1
EXHIBIT 10.19
OPERATING AGREEMENT
FOR
BING BLANKING, L.L.C.
A MICHIGAN LIMITED LIABILITY COMPANY
2
TABLE OF CONTENTS
PAGE #
------
ARTICLE I - ORGANIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Purposes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Duration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Registered Office and Resident Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.6 Intention for Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.7 Minority Business Enterprise Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Competition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Joint Developments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II - DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE III - BOOKS, RECORDS AND ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.1 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.2 Fiscal Year: Accounting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Member's Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
i
3
ARTICLE IV - CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Initial Commitments and Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Additional Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.4 Return of Contributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V - ALLOCATIONS AND DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.2 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Distributions to Pay Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI - MEETINGS OF MEMBERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.1 Voting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6.2 Required Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Action by Written Consent or Telephone Conference. . . . . . . . . . . . . . . . . . . . . . . . 13
6.5 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
6.6 Record Date. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ii
4
ARTICLE VII - MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.1 Management by Managers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.2 Number of Managers; Establishment of Management Committee . . . . . . . . . . . . . . . . . . . 19
7.3 Management Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.4 Functions Reserved to the Management Committee. . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5 Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6 Duties of Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.7 Rights to Obtain Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.8 Compensation of Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.9 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE VIII - EXCULPATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1 Exculpation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.2 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IX - DISPOSITION OF MEMBERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.1 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
9.2 Withdrawal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.3 Admission of Substitute Members. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
9.4 Repurchase of QS' or Shiloh's Membership Interest. . . . . . . . . . . . . . . . . . . . . . . . 35
9.5 Requirements for Effectiveness of Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.6 Prohibited Dispositions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
iii
5
9.7 Absolute Restriction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE X - DISSOLUTION AND WINDING UP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.1 Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.2 No Voluntary Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.3 Methods of Winding Up of Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
10.4 Rights of Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.5 Deemed Distribution and Recontribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
10.6 Alternative Distribution Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
10.7 Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE XI - TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.1 Method of Accounting For Tax Purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.2 Tax Matters Member . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.3 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE XII - MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.1 Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.2 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.3 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
12.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.5 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
iv
6
12.6 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12.8 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.9 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
12.10 Rights of Creditors and Third Parties Under This Agreement . . . . . . . . . . . . . . . . . . 53
12.11 Non-Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.12 Antitrust Policy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
12.13 Settlement of Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
APPENDIX & TAX ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
EXHIBIT A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
EXHIBIT D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
EXHIBIT E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
EXHIBIT F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
v
7
OPERATING AGREEMENT
FOR
BING BLANKING, L.L.C.
A MICHIGAN LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT (the "Agreement") is made and entered into
effective as of the 26th day of November, 1997 by and among Bing Blanking,
L.L.C., a Michigan limited liability company (the "Company"), QS STEEL INC., a
Michigan corporation, ("QS"), SHILOH CORPORATION, an Ohio corporation
("Shiloh") and BING MANAGEMENT II, L.L.C., a Michigan limited liability company
("Bing") (QS, Shiloh and Bing individually a "Member," and collectively,
"Members"), who agree as follows:
ARTICLE I
ORGANIZATION
1.1 Formation. The Company has been organized as a Michigan limited
liability company under and pursuant to the Michigan Limited Liability Company
Act, being Act No. 23, Public Acts of 1993 (the "Act"), by the filing of
Articles of Organization ("Articles") with the Department of Commerce of the
State of Michigan as required by the Act.
8
1.2 Name. The name of the Company shall be Bing Blanking, L.L.C. The
Company may also conduct its business under one or more assumed names.
1.3 Purposes. The purposes of the Company are to engage in any activity
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 the Act.
1.4 Duration. The Company's existence shall be perpetual or until the
earlier dissolution of the Company in accordance with the Act or this
Agreement.
1.5 Registered Office and Resident Agent. The Registered Office and
Resident Agent of the Company shall be as designated in the initial Articles or
any amendment thereof. The Registered Office and/or Resident Agent may be
changed from time to time. Any such change shall be made in accordance with the
Act. If the Resident Agent shall ever resign, the Company shall promptly
appoint a successor.
1.6 Intention for Company. The Members have formed the Company as a
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
2
9
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.
1.7 Minority Business Enterprise Status. The Members have formed the
Company with the specific intention of having the Company certified as a
bonafide Minority Business Enterprise ("MBE") by the Michigan Minority Business
Development Council ("MMBDC") of the National Minority Supplier Development
Council ("NMSDC"). As soon as reasonably practical after formation of the
Company, a MBE certification application will be completed and submitted to the
MMBDC 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 a MBE by the MMBDC no Member will take any actions which would
jeopardize the Company's status as a certified MBE, except as otherwise
specifically permitted in this Agreement.
1.8 Competition. Each Member will have access to the blanking and/or
tolling operations of the Company as a benefit of its ownership in the Company.
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. A Member
shall be entitled to enter into transactions that are competitive with the
business of the Company. Neither the Company nor any Member
3
10
shall have any right by virtue of this Agreement to share or participate in
such other transactions. If the Company generates orders to sell blanks,
independent of the efforts of an individual Member and said order does not
specify the steel supplier or the tooling and fixture supplier, the Company
will offer QS or one of its direct or indirect subsidiaries or affiliates a
right of first refusal to supply the steel to the Company, pursuant to a
certain Supply Agreement referred to in Section 7.8 hereof, and will offer
Shiloh or one of its direct or indirect subsidiaries or affiliates a right of
first refusal to supply all tooling and fixtures and all prototyping and design
work to the Company on terms acceptable to the Company. Any Member may engage
in the business of selling steel blanks or carrying on tolling operations 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
a fiduciary duty to the Company on account of the production and sale of steel
blanks, tolling operations or related activities. Each Member will conduct
business with the Company on an arms length basis and no Member under any
circumstances will interfere with or restrict the operations or management of
the Company unless otherwise specifically permitted in this Agreement.
1.9 Joint Developments. Any and all developments, inventions, patents,
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
4
11
be the property of, and belong to, the Company. If either QS, Shiloh or Bing
desires to use a Joint Development in its own business or operations, or in the
business or operations of any of their subsidiaries and/or affiliates
(including without limitation any subsidiary or affiliate of any one or more of
QS, Shiloh or Bing or any of their subsidiaries and/or affiliates, direct or
indirect) (collectively referred to herein as "Related Entities"), they may do
so without restraint by the Company; provided, however, neither QS, Shiloh nor
Bing may allow third parties, other than Related Entities, to use a Joint
Development unless QS, Shiloh and Bing shall agree to allow the Company to
enter into a license agreement with the third party which provides for a
nonexclusive 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. The
agreement of QS, Shiloh and Bing to such request shall 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 of the Company, the Members and
the Related Entities only, and, following the purchase of the Membership
Interest of the disclosing Member pursuant to Article IX hereof, the Company's
successors and assigns.
5
12
ARTICLE II
DEFINITIONS
For purposes of this Agreement, unless the context clearly indicates
otherwise, (i) all of the capitalized words in this Agreement shall have the
meanings set forth in the text or Appendix and (ii) all non-capitalized words
defined in the Act shall have the meanings set forth therein.
ARTICLE III
BOOKS, RECORDS AND ACCOUNTING
3.1 Books and Records. The Company shall maintain complete and accurate
books and records of the Company's business and affairs as required by the Act
and such books and records shall be kept at the Company's Registered Office.
3.2 Fiscal Year: Accounting. The Company's fiscal year shall begin the
first day of January and shall end on December 31 ("Fiscal Year"). Subject to
the terms of this Agreement, the particular accounting methods and principles
to be followed by the Company shall be selected by the Management Committee.
The Company's method of accounting for depreciation, capital purchases,
expenses and amortization shall be consistent with the procedures and
methodology utilized under GAAP.
6
13
3.3 Reports. The Management Committee shall prepare reports concerning
the financial condition and results of operation 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 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. Any Member may reasonably request additional
substantiating financial information for clarification of such quarterly
reports which will be prepared by the Management Committee.
The books and records of the Company shall be examined as of the close of
each Fiscal Year by Xxxxxx and Xxxxx, P.C. or other independent certified
public accountant selected by the Management Committee, who shall make an
annual certified audit 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 Member's Accounts. Separate Capital Accounts for each Member shall
be maintained by the Company. 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.
7
14
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Commitments and Contributions. By the execution of this
Agreement, the Members hereby agree to make the capital contributions set forth
in the attached Exhibit A, no later than sixty (60) days from the date of this
Agreement (each an "Initial Capital Contribution"). 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 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 Contributions. No Member shall be required to contribute
additional capital to the Company in excess of its Initial Capital Contribution
except in accordance with Section 7.1(b).
4.3 Loans. The Members recognize that on a lease basis, the project
costs, including reasonably necessary equipment, would be approximately
$3,000,000 and that the necessary initial working capital needs of the Company
will be approximately $500,000 and that contributions to be made by the
Members as set forth in Section 4.1 hereof will not be sufficient to fund such
initial project costs and working capital needs.
8
15
The Company is hereby authorized to borrow the funds required in excess of the
initial capital contributions to be made by the Members to finance such initial
project costs and working capital needs as set forth herein. QS shall cause
its parent company, Rouge Industries, Inc. ("Rouge"), to provide any
unconditional guarantees of payment which are required in order to obtain such
additional financing relating to the initial project costs, and to execute in
such regard such forms of guarantee as shall be reasonably requested by the
lending institution providing such financing to the Company for the initial
project costs set forth herein. Bing, Shiloh and QS hereby agree that the
Company will use its best efforts to obtain in any Rouge guarantee of bank debt
incurred by the Company said bank's agreement that upon Rouge's payment in full
to the bank of the Company's obligations to the bank that Rouge shall have full
rights of subrogation and be entitled to an assignment of all rights of the
bank against the Company under the applicable loan documents.
4.4 Return of Contributions. A Member is not entitled to demand the
return of any part of its Capital Contributions or 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.
9
16
ARTICLE V
ALLOCATIONS AND DISTRIBUTIONS
5.1 Allocations. Except as may be required by the By-Laws, Code or this
Agreement, net Profits, 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.
5.2 Distributions. The Company may make distributions to the Members
from time to time. Distributions may be made only after the Management
Committee determines that the Company has sufficient cash on hand which exceeds
the current and the anticipated needs of the Company to fulfill its business
purposes (including needs for operating expenses, technical service expenses,
debt service, acquisitions, reserves and mandatory distributions, if any). All
distributions shall be made to the Members in accordance with their Sharing
Ratios. Distributions shall be in cash, as determined by the Management
Committee. 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, if any, of other Members upon dissolution that are
superior to the rights of the Members receiving the distribution.
10
17
5.3 DISTRIBUTIONS TO PAY TAXES. Notwithstanding Section 5.2 above, the
Company shall, to the extent allowed by the Act, make annual proportional cash
distributions to each Member within ninety (90) days following the conclusion
of each Fiscal Year of the Company equal to forty-four percent (44%) of each
Member's share of the taxable income of the Company. To the maximum extent
possible, periodic distributions shall be made so as to provide each Member
with an amount equal to its estimated tax payment obligations and such periodic
distributions will be reconciled as of the end of the Fiscal Year. 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 of their
affiliates with respect to taxable income of the Company.
ARTICLE VI
MEETINGS OF MEMBERS
6.1 Voting. All Members shall be entitled to vote on any matter
submitted to a vote of the Members. Each Member shall be entitled to a vote
weighted to reflect the proportion of the Member's Sharing Ratio to the total
Sharing Ratios of all Members.
Any vote or action by any Member of the Company will be by such Member's
Board of Directors (or Managers, in the case of Bing) or its Executive
Committee acting on behalf of the Board of Directors; provided, however, that
the Board of Directors (or Managers, in the case of Bing) or the Executive
Committee of any Member may by
11
18
resolution appoint an officer, director, employee, consultant or agent to act
as its proxy to vote or take action on behalf of that Member. Assignees of a
Member are entitled to receive the Member/Assignor's economic interest only and
are not automatically Members and do not have a right to vote unless admitted
as a Member.
6.2 Required Vote. Unless a greater vote is required by the Act or the
Articles, the affirmative vote or consent of a majority of the Sharing Ratios
of all the Members entitled to vote or consent shall be required on any matter
submitted to a vote of the Members.
6.3 Meetings. An annual meeting of Members for the transaction of such
business as may properly come before the meeting shall be held on the 15th day
of March each year (or if that day is a legal holiday, then on the next
succeeding day not a holiday) at 10:00 a.m., at the Company's principal place
of business or at such other time or place as from time to time may be
determined by the Members, provided, however, that the failure to hold an
annual meeting shall not be grounds for dissolution of the Company. Special
meetings of Members for any proper purpose or purposes may be called at any
time by the holders of greater than ten percent (10%) of the Sharing Ratios of
all Members. The Company shall give notice stating the date, time, place and
purposes of any meeting to each Member entitled to vote at the meeting. The
notice shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting. All meetings of Members shall be presided over
by the Chairman of the Management
12
19
Committee. Meetings may be held pursuant to teleconference or conference
telephone call.
6.4 Action by Written Consent or Telephone Conference. Any action
permitted or required to be taken at a meeting of the Members may be taken
without a meeting if a consent in writing, setting forth the action to be
taken, is signed by all the Members. Such consent shall have the same force
and effect as a unanimous vote at a meeting. Members may participate in and
hold a meeting of the Members by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in such meeting shall constitute
attendance and presence in person at such meeting, except when 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.
6.5 Quorum. The presence in person or by proxy of the Members
representing fifty-one percent (51%) of the Sharing Ratios of the Company,
shall constitute a quorum at any meeting of Members.
6.6 Record Date. The officers of the Company may fix a record date for
any lawful purpose, including without limiting the generality of the foregoing,
the determination of Members entitled to (i) receive notice of or to vote at
any meeting, (ii) receive payment of any distribution (subject to any
applicable requirements of the
13
20
Internal Revenue Code of 1986, as amended), (iii) receive or exercise rights of
purchase of or subscription for, or exchange or conversion of, interests,
certificates or other securities, subject to any contract right with respect
thereto, or (iv) participate in the execution of written consents, waivers or
releases. Said record date shall not be more than sixty (60) days preceding
the date of such meeting, the date fixed for the payment of any distribution or
the date fixed for the receipt or the exercise of rights, as the case may be.
If a record date is not fixed, the record date for the determination of Members
who are entitled to notice of, or who are entitled to vote at, a meeting of
Members, shall be the close of business on the date next preceding the day on
which notice is given, or the close of business on the date next preceding the
day on which the meeting is held, as the case may be.
ARTICLE VII
MANAGEMENT
7.1 Management by Managers.
(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 direction of,
Managers acting by and through a
14
21
Management Committee (as defined below). The Management Committee 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 shall have the right to delegate to the officers
of the Company 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.
(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) Establish an annual capital budget for the Company in
excess of One Hundred Fifty Thousand ($150,000.00) Dollars per year;
provided, however, that an initial capital budget of $3,000,000 is
hereby approved;
(iii) Amend or restate the Articles of Organization, the By-Laws
of the Company or this Agreement;
15
22
(iv) Enter into, amend or terminate, other than in accordance
with the terms of such agreement, any agreement between the Company
and any Member of the Company, other than on terms of an Arm's Length
Transaction;
(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;
(vii) Invest in, acquire, merge with or form a legally binding
affiliation or association with another entity;
(viii) Change the nature of the Company's business or the purpose
for which the Company was formed from other than that of
manufacturing, buying, selling and processing steel and steel related
products;
(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;
16
23
(x) Except as otherwise permitted in Section 4.3 hereof, borrow
money or otherwise commit the credit of the Company for Company
activities if such borrowing or commitment of credit requires an
additional guarantee from any Member; provided, however,
notwithstanding anything to the contrary contained in this
subparagraph 7.1(b), only the consent of the Manager(s) of the
Member(s) providing such guarantee shall be required for purposes of
this subparagraph;
(xi) Change the status or certification of the Company as a
Minority Business Enterprise;
(xii) Amend, modify or terminate the Xxxxxx Blanking Technical
Services Contract, or the QS Supply Agreement other than in
accordance with the terms thereof;
(xiii) Appoint the plant manager of the Company; candidates for
plant manager shall be nominated by Bing and submitted to the
Managers not designated by Bing for approval. Provided however, any
plant manager appointed by the Management Committee as provided
herein may be later removed by the Management Committee upon the
vote of a majority of its members;
17
24
(xiv) Make a distribution as provided in Section 5.2 of this
Agreement during the five (5) year period beginning on the effective
date of this Agreement; nothing contained in this subparagraph shall
restrict the making of distributions as provided in Section 5.3
hereof.
In the event that any such action is consummated without the consent of
all Managers, such act shall be null and void and of no legal force or effect
and shall be terminated.
(c) (i) 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, the
Management Committee in a meeting at which a quorum of Managers are
present shall discuss said bankruptcy petition, assignment or
compromise.
(ii) Prior to initiating or settling any litigation for an
amount in excess of One Hundred Thousand Dollars ($100,000.00) and/or
which is likely to affect a significant customer relationship, except
for litigation involving routine employment matters, the Management
Committee in a meeting at which a quorum of Mangers are present shall
discuss the proposed litigation.
18
25
7.2 Number of Managers; Establishment of Management Committee. There
shall be five Managers of the Company. Unless and until this Agreement is
amended by the Members in accordance with Article XII of this Agreement, Shiloh
and QS shall each have the right to appoint one of the five Managers and Bing
shall have the right to appoint three of the five Managers. The following
individuals are hereby appointed as initial Managers of the Company to serve
until their respective successors are duly elected and qualify:
Shiloh Appointee QS Appointee Bing Appointees
Xxxxxxx X. Xxxxxx Xxxxxx X. Xxxx Xxxx Xxxx
Xxxxx X. Xxxxx
Xxxx X. Xxxxx
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 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 Managers,
19
26
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. Bing shall designate from among the members of the
Management Committee one designee to act as Chairman (the "Chairman") of the
Management Committee.
7.3 Management Committee.
(a) Quorum. A majority of the members 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 Members of the Management
Committee are present in person at such meeting. Notwithstanding that a
quorum consisting of less than all of the members 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 members of the Management
Committee (unless a greater number is required under the provisions of
the Operating Agreement of the Company).
(b) Annual Meeting. An annual meeting of the members of the
Management Committee shall be held immediately following the annual
meeting
20
27
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 Meetings. Except as the Management Committee may, by
resolution or by-law, from time-to-time otherwise determine, regular
meetings of the members of the Management Committee shall be held on a
quarterly basis on the 15th day of each March, June, August and November
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
member 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 members of the
Management Committee may be called by the Chairman, the President, any
Vice President, or any two members 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
Michigan, as may be specified in such call.
(e) Notice of Annual or Special Meetings. Notice of the time and
place of each annual or special meeting shall be given to each member of
the Management Committee by the secretary or by the person or persons
calling such
21
28
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 member 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 member of the Management Committee as shown upon the
secretary'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 member of the Management Committee may be reached
for purposes of participation in the meeting as shown upon the
secretary's records and states that the secretary must be notified if a
member 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 member of the Management Committee who shall participate in
such meeting and may be waived, in a writing, by any member of the
Management Committee either before or after such meeting.
(f) Compensation. Unless the members of the Management Committee
unanimously otherwise agree, neither members of the Management Committee
nor the President, 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.
22
29
(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 all of the members of the Management
Committee or members of such committee, as the case may be. Such
consent shall have the same force and effect as a unanimous vote at a
meeting. Members 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 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.
23
30
(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 any officer of the Company
without the specific authorization of the Management Committee:
(a) Engagement of termination of officers of the Company and
designation of compensation for such officers.
(b) Establishment or termination of all banking relationships.
(c) Any other action set forth in this Agreement which requires the
approval of the Management Committee, including all actions specified in
Section 7.1(b) of this Agreement.
7.5 Officers.
(a) The day-to-day operations and management of the Company shall be
exercised by such officers as may annually be appointed from time to time
in
24
31
accordance with this Section 7.5. Subject to Section 7.1(b)(xiii)
hereof, the Management Committee shall appoint, by majority vote of the
members 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, an
Assistant Secretary, and a Treasurer. Any two of such offices, 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 reappointed 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 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
President of the Company shall be responsible for preparing an annual
budget including a detailed salary plan for all officers and associates
of the Company for approval by the Management Committee (the "Annual
Budget"). The officers shall be entitled to such compensation, if any,
as may be approved from time to time by the unanimous determination of
the Management Committee. Any officer may be removed at any time, with
or without cause, by majority vote
25
32
of the members of the Management Committee. Subject to Section
7.1(b)(xiii), any vacancy in any office may be filled by majority vote
of the whole authorized number of members of the Management Committee.
7.6 Duties of Officers.
(a) President. The President shall be the chief executive officer
of the Company and shall exercise supervision over the business of the
Company and over its several officers, subject, however, to the control of
the Management Committee. In the absence of the Chairman, the President
shall preside at meetings of Members and at meetings of the Management
Committee. He shall have authority to sign all certificates for interests
and all deeds, mortgages, bonds, agreements, 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
initial President of the Company shall be Xxxxx X. Xxxxx.
(b) Plant Manager. The Plant Manager shall have general supervision
of the day-to-day 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, subject, however, to the
26
33
control of the President. The duties of the Plant Manager may be
expanded by the President in his sole discretion, subject to the control
of the President.
7.7 Rights to Obtain Information. Each Member shall have the right
to obtain, at such Member's sole cost and expense, during business hours
and upon at least twenty-four hours' notice to the Company, all of the
following:
(a) True and full information regarding the status of the business
and the financial condition of the Company, including access to the
Company's books and records by a representative of the Member;
(b) Promptly after becoming available, a copy of the federal, state
and local income tax returns of the Company for each year;
(c) A current list of the name and last known business, residence or
mailing address of each Member and of each Manager;
(d) A copy of the Articles and all amendments to the Articles;
(e) A copy of this Agreement (including the Bylaws) and all
amendments hereto; and
27
34
(f) True and full information regarding the date on which each
Member became a Member and the amount of cash, and a description and
statement of the agreed value of any contributed property, if any, that
has been contributed by each Member and that each Member has agreed to
contribute in the future.
In making the foregoing information available to Members, the Company may
either provide the Member requesting such information the right to
examine documents in person at the principal office of the Company and to
make copies or extracts of the documents, or provide to such Member true
and accurate copies of documents responsive to such Member's request.
7.8 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. Provided, however, Shiloh or one of its direct or
indirect subsidiaries or affiliates will provide technical expertise services,
specialized engineering services and/or make available specialized equipment
for the benefit of the Company at fair market rates pursuant to the terms and
conditions of a certain Technical Services Contract, a copy of which is
attached hereto as Exhibit "B." In addition, QS or one of its direct or
indirect subsidiaries or affiliates will have a right to first refusal to
supply steel to the Company pursuant to the terms and conditions of a certain
Supply Agreement, a copy of which is attached hereto as Exhibit "C." Finally,
Bing or one of its direct or indirect subsidiaries or affiliates may, in
addition to the officers of the Company set forth in Sections 7.5 and 7.6
hereof, provide management and related services to the Company on an arms
length basis upon the approval of the Management Committee.
28
35
7.9 Employees. In addition to the terms and conditions of the Technical
Services Agreement, it is envisioned that the Company may utilize the services
of additional employees of the Members from time to time. In such cases, the
Company shall reimburse the Member for the cost of salary, payroll taxes and
benefits of such loaned or "seconded" employees, without any markup for
overhead. The Company shall not hire or appoint any outside, independent,
management. The Company shall not hire any manager or otherwise appoint any
officer or employee if such conduct would jeopardize the Company's status as: a
limited liability company analogous to a partnership for taxation and control
purposes; or as a bonafide MBE.
ARTICLE VIII
EXCULPATION OF LIABILITY
8.1 Exculpation of Liability. Anything herein to the contrary
notwithstanding, except as otherwise expressly agreed in writing, a Member
shall not be liable for any debts, liabilities, or obligations of the Company,
whether to the Company, to any of the other Members, or to creditors of the
Company, beyond the Capital Contribution of the Member, together with the
Member's share of the assets and undistributed profits of the Company. In the
event any Member has incurred any debt, liability or obligation prior
29
36
to the organization of the Company that relates to or otherwise affects the
Company, neither the Company nor any other Member shall have any liability or
responsibility for or with respect thereto unless the Company assumes such
debt, liability or obligation pursuant to a written instrument approved by the
Management Committee. No Member shall be obligated to restore a deficit
balance in its Capital Account except as required by law or under this
Agreement.
8.2 Indemnification.
(a) To the maximum extent permitted by law, the Company shall
indemnify and hold harmless all Members, all members of the Management
Committee, the officers, employees and agents of the Company, and the Tax
Matters Partner (each, an "Indemnitee") from and against any and all
losses, liabilities, judgments, fines, settlements, penalties and
expenses, including attorneys' fees, actually and reasonably incurred by
the Indemnitee in connection with any and all claims, demands, actions,
suits, or proceedings, civil, criminal, administrative or investigative,
arising out of or incidental to the business of the Company and in which
the Indemnitee may be involved, as a party or otherwise, by reason of the
fact that the Indemnitee is or was a Member, a member of the Management
Committee, or is or was an officer, employee or agent of the Company.
Such indemnification shall not be provided if the Indemnitee's conduct
constitutes (i) fraud, breach of fiduciary duty or willful misconduct; or
(ii) a breach
30
37
of this Agreement. The termination of any action, suit, or proceeding by
judgment, order, settlement, conviction, or upon a plea of no contest, or
its equivalent, shall not, in and of itself, create a presumption or
otherwise constitute evidence that the Indemnitee acted in a manner
contrary to that specified above.
(b) Expenses incurred by an Indemnitee in defending any claim,
demand, action, suit or proceeding subject to this Section 8.2 may, from
time to time, be advanced by the Company prior to the final disposition
of such claim, demand, action, suit or proceeding upon receipt by the
Company of an undertaking by or on behalf of the Indemnitee to repay such
amount if it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified as authorized in this Section 8.2.
(c) The indemnification provided by this Section 8.2 shall be in
addition to any other rights to which the Indemnitee may be entitled
under any agreement, by action of the Management Committee, as a matter
of law or equity, or otherwise, and shall inure to the benefit of the
successors, assignees, heirs, personal representatives and administrators
of the Indemnitee.
(d) The Company shall purchase and maintain insurance, at the
Company's expense, on behalf of any Indemnitees against any liability
that may be asserted against or expense that may be incurred by an
Indemnitee in connection
31
38
with the activities of the Company regardless of whether the Company would
have the power to indemnify such Indemnitee against such liability under
the provisions of this Agreement.
ARTICLE IX
DISPOSITION OF MEMBERSHIP INTERESTS
9.1 General.
(a) No Member shall, without the prior written consent of the other
Members, sell, assign, transfer, exchange, mortgage, pledge, grant or
dispose of (herein a "Transfer" or any root derivative thereof)
(voluntarily, involuntarily, by operation of law, or otherwise) all or
any part of its Membership Interest in the Company or this Agreement.
Any Transfer or purported Transfer of any Units not made in accordance
with this Article IX shall be null and void.
(b) Notwithstanding the foregoing, in the event of the liquidation
of Bing, Bing may Transfer its Units to the members of Bing, pro rata, in
accordance with the unit ownership of such members; provided, however,
that such members shall acknowledge the obligations under this Agreement,
and such transfers shall not disqualify the Company's status as an MBE.
32
39
(c) Notwithstanding the foregoing, if the Company is required by
law or otherwise unanimously elects through the Management Committee, to
recognize a Transfer that is not authorized by this Agreement, such
Transfer shall not entitle the Assignee to participate in the management
and affairs of the Company or to exercise any rights of a Member. A
Transfer entitles the Assignee to receive, to the extent assigned, only
the distributions to which the assignor would be entitled.
9.2 Withdrawal. Except as set forth in this Agreement or otherwise
agreed in a writing executed by the Members, a Member does not have the right
or power to withdraw from the Company as a Member.
9.3 Admission of Substitute Members.
(a) Upon a Transfer of a Unit by a Member in accordance with Section
9.1 (but not otherwise), the assignor shall have the power to give, and
by transfer of any certificate issued shall be deemed to have given, the
Assignee the right to apply to become a Substitute Member with respect to
the Units acquired, subject to the conditions of and in the manner
permitted under this Agreement. An Assignee of a certificate
representing a Unit shall not be a Substitute Member with respect to the
transferred Units unless and until (i) the instrument of assignment sets
forth the intentions of the assignor that the Assignee succeed to the
assignor's interest as a Substitute Member in his place, (ii) the
assignor and Assignee shall
33
40
have fulfilled all other requirements of this Agreement, (iii) the
Assignee shall have paid all reasonable legal fees and filing costs
incurred by the Company in connection with the Assignee's substitution as
a Member, and (iv) the Members by unanimous vote of the Units held by the
Members other than the transferring Member, shall have approved such
substitution in writing, which approval may be granted or withheld in
each such Member's sole discretion; whereupon the books and records of
the Company shall be modified to reflect the substitution of the
Substitute Member for the transferring Member.
(b) The admission of an Assignee as a Substitute Member with respect
to a transferred Unit shall become effective on the date the Members
other than the transferring Member give their written approval to the
admission and the books and records of the Company have been modified to
reflect such substitution. With respect to any transfer under Section
9.1(b), such approval shall not be unreasonably withheld. Any Member who
Transfers all of the Member's Units with respect to which it had been
admitted as a Member shall cease to be a Member of the Company upon a
Transfer of such Units in accordance with Article IX and the execution of
a counterpart of this Agreement by the transferee (which execution the
transferring Member shall obtain prior to such Transfer) and shall have
no further rights as a Member in or with respect to the Company.
34
41
9.4 Repurchase of QS' or Shiloh's Membership Interest.
(a) Notwithstanding any other provision of this Agreement to the
contrary, upon the occurrence of the fifth (5th) anniversary of the
effective date of this Agreement and at the end of every two (2) years
thereafter (each such date being referred to herein as an "Option Date"),
QS and/or Shiloh (herein referred to as a "Minority Member") shall have
the right to require the Company to repurchase its Membership Interest,
upon sixty (60) days advance notice in writing by such Minority Member to
the Company. Notwithstanding anything to the contrary set forth in this
Section 9.4(a), in the event that a Minority Member exercises its option
as set forth in Section 9.4(a), Bing (or an affiliate of Bing which shall
be referred to as "Bing" for purposes of this Section 9.4) shall have the
option, given by written notice to the Company and to the Minority
Members before the closing of the purchase and sale of such Membership
Interest to purchase all or any part of the Membership Interest of the
applicable Minority Member in lieu of the Company at the same price and
the same terms and conditions as would apply to such purchase by the
Company.
(b) Notwithstanding any other provision of this Agreement to the
contrary, upon the occurrence of the tenth (10th) anniversary of the
effective date of this Agreement and at the end of every two (2) years
thereafter (each such date being referred to herein as an "Option Date"),
the Company shall have the right
35
42
to repurchase all but not less than all of the Membership Interest of
either or both of the Minority Members, upon sixty (60) days advance
notice in writing by the Company to each Minority Member. Notwithstanding
anything to the contrary set forth in this Section 9.4(b), in the event
the Company shall exercise said option pursuant to this Section 9.4(b),
Bing shall have the option, by written notice to the Company and the
Minority Members given before the closing of the purchase and sale of the
Shares, to purchase all or any part of the Shares of subject to such
option in lieu of the Company at the same price and upon the same terms
and conditions as would apply to such purchase by the Company.
(c) The purchase price of a Minority Member's Membership Interest
under Section 9.4(a) above, shall equal the Fair Market Value (as defined
below) of the Company, determined as of the Valuation Date, multiplied by
the Minority Member's Membership Interest (the "Put Purchase Price").
The purchase price of a Minority Member's Membership Interest under
Section 9.4(b) above, shall equal one hundred fifteen percent (115%) of
the Put Purchase Price (the "Call Purchase Price"). The Put Purchase
Price and the Call Purchase Price may each be referred to in this
Agreement as the "Purchase Price." The "Fair Market Value" of the
Company shall mean the enterprise value of the Company as a going
concern, taking into consideration those characteristics of the Company
which an outside investor would evaluate when contemplating an investment
in the Company, including but not limited to the income and cash
generating capabilities
36
43
of the Company and its assets and the risks associated with investing in
the Company, less any discounts for lack of marketability, if appropriate
because the Company is not publicly traded. The Fair Market Value of the
Company shall be determined in accordance with the following:
(i) The Fair Market Value of the Company may be determined by the
unanimous consent of the Members in writing. The parties may enter
such value when and as often as so agreed upon. If the date of the
last determination of value is more than fifteen (15) months prior to
the Valuation Date, or if no determination has been made, then the
Fair Market Value of the Company shall be determined by an appraisal
conducted by the valuation firm of Houlihan, Lokey, Xxxxxx and Xxxxx,
Inc., of Los Angeles, California, whose fees shall be borne by the
Company. If Houlihan, Lokey, Xxxxxx and Zukin, Inc. is not then
available, the Fair Market Value of the Company shall be determined by
a valuation firm of comparable expertise, ability, and qualifications,
selected by mutual and unanimous agreement of the Members, whose fees
shall be borne by the Company. If the Members involved are unable to
agree upon the valuation firm to be appointed within the fifteen (15)
day period after the applicable Option Date, each such Member shall
have the opportunity to appoint, at its own cost, a qualified
valuation firm within five (5) days after the expiration of the
fifteen (15) day period. If either Member fails to appoint
37
44
a valuation firm within this five (5) day period, the other valuation
firm shall unilaterally establish the Fair Market Value of the Company.
If two valuation firms are appointed, they shall establish the Fair
Market Value of the Company in a single written opinion agreed to by
both of them. If the valuation firms so appointed cannot agree on the
Fair Market Value of the Company, they shall appoint a third valuation
firm who shall establish such value in its sole but reasonable opinion.
(ii) If, between the applicable Valuation Date and the
consummation of the sale, (A) the Company has made a distribution to
the Members other than distributions made with respect to income
taxes, or (B) the Company has declared any distributions to be paid to
the Members, other than distributions made with respect to income
taxes as of a date within such period but which are not in fact paid
during such period, then the aggregate of (A) and (B) shall be
deducted from the Fair Market Value of the Company.
(d) Upon an election by a Minority Member to sell its Membership
Interest under Section 9.4(a), the Purchase Price shall be paid in the
following manner: At the closing, the Company or Bing, as the case may
be, shall pay to the Minority Member involved a down payment equal to ten
percent ( 10%) of the Purchase Price in cash or by certified or bank
cashier's check, delivery of a
38
45
promissory note substantially in the form of Exhibit D attached hereto,
which note shall require monthly payments of principal and interest over a
period of sixty (60) months and shall bear interest on the unpaid
principal thereof at a floating rate, adjusted on a monthly basis, which
shall be equal to the prime rate of interest charged by Michigan National
Bank and published as its prime rate from time to time; provided, however,
that such rate shall not be less than six percent (6%) per annum or
greater than fifteen percent (15%) per annum.
The Company or Bing, as the case may be, shall grant a security
interest to the applicable Minority Member in the Membership Interest so
acquired and shall place a certificate representing such Membership
Interest in escrow and the Company or Bing, as the case may be, and the
applicable Minority Member shall execute a Collateral Pledge and Escrow
Agreement substantially in the form of Exhibit E attached hereto.
(e) Upon the election of the Company or Bing, as the case may be, to
purchase a Minority Member's Membership Interest under Section 9.4(b),
the Purchase Price shall be paid in cash by certified check or cashier's
check.
39
46
(f) The following terms and conditions shall also apply:
(i) The closing of any purchase or sale pursuant to this Section
9.4 shall occur within ninety (90) days after the applicable Option
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 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
Company or Bing, as the case may be.
(ii) If the seller does not deliver any certificate evidencing its
Membership Interest or does not execute any document required to
transfer its Membership Interest as required under this Section 9.4,
at the closing, then: (A) The purchaser of such Membership Interest
shall deposit the purchase price by check with the Company's
accountant or attorney as escrow agent, and (B) the Company will
adjust its transfer books to reflect that the Membership Interest of
the Member selling its Membership Interest has been transferred as of
the date of closing.
(iii) Each Member appoints the Company, through its Secretary or
such other officer as the Management Committee may designate, as its
attorney-in-fact to execute and deliver all documents needed to convey
a
40
47
Membership Interest under this Section 9.4. This power of attorney is
coupled with an interest and continues for as long as this Agreement is
in effect.
9.5 Requirements for Effectiveness of Transfer. As a condition to
recognizing the effectiveness of any proposed transfer of Membership Interest,
the remaining Members may require the transferor and/or the proposed transferee
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 a Membership Interest, 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; and
41
48
(e) Assure compliance with any applicable state and federal laws
including securities laws and regulations; and
(f) Confirm or preserve the Company's status as a certified MBE.
9.6 Prohibited Dispositions. Except insofar as may otherwise be
required by law, or permitted by Article IX 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 debts or liabilities of any Member, and any attempt to so alienate or
subject any such Membership Interest shall be null and void.
9.7 Absolute Restriction. Notwithstanding any provision of this
Agreement to the contrary, the disposition of a Membership Interest, (including
any assignment under this Article IX) or any right, title or interest therein
or thereto will not be permitted if the interest sought to be disposed of added
to the total of all other Membership Interest disposed of within the period of
twelve (12) consecutive months ending with the proposed date of the disposition
results in a termination of the Company under Section 708 of the Internal
Revenue Code or if the Membership Interest sought to be disposed of would
jeopardize in the reasonable opinion of the remaining Members the status of the
Company as a certified MBE.
42
49
ARTICLE X
DISSOLUTION AND WINDING UP
10.1 Dissolution. Subject to the provisions herein, the Company shall
be dissolved and its affairs shall be wound up upon the occurrence of any of
the following: (i) the Members unanimously consent in writing to dissolve the
Company; or (ii) any other event causing dissolution of the Company under the
Act. At the election of QS or Shiloh, the Company shall be dissolved and its
affairs wound up if the Company is not certified as a Minority Business
Enterprise ("MBE") by the Michigan Minority Business Development Council
("MMBDC") within 120 days of the date hereof or if the Company ceases to be
certified as an MBE by the MMBDC at any time. Notwithstanding the occurrence
of an event causing the dissolution of the Company under the Act, the Members
not causing the dissolution may, within ninety (90) days after the occurrence
of such event, unanimously consent to continue the business of the Company and
to the admission of additional members, as necessary. If the Company is
continued as provided herein upon the death, withdrawal, bankruptcy, legal
incapacity, expulsion, or dissolution of a Member, the Membership Interest of
such member (the "Terminated Member") or the assignee or personal
representative or estate of the Terminated member (subject to Section 9.3)
shall only be an Assignee and shall have no other rights as a Member of the
Company.
43
50
10.2 No Voluntary Termination. Except as provided herein, no Member
shall have the right voluntarily to dissolve or terminate the Company at any
time.
10.3 Method of Winding Up of Company. Upon the occurrence of any
event under Section 10.1 requiring the dissolution of the Company, the Company
shall continue solely for the purposes of winding up its affairs in an orderly
manner, liquidating its assets, and satisfying the claims of its creditors and
Members. No Member shall take any action that is inconsistent with, or not
necessary or appropriate for, the winding up of the Company's business and
affairs. To the extent not inconsistent with the foregoing, all covenants and
obligations in this Agreement shall continue in full force and effect until
such time as the assets of the Company have been distributed pursuant thereto
and the Articles of Organization have been canceled in accordance with the Act.
(a) The Management Committee shall be responsible for
overseeing the winding up and dissolution of the Company, shall take full
account of the Company's liabilities and assets, and shall cause the
Company's assets to be liquidated as promptly as is consistent with
obtaining the fair market value thereof unless the Members unanimously
consent to distributions of all or any part of the assets in kind.
(b) In the event of the sale of any assets used in the
operation of the Company's business, the Members shall have the right to
meet any such proposed
44
51
sale price for any asset for a period of not more than 10 days from the
receipt of a third party offer to purchase, and to purchase such assets at
the same price and on the same terms and conditions as such third party
offer. If more than one Member desires to meet such price, a controlled
auction shall be held by the Company. Such controlled auction shall be
conducted by an investment banker or firm of attorneys familiar with steel
matters selected by the Management Committee. A reasonable period of time
and reasonable access shall be provided to all Members to permit each
member desiring to do so to prepare and submit a bid upon the terms
specified by such auctioneer. All bids shall be submitted in accordance
with the procedures established by the auctioneer who shall be charged
with the responsibility for an expeditious procedure producing the best
possible price. All expenses of the auction shall be paid out of the
auction proceeds.
(c) Upon the sale or liquidation of the assets of the Company and the
determination of the fair market value of the assets to be distributed,
the Management Committee shall obtain the following: (i) a final
examination, under United States generally accepted auditing standards,
of the Company's financial statements prepared in accordance with the
Untied States generally accepted accounting principles shall be made by
the Company's independent public accountants, (ii) statements setting
forth the Members' Capital Accounts as maintained for financial reporting
purposes under Section 3.4. The Capital
45
52
Accounts subsequent to these adjustments shall be termed the "Final Capital
Accounts."
(d) Thereafter, the Management Committee shall cause the assets or
the proceeds therefrom, to the extent sufficient therefore, to be
applied and distributed in the following order:
(1) To the payment of debts and liabilities of the Company,
including the payment of the expenses of liquidation.
(2) To the establishment of any reserves which the Management
Committee, in its reasonable discretion, may deem reasonably necessary
for any contingent or unforeseen liabilities or obligations of the
Company. Such reserves may, but shall not be required to, be paid
over by the Management Committee to any banking institution or title
company in the States, as escrowee, to be held by it in an interest
bearing account for the purpose of disbursing such reserves in payment
of any of the aforesaid contingencies. At the expiration of such
period as the Membership Committee shall deem advisable, the escrowee,
if any, shall distribute the balance thereafter remaining in the
manner hereinafter provided.
46
53
(3) To each Member, an amount equal to its Final Capital
Account; provided that in the event there are insufficient funds to
return to each Member the full amount of its Final Capital Account,
available funds shall be allocated pro rata among all Members in the
same proportion that each Member's Final Capital Account bears to the
Final Capital Accounts of all Members. No Member who has a negative
Final Capital Account shall have any obligation to the Company or the
other Members for such Member's negative balance.
(4) To the Members in the same proportion that the number of
Units owned by each Member bears to the number of Units owned by all
Members.
(e) The Company shall be dissolved when all property owned by the
Company shall have been disposed of and the net proceeds, after payment
or satisfaction of liabilities to Company creditors, shall have been
distributed to the Members.
10.4 Rights of Members. Except as otherwise provided by this
Agreement, (a) each Member shall look solely to the assets of the Company for
the return of its Capital Contribution and shall have no right or power to
demand or receive property other than
47
54
cash from the Company, and (b) no Member shall have priority over any other
Member as to the return of its Capital Contributions, distributions or
allocations.
10.5 Deemed Distribution and Recontribution. Notwithstanding any
other provisions of Article X of this Agreement, in the event the Company is
"liquidated" within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g) but
no event described in Section 10.1 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.
10.6 Alternative Distribution Methods. In the discretion of the
Management Committee, a pro rata portion of the distributions that would
otherwise be made to the Members pursuant to Article X of this 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
48
55
assets of any such trust shall be distributed to the Members from time to
time, in the reasonable discretion of the Management Committee, 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
Agreement; or
(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.
10.7 Reimbursement of Expenses. Subject to the limitations contained
herein including those set forth in Section 7.3, 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.
49
56
ARTICLE XI
TAXES
11.1 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.
11.2 Tax Matters Member. Bing shall be designated as the "tax matters
partner" of the Company pursuant to Section 6231(a)(7) of the Code. Bing shall
take such actions as are necessary to cause each other Member and Assignee to
become a "notice partner" within the meaning of Section 6223 of the Code. Bing
shall not take any action contemplated by Sections 6223 through 6229 of the
Code without the approval by a unanimous vote of the Members.
11.3 Tax Allocations. All tax allocations shall be made in accordance
with the provisions set forth in Article V and the Appendix.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Terms. Nouns and pronouns will be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the person
or persons, firm or corporation may in the context require.
50
57
12.2 Headings. The headings contained in this Agreement have been
inserted only as a matter of convenience and for reference, and in no way shall
be construed to define, limit or describe the scope or intent of any provision
of this Agreement.
12.3 Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument.
12.4 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and contains all of the agreements among
said parties with respect to the subject matter hereof. This Agreement
supersedes any and all other agreements, either oral or written, between said
parties with respect to the subject matter hereof.
12.5 Severability. The invalidity or unenforceability of any
particular provision of this Agreement shall not affect the other provisions
hereof, and this Agreement shall be construed in all respects as if such
invalid or unenforceable provision were omitted.
12.6 Amendment. This Agreement may be amended or revoked at any time
by a written agreement executed by all of the parties to this Agreement. No
change or modification to this Agreement shall be valid unless in writing and
signed by all of the parties to this Agreement.
51
58
12.7 Notices. Unless a party provides written notice of a new
address, any notice, demand, or any written instrument required or permitted to
be given hereunder, shall be in writing, signed by the party giving or making
the same, and shall be delivered by certified mail, return receipt requested,
by personal hand delivery, or by facsimile with copy by regular U.S. mail to
all parties hereto at their respective addresses hereinafter set forth.
To: Company or Bing:
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
ATTN: Xxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
Copy to:
W. Xxxxxxx Xxxxxxx, Esq.
Xxxxxxx & Xxxxxx, P.C.
0000 Xxxx Xxxxxx, Xxx. 0000
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
To: Shiloh
000 Xxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Copy to:
Xxxxxx X. Xxxxxxx, Esq.
Wegman, Hessler, Xxxxxxxxxx & X'Xxxxx
0000 Xxxxxxxx Xxxxx Xxxxxxxxx
Xxxxx 000
00
00
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
To: QS Steel Inc.
X.X. Xxx 0000
0000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
ATTN: President
Telephone: (000) 000-0000
Fax: (000) 000-0000
Copy to:
Xxxxxx Xxxxxxxxx
Associate General Counsel
Rouge Steel Company
0000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
12.8 Binding Effect. Subject to the provisions of this Agreement
relating to transferability, this Agreement will be binding upon and shall
inure to the benefit of the parties, and their respective distributees, heirs,
successors and permitted assigns.
12.9 Governing Law. This Agreement is made under, and shall be
governed by and construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State.
12.10 Rights of Creditors and Third Parties Under This Agreement. This
Agreement is entered into among the Members for the exclusive benefit of the
Company,
53
60
its Members, and their successors and permitted 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.
12.11 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.
12.12 Antitrust Policy Statement. The Company shall abide by the
terms, conditions and declarations in the Company's Antitrust Policy Statement,
executed by the appropriate representatives of the Members, attached hereto and
incorporated herein as Exhibit F.
12.13 Settlement of Disputes. Notwithstanding any other provision of
this Agreement, any dispute which may arise relating to this Agreement shall be
submitted to binding arbitration by the American Arbitration Association. The
arbitration is to be conducted before a panel of three (3) arbitrators, all of
which have extensive experience in the steel industry, in Southfield, Michigan
in accordance with the commercial arbitration rules, as existing as of the time
the arbitration is commenced, of the American Arbitration Association.
Judgment upon the arbitration award may be entered by any
54
61
court of competent jurisdiction. The arbitrators will be entitled to apportion
the costs of the arbitration proceedings and to award any party its attorney
fees on such grounds as they deem just. The arbitrators will have the
authority to award injunctive relief and specific performance of the respective
obligations of the parties under this Agreement. The arbitrators will not have
authority, under any circumstances, to award punitive or exemplary damages.
The arbitration and any judicial proceedings relating thereto shall be subject
to the Federal Arbitration Act.
IN WITNESS WHEREOF, the parties hereto make and execute this Agreement on
the dates set below their names to be effective on the date first above
written.
BING BLANKING, L.L.C. Members:
SHILOH CORPORATION
/s/ Xxxxx X. Xxxxx /s/ X.X. Xxxxxxxxxx
------------------ ----------------------
By: Xxxxx X. Xxxxx By: X. X. Xxxxxxxxxx
Its: President Its: President
55
62
QS STEEL INC.
/s/ Xxxx X. Xxxxxxxxxxx
-------------------------
By: Xxxx X. Xxxxxxxxxxx
Its: President
BING MANAGEMENT II L.L.C.
/s/ Xxxxx X. Xxxxx
-------------------------
By: Xxxxx X. Xxxxx
Its: President
56