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EXHIBIT 10.23
OPERATING AGREEMENT
OF
THE LOMA COMPANY, L.L.C.
This Operating Agreement of The Loma Company, L.L.C. is hereby entered
into effective as of the ____ day of December, 1996, by and between:
NEWPARK HOLDINGS, INC., a Louisiana corporation (hereinafter sometimes
referred to as "Newpark"); and
OLS CONSULTING SERVICES, INC., a Louisiana corporation (hereinafter
referred to as "OLS").
WHEREAS, OLS is the assignee of the entire right, title and interest of
Ores ▇▇▇▇ ▇▇▇▇▇ in and to a certain new and useful invention as set forth in an
application for United States Letters Patent entitled "Mat System for
Construction of Roadways and Support Surfaces" accorded application serial No.
08/541,083 and filed on October 11, 1995 pursuant to an act of assignment dated
October 4, 1996;
WHEREAS, OLS and Soloco, Inc. (now, by way of merger, Soloco, L.L.C.),
an affiliate of Newpark, have previously entered into that certain exclusive
licensing agreement made effective as of July 1, 1995, as amended on December
____, 1996 and as may be amended from time to time hereafter the "License
Agreement," relating to the production of certain property more fully described
hereinafter;
WHEREAS, it is Newpark's objective to facilitate the financing of the
production of such property and assure itself a reliable source of production
thereof under the Licensing Agreement;
WHEREAS, Newpark and OLS have contemporaneously herewith formed a
Louisiana Limited Liability Company and have agreed to enter into this Operating
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Agreement for the Company to set forth the terms and conditions of the
continuing relationship among the Members and the Company thereafter;
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and in consideration of the
covenants and agreements set forth below, Newpark and OLS agree as follows,
pursuant to the provisions of the Louisiana Limited Liability Company Law,
LSA-R.S. 12:1301, et seq.
(the "Law"), and on the following terms and conditions:
1. Agreement. This Operating Agreement of the Company is hereby adopted by the
Members pursuant to the provisions of the Law upon the terms and conditions set
forth hereinafter (the "Agreement").
2. Name. The name of the Company is The Loma Company, L.L.C.
3. Members. The name and municipal address of each of the members (the
"Members") of the Company are as follows:
Name Municipal Address
Newpark Holdings, Inc. Lakeway Center
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇
OLS Consulting Services, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Second Floor
P.O. Box 52201
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇. ▇▇▇▇ ▇▇▇▇▇
4. Principal Place of Business. The principal place of business of the Company
shall be located at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ Floor, P.O. Box 52201,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other location as selected from time to time
by the Executive Committee (as hereinafter defined).
5. Business and Purpose. The purpose or purposes for which the Company is
organized and the nature of the business to be carried on by it are stated and
declared to be as follows:
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To enter into any business lawful under the laws of the State of
Louisiana, either for its own account, or for the account of others, as agent,
and either as agent or principal, to enter into or engage in any kind of
business of any nature whatsoever, in which limited liability companies
organized under the Law may engage; and to the extent not prohibited thereby to
enter into and engage in any kind of business of any nature whatsoever in any
other state of the United States of America, any foreign nation, and any
territory of any country to the extent permitted by the laws of such other
state, nation or territory.
To establish a manufacturing facility for the development, manufacture,
field trial and production of synthetic mats, including the construction and
operation of a suitable manufacturing facility for such mats (the "Project").
6. Term. The existence of the Company shall commence on the effective date of
this Agreement and shall terminate by the occurrence any of the following
events:
(a) The sale or other disposition of the Project or all or
substantially all of the property of the Company;
(b) The execution of a written agreement of termination setting forth
the effective date thereof by all of the Members;
(c) The withdrawal, expulsion, bankruptcy or dissolution of a Member or
the occurrence of any other event which terminates the continued
membership of a Member in the Company unless, within 90 days after such
event, all of the remaining Members agree in writing to continue the
Company and, if membership is reduced to one, to the admission of one
or more members;
7. Capital Contributions.
(a) Initial. The initial Members respectively have contributed the
following amounts to the capital of the Company:
Member Amount
------ -------
OLS Consulting Services, Inc. $ 51.00
Newpark Holdings, Inc. $ 49.00
(b) Secondary Contribution of Newpark. Subject to reimbursement of its
acquisition cost thereof as set forth hereinbelow, Newpark will
contribute certain immovable property more fully described on Exhibit
"A" attached hereto, which is the property upon which the manufacturing
facility of the Company is to be located (the "Property").
Additionally, Newpark or its affiliates have advanced through August
31, 1996 (inclusive of interest charges
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on such advances), the sum of $669,903.83 to the Company. Newpark will
periodically make additional advances to the Company to fund certain
engineering and other soft costs in connection with the development,
manufacture and field trial of prototype mats and development costs
preliminary to the construction and initial operation of the
manufacturing facility for the mats up to a total amount of $640,000.00
(any such additional amounts together with the amounts advanced by
Newpark or its affiliates through August 31, 1995 shall be referred to
cumulatively as the "Advances"). The Company will execute a note
payable to Newpark equal to the amount of the Advances (the "Note").
Subject to any additional restrictions or terms that may be imposed by
Company's lender(s), the Note shall be repaid in 28 equal quarterly
installments of principal plus accrued interest on the unpaid principal
balance at the rate of eight percent (8%) per annum, said quarterly
installments to commence on the last day of the sixth month following
the commencement of production at the manufacturing facility
contemplated by the Project. The Executive Committee shall also have
the right from time to time to relax the terms for the repayment of the
Note to the extent the Company's financial condition may require. The
Note shall further be subordinated as may be necessary to facilitate
the best possible structure of the financing to be obtained for the
hard costs of the Project as described below. Additionally, with the
cooperation and assistance of the Company, Newpark will arrange
suitable construction and permanent financing for the hard costs of the
manufacturing facility (the "Project Financing"). Newpark will
guarantee the Project Financing if required by the lender. Newpark's
cost of acquiring the Property will be added to the Note if Newpark is
not repaid in full for such cost from proceeds of the Project
Financing.
(c) Secondary Capital Contribution of OLS. OLS will contribute, assign
and/or license to the Company its exclusive manufacturing rights
relating to the manufacture of synthetic and wooden mats as reserved by
OLS in the License Agreement together with OLS's rights, benefits and
obligations under the License Agreement related to the manufacture of
synthetic or wooden mats, including, specifically, but without
limitation thereto, OLS's rights and obligations under Sections
4.01(d), (f) and (g) and Sections 5.01, 5.02 and 5.03 of the License
Agreement. OLS shall retain and not assign to the Company the ownership
of the Patent Rights. In addition, OLS shall contribute, assign and/or
license to the Company the exclusive manufacturing rights relating to
any improvements to the Products including Products produced according
to or embodying the Improvement Inventions and the Engineering Data.
OLS shall retain the right to make, use and sell the components and raw
materials of the Products for uses other than for the production of
Products. All capitalized terms used in this Section 7(c) shall have
the meaning ascribed to them in the License Agreement. The Members
agree that the value of OLS's secondary contribution made herein is
$669,301.05 (the "OLS Advance"). The Company will execute a note
payable to OLS equal to the amount of the OLS Advance
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(the "Note"). Subject to any additional restrictions or terms that may
be imposed by Company's lender(s), the Note shall be repaid in 28 equal
quarterly installments of principal plus accrued interest on the unpaid
principal balance at the rate of eight percent (8%) per annum, said
quarterly installments to commence on the last day of the sixth month
following the commencement of production at the manufacturing facility
contemplated by the Project. The Executive Committee shall also have
the right from time to time to relax the terms for the repayment of the
Note to the extent the Company's financial condition may require. The
Note shall further be subordinated as may be necessary to facilitate
the best possible structure of the financing to be obtained for the
hard costs of the Project as described below.
(d) Limitation. No Member shall be required to make any contribution to
the capital of the Company other than as set forth in (a), (b) and (c).
(e) Provisions not for Benefit of Creditors. The provisions of this
Paragraph 7 are not for the benefit of any creditor or other person
other than a Member to whom any debts, liabilities or obligations are
owed by, or otherwise has any claim against, the Company or any Member,
and no creditor or other person shall obtain any rights under this
Paragraph or by reason of this Paragraph, or shall be able to make any
claim in respect of any debts, liabilities, or obligations against the
Company or any Member.
(f) Property. All Company property shall be held in the name of the
Company.
8. Management.
(a) Executive Committee. As more fully described in Paragraph 8(c)
hereof, the policy of the Company will be directed and its operations
reviewed by an Executive Committee (the "Executive Committee")
comprised of four Directors. Except as provided in Paragraph 8(c)
hereof, no Member of the Company will have the right to bind the
Company or to incur any obligation on behalf of the Company unless
otherwise approved by a majority of the Executive Committee. Newpark
will appoint two Directors to the Executive Committee and OLS will
appoint two Directors to the Executive Committee. In the event of a
payment default in any financing agreement between the Company and any
third party lender, which payment default shall specifically include a
demand by such third party lender upon Newpark or its affiliate(s) to
pay all or any portion of such third party indebtedness (whether
pursuant to a guaranty agreement or otherwise) and such payment default
is not timely cured by Company and prompts an acceleration of the
repayment of the indebtedness by such third party lender or an election
by such third party lender to exercise any of its remedies upon
default, including demand for payment upon Newpark or its affiliate(s)
(except where such event of default has been precipitated by a
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breach of Newpark or any of its affiliates under this Agreement or the
Exclusive License Agreement), then, at Newpark's option, one of OLS's
Directors will resign and the Executive Committee thereafter will be
composed of three Directors, two of which are appointed by Newpark and
one of which is appointed by OLS. If the two OLS Directors cannot agree
on which Director among the two shall resign, Newpark shall select the
OLS Director to resign. In the event or at such time the default is
waived or subsequently cured and providing that Newpark or its
affiliate is not required to advance any funds or incur any additional
liability to such lender(s), OLS shall have the right to reinstate its
resigning director to the Executive Committee.
(b) Authority of the Executive Committee. The following matters shall
be reserved to the Executive Committee:
(i) Final approval of the annual compensation, bonuses or
other benefits to be paid to any managerial level employee of the
Company, including any manager who is also a Member of the Company;
(ii) Final approval of the missions and goals of the Company,
as the same my be modified from time to time, including, without
limitation, final approval of the Company's annual operating plan as
submitted by the Chief Executive Officer;
(iii) The approval of the public accounting firm(s) engaged by
the Company to audit the financial affairs and records of the Company;
(iv) Any contract, except contracts between the Company and
Soloco L.L.C., whose aggregate value to the Company is expected to
exceed $500,000.00;
(v) The purchase, sale or lease of any immovable property by
the Company;
(vi) Any guarantee by the Company of the debt or obligations
of any other person or entity;
(vii) The approval of any proposed capital expenditure for the
Company in excess of $25,000;
(viii) Any borrowings or loans made to or by the Company
except regularly anticipated draws against a pre-approved revolving
line of credit;
(ix) The sale or lease of all or any portion of the assets of
the Company, except where such sale is in the ordinary course of
Company's business or due to obsolescence or ordinary wear and tear;
and
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(x) Any distributions made to the Members out of the Net
Operating Cash Flow of the Company.
(c) Chief Executive Officer. ▇▇▇▇ ▇▇▇▇▇ shall be the Chief Executive
Officer ("CEO") of the Company and, as such, shall have the authority
and function delegated to him by the Executive Committee as set forth
in Paragraph 8(d) hereof.
(d) Authority of the CEO. The CEO shall have exclusive authority to
manage the operations and affairs of the Company and to make all
decisions regarding the business of the Company, subject only to those
matters which are reserved for the vote of the Executive Committee or
the Members by the terms of this Agreement (by the vote herein
specified), or by the Law. It is understood and agreed that the CEO
shall have all of the rights and powers of the Members as provided in
the Law and as otherwise provided by law, and any action taken by the
CEO in accordance with this Paragraph 8 shall constitute the act of,
and serve to bind the Company and its Members. In furtherance of the
foregoing, the CEO shall have all right, power and authority necessary,
appropriate, desirable or incidental to carry out the conduct of the
Company's business, including, but not limited to, the right, power and
authority: (i) to incur and pay all costs, expenses and expenditures
(including the timely payment of all taxes)incurred in good faith in
the course of the conduct of the Company business; (ii) to execute
promissory note(s), loan agreement(s), mortgage(s), security
agreement(s) and other financing related documents reasonably necessary
to finance the operation of the Company's business by causing it to
borrow funds upon such terms and conditions as previously approved by
the Executive Committee and to take any and all actions and to execute,
acknowledge and deliver all documents in connection therewith; provided
however that the CEO shall have no right or power to create or impose
personal liability on any Member for any of the Company's obligations
without the express consent of such Member, except as may otherwise be
provided herein; (iii) to employ and dismiss from employment any and
all employees, agents, independent contractors, consultants,
appraisers, attorneys and accountants, and to pay such fees, expenses,
salaries, wages or other compensation to such persons, as the CEO
determines to be reasonable; (iv) to acquire, purchase or contract to
purchase, sell or contract to sell, or to lease or hire any personal or
movable property; (v) to pay, extend, renew, modify, submit to
arbitration, prosecute, defend or compromise, upon such terms as the
CEO deems proper and upon any evidence as it may deem sufficient, any
obligation, suit, liability, cause of action or claim, in favor of or
against the Company; (vi) to pay or cause to be paid any and all taxes,
charges or assessments that may be levied, assessed or imposed on any
property or assets of the Company; and (vii) to invest funds which, in
the judgment of the CEO, are not immediately required for the conduct
of the Company's business, in government-backed securities,
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money market accounts or other prudent short-term investments generally
recognized as being free of risk.
(e) Certificates. In accordance with La. R.S. 12:1305(C)(5) the
Executive Committee shall have the power and authority to execute from
time to time a certificate to establish the membership of any Member,
the authenticity of any records of the Company or the authority of any
person to act on behalf of the Company including, but not limited to
the authority to take the actions referred to in La. R.S.
12:1318(B).
(f) Management Stalemate, Mediation, Buy-Sell. All actions reserved to
the Executive Committee shall be taken by a majority of the members of
the Executive Committee. If the Executive Committee, after a diligent
and good faith effort, is unable to resolve a matter reserved to the
Executive Committee and at least two members of the Executive Committee
declare in writing that such stalemate has a materially adverse effect
on the effective management of the Company, the Members shall first
endeavor to settle the dispute in an amicable manner by mediation
administered by the American Arbitration Association, under its
mediation rules. Unless otherwise agreed upon, the mediation shall be
conducted in Lafayette, Louisiana by a panel of three (3) mediators,
one appointed by each of the Members and one appointed by the two
mediators so appointed.
If the Members are unable to resolve the stalemate of the
Executive Committee through non-binding mediation, then one Member
shall purchase the entire interest of the other Member in the Company
through the following procedures. Immediately prior to the conclusion
of the mediation, the mediators, by the flip of a coin, shall designate
one of the Members as the defaulting party. The defaulting Member shall
then have a period of up to one hundred eighty (180) days from the date
of the mediators' designation of the defaulting Member to make an offer
to purchase the entire interest of the other Member upon such price and
upon such terms as selected by the defaulting Member. Such offer shall
be in writing and shall be sent by certified mail to the address of the
other Member provided for notices hereunder. Thereafter, the other
Member shall have a period of one hundred eighty (180) days from the
receipt of such offer within which to either sell its entire interest
to the defaulting Member for the price and upon the terms and
conditions as set forth in the offer, or to purchase the interest of
the defaulting Member for the price and upon the terms and conditions
as set forth in the offer. If the defaulting Member fails to make an
offer to purchase the entire interest of the other Member within the
one hundred eighty (180) day period from the conclusion of the
mediation, then such Member must sell its entire interest in the
Company to the other Member for a price equal to the fair market value
of its interest in the Company as determined by an independent United
States investment banking firm appointed by the mediators, upon terms
of all cash to the selling
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Member. If neither Member purchases the interest of the other and the
stalemate continues to exist, the Company shall be dissolved in the
manner provided by applicable law.
(g) Manufacturing Facility. Except for those matters reserved to the
Executive Committee, the CEO shall manage the operation of the
manufacturing facility and all aspects of the manufacturing process.
All aspects of the ongoing business of the Company shall be subject to
the terms and conditions of the Exclusive Licensing Agreement, a copy
of which is attached as Exhibit "B" hereto.
(h) Indemnification. The Company shall indemnify, hold harmless and
defend any person who was or is a party or is threatened to be made a
party of any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative,
(other than an action by or in the right of the Company) by reason of
the fact that such person is or was the CEO or a member of the
Executive Committee of the Company, against expenses (including
attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit, and/or proceeding. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction will not, of
itself, create a presumption that the person did not act in good faith
and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, that such person had reasonable cause to
believe that his or her conduct was unlawful. Expenses incurred by the
CEO or a Director in defending a civil or criminal action, suit or
proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such CEO or Director to repay such
amount if it is ultimately determined that such person is not entitled
to be indemnified by the Company. Such expenses incurred by other
personnel, employees and agents of the Company may be so paid upon such
terms and conditions if any, as the CEO or Director deems appropriate.
(i) Member Liability. Except as expressly provided under the Law, no
Member shall have personal liability for the losses, debts, claims,
expenses or encumbrances of or against the Company or its Property, nor
shall any Member be obligated to restore a deficit balance, if any, in
the Members Capital Account (as hereinafter defined).
(j) Authority to Engage in Other Activities. Except as provided herein,
no Member shall be required to manage the Company as his or its sole
and exclusive function, and a Member may have other business interests
and may engage in other activities in addition to those relating to the
Company. The Members acknowledge that certain of the Members' other
activities and
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business interests may consist of the ownership, development,
marketing, sale, operation or management of facilities or real
properties or entities that compete with the business of the Company.
Except as provided herein or in any Exhibit hereto, neither the Company
nor any Member shall have any right in or to such other ventures by
virtue of this Agreement or the relationship among the Members created
hereby.
9. Profits and Losses.
(a) Determination, Allocation. The profits and losses of the Company
shall be determined under accounting principals consistently applied
and the method of accounting used in maintaining the Company's books
and records, as hereinafter set forth. Except as specifically provided
herein, the annual net profits and losses (and all items of income,
deduction and credit) of the Company shall be allocated among the
Members in accordance with their Membership Percentage Interests, which
shall be as follows:
Membership
Member Percentage Interest
------ -------------------
Newpark 49.0%
OLS 51.0%
TOTAL 100.0%
(b) Allocations to Reflect Contributed Property and Capital Account
Revaluations. In accordance with Section 704(c) of the Internal Revenue
Code of 1986, as amended (the "Code") and the Treasury Regulations
issued thereunder (the "Regulations"), taxable income, gain, loss and
deduction with respect to any property contributed to the capital of
the Company shall, solely for Federal income tax purposes, be allocated
among the Members so as to take into account any variation between the
adjusted basis of such property for Federal income tax purposes and its
fair market value, as recorded on the books of the Company. As provided
in Section 1.704-1(b)(2)(iv)(f) of the Regulations, in the event that
the Capital Accounts of the Members are adjusted to reflect the
revaluation of Company property on the Company's books, then subsequent
allocation of taxable income, gain, loss and deduction with respect to
such property shall take into account any variation between the
adjusted basis of such property for Federal income tax purposes and its
adjusted fair market value, as recorded on the Company's books.
Allocations under this Paragraph shall be made in accordance with
Section 1.704-1(b)(4)(i) of the Regulations and, consequently, shall
not be reflected in the Members' Capital Accounts.
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(c) Varying Partnership Interests During Accounting Year. In the event
there is a change in any Member's Membership Percentage Interest in the
Company during an accounting year, net profits and net losses shall be
appropriately allocated among the Members to take into account the
varying interests of the Members so as to comply with Section 706(d) of
the Code.
(d) Regulatory Allocations. Notwithstanding any other provision in this
Paragraph 9 to the contrary, in order to comply with the rules set
forth in the Regulations for (i) allocations of income, gain, loss and
deductions attributable to nonrecourse liabilities, and (ii)
partnership allocations where partners are not liable to restore
deficit capital accounts, the following rules shall apply:
(1) "Partner nonrecourse deductions" as described and defined
in Section 1.704-2(i)(1) and (2) of the Regulations
attributable to a particular "partner nonrecourse liability"
(as defined in Section 1.704-2(b)(4)) shall be allocated among
the Members in the ratio in which the Members bear the
economic risk of loss with respect to such liability;
(2) Items of Company gross income and gain shall be allocated
among the Members to the extent necessary to comply with the
minimum gain chargeback rules for nonrecourse liabilities set
forth in Sections 1.704-2(f) and 1.704-2(i)(4) of the
Regulations; and
(3) Items of Company gross income and gain shall be allocated
among the Members to the extent necessary to comply with the
qualified income offset provisions set forth in Section
1.704-1(b)(2)(ii)(d) of the Regulations, relating to
unexpected deficit capital account balances (after taking into
account (i) all capital account adjustments prescribed in
Section 1.704-1(b)(2)(ii)(d) of the Regulations and (ii) each
Member's share, if any, of the Company's partnership minimum
gain and partner nonrecourse minimum gain and partner
nonrecourse minimum gain as provided in Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations.
Since the allocations set forth in this Paragraph 9(d) (the
"Regulatory Allocations") may effect results not consistent
with the manner in which the Members intend to divide Company
distributions, the Executive Committee is authorized to divide
other allocations of net profits, net losses, and other items
among the Members so as to prevent the Regulatory Allocations
from distorting the manner in which distributions would be
divided among the Members but for application of the
Regulatory Allocations. The Executive Committee shall have
discretion to accomplish this result in any reasonable manner
that is consistent with Section 704 of the Code and the
related Regulations. The Members may agree, by unanimous
written consent, to make any election permitted by the
Regulations under Section 704 of the Code that may
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reduce or eliminate any Regulatory Allocation that would otherwise be
required.
(e) Tax Conformity; Reliance on Attorneys or Accountants. The
determination of each Member's share of each item of income, gain,
loss, deduction or credit of the Company for any period or fiscal year
shall, for purposes of Sections 702 and 704 of the code, be made in
accordance with the allocations set forth in this Paragraph 9. The
Executive Committee shall have no liability to the Members or the
Company if the Executive Committee relies upon the written opinion of
tax counsel or accountants retained by the Company with respect to all
matters (including disputes) relating to computations and
determinations required to be made under this Paragraph or other
provisions of this Agreement.
10. Distributions.
(a) Net Operating Cash Flow. "Net Operating Cash Flow" means the gross
cash proceeds from Company operations, less the portion thereof used to
pay or establish reserves for all Company expenses, debt payments,
capital improvements, replacements, and contingencies, all as
determined by the Executive Committee. "Net Operating Cash Flow" shall
not be reduced by depreciation, amortization, cost recovery deductions,
or similar allowances, and shall be increased by any reductions of
reserves previously established.
(b) Distribution. The distribution policy of the Company will be
established by the Executive Committee taking into account (i) the
requirements of the Law; (ii) the terms and conditions of the Project
Financing; and (iii) the capital and operating needs of the Company. In
making distributions of Net Operating Cash Flow, the Executive
Committee shall take into account the following priority: first, excess
Net Operating Cash Flow shall be reinvested to the extent required for
appropriate expansions of the business including working capital needs
in connection therewith; second, as necessary, repayments shall be made
under the Company's credit arrangements so as to minimize the cost of
the Company's financing; third, distributions will be made to the
Members. Any distributions of Net Operating Cash Flow shall be made
forty-nine (49%) percent to Newpark and fifty-one (51%) percent to OLS
in accordance with their individual interest set forth in Section 9(a)
hereof. Provided sufficient Net Operating Cash Flow is available, the
Executive Committee shall authorize the distribution of sufficient cash
to cover each Member's federal and state income tax liability for
reported income.
11. Financial Matters. To the extent that capital in addition to the
Advances or the Project Financing is needed to operate the Company or fund
certain maintenance or expansion of the Project, the Company will raise such
funds according to the following priorities; first, the Company will seek to
borrow such funds from third parties;
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second, the Members may loan such funds to the Company upon terms and conditions
similar to those of the Advances; and third, equity contributions may be made by
each of the Members on a pro-rata basis in accordance with the Members'
Membership Percentage Interests in the Company; provided, however, that no such
contributions will be required unless the unanimous agreement of each of the
Members to make such an equity contribution is first obtained.
12. Annual Reports and Tax Information. Within a reasonable time after the
close of each Company accounting year, the Company shall furnish to each Member
an annual report containing a balance sheet as of the close of such accounting
year, statements of income, Members' Capital Accounts and cash flow and
necessary tax information. If the Company's accounting year is the calendar
year, such reports shall be made within sixty (60) days of the close of the
accounting year.
13. Tax Matters Member and Tax Elections. OLS Consulting Services, Inc. is
designated the "tax matters partner" as defined in Internal Revenue Code Section
6231(a)(7) and shall perform all duties imposed thereon under Code Sections 6221
through 6232. Except as specifically provided herein, said Member is further
authorized, in its sole discretion, to make or revoke any Company tax election
as provided for in the Internal Revenue Code; provided, however, that said
Member shall make, on behalf of the Company, the election referred to in Section
754 of the Internal Revenue Code, if so requested by the Members. The Members
intend that the Company be classified, for Federal income tax purposes, as a
partnership, and agree in advance to any amendment which a tax advisor selected
by the Executive Committee shall recommend to be necessary or advisable to
qualify for or maintain such tax classification. Further, the Members authorize
the filing (or the forbearance of filing) of any election under any Regulation
or Internal Revenue Service rulings or procedures to effect the classification
of the Company as a partnership for Federal income tax purposes.
14. Books and Records. The Company shall at all times keep and maintain a
true and accurate set of books and records at the Company's principal place of
business and in accordance with accounting principals consistently applied and
the provisions of this Operating Agreement. The Company shall cause its books
and records to be audited by a recognized public accounting firm approved by the
Members. The Company shall allow its Members and their authorized
representatives to inspect, during normal business hours, the books and
accounting records of the Company, to make extracts and copies therefrom at
their own expense, and to have full access of all of the Property and assets of
the Company. Additionally, the Company shall supply to the Members of the
Company any financial information they may from time to time reasonably require.
15. Accounting Year and Method. For purposes of maintaining the Company's
books and records, the Company's accounting year shall be the calendar year, and
the Company shall employ the cash method of accounting for tax purposes and the
accrual method of accounting for book purposes, provided, however, that the
Company shall use a fiscal year and/or employ the accrual
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method of accounting for tax purposes, if, and only if, the Company is required
to report its federal income tax on such basis.
16. Book Carrying Value of Assets. The Company's assets shall be carried on
the Company's books and records at each asset's "Book Carrying Value," which
shall mean the asset's adjusted basis for Federal income tax purposes, except as
follows:
(a) The initial Book Carrying Value of any asset contributed by a
Member to the Company shall be such asset's fair market value, as
agreed to by the contributing Member and the Company.
(b) The Book Carrying Value of all Company assets (including assets
distributed in accordance with (ii) below) shall be adjusted to reflect
their then current fair market value, as determined by the Members,
upon the happening of any of the following events:
(i) Contributions to the Company, other than pro-rata
contributions by the then current Members,
(ii) Distributions to the Members of property other than money
or pro-rata distributions of undivided interests in the
distributed property, or
(iii) Termination of the Company as a partnership for federal
income tax purposes pursuant to Section 708(b)(1)(B) of the
Internal Revenue Code.
17. Capital Accounts.
(a) Individual capital accounts ("Capital Accounts") shall be
maintained for each Member and shall consist of such Member's initial
capital contribution to the Company, if any, increased by (i) any
additional capital contributions to the Company by such Member and (ii)
such Member's distributive share of Company profits, and decreased by
(x) distributions to such Member pursuant to this Agreement and (y)
such Member's distributive share of Company losses.
(b) If the Book Carrying Value of Company assets is adjusted pursuant
to Paragraph 16(b) hereof, the Capital Accounts of all Members shall be
simultaneously adjusted to reflect the aggregate net adjustments to
said Book Carrying Value of Company assets as if the Company recognized
a profit or loss equal to the amount of such aggregate net adjustment.
(c) The transferee of any interest in the Company transferred in
accordance with the provisions of this Agreement shall succeed to the
Capital Account of the transferor to the extent that it relates to the
transferred interest.
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(d) No Member shall be entitled to interest on the balance in such
Member's Capital Account nor shall any Member be entitled to a
distribution with respect to such Member's Capital Account except as
specifically provided in this Agreement.
18. Prior Written Consent Required for the Sale of Membership Percentage
Interests.
(a) No Member may sell, transfer or otherwise dispose of all or any of
its Membership Percentage Interest in the Company without either (i)
obtaining the prior written consent of the other Members, which consent
will not be unreasonably withheld, or (ii) in the case of a proposed
sale, transfer or disposition by Newpark, complying with the provisions
of Paragraph 18(b), and in the case of a proposed sale, transfer or
disposition by OLS, complying with the provisions of Paragraph 18(c).
Notwithstanding the foregoing, no written consent of the other Members
or compliance with Paragraph 18(b) or Paragraph 18(c) will be required
in the event of (x) an assignment or transfer of any Membership
Percentage Interest in the Company from a Member to its parent
corporation or to another directly or indirectly wholly-owned
subsidiary or holding company of the Member or its parent company or to
any affiliate or subsidiary of such holding company or (y) a collateral
pledge of or grant of a security interest in a Membership Percentage
Interest in the Company in order to secure indebtedness as provided in
Paragraph 19. Any sale, transfer or other disposal of any Membership
Percentage Interest in the Company (whether or not requiring the prior
written consent of the other Members) will not be or become effective
until the assignee or transferee has executed appropriate documentation
in favor of the other Members and to the Company whereby such assignee
or transferee agrees to be bound by the terms and conditions of this
Agreement and any other third party contracts entered into by and
between Members and by and between a Member or his or its affiliate and
the Company, as provided in Paragraph 20.
(b) Newpark Sale. As a condition to Newpark's right to sell, transfer
or otherwise dispose of all or a portion of its Membership Percentage
Interest in the Company (other than as permitted in Paragraph 18(a)),
Newpark will first comply with the following conditions:
(i) Newpark will first inform OLS in writing (the "Newpark
Notice of Sale") of the price, terms and conditions upon which
it proposes to sell, transfer or otherwise dispose of its
entire Membership Percentage Interest in the Company, will
identify the prospective purchaser or transferee of such
Membership Percentage Interest, and will offer OLS the
opportunity to acquire Newpark's Membership Percentage
Interest in the Company upon the same price, terms and
conditions as set forth in
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the Newpark Notice of Sale ("OLS ROFR Rights"). OLS will have
the preferential right to exercise OLS ROFR Rights as of the
date of the Newpark Notice of Sale.
(ii) It will be deemed that OLS ROFR Rights have been waived
if such rights have not been exercised in writing within
thirty (30) calendar days after receipt of the Newpark Notice
of Sale.
(iii) Newpark may, within a period of six (6) months after OLS
ROFR Rights have been refused or waived by OLS, sell, transfer
or otherwise dispose of such Membership Percentage Interest in
the Company to the prospective purchaser or transferee
previously identified in the Newpark Notice of Sale, but not
at a price less than nor upon terms and conditions more
favorable to the purchaser or transferee than the price, terms
and conditions first offered to OLS.
(iv) If no such transaction of Newpark's Membership Percentage
Interest in the Company is consummated by Newpark within the
same period of six (6) months, Newpark will not thereafter
make any sale, transfer or other disposal without again
offering the same to OLS in accordance with the provisions of
this Paragraph 18(b).
(c) OLS Sale. As a condition to OLS's right to sell, transfer or
otherwise dispose of all or a portion of its Membership Percentage
Interest in the Company (other than as permitted in Paragraph 18(a)),
OLS will first comply with the following conditions:
(i) OLS will first inform Newpark in writing ("OLS Notice of
Sale") of the price, terms and conditions upon which it
proposes to sell, transfer or otherwise dispose of its entire
Membership Percentage Interest in the Company, will identify
the prospective purchaser or transferee of such Membership
Percentage Interest, and will offer Newpark the opportunity to
acquire OLS's Membership Percentage Interest in the Company
upon the same price, terms and conditions as set forth in OLS
Notice of Sale (the "Newpark ROFR Rights"). Newpark will have
the preferential right to exercise its Newpark ROFR Rights as
of the date of OLS Notice of Sale.
(ii) It will be deemed that the Newpark ROFR Rights have been
waived if such rights have not been exercised in writing
within thirty (30) calendar days after receipt of OLS Notice
of Sale.
(iii) OLS may, within a period of six (6) months after the
Newpark ROFR Rights have been refused or waived by Newpark,
sell, transfer or
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otherwise dispose of its entire Membership Percentage Interest
in the Company to the prospective purchaser or transferee
previously identified in OLS Notice of Sale, but not at a
price less than nor upon terms and conditions more favorable
to the purchaser or transferee than the price, terms and
conditions first offered to Newpark.
(iv) If no such transaction of OLS's Membership Percentage
Interest in the Company is consummated by OLS within the same
period of six (6) months, OLS will not thereafter make any
sale, transfer or other disposal without again offering the
same to Newpark in accordance with the provisions of this
Paragraph 18(c).
19. Transfers as Security. Any Member may transfer all or any part of its
interest in the Company by way of security, and the provisions of Paragraph 18
shall not apply so long as the Member remains the legal owner of the interest so
given as security. However, the interest cannot be transferred or sold to
satisfy the debt for which it was given as security without complying with the
provisions of Paragraph 18.
20. Status of Transferee. Any transfer (whether voluntary or involuntary) of an
interest in this Company in accordance with the provisions of the Agreement
(other than to another Member) shall convey to the transferee only the
transferor's right to share in distributions, profits and losses and capital
upon liquidation with respect to the interest transferred, shall not convey any
rights to vote on any Company matters or to participate in the management of the
Company and shall not diminish or in any way affect the liabilities and
obligations of the transferring Member under the Agreement, and the transferee
shall not become a Member in the Company unless and until:
(i) the transfer shall have been approved by all of the other
Members;
(ii) the transferee shall agree in writing to be bound by the
terms and conditions of this Agreement (as may be modified in
connection with the transfer) and any other third party
contracts entered into by and between the Members or by and
between the Members or any of his or its affiliates and the
Company; and
(iii) an instrument setting forth the fact of the transfer and
the new interests of the affected Member, is executed by all
of the Members including the transferee.
21. Bankruptcy of a Member.
(a) Except as otherwise provided herein, the bankruptcy of a Member
shall terminate that Member's interest in the Company and the remaining
Members shall have the right to purchase the interest of the
withdrawing Member at a
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price equal to the value of his interest in the Company as of the end
of the month of his bankruptcy as hereinafter calculated.
(b) Upon the termination of a Member's interest in the company as
provided in subparagraph (a) hereof, Company Capital Accounts shall be
posted as of the end of the month in which the terminating event
occurred. The value of the bankrupt Member's interest in the Company
shall be the sum of its Capital Account as posted and any debts due and
owing to it by the Company less any amounts due and owing by him it the
Company.
(c) If the remaining Members exercise their right of purchase, they
shall pay the purchase price of the interest of the Member terminating
hereunder at the valuation determined under subparagraph (b) hereof, as
follows:
(i) One/half within three months after the end of the month in
which the terminating event occurred, and
(ii) the balance within six months after the end of the month
in which the terminating event occurred.
The remaining Members shall purchase the interest of the terminating
Member in proportion to their respective Membership Percentage
Interests; provided, however, that if one Member fails to pay its share
of the purchase price, the remaining Member or Members may pay the
balance and their respective Membership Percentage Interests shall be
increased thereby.
(d) The bankruptcy of a Member shall not terminate that Member's
interest in the Company if the remaining Members unanimously agree to
admit that Member's trustee in bankruptcy, successor, assign or other
legal representative as a Member under the provisions of Paragraph 20
hereof.
(e) Following the bankruptcy of a Member, neither the Member, nor the
Member's trustee in the bankruptcy, successor, assign or other legal
representative shall have any further rights in connection with the
management of the Company as provided in Paragraph 8 hereof, and none
of such shall have any right to serve as a CEO, Director or other
Manager of the Company or any right to appoint any person to any such
position.
22. Other Events of Termination of Interest of Member, Withdrawal of
Member, Admission of New Members.
(a) Upon any other event which terminates a Member's interest in the
Company, other than bankruptcy of the Member, such as the withdrawal,
expulsion or dissolution of a Member, and provided that the Company is
continued pursuant to the terms of Paragraph 6 hereof, such Member
shall be
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distributed, within six (6) months of the date of such Member's
termination of membership in the Company, an amount, in cash, equal to
the Member's capital account as of the end of the month in which the
terminating event occurred, plus any debts due and owing to it by the
Company, less any amounts due and owing by it to the Company.
(b) No Member may voluntarily withdraw without the consent of all
remaining Members and the Members.
(c) A new Member or Members may be admitted with the consent of all
Members and such admission may be effected by an amendment to this
Agreement, executed by all of the Members setting forth the value of
such Member's contribution to the Company and the resulting Membership
Percentage Interests of the newly admitted Member or Members and any
other Member or Members of the Company and any other modifications to
this Agreement occasioned thereby.
23. Seizure of Interest of Member.
(a) In the event of the seizure of the interest in the Company of any
Member by a creditor of the Member, the Company shall have the right
and option to either:
(i) bond out the seizure, or
(ii) satisfy the debt on account of which the seizure was
made, or
(iii) take no action.
(b) If the Company shall elect to bond out the seizure, the Member
whose interest was seized shall be indebted to the Company for the
premiums and other expenditures of the Company incurred by reason of
the bonding out of the seizure.
(c) If the Company shall satisfy the debt on account of which the
seizure was made, the Company shall automatically be subrogated to all
of the rights of the seizing creditor against the Member whose Company
interest was seized with respect to the debt so satisfied by the
Company.
(d) In the event of seizure of the interest in the Company of any
Member, such Member shall no longer have any right to participate in
the management of the Company as set forth in Paragraph 8 hereof or to
serve as a CEO, Director or other Manager of the Company and shall have
no right to appoint any person to any such position.
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24. Liquidation.
(a) Upon termination of the Company as provided in Paragraph 6, the
Members jointly acting as liquidator, shall proceed to wind up the
affairs of the Company and to liquidate the Company in an orderly
manner. The liquidator of the Company shall collect all revenues and
liquidate the assets, to the extent deemed necessary and advisable, and
shall distribute (or establish appropriate reserves therefor) the
proceeds and the unliquidated assets, if any, in accordance with the
following priorities:
(i) First, payment and discharge of debts and liabilities of
the Company;
(ii) Second, liquidation of Members' Capital Accounts; and
(iii) Third, if any proceeds or unliquidated assets remain
after satisfaction of the above priorities (i) and (ii), such
remaining proceeds and unliquidated assets shall be
distributed to the Members in accordance with their Membership
Percentage Interests.
(b) Any gain or loss on disposition of the assets of the Company in
liquidation shall be credited or charged to the Members in proportion
to their Membership Percentage Interests.
(c) Any property distributed in kind shall be valued by an independent
appraisal at its fair market value and then treated as though the
property were sold at such fair market value as of the time of such
distribution (with a resulting allocation of profits and losses) and
the cash proceeds were distributed. In-kind distributions shall be made
at the discretion of the liquidator and, if made, shall to the extent
possible be made on the basis of particular properties being
distributed to particular Members in full ownership.
25. Applicable Law. The relations of the Members with each other and with
third persons shall be governed by the laws of the State of Louisiana.
26. Notices. Notices required or permitted by this Agreement shall be given
(a) to each Member (and to legal representatives and successors) at the Member's
permanent mailing address as hereinabove set forth and (b) to the Company at its
principal place of business, with copies to each Member at their said permanent
mailing address. The Company or any Member may change the address for the giving
of notices to it or him by giving the Company and all other Members a notice of
the new address. Any such notice or communication (a) sent by express overnight
courier or facsimile will be considered given on the first business day
following the date of dispatch and (b) delivered personally will be considered
given on the date of such delivery. Nothing contained in this Paragraph 26 will
excuse failure to give prompt or
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immediate oral notice for purposes of informing the other Member of an event
which requires such notice, but such oral notice will not satisfy the
requirements of written notice set forth in this Paragraph 26.
27. Waiver. No failure or delay by any Member in exercising any right,
power or remedy under this Agreement will operate as a waiver thereof, nor will
any single or partial exercise of the same preclude any further exercise thereof
or the exercise of any other right, power or remedy. No waiver by any Member of
any breach of any provision hereof will be deemed to be a waiver of any
subsequent breach of that or any other provision thereof.
28. Amendments. Except as otherwise provided herein, this Agreement may be
amended only by an instrument in writing signed by all Members.
29. Separability of Provisions. If for any reason, any provision hereof is
determined to be invalid and contrary to any existing or future law, such
invalidity shall not impair the operation of or affect those portions of this
Agreement which are valid.
This Operating Agreement may be executed in any number of multiple
originals or counterparts, each of which shall be binding upon and inure to the
benefit of the parties and their respective heirs, successors and assigns,
jointly, severally and in solido.
IN WITNESS WHEREOF, the parties hereto have executed this Amended and
Restated Operating Agreement effective as of the date first hereinabove set
forth.
WITNESSES NEWPARK HOLDINGS, INC.
By:
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▇▇▇▇▇ ▇. ▇▇▇▇
President
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OLS CONSULTING SERVICES, INC.
By:
-------------------------------- ----------------------------------
Ores ▇▇▇▇ ▇▇▇▇▇
President
--------------------------------
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