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EXHIBIT 3.10
OPERATING AGREEMENT
OF
KEY PLASTICS TECHNOLOGY, L.L.C.
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TABLE OF CONTENTS
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Article 1 Organization of Company 1
1.1 Formation 1
1.2 Name and Office 1
1.3 Duration 1
1.4 Registered Office and Resident Agent 1
Article 2 Definitions 1
Article 3 Purposes 5
Article 4 Capital Contributions; Borrowings 6
4.1 Initial Contributions of Members 6
4.2 Additional Capital Contributions 6
4.3 Withdrawals 6
4.4 Borrowings 6
4.5 Additional Members 6
Article 5 Management 6
5.1 Powers of the Members 6
5.2 Limitations on Powers 7
5.3 Self Dealing 7
5.4 Standard of Care; Liability 8
5.5 Reimbursement 8
5.6 Delegation of Authority 8
Article 6 Meetings of Members 9
6.1 Voting 9
6.2 Meetings 9
6.3 Consent 9
Article 7 Capital Accounts; Profits and Losses;
Distributions 10
7.1 Capital Accounts 10
7.2 Allocation of Profits and Losses 10
7.3 Distributions 11
7.4 Other Allocations 11
7.5 Share of Excess Nonrecourse Liabilities 14
Article 8 Limitation of Liability; Indemnification 15
8.1 Limitation of Liability 15
8.2 Liability of Member to the Company 15
8.3 Indemnification 15
(i)
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Page
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Article 9 Term of Company 16
9.1 Commencement 16
9.2 Dissolution 16
Article 10 Application of Assets 16
Article 11 Assignability of Interests 17
11.1 Permitted Assignments 17
11.2 Admission of Assignees as Members 17
11.3 Restrictions on Transfers 18
11.4 Section 754 Election 18
Article 12 Buy-Out Provisions Upon Member's Death 19
Article 13 Arbitration 20
Article 14 Investment Representation 20
Article 15 Amendments 20
Article 16 Miscellaneous Provisions 20
16.1 Books of Account; Reports 20
16.2 Bank Accounts and Investment of Funds 20
16.3 Accounting Decisions 21
16.4 Federal Income Tax Elections 21
16.5 Entire Agreement 21
16.6 Notices 21
16.7 Further Execution 22
16.8 Binding Effect 22
16.9 Severability 22
16.10 Captions 22
16.11 Counterparts 22
16.12 Michigan Law to Control 23
Exhibit A A-1
(ii)
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OPERATING AGREEMENT
OF
KEY PLASTICS TECHNOLOGY, L.L.C.
THIS OPERATING AGREEMENT of KEY PLASTICS TECHNOLOGY, L.L.C., a
Michigan limited liability company ("Company"), is made and entered into as of
September 16, 1996 by and among the Company and those persons whose names are
set forth on attached Schedule A and are made a part of this Operating
Agreement and those persons who are later admitted as members (individually,
"Member," and collectively, "Members") who agree as follows:
ARTICLE 1
ORGANIZATION OF COMPANY
1.1 Formation. The Company has been organized as a
Michigan limited liability company pursuant to the provisions of the Act and
this Agreement.
1.2 Name and Office. The name of the Company shall be Key
Plastics Technology, L.L.C., and its office shall be located at 00000 Xxxxxxxx
Xxxx, Xxxxx 000, Xxxx, Xxxxxxxx 00000, or such other place as the Majority
Interest may determine from time to time.
1.3 Duration. The Company shall continue in existence for
the period fixed in the Articles for the duration of the Company or until the
Company shall be sooner dissolved and its affairs wound up in accordance with
the Act or this Agreement.
1.4 Registered Office and Resident Agent. The Company's
initial registered office shall be at the office of its resident agent at 00000
Xxxxxxxx Xxxx, Xxxxx 000, Xxxx, Xxxxxxxx 00000 and the name of its initial
resident agent at such address shall be Xxxxx X. Xxxxxx. The registered
office and resident agent may be changed from time to time in accordance with
the Act. If the resident agent shall ever resign, the Company shall promptly
appoint a successor.
ARTICLE 2
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings:
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The "Act" means the Michigan Limited Liability Company Act being
Act No. 23, Public Acts of 1993, as amended.
"Adjusted Deficit Capital Account Balance" means, with respect
to any Member, the deficit balance, if any, in such Member's Capital Account as
of the end of the relevant Company Fiscal Year, (1) increased by any amounts
which such Member is obligated to restore under Treasury Regulation Section
1.704-1(b)(2)(ii)(c), plus an amount equal to such Member's share of Company
Minimum Gain and such Member's share of Member Nonrecourse Debt Minimum Gain
and (2) decreased by the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6). This definition of Adjusted Capital
Account Deficit is intended to comply with the provisions of Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d) and 1.704-2, and will be interpreted
consistently with those provisions.
"Affiliate" means (i) any person directly or indirectly
controlling, controlled by or under common control with another person, (ii) a
person owning or controlling ten percent (10%) or more of the outstanding
voting securities of such other person, (iii) any officer, director, member or
partner of such person, or (iv) a person who is an officer, director, member,
partner or holder of ten percent (10%) or more of any of the voting interests
of any person described in clauses (i) through (iii) of this sentence.
"Agreement" means this Operating Agreement and amendments
adopted in accordance with this Agreement and the Act.
The "Articles" means the Articles of Organization, including any
restatements or amendments, which are filed with the Michigan Department of
Commerce.
"Book Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(a) the initial Book Value of any asset contributed (or
deemed contributed) to the Company shall be such asset's
gross fair market value at the time of such contribution;
(b) the Book Value of all Company assets shall be adjusted
to equal their respective gross fair market values at the
times specified in Treasury Regulations under Code Section
704(b) if the Company so elects;
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(c) if the Book Value of an asset has been determined
pursuant to clause (a) or (b), such Book Value shall
thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing
Profits and Losses.
"Capital Accounts" shall have the meaning set forth in Section
7.1 of this Agreement.
"Capital Contributions" means the amount of cash, property, or
services contributed or obligated to be contributed to the Company by a Member.
The "Code" means the Internal Revenue Code, as amended.
"Company Minimum Gain" means an amount determined in accordance
with Treasury Regulation Section 1.704-2(d) for partnership minimum gain by
computing, with respect to each nonrecourse liability of the Company (as
defined in Treasury Regulation Section 1.752-1(a)(2)), the amount of gain (of
whatever character), if any, that would be realized by the Company if (in a
taxable transaction) it disposed of property subject to such liability in full
satisfaction thereof, and by then aggregating the amounts so computed.
"Depreciation" means for each Fiscal Year of the Company or
other period, an amount equal to the depreciation, amortization or other cost
recovery deduction allowable under the Code with respect to an asset for such
year or other period, except that if the Book Value of an asset differs from
its adjusted basis for federal income tax purposes at the beginning of such
year or other period, Depreciation shall be an amount which bears the same
ratio to such beginning Book Value as the federal income tax depreciation,
amortization or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis; provided, however, that if the
federal income tax depreciation, amortization or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Book Value using any reasonable method selected by the Majority
Interest.
"Distributable Cash" means, at any time, that portion of the
cash and cash equivalent assets of the Company which, in light of the Company's
then current and foreseeable sources of, and needs for, cash, exceeds the
amount of cash needed by the Company, as determined by the Majority Interest,
to (i) service its debts and obligations in a timely fashion, (ii) maintain
adequate working capital and reserves, and (iii) conduct its business and carry
out its purposes.
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The "Fiscal Year" of the Company, and its taxable year for
Federal income tax purposes, shall be the calendar year.
"Insolvent" means such time as when the value of the Company's
assets become less than the sum of its liabilities or the Company becomes
unable to pay its debts as they become due in the usual course of business.
"Majority Interest" means those Members holding more than 50% of
the Membership Percentages held by the Members.
"Majority Interest of the Remaining Members" means Members
holding more than 50% of the Membership Percentages and Capital Account
Balances of the Members entitled to vote (other than the Member triggering
dissolution under Section 9.2(d)).
"Member Nonrecourse Debt" shall have the meaning, and be
determined in the same manner as, partner nonrecourse debt pursuant to Treasury
Regulation Section 1.704-2(b)(4).
"Member Nonrecourse Debt Minimum Gain" means the amount, with
respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that
would result if such Member Nonrecourse Debt were treated as a nonrecourse
liability of the Company, determined in the same manner as partner nonrecourse
debt minimum gain in accordance with Treasury Regulation Section 1.704-2(i)(3).
"Member Nonrecourse Deductions" shall have the meaning, and be
determined in the same manner as, partner nonrecourse deduction pursuant to
Treasury Regulation Section 1.704-2(i)(2).
"Members" are the persons designated as such in Exhibit A. Any
reference to a Member shall, unless the context clearly requires otherwise,
include a reference to his predecessor and successor (other than a mere
assignee not made a substitute Member) in interest.
"Membership Percentages" means the Members' respective interests
in the Company as set forth in Exhibit A, as amended from time to time.
"Nonrecourse Deductions" shall have the meaning set forth in
Treasury Regulation Section 1.704-2(c).
"Profits and Losses" means the Company's taxable income or loss
for each Fiscal Year (or other period) determined in accordance with the
accounting methods followed by the Company for federal income tax purposes (for
this purpose all items of income, gain, loss or deduction required to be
separately stated pursuant to Code Section 703(a)(1)
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shall be included in taxable income or loss) as determined by the independent
certified public accountants employed by the Company, with the following
adjustments:
(a) any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing Profits
and Losses shall be added to such taxable income or loss:
(b) any expenditures of the Company described in
Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
under Code Section 704(b) and not otherwise taken into account in computing
Profits and Losses shall be subtracted from such taxable income or loss;
(c) in the event the Book Value of any Company
asset is adjusted, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing
Profits or Losses;
(d) any gain or loss resulting from any disposition
of Company property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Book Value of
such property rather than its adjusted tax basis;
(e) in lieu of the depreciation, amortization, and
other cost recovery deductions taken into account in computing taxable income
or loss, there shall be taken into account Depreciation for such Fiscal Year or
other period; and
(f) notwithstanding the foregoing, any items which
are specially allocated pursuant to Section 7.4 shall not be taken into account
in computing Profits and Losses.
"Treasury Regulations" includes proposed, temporary and final
regulations promulgated under the Code and the corresponding sections of any
regulations subsequently issued that amend or supersede such regulations.
All references to statutory provisions shall be deemed to
include reference to corresponding provisions of subsequent law.
ARTICLE 3
PURPOSES
The Company may engage in any lawful business permitted by the
Act or the laws of any jurisdiction in which the Company may do business. The
Company shall have the authority to do all things necessary or convenient to
accomplishment of its purposes and to operate its business,
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including all powers granted by the Act.
ARTICLE 4
CAPITAL CONTRIBUTIONS; BORROWINGS
4.1 Initial Capital Contributions of Members. Each of the
Members has made an initial capital contribution and owns a Membership
Percentage in the Company as set forth on Schedule A, as amended. No interest
shall accrue on any Capital Contribution made to the Company unless otherwise
agreed by the Members in writing or otherwise provided in this Agreement.
4.2 Additional Capital Contributions. Additional Capital
Contributions shall be made by the Members to the Company only upon the
unanimous consent of the Members.
4.3 Withdrawals. No Member shall be entitled to be repaid
any portion of his Capital Contribution or withdraw from the Company except as
provided in this Agreement. A Member who withdraws in violation of this
Agreement shall not be entitled to receive the fair market value of his
interest after the withdrawal but shall only be entitled to distributions he
otherwise would have received as a nonwithdrawing Member.
4.4 Borrowings. The Company may borrow sums for Company
purposes from any source, including any Member, provided that such borrowing is
not prohibited by any applicable law or regulation and is approved as required
under Section 5 of this Agreement.
4.5 Additional Members. No additional Members shall be
admitted to the Company without the unanimous consent of all Members.
ARTICLE 5
MANAGEMENT
5.1 Powers of the Members.
(a) The Company shall be managed by the Members in
proportion to their Membership Percentages. Each Member shall have the power
to do all things appropriate to the accomplishment of the purposes of the
Company, including (but not limited to): (1) entering into any and all
agreements and executing contracts, notes, mortgages and other writings; (2)
paying all Company obligations including construction cost expenditures and
property management fees; (3) purchasing and maintaining insurance on behalf of
the Company and its Members and employees or agents against any liability or
expense asserted against or incurred by the Company or such persons; (4)
transacting the Company's business under an assumed name or name other than its
name as set forth in the Articles and
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filing a Certificate of Assumed Name with the Michigan Department of Commerce;
(5) appointing any Member or other person as agent for service of process on
the Company as required by the law of any state in which the Company transacts
business; (6) commencing, prosecuting or defending any proceeding in the
Company's name; (7) participating with others in partnerships, joint ventures,
and other associations of any kind; and (8) doing such other acts as may
facilitate the Company's business.
(b) Every contract, lease, deed or other instrument
executed by a Member or Members holding a Majority Interest of the Membership
Percentages shall be conclusive evidence, at the time of execution, that this
Company was then in existence, that this Agreement had not theretofore been
terminated or amended in any manner not disclosed in the Articles and that the
execution and delivery of such instrument was duly authorized by the Members.
(c) Xxxxx X. Xxxxxx shall act as "tax matters
Partner" of the Company, as defined in Code Section 6231(a)(7).
5.2 Limitations on Powers. Notwithstanding the foregoing
and any other provision contained in this Agreement to the contrary, no act
shall be taken, sum expended, decision made, obligation incurred or power
exercised by any Member on behalf of the Company except by the consent of all
of the Members with respect to (a) the assignment, transfer, pledge, compromise
or release of any of the claims of or debts due the Company (except upon
payment in full) or arbitrate or consent to the arbitration of any of the
disputes or controversies of the Company; (b) any merger of the Company; (c) a
transaction involving an actual or potential conflict of interest between a
Member and the Company; (d) any change in the character of the business and
affairs of the Company; (e) the commission of any act which would make it
impossible for the Company to carry on its ordinary business and affairs; or
(f) any act that would contravene any provision of the Articles or this
Agreement or the Act.
5.3 Self Dealing. Any Member and any Affiliate of a Member
may deal with the Company, directly or indirectly, as vendor, purchaser,
employee, agent or otherwise. No contract or other act of the Company shall be
voidable or affected in any manner by the fact that a Member or his Affiliate
is directly or indirectly interested in such contract or other act apart from
his interest as a Member, nor shall any Member or his Affiliate be accountable
to the Company or the other Members in respect of any profits directly or
indirectly realized by him by reason of such contract or other act, and such
interested Member shall be eligible to vote or take any
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other action as a Member in respect of such contract or other act as it would
be entitled were he or his Affiliate not interested therein. Notwithstanding
the foregoing provisions of this Section 5.3, (a) any direct or indirect
interest of a Member or Affiliate of a Member in any contract or other act,
other than his interest as a Member, shall be disclosed to all other Members,
(b) such contract or other act shall be approved by a Majority Interest of the
Members unless the same is specifically authorized herein, and (c) the Members
shall not receive or hold any property of the Company as collateral security in
respect of any claim against the Company.
5.4 Standard of Care; Liability. Each Member shall
discharge his management duties in good faith, with the care an ordinarily
prudent person in a like position would exercise under similar circumstances,
and in a manner he reasonably believes to the be in the best interests of the
Company as required by the Act. A Member shall not be liable for monetary
damages to the Company for any breach of any such management duties except for
(i) actions constituting fraud, willful misconduct or gross negligence, (ii)
actions taken by a Member in violation of this Agreement, (iii) the receipt of
a financial benefit to which the Member is not entitled, (iv) voting for or
assenting to a distribution to Members in violation of this Agreement or the
Act, or (v) a knowing violation of the law.
5.5 Reimbursement. Members shall receive no compensation
for managing the affairs of the Company unless approved by an affirmative vote
of a Majority Interest. Members shall be entitled to reimbursement from the
Company of all expenses of the Company reasonably incurred and paid for by such
Member on behalf of the Company.
5.6 Delegation of Authority. The Members, acting by
Majority Interest and by a written instrument, may from time to time delegate
all or any of their powers or duties hereunder to one or more Members. Any
Member may by written instrument delegate any of his powers and duties to any
other Member, in which event any exercise or performance of such powers or
duties by such Member shall be treated as the action of the delegating Member
as well as the acting Member. Any Member making such delegation shall be
permitted to revoke the delegation at any time by written notice to the other
Members and the Company.
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ARTICLE 6
MEETINGS OF MEMBERS
6.1 Voting. All Members shall be entitled to vote on any
matter submitted to a vote of the Members. Unless a greater vote is required
by the Act, the Articles, or this Agreement, the affirmative vote or consent of
a Majority Interest of all the Members entitled to vote or consent on such
matter shall be required.
6.2 Meetings. An annual meeting of Members for the
transaction of such business as may properly come before the Meeting, shall be
held at such place, on such date and at such time as the Majority Interest
shall determine. Special meetings of Members for any proper purpose or
purposes may be called at any time by the holders of at least twenty-five
percent (25%) of the Membership Percentages of all Members. The Company shall
deliver or mail written notice stating the date, time, place and purposes of
any meeting to each Member entitled to vote at the meeting. Such notice shall
be given not less than ten (10) nor more than sixty (60) days before the date
of the meeting. Meetings may be conducted in person or by telephone conference
of the Members upon the consent of the Majority Interest.
6.3 Consent. Any action required or permitted to be taken
at an annual or special meeting of the Members may be taken without a meeting,
without prior notice, and without a vote, if consents in writing, setting forth
the action so taken, are signed by the Members having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all Members entitled to vote on the action were present and
voted. Every written consent shall bear the date and signature of each Member
who signs the consent. Prompt notice of the taking of action without a meeting
by less than unanimous written consent shall be given to all Members who have
not consented in writing to such action. In addition, the Company may give all
the Members written notice of the action, event or agreement and state in the
notice that any Member who does not indicate his disapproval by written notice
to the Company within a specified period of time (not less than 30 days after
mailing of the notice) shall be deemed to have given his consent or approval to
the action or event or to have made the agreement referred to in the notice.
In such event, any Member who does not indicate his disapproval by written
notice to the Company within the time specified shall be deemed to have given
his written consent, approval or agreement.
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ARTICLE 7
CAPITAL ACCOUNTS; PROFITS AND LOSSES; DISTRIBUTIONS
7.1 Capital Accounts. A capital account shall be
maintained for each Member, to which contributions, Profits and any items of
income and gain under Section 7.4 shall be credited and against which
distributions and Losses and any items of deduction and loss under Section 7.4
shall be charged. Capital accounts shall be maintained in accordance with the
accounting principles of Code Section 704 and the regulations thereunder.
7.2 Allocation of Profits and Losses. Except as provided
in Section 7.2(c) and (d) and after giving effect to the special allocations
set forth in Section 7.4, to the extent applicable, Profits and Losses for any
Fiscal Year shall be allocated to the Members:
(a) First, in the case of Profits, to any Member in
an amount up to, but not exceeding, the aggregate amount of Losses previously
allocated to that Member in accordance with the second sentence of Section
7.2(c); and
(b) Second, in the case of either Profits or
Losses, to the Members in accordance with their Membership Percentages.
(c) The Losses allocated pursuant to Section 7.2(b)
shall not exceed the maximum amount of Losses that can be so allocated without
causing any Member to have an Adjusted Capital Account Deficit at the end of
any Fiscal Year. In the event some but not all of the Members would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 7.2(b), the limitation set forth in this Section 7.2(c)
will be applied on a Member by Member basis so as to allocate the maximum
permissible Losses to each Member under Treasury Regulations Section
1.704-1(b)(2)(ii)(d). In the event all Members have Adjusted Capital Account
Deficits, Losses shall be allocated in accordance with Section 7.2(b) hereof.
(d) If there is an addition, withdrawal or
substitution of, or any other change in the interest of, any Member during the
period covered by an allocation, then subject to any agreement between the
persons affected, the Profits and Losses for the period shall be allocated
among the varying interests consistent with the provisions of Code Section
706(d) and any regulations promulgated thereunder. If Code Section 706(d) or
any regulation thereunder allow alternative methods of allocation, the Majority
Interest shall determine, in its
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sole discretion, which alternative methods to use in allocating Profits and
Losses among the varying interests.
7.3 Distributions. (a) The Company shall distribute to the
Members from time to time, as determined by the Majority Interest,
Distributable Cash of the Company. Except as provided in Section 10, all
distributions shall be made to the Members in proportion to their respective
Membership Percentages on the date of the distribution.
(b) No distributions shall be declared and paid
unless, after the distribution is made, the Company would be able to pay its
debts as they become due in the usual course of business and the assets of the
Company are in excess of the sum of: (i) the Company's liabilities, plus (ii)
the amount that would be needed to satisfy the preferential rights of other
Members upon dissolution that are superior to the rights of the Members(s)
receiving the distribution.
7.4 Other Allocations. Notwithstanding the foregoing
provisions of this Section 7 or any other provision of this Agreement, the
following provisions shall apply:
(a) Compliance With Treasury Regulations. It is
anticipated that the Company will be treated as a partnership for federal
income tax purposes and, accordingly, the partnership tax provisions of the
Code shall apply to the Company and its Members. It is the intent of the
Members that each Member's distributive share of income, gain, loss, deduction,
or credit (or item thereof) shall be determined and allocated in accordance
with this Section 7 to the fullest extent permitted by Section 704(b) of the
Code. In order to preserve and protect the determinations and allocations
provided for in this Section 7, the Majority Interest is authorized and
directed to allocate income, gain, loss, deduction, or credit (or item thereof)
arising in any year differently than otherwise provided for in this Section 7
to the extent that allocating income, gain, loss, deduction, or credit (or item
thereof) in the manner provided for in this Section 7 would cause the
determinations and allocations of each Member's distributive share of income,
gain, loss, deduction, or credit (or item thereof) not to be permitted by
Section 704(b) of the Code and Treasury Regulations promulgated thereunder.
Any allocation made pursuant to this Section 7.4 shall be deemed to be a
complete substitute for any allocation otherwise provided for in this Section 7
and no amendment of this Agreement or approval of any Member shall be required.
The terms used in this Section 7 shall have the same meaning as in such
Treasury Regulations.
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(b) Only Required Modifications. In making any
allocation (the "new allocation") under Section 7.4, the Majority Interest is
authorized to act only after having been advised by the Company's accountants
that, under Section 704(b) of the Code and the Treasury Regulations thereunder
(i) the new allocation is necessary, and (ii) the new allocation is the minimum
modification of the allocations otherwise provided for in this Section 7
necessary in order to assure that, either in the then current year or in any
preceding year, each Member's distributive share of income, gain, loss,
deduction, or credit (or item thereof) is determined and allocated in
accordance with this Section 7 to the fullest extent permitted by Section
704(b) of the Code and the Treasury Regulations thereunder.
(c) Company Minimum Gain Chargeback. If there is a
net decrease in Company Minimum Gain during a Company Fiscal Year so that an
allocation is required by Treasury Regulation Section 1.704-2(f), then each
Member shall be specially allocated items of income and gain for such year
(and, if necessary, subsequent years) equal to such Member's share of the net
decrease in Company Minimum Gain as determined by Treasury Regulation Section
1.704-2(g)(2). Such allocations shall be made in a manner and at a time which
will satisfy the requirements of Treasury Regulation Section 1.704-2(f)(1) and
shall be interpreted consistently therewith.
(d) Member Minimum Gain Chargeback. If there is a
net decrease in the Member Nonrecourse Debt Minimum Gain during any Fiscal
Year, any Member who has a share of such Member Nonrecourse Debt Minimum Gain
(as determined in the same manner as partner nonrecourse debt minimum gain
under Treasury Regulation Section 1.704-2(i)(5)) shall be specially allocated
items of income or gain for such year (and, if necessary, subsequent Fiscal
Years) equal to such Member's share of the net decrease in the Member
Nonrecourse Debt Minimum Gain in the manner and to the extent required by
Treasury Regulation Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
(e) Qualified Income Offset. If a Member
unexpectedly receives an adjustment, allocation, or distribution described in
Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), any of which
causes or increases an Adjusted Deficit Capital Account Balance in such
Member's capital account, then he will be specially allocated items of income
and gain in an amount and manner sufficient to eliminate such deficit balance
created or increased by such adjustment, allocation, or distribution as quickly
as possible; provided, however, an allocation pursuant to this Section 7.4(e)
will be made if and only to the extent that such Member would have an Adjusted
Capital Account Deficit after all other
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allocations provided for in Section 7 have been tentatively made as if this
Section 7.4(e) were not in the Agreement.
(f) Gross Income Allocation. If a Member has an
Adjusted Deficit Capital Account Balance at the end of a Company taxable year,
such Member shall be allocated items of income and gain in the amount of such
Adjusted Deficit Capital Account Balance as quickly as possible in order to
eliminate it.
(g) Allocation of Nonrecourse Deductions.
Nonrecourse Deductions shall be allocated among the Members in proportion to
their respective Membership Percentages.
(h) Member Nonrecourse Deductions. Any Member
Nonrecourse Deductions shall be allocated to the Member who bears the economic
risk of loss with respect to the Member Nonrecourse Debt to which such Member
Nonrecourse Deductions are attributable in accordance with Treasury Regulation
Section 1.704-2(i)(1).
(i) Curative Allocations. If the Company is
required by Section 7.4(a),(c),(d),(e),(f),(g), or (h) to make any new
allocation in a manner other than as provided for in this Section 7 without
regard thereto, then the Majority Interest is authorized and directed, insofar
as it is permitted to do so by Section 704(b) of the Code, to allocate income,
gain, loss, deduction, or credit (or item thereof) arising in the current
Fiscal Year (or subsequent Fiscal Years, if necessary) in such manner so as to
bring the proportions of income, gain, loss, deduction, or credit (or item
thereof) allocated to the Members as nearly as possible to the proportion
otherwise contemplated by this Section 7 without regard thereto; provided,
however, that Nonrecourse Deductions shall not be taken into account except to
the extent that there has been a reduction in Company Minimum Gain and Member
Nonrecourse Deductions shall not be taken into account except to the extent
that there has been a reduction in Member Minimum Gain and provided further
that such Nonrecourse Deductions and Member Nonrecourse Deduction shall not in
any event be taken into account to the extent that the Majority Interest
reasonably determines that such allocations are likely to be offset by
subsequent allocations pursuant to Section 7.4(c) or (d).
(j) Advice of Accountants. Allocations made by the
Majority Interest under this Section 7.4 in reliance upon the advice of the
Company's accountants shall be deemed to be made pursuant to any fiduciary
obligation to the Company and the Members.
(k) Section 754 Election. To the extent an
adjustment to the adjusted tax basis of any Company asset
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pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m), to be taken into account in
determining capital accounts, the amount of such adjustment to the capital
accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreased such basis) and such
gain or loss shall be specially allocated to the Members in a manner consistent
with the manner in which their capital accounts are required to be adjusted
pursuant to such Section of the Regulations.
(l) Imputed Interest. If any Member makes a loan
to the Company, or the Company makes a loan to any Member, and interest in
excess of the amount actually payable is imputed under Code Sections 7872, 483,
or 1271 through 1288 or corresponding provisions of subsequent Federal income
tax law, then any item of income or expense attributable to any such imputed
interest shall be allocated solely to the Member who made or received the loan
and shall be credited or charged to his capital account, as appropriate.
(m) Contributed Property. Income, gain, loss or
deduction with respect to any property contributed by a Member shall, solely
for tax purposes, be allocated among the Members, to the extent required by
Code Section 704(c) and the related Treasury Regulations, to take account of
the variation between the adjusted tax basis of such property and its Book
Value at the time of contribution to the Company. If the Book Value of any
Company property is adjusted as provided in Treasury Regulation Section
1.704-1(b)(2)(iv), subsequent allocations of income, gain, loss and deduction
and the Book Value of such property shall be adjusted as provided in Code
Section 704(c) and the related Treasury Regulations. If Code Section 704(c)
and the regulations thereunder allow alternative methods of making such
acquired allocations, the Majority Interest shall determine, in their sole
discretion, which alternative method to use. Allocations under this Section
7.4(m) are solely for purposes of federal, state and local taxes and shall not
affect, or in any way be taken into account in computing, any Member's Capital
Account or share of Profits, Losses, or other items or distributions under any
provision of this Agreement.
7.5 Share of Excess Nonrecourse Liabilities. For purposes
of calculating the Members' shares of "excess nonrecourse liabilities" of the
Company (within the meaning of Treasury Regulation Section 1.752-3(a)(3)), the
Members intend that they be considered as sharing profits of the Company in
proportion to their respective Membership Percentages.
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ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
8.1 Limitation of Liability. Unless otherwise provided by
this Agreement, the Act, or expressly assumed, a person who is a Member shall
not be liable for the acts, debts or liabilities of the Company beyond his
respective Capital Contribution.
8.2 Liability of Member to the Company. A Member who
knowingly receives a distribution made by the Company which is either in
violation of this Agreement or when the Company is Insolvent, is liable to the
Company for the repayment of the distribution.
8.3 Indemnification. Except as otherwise provided in this
Section 8.3, the Company shall indemnify any Member (and may indemnify any
employee or agent of the Company), who was or is a party or is threatened to be
made a party to a threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative, or investigative, and whether formal
or informal (other than an action by or in the right of the Company) by reason
of the fact that such person is or was a Member, employee or agent of the
Company against expenses (including attorneys' fees), judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by such
person in connection with the action, suit or proceeding, if the person acted
in good faith, with the care an ordinarily prudent person in a like position
would exercise under similar circumstances, and in a manner that such person
reasonably believed to be in the best interests of the Company, and with
respect to a criminal action or proceeding, if such person had no reasonable
cause to believe such person's conduct was unlawful. To the extent that a
Member, employee or agent of the Company has been successful on the merits or
otherwise in defense of an action, suit or proceeding referred to in this
Section 8.3, or in defense of any claim, issue or other matter in the action,
suit or proceeding, such person shall be indemnified against actual and
reasonable expenses (including attorneys' fees) incurred by such person in
connection with the action, suit or proceeding and any action, suit or
proceeding brought to enforce the mandatory indemnification provided herein.
Any indemnification permitted under this Section 8.3 (unless ordered by a
court) shall be made by the Company only as authorized in the specific case
upon a determination that the indemnification is proper under the circumstances
because the person to indemnify has met the applicable standard of conduct and
upon an evaluation of the reasonableness of expenses and amount paid in
settlement. This determination and evaluation shall be made by the Majority
Interest of the Members who are not parties or threatened to be made parties to
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the action, suit or proceeding. Notwithstanding anything in this Section 8.3
to the contrary, no indemnification shall be provided to any Member, employee
or agent of the Company for or in connection with the receipt of a financial
benefit to which such person is not entitled, voting for or assenting to a
distribution to Members in violation of this Agreement or Act, or a knowing
violation of law.
ARTICLE 9
TERM OF COMPANY
9.1 Commencement. The term of the Company began on the
date the Articles of Organization were filed with the Michigan Department of
Commerce and became effective under the Act, April 15, 1996.
9.2 Dissolution. The Company shall be dissolved and its
affairs be wound up upon the occurrence of any of the following events:
(a) December 31, 2025;
(b) The sale or other disposition of substantially
all of the assets of the Company;
(c) By the written consent of Members holding at
least 75% of the Membership Percentages in the Company;
(d) The death, withdrawal, expulsion, bankruptcy,
or dissolution of a Member or the occurrence of any other event that terminates
the continued membership of a Member in the Company; provided, however, that
the Company's existence shall not terminate if within 90 days after such event,
a Majority Interest of the Remaining Members elect to reconstitute and continue
the business of the Company and to the admission of one or more Members as
necessary; or
(e) Upon entry of a decree of judicial dissolution.
ARTICLE 10
APPLICATION OF ASSETS
Upon dissolution of the Company, the Company shall cease
carrying on its business and affairs and shall commence winding up of the
Company's business and affairs and complete the winding up as soon as
practicable. The Company affairs shall be concluded by a Member or Members
selected in writing by the Majority Interest. The assets of the Company may be
liquidated or distributed in kind, as determined by the Majority Interest, and
the same shall first be applied to the
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payment of, or to a reserve for the payment of Company liabilities (including
such provision for contingent or unforeseen liabilities as the Majority
Interest deems appropriate) and then to the Members in accordance with their
respective positive Capital Accounts after allocations pursuant to Sections 7.2
and 7.4 for the current Fiscal Year. If Company assets are distributed in
kind, the assets so distributed shall be valued at their current fair market
values and the unrealized appreciation or depreciation in value of the assets
shall be allocated to the Members' Capital Accounts in the manner described in
Section 7.2 and 7.4 as if such assets had been sold, and such assets shall then
be distributed to the Members in accordance with their respective positive
Capital Accounts as so adjusted. To the extent that Company assets cannot
either be sold without undue loss or readily divided for distribution in kind
to the Members, then the Company may, as determined by the Majority Interest,
convey those assets to a trust or other suitable holding entity established for
the benefit of the Members in order to permit the assets to be sold without
undue loss and the proceeds thereof distributed to the Members at a future
date. The legal form of the holding entity, the identity of the trustee or
other fiduciary, and the terms of its governing instrument shall be determined
by the Majority Interest.
ARTICLE 11
ASSIGNABILITY OF INTERESTS
11.1 Permitted Assignments. Subject to the provisions of
Section 11, a Member may assign his interest in the Company in whole or part.
Such assignment shall not of itself substitute the assignee as a Member or
entitle the assignee to participate in the management of the Company. Such
assignee is only entitled to receive, to the extent assigned, the distributions
the assigning Member would otherwise be entitled to. Unless otherwise
provided, the assignor shall remain a Member liable for payment of any
remaining installments of Capital Contributions due with respect to the
interest assigned. No assignment of a Company interest shall be effective with
respect to the Company until written notice is given to the Company.
11.2 Admission of Assignees as Members. Except as provided
in Sections 11.3 and 12.1, an assignee shall be admitted as a Member only upon
the unanimous written consent of all the Members. As a condition of such
consent, the Members may require a substitute Member to comply with the
following requirements: (i) the assignment instrument being in form and
substance satisfactory to the Majority Interest and the Company's counsel; (ii)
the assignor and assignee named therein having executed and acknowledged such
other instrument or
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instruments as the Majority Interest may deem necessary or desirable to
effectuate such admission; (iii) the assignee having accepted and adopted all
of the terms and provisions of the Agreement, as the same may have been
amended, as if the assignee were a party who joined in the execution of this
Agreement; and (iv) such assignee having paid or acknowledged an obligation to
pay, as the Majority Interest may determine, all reasonable expenses (including
attorneys' fees) connected with such admission. If admitted, the substitute
Member has, to the extent assigned, all of the rights and powers, and is
subject to all the restrictions and liabilities of a Member.
11.3 Restrictions on Transfers. Notwithstanding the other
provisions of this Section 11, no Member shall sell, assign, transfer,
exchange, mortgage, pledge, grant, hypothecate, or otherwise dispose of any
interest in the Company except in compliance with Section 11.3. No Member
shall dispose of his interest in Company without the prior written consent of
all the Members (1) if the effect of the assignment would be to terminate the
Company within the meaning of Code Section 708(b), or (2) without an opinion of
counsel in form and substance satisfactory to counsel for the Company that
registration is not required under the Securities Act of 1933 and applicable
state law. In no event shall any Member assign his interest in the Company if
such assignment would violate any applicable state or Federal securities law.
The Members acknowledge that their interests in the Company have not been
registered under the Michigan Uniform Securities Act and agree that such
interests will not be transferred without registration under said Act or
exemption therefrom. Any attempted disposition of a Member's interest in the
Company in violation of Section 11 shall be null and void ab initio.
11.4 Section 754 Election. In the event of the transfer of
a Member's interest in the Company by sale or exchange, or upon the death of a
Member, the Company, if the person acquiring such interest so requests, shall
elect pursuant to Code Section 754, to adjust the basis of the Company
property. Each Member hereby agrees to provide the Company with all
information necessary to give effect to such election. The transferee shall
reimburse the Company for any reasonable costs incurred as a result of such
election, as determined by the Majority Interest.
ARTICLE 12
BUY-OUT PROVISION UPON MEMBER'S DEATH
(a) If a Member dies (the "Deceased Member"), the Company
shall have an option to acquire not less than all of the Deceased Member's
interest in the Company ("Company Interest"). The option shall be
exercisable by written notice to the Deceased Member's personal representative
and the
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successors in interest to the Deceased Member, collectively the "Selling
Members", at any time within sixty (60) days after death of the Deceased Member
or the appointment of personal representative, whichever is later ("Notice to
Purchase"). If the option is exercised, the Deceased Member's Company Interest
shall be purchased by the Company. The Company shall purchase the Deceased
Member's Company Interest for (i) an amount agreed upon by the parties within
30 days from the date of the Notice to Purchase, or if they cannot agree, then
(ii) an amount equal to the Net Equity of the Deceased Member's Company
Interest as defined in Section 12(b).
(b) The Net Equity of the Deceased Member's Company
Interest shall be the amount that would be distributed to the Deceased Member
in liquidation of the Company pursuant to Section 10 if (i) all of the
Company's assets were sold at their book value, (ii) the Company paid its
accrued, but unpaid, liabilities and establish reserves for reasonably
anticipated contingent and unknown liabilities, and (iii) the Company
distributed the remaining proceeds to the Members in liquidation, as of the
date of the Notice to Purchase.
(c) The closing for the purchase of the Deceased Member's
Company Interest shall take place within 20 days after the purchase price has
been finally agreed upon or the Net Equity determined. At the closing, the
Selling Members shall execute and deliver such instruments as the Company shall
reasonably require to vest in the Company the interest of the Selling Members
in and to the Deceased Member's Company Interest. Upon delivery of such
instruments, the Company, at its election, shall pay to each Selling Member
their share of the purchase price either (i) in cash or by certified or bank
check in one lump sum, or (ii) in seven equal annual installments. The lump
sum or the first installment shall be paid at the closing and any remaining
payments evidenced by a promissory note bearing interest at the Applicable
Federal Rate at the closing date determined under Section 1274 of the Internal
Revenue Code to avoid the imputed interest rules. However, if the Company is
the beneficiary of any insurance policy on the life of the Deceased Member, the
net proceeds of such policy received by the Company shall, to the extent of any
unpaid purchase price and after reduction for any other amount paid upon
closing, be applied in full as a payment when received. The note shall be
secured by the Company's assets (subordinate to any existing or future bank
debt) and evidenced by a recorded security interest. The note shall permit
prepayment at any time without penalty and shall provide for immediate payment
of the balance due on default in payment of principal or interest after 10 days
written notice of default. The Company also shall agree in writing to defend,
indemnify and hold harmless the Selling Members to the extent that they have
any direct or indirect liability for the debts
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or other obligations of the Company.
(d) If the Company does not purchase the Deceased Member's
Company Interest, the Deceased Member's estate or successors in interest shall
succeed to the Deceased Member's Company Interest, but such interest in the
Company shall remain subject to all of the provisions of this Agreement.
ARTICLE 13
ARBITRATION
Any disputes arising out of this Agreement which cannot be
resolved by the Members themselves or pursuant to the terms of this Agreement
shall be submitted to arbitration in accordance with the rules of the American
Arbitration Association, and judgment may be entered upon the award of the
arbitrators in a court of competent jurisdiction.
ARTICLE 14
INVESTMENT REPRESENTATION
Each Member represents and warrants to each other and to the
Company he is acquiring his respective interest in the Company for his own
personal account for investment, and without a view to transferring, reselling,
or distributing such interest. In addition, no Member shall sell or dispose of
his interest in the Company in a manner that violates any Federal or state
securities laws. Each Member shall indemnify and hold the Company harmless
from and against all liability, costs and expenses, including reasonable
attorneys' fees, incurred by the Company or the Members, as a result of a
breach of the representations and warranties made in this Section 14 by such
Member.
ARTICLE 15
AMENDMENTS
This Agreement may be amended only by written agreement of all
the Members; provided, however, that this Agreement may be amended by the
Majority Interest to the extent necessary to permit the allocations and
distributions contained in this Agreement to be sustained under existing or
future Federal income tax laws and regulations.
ARTICLE 16
MISCELLANEOUS PROVISIONS
16.1 Books of Account; Reports. (a) The Company shall keep
true and complete books of account and records of all Company's business and
affairs as required by the Act. The books of account and records shall be kept
at the principal
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office of the Company. The Company shall maintain at such office (i) a list of
names and addresses of all Members; (ii) a copy of the Articles together with
executed copies of all powers of attorney pursuant to which the Articles have
been executed; (iii) copies of the Company's Federal, state and local income
tax returns and reports for the three most recent years; (iv) copies of the
Company's current Agreement and (v) copies of the financial statements of the
Company for the three most recent years. Such Company records shall be
available to any Member or his designated representative during ordinary
business hours at the reasonable request and expense of such Member.
(b) The Company will use its best efforts to
furnish, or cause to be furnished, the following items on the dates indicated:
(1) an annual report consisting of an income statement
for the prior year and a balance sheet as of the year ended -
annually.
(2) Member information tax returns (Schedule K-1) -
March 15.
16.2 Bank Accounts and Investment of Funds. All funds of the
Company shall be deposited in its name in such checking accounts, savings
accounts, time deposits, or certificates of deposit or shall be invested in
such other manner, as shall be designated by the Majority Interest from time to
time. Withdrawals shall be made upon such signature or signatures as the
Majority Interest may designate.
16.3 Accounting Decisions. All decisions as to accounting
matters, except as specifically provided to the contrary herein, shall be made
by the Majority Interest in accordance with generally accepted accounting
principles consistently applied. Such decisions shall be acceptable to the
accountants retained by the Company, and the Majority Interest may rely upon
the advice of the accountants as to whether such decisions are in accordance
with generally accepted accounting principles.
16.4 Federal Income Tax Elections. The Company shall, to the
extent permitted by applicable law and regulations and upon obtaining any
necessary approval of the Commissioner of Internal Revenue, elect to use such
methods of depreciation, and make all other Federal income tax elections in
such manner, as the Majority Interest determine to be most favorable to the
Members. The Majority Interest may rely upon the advice of the accountants
retained by the Company as to the availability and effect of all such
elections.
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16.5 Entire Agreement. This Agreement constitutes the
entire Agreement between the parties and may be modified only as provided
herein. No representations or oral or implied agreements have been made by any
party hereto or his agent, and no party to this Agreement relies upon any
representation or agreement not set forth in it. This Agreement supersedes any
and all other agreements, either oral or written, by and among the Company and
its Members.
16.6 Notices. All notices or other communications required
or permitted hereunder shall be in writing and shall be deemed to have been
duly given if (i) physically delivered, telephonically transmitted by
telecopier or other similar means, (ii) one (1) day after having been delivered
to Federal Express or other delivery courier for next day delivery, with proof
of delivery to the recipient received by the courier in the form of a signature
of recipient, or (iii) three (3) days after having been deposited in the United
States Mail, as certified mail with return receipt requested and with postage
prepaid, addressed to the Members at the addresses listed in Exhibit A. The
addresses and other information so indicated for any Member may be changed by a
Member by written notice to the Company.
16.7 Further Execution. Upon request of the Company from
time to time, the Members shall execute and swear to or acknowledge any amended
Articles and any other writing which may be required by any rule or law or
which may be appropriate to the effecting of any action by or on behalf of the
Company or the Members which has been taken in accordance with the provisions
of this Agreement.
16.8 Binding Effect. This Agreement shall be binding upon
and shall inure to the benefit of the parties, their successors and permitted
assigns. None of the provisions of this Agreement shall be construed as for
the benefit of or as enforceable by any creditor of the Company or the Members
or any other person not a party to this Agreement.
16.9 Severability. The invalidity or unenforceability of
any provision of this Agreement in a particular respect shall not affect the
validity and enforceability of any other provision of this Agreement or of the
same provision in any other respect.
16.10 Captions. All captions are for convenience only, do not
form a substantive part of this Agreement and shall not restrict or enlarge any
substantive provisions of this Agreement.
16.11 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
shall constitute one instrument. The
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Company shall have custody of counterparts executed in the aggregate by all
Members.
16.12 Michigan Law to Control. The validity and interpretation
of, and the sufficiency of performance under, this Agreement shall be governed
by Michigan law.
The parties have executed this Agreement to be effective on the
date first above written.
SEG:4060
MEMBERS:
KEY PLASTICS, INC.
By: Xxxx X. Xxxx
----------------------------
Its: Treasurer
------------------------
Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx
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KEY PLASTICS TECHNOLOGY, L.L.C.
EXHIBIT A
Initial Capital Membership
Name and Address Contributions Percentages
---------------- ---------------- -----------
Members
-------
Key Plastics, Inc. $ 990 99%
00000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxx, Xxxxxxxx 00000
Xxxxx X. Xxxxxx 10 1%
------- --
00000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxx, Xxxxxxxx 00000
Totals $ 1,000 100%
======= ===
A-1
