AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
▇▇▇▇▇ BROTHERS INDUSTRIES, LLC
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ▇▇▇▇▇
BROTHERS INDUSTRIES, LLC (the "Company") is made and entered into as of May 1,
1999, by and between the Members listed on Schedule 1 hereto, as an amendment
and restatement in its entirety of that certain Limited Liability Company
Agreement of ▇▇▇▇▇ Brothers Industries, LLC, entered into as of December 28,
1998 (the "Initial Agreement"), by and between ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and KBI.
WHEREAS, for tax purposes it is intended that the Company shall
continue to be classified as a "partnership," and not an "association" taxable
as a "corporation," as those terms are defined in Section 7701 of the Code (as
defined below) and the applicable Treasury Regulations (as defined below)
promulgated thereunder.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein, intending to be legally bound, the parties to this Agreement hereby
agree that the Company shall be structured and operate as follows:
ARTICLE I.
DEFINITIONS
Unless the context otherwise requires, the terms defined in this
Article I shall, for the purposes of this Agreement, have the meanings herein
specified.
"ADDITIONAL CAPITAL CONTRIBUTIONS" shall mean for each Member, such
Member's additional capital contributions to the Company pursuant to Section 4.3
or Section 8.4.
"AFFILIATE" shall mean with respect to any Person, another Person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with such Person.
"AGREEMENT" shall mean this Amended and Restated Limited Liability
Company Agreement of the Company, as amended, modified, supplemented or restated
from time to time in accordance with the terms hereof.
"BMHC" shall mean Building Materials Holding Corporation, a Delaware
corporation.
"BMHC FRAMING" shall mean BMHC Framing, Inc., a Delaware corporation
and a wholly-owned subsidiary of BMHC, and any person to whom BMHC Framing may
Transfer Interests in accordance with this Agreement.
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"BMHC FRAMING'S INITIAL CONTRIBUTION" shall mean a deemed contribution
to the Company in an amount equal to [$Redacted].
"BMHC MANAGER DESIGNATION" shall have the meaning set forth in Section
6.1.
"BMHC MEMBERS" shall mean BMHC Framing and any Person to whom BMHC
Framing may Transfer Interests in accordance with this Agreement.
"BMHC'S NET WORTH ADJUSTMENT" shall mean 49% of the Net Worth
Adjustment.
"CAPITAL ACCOUNT" shall mean, with respect to any Member, the account
maintained for such Member in accordance with the provisions of Article V
hereof.
"CAPITAL CONTRIBUTION" shall mean, with respect to any Member, the
aggregate amount of money and the initial Gross Asset Value of any property
(other than money) contributed to the Company pursuant to Sections 4.1 and 4.3
hereof (net of liabilities secured by such contributed property that the Company
is considered to assume or take subject to under Code Section 752) with respect
to such Member's Interest.
"CERTIFICATE" shall mean the Certificate of Formation of the Company
filed by an authorized Person on behalf of the Company with the office of the
Secretary of State of the State of Delaware pursuant to the Delaware Act on
December 28, 1998, and any and all amendments thereto and restatements thereof
similarly filed.
"CHANGE OF CONTROL TRANSACTION" shall mean a transaction in which all
the business, Interests or assets of the Company are sold or otherwise
transferred to a party that is not an Affiliate of any Member or part of a group
(as defined in Section 13(d)(3) of the Exchange Act) including KBI or BMHC
Framing. A Change of Control Transaction may take the form of a sale of all of
the outstanding Interests of the Company, a merger or consolidation in which the
Members of the Company before the transaction do not own a majority of the
outstanding voting stock or other voting rights of the combined entity, a sale
of all or substantially all the assets of the Company, or the dissolution or
liquidation of the Company.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from
time to time, or any corresponding federal tax statute enacted after the date of
this Agreement. A reference to a specific section of the Code refers not only to
such specific section but also to any corresponding provision of any federal tax
statute enacted after the date of this Agreement, as such specific section or
corresponding provision is in effect on the date of application of the
provisions of this Agreement containing such reference.
"CONSENT OF THE MEMBERS COMMITTEE" shall mean the unanimous approval,
authorization or ratification of the Members Committee, which approval,
authorization or ratification: (a) is duly given pursuant to the provisions of
Article VII of this Agreement, and (b) may be withheld for any reason in the
sole and absolute discretion of any Member participating on the Members
Committee.
Pursuant to a request for confidential treatment, selected information in this
document has been omitted and separately filed with the Securities and Exchange
Commission.
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"CONSENT OF THE MEMBERS" shall mean the vote or written consent of the
holders of a majority of the Interests eligible to vote upon a specific matter.
"CONTRIBUTION ACCOUNT" shall mean a single contribution account for
each Member. A Member's Contribution Account shall be equal to a Member's total
capital contributions and deemed capital contributions to the Company. With
respect to KBI, KBI's Contribution Account shall be equal to the sum of: (i)
KBI's Initial Contribution, (ii) KBI's Additional Capital Contributions
(excluding KBI's deemed capital contributions pursuant to Section 8.4, but
including 51% of the amount of BMHC Framing's contribution to the Company
pursuant to Section 6.1 of the Securities Purchase Agreement) and (iii) KBI's
Net Worth Adjustment. With respect to BMHC Framing, BMHC Framing's Contribution
Account shall be equal to the sum of (i) BMHC Framing's Initial Contribution,
(ii) BMHC Framing's Additional Capital Contributions (provided, however, BMHC
Framing's Contribution Account shall be increased by only 49% of the amount of
BMHC Framing's contribution to the Company pursuant to Section 6.1 of the
Securities Purchase Agreement.), and (iii) BMHC's Net Worth Adjustment. A
Member's unrecovered Contribution Account ("Unrecovered Contribution Account")
shall be equal to the Member's Contribution Account less the aggregate
distributions to such Member pursuant to Section 5.6A(a).
"DCP" shall have the meaning given such term in Section 8.4(b).
"DCP BONUSES" shall have the meaning given such term in Section 8.4(b).
"DELAWARE ACT" shall mean the Delaware Limited Liability Company Act, 6
Del. C. Section 18-101, ET SEQ., as amended from time to time.
"DISTRIBUTABLE CASH" shall mean all cash derived from the ordinary
business operations of the Company without reduction for any noncash charges,
but less cash needed to pay current operating expenses and to pay or establish
reasonable and prudent reserves for future expenses, debt payments, and capital
expenditures as determined by the Managing Member consistent with the annual
business plan of the Company. Distributable cash shall not include Net Cash From
Sales or Refinancings.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"FISCAL YEAR" shall mean (a) the period commencing upon the formation
of the Company and ending on December 31, 1998, (b) any subsequent twelve (12)
month period commencing on January 1 and ending on December 31, or (c) any
portion of the period described in clause (b) of this sentence for which the
Company is required to allocate Net Profits, Net Losses and other items of
Company income, gain, loss or deduction pursuant to Article V hereof.
"GROSS ASSET VALUE" shall mean, with respect to any asset, such asset's
adjusted basis for federal income tax purposes, except as follows:
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(a) The initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross fair market value of
such asset, as determined by the Managing Member in good faith and set forth in
a certificate signed by an officer thereof and delivered to each of the other
Members;
(b) The Gross Asset Value of all Company assets shall be
adjusted to equal their respective gross fair market values, as determined by
the Managing Member in good faith and set forth in a certificate signed by an
officer thereof and delivered to each of the other Members, as of the following
times: (i) the distribution by the Company to a Member of more than a DE MINIMIS
amount of Company assets as consideration for the exchange or surrender of such
Member's Interest; (ii) the contribution to the Company by a Member of more than
a DE MINIMIS amount of assets in exchange for an Interest; and (iii) the
liquidation of the Company within the meaning of Treasury Regulation Section
1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clause (i)
or (ii) of this sentence shall be made only if the Managing Member reasonably
determines that such adjustments are necessary or appropriate to reflect the
relative economic interests of the Members in the Company;
(c) The Gross Asset Value of any Company asset
distributed to any Member shall be the gross fair market value of such asset on
the date of distribution, as determined by the Managing Member in good faith and
set forth in a certificate signed by an officer thereof and delivered to each of
the other Members; and
(d) The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m).
"HSR ACT" shall mean the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended.
"INTEREST" of any Member shall mean a limited liability company
interest in the Company which represents such Member's rights and interests
under, and obligations to comply with the terms of, this Agreement, including
the Sharing Ratios attributable to such Interest and such Member's share of the
Net Profits and Net Losses of the Company and a Member's right to receive
distributions of the Company's assets in accordance with the provisions of this
Agreement and the Delaware Act.
"KBI" shall mean ▇▇▇▇▇ Brothers, Inc., an Arizona corporation;
"KBI'S INITIAL CONTRIBUTION" shall mean a deemed contribution to the
Company in an amount equal to [$Redacted].
"KBI MEMBERS" shall mean KBI and any Person to whom KBI may Transfer
Interests in accordance with this Agreement.
Pursuant to a request for confidential treatment, selected information in this
document has been omitted and separately filed with the Securities and Exchange
Commission.
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"KBI'S NET WORTH ADJUSTMENT" shall mean 51% of the Net Worth
Adjustment.
"LIQUIDATOR" shall have the meaning given to such term in Section 10.2.
"MANAGING MEMBER" shall have the meaning given to such term in Section
6.1.
"MEMBERS" shall mean all of the parties to this Agreement and any
Persons who may from time to time be admitted as such in accordance with the
provisions of this Agreement.
"MEMBER ACCEPTANCE" shall have the meaning given to such term in
Section 9.3(b).
"MEMBERS COMMITTEE" shall mean a committee consisting of one
representative selected by KBI and one representative selected by BMHC Framing.
"NET CASH FROM SALES OR REFINANCINGS" shall mean the net cash proceeds
from all sales, other dispositions and refinancings of Company assets other than
in the ordinary course of business, less any portion thereof used to establish
reasonable reserves, as determined by the Managing Member. "Net Cash From Sales
or Refinancings" shall include all principal and interest payments with respect
to any note or other obligation received by the Company in connection with the
sale or other disposition of Company assets other than in the ordinary course of
business.
"NET PROFITS" AND "NET LOSSES" shall mean, for each Fiscal Year or
other period, an amount equal to the Company's taxable income or loss for such
year or period, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), 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 Net Profits or Net
Losses pursuant to this definition of "Net Profits" and "Net 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
pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Net Profits or Net Losses pursuant to this
Section, shall be subtracted from such taxable income or added to such taxable
loss;
(c) In the event the Gross Asset Value of any Company
asset is adjusted pursuant to subsections (b), (c) or (d) of the definition
thereof, the amount of such adjustment shall be taken into account as gain or
loss from the disposition of such asset for purposes of computing Net Profits or
Net Losses;
(d) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by
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reference to the Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its Gross Asset Value;
(e) In lieu of the depreciation, amortization and other
cost recovery deductions taken into account in computing such taxable income or
loss, the Company shall compute such deductions based on the Gross Asset Value
of a property; and
(f) Any items specially allocated pursuant to Section
5.10 and Section 8.4(d)(i) shall not be taken into account,
"NET WORTH ADJUSTMENT" shall mean an amount determined pursuant to
Section 1.23 and Section 5.2 of the Securities Purchase Agreement, divided by
.49.
"NOTICE OF OFFER" shall have the meaning given such term in Section
9.3(a).
"NOTICE RECEIPT DATE " shall have the meaning given such term in
Section 8.1.
"OFFERED INTERESTS" shall have the meaning given such term in Section
9.3(a).
"PARTICIPANTS" shall have the meaning given such term in Section
8.4(b).
"PARTICIPATING MEMBERS" shall have the meaning given to such term in
Section 9.8(a).
"PERSON" shall mean any individual, corporation, association,
partnership (general or limited), joint venture, trust, estate, limited
liability company, or other legal entity or organization.
"PRIME RATE" shall have the meaning set forth in Section 4.6.
"PURCHASE OFFER" shall have the meaning given to such term in Section
9.8(a).
"PUT" shall have the meaning given such term in Section 2 of the Put
Agreement.
"PUT AGREEMENT" shall mean the Put Agreement dated as of May 1, 1999,
by and among KBI, BMHC Framing, BMHC and the Company.
"PUT NOTICE" shall have the meaning given such term in Section 2 of the
Put Agreement..
"REDEMPTION" shall have the meaning set forth in Section 8.1.
"REDEMPTION NOTICE" shall have the meaning set forth in Section 8.1.
"REDEMPTION PRICE" shall mean an amount equal to: (x) the sum of: (i)
KBI's Unrecovered Contribution Account and (ii) 51% of the Undistributed Net
Profits, provided, however, in no event shall the portion of the Redemption
Price determined pursuant to clause
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(i) and (ii) be less than KBI's Initial Contribution reduced by all
distributions to KBI pursuant to Section 5.6A(a) prior to the Termination Date,
less (y) the amount by which the Redemption Price is to be reduced under Section
13.2 of the Securities Purchase Agreement, and plus (z) the amount by which the
Redemption Price is to be increased under Section 13.3 of the Securities
Purchase Agreement plus (aa) 51% of the Workers' Compensation Insurance Refund
provided, however, such refund amount(s) shall be paid to KBI within five
business days of the Company's receipt of same.
"SCHEDULE 1" shall mean the schedule of Members, Sharing Ratios and
Capital Contributions and deemed contributions attached to this Agreement as
Schedule 1, as such schedule may be amended by the Managing Member from time to
time, in accordance with the provisions of this Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities Purchase
Agreement, dated as of March 22, 1999, by and among KBI, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, the
Company, BMHC Framing and BMHC.
"SELLING MEMBER" shall have the meaning set forth in Section 9.3(a).
"SHARING RATIO" shall mean with respect to each Member the percentage
set forth in the "Sharing Ratio" column on Schedule 1.
"SPECIAL LOAN" shall have the meaning set forth in Section 4.6.
"SUBSTITUTE MANAGERS" shall have the meaning set forth in Section 6.1.
"TERMINATION DATE " shall mean the Notice Receipt Date, or the date of
the BMHC Manager Designation (for purposes of Section 8.1), or the date of the
Put Notice, as applicable.
"TRANSFER" shall include any sale, assignment, mortgage, hypothecation,
gift, grant or transfer of any kind of an Interest or a portion thereof, whether
voluntary or involuntary, by bankruptcy or operation of law or otherwise, or the
creation of any agreement pursuant to which any Person shall have any interest
in the Company or in the distributions with respect to such interest. In the
case of a Member that is an entity, a Transfer shall include any transfer
(whether by sale of stock, merger, operation of law or otherwise) of 50% or more
of the outstanding voting power of such Member.
"TREASURY REGULATIONS" shall mean the income tax regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"UNDISTRIBUTED NET PROFITS" shall mean the positive or negative number
equal to the aggregate Net Profits and Net Losses of the Company from the date
of this Agreement to the
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Termination Date less the aggregate distributions to the Members pursuant to
Section 5.6 prior to the Termination Date provided, however, that for purposes
of this definition of Undistributed Net Profits:
(i) Net Profits and Net Losses shall be computed on a
federal income tax basis without taking into account any adjustment to the tax
basis of the Company's assets pursuant to Sections 734 or 743 of the Code.
(ii) Net Profits and Net Losses shall be calculated
without taking into account any deduction for DCP Bonuses.
"WORKERS' COMPENSATION INSURANCE REFUND" shall mean an amount equal to
the Company's workers' compensation insurance refund(s) received after the
Termination Date that is attributable to periods ending on or before the
Termination Date, based on the ratio of the number of months prior to the
Termination Date to which such refund relates to the total number of months to
which such refund relates.
ARTICLE II.
FORMATION
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2.1 NAME. The name of the Company is "▇▇▇▇▇ BROTHERS INDUSTRIES,
LLC", and all business of the Company shall be conducted under that name or any
fictitious name or names selected by the Managing Member from time to time,
provided that any such name reflects the Company's status as a limited liability
company and is otherwise permitted by applicable law.
2.2 PLACE OF BUSINESS AND REGISTERED AGENT. The Company's initial
principal place of business shall be ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, or such other place or places as the Managing Member may from time to
time determine. The registered agent for the service of process and the
registered office shall be that Person and location reflected in the
Certificate.
2.3 BUSINESS AND AUTHORITY. The Company may engage in any lawful
act or activity approved by the Members Committee for which a limited liability
company may be organized under the Delaware Act; including but not limited to
the lease or purchase of real or personal property, entry into joint ventures
and partnerships and such other activities related or incidental to the
foregoing as may necessary or advisable to further the Company's business.
2.4 COMPANY TERM. The term of the Company commenced on the filing
of the Certificate by an authorized Person with the office of the Secretary of
State of Delaware on December 28, 1998, and shall continue until the Company's
dissolution in accordance with the provisions of Article X of this Agreement.
2.5 EFFECT OF INCONSISTENCIES WITH THE DELAWARE ACT. It is the
express intention of the Members that this Agreement shall be the sole source of
agreement of the parties as to
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the subject matter hereof, and, except to the extent a provision of this
Agreement expressly incorporates federal income tax rules by reference to
sections of the Code or Treasury Regulations or is expressly prohibited or
ineffective under the Delaware Act, this Agreement shall govern, even when
inconsistent with, or different than, the provisions of the Delaware Act or any
other law or rule. To the extent that any provision of this Agreement is
prohibited or ineffective under the Delaware Act, this Agreement shall be deemed
to be amended to the smallest degree possible in order to make this Agreement
effective under the Delaware Act in accordance with the intent of the parties.
In the event the Delaware Act is subsequently amended or interpreted in such a
way to make any provision of this Agreement that was formerly invalid valid,
such provision shall be considered to be valid from the effective date of such
interpretation or amendment. The Members hereby agree that each Member shall be
entitled to rely on the provisions of this Agreement, and no Member shall be
liable to the Company or to any Member for any action or refusal to act taken in
good faith reliance on the terms of this Agreement. The Members hereby agree
that the duties and obligations imposed on the Members as such shall be those
set forth in this Agreement, which is intended to govern the relationship among
and between the Company and the Members, notwithstanding any provision of the
Delaware Act or common law to the contrary.
ARTICLE III.
MEMBERS AND INTERESTS
3.1 MEMBERS. There shall be one class of Members of the Company
with the rights, preferences and privileges set forth herein.
3.2 NAMES, ADDRESSES AND SHARING RATIOS OF THE MEMBERS. The
respective names, addresses, Sharing Ratios and required Capital Contributions,
if any, of the Members of the Company are set forth in Schedule 1.
3.3 REPRESENTATIONS AND WARRANTIES. Each Member hereby represents
and warrants to the Company and to the other Members that:
(a) Such Member understands and acknowledges that such
Member's respective Interests have not been registered under the Securities Act
or any state securities laws;
(b) Such Member understands and acknowledges that
Interests, or any portion thereof, may not be Transferred, except as provided in
Article IX hereof;
(c) The limitations on Transfer contained in this Section
3.3 and in Article IX of this Agreement create an economic risk that such Member
is capable of bearing;
(d) Such Member is acquiring its Interests for investment
and not with a view to the resale or distribution thereof in violation of the
Securities Act without prejudice, however, to its rights at all times to sell or
otherwise dispose of all or any part of said Interests pursuant to a
registration statement under the Securities Act, or pursuant to an exemption
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from the registration requirements thereof and subject, nevertheless, to the
disposition of its property being at all times within its control; and
(e) All property contributed to the Company as part of
such Member's Capital Contribution has been or will be contributed free and
clear of all liens, pledges, claims, security interests, encumbrances and
similar interests of any kind whatsoever, except as permitted hereunder.
ARTICLE IV.
CAPITAL CONTRIBUTIONS AND LOANS
4.1 CAPITAL CONTRIBUTIONS. Promptly upon the execution of the
Agreement, each Member who has not previously done so shall deliver to the
Company payment of such Member's Capital Contribution, in the form and amount
set forth on Schedule 1. The assets initially being contributed shall have the
values for income tax purposes set forth on Schedule 1, and the Members shall
file their tax returns consistent with such values.
4.2 INTEREST ON CAPITAL CONTRIBUTIONS. No Member shall be entitled
to receive any interest on such Member's Capital Contribution.
4.3 ADDITIONAL CAPITAL CONTRIBUTIONS. No Member shall be required
or permitted (a) to make any additional contribution to the capital of the
Company over and above that required by Sections 4.1 or 9.5 without the Consent
of the Members Committee; or (b) to restore a deficit Capital Account balance
upon the liquidation of the Company or such Member's Interest in the Company.
Additional contributions to the capital of the Company may be accepted on behalf
of the Company only with the Consent of the Members Committee. Such additional
contributions shall be in the ratio of 51% by the KBI Members and 49% by the
BMHC Members unless otherwise agreed by the Consent of the Members Committee. No
Member shall have any rights of first offer or preemptive rights with respect to
such contributions to the capital of the Company. Upon the acceptance of any
additional Capital Contributions, the Managing Member shall amend Schedule 1 to
reflect such Capital Contributions.
4.4 WITHDRAWAL OF CAPITAL. Except as set forth in this Agreement,
no Member may withdraw any portion of such Member's Capital Contributions from
the Company without the prior Consent of the Members Committee.
4.5 LOANS. Any Member may, at any time, make or cause loans to be
made to the Company in any amount and on such terms as may be approved by the
Consent of the Members Committee.
4.6 SPECIAL LOANS. It is the intent of the Members that the
Company obtain a commercial line of credit for funding its business operations.
If the Managing Member believes that the Company needs additional funding to
carry out its business operations in accordance with the approved annual
business plan of the Company and the Members
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Committee does not approve of the Members making Additional Capital
Contributions to provide such additional funding and financing is not available
from third parties on commercially reasonable terms, then the Managing Member
may, but shall not be obligated to, make a loan (a "Special Loan") to the
Company to provide such funding. A Special Loan shall not be considered a
Capital Contribution of the Managing Member or entitle it to any increase in its
share of the distributions of the Company. Each Special Loan made by the
Managing Member to the Company shall be an obligation of the Company, provided
that (i) no Member shall be personally obligated to repay the Special Loan and
(ii) the Special Loan shall be payable or collectible only out of the assets of
the Company. All Special Loans shall bear interest at the rate of 1% per annum
above the prime rate published in THE WALL STREET JOURNAL (the "Prime Rate")
from time to time, compounded monthly, while such Special Loans are outstanding.
If THE WALL STREET JOURNAL ceases to publish the Prime Rate, the Members
Committee shall reasonably determine a substitute method for determining the
Prime Rate. In no event shall the rate of interest on a Special Loan exceed the
highest rate permitted by law for the lender which, if exceeded, could subject
the Managing Member to penalties or forfeiture of all or any part of the
interest or principal; such rate of interest on a Special Loan shall
automatically be reduced to the highest level permitted without violating any
such law. All Distributable Cash and Net Cash From Sales or Refinancings (but
without deduction for payment of interest or principal on Special Loans) shall,
to the extent of available cash, be applied and paid monthly, first to the
payment of accrued interest on any Special Loans, then to the payment of
principal of any Special Loans, before any distribution is made to a Member as
stipulated in Section 5.6 or Section 5.6A.
ARTICLE V.
CAPITAL ACCOUNTS, DISTRIBUTIONS AND TAX MATTERS
5.1 CAPITAL ACCOUNTS. A separate Capital Account shall be
maintained for each Member.
5.2 INCREASES IN CAPITAL ACCOUNTS. Each Member's Capital Account
shall be increased by:
(a) The amount of cash contributed by the Member to the
Company (including the amount of any Company liabilities that are assumed by
such Member other than in connection with the distribution of Company property
as described in Treasury Regulation Section 1.704-1(b)(2)(iv)(b) and (c));
(b) The Gross Asset Value of real, personal, tangible and
intangible property contributed by the Member to the Company pursuant to
Sections 4.1 and 4.3 (net of liabilities secured by such contributed property
that the Company is considered to assume or take subject to under Code Section
752); and
(c) Allocations to the Member of Net Profits and any
items of income or gain that are specially allocated pursuant to Section 5.10.
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5.3 DECREASES IN CAPITAL ACCOUNTS. Each Member's Capital Account
shall be decreased by:
(a) The amount of cash distributed to the Member by the
Company (including the amount of such Member's individual liabilities that are
assumed by the Company other than in connection with contributions of property
to the Company as described in Treasury Regulation Section 1.704-1(b)(2)(iv)(b)
and (c));
(b) The Gross Asset Value of property distributed to the
Member by the Company (net of liabilities secured by such distributed property
that such Member is considered to assume or take subject to under Code Section
752); and
(c) Allocations to the Member of items of Net Losses and
any items of deduction or loss specially allocated pursuant to Section 5.10.
5.4 TRANSFER OF CAPITAL ACCOUNT AND SHARING RATIOS. In the event
of a Transfer of a Member's Interest, the Capital Account and Sharing Ratios of
the transferor shall become the Capital Account and Sharing Ratios of the
transferee to the extent it relates to the transferred Interest in accordance
with Treasury Regulation Section 1.704-1(b)(2)(iv).
5.5 COMPLIANCE WITH CODE SECTION 704(B). The manner in which
Capital Accounts are to be maintained pursuant to this Article V is intended to
comply with the requirements of Code Section 704(b) and the Treasury Regulations
promulgated thereunder (including the requirements for a qualified income
offset, minimum gain chargeback and chargeback of partner nonrecourse debt
minimum gain). If in the opinion of the Company's independent accountants the
manner in which Capital Accounts are to be maintained pursuant to the preceding
provisions of this Article V should be modified to comply with Code Section
704(b) and the Treasury Regulations thereunder, then, notwithstanding anything
to the contrary contained in the preceding provisions of this Article V, the
method in which Capital Accounts are maintained shall be so modified; provided,
however, that any change in the manner of maintaining Capital Accounts shall not
materially alter the economic agreement between or among the Members without the
Consent of the Members Committee.
5.6 DISTRIBUTIONS OF DISTRIBUTABLE CASH. After adjusting the
Capital Accounts of the Members to take into account allocations under Sections
5.7 through 5.10 hereof, the Managing Member shall make distributions of
Distributable Cash as follows:
(a) First, to the Members in an amount equal to 45% of
the allocations of Net Profits to such Members pursuant to Section 5.8 for such
Fiscal Year. The distributions to the Members pursuant to the immediately
preceding sentence shall be made quarterly based on an estimate of Net Profits
for each quarter (taking into account any Net Losses for any prior quarter
during such Fiscal Year); with the first quarter beginning on January 1, and
ending on March 31, of each Fiscal Year; the second quarter beginning on April
1, and ending on June 30, of each Fiscal Year; the third quarter beginning on
July 1, and ending on September 30, of each Fiscal Year; and the fourth quarter
beginning on October 1, and ending on December 31, of each Fiscal Year. The
distributions to the Members pursuant to
12
immediately preceding sentence shall be made as soon as possible after the end
of each quarter, but no later than 45 days after the end of each quarter. As
soon as practicable after the actual Net Profits for a Fiscal Year are
determined, the Company shall make a distribution to each Member of the excess,
if any, of (i) 45% of the Net Profits allocated to such Member with respect to
such Fiscal Year over (ii) the aggregate quarterly distributions previously made
to such Member with respect to such Fiscal Year. For purposes of this Section
5.6(a), Net Profits and Net Losses shall be computed with the adjustments set
forth in clause (i) and (ii) in the definition of "Undistributed Net Profits;"
and
(b) Second, the Managing Member, with the Consent of the
Members Committee, may, but shall not be required to, make additional
distributions to the Members in accordance with their Sharing Ratios.
5.6A NET CASH FROM SALES OR REFINANCINGS. The Managing Member shall
distribute Net Cash From Sales or Refinancings during the term of the Company
within 30 days after the Company's receipt thereof to the Members in the
following order of priority:
(a) First, to the Members, to the extent of, and in
proportion to the respective excess (if any), for each Member of (i) such
Member's Contribution Account over (ii) the aggregate amounts previously
distributed to such Member pursuant to this Section 5.6A(a); and
(b) Second, to the Members in accordance with their
Sharing Ratios.
5.7 ALLOCATIONS OF NET LOSSES. After taking into account the
allocations made pursuant to Section 5.10 and Section 8.4(d)(i), Net Losses of
the Company shall be allocated to the Members in accordance with their Sharing
Ratios.
5.8 ALLOCATIONS OF NET PROFITS. After taking into account the
allocations made pursuant to Section 5.10 and Section 8.4(d)(i), Net Profits of
the Company shall be allocated to the Members in accordance with their Sharing
Ratios.
5.9. BONUSES. Subject to Section 8.4, the Company shall pay bonuses
to its employees and consultants in accordance with the approved annual business
plan of the Company, or as otherwise determined with the Consent of the Members
Committee.
5.10. REGULATORY ALLOCATIONS. Prior to any other allocations under
the foregoing provisions of this Article V, the following special allocations
shall be made in the following order:
(a) If there is a net decrease in Partnership Minimum
Gain (as defined below) during a taxable year, each Member shall be allocated
items of income and gain for such year in accordance with Section 1.704-2(f) of
the Treasury Regulations.
(b) If there is a net decrease in Partner Nonrecourse
Debt Minimum Gain (as defined below) during a taxable year, each Member who has
a share of such Partner
13
Nonrecourse Debt Minimum Gain, determined in accordance with Section
1.704-2(i)(5) of the Treasury Regulations, shall be specifically allocated items
of income and gain for such year (and, if necessary, subsequent years) in
accordance with Section 1.704-2(i)(4) of the Treasury Regulations.
(c) In the event any Member unexpectedly receives any
adjustments, allocations or distributions described in paragraphs
(b)(2)(ii)(d)(4), (5), or (6) of Section 1.704-1 of the Treasury Regulations,
there shall be specially allocated to such Member such items of income
(including items of gross income) and gain, at such times and in such amounts as
will eliminate as quickly as possible that portion of its deficit (if any) in
its Capital Account (as increased for this purpose by the amount which such
Member is obligated to restore (pursuant to the terms of this Agreement or
otherwise) or deemed obligated to restore pursuant to Section
1.704-1(b)(2)(ii)(c) of the Treasury Regulations and the penultimate sentences
in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations--the
Capital Account balance so adjusted being the "Adjusted Capital Account
Balance") caused or increased by such adjustments, allocations or distributions.
(d) No allocation under this Article V shall be made to a
Member which would cause or increase a deficit balance in such Member's
"Projected Capital Account" (as hereinafter defined) which exceeds the amount of
the Member's Share of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain. For purposes of the foregoing rule, the determination as to
whether an allocation would create or increase a deficit balance in a Member's
Projected Capital Account shall be made as of the end of the Fiscal Year to
which such allocation relates. As used herein, the term "Projected Capital
Account" means, with respect to any Member, such Member's Adjusted Capital
Account Balance as of the last day of any applicable Fiscal Year but reduced by
any applicable projected adjustments, allocations or distributions in accordance
with the provisions of paragraphs (4), (5) and (6) of Treasury Regulation
Section 1.704-1(b)(2)(ii)(d). The foregoing definition of Projected Capital
Account is intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted and
applied consistently therewith.
(e) For each taxable year or other period of the Company for
which allocations are made, all Nonrecourse Deductions shall be allocated to the
Members in accordance with their Sharing Ratios.
(f) Any and all Partner Nonrecourse Deductions shall be
allocated to the Member who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable, as determined in accordance with Section 1.704-2(i) of the
Treasury Regulations.
(g) For purposes of Section 752 of the Code and the Treasury
Regulations thereunder, excess nonrecourse liabilities (within the meaning of
Treasury Regulations Section 1.752-3(a)(3)) shall be allocated to the Members in
accordance with their Sharing Ratios.
14
(h) The allocations set forth in this Section 5.10
(collectively, the "Regulatory Allocations") are intended to comply with certain
requirements of the Treasury Regulations. It is the intent of the Members that,
to the extent possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other items of
income, gain, loss, or deduction pursuant to this subparagraph (h). Therefore,
notwithstanding any other provision of Article V (other than the Regulatory
Allocations) offsetting special allocations of income, gain, loss or deduction
shall be made such that each Member's Capital Account balance is, to the maximum
extent possible, equal to the Capital Account balance such Member would have had
if the Regulatory Allocations were not part of this Agreement and all items were
allocated pursuant to Article V (other than Section 5.10).
(i) For purposes of this Agreement (i) "Partner
Nonrecourse Debt Minimum Gain," (ii) "Nonrecourse Deductions," (iii) "Partner
Nonrecourse Deductions," (iv) "Partner Nonrecourse Debt," and (v) "Partnership
Minimum Gain" shall have the respective meanings set forth in Section 1.704-2 of
the Treasury Regulations.
5.11 TAX MATTERS MEMBER.
(a) KBI is hereby designated as "Tax Matters Partner" of
the Company for purposes of Section 6231(a)(7) of the Code and is authorized and
required to represent the Company in connection with any administrative
proceeding at the Company level with the Internal Revenue Service relating to
the determination of any item of Company income, gain, loss, deduction or credit
for federal income tax purposes.
(b) The Tax Matters Partner shall arrange for the
preparation and timely filing of all returns relating to Company income, gains,
net losses, deductions and credits, as necessary for federal, state and local
income tax purposes.
5.12 SECTION 754 ELECTION. The Company shall make the election
under Section 754 of the Code, so as to adjust the basis of Company property in
the case of a distribution of property within the meaning of Section 734 of the
Code, and in the case of a Transfer of a Company Interest within the meaning of
Section 743 of the Code. Each Member shall, upon request of the Tax Matters
Partner, supply the information necessary to give effect to such an election.
Any Member or transferee first requesting an election hereunder shall reimburse
to the Company the reasonable out-of-pocket expenses incurred by the Company in
respect of such election, including any legal or accountants' fees to the extent
that such out-of-pocket expenses exceed [$Redacted]; thereafter, each transferee
shall reimburse such expenses with respect to adjustments under Section 743 of
the Code in the proportion which the interest of each transferee appears to the
sum of the interests of all transferees; the Company shall bear the expenses of
any adjustments under Section 734 of the Code.
5.13 ALLOCATIONS FOR TAX PURPOSES.
(a) Except as otherwise provided in Section 5.13(b), as
of the end of each Fiscal Year, items of Company income, gain, loss, deduction
and expense shall be allocated
15
for federal, state and local income tax purposes among the Members in the same
manner as the income, gain, loss, deduction and expense of which such items are
components were allocated pursuant to Sections 5.7, 5.8, 5.10 and 8.4(d)(i).
(b) In accordance with Section 704(c) of the Code and the
Treasury Regulations thereunder, income, gain, loss and deduction with respect
to any property (other than cash) contributed or deemed contributed to the
capital of the Company shall, solely for federal, state and local income tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal, state
and local income tax purposes and its Gross Asset Value at the time of such
contribution. If the Gross Asset Value of any Company asset is adjusted pursuant
to the definition of Gross Asset Value hereunder, subsequent allocations of
income, gain, loss and deduction with respect to such asset for tax purposes
shall take account of any variation between the adjusted tax basis of such asset
for income tax purposes and its Gross Asset Value in the same manner as under
Code Section 704(c) and the Treasury Regulations thereunder. Such allocations
shall be made in such manner and utilizing such permissible tax elections as
determined in the reasonable discretion of the Managing Member.
(c) Allocations pursuant to this Section 5.13 are solely
for federal, state and local tax purposes and shall not affect, or in any way be
taken into account in computing, any Member's Capital Account or allocable share
of Net Profits or Net Losses or distributions pursuant to any provision of this
Agreement.
(d) The Members are aware of the tax consequences of the
allocations made by this Section 5.13 and hereby agree to be bound by the
provisions of this Section 5.13 in reporting their allocable shares of items of
Company income, gain, loss, deduction and expense.
5.14 WITHHOLDING. Notwithstanding anything expressed or implied to
the contrary in this Agreement, the Managing Member is authorized to take any
action that it reasonably determines to be necessary or appropriate to cause the
Company to comply with any foreign or United States federal, state or local
withholding requirement with respect to any allocation, payment or distribution
by the Company to any Member or other Person. All amounts so withheld, and in
the manner determined by the Managing Member, in its reasonable discretion,
amounts withheld with respect to any allocation, payment or distribution by any
Person to the Company, shall be treated as distributions to the applicable
Members under the applicable provisions of this Agreement. If any such
withholding requirement with respect to any Member exceeds the amount
distributable to such Member under this Agreement, or if any such withholding
requirement was not satisfied with respect to any amount previously allocated,
paid or distributed to such Member, such Member and any successor or assignee
with respect to such Member's Interest each hereby jointly and severally
indemnifies and agrees to hold harmless the other Members and the Company for
such excess amount or such withholding requirement (including any interest,
additions or penalties with respect thereto), as the case may be.
16
ARTICLE VI.
MANAGEMENT
6.1 THE MANAGING MEMBER. The ordinary and usual decisions
concerning the business affairs of the Company shall be made by a managing
member (the "Managing Member"), who shall be a Member of the Company. The
Managing Member of the Company initially shall be KBI. KBI shall cease to be the
Managing Member upon the death or permanent disability of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇.
Upon the death or permanent disability of ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and until such time
as KBI Members have no Interests in the Company, the duties of the Managing
Member shall be assumed by two managers (the "Substitute Managers"), who shall
be [Redacted] and [Redacted]. Upon each anniversary date of this Agreement, the
Members shall review the Substitute Managers designated in the immediately
preceding sentence and KBI, in its sole and absolute discretion, shall determine
whether to designate one or more persons to replace the persons currently
designated as Substitute Managers. Upon the death or permanent disability of
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, BMHC Members may name one or more persons to replace the then
designated Substitute Managers provided, however, if BMHC Members exercise such
right (the "BMHC Manager Designation"), the KBI Interests shall be redeemed in
accordance with Section 8.1.
6.2 TERM OF MANAGING MEMBER. Subject to Section 6.1, the Managing
Member shall serve until the earliest of: (a) the date on which the Managing
Member ceases to be a Member of the Company; or (b) the resignation of the
Managing Member for any reason. Any vacancy in the office of the Managing Member
shall be filled by the Consent of the Members Committee.
6.3 POWERS OF MANAGING MEMBER. Subject to the limitations imposed
pursuant to the terms of this Agreement or by operation of law, the Managing
Member is individually authorized and empowered to carry out the purposes of the
Company and to act on behalf of the Company in taking any of the actions
described in this Section 6.3 or otherwise contemplated by the Delaware Act or
this Agreement; provided, however, that the Managing Member shall not approve or
take any action with respect to the following matters without the Consent of the
Members Committee: (i) effect a Change of Control Transaction; (ii) approval of
the annual business plan of the Company; (iii) enter into new lines of business;
(iv) enter into material transactions not contemplated by the annual business
plan; (v) make distributions of Distributable Cash in excess of the amounts set
forth in Section 5.6(a) or pay bonuses that are not in accordance with the
approved annual business plan of the Company as set forth in Section 5.9 or are
not pursuant to the DCP; (vi) effect a sale of the Company (regardless of the
form of such sale by merger, sale of assets, sale of Interests or otherwise);
(vii) except as otherwise provided in Section 8.1, effect a sale of the
Interests owned by the KBI Members on or before May 1, 2004; and (viii) amend
the DCP to increase or decrease the total expense to the Company of awards under
the DCP (including the Company's share of withholding taxes) to an amount
different than the amount under the DCP as originally adopted by the Company.
Subject to the limitations of this Agreement, the powers of the Managing Member
shall include, but not be limited to, the following:
Pursuant to a request for confidential treatment, selected information in this
document has been omitted and separately filed with the Securities and Exchange
Commission.
17
(a) To engage personnel, independent attorneys,
accountants or such other Persons as may be deemed necessary or advisable;
(b) To implement all actions with respect to
distributions by the Company, dispositions of the assets of the Company,
borrowing of funds, execution of leases, contracts, bonds, guarantees, notes,
mortgages and other instruments on behalf of the Company;
(c) To open, maintain and close bank accounts and to draw
checks and other orders for the payment of money;
(d) To make, on behalf of the Company, all filings with
the Delaware Secretary of State as may be required or deemed desirable by the
Managing Member, including without limitation, filings to change the registered
agent and/or registered office of the Company;
(e) To take such other actions and to incur such expenses
on behalf of the Company as may be necessary or advisable in connection with the
conduct of the business of the Company;
(f) To bring and defend on behalf of the Company actions
and proceedings at law or in equity before any court or governmental,
administrative or other regulatory agency, body or commission or otherwise;
(g) To execute all documents or instruments, to perform
all duties and powers and do all things for and on behalf of the Company in all
matters necessary, desirable, convenient or incidental to the purposes of the
Company;
(h) To appoint and remove individuals as officers of the
Company, with such titles and such responsibilities as the Managing Member may
elect, including the offices of President, Vice President, Chief Operations
Officer, Chief Financial Officer and Secretary, to act on behalf of the Company
with such power and authority as the Managing Member may delegate; and
(i) To make distributions to Members pursuant to the
terms of Article V and Article X.
6.4 DUTIES OF MANAGING MEMBER. The Managing Member shall manage,
or cause to be managed, the affairs of the Company in a prudent and businesslike
manner and shall devote such time to the Company affairs as the Managing Member
determines to be reasonably necessary for the conduct of such affairs. The
Managing Member, in consultation with the BMHC Members, shall cause the Company
to employ certain persons designated by the BMHC Members and to work with such
persons so that they can learn the policies and practices of the Company's
business. In addition, the Managing Member shall cause the Company to establish
a lumber operation which will supply all the lumber requirements for the
Company's facilities in Phoenix and Tucson, Arizona and Las Vegas, Nevada. In
addition, the Managing Member shall cause the Company to lease from BMHC or its
subsidiary, BMC
18
West Corporation, its facilities in Phoenix, Arizona and to lease from KBI its
facilities in Las Vegas, Nevada on terms mutually agreed upon by the Members
Committee.
6.5 LIABILITY OF MANAGING MEMBER. In carrying out its duties, the
Managing Member shall not be liable to the Company or to any of the Members for
any actions taken in good faith and reasonably believed to be in the best
interests of the Company, or for errors of judgment.
6.6 APPARENT AUTHORITY OF MANAGING MEMBER. All third parties
dealing with the Managing Member may rely conclusively upon any action taken in
the name of the Company by the Managing Member as having been taken on behalf of
the Company.
6.7 REIMBURSEMENT FOR EXPENSES. The Managing Member shall be
entitled to reimbursement from the Company for (or to cause the Company to pay
directly) all reasonable expenses, costs and fees incurred in connection with
the operation of the Company.
6.8 INDEMNIFICATION OF MANAGING MEMBER. The Company shall
indemnify and hold harmless the Managing Member against any loss, claim, damage,
or expense (including reasonable attorneys' fees and costs) arising out of any
claim, demand, suit, or action related to the performance or non-performance of
any act concerning the business or the activities of the Company, unless, as a
result of its performance or non-performance of such act, the Managing Member is
judged guilty in a final judgment by a court of competent jurisdiction of gross
negligence, gross misconduct, or willful malfeasance in connection therewith.
The Company shall reimburse the Managing Member for all costs and expenses
(including reasonable attorney's fees and expenses) incurred in connection with
the investigation of, preparation for or defense of any pending or threatened
claim or any action or proceeding arising therefrom, whether or not the Managing
Member is a party, as such costs and expenses are expended or incurred, subject
to the Managing Member's obligation to repay all such amounts if the Managing
Member is ultimately determined not to be entitled to indemnification pursuant
to this Section 6.8.
6.9 SPECIAL POWER OF ATTORNEY.
(a) Each Member hereby makes, constitutes and appoints
the Managing Member and any successor or substitute Managing Member(s), jointly
and severally, with full power of substitution and resubstitution, such Member's
true and lawful attorney for it in its name, place, and stead and for its use
and benefit to certify, acknowledge, swear to, file and record this Agreement,
and to certify, acknowledge, swear to, file and record all instruments amending
this Agreement, as now or hereafter amended in accordance with this Agreement,
and to sign, execute, certify, acknowledge, swear to, file and record all such
other documents that are necessary or appropriate: (i) to reflect the exercise
by the Managing Member of any of the powers granted to the Managing Member under
this Agreement; (ii) to reflect any amendments made to Schedule 1 by the
Managing Member pursuant to, and in accordance with, this Agreement; and (iii)
to reflect actions which may be required of the Company or the Managing Member
by the applicable laws of any jurisdiction. Each Member authorizes the
19
attorney-in-fact to take any further action which such attorney-in-fact shall
consider necessary or advisable in connection with any of the foregoing, hereby
giving such attorney-in-fact full power and authority to do and perform each and
every act or thing whatsoever requisite or advisable to be done in and about the
foregoing as fully as the Member might or could do if personally present, and
hereby ratifying and confirming all that such attorney-in-fact shall lawfully do
or cause to be done by virtue hereof. Notwithstanding the foregoing, the
Managing Member may not, without the Consent of the Members Committee, take any
action pursuant to the powers granted in this Section 6.9 if, as a result of
such action, the rights or obligations of one or more Members would be changed
(unless the rights and obligations of all Members would be so changed).
(b) The special power granted in Section 6.9(a): (i) is
irrevocable; (ii) is coupled with an interest; and (iii) shall survive a
Member's death, incapacity or dissolution.
(c) The Managing Member may exercise the special power of
attorney granted in Section 6.9(a) by signature of a duly authorized officer of
the Managing Member.
6.10 INTERESTED PARTY TRANSACTIONS. No transaction between a Member
or Managing Member and the Company shall be voidable solely because such Member
or Managing Member has a direct or indirect interest in the transaction if (i)
either the transaction is fair to the Company or (ii) the Members Committee,
knowing the material facts of the transaction and such Member's or Managing
Member's interest, consents to the transaction.
ARTICLE VII.
MEMBERS
7.1 NO PARTICIPATION BY MEMBERS. Except as expressly set forth in
this Agreement, the Members shall not have any vote or take any part in the
control or management of the business of the Company, nor have any authority or
power to act for or on behalf of the Company in any manner whatsoever, other
than as specifically required by the Delaware Act. No Member who is not a
Managing Member or otherwise authorized by the Managing Member as an agent shall
take any action to bind the Company, and each Member taking unauthorized action
shall indemnify and hold harmless the Company for any costs or damages incurred
by the Company as a result of the unauthorized action of such Member.
7.2 LIMITED LIABILITY. Neither the Managing Member nor any Member
shall be obligated or liable to the Company, any creditor of the Company or any
other Person for any losses, debts, obligations or liabilities of the Company,
except as otherwise agreed in writing. Neither the Managing Member nor any
Member shall be liable to the Company, the other Members or the Managing Member,
creditors of the Company or any other Person for the repayment of amounts
received from the Company, except for such distributions received by the
Managing Member or Members from the Company in violation of this Agreement and
as otherwise required by law. The failure of the Company to observe any
formalities or requirements relating to the exercise of its powers or management
of its business or affairs
20
under this Agreement or the Delaware Act shall not be grounds for imposing
direct liability on the Members or the Managing Member for liabilities of the
Company.
7.3 WITHDRAWAL. No Member shall have the right to withdraw as a
Member or take any voluntary action that would result in a dissolution of the
Company pursuant to Section 10.1 hereof.
7.4 MEETINGS. Meetings of the Members, for any purpose or
purposes, unless otherwise prescribed by statute, shall be held from time to
time and may be called by the Managing Member or BMHC Framing.
7.5 PLACE OF MEETINGS. The Managing Member may designate any
place, either within or outside the State of Delaware, as the place of meeting
for any meeting of the Members. Members or their authorized representatives may
participate in any meeting by telephone provided that all participants in the
meeting are able to speak and hear each other.
7.6 NOTICE OF MEETINGS. Except as provided in Section 7.7, written
notice stating the place, day and hour of a meeting and the purpose or purposes
for which the meeting is called shall be delivered not less than five nor more
than fifty days before the date of a meeting, either personally or by mail, by
or at the direction of the Member calling the meeting, to each Member.
7.7 MEETING OF ALL MEMBERS. If all of the Members shall meet at
any time and place, either within or outside of the State of Delaware, and
unanimously agree to the holding of a meeting at such time and place, such
meeting shall be valid without call or notice, and at such meeting lawful action
may be taken.
7.8 MANNER OF ACTING. Except for matters requiring the Consent of
the Members Committee, or as provided in Section 7.12, the Consent of the
Members shall be required for any collective action or approval of the Members,
unless the vote of a greater proportion or number is otherwise required by the
Delaware Act, by the Certificate, or by this Agreement.
7.9 PROXIES. At all meetings of Members, a Member may vote in
person or by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Managing Member of the
Company before or at the time of the meeting. No proxy shall be valid after
eleven months from the date of its execution, unless otherwise provided in the
proxy.
7.10 ACTION BY MEMBERS WITHOUT A MEETING. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting if
the action is evidenced by one or more written consents describing the action
taken, signed by all of the Members required to take such action (except for
matters requiring the Consent of the Members Committee), delivered to the
Company for inclusion in the minutes or for filing with the Company records, and
notice of such action is delivered to the Members not signing the written
consent(s) within five days. Action taken under this Section 7.10 is effective
when all of the Members required to take such action have signed the consent,
unless the consent
21
specifies a different effective date. The record date for determining Members
entitled to take action without a meeting shall be the date the first Member
signs a written consent.
7.11 WAIVER OF NOTICE. When any notice is required to be given to
any Member, a waiver thereof in writing signed by or on behalf of the Member
entitled to such notice, whether before, at, or after the time stated therein,
shall be equivalent to the giving of such notice.
7.12 CHANGE OF CONTROL TRANSACTIONS. The Consent of the Members
Committee and the Consent of the Members shall be required for the Company to
enter into a Change of Control Transaction.
ARTICLE VIII.
REDEMPTION OF KBI INTERESTS; SALE OF THE COMPANY
8.1 REDEMPTION. Subject to the limitations set forth in this
Section 8.1, and subject to the provisions of Section 8.4, at any time, upon
written request by BMHC Framing, or upon BMHC Members exercising the BMHC
Manager Designation pursuant to Section 6.1, the Company shall directly, or
indirectly through BMHC Framing, redeem KBI's Interests (the "Redemption") for
an amount, in the aggregate, equal to the Redemption Price. The Redemption shall
take place not earlier than 60 days and not later than 180 days following, as
applicable, the date of the BMHC Manager Designation or the date (the "Notice
Receipt Date") that the Company and KBI receive from BMHC Framing a notice (the
"Redemption Notice") setting forth the request for redemption and whether the
Redemption Price will be paid in cash or BMHC Common Stock, or a combination of
cash and BMHC Common Stock. KBI agrees that it will surrender its Interest to
the Company or BMHC Framing upon payment of the Redemption Price free and clear
of any lien or encumbrance. The Redemption Price, or a portion thereof, may be
paid in Common Stock of BMHC at its then fair market value based upon the
average of the closing prices of the Common Stock of BMHC for the five most
recent trading days prior to the date of the BMHC Manager Designation or the
Notice Receipt Date, as applicable; provided, however, that KBI shall not be
required to accept Common Stock of BMHC in payment of the Redemption Price
unless such stock may be sold immediately in the public market at the closing of
the Redemption and BMHC agrees to arrangements, including a guaranty of the
aggregate amount KBI is entitled to receive if the Redemption Price were paid in
cash at the closing of the Redemption, reasonably acceptable to KBI to
effectively eliminate the risk of a reduction in the price of the Common Stock
of BMHC during a reasonable sale period of not to exceed six months beginning on
the closing of the Redemption. The Redemption Price shall be allocated for
income tax purposes among the assets of the Company pursuant to Code Sections
755 and 1060. Such allocation shall be on a tax basis, except for real property
which shall be based on fair market value. Any excess above the tax basis and
fair market value of real property shall be allocated to goodwill. The Members
agree to file their tax returns and the Company's tax returns on a basis
consistent with such allocations. BMHC Framing shall have no right to deliver
the Redemption Notice in order to effect a Redemption if KBI has previously
22
delivered to BMHC the Put Notice, except to the extent that the Redemption
Notice permits BMHC Framing to pay all or a portion of the Redemption Price in
BMHC Common Stock.
If there shall be any outstanding loans, including, without limitation,
Special Loans, by KBI to the Company, such loans, including interest thereon
accrued and unpaid, shall be purchased by the Company or BMHC Framing, as
applicable, for the principal amount thereof and accrued and unpaid interest
thereon as a condition precedent to the Redemption. The purchase price for such
loans shall be paid, at KBI's option, by certified check drawn to the order of
KBI, or by wire transfer of immediately available funds to an account designated
by KBI. At the closing, KBI shall deliver to the Company or BMHC Framing, as
applicable, each note evidencing such loans.
8.2 DISTRIBUTIONS UPON A SALE OF THE COMPANY. Subject to Section
8.4, in the event of a Change of Control Transaction (other than with respect to
a sale or transfer of Interests in which event the consideration shall be paid
directly to the Members) the net proceeds shall be distributed to the Members in
accordance with the priorities set forth in Section 5.6A.
8.3 HSR FILINGS. The parties acknowledge that redemption of the
Members' Interests may require filings under the HSR Act. The Company and the
Members agree to cooperate with any Members and use reasonable efforts to comply
with any applicable requirements of the HSR Act; provided, however, that the
Company shall not be under any obligation to comply with any request that it
reasonably determines is unduly burdensome. Filing fees under the HSR Act shall
be paid by the Company. Any time periods specified with respect to the closing
of a Redemption in this Article VIII shall be extended if required to comply
with filing and waiting period requirements under the HSR Act. 8.4 PAYMENT OF
EMPLOYEE BONUSES.
(A) GENERAL. The provisions of this Section 8.4 shall
apply in connection with any transaction described in Sections 8.1, 8.2, 9.8 and
10.2 of this Agreement, and this Section 8.4 shall also apply to the
transactions contemplated by the Put Agreement.
(B) DEFERRED COMPENSATION PLAN. In connection with the
execution of this Agreement, the Company is adopting a Deferred Compensation
Plan (the "DCP") that will provide for the payment of bonuses to certain
employees of the Company (collectively the "Participants" and each a
"Participant") as set forth in the DCP. Subject to the terms and conditions of
the DCP, it is intended that the Participant bonuses provided for in the DCP
(the "DCP Bonuses") be paid by the Company to the Participants in connection
with any transaction described in Section 8.4(a) above.
(C) APPLICABILITY. In connection with a Redemption
described in Section 8.1 or KBI Members' sale of its Interests pursuant to the
Put Agreement, the Redemption Price (in the case of a Redemption) or the
Purchase Price, as defined in the Put Agreement (in the case of the Put), shall
be paid in cash, and not BMHC Common Stock, at
23
least to the extent of the DCP Bonuses, it being the intent of the parties that
the DCP Bonuses be paid in cash and not BMHC Common Stock.
(i) In connection with a Redemption pursuant to
Section 8.1 initiated by the written request of BMHC Framing, a portion of the
Redemption Price, in the amount of the DCP Bonuses, shall be paid directly by
the Company in cash to the Participants upon the closing of the Redemption.
(ii) In connection with a Redemption pursuant to
Section 8.1 resulting from BMHC Members exercising the BMHC Manager Designation,
the Redemption Price otherwise payable to KBI at the closing of the Redemption
shall be reduced by the DCP Bonuses. In the case of a Redemption described n
this Section 8.4c)(ii), the Company shall pay the DCP Bonuses to the
Participants no later than the date that is five years after the date of this
Agreement, as set forth in the DCP.
(iii) In connection with a Change of Control
Transaction described in Section 8.2, the net proceeds received by KBI, whether
directly from a third party (in connection with a sale or transfer of KBI's
Interests), or pursuant to Section 5.6A, shall be, subject to the terms and
conditions of the DCP, used by KBI to pay the DCP Bonuses at the closing of such
transactions. If any proceeds to be received by KBI pursuant to a Change of
Control Transaction are deferred pursuant to an installment sale, KBI's payment
of the DCP Bonuses shall be deferred in a proportionate manner, and KBI's
payment of the deferred DCP Bonuses shall be made at the time of and in
proportion to KBI's receipt of the installment sale proceeds.
(iv) In connection with a dissolution and
termination of the Company, upon KBI's receipt of distributions pursuant to
Section 10.2(c), KBI shall pay, subject to the terms and conditions of the DCP,
the DCP Bonuses to the Participants. If any proceeds to be received by KBI
pursuant to Section 10.2(c) are deferred for any reason, KBI's payment of the
DCP Bonuses shall be deferred in a proportionate manner, and KBI's payment of
the deferred DCP Bonuses shall be made at the time of and in proportion to KBI's
receipt of the deferred proceeds.
(v) Any sale by KBI of a portion of its
Interests pursuant to Section 9.8, shall not require the payment by KBI of the
DCP Bonuses unless after such sale KBI has no further Interests in the Company.
(vi) In connection with KBI's sale of its
Interests pursuant to the Put Agreement, upon KBI's receipt of the Purchase
Price (as defined in the Put Agreement), KBI shall pay the DCP Bonuses.
(D) TAX TREATMENT. In connection with the transactions
described in Section 8.4(c), the Members agree that the following tax treatment
shall apply:
(i) In connection with the transactions
described in Sections 8.4(c)(i), 8.4(c)(iii), 8.4(c)(iv), 8.4(c)(v) and
8.4(c)(vi), KBI shall be treated as making an
24
Additional Capital Contribution to the Company in the amount of the DCP Bonuses,
and the Company shall specially allocate to KBI, the tax deduction related to
the DCP Bonuses. (ii) In connection with the transaction described in Section
8.4(c)(ii), KBI shall be treated as receiving redemption proceeds equal to the
Redemption Price less the DCP Bonuses. There shall be no special allocation to
KBI of the tax deduction related to the DCP Bonuses.
(iii) It is the intent of the Members that the
transactions described in Section 8.4(c) (except for the transaction described
in Section 8.4(c)(ii)) be structured so that any gain or loss recognized by KBI
with respect to such transactions occurs in the same Fiscal Year of the Company
within which KBI is specially allocated the tax deductions related to the DCP
Bonuses and that KBI be a Member of the Company at the time the DCP Bonuses are
paid, and the Members agree to reasonably cooperate to effect such intent of the
Members.
(iv) In connection with the payment of the DCP
Bonuses to the Participants, the Company shall be considered the employer and
shall be responsible for and shall withhold all applicable payroll and
withholding taxes with respect to the DCP Bonuses.
ARTICLE IX.
ASSIGNMENT OF INTERESTS AND ADMISSION OF NEW MEMBERS
9.1 ASSIGNMENT OF A MEMBER'S INTEREST. Interests in the Company
may not be Transferred except as set forth in this Article IX. As a condition to
the proposed Transfer of any Interest by a Member, the Member proposing to
Transfer such Interest shall first have complied with the provisions of this
Article IX. Any attempted Transfer of any such Interest without compliance with
this Article IX shall be void and of no effect, and the Company shall not
recognize any such attempted Transfer for any purpose.
9.2 RESTRICTIONS ON TRANSFER.
(A) RESTRICTIONS ON TRANSFERABILITY. The Interests shall
not be Transferred except upon compliance with the provisions of the Securities
Act and this Agreement, and any attempted Transfer in violation of the terms
hereof is void AB INITIO and transfers no right, title or interest in or to any
Interests or any interest therein, whether now owned or hereafter acquired, to
the purported transferee, buyer, donee, assignee or encumbrance holder. Each
party to this Agreement will cause any proposed transferee of the Interests to
agree in writing to take and hold such Interests subject to the provisions and
upon the conditions specified in this Agreement.
(B) NOTICE OF PROPOSED TRANSFERS; SECURITIES LAW
COMPLIANCE. Prior to any proposed Transfer permitted hereunder, the Member shall
give written notice to the Company of such Member's intention to effect such
Transfer. Each such notice shall describe
25
the manner and circumstances of the proposed Transfer in sufficient detail, and,
if requested by the Company, shall be accompanied by either (i) a written
opinion of legal counsel (who may be internal counsel) who shall be reasonably
satisfactory to the Company addressed to the Company and reasonably satisfactory
in form and substance to the Company's counsel, to the effect that the proposed
Transfer of the Interests may be effected without registration under the
Securities Act, (ii) a "no action" letter from the staff of the Securities and
Exchange Commission (the "Commission") to the effect that the Transfer of such
Interests without registration will not result in a recommendation by the staff
of the Commission that action be taken with respect thereto, or (iii) such other
showing that may be reasonably satisfactory to legal counsel to the Company,
whereupon, subject to the other requirements of this Article IX, the Member
shall be entitled to Transfer such Interests only in accordance with the terms
of this Article IX. Notwithstanding the foregoing, the requirements of clauses
(i), (ii), or (iii) above need not be satisfied with respect to the following
transactions: (A) transactions in compliance with Rule 144 under the Securities
Act so long as the Company is furnished with satisfactory evidence of compliance
with such Rule; (B) Transfers by a Member which is a partnership or limited
liability company on a pro rata basis in accordance with the terms of the
partnership or limited liability company operating agreement to a general
partner, limited partner or member of such partnership or limited liability
company or a retired partner of such partnership or member of such limited
liability company who retires after the date hereof, or to the estate of any
such partner, member or retired partner or member; (C) Transfers by a Member
which is a corporation to any wholly-owned subsidiary or parent of such
corporation that wholly owns such corporation, or, on a pro rata basis in
accordance with ownership interests.
(C) PERMITTED TRANSFERS. Subject to compliance with the
applicable provisions of the Securities Act and with Section 9.2 (a) and (b), if
applicable, the following Transfers may be made without compliance with Section
9.3 or 9.8, subject to the transferee agreeing in writing to be bound by the
terms of this Agreement to the same extent as if such transferee were a party
hereto and subject to any conditions set forth below: (i) Transfers described in
clauses (A), (B) and (C) of Section 9.2(b) hereof; (ii) Transfers by an
individual Member by gift to his or her spouse or to the siblings, lineal
descendants, or ancestors of such individual or his or her spouse or to any
trust, partnership, limited liability company or other entity of which such
person or persons are beneficiaries, if, in the case of a Transfer to such an
entity, the transferor retains voting rights with respect to the Interests being
Transferred, and Transfers by any such entity to its beneficiaries; (iii)
Transfers contemplated by Section 9.8 hereof; (iv) pledges by BMHC Framing of
its Interests to a financial institution to secure indebtedness for money
borrowed; (v) Transfers pursuant to an effective registration statement under
the Securities Act or (vi) Transfers excluded from Section 9.3.
(D) TRANSFERS OF INTERESTS. Except as permitted by
Section 9.2(c), KBI shall not Transfer any Interests until May 1, 2004.
Thereafter, KBI may Transfer its Interests upon compliance with the other
provisions of Article IX. BMHC Framing may, prior to May 1, 2005, Transfer its
Interests upon compliance with Sections 9.2 and 9.3 and, after May 1, 2005, may
Transfer its Interests upon compliance with Sections 9.2, 9.3 and 9.8.
26
9.3 RIGHTS OF FIRST REFUSAL.
(A) FIRST OFFER RIGHTS. A Member desiring to transfer its
Interests or any portion thereof (a "SELLING MEMBER") when permitted to do so
pursuant to Section 9.2 shall first give written notice to the Company of such
proposed Transfer (the "NOTICE OF OFFER"), specifying in reasonable detail all
of the material terms thereof, including the amount of the Interests proposed to
be transferred (the "OFFERED INTERESTS") and the identity of the proposed
transferee, if any, and the proposed purchase price for the Offered Interests
(the "OFFER PRICE"). The consideration for any such transfer must consist of
cash. The Company shall promptly deliver a copy of the Notice of Offer and the
related documents to all other Members. The Notice of Offer shall constitute an
irrevocable offer by the Selling Member to sell to the other Members the Offered
Interests at the Offer Price under the same terms and conditions contained in
the Notice of Offer. For 60 days after receipt by the other Members of such
notice, the other Members shall have the right (and may elect to assign such
right, in whole or in part) to purchase the Offered Interests on the same terms
as are indicated in the Notice of Offer.
(B) MEMBER NOTICE. Within 60 days following the receipt
by the other Members from the Company of the Notice of Offer, each other Member
desiring to purchase any of the Offered Interests shall notify the Selling
Member and the Company in writing as to the percentage of Offered Interests, if
any, that it is electing to purchase (such notification shall be referred to
hereinafter as the "MEMBER ACCEPTANCE"). The Member Acceptance shall be deemed
to be an irrevocable commitment to purchase from the Selling Member the
percentage of Offered Interests set forth in such Member Acceptance (or such
lesser amount as a result of any reduction required). It is the agreement of the
parties that the other Members as a group shall purchase all or none of the
Offered Interests unless the Selling Member elects to permit the other Members
to purchase less than all of the Offered Interests. If the Offered Interests are
less than the total number committed to be purchased in the Member Acceptances,
then the Offered Interests shall be allocated as nearly as practicable among
each Member who elected to purchase Offered Interests in the proportion that the
Sharing Ratio of such Member bears to the sum of Sharing Ratios of all other
Members electing to purchase Offered Interests. Each Member shall have a right
of over-subscription such that if any Member having a similar right fails to
exercise such right to purchase its pro rata portion of the Offered Interests,
the Company shall promptly notify the other Members and such Members may elect
in writing to purchase the non-purchasing Member's portion on a pro rata basis
(based on their Sharing Ratios), within five days of the date of the Company's
notice.
(C) SALE BY SELLING MEMBER. If the other Members do not
deliver sufficient Member Acceptances within 60 days following their receipt
from the Company of the Notice of Offer providing for the purchase by such
Members of all of the Offered Interests, the Selling Member (i) shall be under
no obligation to sell any of the Offered Interests to the other Members, unless
the Selling Member so elects, and (ii) may, within a period of 90 days from the
expiration of the 60-day period referred to above, sell all, but not less than
all, of the Offered Interests to one or more third parties (each a "THIRD PARTY
27
TRANSFEREE"), for cash at a price per unit not less than 95% of the Offer Price
and on such other terms and conditions as are no more favorable to the proposed
Third Party Transferee than those specified in the Notice of Offer; provided,
however, that if there is more than one Third Party Transferee, the Selling
Member in good faith must obtain binding and definitive commitments to purchase
all the Offered Interests within such 90-day period before any sale to a Third
Party Transferee of the Offered Interests may take place. Upon any such sale,
the Third Party Transferee of such Offered Interests shall execute an agreement
in form and substance satisfactory to the Company and pursuant to which such
Third Party Transferee agrees that the Offered Interests it acquired from the
Selling Member are subject to the provisions of this Agreement. If the Selling
Member does not complete the sale of the Offered Interests at an Offer Price of
at least 95% of the Offer Price (and on such other terms and conditions as are
no more favorable to the proposed Third Party Transferee than those specified in
the Notice of Offer) within such 90-day period, the provisions of this Section
9.3 shall again apply, and no sale of Offered Interests held by the Selling
Member shall be made otherwise than in accordance with the terms of this
Agreement. If a proposed Transfer is initiated but not completed, the Member
initiating such Transfer shall only be entitled to initiate another Transfer of
Offered Interests subject to this Section 9.3 after the expiration of the
applicable 90-day period.
(D) CLOSING. The closing of purchases of Offered
Interests pursuant to this Section 9.3 shall take place within 90 days after the
date of the Notice of Offer at 11:00 A.M. local time at the principal offices of
the Company, or at such other date, time or place as the parties to the sale may
agree. At such closing, the Selling Member(s) shall sell, transfer and deliver
to the purchasing Members full right, title and interest in and to the Offered
Interests so purchased, free and clear of all liens, security interests or
adverse claims of any kind and nature (except as otherwise set forth in this
Agreement). At the closing, the purchasing Members shall deliver to the Selling
Member(s), by wire transfer of immediately available funds to such bank and
account as the Selling Member(s) shall designate, a cash amount equal to the
purchase price of the Offered Interests, if any, being acquired by such
purchaser, in full payment of the purchase price of the Offered Interests being
purchased. If any of the purchasing Members fail to close the purchase within 90
days after the date of the Notice of Offer (other than due to the Selling
Member's inability to timely close), then the Selling Member shall be free to
Transfer, to any person at any time and upon the same or different terms, all or
any portion of the Offered Interests proposed to be Transferred and not so
purchased, without compliance with any of the provisions of this Section 9.3;
provided that the eventual transferee executes an agreement in form and
substance satisfactory to the Company and pursuant to which such transferee
agrees that the Offered Interests it acquired from the Selling Member are
subject to the provisions of this Agreement. The parties acknowledge that the
acquisition of Interests pursuant to the provisions of Article IX may require
filings under the HSR Act. The Company and each Member agree to cooperate with
any other Member and use reasonable efforts to comply with any applicable
requirements of the HSR Act; provided, however, that the Company shall not be
under any obligation to comply with any request that it reasonably determines is
unduly burdensome. Filing fees under the HSR Act shall be paid by the Company.
Any time periods specified with respect to
28
a closing contemplated by this Article IX shall be extended if required to
comply with filing and waiting period requirements under the HSR Act.
(E) DESIGNATED PURCHASERS. In exercising their rights
under this Section 9.3, each of the Members and the Company may also designate
one or more nominees to purchase some or all of the Offered Interests instead of
purchasing all of the Offered Interests itself.
(F) LIMITS AND TERMINATION. The provisions of this
Section 9.3 shall not pertain or apply to sales in which the rights provided in
Section 9.8 are exercised.
9.4 ADMISSION AND SUBSTITUTION OF ADDITIONAL MEMBERS.
(a) Additional Members may be admitted only with the
Consent of the Members Committee. Except as provided in the preceding sentence,
notwithstanding any other provision of this Agreement, no Person shall have any
right as a Member of this Company unless and until such Person is admitted as a
Member after such approval as is required by, and compliance with the other
conditions set forth in, this Section 9.4. Any transferee of an Interest who is
not admitted as a Member shall have only the right to receive such
distributions, when, as and if directed by the Managing Member or as otherwise
provided in this Agreement, and to receive such allocations, with respect to the
Interest transferred to such transferee, as are provided for in this Agreement,
and no voting, consent, inspection or other rights whatsoever, except as
otherwise required by the Delaware Act.
(b) Any Person may be admitted as a new Member only if
such Person shall have executed a counterpart of this Agreement or an
appropriate supplement to it, in which such Person agrees to be bound by the
terms and provisions of this Agreement as they may be modified by that
supplement. Any Person so admitted shall have all the rights and obligations of
a Member hereunder effective on and after the date of admission as a Member of
this Company.
9.5 INTEREST OF A NEW MEMBER. Upon receipt of any required Capital
Contribution from any newly admitted Member, the Managing Member shall provide
to each Member an amended Schedule 1 setting forth such new Member's Capital
Contribution and Sharing Ratio and the revised Sharing Ratios of the continuing
Members.
9.6 [INTENTIONALLY OMITTED]
9.7 [INTENTIONALLY OMITTED]
9.8 TAG-ALONG RIGHTS.
(A) THE TAG-ALONG RIGHTS NOTICE. If any Selling Member,
when otherwise permitted to sell its Interests hereunder, negotiates or receives
and elects to accept one or more bona fide offers to purchase or otherwise
acquire for value any of its Interests (a "PURCHASE OFFER"), such Selling
Member, subject to other restrictions contained herein, shall promptly notify in
writing the other Members (the "PARTICIPATING MEMBERS") and the
29
Company of the terms and conditions of such Purchase Offer (the "TAG-ALONG
RIGHTS NOTICE") and must include therewith a copy of drafts of all materials
relating to the Purchase Offer.
(B) THE RIGHTS. The Participating Members shall have the
right, exercisable upon written notice to the Selling Member within 20 days
after the date of receipt of the Tag-Along Rights Notice, to participate in
accordance with the terms and conditions set forth below in the Selling Member's
sale of its Interests pursuant to the specified terms and conditions of such
Purchase Offer. To the extent the Participating Members exercise such right of
participation, the Interests that the Selling Member may sell pursuant to such
Purchase Offer shall be correspondingly reduced. The rights of participation
shall be subject to the following terms and conditions:
(i) Each Participating Member may sell all or
any part of its Interests that is not in excess of its prorata share (based on
its Sharing Ratio in proportion to the Sharing Ratios of all Members) of the
Selling Member's Interest covered by the Purchase Offer.
(ii) Nothing herein shall prevent any Member from
waiving its rights under this Section 9.8.
(C) PROCEDURES.
(i) Each Participating Member may effect his,
her or its participation in the sale by delivering to the Selling Member, with a
copy to the Company, within the 20-day period specified under Section 9.8(b)
above, a written election to participate in the sale with respect to a specified
portion of its Interests.
(ii) The Interests elected to be sold by the
Participating Member shall be transferred by the Participating Member to the
maker(s) of the Purchase Offer in consummation of the sale of the applicable
Interests pursuant to the terms and conditions specified in the Tag-Along Rights
Notice to the Participating Member, and the maker(s) of the Purchase Offer shall
directly pay to such Participating Member that portion of the sale proceeds to
which such Member is entitled by reason of its participation in such sale;
provided however, that if there is any material change in the terms and
conditions of the transaction described in the Tag-Along Rights Notice
(including, without limitation, any decrease in the purchase price) after a
Participating Member makes the election set forth above, then such Participating
Member has the right to withdraw from or reduce its participation in such
transaction any or all of its Interests.
(D) FUTURE RIGHTS. The exercise or non-exercise of the
rights of the Participating Members to participate in one or more sales of
Interests made by a Selling Member shall not adversely affect the rights of the
Participating Member to participate in subsequent sales by a Selling Member
pursuant to this Section 9.8.
(E) LIMITS AND TERMINATION. The provisions of this
Section 9.8 shall not pertain or apply to: (i) Transfers made in accordance with
the provisions of Section 9.2(c) and,
30
in the case of Participating Members, Section 9.8 hereof; and (ii) sales
pursuant to an effective registration statement under the Securities Act.
ARTICLE X.
DISSOLUTION AND TERMINATION OF THE COMPANY
10.1 EVENTS CAUSING DISSOLUTION. Notwithstanding any other
provision of this Agreement, the Company shall be dissolved and its properties
and other assets liquidated and the proceeds therefrom distributed in the manner
and order provided for in Section 10.2 upon the first to occur of any one of the
following:
(a) The Consent of the Members Committee and the Consent
of the Members;
(b) The sale of all or substantially all the assets of
the Company;
(c) The bankruptcy or dissolution of a Member, unless the
business of the Company is continued by the affirmative vote of remaining
Members owning more than fifty percent (50%) of the remaining Sharing Ratios in
the Company within 90 days after such bankruptcy or dissolution, at which time
the remaining Members may agree to the appointment of one or more additional
Members, Managing Members, or both; otherwise, the death, insanity, purported
withdrawal, retirement or resignation from the Company or expulsion of any
Member shall not cause a dissolution of the Company; or
(d) The entry of a decree of judicial dissolution under
the Delaware Act.
10.2 DISTRIBUTION ON TERMINATION. Upon a dissolution and
termination of the Company, the Person (who may be the Managing Member)
appointed for such purpose by the Managing Member (the "LIQUIDATOR") shall
collect and marshal the Company's assets; sell such assets as such Liquidator
shall deem appropriate; provide for the payment of all of the legally
enforceable obligations of the Company that are not then due; and distribute the
proceeds and all other assets of the Company in the following order:
(a) First, in payment of debts and liabilities of the
Company which are then due (including loans by Members and Special Loans);
(b) Second, at the discretion of the Liquidator, to the
setting up of any reserves which the Liquidator may deem necessary, appropriate
or desirable for any contingent or unforeseen liabilities or obligations or for
debts or liabilities of the Company (and, at the expiration of such period as
the Liquidator shall deem necessary, advisable or desirable to accomplish
payment of any such obligations, the Liquidator shall distribute the remaining
reserves in the manner hereinafter provided); and
(c) Third, to the Members in accordance with the
priorities set forth in Section 5.6A.
31
10.3 AUTHORITY OF THE LIQUIDATOR. In carrying out the liquidation
proceedings the Liquidator shall have all of the powers and authority provided
to the Managing Member and the Members acting by Consent, and shall be entitled
to the benefits of limitation of liability and indemnification provided to the
Managing Member and Members in this Agreement.
10.4 LIQUIDATION STATEMENT. Each of the Managing Member and Members
shall be furnished with a statement prepared by the Liquidator, which shall set
forth the assets and liabilities of the Company as of the date of complete
liquidation. Upon the Company complying with the foregoing distribution plan,
the Members, if any, shall cease to be such, and the Liquidator shall execute,
acknowledge and cause to be filed such appropriate documents evidencing the
dissolution and winding up.
10.5 NO RESTORATION OF DEFICIT CAPITAL ACCOUNT. At no time during
or after the term of the Company shall a Member with a deficit balance in its
Capital Account have any obligation to the Company or to another Member or to
any other person to restore such deficit balance.
ARTICLE XI.
GENERAL PROVISIONS
11.1 DISPUTE RESOLUTION. The Members, the Managing Member and the
Company agree to negotiate in good faith to resolve any dispute between them
regarding this Agreement. If the negotiations do not resolve the dispute to the
reasonable satisfaction of all parties, then each party shall nominate one
senior manager of the functional rank of Vice President, general partner or
higher as its representative. These representatives shall, within 30 days of a
written request by any party to call such a meeting, meet in person and alone
(except for one assistant for each participant) and shall attempt in good faith
to resolve the dispute. If the disputes cannot be resolved by such senior
managers in such meeting, the parties agree that they shall, if requested in
writing by either party, meet within 30 days after such written notification for
one day with an impartial mediator and consider dispute resolution alternatives
other than litigation. If an alternative method of dispute resolution is not
agreed upon within 30 days after the one-day mediation, any party may begin
litigation proceedings. This procedure shall be a prerequisite before taking any
additional action hereunder.
11.2 FURTHER ASSURANCES. The Members agree to execute and deliver
to the Company, upon request, any and all additional certificates, instruments
and advice necessary to be filed, recorded or delivered in order to perfect the
formation, operation, termination and dissolution of the Company in accordance
with this Agreement, and to amend, supplement and cancel the Company's
Certificate as required, in the judgment of such Managing Member, to carry out
any of the foregoing.
11.3 AMENDMENTS. This Agreement may be amended at any time only by
the Consent of the Members Committee and the Consent of the Members.
32
11.4 NOTICES. Except as may be otherwise provided herein, all
notices and other communications required or permitted hereunder shall be in
writing and shall be conclusively deemed to have been duly given to the Members
or the Managing Member (a) when hand delivered; (b) when received when sent by
facsimile at the address and number set forth on Schedule 1 (provided, however,
that notices given by facsimile shall not be effective unless either (i) a
duplicate copy of such facsimile notice is promptly given by one of the other
methods described in this Section 11.4, or (ii) the receiving party delivers a
written confirmation of receipt for such notice either by facsimile or any other
method described in this Section 11.4); (c) three business days after deposit in
the U.S. mail with first class or certified mail receipt requested postage
prepaid as set forth on Schedule 1; or (d) the next business day after timely
deposit with a national overnight delivery service, postage prepaid, addressed
to the parties as set forth below with next business day delivery guaranteed,
provided that the sending party receives a confirmation of delivery from the
delivery service provider. A Member may change or supplement the addresses given
above, or designate additional addresses, for purposes of this Section 11.4 by
giving the Company and the other Members written notice of the new address in
the manner set forth above. Notices to the Company shall be given in the same
manner and shall be addressed to it at its principal place of business.
11.5 INCORPORATION BY REFERENCE. The recitals and Schedules to this
Agreement are hereby incorporated herein by this reference as if set forth here
in full.
11.6 SEVERABILITY. Subject to Section 2.5, if any term, provision,
agreement or condition of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, then such term, provision,
agreement or condition shall be deemed to be amended to the smallest degree
possible in order to make such term, provision, agreement or condition of this
Agreement valid or enforceable in accordance with the intent of the parties, and
the rest of this Agreement shall remain in full force and effect and shall in no
way be affected, impaired or invalidated.
11.7 COUNTERPARTS. The Members may execute this Agreement in one or
more counterparts, which shall, in the aggregate, constitute one instrument.
11.8 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of Delaware without
giving effect to any choice of law or conflict of law provision or rule (whether
of the State of Delaware or any other jurisdiction) that would call for the
application of the substantive laws of any jurisdiction other than the State of
Delaware.
11.9 SUCCESSORS. This Agreement shall be binding on and inure to
the benefit of the respective successors, assigns, and personal representatives
of the parties.
11.10 THIRD PARTY BENEFICIARIES. This Agreement is not intended to
create any rights or remedies in favor of any Person who is not a signatory to
this Agreement or in any way create any third-party beneficiary rights or
remedies, including (except as specifically provided to the contrary herein) on
behalf of any transferee not admitted as a Member.
33
11.11 COMPLETE AGREEMENT. This Agreement and the Certificate
constitute the complete and exclusive statement of agreement among the Members
and the Managing Member with respect to the subject matter herein and therein
and replace and supersede all prior written and oral agreements or statements.
No representation, statement, condition or warranty not contained in this
Agreement or the Certificate will be binding on the Members or Managing Member
or have any force or effect whatsoever.
11.12 PRONOUNS: STATUTORY REFERENCES. All pronouns and all
variations thereof shall be deemed to refer to the masculine, feminine, or
neuter, singular or plural, as the context in which they are used may require.
Any reference to the Code, the Treasury Regulations, the Delaware Act, or other
statutes or laws will include all amendments, modifications, or replacements of
the specific sections and provisions concerned.
11.13 HEADINGS. All headings herein are inserted only for
convenience and ease of reference and are not to be considered in the
construction or interpretation of any provision of this Agreement.
11.14 INTERPRETATION. In the event any claim is made by any Member
relating to any conflict, omission or ambiguity in this Agreement, no
presumption or burden of proof or persuasion shall be implied by virtue of the
fact that this Agreement was prepared by or at the request of a particular
Member.
11.15 ENTITY CLASSIFICATION. It is the intention of the Members that
the Company be treated as a partnership for income tax purposes. The Managing
Member shall, for and on behalf of the Company, take all steps as may be
required to maintain the Company's classification as a partnership for federal
and state tax purposes, including affirmatively (if required under Treasury
Regulation Section 301.7701-3) or protectively filing Form 8832 no later than 75
days after the effective date of this Agreement. By executing this Agreement,
each of the parties hereto consents to the authority of the Managing Member to
make any such election and shall cooperate in the making of such election
(including providing consents and other authorizations that may be required).
11.16 SPECIFIC PERFORMANCE. The parties recognize that irreparable
injury will result from a breach of any provision of this Agreement and that
money damages will be inadequate to fully remedy the injury. Accordingly, in the
event of a breach or threatened breach of one or more of the provisions of this
Agreement, any party who may be injured (in addition to any other remedies which
may be available to that party) shall be entitled to seek preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach of this Agreement or (ii) compelling the performance of any obligation
which, if not performed, would constitute a breach of this Agreement.
[SIGNATURES FOLLOW ON NEXT PAGE]
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IN WITNESS WHEREOF, this Amended and Restated Limited Liability Company
Agreement has been duly executed by each of the parties hereto.
▇▇▇▇▇ BROTHERS, INC. (AS MANAGING MEMBER)
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
MEMBERS:
BMHC FRAMING, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice-President of Finance
and Treasurer
▇▇▇▇▇ BROTHERS, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
35
MANAGING MEMBER'S ACKNOWLEDGMENT
IN WITNESS WHEREOF, the undersigned, by the signature of its authorized
representative below, hereby acknowledges and accepts its designation by the
Members as the Managing Member of the Company.
▇▇▇▇▇ BROTHERS, INC.
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
36
SCHEDULE 1
MEMBERS, SHARING RATIOS, CAPITAL CONTRIBUTIONS
AND DEEMED CONTRIBUTIONS
CAPITAL
CONTRIBUTIONS AND
DEEMED
MEMBERS' NAMES AND ADDRESSES SHARING RATIO CONTRIBUTIONS
---------------------------- ------------- -------------
MEMBERS:
▇▇▇▇▇ Brothers, Inc. 51%
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: __________________
BMHC Framing, Inc. 49%
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: __________________
TOTAL: 100%
37