FIRST AMENDMENT TO OPERATING AGREEMENT
THIS FIRST AMENDMENT TO OPERATING AGREEMENT, dated as of July 20, 1999
(this "Amendment"), is by and between MCNIC PIPELINE & PROCESSING COMPANY, a
Michigan corporation ("MCNIC"), and CROWN ASPHALT PRODUCTS COMPANY, a Utah
corporation ("CAPCO").
WITNESSETH:
WHEREAS, MCNIC and CAPCO are parties to an Operating Agreement, dated
June 30, 1998 (the "Agreement"), pursuant to which MCNIC and CAPCO established
their rights and obligations regarding the formation of Crown Asphalt
Distribution L.L.C., a Utah limited liability company (the "Company"); and
WHEREAS, the parties desire to amend the Agreement on the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises herein
provided, the parties hereto agree as follows:
AGREEMENT
1. DEFINITIONS. Terms used but not defined herein shall have the
meanings assigned to such terms in the Agreement.
2. AMENDMENT. The Agreement is amended as follows:
(a) Section 6.3 is deleted in its entirety and
the following inserted in place thereof:
"6.3 COMPANY OPPORTUNITIES, CONFLICTS OF INTEREST. (a) Subject to the
limitations set forth in subsection (b) and (c) of this Section 6.3, during the
term of the Company, unless the Company shall have theretofore ceased conducting
its business, no Member, nor any of their respective Affiliates, shall directly
or indirectly create, start up, acquire, invest in, loan money to, own, hold,
lease, operate or manage any entity whose business utilizes Products in any
manner the same as or similar to the then current business of the Company (an
"ADDITIONAL OPPORTUNITY"), unless (i) such Member shall have offered the Company
the opportunity to acquire or participate in such Additional Opportunity on the
same terms as offered to such Member; (ii) such acquisition or participation by
the Company is not approved by the unanimous consent of all of the Members other
than the Acquiring Member; and (iii) all of the Members consent to such
acquisition or participation by the Acquiring Member.
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The following procedures shall apply to the offer of each Additional
Opportunity to the Company:
(A) Within 15 days after a Member (the "ACQUIRING
MEMBER") or any of its Affiliates proposes to proceed with an activity that
constitutes an Additional Opportunity such Acquiring Member shall notify the
Company and the other Member (the "NONACQUIRING MEMBER") thereof. The Acquiring
Member's notice shall describe in detail the activity, the acquiring party if
that party is an Affiliate, activities and facilities covered thereby, the cost
thereof, and the reason, if any, why the Acquiring Member believes that the
activity is or is not in the best interests of the Members and the Company. In
addition to such notice, the Acquiring Member shall make any and all information
concerning the activity available for inspection by the Company and Nonacquiring
Member, including, without limitation, any proposed contracts, term sheets,
letters of intent or other similar documents relating to the Additional
Opportunity.
(B) The Company shall have 30 days after receiving the
Acquiring Member's notice pursuant to the immediately preceding clause (A) to
notify the Acquiring Member of the Company's election to pursue the Additional
Opportunity; the Company shall elect to accept the Additional Opportunity if the
Nonacquiring Member notifies the Company to do so within 25 days after receiving
the Acquiring Member's notice under the immediately preceding clause (A).
Promptly upon such notice, the Members shall negotiate to select an appropriate
business structure within which to conduct the Additional Opportunity upon
mutually agreeable terms in which either Member or an Affiliate shall have the
option, though not the obligation, of acquiring (and making a like share of all
capital contributions) up to a 50% sharing ratio or equity interest in such
entity. Following the formation of the foregoing mutually agreeable business
entity, the Acquiring Member shall convey or cause its Affiliate to convey to
the Company or the newly formed entity, as the case may be, all of the Acquiring
Member's (or its Affiliate's) interest in the Additional Opportunity, free and
clear of all Encumbrances arising by, through or under the Acquiring Member (or
its Affiliate) other than those to which the Nonacquiring Member has agreed. The
Company or the newly formed entity, as the case may be, shall promptly pay to
the Acquiring Member the latter's actual out-of-pocket acquisition costs.
(C) If the Company does not give such notice within such
30-day period set forth in the preceding clause (B) or elects not to pursue the
Additional Opportunity, if all of the other Nonacquiring Members give written
notice to the Acquiring Member within 15 days following the expiration of the
Company's option period refusing consent to the acquisition or participation by
the Acquiring Member in the Additional Opportunity, Acquiring Member shall no
longer pursue, acquire or participate in the Additional Opportunity. If the
Non-Acquiring Members consent to the acquisition or participation by Acquiring
Member in the Additional Opportunity, then no Member (other than the Acquiring
Member) shall thereafter have any interest in the activity or Additional
Opportunity.
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(b) The restrictions on any Member's ability to pursue an
Additional Opportunity set forth in Section 6.3 (a) above shall continue as set
forth in such section until the earlier to occur of March 15, 2000, or the
occurrence of a CAR Event (such earlier to occur date being known herein as the
"Veto Termination Date"). "CAR Event" shall mean either of the following: (i)
the Initial Plant (as defined in Operating Agreement for Crown Asphalt Ridge LLC
dated as of August 1, 1997 between MCNIC and Crown Asphalt Products Company)
shall have cumulative production of 12,500 tons of finished asphalt product over
any 100 successive days or (ii) the Members shall have unanimously agreed that
the Initial Plant is incapable of commercial operations, which shall mean for
purposes of this paragraph that the Initial Plant is not capable of producing
revenues in excess of the total costs of production, excluding depreciation.
Beginning with the Veto Termination Date and ending on June 18, 2001, the
provisions of 6.3 (a) shall remain in full force and effect provided that if the
Company does not elect to participate in an Additional Opportunity and the
Nonacquiring Member does not consent to the Acquiring Member's acquisition or
participation in the Additional Opportunity, the Acquiring Member may
nonetheless proceed with such Additional Opportunity and the Nonacquiring Member
shall have the right to back into participation according to the following
terms:
(i) The Nonacquiring Member shall have the option (the "Back
In Option") to acquire an interest in the entity or business conducting the
Additional Opportunity such that (1) the Nonacquiring Member's sharing ratio in
the Additional Opportunity if acquired or purchased by the Company or the newly
formed entity or business before 150% Payout is zero and (2) its sharing ratio
after 150% Payout is 50%.
(ii) "150% PAYOUT" shall mean 7:00 a.m. local time on the
first day of the calendar month following the earliest calendar month during
which the proceeds from the operations of the Additional Opportunity, after
deducting all costs and expenses associated with the Additional Opportunity
(other than income taxes), equals (A) 150% of the amount invested in the
Additional Opportunity by the Acquiring Member plus (B) interest on the invested
amount at the General Interest Rate plus 3% (compounded quarterly) from the time
each separate portion of such amount was paid.
(iii) The Acquiring Member shall provide the Nonacquiring
Member with quarterly reports of the operations, and returns from, the entity
that owns the Additional Opportunity. The Nonacquiring Member shall have fifteen
days following receipt of written notice that 150% Payout has occurred with
respect to the Additional Opportunity to give written notice the Acquiring
Member of its election to exercise the Back In Option with respect to the
Additional Opportunity. The failure by the Nonacquiring Member to notify the
Acquiring Member within such 15 day period shall be deemed to be an election by
the Nonacquiring Member not to exercise its Back In Option with respect to the
Additional Opportunity. If the Nonacquiring Member elects (or is deemed to
elect) not to exercise any Back In Option with respect to any Additional
Opportunity, such Member shall have no further right, option or contingent
interest whatsoever in the Additional Opportunity and upon the request of the
Acquiring Member will promptly
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execute and deliver to the Acquiring Member a release and assignment in
recordable form acknowledging the same and assigning to the Acquiring Member all
of the Nonacquiring Member's interest in such Additional Opportunity. In the
event a Nonacquiring Member elects to exercise the Back In Option, the Acquiring
Member shall assign to the Nonacquiring Member the applicable portion of its
sharing ratio in the entity or business that owns such Additional Opportunity.
(c) After June 10, 2001 the provisions of Section 6.3 (b) shall no longer be
applicable but Section 6.3 (a) shall remain in effect with the modification that
clause 6.3 (a)(iii) and clause (C) of Section 6.3 (a) shall be deleted so that
an Acquiring Member may proceed with any Additional Opportunity unless within
the notice period set forth in Section 6.3 (a)(B), the Company shall have made
the election to participate in the Additional Opportunity.
3. RATIFICATION. The Agreement, as amended hereby, remains in full
force and effect.
4. COUNTERPARTS. This Amendment may be executed in counterparts, each
of which shall be deemed an original, but all of which shall together constitute
one and the same agreement.
5. GOVERNING LAW. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of Utah.
6. NOTICES. All notices given under the amended Section 6.3 to the
Company and the Nonacquiring Member shall be given by certified or registered
mail.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date and year first above written.
MCNIC PIPELINE & PROCESSING COMPANY
By:
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Xxxxxxx X. Xxxxxxx, Vice President
CROWN ASPHALT PRODUCTS COMPANY
By:
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Xxx Xxxxxx, President
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