Exhibit 10.14
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OPERATING AGREEMENT
OF
VALLEY CITY STEEL-7779, LLC
An Ohio Limited Liability Company
THIS OPERATING AGREEMENT (the "Agreement") is made and entered into and
shall be effective as of the 31st day of July, 2001, by and among VALLEY CITY
STEEL-7779, LLC, an Ohio limited liability company (the "Company"), VALLEY CITY
STEEL COMPANY, an Ohio corporation ("VCS") and VIKING STEEL, LLC, an Ohio
limited liability company ("Viking") (VCS and Viking may be referred to
hereinafter individually as a "Member", and, collectively, as the "Members"), on
the following terms and conditions.
SECTION 1
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DEFINITIONS
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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 text or Appendix and (ii) all non-capitalized words
defined in the Act (as hereinafter defined) shall have the meanings set forth
therein.
SECTION 2
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FORMATION
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2.1 Organization. The Company has been organized as an Ohio limited
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liability company under and pursuant to the Ohio Limited Liability Act and Ohio
Revised Code Chapter 1705, et seq., as amended from time to time (the "Act"), by
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the filing of Articles of Organization ("Articles") with the Secretary of the
State of Ohio as required by the Act.
2.2 Purposes. The purposes of the Company are to engage in any activity
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for which limited liability companies may be formed under the Act. The Company
shall have all the powers necessary or convenient to effect any purpose for
which it is formed, including all powers granted by or under the Act.
2.3 Duration. The term of the Company shall be perpetual from the date of
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filing of the Articles of Organization with the Ohio Secretary of State, unless
the Company is earlier dissolved pursuant to the provisions of the Act or this
Agreement.
2.4 Principal Office. The principal office of the Company shall be
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located at: 000 Xxxxx Xxxxx, Xxxxxx Xxxx, Xxxx 00000.
2.5 Agent. The Agent for service of process upon the Company is Xxxxxxx
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Xxxxx, whose address in the State of Ohio is 00000 Xxxxxxxxxx Xxxx, Xxxxx 000,
Xxxxx, Xxxx 00000. The Members
may, from time to time, change the Agent by filing the appropriate documents
with the Ohio Secretary of State. If the registered Agent ceases to act as such
for any reason, the Members shall promptly designate a replacement Agent. The
Members 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
address. If the Members shall fail to designate a replacement registered Agent
or if the Members or the Agent fail to file the appropriate notice of a change
of agent or his address, any Member may designate a replacement Agent or file a
notice of change of agent or his address.
2.6 Title to Property. Title to all property contributed to or otherwise
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acquired by the Company shall be held in the name of the Company.
2.7 Intention for Company. The Members have formed the Company as a
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limited liability company under and pursuant to the Act. The Members
specifically intend and agree that the Company not be a partnership (including a
limited partnership) or any other venture but a limited liability company under
and pursuant to the Act. No Member shall be construed to be a partner in the
Company or a partner of any other Member or Person and the Articles, this
Agreement and the relationships created thereby and arising therefrom shall not
be construed to suggest otherwise. Notwithstanding the above, the Members agree
that the Company shall be treated as a partnership for tax purposes.
2.8 Minority Business Enterprise. The Members have formed the Company
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with the specific intention of having the Company certified as a bona fide
Minority Business Enterprise ("MBE") by the North East Ohio Minority Business
Development Council ("NEOMBDC") of the National Minority Supplier Development
Council ("NMSDC"). As soon as reasonably practicable following the effective
date hereof, the Members agree to cause an MBE certification application to be
completed and submitted to the NEOMBDC for approval. All Members agree to take
all actions reasonably necessary to accomplish the certification of the Company
as an MBE. Upon approval of the Company as an MBE by the NEOMBDC, no Member
will take any actions which would jeopardize the Company's status as a certified
MBE, except as otherwise specifically provided for and permitted under this
Agreement.
2.9 Competition. Each Member will have access to the pickling and
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slitting of hot rolled steel and related services and related operations (the
"Business") of the Company on an Arms-Length Transaction basis. Any formal
written arrangement or supply agreement between the Company and a Member related
to the Business, shall be on an Arms-Length Transaction basis. Although no
specific allocations of capacity shall be made to any Member, in determining to
accept an order generated by the efforts of an individual Member, the Company
may consider factors such as longevity and volume, in addition to the Company's
operating margin, on a particular order. Except otherwise provided in this
Agreement, as long as a Member is a Member, a Member shall not be entitled to
enter into transactions that are competitive with the Business of the Company.
Any Member or related entity may engage in the business of slitting and/or
cutting to length of cold rolled steel and related processing in competition
with the Company or any other Member, in any territory, at any time during the
term of this Agreement, whether directly or indirectly through another venture
or entity, and no Member shall be deemed to be in violation of any fiduciary
duty to the Company on account of such slitting and/or cutting to length of cold
rolled steel and related processing or related
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activities. Neither the Company nor any Member shall have any right by virtue of
this Agreement to share or participate in such other slitting and/or cutting to
length of cold rolled steel activities of a Member permitted hereunder. Each
Member will conduct business with the Company on an Arms-Length Transaction
basis and no Member under any circumstances may interfere with or restrict the
operations or management of the Company unless otherwise specifically permitted
under this Agreement.
2.10 Joint Developments. Any and all developments, inventions, patents,
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copyrights, or other confidential or proprietary information relating to any of
the foregoing, which is produced, generated or developed by the Company or any
of its employees or agents while working for the Company (each, a "Joint
Development") shall be the property of, and belong to, the Company. If a Member
or any of their affiliates desire to use a Joint Development in their own
businesses or operations, or in the businesses or operations of any of their
subsidiaries and/or affiliates, they may do so provided that all the Members
have agreed in writing to allow the Company to enter into a license agreement
with such Member which provides for a non-exclusive license to use the Joint
Development for a period of years, not to exceed the period of existence of the
Company, at a fair commercial rate and on terms equivalent to an Arms-Length
Transaction. The Agreement of the Members to such request may not be
unreasonably withheld.
Any and all developments, inventions, patents, copyrights, or other
confidential or proprietary information of any Member which is disclosed to the
Company in confidence, shall at all times remain the property of such disclosing
Member and shall be for the sole use and benefit of the Company, the Members and
the related entities of the Members only, and, following the purchase of the
Membership Interest of the disclosing Member pursuant to Section 9 hereof, the
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Company's successors and assigns.
SECTION 3
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ACCOUNTING AND RECORDS
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3.1 Records to be Maintained. The Company shall maintain the following
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records at its principal office:
(a) A current list of the full names, in alphabetical order, and last
known business or residence address of each Member;
(b) 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;
(c) 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;
(d) Copies of the Company's federal, state, and local income tax returns
and reports, for the five (5) most recent years;
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(e) Copies of any financial statements of the Company for the three (3)
most recent years;
(f) Any other agreements or documents required by the Act or this
Agreement.
Each Member shall have the right to inspect and copy any books and records
of the Company during normal business hours, at such Member's own expense.
3.2 Accounting. Subject to the terms of this Agreement, the particular
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accounting methods and principles to be followed by the Company shall be
determined under GAAP. The Company's method of accounting for depreciation,
capital purchases, expenses and amortization shall be consistent with historical
practices for book purposes and the procedures and methodology utilized under
GAAP.
3.3 Reports. The Management Committee shall prepare reports concerning
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the financial condition and results of operations of the Company and the Capital
Accounts of the Members in the time, manner and form as the Management Committee
determines. Such reports shall be provided at least quarterly and as soon as
practicable after the end of each fiscal quarter and shall include a statement
of each Member's share of Profits and other items of income, gain, loss,
deduction and credit. The books and records of the Company shall be reviewed as
of the close of each Fiscal Year by an independent certified public accountant
selected by the Management Committee, who shall make a report thereon within one
hundred and twenty (120) days following the end of each Fiscal Year, unless
waived unanimously by all of the Managers on the Management Committee.
3.4 Fiscal Year. The Fiscal Year of the Company shall begin on the first
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day of November and shall end on October 31/st/.
3.5 Member's Accounts. Separate Capital Accounts for each Member shall be
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maintained by the Company. In addition, an account reflecting the Preferential
Cash Balance, as defined herein shall be maintained for VCS. Each Member's
Capital Account shall reflect the Member's Capital Contributions and increases
for the Member's share of any net Profits, income or gain of the Company. Each
Member's Capital Account shall also reflect decreases for distributions made to
the Member and the Member's share of any Losses and deductions of the Company.
SECTION 4
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CONTRIBUTIONS AND COMMITMENTS
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4.1 Initial Capital Contributions. By execution of this Agreement, each
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Member shall be deemed to have made an initial Capital Contribution in cash or
property having a fair market value in the amount set forth opposite that
Member's name on Exhibit "A", no later than sixty (60) days from the date of
this Agreement (each an "Initial Capital Contribution"). Contributions of
property in lieu of cash require the unanimous written consent of all Members
and unanimous agreement as to value. The Sharing Ratios and Units of the
Members are set forth in Exhibit "A". Any additional Member (other than an
assignee of a Membership Interest (as hereinafter defined) who has been admitted
as a Member) shall make the Capital Contribution set forth in an Admission
Agreement. No interest shall
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accrue on any Capital Contribution and no Member shall have any right to
withdraw or to be repaid any Capital Contribution except as provided in this
Agreement.
4.2 Additional Capital Contributions. No Member shall be obligated to
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make additional capital contributions to the Company in excess of its Initial
Capital Contribution except in accordance with Section 7.1(b) hereunder. If the
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Managers determine that the Company requires additional Capital Contributions in
accordance with Section 7.1(b), then each Member shall contribute his, her or
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its share of additional Capital Contributions. A Member's share of the
additional Capital Contributions shall be equal to the product obtained by
multiplying the Member's Percentage and the total additional Capital
Contributions required. Within thirty (30) days after the Members have
determined the amount of additional Capital Contribution required, each Member
shall pay the Member's share, in cash or by certified check, to the Company,
unless the Management Committee decides to the contrary.
4.3 Failure to Make Capital Contribution. If any Member or Assignee (a
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"Delinquent Member") fails to make a Capital Contribution required to be made
hereunder, any Member who is not a Delinquent Member may give the Delinquent
Member a notice of such failure. If the Delinquent Member fails to pay the
Capital Contribution within ten (10) business days of receipt of such notice,
the Delinquent Member shall be considered a Defaulting Member and the Defaulting
Member's obligation shall thereafter bear interest at the Default Interest Rate.
Members who are not a Delinquent Member may elect to satisfy all or any portion
of the Delinquent Member's unsatisfied Capital Contribution (the "Unpaid
Contribution"). Those Members who elect to contribute (the "Contributing
Members") shall do so in the ratio of their respective Units or in such other
ratio as they may agree in writing. The Contributing Members advancing such
amount shall be entitled to one of the following, provided such action does not
reasonably jeopardize the Company's status as a certified MBE, unless the
Contributing Members otherwise agree:
i. Repayment of the amount of the Unpaid Contribution, together with
interest thereon at an annual interest rate equal to four percent
(4%) over the prime rate of interest designated by KeyBank, N.A.,
(the "Bank") as being its prime rate (the "Prime Rate"), from
time to time, commencing on the due date for such contribution
until the Unpaid Contribution shall have been paid in full by the
Defaulting Member, together with interest thereon as herein
provided; and the right to receive such Defaulting Member's share
of all Distributions to which the Defaulting Member would have
been entitled until such time as the full amount advanced on
behalf of the Defaulting Member, together with interest thereon,
as herein provided, is fully repaid; or
ii. Treat the amount of the Defaulting Member's Unpaid Contribution
as a proportionate addition to the Capital Accounts of the
Contributing Members. To the extent the Unpaid Contribution is
contributed by any other Member, the Defaulting Member's
ownership percentage shall be reduced, and the percentage of each
Contributing Member shall be increased, so that each Member's
percentage is equal to a fraction, the numerator of which is that
Member's total Capital Contribution and the denominator of which
is the
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total Capital Contributions of all Members. The Chairman or Chief
Executive Officer shall thereafter amend Exhibit "A" accordingly;
or
iii. Purchase (either directly or through a subsidiary, assignee or
nominee) the Membership Units of the Defaulting Member for a
purchase price equal to ninety percent (90%) of the Defaulting
Member's Capital Account as of the date of default. If the option
to purchase is exercised, the Contributing Members will pay the
Defaulting Member such purchase price, in equal annual
installments, over not less than a three (3) year period with
interest at the rate considered the Prime Rate of the Bank from
time to time, commencing on the date the aforesaid option to
purchase is exercised; or
iv. Treat the failure to make a required Capital Contribution as an
event of withdrawal of the Member thereby invoking the provisions
of this Agreement in the event of a voluntary withdrawal of a
Member; or
v. Require the Company to repay such excess to the advancing Member,
with interest thereof, at an interest rate equal to two percent
(2%) over the Bank's Prime Rate.
Each Contributing Member advancing funds on behalf of a Defaulting Member
shall elect which of the options he wishes to exercise pursuant to Section 4.3.
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If more than one Contributing Member elects to advance or purchase, the amount
to be advanced or the purchase price to be paid, respectively, shall be
allocated to each such Contributing Member in the same proportion as his
Membership units bears to the total Membership units of all those Contributing
Members who have elected to advance or purchase.
Except as provided in this Section 4 hereof, any advance to the Company in
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excess of a Member's required contribution shall not increase such Member's
Company units or entitle such Member to an increased share of Company profits or
losses.
4.4 Loans. Without limiting the powers of the Company, the Company may
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borrow funds from time to time, required in excess of the Initial Capital
Contributions to be made by the Members, to finance such Real Property lease
costs and working capital needs as set forth herein. Notwithstanding such
borrowings by the Company, neither VCS or any of its other affiliates or Viking
or any of its other affiliates shall be a guarantor under any loans to or
borrowings of the Company, unless such entity consents specifically thereto, in
writing.
4.5 Return of Capital Contributions. A Member is not entitled to demand
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the return of any part of its Capital Contributions, nor to interest in respect
of either its Capital Account or its Capital Contributions. Neither the Company
nor any Member has any obligation to return the Capital Contributions of any
Member, except as otherwise provided under this Agreement.
SECTION 5
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ALLOCATIONS AND DISTRIBUTIONS
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5.1 Allocations. Subject to the last sentence in this Section 5.1, except
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as may be required by the Code or this Agreement, book and/or tax net Profits
and net Losses and other items of income, gain, loss, deduction and credit of
the Company shall be allocated among the Members in accordance with their
Sharing Ratios. Notwithstanding the above, any management fees and expenses
paid by the Company to Viking, or any interest expense attributable to Original
Debt, less an amount equal to the Interest Differential Amount as hereinafter
defined, shall be allocated entirely to Viking, and an amount of interest equal
to the Interest Differential Amount shall be allocated entirely to VCS.
5.2 Preferential Cash Balance. VCS shall have credited to its account a
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cumulative Preferential Cash Balance as defined herein. The Preferential Cash
Balance of VCS as a Member shall be cumulative from year to year, and increased
or decreased as follows:
(a) At the inception of the Company, the Preferential Cash Balance to VCS
as a Member of the Company shall be zero.
(b) The Preferential Cash Balance of VCS as a Member of the Company shall
be increased by:
(i) Distributions that are foregone by VCS to cover Original Debt
Servicing Payments and/or the Excess Amount as described in
Section 5.3 of this Agreement; and
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(ii) The portion of additional voluntary Capital Contributions by VCS,
if any, to the Company, utilized by the Company to cover the
Original Debt Servicing Payments.
(c) The Preferential Cash Balance of VCS as a member shall be decreased by
Preferential Cash Distributions to VCS as described in Section 5.3 of
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this Agreement (the "Preferential Cash Balance").
To the extent a cumulative Preferential Cash Balance exists at the time of a
purchase of a Member's membership interest as described in Section 9.9 of this
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Agreement, the cumulative Preferential Cash Balance shall be taken into account
in calculating any purchase price to be paid pursuant to Section 9.9.
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5.3 Distributions. Subject to Section 7.1, Distributions shall be
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declared and paid from time to time by the Company as hereinafter provided.
Annually, after the close of each fiscal year of the Company (the "Relevant
Fiscal Year"), the Members agree that Distributions by the Company shall be made
to the Members equal to the amount of Distributable Cash for the Relevant Fiscal
Year (the "Annual Distribution"), the portion of any such Annual Distribution to
be paid to (i) VCS, however, shall be reduced by the sum of the following
amounts: (a) all Distributions (including Tax Distributions as hereinafter
defined) if any, received by VCS during the fiscal year that just then ended
(the "Relevant Fiscal Year"), and (b) (until the earlier of VCS no longer being
a Member of
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the Company or February 1, 2010, whichever occurs first), the applicable
Interest Differential Amount (as hereinafter defined), incurred during such
Relevant Fiscal Year; and (ii) Viking, however, shall be reduced by the sum of
the following amounts: (a) all Distributions (including Tax Distributions) if
any, received by Viking during the Relevant Fiscal Year, (b) any management fees
("Management Fees") paid to Viking or Viking Management, LLC during the Relevant
Fiscal Year, and (c) all payments made during the Relevant Fiscal Year by the
Company for Original Debt Servicing Payments [but excluding therefrom (until the
earlier of VCS no longer being a Member of the Company or February 1, 2010,
whichever occurs first) two and one-half percent (2-1/2%) of the interest paid
on the principal balance of Five Million Four Hundred Thousand Dollars
($5,400,000) of the term debt which is part of the Original Debt.] In the event
that the Company should re-finance and pay off the Original Debt, then the
payoff of the Original Debt which is made as a result of such re-financing shall
not be included as a deduction from the Distribution payable to Viking, provided
however, the principal balance of the Original Debt on the date such Original
Debt is paid off as a result of such re-financing, shall after such re-financing
continue for purposes of this Agreement, and the Distributions hereunder, to be
defined and classified as "Original Debt". In the event that the above
reductions from the Distributions to be made to Viking exceed the amount of the
Distribution to Viking (the amount by which the Distribution to Viking is
exceeded, "Excess Amount"), then Viking shall receive no Distribution pursuant
to the foregoing contained in this Section 5.3, shall not be obligated to return
any moneys or property to the Company as a result thereof, and the Distribution
to VCS shall be reduced, but not below $0, in addition to the amount set forth
above, by the Excess Amount and such Excess Amount shall become part of the
Preferential Cash Balance. Notwithstanding the above, other than a Tax
Distribution, if a positive cumulative Preferential Cash Balance exists at the
time of any Distributions, Distributions shall solely be made to VCS until the
Preferential Cash Balance is equal to $0 (such Distributions "Preferential Cash
Distributions"). Distributions in anticipation of a Dissolution Event or
subsequent to a Dissolution Event shall be made as provided in Sections 14.2 and
14.3. To the extent there is not sufficient Distributable Cash available to
cover Original Debt Servicing Payments, Viking shall first forego any and all
management fees, other than for the twelve (12) consecutive calendar months
commencing immediately after the date hereof, and then VCS shall forego its
Distribution to cover Original Debt Servicing Payments, subject to Section 5.2.
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VCS shall not forego any Distributions to cover management fees to be paid to
Viking. Notwithstanding the above, Viking shall forego any and all management
fees if there is an event or condition of default under the agreements of the
Company with its secured lender applicable to the Original Debt which event of
default prohibits the payment of management fees or Distributions and such
foregoing shall not be a default under any agreement of the Company to pay
Management Fees to Viking and/or Viking Management, LLC. Distributions shall be
in cash or property or partially in both, as determined by the Management
Committee. However, no Distribution shall be declared or made if, after giving
it effect, the Company would not be able to pay its debts as they become due in
the usual course of business or the Company's total assets would be less than
the sum of its total liabilities plus the amount that would be needed if the
Company were to be dissolved at the time of the Distribution to satisfy the
preferential rights of other Members upon dissolution that are superior to the
rights of the Members receiving the Distribution, or if the making of any such
Distribution would violate Ohio law or the agreements of the Company with its
secured lenders applicable to the Original Debt.
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5.4 Distributions of Distributable Cash. Unless expressly modified by
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Sections 5.2, 5.3 or some other provision of this Agreement, the Members intend
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for Distributable Cash for each taxable year of the Company, to be distributed
to the Interest Holder in proportion to their percentages of ownership of the
Units no later than ninety (90) days after the end of the taxable year.
Notwithstanding the provisions of Sections 5.2 and 5.3, quarterly Distributions
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shall be made so as to provide each Member with an amount equal to its estimated
and final tax payment obligations as a result of being a Member of the Company,
including but not limited to Federal, state and local income and related taxes,
and such quarterly Distributions will be reconciled as of the end of the Fiscal
Year ("Tax Distributions"). Such Distributions are intended to be sufficient
for purposes of paying any and all types of federal, state and local income tax
incurred by the Members or their affiliates (included as an affiliate, member(s)
of a Member) with respect to taxable income of the Company. For purposes of the
foregoing, each Member shall be deemed to have paid taxes, as a result of its
membership interest in the Company, at the highest marginal tax rate applicable
to such Member.
5.5 Offset against VCS Distributions. Notwithstanding any other provision
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of this Agreement to the contrary, the Members acknowledge and agree that if a
Claim under the Asset Purchase Agreement is made by the Company against VCS, and
such Claim is finally resolved pursuant to the provisions of the Asset Purchase
Agreement, including Section 12.21 thereof, and results in the Company having a
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right to be indemnified by VCS pursuant to the indemnification provisions of the
Asset Purchase Agreement; the Company shall have a right, upon prior written
notice to VCS, and if VCS fails to indemnify the Company pursuant to the
indemnification provisions of the Asset Purchase Agreement, to offset dollar for
dollar against the Distributions payable to VCS as a Member of the Company the
amount of such indemnification obligation under the Asset Purchase Agreement
associated with such Claim.
5.6 Allocations and Distributions to New Members and Assignees. If Units
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are transferred or if additional Units are issued to a new Member during any
Fiscal Year, Profits and Losses, for the Fiscal Year shall be allocated to the
Assignee or the new or Substitute Member in accordance with Section 706(d) of
the Code, using any conventions permitted by law and selected by the non-
Transferring Members. 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
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9 of this Agreement, then any Distributions shall be allocated to the Person who
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attempted to make the Transfer.
5.7 Curative Amendment. The Management Committee by unanimous consent is
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hereby authorized, upon the advice of the Company's tax counsel, to amend this
Section 5 to comply with the Code and the Regulations promulgated under Code
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Section 704(b); provided, however, that no amendment shall materially adversely
affect any Distributions to a Member without the Member's prior written consent.
SECTION 6
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MEMBERS AND MEETINGS OF MEMBERS
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6.1 Liability of Members. No Member shall be liable as such for the
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liabilities of the Company. 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.
6.2 Representations and Warranties. Each Member hereby represents and
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warrants to each other Member that (a) the Member is acquiring the Units for the
Member's own account as an investment and without an intent to distribute the
Units, and (b) the Member acknowledges that the Units have not been registered
under the Securities Act of 1933, as amended, or any state securities laws, and
may not be resold or transferred by the Member without appropriate registration
or the availability of an exemption from such requirements.
6.3 Meetings of Members. The Members shall meet annually at such time as
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shall be reasonably determined by resolution of a Majority-in-Interest of the
Members, commencing with the year following the adoption of this Agreement, 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 or Members holding at least
thirty-five percent (35%) of the outstanding Units. All meetings shall be
presided over by the Chairman of the Management Committee. Members may
participate in any annual 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 any such
communication device is deemed to be present in person at the meeting.
6.4 Notice and Record Date of Meetings. Except as otherwise provided
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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 not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, to each Member entitled to Vote at such meeting.
If mailed, such notice shall be deemed to be delivered two calendar days after
being deposited in the United States mail, addressed to the Member at its
address as it appears on the books of the Company, with postage thereon prepaid.
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 such determination of
Members entitled to notice of or to Vote at any meeting of Members.
6.5 Quorum. The presence in person or by proxy of the Members
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representing fifty-one percent (51%) of the outstanding Units in the Company
shall constitute a quorum at any meeting of Members.
6.6 Voting. The Members shall have one Vote for each Unit owned by them
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with respect to all matters submitted to a vote of the Members. 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 beginning of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy. Assignees of a Member are entitled to receive
the Member/Assignor's economic
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interest only and shall not become a Member and will not have a right to vote
unless admitted as a Member pursuant to the provisions of Section 9 hereof.
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6.7 Required Vote. Unless a greater vote is required under this
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Agreement, the Act or the Articles, the affirmative vote or consent of a
Majority-in-Interest of the Members entitled to vote thereon or consent thereto
shall be required on any matter submitted to a vote of the Members.
6.8 Action by Members Without a Meeting. Subject to the Act or the terms
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of this Agreement, any action required or permitted to be taken at a meeting of
Members may be taken without notice and without a meeting if the action is
evidenced by one 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. Unless an action requires
unanimous approval, the written consent will be effective upon approval by
Members holding the number of Units necessary to approve the action. Any action
taken hereunder is effective when the Members holding the number of necessary
Units have signed the consent, unless the consent specifies a different
effective date. The record date for determining Members entitled to take action
without a meeting shall be the date the first Member signs a written consent.
6.9 Withdrawal of Member. The Members covenant not to withdraw as a
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Member without the prior written consent of all of the other Members if such
withdrawal would cause the Company to be taxed in any way other than as a
partnership for federal income tax purposes.
6.10 Other Business Interests of Members. Subject to Section 2.9 of this
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Operating Agreement, unless specified to the contrary in some other written
agreement between the Members, each Member may have other business interests
provided that such other business interests are not in conflict with or in
competition with the Business of the Company. The Members shall not be
obligated to devote more time and attention to the conduct of the Business of
the Company than shall be required for the supervision of the ownership,
operation and management of the Company's business property in accordance with
the terms of this Agreement.
6.11 Members Authority. The provisions contained in this Section 6
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supersede any authority granted to the Members pursuant to Section 1705.25(A) of
the Act. Any Member who takes any action or binds the Company in violation of
this Section 6 shall be solely responsible for any loss and expense incurred as
---------
a result of the unauthorized action and shall indemnify and hold the Company
harmless with respect to the loss or expense.
SECTION 7
---------
MANAGEMENT AND MANAGEMENT COMMITTEE
-----------------------------------
7.1 Management and Management Committee.
------------------------------------
(a) Except for situations in which the approval of the Members is required
by this Agreement or by nonwaivable provisions of the Act, and subject
to the provisions of subsection (b) below, the powers of the Company
shall be exercised by or under the authority of, and the business and
affairs of the Company shall be managed under the
11
direction of, Managers acting by and through a Management Committee
(as defined below). The Management Committee as hereinafter defined,
pursuant to a majority vote of its Managers, shall manage, control,
administer and operate, and make all decisions relating to, the
business and affairs of the Company and exercise all power conferred
upon the Company in the Act, except such as are by law, by the
Articles or by this Agreement conferred upon or reserved to the
Members. The Management Committee pursuant to a majority vote of its
Managers shall have the right to delegate to the officers of the
Company, if any, authority to exercise any power, duty or
responsibility of the Management Committee not specifically reserved
to the Management Committee or the Members under this Agreement. The
day-to-day operations and management of the Company shall be by or
under the authority of the Chairman of the Management Committee as
hereinafter designated.
(b) Notwithstanding any other provision of this Agreement to the contrary,
the following actions may be undertaken only upon the affirmative vote
of all the Managers:
(i) Admit a new or Substitute Member;
(ii) Make investments in Growth Capital for the Business;
(iii) Amend or restate the Articles of Organization or this
Agreement;
(iv) Except in connection with the Asset Purchase Agreement or any
instrument, document or agreement executed therewith, or
contemplated thereby, enter into, amend or terminate, any
agreement between the Company and any Member of the Company,
other than on terms of an Arm's-Length Transaction basis;
(v) Guarantee any loans to a third party;
(vi) Sell, lease, exchange or otherwise dispose of substantially all
of the property and assets, with or without the goodwill, of
the Company other than in connection with the dissolution of
the Company pursuant to Section 14 hereof and other than
----------
inventory in the ordinary course of business;
(vii) Invest in, acquire, merge with or form a legally binding
affiliation or association with another entity or be a party to
a merger, consolidation, exchange or acquisition;
(viii) Change the nature of the Company's business or the purpose for
which the Company was formed from other than that of pickling
and slitting hot rolled steel and related processing services;
(ix) Make any request for or accept additional Contributions of
capital from a Member or offer an equity interest in the
Company to any third-party;
12
(x) Borrow money or otherwise commit the credit of the Company for
Company activities if such borrowing or commitment of credit
requires a guarantee or security from a Member or any of its
affiliates;
(xi) Change the status or certification of the Company as a Minority
Business Enterprise;
(xii) Becoming contingently liable with respect to the indebtedness
of others except for the endorsement of instruments in the
ordinary course of business;
(xiii) Initiate or settle any litigation for an amount in excess of
One Hundred Thousand Dollars ($100,000) and/or which is likely
to affect a significant customer relationship, except for
litigation involving routine employment matters or in
connection with the Asset Purchase Agreement or any document,
instrument or agreement executed therewith;
(xiv) Pay any management fees to Viking or Viking Management, LLC
other than for periods ending before the twelve (12)
consecutive calendar months commencing after the date hereof;
or
(xv) Restore deficit Capital Accounts.
In the event that any such action is consummated without the
consent of Managers, such act shall be null and void and of no legal
force or effect and shall be terminated.
(c) Prior to filing a bankruptcy petition on behalf of the Company; or
making any assignment for the benefit of creditors of the Company; or
compromising any material sums due the Company; or appointing the
Plant Manager of the Company; or approving the annual budget for the
Company, the Management Committee in a meeting at which a quorum of
Managers are present shall discuss said bankruptcy petition,
assignment, compromise, appointment or budget.
7.2 Number of Managers: Establishment of Management Committee. There
-----------------------------------------------------------
shall be five (5) Managers of the Company. Unless and until this Agreement is
amended by the Members in accordance with Section 15 of this Agreement, VCS
----------
shall have the right to appoint two (2) Managers and Viking shall have the right
to appoint three (3) of the five (5) Managers. The following individuals are
hereby appointed as initial Managers of the Company to serve until their
respective successors are duly elected and qualified:
VCS Appointees Viking Appointees
-------------- -----------------
Xxxx X. Xxxxxx Xxxxxxx X. Xxxxx
Xxx Xxxxxxxxxxx Xxxxxxx Xxxxxxxxxxxx
13
Xxx X. Xxxxxxx
The Managers each shall be either an officer, director or employee of the
Member that appointed such Manager and each shall serve at the pleasure and on
behalf of the Member that appointed such Manager. Any Manager may be removed,
with or without cause, only by the Member that appointed such Manager. Any
vacancy shall be filled by the Member that appointed the Manager whose seat is
then vacant. Each Manager shall serve in such capacity until resignation or
until removed by the Member that appointed such Manager or until such seat
otherwise becomes vacant. The Managers shall act by and through a management
committee (the "Management Committee") consisting of all five (5) Managers, and
no individual Manager shall have authority to act individually on behalf of the
Company or to bind the Company absent a specific grant of authority from the
Management Committee. Viking shall designate from among the Managers of the
Management Committee appointed by Viking, one (1) designee to act as Chairman
(the "Chairman") of the Management Committee.
7.3 Management Committee.
---------------------
(a) Quorum. A majority of the Managers of the Management Committee shall
-------
constitute a quorum. No action shall be taken at any meeting of the
Management Committee unless a quorum of the Managers of the Management
Committee are present in person at such meeting. Notwithstanding that
a quorum consisting of less than all of the Managers of the Management
Committee may be present at any meeting of the Management Committee,
all actions of the Management Committee shall require the consent of a
majority of the whole authorized number of Managers of the Management
Committee (unless a greater number is required under the provisions of
this Operating Agreement).
(b) Annual Meeting. An annual meeting of the Managers of the Management
---------------
Committee shall be held immediately following the annual meeting of
the Members, or as soon thereafter as is practicable. Such annual
meeting shall be held at the same place at which such Members' meeting
was held.
(c) Regular Meeting. Except as the Management Committee may, by
----------------
resolution or by-law, from time-to-time otherwise determine, regular
meetings of the Managers of the Management Committee shall be held on
a quarterly basis on the 15th day of each February, May, August and
December during the term hereof at the principal offices of the
Company. The Secretary shall give notice of each such resolution or
by-law to any Manager of the Management Committee who was not present
at the time the same was adopted, but no further notice of such
regular meeting need be given.
(d) Special Meetings. Special meetings of the Managers of the Management
-----------------
Committee may be called by the Chairman, or any two Managers of the
Management Committee that have not been appointed to the Management
Committee by the same Member, and shall be held at such times and
places, within or without the State of Ohio, as may be specified in
such call.
14
(e) Notice of Annual or Special Meetings. Notice of the time and place of
-------------------------------------
each annual or special meeting shall be given to each Manager of the
Management Committee by the Chairman or by the person or persons
calling such meeting. Such notice need not specify the purpose or
purposes of the meeting and may be given in any manner or method and
at such time so that the Manager of the Management Committee receiving
it may have reasonable opportunity to participate in the meeting.
Such notice shall, in all events, be deemed to have been properly and
duly given if mailed at least forty-eight (48) hours prior to the
meeting and directed to the business address of each Manager of the
Management Committee as shown upon the Company's records and, in the
event of a meeting to be held through the use of communications
equipment, if the notice sets forth the telephone number at which each
Manager of the Management Committee may be reached for purposes of
participation in the meeting as shown upon the Company's records and
states that the Chairman must be notified if a Manager of the
Management Committee desires to be reached at a different telephone
number. The giving of notice shall be deemed to have been waived by
any Manager of the Management Committee who shall participate in such
meeting and may be waived, in a writing, by any Manager of the
Management Committee either before or after such meeting.
(f) Compensation. Unless the Managers of the Management Committee
-------------
unanimously otherwise agree, neither Managers of the Management
Committee nor the Chairman of the Management Committee, as such, shall
be entitled to receive from the Company any compensation for their
services but shall be entitled to reimbursement of any expenses of
attendance at any meeting of the Management Committee.
(g) Action by Written Consent or Telephone Conference. Any action
--------------------------------------------------
permitted or required to be taken at a meeting of the Management
Committee or any committee designated by the Management Committee may
be taken without a meeting if a consent in writing, setting forth the
action to be taken, is signed by that number of the Managers of the
Management Committee as members of such committee, as the case may be
required to approve the action. Such consent shall have the same
force and effect as a vote at a meeting that would be required to
approve the action at which a quorum was present. Managers of the
Management Committee, or members of any committee designated by the
Management Committee, may participate in and hold a meeting of the
Management Committee or any committee of Management Committee, as the
case may be, by means of a conference telephone or similar
communications equipment by means of which all persons participating
in the meeting can hear each other, and participation in such meeting
shall constitute attendance and presence in person at such meeting,
except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground
that the meeting is not lawfully called or convened.
(h) Proxies. A person who is entitled to attend a meeting of the
--------
Management Committee, to vote thereat or to execute consents, waivers
or releases may be
15
represented at such meeting or vote thereat, and execute consents,
waivers and releases, and exercise any of his other rights, by proxy
or proxies appointed by a writing signed by such person.
(i) Chairman to Preside. The Chairman of the Management Committee shall
--------------------
preside at all meetings of Members and at all meetings of the
Management Committee.
7.4 Functions Reserved to the Management Committee. The following actions
-----------------------------------------------
shall not be taken by the Chairman of the Company without the specific
authorization of the Management Committee. Any action set forth in
this Agreement which requires the approval of the whole Management
Committee, including all actions specified in Section 7.1(b) of this
--------------
Agreement.
7.5 Chairman and Officers. The day-to-day operations and management of
----------------------
the Company shall be exercised by or under the authority of the Chairman as
designated from time to time in accordance with Section 7.2 hereof. The
-----------
Management Committee may appoint, by majority vote of the Managers of the
Management Committee, such officers as it may determine from time to time, which
may include a President, such number of Vice Presidents as it may from time to
time determine, a Secretary and a Treasurer. Any two (2) of such officers,
other than President and Vice President, and Secretary and Assistant Secretary,
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument in more than one capacity. Each officer of the Company
shall hold office at the pleasure of the Management Committee and no officer may
hold office for more than twelve (12) months following his appointment to office
unless he is re-appointed to office by the Management Committee at the end of
the twelve (12) month period following that appointment. The officers, subject
to the direction and control of the Chairman and the Management Committee, shall
do all things and take all actions necessary to run the business of the Company.
Each officer shall have the duties assigned to him by this Agreement or by the
Management Committee. In addition to any duties assigned by this Agreement, the
Chairman of the Company shall be responsible for preparing an annual budget
including a detailed capital expenditure plan and salary plan for employees of
the Company for approval by the Management Committee (the "Annual Budget"). The
officers' if any, and the Plant Manager shall be entitled to such compensation,
if any, as may be approved from time to time by the majority vote of the
Management Committee. Any officer may be removed at any time, with or without
cause, by majority vote of the Managers of the Management Committee. Subject to
Section 7.1(b)(c), any vacancy in any office or in the position of Plant
-----------------
Manager, may be filled by majority vote of the whole authorized number of
Managers of the Management Committee. Notwithstanding the foregoing, the
Chairman shall serve until his resignation or removal. The Chairman may only be
removed by Viking. Any vacancy in the position of Chairman may be filled only
by Managers selected by Viking.
7.6 Duties of Chairman.
------------------
Chairman. The Chairman shall be the chief executive officer of the Company
---------
and shall exercise supervision over the day-to-day business and management of
the Company and over its officers, if any, subject however, to the Management
Committee as provided herein. The Chairman shall have authority to sign all
certificates for interests and all deeds, mortgages, bonds, agreements,
16
notes, and other instruments requiring his signature; and shall have all the
powers and duties as may from time to time be assigned to him by the Management
Committee. The Chairman shall also have general supervision of the day-to-day
management and operations of the plant, including the authority to hire and
terminate production personnel, and shall be responsible for the productivity of
the plant and the quality of the products produced therefrom.
7.7 Compensation of Members. Except as hereinafter provided, no Member
------------------------
shall receive monetary or any other form of compensation for routine services
rendered to the Company.
7.8 Standard of Care. Each Manager on the Management Committee shall
----------------
perform his or her duties in good faith, in a manner he or she reasonably
believes to be in the best interest of the Company and with such care as an
ordinarily prudent person in a like position would use under similar
circumstances. A Manager who so performs his or her duties as a Manager shall
not have any liability by reason of being or having been a manager of the
Company. The Managers do not, in any way, guarantee the return of the Members'
Capital Contributions or a profit for the Members from the operations of the
Company. The Managers shall not be liable to the Company or to any Member for
any loss or damage sustained by the Company or by any Member, unless the loss or
damage shall have been the result of fraud, deceit, gross negligence, willful
misconduct, breach of this Agreement or a wrongful taking by a Manager.
7.9 Indemnification. The Company shall indemnify each Manager to the
---------------
fullest extent allowed by Section 1705.32 of the Act and any other applicable
law.
7.10 Managers have no Exclusive Duty to Company. Except to the extent
------------------------------------------
agreed to in any written employment agreement entered into by and between the
Company and any Manager, no Manager shall be required to manage the Company as
his or her sole and exclusive job and he or she, as well as any Member, may have
other interests and may engage in other activities in addition to those relating
to the Company. Neither the Company nor any Member shall have any right, by
virtue of this Agreement, to share or participate in such other investments or
activities of any Manager and/or Member or to the income or proceeds derived
therefrom. Except to the extent provided for in some other agreement, neither
the Manager or any Member shall incur any liability to the Company or to any
Member as a result of engaging in any other business or venture.
7.11 Management Fees. The Company shall make periodic monthly management
---------------
fee payments to Viking Management, LLC of Twenty-Five Thousand Dollars ($25,000)
per month for the twelve (12) consecutive months commencing immediately after
the closing under the Asset Purchase Agreement, thereafter management fees are
subject to Section 7.1(b).
SECTION 8
---------
INDEMNIFICATION
---------------
8.1 General. The Company shall indemnify any Person who was or is a
-------
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (excluding actions by or in the right of the Company) and whether
formal or informal, by reason of the fact that the Person is or was a Member
17
of the Company, Manager, officer or member of the Management Committee, against
expenses (including counsel fees), judgments, settlements, penalties and fines
(including excise taxes assessed with respect to employee benefit plans)
actually or reasonably incurred in accordance with such action, suit or
proceeding, if the Person acted in good faith and in a manner reasonably
believed by the Person to have been, in the best interest of the Company and not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, either the Person had no reasonable cause to believe such
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement or conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Person did
not meet the prescribed standard of conduct.
8.2 Authorization. To the extent that a Person has been successful in the
-------------
defense of any action, suit or proceeding referred to in Section 8.1, on the
-----------
merits or otherwise, or in the defense of any claim, issue or other matter
therein, the Company shall indemnify such Person against expenses (including
counsel fees) actually and reasonably incurred by the Person. Any other
indemnification under Section 8.1 shall be made by the Company only as
-----------
authorized in the specific case, upon a determination that indemnification of
the Person is permissible in the circumstances because the Person has met the
applicable standard of conduct. Such determination may be made by either: (a)
a Majority of the Members who are not at the time parties to such action, suit
or proceeding; or (b) a written opinion authored by independent legal counsel.
8.3 Reliance on Information. For purposes of any determination under
-----------------------
Section 8.1, a Person shall be deemed to have acted in good faith and to have
-----------
otherwise met the applicable standard of conduct set forth in Section 8.1 if the
-----------
action is based on information, opinions, reports, or statements, including
financial statements and other financial data, if prepared or presented by (a)
one or more Members, Managers, officers or employees of the Company or another
enterprise whom the Person reasonably believes to be reliable and competent in
the matters presented; (b) legal counsel, public accountants, appraisers or
other Persons as to matters reasonably believed to be within the Person's
professional or expert competence; or (c) the board of directors or other
governing body of another entity, employee benefit plan or other enterprise of
which such Person is or was serving at the request of the Company as a director,
officer, partner, member, trustee, employee or agent. The provisions of this
Section 8.3 shall not be deemed to be exclusive or to limit in any way the
-----------
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Section 8.1.
-----------
8.4 Advancement of Expenses. Expenses incurred in connection with any
-----------------------
civil or criminal action, suit or proceeding may be paid for or reimbursed by
the Company in advance of the final disposition of the action, suit or
proceeding, as authorized in the specific case in the same manner described in
Section 8.2, upon receipt of a written affirmation of the Member, Manager,
-----------
employee or agent's good faith belief that such Person has met the standard of
conduct described in Section 8.1 and upon receipt of a written undertaking by or
-----------
on behalf of the Person to repay such amount if it shall ultimately be
determined that the Person did not meet the standard of conduct, and a
determination is made that the facts then known to those making the
determination shall not preclude indemnification under this Section.
18
8.5 Non-Exclusive Provisions: Vesting. The indemnification provided by
---------------------------------
this Section 8 is not exclusive of any other rights to which a Person seeking
---------
indemnification may be entitled. The right of any Person to indemnification
under this Section shall vest at the time of occurrence or performance of any
event, act or omission giving rise to any action, suit or proceeding of the
nature referred to in Section 8.1 and, once vested, shall not later be impaired
-----------
as a result of any amendment, repeal, alteration or other modification of any or
all of these provisions.
8.6 Insurance. The Company shall have the power to purchase insurance on
---------
behalf of any Member against any liability asserted against or incurred by such
Member, in the capacity or arising out of such Member's status as a Member of
the Company.
8.7 Definitions. For purposes of this Section 8, serving an employee
----------- ---------
benefit plan at the request of the Company shall include any service as a
director, officer, employee or agent of an entity which imposes duties on, or
involves services by such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries. A Person who acted
in good faith and in a manner reasonably believed to be in the best interests of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interest of the Company"
referred to in this Section. For purposes of this Section, "party" includes any
individual who is or was a plaintiff, defendant or respondent in any action,
suit or proceeding, or who is threatened to be made a named defendant or
respondent in any action, suit or proceeding.
SECTION 9
---------
TRANSFER OF UNITS
-----------------
9.1 General Prohibition of Transfers. The Transfer of the Units owned by
--------------------------------
VCS pursuant to the Merger as defined in the Asset Purchase Agreement shall be
permitted hereunder. Further, provided that the terms and conditions set forth
in Section 9.3 are complied with, a Member may upon prior written notice to the
-----------
other Member(s), Transfer its Units to an Affiliate of such Member without the
consent of the other Member provided that in the case of a transfer of Units by
VCS, the right of offset to Distributions as set forth in Section 5.5 hereof
-----------
shall continue as if VCS were still the owner of such Units. Except as provided
above, no Member shall, without the unanimous prior written consent of the other
Members, sell, assign, transfer, exchange, mortgage, pledge, grant or dispose
of, voluntarily, involuntarily, by operation of law or otherwise (hereinafter, a
"Transfer" or any root derivative thereof) all or any part of its Membership
Interest in the Company or this Agreement. Any purported Transfer of Units not
in compliance with this Section 9 shall be null and void.
---------
9.2 Effective Date of Transfer. In the event of the unanimous prior
--------------------------
written consent of all of the Members permitting a proposed Transfer, said
proposed Transfer of Units hereunder shall not be effective until the latest to
occur of the following to the extent applicable:
(a) Any proposed Transfer that is a sale to a third party subject to
Section 9.1 shall not be effective unless and until the requirements
-----------
of Section 9.1 have been satisfied.
-----------
19
(b) No Transfer of Units shall be effective unless and until the
transferee has complied with Section 9.3.
-----------
(c) Any Transfer of Units shall be deemed effective as of the last day of
the calendar month in which the last of the conditions specified in
this Section 9.2 is satisfied.
-----------
9.3 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) Constitute such transferee, as an Assignee or a Substitute Member;
(b) Confirm that the Person acquiring Units, or being admitted as a
Member, has agreed to be subject to and bound by this Agreement, as it
may be further amended, regardless of whether the Person is to be
admitted as a Substitute Member or will merely be an Assignee;
(c) Preserve the Company's status under the laws of each jurisdiction in
which the Company is qualified, organized or does business after the
Transfer;
(d) Maintain the Company's classification as a partnership for federal
income tax purposes;
(e) Assure compliance with any applicable state and federal laws including
securities laws and regulations; and
(f) Maintain the Company's status as a certified MBE, unless otherwise
provided herein.
9.4 Admission of a Transferee as a Member. A transferee of Units shall be
-------------------------------------
admitted as a Member with respect thereto if the transferee (a) complies with
Section 9.3 and is a Member or (b) is unanimously approved as a Substitute
-----------
Member by the non-transferring Members.
9.5 Transfer to a Person Not Admitted as a Member. Any transfer of Units
---------------------------------------------
under this Section 9 to a transferee not admitted as a Member pursuant to
---------
Section 9.4 shall be an assignment only of income and loss rights to the
-----------
transferee. Any such transferee of Units not admitted as a Member shall be an
Assignee and have no right to participate in the management of the business and
affairs of the Company. Any and all rights of the Assignee shall terminate at
such time when the Transferor no longer owns any Units of the Company and/or
ceases to be a Member.
9.6 Unauthorized Transfer. If the Membership Interest of a Member or
---------------------
Members is in doubt, or if there is reasonable doubt as to who is entitled to a
distribution of the income realized from a Membership Interest, the Company may
accumulate the income until this issue is finally
20
determined and resolved. Accumulated income will be credited to the Capital
Account of the Member whose interest is in question.
9.7 Prohibited Transfer. Except insofar as may otherwise by required by
-------------------
law, or permitted by Section 9 hereof, no Member's Membership Interest in the
---------
Company, in whole or in part, shall be subject in any manner to alienation by
anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge
or encumbrance of any kind, nor in any manner be subject to the debt or
liabilities of any Member, and any attempt to so alienate or subject any such
Membership Interest shall be null and void.
9.8 Absolute Restriction. Notwithstanding any provision contained herein
--------------------
to the contrary, the transfer of a Membership Interest (including any assignment
under this Section 9) or any right, title or interest therein or thereto will
---------
not be permitted if the interest sought to be transferred added to the total of
all other Membership Interest transferred within the period of twelve (12)
consecutive months ending with the proposed date of the transfer results in a
termination of the Company under Section 708 of the Internal Revenue Code or if
the Membership Interest sought to be transferred would jeopardize, in the
reasonable opinion of the remaining Members, the status of the Company as a
certified MBE, unless such remaining Members otherwise consent to such transfer.
9.9 Repurchase of Membership Interest.
---------------------------------
(a) Notwithstanding any other provisions of this Agreement to the
contrary, upon the first (1/st/) day of the first (1/st/) month after
the first (1/st/) anniversary date of the effective date of this
Agreement and on the first (1st) day of every month thereafter (each
such date being referred to herein as a "Put Date" or sometimes
"Valuation Date"), VCS shall have the right to require the Company to
repurchase its Membership Interest, upon sixty (60) days' advance
written notice by VCS to the Company, at the price and on the terms as
more fully set forth in this Section 9.9. Notwithstanding anything to
-----------
the contrary herein, the Company may at its option, assign its rights
and obligations under this Section 9.9(a) to Viking, and the
---------------------------------
performance thereof by Viking shall satisfy the obligation of the
-----------------------------------------------------------------
Company hereunder.
-----------------
(b) The purchase price of VCS's Membership Interest under Section 9.9(a)
--------------
above shall equal five (5) times the trailing EBITDA (as defined
below) of the Company, over the prior twelve (12) month period as of
the Valuation Date, multiplied by VCS's Membership Interest plus any
unpaid cumulative Preferential Cash Balance provided under Section 5.2
-----------
hereof; less the outstanding principal balance of the secured funded
debt of the Company as of the Valuation Date, over and above the
outstanding principal balance of the Original Debt as of the Valuation
Date, multiplied by VCS's Membership Interest (the "Put Purchase
Price"). In addition to the Put Purchase Price to be paid by the
Company or Viking, as applicable, the Company shall also as part of
the consideration to be paid for the purchase of the VCS Membership
Interest, caused to be discharged any lien and/or mortgage on the Real
Property securing the Original Debt. The trailing EBITDA of the
Company shall mean as of the Valuation Date, the net income or loss of
the Company over the prior twelve (12) month period
21
determined in accordance with GAAP by the then current public
accounting firm engaged by the Company, plus the sum of interest
expense for such period, all amounts attributable to depreciation and
amortization for such period, and any extraordinary or unusual charges
for such period to the extent such applicable expenses or deductions
were deducted to determine net income or loss, and minus the sum of
any extraordinary gains to the extent included to determine net income
or loss for such period ("trailing EBITDA").
(c) Notwithstanding any other provisions of this Agreement to the
contrary, upon the first (1/st/) day of the first (1/st/) month after
the first (1/st/) anniversary date of the effective date of this
Agreement, and on the first (1/st/) day of every month thereafter
(each such date being referred to herein as a "Call Date" or sometimes
"Valuation Date"), Viking and VCS shall each have the right to
purchase the Membership Interest of the other, upon sixty (60) days'
advance written notice by the acquiring Member to the selling Member
at the price and on the terms as more fully set forth in this Section
-------
9.9.
----
(d) The purchase price of VCS's Membership Interest under Section 9.9(c)
--------------
above, shall equal the greater of Fifteen Million Dollars
($15,000,000) plus any unpaid cumulative Preferential Cash Balance
provided under Section 5.2 hereof, or six (6) times the trailing
-----------
EBITDA (as defined in Section 9.9(b) above) of the Company, over the
--------------
prior twelve (12) month period, as of the Valuation Date multiplied by
VCS's Membership Interest plus any unpaid cumulative Preferential Cash
Balance provided under Section 5.2 hereof; less the outstanding
-----------
principal balance of the secured funded debt of the Company as of the
Valuation Date over and above the outstanding principal balance of the
Original Debt as of the Valuation Date multiplied by VCS's Membership
Interest, (the "Viking Call Purchase Price"). In addition to the
Viking Call Purchase Price to be paid by Viking, Viking shall also as
part of the consideration to be paid for the purchase of the VCS
Membership Interest, caused to be discharged any lien and/or mortgage
on the Real Property securing the Original Debt. The purchase price
of Viking's Membership Interest under Section 9.9(c) above, shall
--------------
equal one of the following as applicable: (i) as long as there is a
lien or mortgage on the Real Property securing the Mortgage Debt or
any part of the Original Debt, four and one-half (4-1/2) times the
trailing EBITDA (as defined in Section 9.9(b) above), of the Company
--------------
over the prior twelve (12) month period, determined as of the
Valuation Date multiplied by Viking's Membership Interest less the sum
of any unpaid cumulative Preferential Cash Balance provided under
Section 5.2 hereof, the outstanding principal balance of the Original
-----------
Debt as of the Valuation Date and the outstanding principal balance of
the secured funded debt of the Company as of the Valuation Date over
and above the outstanding principal balance of the Original Debt as of
the Valuation Date, multiplied by Viking's Membership Interest; and
(ii) if there is no lien or mortgage on the Real Property securing the
Mortgage Debt or any part of the Original Debt, the greater of Fifteen
Million Dollars ($15,000,000); or six (6) times the trailing EBITDA
(as defined in Section 9.9(b) above) of the Company over the prior
--------------
twelve (12) month period, determined as of the Valuation Date
22
multiplied by Viking's Membership Interest less the sum of any unpaid
cumulative Preferential Cash Balance provided under Section 5.2
-----------
hereof, the outstanding principal balance of the Original Debt as of
the Valuation Date and the outstanding principal balance of the
secured funded debt of the Company as of the Valuation Date over and
above the outstanding principal balance of the Original Debt as of the
Valuation Date multiplied by Viking's Membership Interest (the "VCS
Call Purchase Price").
(e) Upon the election by VCS to sell its Membership Interest to the
Company under Section 9.9(a), or the election of Viking or VCS to
--------------
purchase the Membership Interest of the other under Section 9.9(c),
--------------
the purchase price shall be paid in the following manner: at the
closing, the acquiring Member or Company, as applicable, shall pay to
the selling Member one hundred percent (100%) of the purchase price in
cash or by certified or bank cashier's check. Notwithstanding the
above, if on the Valuation Date, the leverage ratio of the Company
(i.e., debt to EBITDA) is greater than 3 to 1 ("Threshold Leverage
Ratio"), the purchase price to be paid by the Company, for the
Membership Interest of VCS shall be paid to VCS in equal installments
pursuant to the terms and conditions of a five (5) year term
promissory note with interest at the Prime Rate plus three percent
(3%) ("Purchase Price Note"). In addition, if on the Valuation Date,
the leverage ratio of the Company is less than the Threshold Leverage
Ratio, then the purchase price to be paid by the Company for the
Membership Interest of VCS shall be paid to VCS as follows:
(i) The Company shall cause the Company to either raise additional
funds and/or incur debt and borrow money up to an amount which if
outstanding on the Valuation Date would not cause the Threshold
Leverage Ratio to be exceeded ("Additional Funds"), and utilize
such Additional Funds to pay at closing the cash portion of the
purchase for the Membership Interests of VCS; and
(ii) The balance of the purchase price to be paid by the Company, if
any, for the Membership Interest of VCS shall be paid to VCS in
equal installments pursuant to the Purchase Price Note.
Notwithstanding the above, the Company shall not have an obligation to
acquire the whole or any part of the Membership Interest of VCS under
Section 9.9(a), if such acquisition of the whole or any part thereof, would
cause the Company to be in default under the agreements of the Company with
its secured lender, applicable to the Original Debt.
(f) The following terms and conditions shall also apply to any purchase of
Membership Interests under this Section 9.9:
-----------
(i) The closing of any purchase or sale pursuant to this Section 9.9
-----------
shall occur within ninety (90) days after the applicable Put Date
or Call Date; provided, however, if, because of the time required
to determine the purchase price of the Membership Interest being
purchased, such closing cannot take place
23
within such ninety (90) day period, the closing shall take
place within ten (10) days after the determination of such
purchase price at the time, date and place designated by the
acquiring Member.
(ii) Each Member appoints the Company, through its Chairman or such
other manager as the Management Committee may designate, as its
attorney-in-fact to execute and deliver all documents needed to
convey a Membership Interest under this Section 9.9. This power
-----------
of attorney is coupled with an interest and continues for as
long as this Agreement is in effect.
(iii) In the event of the purchase of Membership Interests of a
Member under this Section 9.9, the Members shall cooperate to
-----------
notify all lenders and creditors of the Company of said
purchase. The Company further shall indemnify and hold the
selling Member harmless from and against any and all
liabilities of the Company accrued or existing on or prior to
the date of closing, or arising thereafter.
9.10 Transfer of Certain VCS's Member Interest. Notwithstanding any other
-----------------------------------------
provisions of this Agreement to the contrary, once the mortgage on the Real
Estate securing the Mortgage Debt has been discharged and released, VCS shall
transfer to Viking, for the consideration of Ten Dollars ($10.00), and other
good and valuable consideration as hereinafter provided, free and clear of any
and all liens and encumbrances, other than the restrictions set forth herein,
sufficient Units in the Company such that after the transfer, VCS's Membership
Interest in the Company is equivalent to forty percent (40%) and Viking's
Membership Interest in the Company is equivalent to sixty percent (60%).
Notwithstanding the transfer of Units by VCS as provided in this Section 9.10,
-------------
the Capital Account balance of VCS as of the date of the transfer of Units,
shall not under any circumstances be transferred as a result of the transfer of
Units under this Section 9.10.
------------
The Members and the Company agree and acknowledge that any and all taxes owed
by VCS as a result of the transfer of the Membership Interest provided in this
Section 9.10, shall be paid by Viking, or the Company, provided however, if paid
by the Company, such taxes and payments thereof shall be allocated solely to
Viking and not VCS.
SECTION 10
----------
TAXES
-----
10.1 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.
10.2 Tax Matters Member. Viking shall be designated as the "Tax Matters
------------------
Partner" of the Company pursuant to Section 6231, et seq. of the Code and
regulations issued thereunder. Each Member, by the execution of this Agreement,
consents to such designation of the Tax Matters Partner and agrees to execute,
certify, acknowledge, deliver, swear to, file and record at the appropriate
public offices such documents as may be necessary or appropriate to evidence
such consent. The Tax Matters Partner shall take such actions as are necessary
to cause each other
24
Member and Assignee to become a "notice partner" within the meaning of Section
6223 of the Code. The Tax Matters Partner shall not take any action contemplated
by Sections 6223 through 6229 of the Code without the approval by a Majority
Vote of the Members. The Tax Matters Partner shall keep all Members informed of
all notices from government taxing authorities that may come to the attention of
the Tax Matters Partner. The Company shall pay and be responsible for all
reasonable third party costs and expenses incurred by the Tax Matters Partner in
performing those duties. A Member shall be responsible for any costs incurred by
the Member with respect to any tax audit or tax related administrative or
judicial proceeding against any Member, even though it relates to the Company.
The Tax Matters Partner shall not compromise any dispute with the Internal
Revenue Service except upon a Majority Vote of the Members. The Tax Matters
Partner may be replaced upon ninety (90) days notice with the approval by a
Majority Vote of the Members.
10.3 Separate Entity. Other than for income tax purposes, the Company
---------------
shall be deemed an entity separate and distinct from the Members and shall not
be deemed to be an aggregation of the Members.
SECTION 11
----------
RESTRICTIVE ENDORSEMENT
-----------------------
11.1 Restriction; Endorsement on Unit of Ownership Certificates. The
-----------------------------------------------------------
Members agree not to dispose of or encumber the Units presently owned by each of
them in the Company except subject to the terms of this Agreement. Upon the
execution of this Agreement, the certificates subject hereto, if any, shall be
endorsed as follows:
The Units represented by this certificate are subject to an Agreement
restricting the sale of Units of Ownership in this Company. The Agreement
provides certain restrictions on the transfer of this certificate which
restrictions must be complied with. The aforesaid obligations and the full
terms thereof are contained in the Operating Agreement of the Company, a
copy of which is on file at the office of the Company and a copy of which
will be provided upon written request.
The Members agree that if any certificate, in addition to or in
substitution for the certificates of the Units of Ownership of the Company
presently owned by them, is issued or reissued, they will cause the Company to
place a legend on the certificate similar to the foregoing legend. The Members
further agree that any additional Units of Ownership issued by the Company shall
be subject to the terms of this Agreement.
SECTION 12
----------
ADDITIONAL MEMBERS
------------------
The Members, by their unanimous consent, may make a Person a Member by the
Company issuing Units for such consideration as the Members by unanimous consent
determine. In such event, Exhibit A to this Agreement shall be amended to
------- -
reflect the issuance of Additional Units and the New Member shall execute such
documents as shall be required to reflect its acquisition of Units in the
Company and its agreement to be bound by the terms of the Articles and this
Agreement.
25
SECTION 13
----------
DISSOCIATION OF A MEMBER
------------------------
13.1 Dissociation. No Member shall have the right or power to voluntarily
------------
withdraw from the Company except as otherwise provided in this Agreement. A
Person ceases to be a Member upon the happening of any of the following events:
(a) The withdrawal of a Member, provided the same is consented to by the
non-withdrawing Member, (unless all of the other Members have
consented to the withdrawal, the withdrawing Member will be liable for
damages if the Company is taxed as anything other than a partnership
for federal income tax purposes);
(b) The Member makes an assignment for the benefit of creditors;
(c) The Member files a voluntary petition of bankruptcy;
(d) The Member is adjudged bankrupt or insolvent;
(e) The Member files a petition or answer seeking for the Member any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statue, law or regulation;
(f) The Member files an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against the
Member in any proceeding described in Subsection (e);
(g) Any proceeding against the Member seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar relief
under any statute, law, or regulation, continues for one hundred
twenty (120) days after the commencement thereof, or the appointment
of a trustee, receiver, or liquidator for the Member or all or any
substantial part of the Member's properties without the Member's
agreement or acquiescence, which appointment is not vacated or stayed
for ninety (90) days or, if the appointment is stayed, for ninety (90)
days after the expiration of the stay during which period the
appointment is not vacated;
(h) 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);
(i) If the Member is a partnership or limited liability company, the
dissolution and commencement of winding up of the partnership or
limited liability company; or
(j) 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.
26
13.2 Rights of Dissociating Member. In the event any Member dissociates
-----------------------------
prior to the dissolution and winding up of the Company:
(a) If the Dissociation causes a dissolution and winding up of the
Company pursuant to the terms of this Agreement, the Member shall be
entitled to participate in the winding up of the Company to the same
extent as any other Member, except that any Distributions to which
the Member would have been entitled shall be reduced by the damages
sustained by the Company as a result of the dissolution and winding
up; and
(b) If the Dissociation does not cause a dissolution and winding up of
the Company pursuant to this Agreement, the dissociated Person shall
have no right to compel a liquidation of his Units.
SECTION 14
----------
DISSOLUTION AND WINDING UP
--------------------------
14.1 Dissolution. The Company shall be dissolved and its affairs wound
-----------
up, upon the first to occur of the following events:
(a) The unanimous written consent of all of the Members;
(b) Any other event causing dissolution of the Company under the Act; or
(c) Upon entry of a decree of judicial dissolution.
Notwithstanding the foregoing, at the election of VCS, the Company shall be
dissolved and its affairs wound up if the Company is not certified as a Minority
Business Enterprise ("MBE") by the North East Ohio Minority Business Development
Council ("NEOMBDC") within one hundred eighty (180) days of the date hereof or
if the Company ceases to be certified as an MBE by the NEOMBDC (or its successor
organization) at any time.
Upon the occurrence of any Event of Dissolution, a certificate of
dissolution containing the information required by the Act shall be delivered to
the Secretary of State of the State of Ohio for filing. The business of the
Company may be continued with the written consent of the remaining Members
representing at least two-thirds of the remaining equitable ownership of the
Company within seventy-five (75) days after Dissociation.
14.2 Proceeds of Liquidation. The proceeds from liquidation of the
-----------------------
rights, property and assets of the Company shall be applied in the following
order of priority and, upon the completion of the distribution of such proceeds,
the Company shall be deemed to have been entirely terminated:
(a) The satisfaction of any outstanding obligations and liabilities to
creditors of the Company who are not Members;
27
(b) Establishment of any reserves which such persons as are supervising
and controlling the liquidation of the Company may deem advisable
with respect to any contingent or unforeseen liabilities or
obligations of the Company, such reserves to be maintained in a
regular trust account and at the expiration of such reasonable period
of time as such persons shall deem advisable the remaining balance in
the trust fund shall be distributed to the Members in accordance with
the priorities herein provided for;
(c) Payment of any positive cumulative Preferential Cash Balance to VCS;
(d) Payment to the Members of any accrued but unpaid interest on and
repayment, if any, of the outstanding principal of any loans made to
the Company by the Members hereunder or any other debts of the
Company to the Members;
(e) Distribution to the Members of that portion of such property and
assets then remaining as will result in a return to each Member of
the balance of its Capital Account; if such remaining property and
assets are not sufficient to return to the Members the entire amounts
of their Capital Accounts, such remaining property and assets shall
be distributed between the Members in proportion to their Capital
Accounts; and
(f) Distribution of any balance remaining, after deducting the cost of
liquidation, to the Members in accordance with their respective unit
ownership.
14.3 Deemed Distribution and Recontribution. Notwithstanding any other
--------------------------------------
provisions of this Section, in the event the Company is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no event described in
Sections 14.1 has occurred, the Company shall not be liquidated, the Company's
-------------
liabilities shall not be paid or discharged, and the Company's affairs shall not
be wound up. Instead, the Company shall be deemed to have distributed its
assets in kind to the Members, who shall be deemed to have assumed and taken
such assets subject to all Company liabilities, all in accordance with their
respective Capital Accounts. Immediately thereafter, the Members shall be
deemed to have recontributed the assets in kind to the Company, which shall be
deemed to have assumed and taken such assets subject to all such liabilities.
14.4 Alternative Distribution Methods. In the discretion of the Members,
--------------------------------
a pro rata portion of the distributions that would otherwise be made to the
Members pursuant to Section 5 of this Operating Agreement may be:
---------
(a) Distributed to a trust established for the benefit of the Members for
the purposes of liquidating Company assets, collecting amounts owed
to the Company, and paying any contingent or unforeseen liabilities
or obligations of the Company or the Members arising out of or in
connection with the Company. The assets of any such trust shall be
distributed to the Members from time to time, in the reasonable
discretion of the Members, in the same proportions as the amount
distributed to such trust by the Company would otherwise have been
distributed to the Members pursuant to this Operating Agreement; or
28
(b) Withheld to provide a reasonable reserve for Company liabilities
(contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Company, provided that such
withheld amounts shall be distributed to the Members as soon as
practicable.
14.5 Reimbursement of Expenses. Subject to the limitations contained
-------------------------
herein, the Members shall be entitled to reimbursement for out-of-pocket
expenses incurred in connection with the winding up and liquidation of the
business carried on by the Company. Such reimbursement shall be paid as an
expense of the business carried on by the Company after all liabilities to
creditors of the Company (other than any of the Members) have been repaid but
prior to any repayments of or distributions to any of the Members.
SECTION 15
----------
MISCELLANEOUS PROVISIONS
------------------------
15.1 Entire Agreement. This Agreement and the Articles represent the
----------------
entire agreement among all the Members regarding the subject matter hereof.
This Agreement supersedes all agreements previously made between the parties
relating to the subject matter hereof unless specifically adopted herein.
15.2 Amendment or Modification of this Agreement. This Agreement may be
-------------------------------------------
amended or modified from time to time only by a written instrument approved by
the Unanimous Vote of the Members.
15.3 No Partnership Intended for Non-Tax Purposes. The Members have formed
--------------------------------------------
the Company pursuant to the Act, and expressly do not intend to form a
partnership or a limited partnership. The Members do not intend to be partners
one to another, or partners as to any third party. To the extent any Member, by
word or action, represents to another person that any other Member is a partner
or that the Company is a partnership, the Member making such wrongful
representation shall be liable to any other Member who incurs personal liability
by reason of such wrongful representation.
15.4 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.
15.5 Notice. All notices required or permitted by this Agreement shall be
------
in writing. Notice to the Company shall be mailed to its principal office or
personally delivered to the custodian of the Company's records. Notice to a
Member or Assignee shall be mailed or personally delivered to the Member or
Assignee at the address on Exhibit A as amended from time to time unless such
---------
Member or Assignee has notified the Company in writing of a different address.
29
15.6 Severability. Every provision of this Agreement is intended to be
------------
severable. If any term or provision of this Agreement is illegal or invalid for
any reason, the illegality or invalidity shall not affect the legality or
validity of the remainder of this Agreement.
15.7 Number and Gender. All provisions and references to gender shall be
-----------------
deemed to refer to masculine, feminine or neuter, singular or plural, as the
identity of the person or persons may require.
15.8 Binding Effect. Except as otherwise provided in this Agreement,
--------------
every covenant, term and provision of this Agreement shall be binding upon and
inure to the benefit of the Members and their respective heirs, legatees, legal
representatives, successors and assigns.
15.9 Counterparts. This Agreement may be executed in several
------------
counterparts, all of which shall be deemed to constitute one and the same
instrument and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart. Facsimile
signatures shall be considered as valid and binding as original signatures for
all purposes under this Agreement.
15.10 Ohio Law Controlling. 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.
15.11 Representation. Each party hereby represents and covenants that
--------------
each has had the opportunity to consult with their independent attorney(s)
and/or tax advisors prior to the execution of this Agreement.
15.12 Availability of Equitable Remedies. Since a breach of the
----------------------------------
provisions of this Agreement could not adequately be compensated by money
damages, any party shall be entitled, in addition to any other right or remedy
available to him, to an injunction restraining such breach or a threatened
breach, and to the specific performance of any such provision of this Agreement,
and in either case no bond or other security shall be required in connection
therewith, and the parties hereby consent to such injunction and to the ordering
of specific performance. Therefore, if any party hereto or the personal
representatives of a decedent shall institute any action or proceeding to
enforce the provisions herein, any person (including the Company) against whom
such action or proceeding is brought hereby waives the claim or defense therein
that such party or such personal representative has or have an adequate remedy
at law, and such person shall not urge in any such action or proceeding the
claim or defense that such remedy at law exists.
15.13 Necessary Acts. Each of the parties hereto agrees that he will do
--------------
any act or thing and will execute any and all certificates, instruments or other
documents necessary and/or proper to make effective the provisions of this
Agreement or as appropriate to comply with the requirements of law 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. The executor or
30
administrator of a deceased Member, or guardian or personal representative of a
disabled Member, shall undertake such action in his or her representative
capacity for and on behalf of said Member.
15.14 Non-Waiver. No delay or failure by a party to exercise any right
----------
under this Agreement, and no partial or single exercise of that right, shall
constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
15.15 Construction and Interpretation. This Agreement has been drafted
-------------------------------
jointly and there shall be no presumption of construction against any party.
The parties agree that the language of all parts of this Agreement shall in all
cases be construed as a whole, according to the fair meaning, not strictly for
or against any party.
SECTION 16
----------
ARBITRATION
-----------
Any controversy arising under or out of this Agreement shall be submitted
to and settled by binding arbitration in accordance with the governing rules of
the American Arbitration Association as administered through the Cleveland, Ohio
office. The commercial arbitration rules of the American Arbitration
Association shall apply and the controversy shall be governed by the laws of the
State of Ohio. The arbitration shall be conducted before a panel of three (3)
arbitrators, one of which shall be chosen by the initiating party, one of which
shall be chosen by the responding party and the third of which shall be chosen
by the arbitrators chosen by the parties, all of which have extensive experience
in the steel industry, in Cleveland, Ohio in accordance with the commercial
arbitration rules, as existing as of the time the arbitration is commenced, of
the American Arbitration Association. The award rendered by the panel of
arbitrators shall be final and judgment may be entered upon it in accordance
with applicable law in any court having jurisdiction thereof, including a
federal district court, pursuant to the Federal Arbitration Act. In preparation
for the arbitration hearing, each party may utilize all methods of discovery
authorized by the Ohio Rules of Civil Procedure, and may enforce the right to
such discovery in the manner provided by said Rules. All fees and expenses of
the arbitration shall be borne by the parties equally. However, each party
shall bear the expense of its own counsel, experts, witnesses, and preparation
and presentations. Notwithstanding the above, the arbitrators are authorized to
award any party such sums as shall be deemed proper for the time, expense, and
inconvenience of arbitration, including arbitration fees and attorneys fees.
The arbitrators will not have authority, under any circumstances, to award
punitive or exemplary damages.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
VALLEY CITY STEEL COMPANY
/s/ Xxxx X. Xxxxxx
------------------------
By: Xxxx X. Xxxxxx
Its: President
31
VIKING STEEL, LLC
/s/ Xxxxxxx Xxxxx
-----------------------
By: Xxxxxxx Xxxxx
Its: President and Member
VALLEY CITY STEEL-7779, LLC
/s/ Xxxxxxx Xxxxx
-----------------------
By: Xxxxxxx Xxxxx
Its: Chairman
32
