLER	 	BUYER
	     Macum Energy Inc.

	 	Kykuit Resources, LLC
	     730 Main Street, Suite 103

	 	8500 Station Street, Suite 345
	     Billings, MT 59105

	 	Mentor, Ohio 44060
	     Attn: Ralph Gailey

	 	Attn: Gregory J. Osborne

Page 14 of 18

 

21. Further Assistance. Incidental and subsequent to closing, each of the parties shall
execute, acknowledge, and deliver to the other such further instruments, and take such other
actions as may be reasonably necessary to carry out the provisions of this Agreement.

22. Casualty Loss. Seller assumes the risk of any casualty loss prior to Closing/

23. Termination. This Agreement may be terminated at any time by mutual consent of Seller
and Buyer. In addition, this Agreement may be terminated (i) by Seller by notice to Buyer if all
conditions described in Section 7 shall not have been met and such noncompliance shall not have
been caused or waived by the actions-or inactions of Seller, (ii) by Buyer by notice to Seller if
all conditions described in Section 6 shall not have been met and such non-compliance shall not
have been caused or waived by the actions or inactions of Buyer, or (iii) by Buyer by written
notice to Seller in accordance with Section 5 hereof if Buyer is dissatisfied with its findings of
its Due Diligence Investigation for any reason whatsoever in Buyer’s sole and absolute discretion.
Upon termination of this Agreement the parties shall thereafter be under no further Obligation to
one another hereunder.

24. Default. If Buyer fails to comply with any obligation, term, covenant, warranty or
agreement to be kept, honored, observed or performed by Buyer pursuant to the terms and provisions
of this Agreement (a “Buyer’s Default”), and such Buyer’s Default is not cured within ten (10) days
after notice thereof, then Seller may terminate this Agreement, in which event the Initial Deposit
shall be retained by Seller as agreed upon liquidated damages, and neither Purchaser nor Seller
shall have any further obligations or liabilities hereunder. If Seller fails to comply with any
obligation, term, covenant, warranty or agreement to be kept, honored, observed or performed by
Seller pursuant to the terms and provisions of this Agreement (a “Seller’s Default”), and such
Seller’s Default is not cured within ten (10) days after notice thereof and Buyer does not
expressly waive such Seller’s Default, then Buyer may either (i) terminate this Agreement, in which
event the Initial Deposit shall be promptly returned to Buyer pursuant to Section 2(b) hereof, and
neither Buyer nor Seller shall have any further obligations or liabilities hereunder, or (ii)
pursue the right of specific performance.

25. Express. Whether or not the transactions contemplated by this Agreement are
consummated, each of the parties hereto shall pay its own fees and expenses incident to the
negotiation, preparation and execution of this Agreement, including attorneys’ and accountants’
lees.

26. Entire Agreement. This instrument states the entire agreement between the parties and
may be supplemented, altered, amended, modified or revoked by writing only, signed by both parties.

27. Survival of Representations and Covenants. All representations, warranties, and
covenants of the parties to the extent not fully performed or waived prior to Closing shall survive
the Closing.

28. Counterpart. This Agreement may be executed by Buyer and Seller in any number of
counterparts, each of which shall be deemed an original instrument, but all of which together shall
constitute one and the same instrument.

Page 15 of 18

 

29. Time of Essence. Time is of the essence in this Agreement.

30. Announcements. Seller and Buyer shall consult with each other prior to the release of
any press releases and other announcements concerning this Agreement or the transactions
contemplated hereby.

31. Severability. If at any time subsequent to the date hereto any provision of this
Agreement shall be held by any court of competent jurisdiction to be illegal, void or
unenforceable, such provision shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon and shall not impair the
enforceability of any of the provision of this Agreement.

32. Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the State of Montana. The validity of the various conveyances and transfers affecting
the title to the Interests shall be governed by and construed in accordance with the laws of the
jurisdiction ill which such Interests are situated.

33. Waiver of Jury Trial. SELLER AND BUYER DO HEREBY IRREVOCABLY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT OR
OTHER LEGAL PROCEEDING BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.

34. In further consideration of the Purchase Price being paid by Buyer hereunder, from and after
the Closing Date, each Seller and any affiliate, agent, or other representative of any Seller shall
be prohibited from, directly or indirectly, acquiring, owning or otherwise maintaining a leasehold
interest, mineral interest, royalty interest, overriding royalty interest or any other interest in
the production of oil, gas or other minerals with regard to any part of the land located in Fergus
and Blaine Counties, State of Montana, more particularly described as follows: Townships 21, 22,
23, 24, 25, 26, and 27 and Ranges 16, 17, 18, 19, 20, 21, and 22, and shall also be prohibited
from, directly or indirectly, participating in the drilling of any oil, gas or other mineral wells
within the aforedescribed land area. 

     EXECUTED as of the date first above mentioned.

	 	 	 	 	 	 	 
	 

	 	SELLER:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	MACUM ENERGY, INC.	 	 
	 	 	a Montana corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ R.S. Gailey
 

	 	 
	 	 	Print Name: R.S. Gailey	 	 
	 

	 	Its:
	 	President	 	 

Page 16 of 18

 

	 	 	 	 	 	 	 
	 

	 	 	 	HAROLD & EVA HOLDEN LIVING TRUST

DATED 1995	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Harold Holden
 

Harold Holden, Trustee
	 	 
	 

	 	 	 	/s/ Eva Holden	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Eva Holden, Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	WINIFRED GAS PARTNERSHIP	 	 
	 

	 	 	 	A                      partnership	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Patrick W. Hanley	 	 
	 

	 	 	 	 	 	 
	 	 	Print Name: Patrick W. Hanley	 	 
	 

	 	Its:
	 	General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	GOOD RIDGE RESOURCES, INC.	 	 
	 

	 	 	 	A                      corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ William Goodridge	 	 
	 

	 	 	 	 	 	 
	 	 	Print Name: William Goodridge	 	 
	 

	 	Its:
	 	President	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	VINCENT C. LARSON	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Vincent C. Larsen	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Vincent C. Larson	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	DR. DAVID T. LARSEN	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Dr. David T. Larsen	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Dr. David T. Larsen	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	PIC PRODUCTION COMPANY	 	 
	 

	 	 	 	A                      corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Patrick J. Butler	 	 
	 

	 	 	 	 	 	 
	 	 	Print Name: Patrick J. Butler	 	 
	 

	 	Its:
	 	President	 	 

Page 17 of 18

 

	 	 	 	 	 	 	 
	 

	 	 	 	STANLEY & BEVERLY STOTT LIVING TRUST

DATED 4/30/96	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	/s/ Stanley Stott
 

Stanley Stott, Trustee
	 	 
	 

	 	 	 	/s/ Beverly Stott	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Beverly Stott, Trustee	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	FAITH DRILLING, INC.	 	 
	 

	 	 	 	A Montana corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Doug Brenner	 	 
	 

	 	 	 	 	 	 
	 	 	Print Name: Doug Brenner	 	 
	 

	 	Its:
	 	President	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	BUYER:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	KYKUIT RESOURCES, LLC	 	 
	 

	 	 	 	an Ohio limited liability company	 	 
	 

	 	By:
	 	John D. Oil and Gas, Inc.,	 	 
	 

	 	Its:
	 	Managing Member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gregory J. Osborne	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Gregory J. Osborne	 	 
	 

	 	 	 	President of John D. Oil and Gas, Inc.	 	 

Page 18 of 18

 

EXHIBIT “A”

Leases

A-1

 

EXHIBIT “B”

Wells

B-1

 

EXHIBIT “C”

Pipelines

C-1

 

EXHIBIT “D”

Agreements

D-1

 

EXHIBIT “E”

INTENTIONALLY OMITTED

E-1

 

EXHIBIT “F”

Net Revenue Interest/Working Interest

F-1

 

EXHIBIT “G”

Sales Contracts

G-1

 

EXHIBIT “H”

Third Party Consents to Assignments

H-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00144-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00144-of-00352.parquet"}]]