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EXHIBIT 10.18
OPERATING AGREEMENT
OF
DELACO PROCESSING, L.L.C.
A Michigan Limited Liability Company
Dated as of September 3, 1997
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OPERATING AGREEMENT
OF
DELACO PROCESSING, L.L.C.
TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINITIONS
1.1 Definitions...........................................................................................1
ARTICLE II
FORMATION AND NAME, OFFICE, STATUTORY AGENT,
PURPOSE, PARTNERSHIP STATUS, POWERS AND TERM
2.1 Formation and Name....................................................................................5
2.2 Office................................................................................................5
2.3 Registered Office and Resident Agent..................................................................6
2.4 Purpose...............................................................................................6
2.5 Partnership Status....................................................................................6
2.6 Powers................................................................................................6
2.7 Term..................................................................................................6
2.8 Initial Costs.........................................................................................7
2.9 Equipping the Facility................................................................................7
2.10 Toll Processing.......................................................................................7
2.11 Marketing of Secondary and Surplus Material........................................................7
2.12 Employees........................................................................................7
2.13 Minority Business Enterprise Status...................................................................8
ARTICLE III
MEMBERS AND CAPITAL
3.1 Capital Contributions; Additional Members...............................................................8
3.2 Additional Funds........................................................................................9
3.3 Loans by Members........................................................................................9
3.4 No Priority Among Members...............................................................................9
3.5 No Interest on Capital Contributions; No Withdrawal of Capital..........................................9
3.6 Capital Accounts........................................................................................9
3.7 Actions of Members; Meetings of Members.................................................................9
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3.8 No Requirement to Restore Deficit in Capital Account...................................................10
3.9 Limited Liability of Members...........................................................................10
3.10 Confidentiality........................................................................................10
3.11 Competition Matters....................................................................................11
3.12 Investment Representations.............................................................................11
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1 Allocation of Profits and Losses.......................................................................12
4.2 Special Allocations and Other Provisions Relating to Allocations.......................................12
4.3 Cash Distributions.....................................................................................13
4.4 Distributions of Liquidation Proceeds Upon Liquidation.................................................13
4.5 Distributions in Kind on Liquidation...................................................................14
4.6 Certain Provisions of the Act Superseded...............................................................14
ARTICLE V
POWER, AUTHORITY, RIGHTS, DUTIES AND OBLIGATIONS OF
THE BOARD OF GOVERNORS
5.1 Management and Control of Company's Business and Affairs by Governors..................................14
5.2 Power and Authority of Governors.......................................................................15
5.3 Prohibited Actions.....................................................................................15
5.4 Management and Services Agreement......................................................................15
5.5 Management Personnel and Officers......................................................................15
5.6 Compensation and Expenses..............................................................................17
5.7 Budgets................................................................................................17
5.8 Meeting of Governors...................................................................................17
5.9 Liability..............................................................................................17
5.10 Indemnification........................................................................................17
5.11 Insurance..............................................................................................18
5.12 Bank Accounts..........................................................................................18
5.13 Tax Matters Member.....................................................................................18
5.14 Certain Provisions of the Act Superseded...............................................................19
ARTICLE VI
TRANSFERS OF INTERESTS BY MEMBERS; SUBSTITUTION OF MEMBERS
6.1 Transfer of Interests by Members.......................................................................19
6.2 Additional Restrictions on Transfers...................................................................19
6.3 Requirements for Substitution..........................................................................20
6.4 Obligations and Rights of Transferees..................................................................20
6.5 Distributions and Allocations in Respect of Transferred Interests......................................20
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6.6 Continuation Upon Transfer.............................................................................21
6.7 Restrictions Reasonable................................................................................21
6.8 Certain Provisions of the Act Superseded...............................................................21
ARTICLE VII
PROCEDURE ON LIQUIDATION
7.1 Liquidation............................................................................................21
7.2 Operations During Liquidation..........................................................................21
7.3 Time for Liquidation...................................................................................22
7.4 Termination............................................................................................22
ARTICLE VIII
BOOKS AND RECORDS, BANK ACCOUNTS
8.1 Maintenance of Books and Accounting Method.............................................................22
8.2 Fiscal Year............................................................................................22
8.3 Reports to the Members.................................................................................22
8.4 Tax Elections; Special Basis Adjustments...............................................................23
ARTICLE IX
AMENDMENTS AND MAJOR DECISIONS
9.1 Amendments Requiring Consent of the Governors..........................................................23
9.2 Major Decisions........................................................................................23
ARTICLE X
DISSOLUTION
10.1 Events of Dissolution - General.......................................................................24
10.2 Events of Dissolution - Elective......................................................................24
10.3 Events of Dissolution - Default.......................................................................24
10.4 Notice of Dissolution.................................................................................25
10.5 Winding Up............................................................................................25
10.6 Buy-Out Procedures....................................................................................25
10.7 Necessary Approvals...................................................................................26
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ARTICLE XI
GENERAL PROVISIONS
11.1 Non-Waiver............................................................................................26
11.2 Additional Documents and Instruments..................................................................26
11.3 Severability..........................................................................................26
11.4 Entire Agreement......................................................................................27
11.5 Provisions Binding....................................................................................27
11.6 Captions..............................................................................................27
11.7 Counterparts..........................................................................................27
11.8 Word Meanings.........................................................................................27
11.9 Applicable Law........................................................................................27
11.10 Dispute Resolution....................................................................................27
Exhibit 1 -- Description of Facility
Exhibit 2 -- Members and Percentage Interests
Exhibit 3 -- Major Decisions
Exhibit 4 -- Processing Agreement
Exhibit 5 -- Management and Services Agreement
Exhibit 6 -- Leased Employees Agreement
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OPERATING AGREEMENT OF DELACO PROCESSING, L.L.C.
THIS OPERATING AGREEMENT OF DELACO PROCESSING, L.L.C. (this
"Agreement"), effective as of the 3rd day of September, 1997 by and between QS
Steel Inc., a Michigan corporation, ("QS Steel"), and Delaco Supreme Tool & Gear
Co., a Michigan corporation ("Delaco Tool");
W I T N E S S E T H:
WHEREAS, the Members desire to enter into this Agreement and to cause
articles of organization to be filed with the Administrator of the Michigan
Department of Consumer and Industry Services, Corporations, Securities and Land
Development Bureau, thereby forming a limited liability company under the laws
of the State of Michigan; and
WHEREAS, this Agreement shall constitute the "Operating Agreement" of
Delaco Processing, L.L.C., within the meaning of that term as used in the Act;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings ascribed to them as follows:
Act means the Michigan Limited Liability Company Act, Mich. Comp. ▇▇▇▇
▇▇▇. Section 450.4101 et seq., Mich. Stat. ▇▇▇. Section 21.198 et seq.,
governing, among other matters, certain aspects of the formation, operation and
dissolution of limited liability companies in Michigan, as the same may be
amended from time to time.
Adjusted Capital Account Deficit means the deficit balance, if any, in
a Member's Capital Account at the time in question, after (i) reducing the
amount of such deficit by the amount, if any, of such Member's Restoration
Obligation and (ii) increasing the amount of such deficit by the amount, if any,
of the items described in paragraphs (4), (5) and (6) of Section
1.704-1(b)(2)(ii)(d) of the Allocation Regulations. The determination of a
Member's Adjusted Capital Account Deficit is made for purposes of
Section 1.704-1(b)(2)(ii)(d) of the Allocation Regulations and shall be made
consistently therewith.
Affiliate of a Person means an Entity which, directly or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, such Entity.
Agreement means this Operating Agreement, as the same may be modified,
amended, supplemented and/or restated from time to time in accordance with its
terms and applicable law.
Allocation Regulations means the Income Tax Regulations promulgated
under Code Section 704(b) (regarding partners' distributive shares of
partnership tax items), as currently in
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effect, and as modified and clarified by amendment, successor regulation,
ruling, court decision or other Income Tax Regulation relating to partners'
distributive shares.
Articles of Organization means the Articles of Organization of the
Company filed with the Department upon execution of this Agreement as required
by the Act, as amended and/or restated from time to time in accordance with the
terms of this Agreement and applicable law.
Bankruptcy, in reference to a Member, means that event and date when
(i) the Member makes an assignment for the benefit of creditors; (ii) the Member
files a voluntary petition in bankruptcy; (iii) the Member is adjudicated as
bankrupt or insolvent; (iv) the Member files a petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law, or regulation; (v) the
Member files an answer or other pleading admitting or failing to contest the
material allegations of a petition filed against it in any proceeding of the
type referred to in clause (iv); (vi) the Member seeks, consents to, or
acquiesces in the appointment of a trustee, receiver, or liquidator of such
Member or of all or any substantial part of its property; (vii) ninety (90) days
or more have elapsed after the commencement of any proceeding against the Member
seeking reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any statute, law, or regulation, if the
proceeding has not been dismissed prior thereto; (viii) ninety (90) days or more
have elapsed after the appointment without its consent or acquiescence of a
trustee, receiver, or liquidator of the Member or of all or any substantial part
of its property, if such appointment has not been vacated or stayed prior
thereto; or (ix) ninety (90) days have elapsed after the expiration of any such
stay, if such appointment has not been vacated.
Capital Account has the meaning specified in Section 3.6.
Capital Contribution means the total amount of cash and/or property
contributed to the Company by each Member as shown in Schedule OA-2, as such
Schedule OA-2 may be modified, supplemented or amended from time to time in
accordance with this Agreement and applicable law, plus any other contributions
to the capital of the Company made by a Member, in such Member's capacity as a
Member, pursuant to the terms of this Agreement, in respect of the Interest of
such Member in the Company.
Code means the Internal Revenue Code of 1986, as amended, or the
corresponding provisions of any subsequent federal income tax law.
Company means Delaco Processing, L.L.C., a Michigan limited liability
company.
Company Minimum Gain means "partnership minimum gain" as set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Allocation Regulations.
Confidential Information means all records and accounts of the Company,
and any technical data or other know-how or information which, prior to or
subsequent to the date of this Agreement, has been or may be disclosed by a
Member or any of its Affiliates, directly or indirectly, to any other Member or
an Affiliate of any other Member (a) in writing and identified in writing as
being confidential at the time of or prior to such disclosure or (b) orally and
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identified at the time of disclosure as confidential and promptly thereafter
identified and described in writing as confidential or (c) is so obviously
confidential that no such identification is necessary.
Consent of a Member or a Governor means the consent of such Member or
Governor, which shall be deemed to have been given if: (a) such consent is given
in a vote (either in person or by proxy) at a duly called meeting of the Member
or Governors, as the case may be, called and held in accordance with the
provisions of this Agreement, or (b) such consent is delivered in writing to
each other Member, in the case of a Member, or to each other Governor, in the
case of a Governor. Such consent may be withheld by any Member or Governor, in
such Member's or Governor's sole and absolute discretion, for any reason or for
no reason at all.
Department means the Administrator of the Michigan Department of
Commerce, Consumer and Industry Services, Corporation Securities and Land
Development Bureau.
Entity means any limited liability company, general partnership,
limited partnership, corporation, joint venture, trust, real estate investment
trust, business trust, estate or association.
Facility means the facility of the Company as defined in Section 2.4.
General Manager means the General Manager appointed and serving from
time to time in accordance with Section 5.5, if any.
Governor means an individual appointed and serving as a Governor in
accordance with Section 5.1 of this Agreement. The Board of Governors shall be
deemed to be the "Managers" in respect of the Company, within the meaning of
that term as used in the Act.
Income Tax Regulations means those regulations promulgated under the
Code. Whenever reference is made to any Income Tax Regulation, unless otherwise
specified, such reference shall include any amendments or successor regulations
thereto.
Interests means the interests in the Company of the Members, including
such Members' respective shares of, and rights to receive distributions and
allocations of, the business, property, assets, capital, profits and losses of
the Company, subject to and as provided in this Agreement and the Act. The
holder of an Interest shall have no right to participate in the management of
the business and affairs of the Company under the terms of this Agreement unless
such holder is also a Member.
Losses means the net losses of the Company for federal income tax
purposes (or as may be otherwise required to comply with the Allocation
Regulations) as determined as of the close of the Company's fiscal year and,
when the context requires, related items of deduction or loss, tax preference,
credits and depreciation, provided that "Losses" shall include items described
in Code Section 705(a)(2)(B) or required by the Income Tax Regulations to be
treated as so described.
Major Decisions means any of the decisions, actions or inactions
referred to and described in Exhibit 3 hereto.
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Member means each Entity identified as a member on Exhibit 2, as such
Exhibit 2 may be modified, supplemented or amended from time to time in
accordance with this Agreement and applicable law, and any Entity which may be
admitted as an additional or Substitute Member as provided herein. Unless the
context otherwise requires, the term "Member" refers to any one of the Members
and to all the Members.
Member Loan shall mean a loan made by a Member to the Company in
accordance with the provisions of this Agreement.
Member Nonrecourse Debt shall mean "partner nonrecourse debt" as set
forth in Section 1.704-2(b)(4) of the Allocation Regulations.
Member Nonrecourse Debt Minimum Gain shall mean "partner nonrecourse
debt minimum gain" as set forth in Section 1.704-2(i) of the Allocation
Regulations.
Member Nonrecourse Deductions shall mean "partner nonrecourse
deductions" as set forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the
Allocation Regulations.
Nonrecourse Deductions has the meaning set forth in Sections
1.704-2(b)(1) and 1.704-2(c) of the Allocation Regulations.
Nonrecourse Liability has the meaning set forth in Section
1.704-2(b)(3) of the Allocation Regulations and Section 1.752-1(a)(2) of the
Income Tax Regulations.
Owning Party has the meaning specified in Section 3.10(a).
Percentage Interests means the percentage interests of the Members in
the Company as set forth on Exhibit 2, as amended from time to time.
Person means any natural person or Entity.
Profits means the net profits of the Company for federal income tax
purposes (or as may otherwise be required to comply with the Allocation
Regulations) as determined as of the close of the Company's fiscal year, and,
when the context requires, related items of income or gain, provided that
Profits shall include income exempt from tax.
Quarter means a fiscal quarter of the Company.
Related Agreements means the Management and Services Agreement, the
Processing Agreement, and the Leased Employees Agreement to be executed in
connection with this Agreement.
Restoration Obligation means, with respect to any Member, the sum of
(i) the amount of any express, unconditional obligation of such Member pursuant
to this Agreement to restore to the Company the amount of any deficit in such
Member's Capital Account, which meets the timing requirements of the Allocation
Regulations, and (ii) the amount of any deficit balance in such Member's Capital
Account which such Member is treated as obligated to restore pursuant to
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(A) Section 1.704-1(b)(2)(ii)(c) of the Allocation Regulations and (B) the
penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the
Allocation Regulations. Computation of the amount of a Member's Restoration
Obligation, and any determinations related thereto, shall be made in accordance
with the Allocation Regulations.
Retirement means, with respect to any Member, (i) the Bankruptcy of
such Member; (ii) the Member's retirement, resignation, expulsion or other
withdrawal from the Company; (iii) the Transfer by the Member of all of the
Member's Interest in compliance with this Agreement (other than (A) an
assignment merely of its right to receive distributions or (B) a pledge,
hypothecation or other collateral assignment of its rights before the time such
pledge, hypothecation or other collateral assignment becomes absolute); (iv) if
such Member is a corporation, the filing of a certificate of dissolution, or its
equivalent, for said corporation, or the revocation of its charter; or (v) if
such Member is a separate limited liability company or partnership, the
dissolution and termination of such separate limited liability company or
partnership. If this Operating Agreement is amended to permit individuals to be
Members, the death or incapacity of such individual shall also be a Retirement.
Schedules means the Schedules for the Operating Agreement, the
Management and Services Agreement, the Processing Agreement and the Leased
Employees Agreement, which shall be included in a separate "Schedule Packet", if
any.
Site means the land on which the Facility, and all fixtures and
improvements from time to time added to the Facility is built, including a
permanent easement of ingress and egress at all times over roads and
transmission facilities providing access to the Facility.
Substitute Member means any Entity which acquires an Interest from a
Member and is admitted to the Company as a Member.
Tax Matters Member means the Entity at the time designated as such
pursuant to Section 5.14 of this Agreement.
Transfer means a sale, assignment, transfer, conveyance, pledge,
encumbrance, grant, gift or other disposition, whether direct or indirect,
voluntary, involuntary or by operation of law, or with or without consideration.
ARTICLE II
FORMATION AND NAME, OFFICE, REGISTERED OFFICE AND RESIDENT AGENT,
PURPOSE, PARTNERSHIP STATUS, POWERS AND TERM
2.1 FORMATION AND NAME. The Company shall be and is formed upon the
filing of the original Articles of Organization with the Department in
accordance with the provisions of the Act, under the name of DELACO PROCESSING,
L.L.C., as a limited liability company under the Act.
2.2 OFFICE. The principal offices of the Company at which its books and
records shall be kept shall be maintained at ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇,
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or at such other location as the Governors may from time to time determine. The
Governors shall notify the Members of any change in the principal offices of
the Company.
2.3 REGISTERED OFFICE AND RESIDENT AGENT. The Registered Office of the
Company shall be maintained at 8111 Tireman, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇. The
Resident Agent of the Company shall be ▇▇. ▇▇▇▇▇ ▇▇▇▇, an individual resident of
Michigan whose business address is the same as that of the Registered Office.
The Governors have the right, power and authority to change the location of the
Registered Office and to revoke the appointment of the Resident Agent of the
Company from time to time, and to appoint a substitute or replacement Resident
Agent, in accordance with applicable law. The Governors shall notify the Members
of any change in the Registered Office of Resident Agent of the Company.
2.4 PURPOSE. The purpose of the Company is to equip and operate a steel
slitting and processing facility, as more particularly described in Exhibit 1
hereto (the "Facility) on the Site in Dearborn, Michigan, which Facility shall
generally be equipped as described in Schedule OA-1, and to engage in any and
all acts or activities incidental thereto for which limited liability companies
legally may be formed in the State of Michigan.
2.5 PARTNERSHIP STATUS. It is intended that the Company be treated as a
partnership for federal income tax purposes (but not for liability purposes).
Accordingly, this Agreement shall be construed in a manner that ensures the
Company's classification as a partnership for federal income tax purposes at all
times, and any provision of this Agreement that would have the effect of
preventing the Company from being classified as a partnership for federal income
tax purposes shall be null and void. The Members shall take all actions, and
execute, acknowledge and deliver all documents, including without limitation any
tax election forms, which in the judgment of the Governors, or in the opinion of
counsel satisfactory to the Governors, are necessary or desirable to obtain
and/or maintain the Company's classification as a partnership for such tax
purposes at all times.
2.6 POWERS. In furtherance of the Company's purposes, the Company shall
have all of the powers granted or permitted to a limited liability company under
the laws of the State of Michigan, including, without limitation, the powers
specifically enumerated in the Act.
2.7 TERM. The term of the Company commenced with the filing of Articles
of Organization with the Department. The Company shall continue until dissolved
upon the occurrence of the earliest of (a) December 31, 2025, (b) the passage of
ninety (90) days from the sale or other disposition of all or substantially all
of the assets of the Company unless the Governors elect to continue the Company
for the sole purpose of collecting the proceeds of such sale or other
disposition, (c) the Retirement of any Member, unless the Company is continued
as provided in Section 6.6 or a Substitute Member is admitted and all Members
consent to a continuation of the Company; (d) the voluntary or elective
dissolution of the Company; (e) at any time when there are less than two Members
of the Company, unless the sole remaining Member admits a Substitute Member to
the Company; or (f) the entry of a judicial decree of dissolution; and shall
terminate as soon as the winding up of its affairs upon such dissolution has
been completed. The provisions of this Section 2.7 are intended to and shall, to
the fullest extent
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permitted by law, supersede the provisions of the Act regarding the dissolution
of limited liability companies.
2.8 INITIAL COSTS. The anticipated initial capital, funding and other
costs and cash needs for the Company are as set forth on Schedule OA-1. The
parties shall amend Schedule OA-1 from time to time prior to start-up of the
facility to reflect any changes in such costs or cash needs. The Members shall
each bear their own management time and attorneys fees incurred in connection
with the preparation of this Agreement and the related documents.
2.9 EQUIPPING THE FACILITY. Members have agreed upon the design and
equipping of the Facility as set forth in Schedule OA-1. Any changes to or
improvement of the Facility shall require approval of the Board of Governors.
2.10 TOLL PROCESSING.
(a) The Members intend that the Company will offer slitting
services to any customer that may provide appropriate earnings opportunities. It
is intended, however, that QS Steel and Delaco Tool will make every effort to
insure the effective utilization of the equipment installed by the Company.
(b) A toll slitting pricing schedule shall be established by
the Company for any processing performed for the Members. This schedule will be
based on processing costs, return on investment considerations and other
relevant factors all of which shall be set forth in the Processing Agreement.
2.11 MARKETING OF SECONDARY AND SURPLUS MATERIAL. QS Steel or its
affiliate, Rouge Steel Company, will on occasion sell to the Company certain
amounts of secondary and surplus steel material. The amount of such material
sold to the Company and the frequency of such sales will be at the sole
discretion of QS Steel. The selling price to the Company for such material shall
be comparable to the price for which this same material is sold by QS Steel or
Rouge Steel Company to other customers of this material. If necessary, the
Company will engage an agent to effectively re-sell this material. For such
services, the agent will receive a management fee to be determined.
2.12 EMPLOYEES. Most of the employees will be leased by the Company.
Delaco Tool may supply certain non-management employees to the Company on a
lease type basis from time to time ("Direct Employees") and the cost (including
benefits) will be charged to the Company and paid to Delaco Tool. The Company
and Delaco Tool or Delaco Tool's designee shall enter into a Leased Employees
Agreement in the form of Exhibit 6 to cover Direct Employees leased from Delaco
Tool or its designee. Management services received from employees of Delaco Tool
will be covered under the Management and Services Agreement referred to in
Section 5.4.
2.13 MINORITY BUSINESS ENTERPRISE STATUS. The Members have formed the
Company with the specific intention of having the Company certified as a
bonafide Minority Business Enterprise ("MBE") by the Michigan Minority Business
Development Council ("MMBDC"). As soon as reasonably practical after formation
of the Company, an MBE
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certification application will be completed and submitted to the MMBDC for
approval. All members agree to take all actions reasonably necessary to
accomplish the certification of the Company as an MBE. Upon approval of the
Company as an MBE by the MMBDC, no member will take any actions which would
jeopardize the Company's status as a certified MBE.
ARTICLE III
MEMBERS AND CAPITAL
3.1 CAPITAL CONTRIBUTIONS; ADDITIONAL MEMBERS.
(a) Capital Contributions. The total initial Capital
Contribution to the Company to be made by the Members shall be to fund the
venture's cash needs as set forth in Schedule OA-1, with each Member paying its
prorata share thereof, in accordance with its Percentage Interest. Accordingly,
Delaco Tool' s total initial contribution shall be 51% and QS Steel's
total initial capital contributions shall be 49% of the Company's initial cash
needs as set forth in Schedule OA-1. The initial capital contributions shall be
made by the Members either in lump sums or in periodic payments as determined
by the Board of Governors. Payments of the Capital Contributions shall be made
by the Members within ten business days after the request of the Board of
Governors.
(b) Failure to Contribute. Should either Member fail to pay
all or a portion of its Capital Contribution on time, the other Member may, but
need not, loan such funds to the Company. If a Member fails to make its capital
contribution, it shall be obligated to pay to the Company interest compounded
monthly at the prime interest rate in effect on date the payment was due, quoted
by First Chicago-NBD, as publicly announced, plus 3%, or the maximum amount as
may be permitted by applicable law, whichever is less. Such interest shall
accrue on the date the contribution was due and shall cease to accrue on the
date the contribution is finally made to the Company by the non-contributing
Member. Upon receipt by the Company of such funds from the previously
non-contributing Member, the Member who covered for the non-contributing Member
shall be repaid by the Company for the amount covered, plus interest as set
forth above. In addition, during such period of non-contribution, the covering
Member shall have a lien on the Capital Account of the non-contributing Member
for the amount of its cover.
In addition to the foregoing, at any time a non-contributing
Member has not paid its appropriate Capital Contribution, it shall be considered
in default of its obligations under the Operating Agreement. Accordingly, the
non-defaulting Member shall be entitled, by written notice to the
non-contributing Member, to call the non-contributing Member in default and if
payment is not made within 15 business days after such notice, then the
provisions of Section 10.3 may be invoked by the non-defaulting Member and once
such provisions have been invoked, the non-contributing Member shall no longer
be able to cure its failure to make its contribution.
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3.2 ADDITIONAL FUNDS . Any funds required by the Company in excess of
the Capital Contributions by the Members shall be obtained from borrowings by
the Members which shall be presented and approved by the Board of Governors.
3.3 LOANS BY MEMBERS. Any Member may, but is not obligated to, loan to
the Company such sums as the Governors determine to be appropriate for the
conduct of the Company's business. Any such Member loans shall be made on such
terms and for such maturities as are approved by the Consent of the Governors.
3.4 NO PRIORITY AMONG MEMBERS. No Member shall have priority over any
other Member either as to the return of its original capital contribution or as
to distributions by the Company, except as specifically provided in this
Agreement.
3.5 NO INTEREST ON CAPITAL CONTRIBUTIONS; NO WITHDRAWAL OF CAPITAL. No
interest shall be paid by the Company to any Member with respect to any Capital
Contribution. Except as otherwise specifically set forth in this Agreement, no
Member shall have the right to (a) demand to receive property other than cash in
return for its Capital Contribution or as distributions of income, (b) withdraw
any part of its Capital Contribution (regardless of whether or not such Member
has withdrawn from the Company), or (c) demand to receive any funds or property
of the Company.
3.6 CAPITAL ACCOUNTS. A single Capital Account shall be established,
determined and maintained for each Member on the books and records of the
Company in accordance with the provisions of the Allocation Regulations. The
property of the Company shall be revalued on the books of the Company in any
case in which such revaluation is required by the Allocation Regulations and may
be revalued in any case where such revaluation is permitted by the Allocation
Regulations and such revaluation is determined to be appropriate by the Members.
Any such revaluation shall be carried out in accordance with the principles and
methodology agreed to by the Members. In the event any Company property is
revalued on the books of the Company in accordance with the Allocation
Regulations, the Members' Capital Accounts shall be adjusted in accordance with
the Allocation Regulations to reflect such revaluations and for allocations to
them of Profits and Losses, and items thereof, as computed for book purposes,
with respect to such property. In the event the property of the Company is
revalued on the books of the Company, all Company property shall be valued for
such purpose at its fair market value, as determined by the Members.
3.7 ACTIONS OF MEMBERS; MEETINGS OF MEMBERS. Any action or inaction by
Consent of Members holding greater than 50% of the Percentage Interests shall
constitute an action of the Members. Any Member may from time to time by written
notice to each other Member call a meeting of the Members. Upon receipt of a
written request for such a meeting, the Members shall promptly, and in any event
not later than ten (10) days after receipt of such request, fix a place and time
for such meeting. To the extent possible, such meeting shall be held at a place
convenient to all the Members. Such meeting shall be held not less than fifteen
(15) nor more than sixty (60) days after receipt of a request for a meeting
unless the Members otherwise agree. In the absence of agreement of Members, such
meeting shall be held at 10:00 a.m. local time on the first business day falling
on or after the fifteenth (15th) day after receipt of a request for a
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meeting at the principal place of business of the Company. Meetings of the
Members may be held through any communications equipment if all those
participating can hear each other and participation in any such meeting shall
constitute presence thereat.
3.8 NO REQUIREMENT TO RESTORE DEFICIT IN CAPITAL ACCOUNT. Nothing
contained in this Agreement shall be construed to require any Member to restore
any deficit in its Capital Account.
3.9 LIMITED LIABILITY OF MEMBERS. Subject to the provisions of the Act,
the liability of a Member for the debts and obligations of the Company shall be
limited to the amount of such Member's Capital Contribution, and no Member shall
be obligated to contribute money to the Company or to otherwise answer for an
obligation of the Company beyond such Member's obligation to pay such Member's
Capital Contribution, except to the extent required by law.
3.10 CONFIDENTIALITY.
(a) Restrictions on Disclosure. Each Member, on behalf of
itself and its Affiliates, agrees with respect to the Confidential Information
of the Company or the other Member (the "Owning Party"), to:
(i) treat in strict confidence such Confidential
Information and use reasonable efforts to ensure that its employees and
others subject directly or indirectly to its control shall not
reproduce, disclose or make available to any third party any of such
Confidential Information;
(ii) limit access to such Confidential Information to
such of its employees and representatives, including without limitation
members of each Member's outside law and accounting firms, as may be
reasonably required in connection with the activities of the Company as
contemplated by this Agreement; and
(iii) not use such Confidential Information for any
purpose other than the activities of the Company as contemplated by
this Agreement;
unless the Owning Party otherwise consents thereto in writing. Without limiting
the generality of the foregoing, each Member and its Affiliates specifically
agrees not to directly or indirectly use or disclose Confidential Information in
any judicial or administrative proceeding, unless (i) served with compulsory
process or otherwise required by law, or (ii) consented to by the other Member.
(b) Exceptions. The obligations of each Member and its
Affiliates set forth in Section 3.10(a) shall not apply to Confidential
Information which:
(i) is or becomes generally available to the public
other than as a result of disclosure by the Member or its Affiliates in
whom the Confidential Information is confided;
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(ii) becomes available to the confidant Member on a
non-confidential basis from a source other than the Owning Party, or
its Affiliates, and provided that such source has represented to the
confidant Member (and which confidant Member has no reason to
disbelieve after due inquiry) that it is entitled to disclose the
Confidential Information; or
(iii) was known to the confidant Member on a
non-confidential basis prior to the disclosure thereof to the confidant
Member by the Owning Party or its Affiliates.
(c) Return of Confidential Information. All Confidential
Information furnished by any Member to the other Member shall be returned by
such other Member to the Owning Party immediately upon the request of the Owning
Member. The confidentiality obligations and restrictions on use contained in
this Section 3.10 shall survive this Agreement.
3.11 COMPETITION MATTERS.
(a) Acknowledgment of Competitive Situation. Each Member
acknowledges that it and its Affiliates now are and/or hereinafter may be
engaged in businesses which may compete with, relate to or are similar to the
businesses of each other. Because the Members may compete with each other in
various areas, no Member shall be obligated to render any information to any
other Member, on demand or otherwise, if the Member reasonably believes it to be
inappropriate to disclose such information to a competitor.
(b) Dealing with Company. Nothing in this Agreement shall be
construed to prevent a Member, or its Affiliates, or entity in which a Member,
or its Affiliates, shall have an interest, from dealing with the Company in good
faith as vendor, customer or otherwise in a manner not specifically covered by
this Agreement, provided the Member or entity shall have given notice of such
interest to the Governors, and the Governors designated by the unaffiliated
Member shall have approved or ratified such dealing.
3.12 INVESTMENT REPRESENTATIONS .
(a) Each Member represents and warrants to the other Member
and the Company as follows: (i) such Member is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization;
(ii) such Member has full power and authority to execute, deliver and perform
such Member's obligations under this Agreement and the Related Agreements;
(iii) such Member has duly authorized, executed and delivered this Agreement and
has duly authorized the performance of such Member's obligations under this
Agreement and the Related Agreements; and (iv) such Member's authorization,
execution, delivery and performance under this Agreement and the Related
Agreements do not and will not conflict with any organizational document,
agreement or law applicable to such Member or by which such Member is bound.
(b) Each Member further represents and warrants to the Company
that such Member is acquiring such Member's Interest for such Member's own
account and not with a view toward the distribution or resale thereof, and each
Member agrees that such Member will not sell
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or offer to sell all or any portion of its Interest, or negotiate in respect
thereof with any Person or Persons whomsoever, so as thereby to bring the
transaction in which such Member acquired such Member's Interest or any other
offering of interests in the Company within the provisions of Section 5 of the
Securities Act of 1933, as amended, or the registration requirement of any
other federal or state securities statute.
(c) Each Member further represents and warrants to the other
Member and the Company that (i) such Member has been given access to all
information concerning the Company and the terms and conditions of the Interest
such Member is purchasing hereby; (ii) such Member understands and acknowledges
that the Interest such Member is purchasing hereby is a speculative investment
and involves a high degree of risk and that no federal or state agency has made
any finding or determination as to the fairness for public or private investment
in, nor any recommendations or endorsement of, such Interest as an investment;
(iii) such Member has such knowledge and experience in business and financial
matters that such Member is capable of evaluating the merits and risks of an
investment in such Interest; and (iv) such Member's financial situation is such
that such Member can afford the risks of an investment in such Interest.
ARTICLE IV
ALLOCATIONS AND DISTRIBUTIONS
4.1 ALLOCATION OF PROFITS AND LOSSES. Except as provided in Section
4.2, Profits and Losses shall be allocated among the Members in proportion to
their respective Percentage Interests.
4.2 SPECIAL ALLOCATIONS AND OTHER PROVISIONS RELATING TO ALLOCATIONS.
(a) Allocation of Nonrecourse Deductions. Any Member
Nonrecourse Deductions for any fiscal year shall be specially allocated to the
Members who bear the economic risk of loss with respect to the Member
Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in
accordance with the Allocation Regulations. Such Members shall be specially
allocated items of Company income and gain as are required by the "chargeback of
partner nonrecourse debt minimum gain" requirements of the Allocation
Regulations.
(b) Manner of Allocation. Nonrecourse Deductions for any
fiscal year shall be specially allocated to the Members (with the Members
intending to satisfy the reasonable consistency requirement contained in the
Allocation Regulations as a result of this allocation) in proportion to their
respective Percentage Interests. Such Members shall be specially allocated items
of Company income and gain as are required by the "minimum gain chargeback"
requirements of the Allocation Regulations.
(c) Disallowed Deduction. If the deduction of all or any part
of any fee paid by the Company to a Member is disallowed by recharacterizing
such fee as a distribution to such Member, such Member shall be, to the extent
permitted by the Code, allocated items of
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Company income and gain for the taxable year in which such disallowed deduction
was claimed by the Company in the amount of such disallowed deduction.
(d) Qualified Income Offset. In the event any Member's
unexpected receipt of any adjustments, allocations or distributions described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6) of the Allocation Regulations causes such Member to have
(or increases) an Adjusted Capital Account Deficit, items of Company income and
gain shall be specially allocated to each such Member in an amount and manner
sufficient to eliminate, to the extent required by the Allocation Regulations,
the Adjusted Capital Account Deficit of such Member as quickly as possible,
provided that an allocation pursuant to this Section 4.2(d) shall be made only
if and to the extent that such Member would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article IV have been
tentatively made as if this Section 4.2(d) were not in the Agreement.
(e) Curative Allocations. The allocations set forth in
paragraphs (a), (b) and (d) of this Section 4.2 (the "Regulatory Allocations")
are intended to comply with certain requirements of the Allocation Regulations.
It is the intent of the Members that, to the extent possible, all Regulatory
Allocations will be offset either with other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss or deduction
pursuant to this Section 4.2(e). Therefore, notwithstanding any other provision
of this Article IV (other than the Regulatory Allocations), the Members shall
make such offsetting special allocations in whatever manner the Members
determine appropriate so that, after such offsetting allocations are made, each
Member's Capital Account balance is, to the 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 Company items were allocated pursuant to
Section 4.1. In exercising its discretion under this Section 4.2(e), the Members
may take into account future Regulatory Allocations under the last sentence of
each of Sections 4.2(a) and 4.2(b) that, although not yet made, are likely to
offset other Regulatory Allocations previously made under the first sentence of
each of Sections 4.2(a) and 4.2(b), respectively.
4.3 CASH DISTRIBUTIONS. Cash shall be distributed to the Members
from the Company in such amounts and at such times as the Governors may
determine, consistent with the Act. Each distribution of cash shall be made to
the Members in proportion to their respective Percentage Interests in the
Company at the time of such distribution. The Company shall distribute to the
Members any cash in excess of the Company's current and reasonably anticipated
future cash needs. It is the intent of the Company, to the extent cash is
available, to make sufficient cash distributions to the Members to fund federal
income tax payments which may become owing by the Members on the Company's
Profits. In such case, the cash distributed to the Members shall be based on the
higher of the two Members' applicable tax rates then in effect.
4.4 DISTRIBUTIONS OF LIQUIDATION PROCEEDS UPON LIQUIDATION. Upon
the liquidation of the Company, the Governors shall attempt to liquidate the
assets of the Company and the proceeds of such liquidation shall be applied and
distributed in the following order of priority:
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(i) First, to creditors, including Members who are creditors,
to the extent permitted by law, in satisfaction of liabilities of the Company
(other than liabilities to Members for distributions of cash to which they may
be entitled), and to the expenses of liquidation;
(ii) Second, to the setting up of reserves that the Governors
determine are necessary to pay all contingent, conditional or unmatured claims
and obligations that are known to the Company and all claims and obligations
that are known to the Company but with respect to which the claimant or obligee
is unknown; such reserves may be paid over by the Governors to any attorney at
law or other party selected by the Governors, as escrow agent to be held for
disbursement in payment of any of the aforementioned liabilities or obligations,
or at the expiration of such period as shall be deemed advisable by the
Governors, for distribution in accordance with clause (c) of this Section 4.4;
(iii) Thereafter, to the Members in accordance with their
respective positive Capital Account balances, determined after all allocations
pursuant to Sections 4.1 through 4.2 (including, without limitation, allocations
to reflect the gain or loss recognized upon the sale of the Company's assets)
and all distributions pursuant to Section 4.3 have been made, but before any
distributions pursuant to this Section 4.4(c) are made.
4.5 DISTRIBUTIONS IN KIND ON LIQUIDATION. Upon the liquidation of
the Company, to the extent the Company's assets are not sold or otherwise
disposed of, such assets (if any) may be distributed in kind to the Members as
follows: the value of such assets shall be appraised (by an appraiser selected
by the Governors) to determine the Profits and Losses that would have resulted
if such assets had been sold; the Capital Account of each Member shall be
credited or debited with such Member's respective share of the hypothetical
gains or losses resulting from such assumed sales in the same manner as such
Capital Account would have been credited or debited on the actual disposition of
such assets; and such assets shall be distributed in accordance with the
Members' Capital Account balances as thus adjusted, each Member taking an
undivided interest in such assets subject to a pro rata share of the Company's
liabilities.
4.6 CERTAIN PROVISIONS OF THE ACT SUPERSEDED. The provisions of
this Agreement regarding allocations and distributions among the Members are
intended to and should, to the fullest extent permitted by law, supersede the
provisions of the Act regarding allocations and distributions.
ARTICLE V
POWER, AUTHORITY, RIGHTS, DUTIES AND OBLIGATIONS OF THE BOARD OF GOVERNORS
5.1 MANAGEMENT AND CONTROL OF COMPANY'S BUSINESS AND AFFAIRS BY
GOVERNORS. Subject to the restrictions hereinafter set forth, the Governors
shall have full and exclusive right, power and authority to conduct the business
and manage the affairs of the Company in accordance with the terms and
conditions of this Agreement. Any action or inaction by Consent of Governors
designated by Members holding greater than 50% of the Percentage Interests shall
constitute the action of the Governors and shall bind all of the Governors and
the Company. No Governor, acting alone, shall have the power or authority to
bind the Governors or the Company. The
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Governors may delegate such power and authority by Consent of Governors
designated by Members holding a majority of the Percentage Interests. Each
Member shall be entitled to name one Governor for each 25%, or part thereof, of
Percentage Interests held by such Member. Delaco Tool shall be entitled to
designate three Governors and QS Steel shall be entitled to designate two
Governors. Each Governor shall serve at the pleasure of the Member entitled to
designate such Governor. All designations and removals of Governors shall be
made by written notice by the designating or removing Member, as the case may
be, to the other Members.
5.2 POWER AND AUTHORITY OF GOVERNORS. The Governors shall have
all power and authority necessary to carry out the purposes, business and
objectives of the Company.
5.3 PROHIBITED ACTIONS .The Governors may not:
(i) change the nature of the business of the Company
or enter into any business other than or in addition to that
contemplated by this Agreement:
(ii) sell, exchange, transfer, convey, assign,
mortgage, lease or otherwise dispose of all or substantially all of the
assets of the Company except to secure loans of the Company;
(iii) enter into any merger of or consolidation
involving the Company, whether or not the Company shall be the survivor
thereof;
(iv) authorize or undertake a major capital expansion
of the Company's facilities beyond that originally contemplated; and
(v) add new Members, except as permitted under
Article VI hereof.
5.4 MANAGEMENT AND SERVICES AGREEMENT . The Company shall enter
into a Management and Services Agreement with Delaco Tool or its designee
substantially in the form set forth in Exhibit 5 hereto, pursuant to which
Delaco Tool or its designee will provide certain management and other services
to the Company.
5.5 MANAGEMENT PERSONNEL AND OFFICERS .
(a) The Governors shall have the authority to nominate
Company officers and employ and dismiss from employment any and all Company
management personnel. Company officers and management personnel shall serve at
the pleasure of the Governors and may be removed at any time by the Governors,
subject to guidelines and policies established by the Governors from time to
time.
(b) Delaco Tool may nominate the Company's officers and
management personnel and shall consider candidates proposed by QS Steel. Such
nominations shall be subject to the approval of the Governors.
(c) The Company's officers and management personnel shall
provide general management and supervision for the Company and have such power
and duties as the
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Governors may assign. Initially, the Company's officers and General Manager or
other designated management personnel shall have the powers and duties set
forth as follows, subject to the Governors authority to amend such powers and
duties;
(i) oversee the operations of the business of the
Company;
(ii) execute and implement the plans and policies of
the Governors;
(iii) authorize the making of unbudgeted capital
expenditures in amounts not exceeding the dollar limitations as set by
the Governors;
(iv) authorize the execution, delivery and
performance of any contract or agreement to be entered into by the
Company in the ordinary course of business, involving an aggregate
amount of not more than the dollar limitations set by the Governors, or
consistent with approved budgets;
(v) execute and deliver on behalf of the Company any
and all contracts and agreements as shall have been approved by the
Governors if required under this Agreement or as provided in clause
(iv);
(vi) approve all expenditures and the payment of all
obligations of the Company in accordance with the authority provided by
or consistent with approved budgets and the plans and policies of the
Governors;
(vii) employ and dismiss from employment any and all
Company personnel, other than management personnel designated from time
to time by the Governors;
(viii) prepare or arrange for the preparation of
financial statements concerning the Company;
(ix) propose and prepare annual budgets and
operational plans of the Company;
(x) make recommendations to the Governors concerning
appropriate policies, procedures, facilities and equipment;
(xi) arrange for the obtaining of insurance by
the Company;
(xii) authorize the opening of bank accounts and the
establishment of other depository relationships on behalf of the
Company with such signatories and on such terms as the Governors shall
deem appropriate;
(xiii) oversee the preparation of financial
statements and tax information concerning the Company and its business,
and the preparation and filing of all Company tax returns, subject to
the authority of the Tax Matters Member;
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(xiv) supervise the procurement, construction,
erection and installation of facilities and improvements to the
facilities of the Company, consistent with approved budgets; and
(xv) authorize the employment and dismissal from
employment of any and all Company agents, independent contractors,
consultants, attorneys and accountants for amounts not in excess of the
dollar limitations as set by the Governors.
5.6 COMPENSATION AND EXPENSES. The philosophy and guidelines with
respect to the salary, benefits and other terms and conditions of employment of
the Company's management shall be established and reviewed from time to time by
the Governors. The officers shall be entitled to such compensation, if any, as
may be approved from time to time by the unanimous determination of the
Governors.
5.7 BUDGETS. The Governors shall consider and approve from time to time
budgets for the Company. Upon approval of a budget by the Governors, the
management personnel of the Company, shall have the right without further
consent or approval by the Governors, to incur and pay on behalf of the Company
the expenses set forth in such approved budget.
5.8 MEETINGS OF GOVERNORS . Any Governor may by written notice to each
other Governor call a meeting of all the Governors. Upon receipt of a written
request for such a meeting, the Governors shall promptly, and in any event not
later than ten (10) days after receipt of such request, fix a place and time for
such meeting. To the extent possible, such meeting shall be held at a place
convenient to all the Governors. Such meeting shall be held not less than
fifteen (15) nor more than sixty (60) business days after receipt of a request
for a meeting. In the absence of agreement by a majority of the Governors, such
meeting shall be held at 10:00 a.m. local time on the fifteenth (15th) business
day after receipt of a request for a meeting at the principal place of business
of the Company. Meetings of the Governors may be held through any communications
equipment if all those participating can hear each other and participation in
any such meeting shall constitute presence thereat.
5.9 LIABILITY. When acting with respect to the Company, the Governors
shall not be liable to the Company or to any Member for any mistake or error in
judgment or for any act or omission believed in good faith to be within the
scope of the authority conferred by this Agreement. When acting with respect to
the Company, the Governors shall be liable only for willful misconduct or
failure to act in good faith.
5.10 IDEMNIFICAITON. The Company shall, to the fullest extent
permitted under the Act and other applicable law, indemnify any Person who is a
party, or is threatened to be made a party, to any threatened, pending or
completed civil, criminal, administrative or investigative action, suit or
proceeding because such Person is or was a Member, Affiliate of a Member,
Governor, General Manager, officer, employee or agent of the foregoing or
is or was serving at the request of the Company as a member, manager,
director, trustee, partner, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, against costs, claims, damages, losses, judgments, fines and
expenses (including without limitation, reasonable attorneys' fees, filing
fees, court reporters' fees and transcript costs) actually and
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reasonably incurred by such Person in connection with such action, suit or
proceeding if such Person's act or omission giving rise to any claim for
indemnification under this Section 5.11 was not occasioned by such Person's
fraud, willful misconduct, gross negligence or intent to cause injury to the
Company or by such Person's reckless disregard for the best interests of the
Company, and in respect of any criminal action or proceeding, such Person had no
reasonable basis to believe such Person's conduct was unlawful.
5.11 INSURANCE. The Company shall, with the assistance of Delaco Tool
arrange for the necessary and desirable insurance coverages with respect to
Company and its business, the type of policies and the amounts of coverage to be
determined by the Board of Governors. Such policies may be separate policies of
the Company, or if approved by the Board of Governors, may be maintained under
blanket insurance policies maintained by Delaco Tool or its Affiliates. The
premiums and deductibles for such insurance shall be paid by the Company. If
insurance is obtained under blanket policies, premiums shall be pro rated and
reimbursed to Delaco Tool (or its Affiliates), and any deductibles, copayment
or other self-insured amounts applicable to claims of or against the Company
shall be the responsibility of the Company.
5.12 BANK ACCOUNTS.
(a) ESTABLISHMENT. All funds received in connection
with the operation of the Company shall be deposited in such bank
account or accounts as approved by the Board of Governors. The Company
shall also create and designate one or more disbursing accounts from
which the obligation owing by the Company shall be paid. Such account
may be the same as or separate from the collection account. The
operating expenses of the Company shall be paid out of such disbursing
account.
(b) WORKING CAPITAL. No monies received from the
Company are to be commingled with Member funds.The Members may agree to
advance funds to the Company in order to make disbursements or for
other purposes. A revolving line of credit shall be established with
each Member and the Member shall be entitled to a reasonable interest
expense allocation, as agreed upon by the parties for such funds. Any
advances obtained by the Company from the Members shall be repaid with
interest before any cash dividend will be distributed.
(c) SIGNATORIES. The Board of Governors shall
designate the persons permitted access to the bank accounts of the
Company.
5.13 TAX MATTERS MEMBER. The Tax Matters Member (referred to as the
"tax matters partner" in Section 6231(a)(7) of the Code) initially shall be
Delaco Tool. The Tax Matters Member may at any time resign as the Tax Matters
Member, and the Tax Matters Member may be removed as the Tax Matters Member by
Consent of Members. In the event that the Tax Matters Member resigns or is
removed, a new Tax Matters Member shall be appointed with the Consent of
Members. The Tax Matters Member shall represent the Company and the Members, at
Company expense, in any administrative or judicial proceeding with the Internal
Revenue Service. Any other Member may, at such Member's own expense, participate
in such proceeding to the extent permitted by the Code. If an administrative
proceeding results in the issuance of a
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"final partnership administrative adjustment" ("FPAA"), as that term is used in
Sections 6223 et seq. of the Code, the Tax Matters Member shall determine
whether the Company shall seek judicial review of such FPAA. If the Tax Matters
Member determines that the Company shall not seek judicial review, such Member
shall promptly notify each Member of this determination and each Member shall be
entitled, at such Member's own expense, to pursue whatever rights such Member
may have under the Code. Any amounts paid by the Tax Matters Member on behalf of
the Company in connection with any administrative or judicial proceeding shall
be considered a loan to the Company, and not a contribution to capital. The Tax
Matters Member shall not be liable to the Company or the other Members for any
action such Member takes or fails to take in connection with any such judicial
or administrative proceeding, including, without limitation, the agreement to
or failure to agree to a settlement or the extension of, or failure to extend
the relevant statutes of limitations, unless such action or failure
constitutes willful misconduct or failure to act in good faith.
5.14 CERTAIN PROVISIONS OF THE ACT SUPERSEDED. The provisions of this
Agreement regarding the management of the Company and the power, authority,
rights, duties and obligations of the Members are intended to and shall, to the
fullest extent permitted by law, supersede the provisions of the Act regarding
the management of a limited liability company and the power, authority, rights,
duties and obligations of limited liability company members set forth in the
Act.
ARTICLE VI
TRANSFERS OF INTERESTS BY MEMBERS; SUBSTITUTION OF MEMBERS
6.1 TRANSFER OF INTERESTS BY MEMBERS.
General. No Member may Transfer its Interest to any
Person without the Consent of the other Members, provided, however, that the
other Members shall not unreasonably withhold consent to a transfer to an
Affiliate of another Member. Any transfer permitted by this Section 6.1 shall
be subject to the further limitations set forth in Section 6.2 and the
admission of a Substitute Member shall be subject to Section 6.3.
6.2 ADDITIONAL RESTRICTIONS ON TRANSFERS. Notwithstanding anything in
this Article VI to the contrary, the following additional restrictions apply to
the Interests:
(a) Unless the other Members consent, no Member shall make any
assignment or transfer of any Interest if the transfer would, when considered
with all other assignments and transfers during the same applicable twelve-month
period, cause a termination of the Company for federal income tax purposes.
(b) No Member shall make an assignment or transfer to a
tax-exempt Entity under Section 168(h) of the Code.
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(c) No Member shall make any assignment or transfer of any
Interest unless such Member gives a copy of this Agreement to the assignee or
transferee before such assignment or transfer is effected.
6.3 REQUIREMENTS FOR SUBSTITUTION. Notwithstanding anything in
this Article VI to the contrary, upon the assignment or transfer of any
Interest, no assignee or transferee shall have the right to become a
Substitute Member in place of its assignor or transferor unless the conditions
of Sections 6.1 and 6.2 have been satisfied and:
(a) The assignor or transferor has evidenced in a written
instrument of assignment or transfer its intention that the assignee or
transferee be admitted as a Substitute Member pursuant to the provisions hereof;
(b) Consent shall have been given by the remaining Member
which consent may be withheld by such remaining Member in its sole and absolute
discretion, for any reason or for no reason at all, except in the case of a
transfer to an Affiliate, in which case consent may not be unreasonably
withheld;
(c) The assignee or transferee has adopted and agreed in
writing to be bound by all of the provisions hereof, as the same may have been
amended; and
(d) All documents reasonably required by the Governors to
effect the substitution of the assignee or transferee as a Member shall have
been executed.
When and if all of the provisions of this Section 6.3 have been complied with,
the assignee or transferee shall thereupon become a Member of the Company.
6.4 OBLIGATIONS AND RIGHTS OF TRANSFEREES. Whether or not an
Entity which acquires an interest in the Company has accepted in writing the
terms and provisions of this Agreement and assumed in writing the obligations
hereunder of its predecessor in interest, such Entity shall be deemed, by such
acquisition of such interest, to have agreed to be subject to and bound by all
the obligations of this Agreement with the same effect as any predecessor in
interest of such Entity. An Entity acquiring an interest in the Company shall
have only such rights and shall be subject to all the obligations as provided
in this Agreement, and, without limiting the foregoing, such Entity shall not
have the right to have the value of its interest ascertained or receive the
value of such interest or, in lieu thereof, profits attributable to any right
in the Company, except as set forth in this Agreement.
6.5 DISTRIBUTIONS AND ALLOCATIONS IN RESPECT OF TRANSFERRED
INTERESTS.
If any Interest is sold, assigned or transferred during any accounting period in
compliance with the provisions of this Article VI, Profits, Losses, each item
thereof and all other items attributable to such Interest for such period shall
be divided and allocated between the transferor and the transferee by taking
into account their varying interests during the period in accordance with Code
Section 706 (d), using any conventions permitted by law and selected by the
Governors. Unless otherwise determined by Governors, all distributions made on
or before the date thirty (30) days following the date on which the Company
receives written notice of such transfer
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(accompanied by the transfer documents) shall be made to the transferor, and
all distributions made thereafter shall be made to the transferee. Solely for
purposes of making such allocations and distributions, the Company shall
recognize such transfer not later than the end of the calendar month during
which it is given notice of such transfer, provided that if the Company does not
receive a notice stating the date such Interest was transferred and such other
information as the Governors may reasonably require within thirty (30) days
after the end of the accounting period during which the transfer occurs, then,
at the Governors' option, all of such items shall be allocated, and all
distributions shall be made, to the Entity which, according to the books and
records of the Company, on the last day of the accounting period during which
the transfer occurs, was the owner of the Interest. Neither the Company nor the
Governors shall incur any liability for making allocations and distributions in
accordance with the provisions of this Section 6.5, whether or not the
Governors or the Company have knowledge of any transfer of ownership of any
Interest.
6.6 The Company shall be dissolved upon the Transfer of the Interest
of a Member in compliance with the Agreement (other than (i) an assignment
merely of its right to receive distributions or (ii) a pledge, hypothecation or
other collateral assignment of its rights before the time such pledge,
hypothecation or other collateral assignment becomes absolute); provided,
however, that the Company and its business shall be continued after such
Transfer if the transferee becomes a Substitute Member in accordance with the
provisions of this Agreement including the Consent of all remaining Members. In
the event the Company's business has been validly continued as provided in the
preceding sentence, such business shall be continued in the form of a successor
limited liability company, which shall be deemed constituted and continued on
the terms and conditions in this Agreement except as may be modified by the
Agreement of the Members as provided in Article IX hereof; and the assets of the
Company shall not be liquidated. Each Member hereby agrees to execute and
deliver all documents necessary to effectuate the purposes of this Section.
6.7 RESTRICTIONS REASONABLE. Each Member acknowledges and agrees that
the restrictions or the transfer of Interests imposed by this Agreement are
imposed to accomplish legitimate purposes of the Company, and that such
restrictions are not more restrictive than necessary to accomplish those
purposes.
6.8 CERTAIN PROVISIONS OF THE ACT SUPERSEDED. The provisions of this
Agreement regarding the Transfer of a Member's Interest are intended to and
shall, to the fullest extent permitted by law, supersede the provisions of the
Act regarding the withdrawal of a member set forth in the Act.
ARTICLE VII
PROCEDURE ON DISSOLUTION
7.1 LIQUIDATION. Upon the dissolution of the Company, unless the
Company is continued or reformed as provided in this Agreement, the Members
shall proceed to liquidate the
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Company and to apply and distribute the proceeds of liquidation as set forth in
Sections 4.4 and 4.5 and as is consistent with the Act.
7.2 OPERATIONS DURING LIQUIDATION. Upon the determination that the
Company is to be dissolved and liquidated, the business of the Company during
the period of liquidation shall be carried on by the Governors, or by a designee
of the Governors, who shall possess all the powers of the Governors to the
extent necessary to wind up the business and affairs of the Company.
7.3 TIME FOR LIQUIDATION. In the event the Company is "liquidated"
within the meaning of the Allocation Regulations, distributions shall be made
pursuant to Section 4.4 in compliance with the timing requirements of the
Allocation Regulations; provided, however, that if, in the opinion of counsel
satisfactory to the Governors, failure to comply with the Allocation Regulations
would not cause the allocations of Profits and Losses (or any item thereof) to
the respective Members to lack substantial economic effect within the meaning of
Section 704(b) of the Code, then distributions need not be made in compliance
with the timing requirements of the Allocation Regulations.
7.4 TERMINATION. Upon compliance with the foregoing distribution plan
(including payment over to an escrow agent or trustee, if deemed appropriate by
the Governors and if there be sufficient funds therefor), the Company shall
cease to be such, and the Governors and/or the Members shall execute,
acknowledge and cause to be filed a certificate of dissolution of the Company
with the Department, including the name of the Company and the effective date of
its dissolution subject to and in accordance with applicable law.
ARTICLE VIII
BOOKS AND RECORDS, BANK ACCOUNTS
8.1 MAINTENANCE OF BOOKS AND ACCOUNTING METHOD. The Governors shall
keep or cause to be kept the following: (i) a current list of the name and last
known business or residence addresses of all Members and Governors; (ii) a copy
of the Articles of Organization, including any amendments thereof and any
written powers of attorney relating to the execution thereof; (iii) a copy of
this Agreement, including any amendments thereof and any written powers of
attorney relating to the execution thereof; (iv) copies of federal, state and
local income tax returns and reports of the Company for the three (3) most
recent years; (v) copies of any financial statements of the Company for the
three (3) most recent years; and (vi) copies of any records that would enable a
Member to determine the Member's relative share of the Company's distributions
and the Member's relative voting rights. Such books and records shall be
maintained at the Registered Office of the Company or at such other place as the
Governors may designate and shall be available upon reasonable notice, at
reasonable times, for inspection and examination by the Members or their duly
authorized agents or representatives. Such books and records shall be consistent
with the rules referred to in Section 3.7 of this Agreement. The books and
records of the Company shall be kept in accordance with accounting policies and
methods unless other policies or methods are selected by the Governors.
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8.2 FISCAL YEAR. The fiscal year of the Company shall end on
December 31.
8.3 REPORTS TO THE MEMBERS.
(a) On a quarterly basis (or on a monthly basis if the
Governors so determine), the Governors shall cause to be prepared and shall send
to each Member: (i)(A) a statement of operations of the Company and (B) a
statement of cash flows of the Company for the preceding period (and
year-to-date through and including such period); and (ii) a balance sheet of the
Company as of the close of such period. The annual financial statements of the
Company will be audited by the outside auditing firm of the Tax Matters Member,
or such other independent accounting firm as may be selected by the Governors,
unless all Members agree that no audit is necessary.
(b) The Governors shall cause to be prepared and distributed
to each Member, in a timely manner copies of all Single Business Tax and other
state and local tax returns prior to filing the same with the respective tax
authorities, as well as the Member's Schedule K-1 (Form 1065) and all other
information reasonably necessary for the preparation of such Member's federal,
state and local tax returns.
(c) No cause of action shall accrue to any Member under this
Section 8.3 if the Governors shall have acted in good faith in attempting to
meet its obligations under this Section yet failed to deliver any required
statements, reports, returns or information within the specified time period.
(d) In the event of any dispute among the Members relating to
the financial statements or accounting for the Company, the dispute shall be
submitted, at the request of any Member involved, to the public accounting firm
which has been engaged to audit the books of the Company, or if no accounting
firm has been so engaged, then to a public accounting firm to be selected as
provided in Section 8.3(a). In the case of any such disputes, the determination
of the accounting firm shall be final and binding on the Members.
8.4 TAX ELECTIONS; SPECIAL BASIS ADJUSTMENTS. The Tax Matters Member
shall make all tax elections on behalf of the Company. In the event of a
transfer of all or any part of the Interest of any Member for an amount in
excess of the adjusted basis for such interest for federal income tax purposes,
the Governors may elect, pursuant to Section 754 of the Code (or corresponding
provisions of succeeding law), to enable an adjustment to be made to the basis
of the Company's property. Any costs incurred by the Company in connection with
such Section 754 election shall be borne by the Member seeking a transfer of its
Interest. Any adjustments made pursuant to an election under Section 754 shall
affect only the successor in Interest to the transferring Member. Each Member
will furnish the Company with all information necessary to give effect to such
election.
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ARTICLE IX
AMENDMENTS AND MAJOR DECISIONS
9.1 AMENDMENTS REQUIRING CONSENT OF GOVERNORS. The Governors may amend
this Agreement or the Articles of Organization only with the Consent of all the
Governors.
9.2 MAJOR DECISIONS. Major Decisions shall require the convening of a
Governors' meeting where an attempt will be made to obtain the unanimous
agreement of the Governors prior to approving a Major Decision. If the
Governors fail to reach a unanimous agreement, a Major Decision can,
nevertheless, be made, if the Governors representing a Member holding more
than 50% of the Percentage Interests vote in favor thereof. In such case,
however, the dissenting Member shall be entitled to invoke the provisions of
Section 10.2 (c) hereof.
ARTICLE X
DISSOLUTION
10.1 EVENTS OF DISSOLUTION - GENERAL. The Company will be terminated
upon the mutual written agreement of the Members that the Company be dissolved
and the term of the Agreement ended.
10.2 EVENTS OF DISSOLUTION - ELECTIVE. The Company may be dissolved,
at the election of a Member, as follows:
(a) Any Member may elect to dissolve the Company upon the
occurrence of:
(i) any event or the existence of any condition
beyond the reasonable control of the Members which prevents the Company from
producing commercially acceptable products consistent with the purpose of the
Company or the Company is otherwise unable to carry out its purpose, and such
event or condition cannot be corrected within a reasonable time, at a reasonable
expense; or
(ii) the Company fails or ceases to qualify as an
MBE as described in paragraph 2.13 hereof.
(b) Either Member may elect to dissolve the Company as of the
end of the third full year after the Company's inception or as of the end of any
year thereafter. Such election to dissolve must be made at least 24 months
before the end of such year.
(c) QS Steel may elect to dissolve the Company if Delaco Tool
invokes its right to effect a Major Decision without the unanimous agreement of
the Governors as provided in Section 9.2 hereof. Such election may be made by
written notice from QS Steel to Delaco Tool within 90 days after Delaco Tool
invokes such right.
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10.3 EVENTS OF DISSOLUTION - DEFAULT. The non-defaulting Member may
elect to terminate and dissolve the Company in the event of a default, as
specified below, by the other Member. The occurrence of any of the following
events shall constitute a default by a Member:
(a) A Member shall have defaulted in its obligation to
make any capital contribution or to provide financial support as required in
Section 3.1 hereof and such default shall continue to exist for a period of
fifteen (15) business days after the other Member gives such defaulting Member
notice of such default.
(b) A Member or its Affiliate shall materially default
in the observance or performance of any material agreement, covenant, or
condition contained in this Agreement or in any material agreement with or
relating to the Company and such default shall continue to exist for a period
of 30 days after the other Member or the Company gives such defaulting Member
or its Affiliate written notice of such Default;
(c) A representation or warranty made by the Member
herein (or in any certificate or financial or other statement furnished by such
Member to the other pursuant to the terms hereof) or by the Member's Affiliate
in connection herewith shall prove to be false or misleading in any material
respect when made;
(d) The Bankruptcy of such Member.
10.4 NOTICE OF DISSOLUTION. If a Member is entitled to dissolve the
Company, it may do so by giving notice to the other Member, in writing, that
it is electing to dissolve the Company.
10.5 WINDING UP. If the Company is to be dissolved, then the Members
shall proceed jointly to wind up the affairs of the Company; provided, however,
that if the dissolution is occurring pursuant to Section 10.3, then the
non-defaulting Member may unilaterally wind up the affairs of the Company if it
so chooses.
10.6 BUY-OUT PROCEDURES.
(a) If an election is made by Delaco Tool to dissolve the
Company pursuant to Section 10.3 above (i.e. for Default), Delaco Tool may also
elect, by written notice given within ninety (90) days of the date of the
election to dissolve, to either (i) purchase QS Steel's Interest in the Company
for an amount equal to ninety (90) percent of the fair market value of QS
Steel's interest, or (ii) require QS Steel to purchase Delaco Tool's Interest in
the Joint Venture for an amount equal to 110% of the fair market value of QS
Steel's Interest.
(b) If an election is made by QS Steel to dissolve the Company
pursuant to Section 10.3 above (i.e. for Default) QS Steel may also elect by
written notice given within 90 days of the election to dissolve, to either (i)
purchase Delaco Tool's Interest in the Company for an amount equal to ninety
percent (90%) of the fair market value of Delaco Tool's Interest, or
(ii) require Delaco Tool to purchase QS Steel's Interest in the Company for an
amount equal to 110% of the fair market value of QS Steel's Interest.
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(c) If an election is made by a Member (the "Terminating
Member") to dissolve the Company pursuant to Section 10.2 (a), (b) or (c), the
other Member may elect, by written notice given within 90 days of the date of
the election to dissolve, to continue the business of the Company by acquiring
the Terminating Member's interest in the Company for an amount equal to one
hundred percent (100%) of the fair market value of the Terminating Member's
Interest.
(d) If an election is made by QS Steel to dissolve the Company
pursuant to Section 10.2 (c), QS Steel may also elect in its notice of
dissolution to require Delaco Tool to purchase QS Steel's Interest in the
Company for an amount equal to 100% of the fair market value of QS Steel's
Interest.
(e) If the Company is dissolved pursuant to Section 10.1
above, either Member may elect, by written notice given within ninety (90) days
of the date of dissolution, to continue conducting the business of the Company.
Unless the Members otherwise agree, the acquiring Member shall purchase the
Terminating Member's interest in the Company for an amount equal to one hundred
percent (100%) of the fair market value of the Terminating Member's interest.
(f) In case of any election under this Agreement requiring the
determination of fair market value of the Company, the Members shall use their
best efforts to agree as to the fair market value of the Company. If the Members
fail to agree on such fair market value within sixty (60) days following the
election which requires such a determination, then the Members shall attempt to
agree upon a single appraiser to determine fair market value. If the parties
fail to agree on a single appraiser within 15 days, each Member shall appoint a
reputable appraiser, and the two appraisers shall appoint a third appraiser. The
appraiser or appraisers shall then determine in good faith such fair market
value(s), with such determination to be due within 60 days. In the event three
appraisers are appointed and the appraisers cannot agree upon a fair value, each
of the three appraisers shall set forth, in good faith, their own valuation, and
the highest and lowest valuations shall be discarded and the middle of the three
valuations shall be deemed to be the fair value.
10.7 NECESSARY APPROVALS. The provisions as to liquidation of the
Company and the purchase of the business of the Company and the purchase of the
business of the Company shall be subject to any necessary governmental
approvals, and the Members shall agree upon such reasonable extensions of time
with respect to such provisions as may be reasonably necessary in order to
obtain any such approvals.
ARTICLE XI
GENERAL PROVISIONS
11.1 NON-WAIVER. No provision of this Agreement shall be deemed to have
been waived unless such waiver is contained in a written notice given by the
party granting such waiver to the party claiming such waiver and no such waiver
shall be deemed to be a waiver of
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any other or further obligation or liability of the party or parties in whose
favor the waiver was given or a waiver by any party not executing such waiver
of any of its rights.
11.2 ADDITIONAL DOCUMENTS AND INSTRUMENTS. The Members shall execute
and deliver to each other such other and further documents and instruments as
may be necessary to carry out the purposes of this Agreement and which are
required by the Governor, or any federal, state or local governmental agency
having jurisdiction over the Company.
11.3 SEVERABILITY. If any provision or provisions of this Agreement (or
any part thereof) or the application thereof to any particular facts or
circumstances shall be illegal and unenforceable by reason of any statute or
rule of law, or shall be deemed null and void pursuant to Section 2.5 of this
Agreement, the remaining provisions (or parts thereof) of this Agreement or the
application of the particular provision or provisions (or parts thereof) to
other facts or circumstances shall not be affected thereby and shall remain in
full force and effect. It is the intention of the provisions of this Section to
make clear that the agreement of the parties to this Agreement is that this
Agreement shall be enforced insofar as it may be enforced consistent with
applicable statutes and rules of law.
11.4 ENTIRE AGREEMENT. This Agreement and any schedules and exhibits
annexed hereto, each of which is made a part hereof by this reference,
constitute the entire operating agreement of the Company within the meaning of
the Act and contain the entire understanding and agreement between the parties
upon the subject matter of this Agreement and may only be amended or changed in
a writing executed by Members holding the requisite Percentage Interests as
specified in Article IX. Any prior understandings and agreements between the
parties are merged herein, except only as herein otherwise expressly stated.
11.5 PROVISIONS BINDING. This Agreement shall inure to the benefit of
and be binding upon the parties and their respective heirs, executors,
administrators, successors and assigns and any additional or Substitute Members
(except as may otherwise be specifically provided herein).
11.6 CAPTIONS. The table of contents and captions set forth herein are
for convenience and reference only and are not intended to modify, limit,
describe or affect in any way the contents, scope or intent of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in several
counterparts and all so executed shall constitute one and the same agreement
binding on all parties hereto, notwithstanding that all parties have not signed
the same counterpart or that any such counterpart does not have attached copies
of all signature pages attached hereto that constitute part of this Agreement.
11.8 WORD MEANINGS. The words such as "herein," "hereinafter," "hereof"
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context otherwise requires.
The singular shall include the plural, and the masculine gender shall include
the feminine and neuter, and vice versa, unless the context otherwise requires.
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11.9 APPLICABLE LAW. This Agreement and the rights of the parties
hereto shall be construed under and enforced in accordance with the laws of the
State of Michigan (exclusive of its choice of law principles).
11.10 DISPUTE RESOLUTION.
(a) Initial Procedure. Any claim, dispute, difference or
controversy arising out of or relative to this Agreement or the operation of the
Company and any deadlock in voting relative to the operation of the Company
which cannot be settled by mutual understanding between the Members or their
Governors, will first be submitted to the chief executive officers of the
Members, who will meet and attempt to resolve such dispute.
(b) Formal Dispute Resolution. Should said claim, dispute,
difference or controversy or the deadlock not be resolved as above provided
within sixty (60) days after submission to the named persons, then at the
written request of the Company or any Member involved, the said claim, dispute,
difference or controversy or the deadlock shall be submitted to Alternative
Dispute Resolution in Michigan in accordance with a procedure to be agreed upon
by the Members.
IN WITNESS WHEREOF, the undersigned have duly executed this Operating
Agreement of Delaco Processing, L.L.C.
QS STEEL INC., a Michigan corporation DELACO SUPREME TOOL & GEAR CO., a
Michigan corporation
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------- --------------------------
Printed Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ Printed Named: ▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------- ---------------
Title: President Title: CEO
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