Document:

Exhibit 10.6

 

FORM OF

 

TAX RECEIVABLE AGREEMENT

 

among

 

US LBM HOLDINGS, INC.,

 

LBM MIDCO, LLC

 

and

 

EACH MEMBER OF

 

LBM MIDCO, LLC LISTED ON ANNEX A

 

Dated as of               , 2018

 

 

	
ARTICLE I.   DEFINITIONS
    	
2
    
	
 
    	
 
    	
 
    
	
1.1.
    	
Definitions
    	
2
    
	
 
    	
 
    	
 
    
	
1.2.
    	
Terms Generally
    	
12
    
	
 
    	
 
    	
 
    
	
ARTICLE II.   DETERMINATION OF CERTAIN REALIZED TAX BENEFITS
    	
13
    
	
 
    	
 
    	
 
    
	
2.1.
    	
Tax Benefit Schedule
    	
13
    
	
 
    	
 
    	
 
    
	
2.2.
    	
Procedure, Amendments
    	
14
    
	
 
    	
 
    	
 
    
	
2.3.
    	
Consistency with Tax   Returns
    	
15
    
	
 
    	
 
    	
 
    
	
ARTICLE III.   TAX BENEFIT PAYMENTS
    	
16
    
	
 
    	
 
    	
 
    
	
3.1.
    	
Payments
    	
16
    
	
 
    	
 
    	
 
    
	
3.2.
    	
Duplicative Payments
    	
17
    
	
 
    	
 
    	
 
    
	
3.3.
    	
Pro Rata Payments;   Coordination of Benefits
    	
17
    
	
 
    	
 
    	
 
    
	
ARTICLE IV.   TERMINATION
    	
18
    
	
 
    	
 
    	
 
    
	
4.1.
    	
Early Termination,   Change in Control and Breach of Agreement
    	
18
    
	
 
    	
 
    	
 
    
	
4.2.
    	
Early Termination   Notice
    	
20
    
	
 
    	
 
    	
 
    
	
4.3.
    	
Payment upon Early   Termination
    	
20
    
	
 
    	
 
    	
 
    
	
ARTICLE V.   SUBORDINATION AND LATE PAYMENTS
    	
21
    
	
 
    	
 
    	
 
    
	
5.1.
    	
Subordination
    	
21
    
	
 
    	
 
    	
 
    
	
5.2.
    	
Late Payments by   Corporate Taxpayer
    	
21
    
	
 
    	
 
    	
 
    
	
ARTICLE VI.   NO DISPUTES; CONSISTENCY; COOPERATION
    	
21
    
	
 
    	
 
    	
 
    
	
6.1.
    	
Participation in   Corporate Taxpayer’s and US LBM LLC’s Tax Matters
    	
21
    
	
 
    	
 
    	
 
    
	
6.2.
    	
Consistency
    	
22
    
	
 
    	
 
    	
 
    
	
6.3.
    	
Cooperation
    	
22
    
	
 
    	
 
    	
 
    
	
ARTICLE VII.   MISCELLANEOUS
    	
22
    
	
 
    	
 
    	
 
    
	
7.1.
    	
Notices
    	
22
    
	
 
    	
 
    	
 
    
	
7.2.
    	
Counterparts
    	
24
    
	
 
    	
 
    	
 
    
	
7.3.
    	
Entire Agreement; Third   Party Beneficiaries
    	
24
    
	
 
    	
 
    	
 
    
	
7.4.
    	
Severability
    	
24
    
	
 
    	
 
    	
 
    
	
7.5.
    	
Successors; Assignment;   Amendments; Waivers
    	
24
    
	
 
    	
 
    	
 
    
	
7.6.
    	
Titles and Subtitles
    	
25
    

 

i

 

	
7.7.
    	
Governing Law;   Jurisdiction; Waiver of Jury Trial
    	
25
    
	
 
    	
 
    	
 
    
	
7.8.
    	
Reconciliation
    	
25
    
	
 
    	
 
    	
 
    
	
7.9.
    	
Withholding
    	
26
    
	
 
    	
 
    	
 
    
	
7.10.
    	
Admission of Corporate   Taxpayer into a Consolidated Group; Transfers of Corporate Assets
    	
27
    
	
 
    	
 
    	
 
    
	
7.11.
    	
Confidentiality
    	
27
    
	
 
    	
 
    	
 
    
	
7.12.
    	
Change in Law
    	
28
    
	
 
    	
 
    	
 
    
	
7.13.
    	
Independent Nature of   LLC Unit Holders’ Rights and Obligations
    	
28
    
	
 
    	
 
    	
 
    
	
7.14.
    	
LLC Agreement/Exchange   Agreement
    	
29
    

 

ii

 

This TAX RECEIVABLE AGREEMENT (“Agreement”), dated as of              , 2017 and effective upon the consummation of the Reorganization Transactions (as defined in the Reorganization Agreement (as defined herein)) and prior to the IPO Closing, is hereby entered into by and among US LBM Holdings, Inc., a Delaware corporation (“Corporate Taxpayer”), LBM Midco, LLC, a Delaware limited liability company (“US LBM LLC”), each LLC Unit Holder (as defined below), and each of the successors and assigns thereto.

 

RECITALS

 

WHEREAS, in connection with the initial public offering of Class A Common Stock (as defined below) of the Corporate Taxpayer (the “IPO”), US LBM LLC will, pursuant to the Reorganization Agreement (as defined below), enter into a series of transactions to reorganize its structure;

 

WHEREAS, the limited liability company interests in US LBM LLC are and will be classified as limited liability company units (“LLC Units”);

 

WHEREAS, US LBM LLC is treated as a partnership for U.S. federal income tax purposes;

 

WHEREAS, the Corporate Taxpayer will be the sole managing member of US LBM LLC on or about the date of the IPO Closing (as defined below), and holds or will hold on or about the date of the IPO Closing, directly or indirectly, LLC Units;

 

WHEREAS, each holder of LLC Units (other than, for clarity, Corporate Taxpayer and its consolidated Subsidiaries) listed on Annex A (each an “LLC Unit Holder”, and, for the avoidance of doubt, such term shall include former holders of LLC Units entitled to current or future payments pursuant to this Agreement) may exchange its LLC Units (or, in the case of a “disguised sale” described under Section 707 of the Code (as defined below), be deemed to exchange other interests in the US LBM LLC or its assets) for (A) Class A Common Stock (as defined herein) of Corporate Taxpayer (or, at the option of Corporate Taxpayer, for cash), in accordance with and subject to the provisions of the Exchange Agreement (as defined below) and (B) the amounts payable pursuant to and subject to the terms of this Agreement in respect of such exchange (or deemed exchange);

 

WHEREAS, US LBM LLC and any direct or indirect subsidiary (owned through a chain of pass-through entities) of US LBM LLC that is treated as a partnership for U.S. federal income tax purposes (together with US LBM LLC and any direct or indirect subsidiary (owned through a chain of pass-through entities) of US LBM LLC that is treated as a disregarded entity for U.S. federal income tax purposes, the “US LBM LLC Group”) will have in effect an election under Section 754 of the Code as provided under Section 2.1(c) for the taxable year in which any Exchange (as defined below) occurs, which election will result in an adjustment to the Corporate Taxpayer’s share of the tax basis of the assets owned by the US LBM LLC Group as of the date of the Exchange, with a consequent result on the taxable income subsequently derived therefrom;

 

1

 

WHEREAS, the income, gain, loss, deduction and other Tax (as defined below) items of Corporate Taxpayer and its consolidated Subsidiaries may be affected by (i) the Basis Adjustments (as defined below), (ii) any Interest Amount (as defined below) paid, (iii) the Imputed Interest (as defined below) and (iv) Former LLC Owner TRA Basis Adjustments (as defined below);

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustments, any Interest Amount paid and the Imputed Interest on the liability for Taxes of Corporate Taxpayer;

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I.
  DEFINITIONS

 

1.1.                            Definitions.  As used in this Agreement, the terms set forth in this ARTICLE I shall have the following meanings.

 

“Advisory Firm” means any accounting firm or any law firm that, in either case, is nationally recognized as being expert in tax matters.

 

“Affiliate” means, with respect to any specified Person, (a) any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such specified Person, (b) a Member of the Immediate Family of such specified Person, and (c) any investment fund advised or managed by, or under common control or management with, such specified Person.

 

“Agreed Rate” means LIBOR plus 100 basis points.

 

“Agreement” has the meaning set forth in the Preamble of this Agreement.

 

“Amended Schedule” has the meaning set forth in Section 2.2(b) of this Agreement.

 

“Basis Adjustment” means the adjustment to the tax basis of a Reference Asset under Sections 732, 755 and 1012 of the Code (in situations where, following an Exchange, a Merger, or a merger or liquidation of Corporate Taxpayer’s consolidated Subsidiaries, US LBM LLC becomes an entity that is disregarded as separate from its owner for U.S. federal income tax purposes) or under Sections 743(b), 754 and 755 of the Code (in situations where, following an Exchange, a Merger ,or a merger or liquidation of Corporate Taxpayer’s consolidated Subsidiaries, US LBM LLC is not an entity that is disregarded as separate from its owner for U.S. federal income tax purposes) and the Treasury Regulations promulgated thereunder and, in each case, comparable sections of state and local tax laws, as a result of (i) an Exchange by an LLC Unit Holder and (ii) the payments made to LLC Unit Holders pursuant to this Agreement.  For the avoidance of doubt, the amount of any Basis

 

2

 

Adjustment resulting from an Exchange shall be determined without regard to any Pre-Exchange Transfers (and as if any such Pre-Exchange Transfers had not occurred).  As required by Section 2.1(c), the Corporate Taxpayer will ensure that an election under Section 754 of the Code is in effect at all times for US LBM LLC and each of its direct and indirect subsidiaries (until US LBM LLC and each of its direct and indirect subsidiaries becomes an entity that is disregarded as separate from its owner for U.S. federal income tax purposes).

 

“Blended Rate” means, with respect to any taxable year, the sum of the effective rates of tax imposed on the aggregate net income of the Corporate Taxpayer in each state or local jurisdiction in which the Corporate Taxpayer files Tax Returns for such taxable year, with the maximum effective rate in any state or local jurisdiction being equal to the product of: (i) the apportionment factor on the income or franchise Tax Return filed by the Company in such jurisdiction for such taxable year, and (ii) the maximum applicable corporate tax rate in effect in such jurisdiction in such taxable year.  As an illustration of the calculation of Blended Rate for a taxable year, if the Corporate Taxpayer solely files Tax Returns in State 1 and State 2 in a taxable year, the maximum applicable corporate tax rates in effect in such states in such taxable year are 6.5% and 5.5%, respectively, and the apportionment factors for such states in such taxable year are 55% and 45%, respectively, then the Blended Rate for such taxable year is equal to 6.05% (i.e., 6.5% times 55% plus 5.5% times 45%).

 

“Board” means the Board of Directors of Corporate Taxpayer.

 

“Business Day” means any day excluding Saturday, Sunday and any day that is a legal holiday under the laws of the State of New York or is a day on which banking institutions located in New York are closed.

 

A “Change in Control” shall be deemed to have occurred upon:

 

(i)                                     the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of Corporate Taxpayer’s assets (determined on a consolidated basis) to any “person” or “group” (as such term is used in Section 13(d)(3) of the Exchange Act) other than to any Subsidiary of Corporate Taxpayer; provided, that, for clarity and notwithstanding anything to the contrary, neither the approval of nor consummation of a transaction treated for U.S. federal income tax purposes as a liquidation into Corporate Taxpayer of its consolidated Subsidiaries or merger of such entities into one another or Corporate Taxpayer will constitute a “Change in Control”;

 

(ii)                                  the merger or consolidation of Corporate Taxpayer with any other person, other than a merger or consolidation which would result in the Voting Securities of Corporate Taxpayer outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity)

 

3

 

more than 50% of the total voting power represented by the Voting Securities of Corporate Taxpayer or such surviving entity outstanding immediately after such merger or consolidation;

 

(iii)                               the shareholders of the Corporate Taxpayer approve a plan of complete liquidation or dissolution of the Corporate Taxpayer;

 

(iv)                              the acquisition, directly or indirectly, by any “person” or “group” (as such term is used in Section 13(d)(3) of the Exchange Act) (other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of Corporate Taxpayer; (b) a corporation or other entity owned, directly or indirectly, by the stockholders of Corporate Taxpayer in substantially the same proportions as their ownership of stock of Corporate Taxpayer; or (c) Affiliates of Kelso Investment Associates IX, L.P.) of beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the aggregate voting power of the Voting Securities of Corporate Taxpayer; or

 

(v)                                 the following individuals cease for any reason to constitute a majority of the number of directors of the Corporate Taxpayer then serving: individuals who, at the IPO Closing, constitute the Board and any new director whose appointment or election by the Board or nomination for election by the Corporate Taxpayer’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the IPO Closing or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (v).

 

“Class A Common Stock” means the Class A Common Stock, par value $0.01 per share, of the Corporate Taxpayer, having the rights to be set forth in the Amended and Restated Certificate of Incorporation.

 

“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended from time to time.

 

“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of Voting Securities, by contract or otherwise.

 

“Corporate Taxpayer” has the meaning set forth in the Preamble of this Agreement and includes any predecessor entities.

 

“Corporate Taxpayer Return” means the federal, state or local Tax Return, as applicable, of Corporate Taxpayer or any consolidated Subsidiary of Corporate Taxpayer (or any Tax Return filed for a consolidated, affiliated, combined or unitary group of which Corporate Taxpayer or any consolidated Subsidiary of Corporate Taxpayer is a member) filed with respect to Taxes of any taxable year.

 

4

 

“Cumulative Net Realized Tax Benefit” means for a taxable year the cumulative amount of Realized Tax Benefits for all taxable years or portions thereof of (i) Corporate Taxpayer, (ii) its consolidated Subsidiaries, and (iii) without duplication, US LBM LLC and its Subsidiaries, up to and including such taxable year, net of the cumulative amount of Realized Tax Detriments for the same period.  The Realized Tax Benefit and Realized Tax Detriment for each taxable year or portion thereof shall be determined based on the most recent Tax Benefit Schedule or Amended Schedule, if any, in existence at the time of such determination.  If a Cumulative Net Realized Tax Benefit is being calculated with respect to a portion of a taxable year, then calculations of the Cumulative Net Realized Tax Benefit (including determinations relating to Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest to the extent applicable) shall be made as if there were an interim closing of the books of the relevant entity and its Subsidiaries and the taxable year had closed on the relevant date.

 

“Default Rate” means LIBOR plus 500 basis points.

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state and local tax law, as applicable, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.

 

“Early Termination Date” means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.

 

“Early Termination Effective Date” has the meaning set forth in Section 4.2 of this Agreement.

 

“Early Termination Notice” has the meaning set forth in Section 4.2 of this Agreement.

 

“Early Termination Payment” has the meaning set forth in Section 4.3(b) of this Agreement.

 

“Early Termination Rate” means LIBOR plus 100 basis points.

 

“Early Termination Schedule” has the meaning set forth in Section 4.2 of this Agreement.

 

“Exchange” means an acquisition, purchase or redemption, as determined for U.S. federal income tax purposes, of LLC Units (or, in the case of a “disguised sale” described under Section 707 of the Code, of other interests in US LBM LLC or its assets) by Corporate Taxpayer, US LBM LLC or any of US LBM LLC’s consolidated Subsidiaries from a person (other than Corporate Taxpayer or any of its consolidated Subsidiaries) who is party to this Agreement (including a permitted transferee under Section 7.5 who is a party by reason of a joinder), including by way of an exchange of Corporate Taxpayer shares (or, at the election of Corporate Taxpayer, the cash equivalent of such shares) for LLC Units, in each case occurring on or after the date

 

5

 

of this Agreement.  For the avoidance of doubt, an Exchange includes (i) any disguised sale of an interest in US LBM LLC under Section 707 of the Code that occurs by reason of the distribution of proceeds from US LBM LLC on or near the date of an Exchange and the contribution of cash by Corporate Taxpayer or any of its consolidated Subsidiaries on or near the date thereof; and (ii) any disguised sale occurring in connection with the exchange right described in the LLC Agreement or the Exchange Agreement.  Any reference in this Agreement to LLC Units “Exchanged” is intended to denote LLC Units that were, or are, the subject of an Exchange.

 

“Exchange Basis Schedule” has the meaning set forth in Section 2.1(d) of this Agreement.

 

“Exchange Date” means the date of any Exchange.

 

“Exchanged Owner” has the meaning set forth in the Former LLC Owner TRA.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Exchange Agreement” means the Exchange Agreement entered into by and among the Corporate Taxpayer, US LBM LLC, and certain holders of units and stock dated on or about the date hereof, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.

 

“Expert” has the meaning set forth in Section 7.8 of this Agreement.

 

“Former LLC Owner TRA” means the Tax Receivable Agreement entered into by and among the Corporate Taxpayer, US LBM LLC, and certain stockholders of the Corporate Taxpayer, as such agreement may be amended, restated, supplemented or otherwise modified from time to time.

 

“Former LLC Owner TRA Basis Adjustment” means “Basis Adjustment” as defined in the Former LLC Owner TRA.

 

“Hypothetical Federal Tax Liability” means, with respect to any taxable year or portion thereof, the liability for U.S. federal income Taxes for such taxable year or portion thereof of (i) Corporate Taxpayer, (ii) its consolidated Subsidiaries and (iii) without duplication, US LBM LLC, but only with respect to Corporate Taxpayer and its consolidated Subsidiaries’ pro rata shares of the U.S. federal income Tax liability of US LBM LLC and its Subsidiaries for such taxable year or portion thereof, in each case using the same methods, elections, conventions and similar practices used on the relevant federal Corporate Taxpayer Return but (i) using the Non-Stepped Up Tax Basis, (ii) excluding any deduction attributable to Imputed Interest for the taxable year, (iii) excluding any deduction attributable to Former LLC Owner TRA Basis Adjustments and (iv) deducting the Hypothetical Other Tax Liability (rather than any amount for state or local tax liabilities).  For the avoidance of doubt, the Hypothetical Federal Tax Liability shall be determined without taking into account

 

6

 

the carryover or carryback of any Tax item (or portions thereof) that is attributable to any Basis Adjustment, Former LLC Owner TRA Basis Adjustment, Imputed Interest or the deduction in respect of any Hypothetical Other Tax Liability, as applicable.  If a Hypothetical Federal Tax Liability is being calculated with respect to a portion of a taxable year, then calculations of the Hypothetical Federal Tax Liability (including determinations relating to Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest to the extent applicable) shall be made as if there were an interim closing of the books of the relevant entity and its Subsidiaries and the taxable year had closed on the relevant date.

 

“Hypothetical Other Tax Liability” means, with respect to any taxable year or portion thereof, the United States federal taxable income determined in connection with calculating the Hypothetical Federal Tax Liability for such Taxable Year (determined without regard to clause (iv) thereof) multiplied by the Blended Rate for such taxable year.

 

“Hypothetical Tax Liability” means, with respect to any taxable tear, the Hypothetical Federal Tax Liability for such taxable year, plus the Hypothetical Other Tax Liability for such taxable year.

 

“Imputed Interest” means any interest imputed under Section 1272, 1274 or 483 or other provision of the Code and any similar provision of state and local tax law with respect to Corporate Taxpayer’s payment obligations under this Agreement or the Former LLC Owner TRA.

 

“Initial Debt Documents” has the meaning set forth in Section 4.1(b) of this Agreement.

 

“Interest Amount” has the meaning set forth in Section 3.1(b) of this Agreement.

 

“IPO” has the meaning set forth in the Recitals of this Agreement.

 

“IPO Closing” means the closing of the sale of the shares of Class A Common Stock in the IPO (without giving effect to any exercise of the underwriters’ over-allotment option).

 

“Kelso Representative” means Kelso & Company, L.P. or its designated successor.

 

“LIBOR” means during any period, an interest rate per annum equal to the one-year LIBOR reported, on the date two days prior to the first day of such period, on the Reuters Screen page “LIBOR01” (or if such screen shall cease to be publicly available, as reported by any other publicly available source of such market rate) for London interbank offered rates for U.S. dollar deposits for such period.

 

“LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of US LBM LLC, dated on or about the date hereof, as such

 

7

 

agreement may be amended, restated, supplemented or otherwise modified from time to time.

 

“LLC Unit Holder” has the meaning set forth in the Recitals of this Agreement.

 

“LLC Units” has the meaning set forth in the Recitals of this Agreement.

 

“Market Value” shall mean the closing price per share of the Class A Common Stock on the applicable determination date on the national securities exchange or interdealer quotation system on which such Class A Common Stock is then traded or listed, as reported by the Wall Street Journal (or other mutually acceptable electronic or print publication); provided, that if the closing price is not reported by the Wall Street Journal (or such other mutually acceptable electronic or print publication) for the applicable determination date, then the “Market Value” shall mean the closing price of the Class A Common Stock on the Business Day immediately preceding such determination date on the national securities exchange or interdealer quotation system on which such Class A Common Stock is then traded or listed, as reported by the Wall Street Journal (or such other mutually acceptable electronic or print publication); provided, further, that if the Class A Common Stock is not then listed on a national securities exchange or interdealer quotation system, “Market Value” shall mean the fair market value of the Class A Common Stock on the applicable determination date, as determined by the Board in good faith.

 

“Member of the Immediate Family” means, with respect to any Person who is an individual, (a) each parent, spouse (but not including a former spouse or a spouse from whom such Person is legally separated) or child (including those adopted) of such individual and (b) each trust naming only one or more of the Persons listed in sub-clause (a) as beneficiaries.

 

“Merger” has the meaning set forth in the Former LLC Owner TRA.

 

“Net Tax Benefit” means for any taxable year the amount equal to 85% of the Cumulative Net Realized Tax Benefit, if any, as of the end of such taxable year (or portion thereof).

 

“Non-Stepped Up Tax Basis” means, with respect to any Reference Asset at any time, the Tax basis that such asset would have had at such time if no Basis Adjustments had been made.

 

“Objection Notice” has the meaning set forth in Section 2.2(a) of this Agreement.

 

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

 

8

 

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

 

“Pre-Exchange Transfer” means, with respect to an LLC Unit (or, in the case of a “disguised sale” described under Section 707 of the Code, other interests in US LBM LLC or its assets), any transfer (including upon the death of an LLC Unit Holder) (i) that occurs prior to an Exchange of such LLC Unit or LLC Units (or such other interests in US LBM LLC or its assets) and (ii) to which Section 734(b) or 743(b) of the Code applies.

 

“Realized Tax Benefit” means, for a taxable year (or portion thereof), the excess, if any, of the Hypothetical Tax Liability for such taxable year (or portion thereof) over the actual liability for Taxes for such taxable year (or portion thereof) of (i) Corporate Taxpayer, (ii) its consolidated Subsidiaries, and (iii) without duplication, US LBM LLC and its Subsidiaries, but only with respect to Corporate Taxpayer and its consolidated Subsidiaries’ pro rata shares of the Tax liability of US LBM LLC and its Subsidiaries for such taxable year (or portion thereof).  If all or a portion of the actual liability for such Taxes for the taxable year arises as a result of an audit by a Taxing Authority of any taxable year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.  If an “actual liability” for Taxes is being calculated with respect to a portion of a taxable year, then calculations of such actual liability (including determinations relating to Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest to the extent applicable) shall be made as if there were an interim closing of the books of the relevant entity and its Subsidiaries and the taxable year had closed on the relevant date.

 

“Realized Tax Detriment” means, for a taxable year (or portion thereof), the excess, if any, of the actual liability for Taxes for such taxable year (or portion thereof) of (i) Corporate Taxpayer, (ii) its consolidated Subsidiaries, and (iii) without duplication, US LBM LLC and its Subsidiaries, but only with respect to Corporate Taxpayer and its consolidated Subsidiaries’ pro rata shares of the Tax liability of US LBM LLC and its Subsidiaries for such taxable year (or portion thereof) over the Hypothetical Tax Liability for such taxable year (or portion thereof).  If all or a portion of the actual liability for such Taxes for the taxable year arises as a result of an audit by a Taxing Authority of any taxable year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.  If an “actual liability” for Taxes is being calculated with respect to a portion of a taxable year, then calculations of such actual liability (including determinations relating Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest to the extent applicable) shall be made as if there were an interim closing of the books of the relevant entity and its Subsidiaries and the taxable year had closed on the relevant date.

 

“Reconciliation Dispute” has the meaning set forth in Section 7.8 of this Agreement.

 

9

 

“Reconciliation Procedures” has the meaning set forth in Section 2.2(a) of this Agreement.

 

“Reference Asset” means (a) with respect to any Exchange, an asset that is held by the US LBM LLC Group, at the time of such Exchange and (b) any asset that is “substituted basis property” under Section 7701(a)(42) of the Code with respect to a Reference Asset.

 

“Reorganization Agreement” means that certain Reorganization Agreement dated as of May 9, 2017 by and among the Corporate Taxpayer, US LBM LLC and the other parties named therein.

 

“Schedule” means any of the following: (i) a Tax Benefit Schedule, or (ii) the Early Termination Schedule, and, in each case, any amendments thereto.

 

“Senior Obligations” has the meaning set forth in Section 5.1 of this Agreement.

 

“Subsidiary” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests or the sole general partner interest or managing member or similar interest of such Person.

 

“Tax Benefit Payment” has the meaning set forth in Section 3.1(b) of this Agreement.

 

“Tax Benefit Schedule” has the meaning set forth in Section 2.1(a) of this Agreement.

 

“Tax Return” means any return, declaration, election, report or similar statement filed or required to be filed with a Taxing Authority with respect to Taxes (including any attached schedules), including any information return, claim for refund, declaration of estimated Tax, and amendments of any of the foregoing.

 

“Taxes” means any and all U.S. federal, state, local and foreign taxes, assessments or similar charges that are based on or measured with respect to net income or profits, and any interest related to such Tax.

 

“Taxing Authority” shall mean any domestic, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

“Treasury Regulations” means the final, temporary and (to the extent they can be relied upon) proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

10

 

“US LBM LLC Group” has the meaning set forth in the Recitals of this Agreement.

 

“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that (1) in each taxable year ending on or after such Early Termination Date, Corporate Taxpayer and its consolidated Subsidiaries will have taxable income sufficient to fully use the deductions within Net Tax Benefit (including arising from the Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest) during such taxable year (including, for the avoidance of doubt, Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest that would result from post-Early Termination Date Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available, (2) the U.S. federal, state and local income tax rates (and, if applicable, foreign income tax rates) that will be in effect for each such taxable year will be those specified for each such taxable year by the Code and other law as in effect on the Early Termination Date (but taking into account for the applicable taxable years adjustments to the tax rates that have been enacted as of the Early Termination Date with a delayed effective date), (3) any loss carryovers generated by any Basis Adjustment, Former LLC Owner TRA Basis Adjustments or Imputed Interest, and available as of the Early Termination Date will be used by Corporate Taxpayer on a pro rata basis from the Early Termination Date through the scheduled expiration date of such loss carryovers, (4) any non-amortizable assets (other than stock of the Corporate Taxpayer’s consolidated Subsidiaries with which the Corporate Taxpayer files a consolidated return) will be disposed of in a taxable sale on the fifteenth anniversary of the applicable Basis Adjustment for an amount sufficient to fully use the Basis Adjustments with respect to such assets and any short-term investments (including cash equivalents) will be disposed of 12 months following the Early Termination Date; provided that, in the event of a Change in Control which includes a taxable sale of any relevant asset, such non-amortizable assets shall be deemed disposed of at the time of the Change in Control (if earlier than such fifteenth anniversary), (5) if, on the Early Termination Date, an LLC Unit Holder has LLC Units that have not been Exchanged, then each such LLC Unit shall be deemed to be Exchanged for the Market Value of the Class A Common Stock on the Early Termination Date, and such LLC Unit Holder shall be deemed to receive the amount of cash such LLC Unit Holder would have been entitled to pursuant to this Agreement had such LLC Units actually been Exchanged on the Early Termination Date, determined using the Valuation Assumptions and (6) any payment obligations pursuant to this Agreement will be satisfied on the date that any Tax Return to which such payment obligation relates is required to be filed excluding any extensions.

 

“Voting Securities” shall mean any securities of Corporate Taxpayer which are entitled to vote generally on matters submitted for a vote of Corporate Taxpayer’s stockholders or generally in the election of the Board.

 

11

 

1.2.                            Terms Generally.  In this Agreement, unless otherwise specified or where the context otherwise requires:

 

(a)                                 the headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement;

 

(b)                                 words importing any gender shall include other genders;

 

(c)                                  words importing the singular only shall include the plural and vice versa;

 

(d)                                 the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation”;

 

(e)                                  the words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(f)                                   references to “Articles,” “Exhibits,” “Sections” or “Schedules” shall be to Articles, Exhibits, Sections or Schedules of or to this Agreement;

 

(g)                                  references to any Person include the successors and permitted assigns of such Person;

 

(h)                                 the use of the words “or,” “either” and “any” shall not be exclusive;

 

(i)                                     the word “or” shall be construed to be used in the inclusive sense of “and/or”;

 

(j)                                    wherever a conflict exists between this Agreement and any other agreement among parties hereto, this Agreement shall control but solely to the extent of such conflict;

 

(k)                                 references to “$” or “dollars” means the lawful currency of the United States of America;

 

(l)                                     references to any agreement, contract or schedule, unless otherwise stated, are to such agreement, contract or schedule as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; and

 

(m)                             the parties hereto have participated collectively in the negotiation and drafting of this Agreement; accordingly, in the event an ambiguity or question of intent or interpretation arises, it is the intention of the parties that this Agreement shall be construed as if drafted collectively by the parties hereto, and that no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provisions of this Agreement.

 

12

 

ARTICLE II.
  DETERMINATION OF CERTAIN REALIZED TAX BENEFITS

 

2.1.                            Tax Benefit Schedule.

 

(a)                                 Tax Benefit Schedule.  Within ninety (90) calendar days after the due date (taking into account valid extensions) of the U.S. federal income Tax Return of Corporate Taxpayer (or its consolidated Subsidiaries, as applicable) for any taxable year in which there is a Realized Tax Benefit or Realized Tax Detriment, Corporate Taxpayer shall provide to the Kelso Representative a schedule showing in reasonable detail the calculation of the Realized Tax Benefit or Realized Tax Detriment for such taxable year and any Tax Benefit Payment in respect of each LLC Unit Holder that has previously effected an Exchange (other than any former LLC Unit Holder that has no rights to further payments under this Agreement) (a “Tax Benefit Schedule”).  The Tax Benefit Schedules provided by Corporate Taxpayer will become final as provided in Section 2.2(a) and may be amended as provided in Section 2.2(b).

 

(b)                                 Applicable Principles.  Subject to Section 3.3(a), the Realized Tax Benefit or Realized Tax Detriment for each taxable year is intended to measure the decrease or increase in the actual liability for Taxes of Corporate Taxpayer and its consolidated Subsidiaries (and US LBM LLC and its Subsidiaries, as applicable and without duplication) for such taxable year (or portion thereof) attributable to the Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest, determined using a “with and without” methodology.  For the avoidance of doubt, the actual liability for Taxes of Corporate Taxpayer and its consolidated Subsidiaries (and US LBM LLC and its Subsidiaries, as applicable and without duplication) will take into account any deduction in respect of Imputed Interest.  Carryovers or carrybacks of any Tax item attributable to the Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of U.S. state and local income and franchise tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type.  The parties agree that (i) all Tax Benefit Payments to an LLC Unit Holder attributable to the Basis Adjustments in respect of a taxable Exchange will be treated as subsequent upward purchase price adjustments that have the effect of creating additional Basis Adjustments in respect of such LLC Unit Holder to Reference Assets for the Corporate Taxpayer or its consolidated Subsidiaries, as applicable, in the year of payment and (ii) as a result, such additional Basis Adjustments in respect of such LLC Unit Holder will be incorporated into the current year calculation and into future year calculations, as appropriate. Notwithstanding anything herein to the contrary, unless (i) the Parties agree otherwise in writing upon the request of the Kelso Representative or (ii) the Kelso Representative provides timely written notice to Holdings that any recipient of any Tax Benefit Payment will elect out of the installment method under Section 453 for any Exchange, in no event shall the sum of (i) the excess of (x) the gross Tax Benefit Payments over (y) the portion of such Tax Benefit Payments treated as interest under Section 453 of the Code and the regulations thereunder plus (ii) the initial consideration received for U.S. federal income tax purposes exceed 140% of

 

13

 

the initial consideration received for U.S. federal income tax purposes (which, for the avoidance of doubt, shall include the amount of any cash and the fair market value of any Class A Shares to be received, and exclude the fair market value of any Tax Benefit Payments). Further, notwithstanding anything to the contrary, all calculations made pursuant to this agreement shall be determined as if US LBM LLC has not made an election pursuant to New Hampshire Rev. State. Section 77-A:4 XIV(b) (and any successor provision) to recognize a Basis Adjustment for purposes of the New Hampshire Business Profits Tax.

 

(c)                                  US LBM LLC Group Section 754 Elections.  Notwithstanding anything to the contrary, in its capacity as the sole managing member of US LBM LLC, the Corporate Taxpayer will ensure that, on and after the date hereof and continuing throughout the term of this Agreement, US LBM LLC and any other member of the US LBM LLC Group that is treated as a partnership for U.S. federal income tax purposes will have in effect an election under Section 754 of the Code (and under any similar provisions of applicable U.S. state or local law) for each taxable year.

 

(d)                                 Exchange Basis Schedule. If requested by the Kelso Representative no later than 30 days prior to the due date (without taking into account any permitted extensions) of the U.S. federal income Tax Return of Corporate Taxpayer (or its consolidated Subsidiaries, as applicable), the Corporate Taxpayer shall, no later than the date the Tax Benefit Schedule for the applicable year is delivered, deliver to the Kelso Representative a schedule (the “Exchange Basis Schedule”) that shows, in reasonable detail necessary to perform the calculations required by this Agreement for each LLC Unit Holder, (i) the Non-Stepped Up Tax Basis of the Reference Assets in respect of such LLC Unit Holder as of each applicable Exchange Date, (ii) the Basis Adjustment with respect to the Reference Assets in respect of such LLC Unit Holder as a result of the Exchanges effected in the taxable year (or, if requested, effected in prior taxable years) by such LLC Unit Holder, calculated in the aggregate, (iii) the period (or periods) over which the Reference Assets in respect of such LLC Unit Holder are amortizable and/or depreciable and (iv) the period (or periods) over which each Basis Adjustment in respect of such LLC Unit Holder is amortizable and/or depreciable.

 

2.2.                            Procedure, Amendments.

 

(a)                                 Procedure.  Every time Corporate Taxpayer delivers to the Kelso Representative an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.2(b), including any Early Termination Schedule or amended Early Termination Schedule, Corporate Taxpayer shall also (i) allow the Kelso Representative reasonable access, at the Corporate Taxpayer’s sole cost, to the appropriate representatives, as determined by Corporate Taxpayer, at Corporate Taxpayer and the Advisory Firm that prepared the relevant Corporate Taxpayer Returns in connection with a review of such Schedule and (ii) provide a copy of the applicable Schedule upon request to any LLC Unit Holder if such LLC Unit Holder holds five percent (5%) or more of the present value of all Early Termination Payments under this Agreement (measured by present value of payments due under this Agreement, using the present value calculation and assumptions described under Section 4.3(b) below assuming for such purpose the Early Termination Date is the date the applicable Schedule is delivered).  Without limiting

 

14

 

the application of the preceding sentence, the Corporate Taxpayer shall, upon request, deliver to the Kelso Representative the relevant Corporate Taxpayer Returns as well as any other work papers but shall be entitled to redact any information that it reasonably believes is unnecessary for purposes of the calculations contemplated by this Agreement.  An applicable Schedule or amendment thereto shall, subject to the final sentence of this Section 2.2(a), become final and binding on each LLC Unit Holder and the Kelso Representative thirty (30) calendar days from the first date on which the Corporate Taxpayer sent the Kelso Representative the applicable Schedule or amendment thereto unless (a) the Kelso Representative within thirty (30) calendar days after the date Corporate Taxpayer sent such Schedule or amendment thereto provides Corporate Taxpayer with written notice of a material objection to such Schedule made in good faith and setting forth in reasonable detail the Kelso Representative’s material objection along with a letter from an Advisory Firm supporting such objection, if such objection relates to the application of Tax law (an “Objection Notice”) or (b) the Kelso Representative provides a written waiver of the right of the Kelso Representative to provide any Objection Notice with respect to such Schedule or amendment thereto within the period described in clause (i), in which case such Schedule or amendment thereto becomes binding on the date the waiver is received by Corporate Taxpayer.  If the parties are unable to resolve the issues raised in such Objection Notice within thirty (30) calendar days after receipt by Corporate Taxpayer of the Objection Notice, the parties shall employ the reconciliation procedures described in Section 7.8 of this Agreement (the “Reconciliation Procedures”).  If a Schedule (or any “Schedule” (as defined in the Former LLC Owner TRA))  relating to the calculation of payments payable to any LLC Unit Holder or any of their respective Affiliates hereunder (or to any recipient under the Former LLC Owner TRA) is amended to reflect a revised calculation methodology that, if utilized in the calculation of amounts payable to one or more other LLC Unit Holders, would change the amounts payable to such other Persons hereunder, the Corporate Taxpayer shall utilize such revised methodology with respect to all LLC Unit Holders and make additional payments (or reduce future payments), as applicable.

 

(b)                                 Amended Schedule.  The applicable Schedule for any taxable year may be amended from time to time by Corporate Taxpayer (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified after the date the Schedule was provided to the Kelso Representative, (iii) to comply with an Expert’s determination under the Reconciliation Procedures applicable to this Agreement, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such taxable year attributable to a carryback or carryforward of a loss or other tax item to such taxable year, (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such taxable year attributable to an amended Tax Return filed for such taxable year, or (vi) to take into account payments made pursuant to this Agreement or under the Former LLC Owner TRA (any such Schedule, an “Amended Schedule”).

 

2.3.                            Consistency with Tax Returns.  Notwithstanding anything to the contrary herein, all calculations and determinations hereunder, including Basis

 

15

 

Adjustments, Former LLC Owner TRA Basis Adjustments the Schedules, and the determination of the Realized Tax Benefit or Realized Tax Detriment, shall be made in accordance with any elections, methodologies or positions taken on the relevant Corporate Taxpayer Returns.

 

ARTICLE III.
  TAX BENEFIT PAYMENTS

 

3.1.                            Payments.

 

(a)                                 Payments.  Subject to Section 3.3, within five (5) Business Days after all the Tax Benefit Schedules with respect to the taxable year delivered to the Kelso Representative and any LLC Unit Holder entitled to receive a Tax Benefit Schedule pursuant to this Agreement become final in accordance with Article II of this Agreement, Corporate Taxpayer shall pay or cause to be paid to each applicable LLC Unit Holder for such taxable year such LLC Unit Holder’s Tax Benefit Payment (if any) determined pursuant to Section 3.1(b).  Each such payment shall be made, at the sole discretion of Corporate Taxpayer, by wire or Automated Clearing House transfer of immediately available funds to the bank account previously designated by the applicable LLC Unit Holder to Corporate Taxpayer or as otherwise agreed by Corporate Taxpayer and the applicable LLC Unit Holder.

 

(b)                                 A “Tax Benefit Payment” in respect of an LLC Unit Holder for a taxable year means an aggregate amount, not less than zero, which Corporate Taxpayer is required to pay or cause to be paid pursuant to Section 3.1 of this Agreement, equal to the sum of the Net Tax Benefit allocable to such LLC Unit Holder and the Interest Amount in respect of such LLC Unit Holder.  For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of LLC Units in Exchanges, unless otherwise required by law, as reasonably determined by Corporate Taxpayer.  The Net Tax Benefit allocable to such LLC Unit Holder for a taxable year shall be an amount equal to the portion of such Net Tax Benefit derived from any Basis Adjustment or Imputed Interest that is attributable to such LLC Unit Holder as of the end of such taxable year (or portion thereof) over the total amount of payments previously made under this Section 3.1 in respect of such LLC Unit Holder (excluding payments of Interest Amounts); provided, for the avoidance of doubt, that an LLC Unit Holder shall not be required to return any portion of any previously made Tax Benefit Payment except in the case of manifest error.  The “Interest Amount” in respect of such LLC Unit Holder for a taxable year (or portion thereof) shall equal the interest on the portion of the Net Tax Benefit allocable to such LLC Unit Holder with respect to such taxable year (or portion thereof) calculated at the Agreed Rate compounded annually from the due date (without extensions) for filing the U.S. federal income Tax Return of Corporate Taxpayer for such taxable year until the earlier of (i) the Payment Date or (ii) the date on which the Corporate Taxpayer makes the relevant Tax Benefit Payment due on such Payment Date.  The Net Tax Benefit allocable to such LLC Unit Holder and the Interest Amount shall be

 

16

 

determined separately with respect to each separate Exchange on an individual basis by reference to the resulting Basis Adjustment to the Corporate Taxpayer.

 

3.2.                            Duplicative Payments.  It is intended that the provisions of this Agreement will not result in a duplicative payment of any amount (including interest) required under this Agreement.  It is also intended that the provisions of (i) this Agreement, subject to ARTICLE IV and Section 7.12 and (ii) the Former LLC Owner TRA, subject to Article IV and section 7.12 of the Former LLC Owner TRA, will result in 85% of the Cumulative Net Realized Tax Benefit (but calculated taking into account all Exchanges by all LLC Unit Holders as of any time and all Mergers by all Exchanged Owners) as of any determination date being paid in the aggregate to the LLC Unit Holders pursuant to this Agreement and the Exchanged Owners pursuant to the Former LLC Owner TRA.  The provisions of this Agreement shall be construed in the appropriate manner to ensure such intentions are realized.

 

3.3.                            Pro Rata Payments; Coordination of Benefits.

 

(a)                                 Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate tax benefit of the Corporate Taxpayer, or its consolidated Subsidiaries, as applicable, with respect to the Basis Adjustments, Former LLC Owner TRA Basis Adjustments and Imputed Interest is limited in a particular taxable year because the Corporate Taxpayer or its consolidated Subsidiaries, as applicable, do not have sufficient taxable income to utilize the tax benefits with respect to the Basis Adjustments, Former LLC Owner TRA Basis Adjustments or Imputed Interest or any other limitation prevents the use of such tax benefits, the Tax Benefit Payments and “Tax Benefit Payments” (as defined in the Former LLC Owner TRA) payable shall be allocated among all parties eligible for payments hereunder and under the Former LLC Owner TRA in proportion to the respective amounts of the Tax Benefit Payment or “Tax Benefit Payment” (as defined in the Former LLC Owner TRA) that would have been paid to each such party if the Corporate Taxpayer and, as applicable, its consolidated Subsidiaries, had sufficient taxable income so that there were no such limitation (or such other limitations did not apply).

 

(b)                                 After taking into account Section 3.3(a), if for any reason the Corporate Taxpayer does not fully satisfy its payment obligations to make or cause to be made all Tax Benefit Payments due under this Agreement in respect of a particular taxable year, then the Corporate Taxpayer and the parties agree that no Tax Benefit Payment shall be made in respect of any taxable year until all Tax Benefit Payments in respect of prior taxable years have been made in full.  If for any reason the Tax Benefit Payments are to be partially but not fully satisfied with respect to a taxable year, such Tax Benefit Payments shall be made in the same proportion as the Tax Benefit Payments that would have been paid to each LLC Unit Holder if the Corporate Taxpayer were to satisfy its obligation in full.

 

17

 

ARTICLE IV.
  TERMINATION

 

4.1.                            Early Termination, Change in Control and Breach of Agreement.

 

(a)                                 Corporate Taxpayer may, with the consent of a majority of the disinterested members of the Board, terminate this Agreement with respect to all amounts payable to all of the LLC Unit Holders (including, for the avoidance of doubt, any transferee pursuant to Section 7.5(a)) at any time by paying or causing to be paid to each such LLC Unit Holder an Early Termination Payment; provided, however, that this Agreement shall only terminate with respect to any such LLC Unit Holder upon the payment of such Early Termination Payment to such LLC Unit Holder, and provided, further, that Corporate Taxpayer may withdraw any notice to execute its termination rights under this Section 4.1(a) prior to the time at which any Early Termination Payment has been paid.  Upon payment of an Early Termination Payment to any LLC Unit Holder, neither such LLC Unit Holder nor Corporate Taxpayer shall have any further payment obligations under this Agreement, other than for any Tax Benefit Payment (1) agreed to by Corporate Taxpayer and such LLC Unit Holder as due and payable but unpaid as of the Early Termination Date, (2) that is the subject of an Objection Notice, which will be payable in accordance with resolution of the issues identified in such Objection Notice pursuant to this Agreement, and (3) due for the taxable year ending with or including the Early Termination Date (except to the extent that the amounts described in clauses (1), (2) and (3) are included in the calculation of the Early Termination Payment).  Notwithstanding the foregoing, the Corporate Taxpayer may not terminate this Agreement pursuant to this Section 4.1(a) unless (i) no further payments are required under the Former LLC Owner TRA or (2) the Former LLC Owner TRA is terminated pursuant to section 4.1(a) of the Former LLC Owner TRA concurrently with the termination of this Agreement pursuant to this Section 4.1(a). If an Exchange occurs with respect to LLC Units (or other interests in the company or its assets pursuant to a “disguised sale” transaction for U.S. federal income tax purposes) with respect to which Corporate Taxpayer has previously paid or cause to be paid to the applicable LLC Unit Holder an Early Termination Payment, Corporate Taxpayer shall have no obligations under this Agreement with respect to such Exchange.

 

(b)                                 In the event that there occurs a Change in Control or Corporate Taxpayer breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due, failure to honor any other material obligation required hereunder, under the Former LLC Owner TRA, or by operation of law as a result of the rejection of this Agreement in a case commenced under the United States Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated, and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such Change in Control or breach, as applicable, to each LLC Unit Holder and shall include (1) each Early Termination Payment calculated as if an Early Termination Notice had been delivered on the date of such Change in Control or breach (and Corporate Taxpayer shall provide each LLC Unit Holder with an Early Termination Schedule, which shall become final in accordance

 

18

 

with the procedures set forth in Section 4.2), (2) any Tax Benefit Payment agreed to by Corporate Taxpayer and any LLC Unit Holder as due and payable but unpaid as of the date of such Change in Control or breach, as applicable, (3) any Tax Benefit Payment that is the subject of an Objection Notice, which will be payable in accordance with resolution of the issues identified in such Objection Notice pursuant to this Agreement, and (4) any Tax Benefit Payment due for the taxable year ending with or including the date of such Change in Control or breach, as applicable (except to the extent that the amounts described in clauses (2), (3) and (4) are included in the calculation of the amount described in clause (1)).  Notwithstanding the foregoing, in the event that Corporate Taxpayer materially breaches this Agreement, each LLC Unit Holder shall be entitled to elect to receive the amounts set forth in clauses (1), (2), (3) and (4) above or to seek specific performance of the terms hereof.  The parties agree that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three (3) months of the date such payment is due.  Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if Corporate Taxpayer fails to make or cause to be made any Tax Benefit Payment (or portion thereof) when due to the extent that the Board determines in good faith that Corporate Taxpayer has insufficient funds (taking into account funds of its consolidated Subsidiaries that are permitted to be distributed to Corporate Taxpayer (in contemplation of this Agreement or otherwise) pursuant to the terms of any applicable credit agreements or other documents evidencing indebtedness (each as interpreted by the Board in good faith), including any available funds under any revolving credit facility of US LBM LLC or its consolidated Subsidiaries, but not taking into account funds of Subsidiaries that are not permitted to be distributed pursuant to the terms of such credit agreements or other documents and not taking into account funds reasonably reserved for reasonably expected liabilities or expenses) to make such payment; provided that the interest provisions of Section 5.2 shall apply to such late payment (unless the Board determines in good faith that (x) Corporate Taxpayer does not have sufficient cash to make such payment as a result of limitations imposed by credit agreements or any other documents evidencing indebtedness to which US LBM LLC or any of its Subsidiaries is a party, guarantor or otherwise an obligor as of the date of this Agreement (the “Initial Debt Documents”) or any other document evidencing indebtedness to which US LBM LLC or any of its Subsidiaries becomes a party, guarantor or otherwise an obligor thereafter to the extent the terms of such other documents are not materially more restrictive in respect of Corporate Taxpayer’s ability to receive from its Subsidiaries funds sufficient to make such payments compared to the terms of the Initial Debt Documents (as determined by the Board in good faith), provided, however, that the Corporate Taxpayer uses good faith efforts to remove such limitations to the extent required to make such interest payments unless such efforts could have an adverse effect on the Corporate Taxpayer, US LBM LLC or their Subsidiaries, or (y) such payments could (I) be set aside as fraudulent transfers or conveyances or similar actions under fraudulent transfer laws or (II) could cause Corporate Taxpayer or its consolidated Subsidiaries to be undercapitalized, in which case Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate).

 

19

 

(c)                                  Refinancing of the Initial Debt Documents. Without the consent of the Kelso Representative, the Corporate Taxpayer shall not incur additional indebtedness, enter into any new credit agreement or refinance any Initial Debt Document that, in each case, have terms materially more restrictive in respect of the Corporate Taxpayer’s ability to make payments under this Agreement than the Initial Debt Documents.

 

4.2.                            Early Termination Notice.  If Corporate Taxpayer chooses to exercise its right of early termination under Section 4.1 above, Corporate Taxpayer shall deliver to the Kelso Representative and each Unit Holder notice of such intention to exercise such right (“Early Termination Notice”) and a schedule (the “Early Termination Schedule”) specifying Corporate Taxpayer’s intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment for each Unit Holder.  The Early Termination Schedule provided to an Unit Holder shall become final and binding on each Unit Holder and the Kelso Representative thirty (30) calendar days from the first date on which the Corporate Taxpayer sent the Kelso Representative such Early Termination Schedule unless (a) the Kelso Representative within thirty (30) calendar days after the date the Corporate Taxpayer sent such Schedule or amendment thereto provides Corporate Taxpayer with an Objection Notice with respect to such Early Termination Schedule or (b) the applicable LLC Unit Holder provides a written waiver of the right of the Kelso Representative to provide any Objection Notice with respect to such Schedule or amendment thereto within the period described in clause (a), in which case such Schedule or amendment thereto becomes binding on the date the waiver is received by Corporate Taxpayer.  If Corporate Taxpayer and the Kelso Representative, for any reason, are unable to resolve the issues raised in such Objection Notice within thirty (30) calendar days after receipt by Corporate Taxpayer of the Objection Notice, Corporate Taxpayer and the Kelso Representative shall employ the Reconciliation Procedures.  The date on which every Early Termination Schedule under this Agreement becomes final with respect to all LLC Unit Holders in accordance with this Section 4.2 shall be the “Early Termination Effective Date”.  If the Early Termination Schedule relating to the calculation of payments payable to any LLC Unit Holder or any of its respective Affiliates hereunder or to any recipient under the Former LLC Owner TRA is amended to reflect a revised calculation methodology that, if utilized in the calculation of amounts payable to one or more other LLC Unit Holders or such other recipient, would change the amounts payable to such other Persons hereunder or under the Former LLC Owner TRA, the Corporate Taxpayer shall utilize such revised methodology with respect to all LLC Unit Holders and make additional payments (or reduce payments, if any), as applicable.

 

4.3.                            Payment upon Early Termination.

 

(a)                                 Within five (5) Business Days after the Early Termination Effective Date, Corporate Taxpayer shall pay or cause to be paid to each LLC Unit Holder an amount equal to its Early Termination Payment.  Such payment shall be made, at the sole discretion of Corporate Taxpayer, by wire or Automated Clearing House transfer of immediately available funds to a bank account or accounts designated by the

 

20

 

applicable LLC Unit Holder or as otherwise agreed by Corporate Taxpayer and the LLC Unit Holder.

 

(b)                                 An “Early Termination Payment” in respect of an LLC Unit Holder shall equal the net present value, discounted at the Early Termination Rate as of the Early Termination Date, of all Tax Benefit Payments that would be required to be paid by Corporate Taxpayer to the applicable LLC Unit Holder under Section 3.1(a) of this Agreement beginning from the Early Termination Date and assuming that the Valuation Assumptions are applied.

 

ARTICLE V.
  SUBORDINATION AND LATE PAYMENTS

 

5.1.                            Subordination.  Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment (or portion thereof) or Early Termination Payment required to be made to an LLC Unit Holder under this Agreement shall rank subordinate and junior in right of payment to any principal, interest (including interest which accrues after the commencement of any case or proceeding in bankruptcy, or the reorganization of the Corporate Taxpayer or any Subsidiary thereof), fees, premiums, charges, expenses, attorneys’ fees or other obligations in respect of indebtedness for borrowed money of Corporate Taxpayer (and its consolidated Subsidiaries, if applicable) (“Senior Obligations”) and shall rank pari passu with all current or future unsecured obligations of Corporate Taxpayer (and its consolidated Subsidiaries, as applicable) that are not Senior Obligations.

 

5.2.                            Late Payments by Corporate Taxpayer.  The amount of all or any portion of any Tax Benefit Payment or Early Termination Payment not made to an LLC Unit Holder when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate (or the Agreed Rate, to the extent expressly contemplated by this Agreement) and commencing from, (a) in the case of a Tax Benefit Payment (or portion thereof) due and payable pursuant to Article III, the Payment Date and (b) in the case of an Early Termination Payment or any other payment not described in clause (a) above, from the date on which such payment was due and payable.

 

ARTICLE VI.
  NO DISPUTES; CONSISTENCY; COOPERATION

 

6.1.                            Participation in Corporate Taxpayer’s and US LBM LLC’s Tax Matters.  Except as otherwise provided herein or in the Reorganization Agreement, Exchange Agreement or LLC Agreement, Corporate Taxpayer shall have full responsibility for, and sole discretion over, all Tax matters concerning Corporate Taxpayer (and its consolidated Subsidiaries), US LBM LLC and their respective Subsidiaries, including the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes.  Notwithstanding the foregoing, the Corporate Taxpayer shall notify the Kelso Representative of, and keep the Kelso Representative reasonably informed with respect to, the portion of any audit

 

21

 

of the Corporate Taxpayer or US LBM LLC by a Taxing Authority the outcome of which is reasonably expected to affect the rights and obligations of the Kelso Representative, any LLC Unit Holder or any of their respective Affiliates under this Agreement, and shall provide to the Kelso Representative reasonable opportunity to provide information and other input to the Corporate Taxpayer, US LBM LLC and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporate Taxpayer and US LBM LLC shall not take any action that is inconsistent with any provision of the LLC Agreement or Exchange Agreement.

 

6.2.                            Consistency.  Corporate Taxpayer and each LLC Unit Holder agree to report and cause to be reported for all purposes, including federal, state and local Tax purposes, all Tax-related items (including the Basis Adjustments and each Tax Benefit Payment and any Imputed Interest) in a manner consistent with that specified by Corporate Taxpayer in any Schedule provided by or on behalf of Corporate Taxpayer under this Agreement unless otherwise required by law based on written advice of an Advisory Firm.  The Corporate Taxpayer shall (and shall cause US LBM LLC and its other Subsidiaries to) use reasonable efforts (for the avoidance of doubt, taking into account the interests and entitlements of all parties under this Agreement) to defend the Tax treatment contemplated by this Agreement and any Schedule in any audit, contest or similar proceeding with any Taxing Authority.  Each LLC Unit Holder that does intend to report inconsistently with Corporate Taxpayer in any Schedule provided by or on behalf of Corporate Taxpayer under this Agreement shall provide thirty (30) days advance written notice to the Corporate Taxpayer.

 

6.3.                            Cooperation.  Each LLC Unit Holder shall (a) furnish to Corporate Taxpayer in a timely manner such information, documents and other materials as Corporate Taxpayer may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return, complying with any Tax law, or contesting or defending any audit, examination or controversy with any Taxing Authority or other governmental authority, (b) make itself available to Corporate Taxpayer and its representatives to provide explanations of documents and materials and such other information as Corporate Taxpayer or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter. Corporate Taxpayer shall reimburse the LLC Unit Holder for any reasonable third-party costs and expenses incurred pursuant to this Section 6.3.

 

ARTICLE VII.
  MISCELLANEOUS

 

7.1.                            Notices.  All notices, requests, consents and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by fax, by electronic mail or by certified or registered mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address

 

22

 

for a party as shall be as specified in a notice given in accordance with this Section 7.1).  All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

If to Corporate Taxpayer or  US LBM LLC, to:

 

US LBM Holdings, Inc.
  1000 Corporate Grove Drive
 Buffalo Grove, Illinois 60089

Fax: 877-787-5269

E-mail: michelle.pollock@uslbm.com
  Attention:  Michelle Pollock

 

with a copy (which shall not constitute notice) to:

 

Debevoise and Plimpton LLP
  919 Third Avenue
 New York, New York 10022
 E-mail:  mjhayes@debevoise.com
 Attention:  Morgan J. Hayes, Esq.
 Fax:  (212) 521-7483

 

If to the Kelso Representative or its Affiliates:

 

c/o Kelso & Company
 320 Park Avenue, 24th Floor
 New York, New York 10022
 E-mail:  jconnors@kelso.com
 Fax: 212 223 2379
 Attention:  James Connors, II

 

with a copy (which shall not constitute notice) to:

 

Debevoise and Plimpton LLP
  919 Third Avenue
 New York, New York 10022
 E-mail:  mjhayes@debevoise.com
 Attention:  Morgan J. Hayes, Esq.
 Fax:  (212) 521-7483

 

If to any LLC Unit Holder, to the address and other contact information set forth in the records of Corporate Taxpayer from time to time.

 

Any party may change its address, fax number or e-mail by giving the other party written notice of its new address or fax number in the manner set forth above.

 

23

 

7.2.                            Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one and the same instrument.  A facsimile signature page (or signature page in similar electronic form) hereto shall be treated by the parties for all purposes as equivalent to a manually signed signature page.

 

7.3.                            Entire Agreement; Third Party Beneficiaries.  This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof.  This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

7.4.                            Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

7.5.                            Successors; Assignment; Amendments; Waivers.

 

(a)                                 An LLC Unit Holder shall be permitted to transfer any of its rights only upon execution and delivery by the transferee of a joinder to this Agreement, in form and substance substantially similar to Exhibit A to this Agreement, in which the transferee agrees to become an “LLC Unit Holder” for all purposes of this Agreement, except as otherwise provided in such joinder.  If the Kelso Representative or one of its Affiliates assigns its rights under this Agreement, such transferee shall also have the rights provided to the Kelso Representative.

 

(b)                                 No provision of this Agreement may be amended unless such amendment is approved in writing by (i) Corporate Taxpayer, (ii) each LLC Unit Holder party to the Agreement that, together with its Affiliates, would be entitled to ten percent (10%) or more of the present value of all Early Termination Payments under this Agreement (measured by present value of payments due under this Agreement, using the present value calculation and assumptions described under Section 4.3(b) above assuming for such purpose the Early Termination Date is the date the amendment is proposed to the LLC Unit Holders) and (iii) the Kelso Representative to the extent such amendment would affect the rights of the Kelso Representative or any of its Affiliates, provide that no amendment may be effected that adversely and disproportionately affects the interest of any LLC Unit Holder without the consent of such LLC Unit Holder.  No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

 

24

 

(c)                                  All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, permitted assigns, heirs, executors, administrators and legal representatives.  Corporate Taxpayer shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of Corporate Taxpayer, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that Corporate Taxpayer would be required to perform if no such succession had taken place (except to the extent expressly provided by this Agreement and provided that, for the avoidance of doubt, if a Change in Control has occurred and an Early Termination Payment is required to be made then the Corporate Taxpayer’s payment obligations shall be determined taking into account the provisions of ARTICLE IV).

 

7.6.                            Titles and Subtitles.  The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

7.7.                            Governing Law; Jurisdiction; Waiver of Jury Trial.  This Agreement shall be governed by the laws of the state of Delaware.  The parties irrevocably consent to the exclusive jurisdiction of the courts of the state of Delaware and of the federal courts sitting in the state of Delaware in connection with any action relating to this Agreement and each party agrees (a) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party’s agent for acceptance of legal process, and (b) that, to the fullest extent permitted by applicable law, service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service, and that service made pursuant to (a) or (b) above shall, to the fullest extent permitted by applicable law, have the same legal force and effect as if served upon such party personally within the State of Delaware. To the extent not prohibited by applicable law, each party hereto waives and agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding brought in the above-named courts, any claim that such party is not subject personally to the jurisdiction of such courts, that such party’s property is exempt or immune from attachment or execution, that such proceeding is brought in an inconvenient forum, that the venue of such proceeding is improper, or that this Agreement or the subject matter thereof, may not be enforced in or by such courts. Each of the parties hereto hereby irrevocably and unconditionally waives trial by jury in any legal action or proceeding in relation to this Agreement and for any counterclaim herein.

 

7.8.                            Reconciliation.  In the event that Corporate Taxpayer and the Kelso Representative are unable to resolve a disagreement with respect to the matters governed by ARTICLE II or ARTICLE IV within the relevant period designated in this Agreement (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to such parties.  The Expert shall

 

25

 

be a partner or principal in a nationally recognized accounting or law firm, and (unless Corporate Taxpayer and the Kelso Representative agree otherwise), the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with Corporate Taxpayer or the Kelso Representative or its Affiliates or other actual or potential conflict of interest.  If the applicable parties are unable to agree on an Expert within fifteen (15) calendar days of the end of the thirty (30) calendar-day period set forth in Section 2.1 or Section 4.2, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise.  The Expert shall resolve any matter relating to the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or, in each case, as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution.  If the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement), the undisputed amount shall be paid on the date prescribed by this Agreement, subject to adjustment upon resolution.  For the avoidance of doubt, this Section 7.8 shall not restrict the ability of Corporate Taxpayer or its Affiliates to determine when or whether to file or amend any Tax Return.  The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne equally by Corporate Taxpayer and the LLC Unit Holders participating in the Reconciliation Dispute (on a pro rata basis based on relative proportion of all Early Termination Payments under this Agreement, measured by present value of payments due under this Agreement, using the present value calculation and assumptions described under Section 4.3(b) above assuming for such purpose the Early Termination Date is the date the Reconciliation Dispute is resolved).  Corporate Taxpayer may withhold payments under this Agreement to collect amounts due under the preceding sentence.  Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.8 shall be decided by the Expert.  The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.8 shall be binding on Corporate Taxpayer and the Kelso Representative or its Affiliates, as applicable, participating in the Reconciliation Dispute and may be entered and enforced in any court having jurisdiction.

 

7.9.                            Withholding.  Corporate Taxpayer shall be entitled to deduct and withhold or cause to be deducted and withheld from any payment payable pursuant to this Agreement to an LLC Unit Holder such amounts as Corporate Taxpayer determines in good faith it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law.  To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by Corporate Taxpayer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to such LLC Unit Holder.

 

26

 

7.10.                     Admission of Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets.

 

(a)                                 If Corporate Taxpayer and its consolidated Subsidiaries are or become members of a combined, consolidated, affiliated or unitary group that files a consolidated, combined or unitary income tax return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state or local law, then: (i) the provisions of this Agreement shall be applied with respect to the relevant group as a whole; and (ii) Tax Benefit Payments, Net Tax Benefit, Cumulative Net Realized Tax Benefit, Realized Tax Benefit, Realized Tax Detriment, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated (or combined or unitary, where applicable) taxable income, gain, loss, deduction and attributes of the relevant group as a whole.

 

(b)                                 If any entity that is or may be obligated to make a Tax Benefit Payment or Early Termination Payment hereunder, or any entity any portion of the income of which is included in the income of the Corporate Taxpayer’s consolidated, combined, affiliated or unitary group, directly or indirectly transfers (as determined for U.S. federal income tax purposes) one or more assets to a Person classified as a corporation for U.S. income tax purposes with which such entity does not file a consolidated income tax return pursuant to Section 1501 et seq. of the Code (or, for purposes of calculations relating to state or local taxes, a consolidated, combined or unitary income tax return under applicable state or local law), such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the gross income of the entity and, if applicable, determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such transfer.  The consideration deemed to be received by such entity shall be equal to the fair market value of the transferred asset, increased by the amount of debt that would increase the transferor’s “amount realized” for U.S. federal income tax purposes in connection with such transfer, in the case of a contribution of an encumbered asset (including an interest in an entity classified for U.S. federal income tax purposes as a partnership which has debt outstanding).  For the avoidance of doubt, a transaction treated for U.S. federal income tax purposes as a liquidation into Corporate Taxpayer of one or more of its consolidated Subsidiaries or merger of one or more of such entities into one another or Corporate Taxpayer will not cause any such Persons to be treated as having disposed of any of its assets for purposes of this Section 7.10(b).  In the event there occurs a transaction described in the preceding sentence, the Tax Benefit Payments and any other amounts due under this Agreement shall be calculated without regard to such transaction.

 

7.11.                     Confidentiality.  Each LLC Unit Holder and each of its transferees acknowledge and agree that the information of Corporate Taxpayer is confidential and, except in the course of performing any duties as necessary for Corporate Taxpayer and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters acquired pursuant to this

 

27

 

Agreement of Corporate Taxpayer and its Affiliates and successors, learned by the LLC Unit Holder heretofore or hereafter.  This Section 7.11 shall not apply to (i) any information that has been made publicly available by Corporate Taxpayer or any of its Affiliates, becomes public knowledge (except as a result of an act of the LLC Unit Holder in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for the LLC Unit Holder to prepare and file its Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such Tax Returns.  Notwithstanding anything to the contrary herein or in any other agreement, the LLC Unit Holders and each of their transferees (and each employee, representative or other agent of the LLC Unit Holders or their transferees, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure and any related tax strategies of or relating to Corporate Taxpayer and its Affiliates, the LLC Unit Holder or transferee, and any of their transactions or agreements, and all materials of any kind (including opinions or other tax analyses) that are provided to the LLC Unit Holder or transferee relating to such tax treatment and tax structure and any related tax strategies.

 

If the LLC Unit Holder or its transferee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.11, Corporate Taxpayer and its Affiliates shall have the right and remedy to have the provisions of this Section 7.11 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to Corporate Taxpayer or its Affiliates and the accounts and funds managed by Corporate Taxpayer and that money damages alone shall not provide an adequate remedy to such Persons.  Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

 

7.12.                     Change in Law.  Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in law, an LLC Unit Holder reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by such LLC Unit Holder (or direct or indirect equity holders in such LLC Unit Holder) upon the IPO, Reorganization Transactions or any Exchange to be treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income tax purposes or could have other material adverse tax consequences to the LLC Unit Holder or any direct or indirect owner of the LLC Unit Holder, then at the election of the LLC Unit Holder and to the extent specified by the LLC Unit Holder, this Agreement shall cease to have further effect with respect to such LLC Unit Holder and shall for clarity not apply to an Exchange by such LLC Unit Holder occurring after a date specified by the LLC Unit Holder.

 

7.13.                     Independent Nature of LLC Unit Holders’ Rights and Obligations.  The rights and obligations of each LLC Unit Holder hereunder are independent of the rights and obligations of any other LLC Unit Holder hereunder.  No LLC Unit Holder

 

28

 

shall be responsible in any way for the performance of the obligations of any other LLC Unit Holder hereunder, nor shall any LLC Unit Holder have the right to enforce the rights or obligations of any other LLC Unit Holder hereunder.  The obligations of each LLC Unit Holder hereunder are solely for the benefit of, and shall be enforceable solely by, Corporate Taxpayer.  The decision of each LLC Unit Holder to enter into this Agreement has been made by such LLC Unit Holder independently of any other LLC Unit Holder.  Nothing contained herein or in any other agreement or document delivered at any closing (other than the LLC Agreement and any joinder thereto), and no action taken by any LLC Unit Holder pursuant hereto or thereto, shall be deemed to constitute the LLC Unit Holders as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the LLC Unit Holders are in any way acting in concert or as a group with respect to such rights or obligations or the transactions contemplated hereby, and Corporate Taxpayer acknowledges that the LLC Unit Holders are not acting in concert or as a group and will not assert any such claim with respect to such rights or obligations or the transactions contemplated hereby.

 

7.14.                     LLC Agreement/Exchange Agreement.  This Agreement shall be treated as part of the LLC Agreement and Exchange Agreement as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.

 

29

 

IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the date first written above.

 

 

	
 
    	
US LBM   Holdings, Inc.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LBM Midco, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

[Signature Page to Tax Receivable Agreement]

 

 

	
 
    	
LBM Acquisition, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
Name:
    
	
 
    	
Title:
    

 

[Signature Page to Tax Receivable Agreement]

 

 

Exhibit A

 

Joinder

 

This JOINDER (this “Joinder”) to the Tax Receivable Agreement (as defined below), dated as of [ ], by and among US LBM Holdings, Inc., a Delaware corporation (“Corporate Taxpayer”), and [ ] (“Permitted Transferee”).

 

WHEREAS, on [ ], the Permitted Transferee acquired (the “Acquisition”) from [ ] (“Transferor”) the right to receive any and all payments that may become due and payable to Transferor under the Tax Receivable Agreement (as defined below) with respect to LLC Units that have been Exchanged or may in the future be Exchanged in LBM Midco, LLC (the “Applicable Interests”); and

 

WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.5 of the Tax Receivable Agreement, dated as of             , 2017, between Corporate Taxpayer and each LLC Unit Holder (as defined therein) (the “Tax Receivable Agreement”);

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, Permitted Transferee hereby agrees as follows:

 

Section 1.1.                                 Definitions.  To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Tax Receivable Agreement.

 

Section 1.2.                                 Joinder.  Permitted Transferee hereby acknowledges and agrees to become an “LLC Unit Holder” (as defined in the Tax Receivable Agreement) for all purposes of the Tax Receivable Agreement with respect to the Applicable Interests.

 

Section 1.3.                                 Notice.  Any notice, request, consent, claim, demand, approval, waiver or other communication hereunder to Permitted Transferee shall be delivered or sent to Permitted Transferee at the address set forth on the signature page hereto in accordance with Section 7.1 of the Tax Receivable Agreement.

 

Section 1.4.                                 Governing Law.  This Agreement and the rights and obligations of the parties hereunder shall be governed by, and construed, interpreted and enforced in accordance with, the laws of the State of Delaware (without regard to any choice of law rules thereunder).

 

IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.

 

 

Annex A

 

List of LLC Unit Holders

 

1.                                      LBM Acquisition, LLCExhibit 10.7

 

LBM MIDCO, LLC

 

A Delaware Limited Liability Company

 

FORM OF

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

 

Dated as of [             ], 2018

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
ARTICLE I DEFINITIONS
    	
 
    	
2
    
	
 
    	
 
    	
 
    
	
Section 1.1   Definitions
    	
 
    	
2
    
	
Section 1.2   Terms Generally
    	
 
    	
10
    
	
 
    	
 
    	
 
    
	
ARTICLE II GENERAL PROVISIONS
    	
 
    	
11
    
	
 
    	
 
    	
 
    
	
Section 2.1   Formation
    	
 
    	
11
    
	
Section 2.2   Name
    	
 
    	
12
    
	
Section 2.3   Term
    	
 
    	
12
    
	
Section 2.4   Purpose; Powers
    	
 
    	
12
    
	
Section 2.5   Existence and Good Standing; Foreign Qualification
    	
 
    	
13
    
	
Section 2.6   Registered Office; Registered Agent; Principal Office; Other Offices
    	
 
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE III CAPITALIZATION
    	
 
    	
13
    
	
 
    	
 
    	
 
    
	
Section 3.1   Units; Initial Capitalization; Schedules
    	
 
    	
13
    
	
Section 3.2   Authorization and Issuance of Additional Units
    	
 
    	
14
    
	
Section 3.3   Capital Accounts
    	
 
    	
18
    
	
Section 3.4   No Withdrawal
    	
 
    	
20
    
	
Section 3.5   Loans From Members
    	
 
    	
20
    
	
Section 3.6   No Right of Partition
    	
 
    	
20
    
	
Section 3.7   Non-Certification of Units; Legend; Units are Securities
    	
 
    	
20
    
	
Section 3.8   Exchange of Units for Common Stock
    	
 
    	
22
    
	
 
    	
 
    	
 
    
	
ARTICLE IV DISTRIBUTIONS
    	
 
    	
22
    
	
 
    	
 
    	
 
    
	
Section 4.1   Distributions
    	
 
    	
22
    
	
Section 4.2   Distributions to Holdings
    	
 
    	
22
    
	
Section 4.3   Tax Distributions
    	
 
    	
23
    
	
Section 4.4   Withholding; Indemnification
    	
 
    	
25
    
	
Section 4.5   Limitation
    	
 
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE V ALLOCATIONS
    	
 
    	
26
    
	
 
    	
 
    	
 
    
	
Section 5.1   Allocations for Capital Account Purposes
    	
 
    	
26
    
	
Section 5.2   Allocations for Tax Purposes
    	
 
    	
27
    
	
 
    	
 
    	
 
    
	
ARTICLE VI MANAGEMENT
    	
 
    	
29
    
	
 
    	
 
    	
 
    
	
Section 6.1   Managing Member; Delegation of Authority and Duties
    	
 
    	
29
    
	
Section 6.2   Officers
    	
 
    	
30
    

 

i

 

	
Section 6.3   Liability of Members
    	
 
    	
31
    
	
Section 6.4   Indemnification by the Company
    	
 
    	
32
    
	
Section 6.5   Investment Representations of Members
    	
 
    	
33
    
	
Section 6.6   Representations and Warranties of Holdings
    	
 
    	
34
    
	
 
    	
 
    	
 
    
	
ARTICLE VII WITHDRAWAL; DISSOLUTION; TRANSFER   OF MEMBERSHIP INTERESTS; ADMISSION OF NEW MEMBERS
    	
 
    	
35
    
	
 
    	
 
    	
 
    
	
Section 7.1   Member Withdrawal
    	
 
    	
35
    
	
Section 7.2   Dissolution
    	
 
    	
35
    
	
Section 7.3   Transfer by Members
    	
 
    	
36
    
	
Section 7.4   Admission or Substitution of New Members
    	
 
    	
39
    
	
Section 7.5   Additional Requirements
    	
 
    	
40
    
	
Section 7.6   Bankruptcy
    	
 
    	
40
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII BOOKS AND RECORDS; FINANCIAL   STATEMENTS AND OTHER INFORMATION; TAX MATTERS
    	
 
    	
40
    
	
 
    	
 
    	
 
    
	
Section 8.1   Books and Records
    	
 
    	
40
    
	
Section 8.2   Information
    	
 
    	
41
    
	
Section 8.3   Fiscal Year
    	
 
    	
41
    
	
Section 8.4   Certain Tax Matters
    	
 
    	
41
    
	
 
    	
 
    	
 
    
	
ARTICLE IX MISCELLANEOUS
    	
 
    	
43
    
	
 
    	
 
    	
 
    
	
Section 9.1   Schedules
    	
 
    	
43
    
	
Section 9.2   Governing Law
    	
 
    	
43
    
	
Section 9.3   Consent to Jurisdiction
    	
 
    	
43
    
	
Section 9.4   Successors and Assigns
    	
 
    	
44
    
	
Section 9.5   Amendments and Waivers
    	
 
    	
44
    
	
Section 9.6   Notices
    	
 
    	
46
    
	
Section 9.7   Counterparts
    	
 
    	
46
    
	
Section 9.8   Power of Attorney
    	
 
    	
46
    
	
Section 9.9   Entire Agreement
    	
 
    	
47
    
	
Section 9.10   Remedies
    	
 
    	
47
    
	
Section 9.11   Severability
    	
 
    	
47
    
	
Section 9.12   Creditors
    	
 
    	
47
    
	
Section 9.13   Waiver
    	
 
    	
48
    
	
Section 9.14   Further Action
    	
 
    	
48
    
	
Section 9.15   Delivery by Facsimile or Email
    	
 
    	
48
    

 

ii

 

AMENDED AND RESTATED
 LIMITED LIABILITY COMPANY AGREEMENT
 OF
 LBM MIDCO, LLC
 A Delaware Limited Liability Company

 

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of LBM Midco, LLC (the “Company”), dated and effective as of [          ], 2018 (as amended from time to time, this “Agreement”), is adopted, executed and agreed to, for good and valuable consideration, by and among the Members (as defined herein).

 

WHEREAS, the Company was formed as a limited liability company pursuant to the Delaware Limited Liability Company Act by the filing of a Certificate of Formation of the Company with the Secretary of State of the State of Delaware on July 17, 2015 (as amended from time to time, the “Certificate”), and the execution of the Limited Liability Company Agreement of the Company, dated as of July 17, 2015 (the “Pre-IPO Agreement”);

 

WHEREAS, US LBM Holdings, Inc., a Delaware corporation (“Holdings”), a holding company that is expected to hold Units (as defined herein) as its principal material asset following the IPO (as defined herein), has entered into an underwriting agreement (i) to issue and sell to the several underwriters named therein (the “Underwriters”) shares of its Class A Common Stock (as defined herein) and (ii) to make a public offering of such shares of Class A Common Stock (collectively, the “IPO”);

 

WHEREAS, pursuant to that certain Reorganization Agreement (as defined herein), the Former LLC Owners (as defined herein) have agreed to receive Units in exchange for their existing indirect ownership interests in the Company and to contribute or transfer such Units to Holdings (including by way of merger) in exchange for shares of Class A Common Stock of Holdings prior to the consummation of the IPO;

 

WHEREAS, in connection with the IPO, pursuant to that certain Reorganization Agreement, at the time of the consummation of the IPO, (i) Holdings intends to purchase, for cash, newly-issued Common Units (as defined herein) from the Company at a purchase price per Common Unit equal to the IPO price per share of Class A Common Stock in the IPO, less the underwriting discount and (ii) Holdings intends to enter into the Tax Receivable Agreements (as defined herein) (the “Reorganization Transactions”);

 

WHEREAS, pursuant to and in accordance with the terms of that certain Reorganization Agreement, Holdings will also issue shares of Class B Common Stock (as defined herein) to LBM Acquisition, LLC, a Delaware limited liability company (“Continuing LLC Owner”);

 

 

WHEREAS, pursuant to the Exchange Agreement (as defined herein), the Common Units, together with the cancellation of a corresponding number of shares of Class B Common Stock, may be exchanged for shares of Class A Common Stock or, at the election of Holdings, for certain cash amounts;

 

WHEREAS, on [·], 2018, in accordance with the Pre-IPO Agreement, Continuing LLC Owner approved, by written consent, the amendment and restatement of the Pre-IPO Agreement into the form of this Agreement and the admission of Holdings as a Member and as sole Managing Member, each effective on the date hereof;

 

WHEREAS, a result of the Reorganization Transactions and the IPO, Holdings is expected to hold Common Units and be the sole Managing Member (as defined herein) of the Company;

 

WHEREAS, the Company and the Members now wish to amend and restate the Pre-IPO Agreement to give effect to the Reorganization Transactions and to reflect Holdings as the sole Managing Member of the Company; and

 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto, each intending to be legally bound, agree that the Pre-IPO Agreement is hereby amended and restated in its entirety as follows:

 

ARTICLE I
 DEFINITIONS

 

Section 1.1  Definitions.

 

Unless the context otherwise requires, the following terms shall have the following meanings for purposes of this Agreement:

 

“Act” means the Delaware Limited Liability Company Act, 6 Del.  C.  Sections 18-101 et seq., as it may be amended from time to time, and any successor to the Act.

 

“Additional Member” means any Person that has been admitted to the Company as a Member pursuant to Section 7.4 by virtue of having received its Company Interest from the Company and not from any other Member or Assignee.

 

“Affiliate” when used with reference to another Person means any Person (other than the Company), directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, such other Person.  In addition, Affiliates of the Members shall include all their directors, managers, officers and employees in their capacities as such.

 

“Agreement” has the meaning set forth in the recitals hereto.

 

2

 

“Asset Value” of any tangible or intangible property of the Company (including goodwill) means its adjusted basis for federal income tax purposes unless:

 

(a)                                           the property was accepted by the Company as a contribution to capital at a value different than its adjusted basis, in which event the initial Asset Value for such property means the Fair Market Value of such asset, as determined by the Managing Member; or

 

(b)                                           as a consequence of the issuance of additional Units or the redemption of all or part of the Company Interest of a Member, the property of the Company is revalued in accordance with Section 3.3(b) (“Revaluations of Assets and Capital Account Adjustments”).

 

As of any date, references to the “then prevailing Asset Value” of any property means the Asset Value last determined for such property less the depreciation, amortization and cost recovery deductions taken into account in computing Net Income or Net Loss in fiscal periods subsequent to such prior determination date.

 

“Assignee” means any Transferee to which a Member or another Assignee has Transferred all or a portion of its Company Interest in accordance with the terms of this Agreement, but that is not admitted to the Company as a Member.

 

“Bankruptcy” means, with respect to any Person, (A) if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (B) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, the proceeding has not been dismissed, or if within 90 days after the appointment without such Person’s consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated.  The foregoing definition of “Bankruptcy” is intended to replace and shall supersede and replace the definition of “Bankruptcy” set forth in Sections 18-101(1) and 18-304 of the Act.

 

“Business Day” means any day that is not a Saturday, Sunday or other day on which banks are required or authorized by law to be closed in New York City.

 

3

 

“Capital Account” means the capital account maintained for a Member pursuant to Section 3.3.

 

“Certificate” has the meaning set forth in the recitals hereto.

 

“Class A Common Stock” means the Class A common stock, par value $0.01 per share, of Holdings.

 

“Class B Common Stock” means the Class B common stock, par value $0.0001 per share, of Holdings.

 

“Code” means the United States Internal Revenue Code of 1986, as amended from time to time.

 

“Common Stock” means, collectively, the Class A Common Stock and the Class B Common Stock.

 

“Common Units” has the meaning set forth in Section 3.1(a).

 

“Company” has the meaning set forth in the recitals hereto.

 

“Company Interest” means, with respect to each Member, such Member’s economic interest and rights as a Member.

 

“Company Interest Certificate” has the meaning set forth in Section 3.7(b)(i).

 

“Company’s Tax Liability” has the meaning set forth in Section 4.3(b).

 

“Continuing LLC Owner” has the meaning set forth in the recitals hereto.

 

“Continuing LLC Owner Tax Receivable Agreement” means the Tax Receivable Agreement, dated on or about the date hereof, between Holdings, Continuing LLC Owner, the Company and any other person from time to time a party thereto; as such agreement may be amended or supplemented from time to time.

 

“DRE” has the meaning set forth in Section 6.5(f).

 

“DRE Affiliate” has the meaning set forth in Section 6.5(f).

 

“ECI” has the meaning set forth in Section 8.4(a).

 

“Employee Taxes” has the meaning set forth in Section 3.3(e).

 

“Employer Taxes” has the meaning set forth in Section 3.3(e).

 

4

 

“Equity Securities” means, as applicable, (i) any capital stock, limited liability company or membership interests, partnership interests, or other equity interest, (ii) any securities directly or indirectly convertible into or exchangeable for any capital stock, limited liability company or membership interests, partnership interests, or other equity interest or containing any profit participation features, (iii) any rights or options directly or indirectly to subscribe for or to purchase any capital stock, limited liability company or membership interests, partnership interest, other equity interest or securities containing any profit participation features or to subscribe for or to purchase any securities directly or indirectly convertible into or exchangeable for any capital stock, limited liability company or membership interests, partnership interest, other equity interests or securities containing any profit participation features, (iv) any equity appreciation rights, phantom equity rights or other similar rights, or (v) any Equity Securities issued or issuable with respect to the securities referred to in clauses (i) through (iv) above in connection with a combination, recapitalization, merger, consolidation or other reorganization.

 

“Exchange” means an exchange of a Unit, combined with a cancellation of a share of Class B Common Stock, for a share of Class A Common Stock (or cash at the Company’s option) in accordance with the Exchange Agreement.

 

“Exchange Agreement” means the Exchange Agreement by and among Holdings, the Company and certain holders of Units and Shares of Class B Common Stock to be entered into in connection with the IPO and the Reorganization Transactions, as it may be amended from time to time, or any successor agreement.

 

“Fair Market Value” means (i) in reference to a particular Common Unit or other Equity Security issued by the Company or, as the case may be, all of the outstanding Common Units or other Equity Securities issued by the Company, the hypothetical amount that would be distributed with respect to such Unit(s) or Equity Security(ies), as determined pursuant to an appraisal, which appraisal shall be subject to the approval of the Managing Member, performed at the expense of the Company by (A) the Company or any of its Subsidiaries or (B) an investment bank, accounting firm or other Person of national standing having particular expertise in the valuation of businesses comparable to that of the Company selected by the Managing Member, and where such appraisal (1) determines the net equity value of the Company, and (2) assumes the distribution to the Members pursuant to Section 4.1 and ARTICLE VII of the proceeds that would hypothetically be received with respect to such Unit(s) or other Equity Security(ies) issued by the Company based on such net equity value, and (ii) in reference to assets or securities other than Common Units or other Equity Securities issued by the Company, the fair market value for such assets or securities as between a willing buyer and a willing seller in an arm’s length transaction occurring on the date of valuation, taking into account all relevant factors determinative of value, as is determined by the Managing Member in its sole discretion.

 

“FATCA” has the meaning set forth in Section 8.4(e).

 

5

 

“Fiscal Year” means the taxable year of the Company.

 

“Former LLC Owners” refer to those Original LLC Owners (as defined below) that have agreed to contribute or transfer their Common Units to Holdings (including by way of merger) in exchange for shares of Class A Common Stock pursuant to the Reorganization Agreement and in connection with the consummation of the IPO.

 

“Former LLC Owner Tax Receivable Agreement” means the Tax Receivable Agreement, dated on or about the date hereof, between the Company and certain of the Former LLC Owners and any other person from time to time a party thereto; as such agreement may be amended or supplemented from time to time.

 

“GAAP” means accounting principles generally accepted in the United States of America, consistently applied and maintained throughout the applicable periods.

 

“Good Faith” shall mean a Person having acted in a manner such Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to a criminal proceeding, having had no reasonable cause to believe such Person’s conduct was unlawful.

 

“Governmental Entity” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government, including any court, in each case, having jurisdiction over the Company or any of its Subsidiaries or any of the property or other assets of the Company or any of its Subsidiaries.

 

“Holdings” has the meaning set forth in the recitals hereto.

 

“Holdings’ Board of Directors” means the board of directors of Holdings.

 

“Holdings Group” means Holdings and any Subsidiary of Holdings (other than, for clarity, the Company and its Subsidiaries).

 

“HSR Act” has the meaning set forth in Section 7.2(f).

 

“Indemnified Person” has the meaning set forth in Section 6.4.

 

“Incentive Unit” has the meaning ascribed to such term in the LBM Acquisition, LLC Incentive Unit Appreciation Plan.

 

“Incentive Unit Payment” means a payment in respect of Incentive Units to the holder of such Incentive Units.

 

“Incentive Unit Payment Contribution” has the meaning set forth in Section 3.3(e).

 

6

 

“IPO” means the initial public offering and sale of Class A Common Stock of Holdings (as contemplated by Holdings’ Registration Statement on Form S-1 (File No. 333-217816)).

 

“LIBOR” has the meaning set forth in the First Lien Credit Agreement, dated as of August 20, 2015, among LBM Midco, LLC, LBM Borrower,  LLC (“Borrower”), the several lenders from time to time party thereto, Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent, Credit Suisse Securities (USA) LLC and RBC Capital Markets, LLC, as joint lead arrangers, and Credit Suisse Securities (USA) LLC, RBC Capital Markets, LLC, Barclays Bank PLC and SunTrust Robinson Humphrey, Inc., as joint bookrunners, as amended.

 

“Managing Member” means Holdings, and any permitted assignee to which the Managing Member Transfers all of its Common Units and other Equity Securities of the Company that is admitted to the Company as the managing member of the Company, in its capacity as the managing member of the Company.

 

“Member” means each Person listed on the Schedule of Members on the date hereof (including the Managing Member) and each other Person who is hereafter admitted as a Member in accordance with the terms of this Agreement and the Act.  The Members shall constitute the “members” (as such term is defined in the Act) of the Company.  Any reference in this Agreement to any Member shall include such Member’s Successors in Interest to the extent such Successors in Interest have become Substituted Members in accordance with the provisions of this Agreement.  Except as otherwise set forth herein or in the Act, the Members shall constitute a single class or group of members of the Company for all purposes of the Act and this Agreement.

 

“Net Income” or “Net Loss” means, for any taxable year or relevant part thereof, the Company’s taxable income or loss for federal income tax purposes for such period (including all items of income, gain, loss or deduction required to be stated separately pursuant to section 703(a)(1) of the Code), with the following adjustments:

 

(a)                                 Gain or loss attributable to the disposition of property of the Company with an Asset Value different from the adjusted basis of such property for federal income tax purposes shall be computed with respect to the Asset Value of such property, and any tax gain or loss not included in Net Income or Net Loss shall be taken into account and allocated for federal income tax purposes among the Members pursuant to Section 5.2.

 

(b)                                 In lieu of the depreciation, amortization or other cost recovery deductions taken into account in computing such taxable income or loss, depreciation, amortization or cost recovery deductions allowable with respect to any property the Asset Value of which differs from its adjusted tax basis for federal income tax purposes shall be equal to an amount that bears the same ratio to such beginning Asset Value as the federal income tax depreciation, amortization or other cost recovery deductions for such period bear to

 

7

 

such beginning adjusted tax basis; provided, however, that if the adjusted tax basis of the property at the beginning of such period is zero, depreciation shall be determined with respect to such asset using any reasonable method selected by the Managing Member.

 

(c)           Any items that are required to be specially allocated pursuant to Section 5.1(b) shall not be taken into account in determining Net Income or Net Loss.

 

“Officer” means each Person designated as an officer of the Company by the Managing Member pursuant to and in accordance with the provisions of Section 6.2.

 

“Original LLC Owners” refer to the direct and indirect owners of the Company prior to the Reorganization Transactions and the IPO, including Continuing LLC Owner and the Former LLC Owners.

 

“Permitted Transferee” has the meaning set forth in Section 7.3(b).

 

“Person” means an individual, a partnership (including a limited partnership), a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, association or other entity or a Governmental Entity.

 

“Pledge” means pledge, grant a security interest in, create a lien on, assign the right to receive distributions or proceeds from, or otherwise encumber, directly or indirectly, or any act of the foregoing.

 

“Pre-IPO Agreement” has the meaning set forth in the recitals hereto.

 

“Proceeding” has the meaning set forth in Section 6.4.

 

“Registration Rights Agreement” means the Registration Rights Agreement by and among Holdings and the parties named therein to be executed in connection with the IPO and the Reorganization Transactions, as it may be amended from time to time, or any successor agreement.

 

“Regulatory Allocations” has the meaning set forth in Section 5.1(b).

 

“Reorganization Agreement” means the Reorganization Agreement, dated May 9, 2017, by and among Holdings, Continuing LLC Owner, the Former LLC Owners, as amended on [·], 2018.

 

“Reorganization Transactions” has the meaning set forth in the recitals hereto.

 

“Revaluations of Assets and Capital Account Adjustments” has the meaning set forth in the definition of “Asset Value.”

 

8

 

“Schedule of Members” has the meaning set forth in Section 3.1(b).

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof.  For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall control the management of any such limited liability company, partnership, association or other business entity.  For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

 

“Substituted Member” means any Person that has been admitted to the Company as a Member pursuant to Section 7.4 by virtue of such Person receiving all or a portion of a Company Interest from a Member or an Assignee and not from the Company.

 

“Successor in Interest” means any (i) trustee, custodian, receiver or other Person acting in any Bankruptcy or reorganization proceeding with respect to, (ii) assignee for the benefit of the creditors of, (iii) trustee or receiver, or current or former officer, director or partner, or other fiduciary acting for or with respect to the dissolution, liquidation or termination of, or (iv) other executor, administrator, committee, legal representative or other successor or assign of, any Member, whether by operation of law or otherwise.

 

“Takeover Laws” has the meaning set forth in Section 6.6(c).

 

“Tax Distribution” has the meaning set forth in Section 4.3(a).

 

“Tax Distribution Date” has the meaning set forth in Section 4.3(a).

 

“Tax Matters Member” has the meaning set forth in Section 8.4(c).

 

“Tax Owner” has the meaning set forth in Section 6.5(f).

 

9

 

“Tax Receivable Agreements” means the Continuing LLC Owner Tax Receivable Agreement and the Former LLC Owner Tax Receivable Agreement.

 

“Tax Transfer” has the meaning set forth in Section 6.5(f).

 

“Transfer” means sell, assign, convey, contribute, give, or otherwise transfer, whether directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise (including a transfer by way of entering into a financial instrument or contract the value of which was determined in whole or part by reference to the Company (including the amount of Company distributions, the value of Company assets or the results of Company operations)), or any act of the foregoing, but excludes a Pledge or any act of Pledging.  For the avoidance of doubt, a Transfer of a Unit includes an Exchange of such Unit.  The terms “Transferee,” “Transferor,” “Transferred,” “Transferring Member,” “Transferor Member” and other forms of the word “Transfer” shall have the correlative meanings.

 

“Treasury Regulations” means the regulations, including temporary regulations, promulgated by the United States Treasury Department under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

“UBTI” has the meaning set forth in Section 8.4(a).

 

“Underwriters” has the meaning set forth in the recitals hereto.

 

“Units” mean the Common Units and any other class of limited liability company interests in the Company denominated as “Units” that is established in accordance with this Agreement, entitling the holders thereof to the relative rights, title and interests in the profits, losses, deductions and credits of the Company at any particular time as set forth in this Agreement, and any and all other benefits to which a holder thereof may be entitled as a Member as provided in this Agreement, together with the obligations of such Member to comply with all terms and provisions of this Agreement.

 

Section 1.2  Terms Generally.  In this Agreement, unless otherwise specified or where the context otherwise requires:

 

(a)           the headings of particular provisions of this Agreement are inserted for convenience only and will not be construed as a part of this Agreement or serve as a limitation or expansion on the scope of any term or provision of this Agreement;

 

(b)           words importing any gender shall include other genders;

 

(c)           words importing the singular only shall include the plural and vice versa;

 

10

 

(d)           the words “include,” “includes” or “including” shall be deemed to be followed by the words “without limitation”;

 

(e)           the words “hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement;

 

(f)            references to “Articles,” “Exhibits,” “Sections” or “Schedules” shall be to Articles, Exhibits, Sections or Schedules of or to this Agreement;

 

(g)           references to any Person include the successors and permitted assigns of such Person;

 

(h)           the use of the words “or,” “either” and “any” shall not be exclusive;

 

(i)            wherever a conflict exists between this Agreement and any other agreement among parties hereto, this Agreement shall control but solely to the extent of such conflict;

 

(j)            references to “$” or “dollars” means the lawful currency of the United States of America;

 

(k)           references to any agreement, contract or schedule, unless otherwise stated, are to such agreement, contract or schedule as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; and

 

(l)            the parties hereto have participated collectively in the negotiation and drafting of this Agreement; accordingly, in the event an ambiguity or question of intent or interpretation arises, it is the intention of the parties that this Agreement shall be construed as if drafted collectively by the parties hereto, and that no presumption or burden of proof shall arise favoring or disfavoring any party hereto by virtue of the authorship of any provisions of this Agreement.

 

ARTICLE II
 GENERAL PROVISIONS

 

Section 2.1  Formation.  The Company was formed as a Delaware limited liability company on July 17, 2015 pursuant to the Certificate and the execution of the Pre-IPO Agreement.  The execution and filing of the Certificate are hereby ratified and approved.  The Members agree to continue the Company as a limited liability company under the Act, upon the terms and subject to the conditions set forth in this Agreement.  The rights, powers, duties, obligations and liabilities of the Members shall be determined pursuant to the Act and this Agreement.  To the extent that the rights, powers, duties, obligations and liabilities of any Member are different by reason of any provision of this Agreement than

 

11

 

they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control.

 

Section 2.2  Name.  The name of the Company is “LBM Midco, LLC,” and all Company business shall be conducted in that name or in such other names that comply with applicable law as the Managing Member may select from time to time.  Subject to the Act, the Managing Member may change the name of the Company (and amend this Agreement to reflect such change) at any time and from time to time without the consent of any other Person.  Prompt notification of any such change shall be given to all Members.

 

Section 2.3  Term.  The term of the Company commenced on the date the Certificate was filed with the office of the Secretary of State of the State of Delaware and shall continue perpetually until dissolution of the Company in accordance with this Agreement and the Act. The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate in accordance with Section 7.2(d) and the Act.

 

Section 2.4  Purpose; Powers.

 

(a)           Managing Powers.  The nature of the business or purposes to be conducted or promoted by the Company is to engage in any lawful act or activity for which limited liability companies may be formed under the Act.  The Company may engage in any and all activities necessary, desirable or incidental to the accomplishment of the foregoing.  Notwithstanding anything herein to the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any purpose or power, or to do any act or thing, forbidden by law to a limited liability company formed under the laws of the State of Delaware.

 

(b)           Company Action.  Subject to the provisions of this Agreement and except as prohibited by the Act, (i) the Company may, with the approval of the Managing Member, enter into and perform any and all documents, agreements and instruments, all without any further act, vote or approval of any Member and (ii) the Managing Member may authorize any Person (including any Member or Officer) to enter into and perform any document on behalf of the Company. Without limiting the generality of the foregoing, the Company, and the Managing Member on behalf of the Company, is hereby authorized to execute, deliver and perform (i) the Exchange Agreement, (ii) the Tax Receivable Agreements, (iii) the Contribution and Distribution Agreement, among Continuing LLC Owner, the Managing Member, KIA IX (Hammer) Investor, L.P., BEP/US LBM Blocker Corporation, BEP/US LBM Investors, LLC, US LBM Intermediate Investors, LLC, KIA IX (Hammer) Blocker, LLC, Kelso Hammer Co-Investment Blocker, LLC, LBM Acquisition Vehicle, LLC and the Company, (iv) the Contribution and Subscription Agreement, among the Managing Member, Continuing LLC Owner and the Company, (v) the Amended and Restated Advisory Services

 

12

 

Agreement, by the Company and agreed and accepted by Kelso & Company, L.P., BlackEagle Partners, LLC and the Managing Member, and (vi) any documents, agreements, certificates or instruments contemplated thereby or related thereto or to the IPO, without any further approval of any Person, notwithstanding any provision of this Agreement.

 

Section 2.5  Existence and Good Standing; Foreign Qualification.  The Managing Member may take all action which may be necessary or appropriate (i) for the continuation of the Company’s valid existence as a limited liability company under the laws of the State of Delaware (and of each other jurisdiction in which such existence is necessary to enable the Company to conduct the business in which it is engaged) and (ii) for the maintenance, preservation and operation of the business of the Company in accordance with the provisions of this Agreement and applicable laws and regulations.  The Managing Member may file or cause to be filed for recordation in the office of the appropriate authorities of the State of Delaware, and in the proper office or offices in each other jurisdiction in which the Company is formed or qualified, such certificates (including certificates of limited liability companies and fictitious name certificates) and other documents as are required by the applicable statutes, rules or regulations of any such jurisdiction or as are required to reflect the identity of the Members and the amounts of their respective capital contributions.  The Managing Member may cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Officers, with all requirements necessary to qualify the Company as a foreign limited liability company in any jurisdiction other than the State of Delaware.

 

Section 2.6  Registered Office; Registered Agent; Principal Office; Other Offices.  The address of the registered office of the Company required by the Act to be maintained in the State of Delaware shall be 160 Greentree Drive, Suite 101, City of Dover, County of Kent, Delaware 19904.  The name of its registered agent at such address is National Registered Agents, Inc.  The principal office of the Company shall be at such place as the Managing Member may designate from time to time, which need not be in the State of Delaware.  The Company may have such other offices or places of business as the Managing Member may designate from time to time.

 

ARTICLE III
 CAPITALIZATION

 

Section 3.1  Units; Initial Capitalization; Schedules.

 

(a)           Limited Liability Company Interests.  Interests in the Company shall be represented by Units, or such other Equity Securities in the Company, or such other Company securities, in each case as the Managing Member may establish in its sole discretion in accordance with the terms hereof.  As of the date hereof, the Units are comprised of one class of Units (“Common Units”) with the rights, powers and preferences attributable to Common Units specified in this Agreement.

 

13

 

(b)           Schedule of Members.  The Company shall maintain a schedule, from time to time amended or supplemented, in the form of Exhibit A hereto setting forth the name and address of each Member, and the number of Units and/or Equity Securities owned by such Member (such schedule, the “Schedule of Members”).  The Schedule of Members, as amended and supplemented from time to time, shall be the definitive record of ownership of each Unit or other Equity Security in the Company.  All Members acknowledge, and hereby agree, that the Schedule of Members is confidential to the Company and that each Member is only entitled to view the portion of the Schedule of Members representing his, her or its Company Interest.  The Company shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units or other Equity Securities in the Company for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units or other Equity Securities in the Company on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Act.

 

(c)           As of the date hereof, each Member owns the number of Common Units set forth opposite the name of such Member in the Schedule of Members set forth in Exhibit A hereto.

 

Section 3.2  Authorization and Issuance of Additional Units.

 

(a)           The Managing Member may issue additional Common Units and/or establish and issue other classes of Units, other Equity Securities in the Company or other Company securities from time to time with such rights, obligations, powers, designations, preferences and other terms, which may be different from, including senior to, any then-existing or future classes of Units, other Equity Securities in the Company or other Company securities, as the Managing Member shall determine from time to time, in its sole discretion, without the vote or consent of any other Member or any other Person, including (i) the right of such Units, other Equity Securities in the Company or other Company securities to share in Net Income and Net Loss or items thereof; (ii) the right of such Units, other Equity Securities in the Company or other Company securities to share in Company distributions; (iii) the rights of such Units, other Equity Securities or other Company securities upon dissolution and liquidation of the Company; (iv) whether, and the terms and conditions upon which, the Company may or shall be required to redeem such Units, other Equity Securities in the Company or other Company securities (including sinking fund provisions); (v) whether such Units, other Equity Securities in the Company or other Company securities are issued with the privilege of conversion or exchange and, if so, the terms and conditions of such conversion or exchange; (vi) the terms and conditions upon which such Units, other Equity Securities in the Company or other Company securities will be issued, evidenced by certificates or assigned or transferred; (vii) the terms and conditions of the issuance of such Units, other Equity Securities in the Company or other Company securities (including the amount and form of consideration, if any, to be received by the Company in respect thereof, the Managing

 

14

 

Member being expressly authorized, in its sole discretion, to cause the Company to issue Units, other Equity Securities in the Company or other Company securities for less than Fair Market Value); and (viii) the right, if any, of the holder of such Units, other Equity Securities in the Company or other Company securities to vote on Company matters, including matters relating to the relative designations, preferences, rights, powers and duties of such Units, other Equity Securities in the Company or other Company securities.  The Managing Member, without the vote or consent of any other Member or any other Person, is authorized (i) to issue any Units, other Equity Securities in the Company or other Company securities of any such newly established class or any existing class and (ii) to amend this Agreement to reflect the creation of any such new class, the issuance of Units, other Equity Securities in the Company or other Company securities of such class, and the admission of any Person as a Member which has received Units or other Equity Securities of any such class, in accordance with Sections 3.2, 7.4 and 9.4.  Except as expressly provided in this Agreement to the contrary, any reference to “Units” shall include the Common Units and any other classes of Units that may be established in accordance with this Agreement.

 

(b)           Notwithstanding the foregoing or anything else to the contrary in this Agreement, if at any time Holdings issues a share of its Class A Common Stock (including in the IPO) or any other Equity Security of Holdings (other than shares of Class B Common Stock), (i) the Company shall issue to Holdings (or one or more Subsidiaries of Holdings) one Common Unit (if Holdings issues a share of Class A Common Stock), or such other Equity Security of the Company (if Holdings issues Equity Securities other than Class A Common Stock) corresponding to the Equity Security issued by Holdings, and with the rights to dividends and distributions (including distributions upon liquidation) and other economic rights as are determined in Good Faith to correspond to those of such Equity Securities of Holdings and (ii) the net proceeds received by Holdings with respect to the corresponding share of Class A Common Stock or other Equity Security, if any, shall be concurrently Transferred (directly or indirectly through one or more Subsidiaries of Holdings) to the Company; provided, however, that if Holdings issues any shares of Class A Common Stock (including in the IPO) or other Equity Securities some or all of the net proceeds of which are to be used to fund expenses or other obligations of Holdings for which Holdings (or one or more Subsidiaries of Holdings) would be permitted a cash distribution pursuant to clause (ii) of Section 4.2, then, Holdings shall not be required to Transfer such net proceeds to the Company which are used or will be used to fund such expenses or obligations; provided, further, that if Holdings issues any shares of Class A Common Stock in order to acquire from a Member a number of Common Units (together with a cancellation of an equal number of shares of Class B Common Stock held by such Member) equal to the number of shares of Class A Common Stock so issued, then the Company shall not issue any new Common Units in connection therewith and Holdings shall not be required to Transfer (directly or indirectly) such net proceeds to the Company (it being understood that such net proceeds shall instead be transferred to such Member as consideration for such purchase).

 

15

 

Notwithstanding the foregoing, this Section 3.2(b) and Section 3.2(c) shall not apply to the issuance and distribution to holders of shares of Holdings Class A Common Stock of rights to purchase Equity Securities of the Holdings under a “poison pill” or similar shareholders’ rights plan (it being understood that upon Exchange of Common Units for Class A Common Stock, such Class A Common Stock will be issued together with any such corresponding right), or to the issuance under Holdings’ employee benefit plans of any warrants, options, other rights to acquire Equity Securities of Holdings or rights or property that may be converted into or settled in Equity Securities of Holdings, but shall in each of the foregoing cases apply to the issuance of Equity Securities of Holdings in connection with the exercise or settlement of such rights, warrants, options or other rights or property (for cash or other consideration in accordance with their terms or otherwise).  Except for transactions permitted or contemplated by the Exchange Agreement, (x) the Company may not issue any additional Common Units to any member of the Holdings Group unless substantially simultaneously Holdings issues or sells an equal number of shares of Holdings’ Class A Common Stock to another Person, (y) the Company may not issue any additional Common Units to any Person other than the Holdings Group unless substantially simultaneously Holdings issues an equal number of shares of Holdings Class B Common Stock to such other Person and (z) the Company may not issue any other Equity Securities of the Company to any member of the Holdings Group unless substantially simultaneously Holdings issues or sells, to another Person, an equal number of shares of a new class or series of Equity Securities of Holdings with the rights to dividends and distributions (including distributions upon liquidation) and other economic rights as are determined in Good Faith to correspond to those of such Equity Securities of the Company.

 

(c)           Except for transactions permitted or contemplated by the Exchange Agreement, Holdings may not redeem, repurchase or otherwise acquire any shares of Class A Common Stock unless Holdings causes the Company to substantially simultaneously redeem, repurchase or otherwise acquire from a member of the Holdings Group an equal number of Common Units for the same price per security, and Holdings may not redeem, repurchase or otherwise acquire any other Equity Securities of Holdings unless Holdings causes the Company to substantially simultaneously redeem, repurchase or otherwise acquire from a member of the Holdings Group an equal number of Equity Securities of the Company of a corresponding class or series for the same price per security.  The Company may not redeem, repurchase or otherwise acquire any Common Units from a member of the Holdings Group unless substantially simultaneously Holdings redeems, repurchases or otherwise acquires an equal number of shares of Class A Common Stock for the same price per security from holders thereof, and the Company may not redeem, repurchase or otherwise acquire any other Equity Securities of the Company from a member of the Holdings Group unless substantially simultaneously Holdings redeems, repurchases or otherwise acquires for the same price per security an equal number of Equity Securities of Holdings of a corresponding class or series.  Notwithstanding the foregoing, to the extent that any consideration payable by Holdings

 

16

 

in connection with the redemption or repurchase of any shares of Class A Common Stock or other Equity Securities of Holdings consists (in whole or in part) of shares of Class A Common Stock or such other Equity Securities (including in connection with the cashless exercise of an option or warrant), then the redemption or repurchase of the corresponding Common Units or other Equity Securities of the Company shall be effectuated in an equivalent manner.

 

(d)           The Company shall not in any manner effect any subdivision (by any stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of the outstanding Common Units or other Equity Securities of the Company unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Class A Common Stock or corresponding other Equity Securities of Holdings with corresponding changes made with respect to any other exchangeable or convertible securities.  Holdings shall not in any manner effect any subdivision (by any stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of the outstanding Class A Common Stock or other Equity Securities of Holdings unless accompanied by an identical subdivision or combination, as applicable, of the outstanding Common Units or corresponding other Equity Securities of the Company, with corresponding changes made with respect to any other exchangeable or convertible securities.

 

(e)           Notwithstanding anything to the contrary, it is the intention of the Members that the Holdings Group collectively owns an aggregate number of Common Units of the Company that is equal to the aggregate number of outstanding shares of Class A Common Stock of Holdings (subject to the second sentence of Section 3.2(b)), and this Section 3.2 shall be interpreted consistent with such intent, and in the event that a member of the Holdings Group acquires from other Members any Common Units and such acquisition results in the Holdings Group collectively owning an aggregate number of Common Units of the Company that exceeds the aggregate number of outstanding shares of Class A Common Stock of Holdings (subject to the second sentence of Section 3.2(b)), the Managing Member may cause a recapitalization or other similar adjustment regarding the Company and the number of shares of Class B Common Stock held by a Member (or a recapitalization or other similar adjustment regarding Holdings) such that (x) the Holdings Group collectively owns an aggregate number of Common Units of the Company that is equal to the aggregate number of outstanding shares of Class A Common Stock of Holdings (subject to the second sentence of Section 3.2(b)) and (y) the Members maintain to the maximum extent possible the economic sharing arrangement among the Members as in place immediately prior to such recapitalization or other adjustment.

 

17

 

Section 3.3  Capital Accounts.

 

(a)                                 Capital Accounts.  A separate account (each a “Capital Account”) shall be established and maintained for each Member which:

 

(i)                                     shall be increased by (i) the amount of cash and the Fair Market Value of any other property contributed (or deemed contributed) by such Member to the Company as a capital contribution (net of liabilities secured by such property or that the Company assumes or takes the property subject to, including certain obligations of the Continuing LLC Owner to make Incentive Unit Payments described in Section 3.3(e)) and (ii) such Member’s share of the Net Income (and other items of income and gain) of the Company; and

 

(ii)                                  shall be reduced by (i) the amount of cash and the Fair Market Value of any other property distributed to such Member (net of liabilities secured by such property or that the Member assumes or takes the property subject to) and (ii) such Member’s share of the Net Loss (and other items of loss and deduction) of the Company.

 

The Capital Accounts as of the date hereof, as adjusted for the revaluation that will occur under Section 3.3(b) in connection with the direct or indirect investment in the Company by Holdings that is expected to occur on or about the date hereof, are set forth on Schedule 3.3.  It is the intention of the Members that the Capital Accounts of the Company be maintained in accordance with the provisions of section 704(b) of the Code and the Treasury Regulations thereunder and that this Agreement be interpreted consistently therewith.  Notwithstanding anything expressed or implied to the contrary in this Agreement, in the event the Managing Member shall determine, in its sole and absolute discretion, that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto, are computed in order to effectuate the intended economic sharing arrangement of the Members or comply with the principles of section 704(b) of the Code and the Treasury Regulations thereunder, the Managing Member may make such modification, notwithstanding any other provision hereof, without the consent of any other Person.

 

(b)                                 Revaluations of Assets and Capital Account Adjustments.  Unless otherwise determined by the Managing Member, immediately preceding the issuance of additional Units in exchange for cash, property or services to a new or existing Member and upon the redemption of any portion of a Company Interest of any Member (or such other times as may be determined by the Managing Member), the then prevailing Asset Values of the Company shall be adjusted to equal their respective gross Fair Market Values and any increase in the net equity value of the Company (Asset Values less liabilities) shall be credited to the Capital Accounts of the Members in the same manner as Net Income is credited under Section 5.1 (or any decrease in the net equity value of the Company shall be debited in the same manner as Net Loss is debited under Section 5.1).

 

18

 

The Capital Accounts of the Company shall be revalued immediately prior to the (direct or indirect) investment by Holdings in the Company that is expected to occur as of the date hereof. This paragraph is intended to comply with the principles of section 704(b) of the Code and the Treasury Regulations thereunder.  For these purposes, the value of any property contributed or deemed contributed to the Company in connection with the IPO shall be determined in a manner consistent with the price at which Class A Common Stock of Holdings (net of all underwriting discounts and commissions) is sold pursuant to the IPO.

 

(c)                                  Additional Capital Account Adjustments.  Any income of the Company that is exempt from federal income tax shall be credited to the Capital Accounts of the Members in the same manner as Net Income is credited under Section 5.1 when such income is realized.  Any expenses or expenditures of the Company which may neither be deducted nor capitalized for tax purposes (or are so treated for tax purposes) shall be debited to the Capital Accounts of the Members in the same manner as Net Loss is debited under Section 5.1.  If any special adjustments are made to or with respect to Company property pursuant to sections 734(b) or 743(b) of the Code, Capital Accounts shall be adjusted to the extent required by the Treasury Regulations under section 704(b) of the Code.  The amount by which the Fair Market Value of any property to be distributed in kind to the Members exceeds or is less than the then-prevailing Asset Value of such property shall, to the extent not otherwise recognized by the Company, be taken into account in determining Net Income and Net Loss and determining the Capital Accounts of the Members by treating such property as if such property had been sold at its Fair Market Value immediately prior to such distribution.

 

(d)                                 Additional Capital Account Provisions.  No Member shall have the right to demand a return of all or any part of such Member’s capital contributions to the Company.  Any return of the capital contributions of any Member shall be made solely from the assets of the Company and only in accordance with the terms of this Agreement.  Except to the extent otherwise expressly provided for in this Agreement, no interest shall be paid to any Member with respect to such Member’s capital contributions or Capital Account.  In the event that all or a portion of the Units of a Member are Transferred in accordance with this Agreement, the Transferee of such Units shall also succeed to all or the relevant portion of the Capital Account of the Transferor.  Units held by a Member may not be Transferred independently of the Company Interest to which the Units relate.

 

(e)                                  Incentive Unit Contributions.  The Continuing LLC Owner may from time to time contribute Incentive Unit Payment amounts (“Incentive Unit Payment Contributions”) to the Company.  The Company shall (i) accept each such Incentive Unit Payment Contribution in exchange for the obligation to make a cash Incentive Unit Payment through the Company’s payroll no later than ten (10) days following the receipt of each Incentive Unit Payment Contribution to the individuals and in the amounts specified by the Continuing LLC Owner at the time of such contribution (up to the amount of such Incentive Unit Contribution), (ii) make the Incentive Unit Payment as

 

19

 

provided in clause (i) above, (iii) pay the employer portion of any employment or social security taxes due in connection with the Incentive Unit Payment (the “Employer Taxes”), (iv) withhold the employee portion of any income, employment, social security or other taxes required to be withheld in connection with the Incentive Unit Payouts (the “Employee Taxes”), (v) duly remit such Employer Taxes and Employee Taxes to the appropriate governmental authorities in accordance with applicable Law and (vi) duly report such Incentive Unit Payments, Employer Taxes and Employee Taxes to the appropriate governmental authorities and to the applicable recipients of the Incentive Unit Payments in accordance with applicable Law.  Notwithstanding anything in this Section 3.3, the amount of each Incentive Unit Payment Contribution shall be characterized as a contribution to capital by the Continuing LLC Owner to the Company for tax purposes, as described in Section 5.2(f).

 

Section 3.4  No Withdrawal.  No Person shall be entitled to withdraw any part of such Member’s capital contributions to the Company or Capital Account or to receive any distribution from the Company, except as expressly provided herein.

 

Section 3.5  Loans From Members.  Loans by Members to the Company shall not be considered capital contributions to the Company.  If any Member shall loan funds to the Company, then the making of such loans shall not result in any increase in the Capital Account balance of such Member.  The amount of any such loans shall be a debt of the Company to such Member and shall be payable or collectible in accordance with the terms and conditions upon which such loans are made.

 

Section 3.6  No Right of Partition.  To the fullest extent permitted by law, no Member shall have the right to seek or obtain partition by court decree or operation of law of any property of the Company or any of its Subsidiaries or the right to own or use particular or individual assets of the Company or any of its Subsidiaries, or, except as expressly contemplated by this Agreement, be entitled to distributions of specific assets of the Company or any of its Subsidiaries.

 

Section 3.7  Non-Certification of Units; Legend; Units are Securities.

 

(a)                                 Units shall be issued in non-certificated form; provided that the Managing Member may cause the Company to issue certificates to a Member representing the Units held by such Member.

 

(b)                                 If the Managing Member determines that the Company shall issue certificates representing Units to any Member, the following provisions of this Section 3.7 shall apply:

 

(i)                                     The Company shall issue one or more certificates in the name of such Person in such form as it may approve, subject to Section 3.7(b)(ii) (a “Company Interest Certificate”), which shall evidence the ownership of the Units

 

20

 

represented thereby.  Each such Company Interest Certificate shall be denominated in terms of the number of Units evidenced by such Company Interest Certificate and shall be signed by the Managing Member or an Officer on behalf of the Company.

 

(ii)                                  Each Company Interest Certificate shall bear a legend substantially in the following form:

 

This certificate evidences a Common Unit representing an interest in LBM Midco, LLC and shall constitute a “security” within the meaning of, and shall be governed by, (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the State of Delaware, and (ii) the corresponding provisions of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995.

 

The interests in LBM Midco, LLC represented by this certificate are subject to restrictions on transfer set forth in the Amended and Restated Limited Liability Company Agreement of LBM Midco, LLC, dated as of April [·], 2018, by and among each of the members from time to time party thereto, as the same may be amended from time to time, and such interests in LBM Midco, LLC may not be transferred except as provided therein.

 

(iii)                               Each Unit shall constitute a “security” within the meaning of, and shall be governed by, (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the State of Delaware, and (ii) the corresponding provisions of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995.

 

(iv)                              The Company shall issue a new Company Interest Certificate in place of any Company Interest Certificate previously issued if the holder of the Units represented by such Company Interest Certificate, as reflected on the books and records of the Company:

 

(A)                               makes proof by affidavit, in form and substance satisfactory to the Company, that such previously issued Company Interest Certificate has been lost, stolen or destroyed;

 

21

 

(B)                               requests the issuance of a new Company Interest Certificate before the Company has notice that such previously issued Company Interest Certificate has been acquired by a purchaser for value in Good Faith and without notice of an adverse claim;

 

(C)                               if requested by the Company, delivers to the Company such security, in form and substance satisfactory to the Company, as the Managing Member may direct, to indemnify the Company against any claim that may be made on account of the alleged loss, destruction or theft of the previously issued Company Interest Certificate; and

 

(D)                               satisfies any other reasonable requirements imposed by the Company.

 

(v)                                 Upon a Member’s Transfer in accordance with the provisions of this Agreement of any or all Units represented by a Company Interest Certificate, the Transferee of such Units shall deliver such Company Interest Certificate, duly endorsed for Transfer by the Transferee, to the Company for cancellation, and the Company shall thereupon issue a new Company Interest Certificate to such Transferee for the number of Units being Transferred and, if applicable, cause to be issued to such Transferring Member a new Company Interest Certificate for the number of Units that were represented by the canceled Company Interest Certificate and that are not being Transferred.

 

Section 3.8  Exchange of Units for Common Stock.  Notwithstanding any other provision of this Agreement (including Article VII), each Unit held by a Member, combined with a cancellation of Class B Common Stock held by such Member, may be exchanged for a share of Class A Common Stock in the manner set forth in the Exchange Agreement.

 

ARTICLE IV
  DISTRIBUTIONS

 

Section 4.1  Distributions.  Except as described in the Exchange Agreement, this Article IV and/or Section 7.2, distributions (other than Tax Distributions) shall be made to the Members as and when determined by the Managing Member, ratably among the Members in accordance with their respective number of Common Units.

 

Section 4.2  Distributions to Holdings.  Subject to Section 4.5, the Managing Member, in its sole discretion, may authorize that cash be distributed to members of the Holdings Group (which distribution shall be made without pro rata distributions to the other Members) (i) in exchange for the redemption, repurchase or other acquisition of Common Units (or other Equity Securities) held by such Person, where the redemption proceeds are to be used by Holdings to acquire its outstanding Class A Common Stock

 

22

 

(or other Equity Securities) in accordance with Section 3.2, and (ii) as required for members of the Holdings Group to pay (A) operating, administrative and other similar costs and expenses incurred by the Managing Member or its Affiliates, and other costs and expenses relating to the investment in or activities of the Company and its Subsidiaries, including payments in respect of indebtedness and preferred stock, to the extent used or to be used to pay expenses or other obligations described in this clause (ii) (in either case only to the extent economically equivalent indebtedness or Equity Securities of the Company were not issued to the Managing Member or the applicable Affiliates), fees and disbursements of all investment bankers, financial advisers, legal counsel, independent certified public accountants, consultants and other Persons retained by the board of directors of any member of the Holdings Group, and fees associated with any filings by a member of the Holdings Group with any Governmental Entity, (B) any judgments, settlements, penalties, fines or other costs and expenses in respect of any claims against, or any litigation or proceedings involving, any member of the Holdings Group, (C) fees and expenses related to any securities offering, investment or acquisition transaction (whether or not successful) authorized by the board of directors of any member of the Holdings Group, or to any redemptions or acquisitions of Common Units or other Equity Securities and (D) other fees and expenses in connection with the maintenance of the existence of each member of the Holdings Group (including any franchise taxes and any costs or expenses associated with being a public company listed on a national securities exchange).  For the avoidance of doubt, distributions under this Section 4.2 may not be used to pay or facilitate dividends or distributions on the Class A Common Stock (other than distributions in redemption or repurchase or other acquisition of Class A Common Stock (or other Equity Securities) in accordance with Section 3.2).  Further, and without limiting the foregoing, the Managing Member, in its sole discretion, may authorize that cash be distributed to members of the Holdings Group to make any payments to be made under the Tax Receivable Agreements or the Exchange Agreement, including, without limitation, losses, claims damages, liabilities and expenses due by the Holdings Group under the Registration Rights Agreement, so long as such distributions are made pro rata to all Members in accordance with Common Units.

 

Section 4.3  Tax Distributions.

 

(a)                                 Subject to Section 4.5, the Company shall distribute ratably among the Members in accordance with their respective number of Common Units (with appropriate adjustments to the extent that such number changes within any calculation period, as determined by the Managing Member in its sole discretion) on a quarterly basis by the 10th (or next succeeding Business Day) of each of March, June, September and December of each taxable year, or such other dates as may be appropriate in light of tax payment requirements (each a “Tax Distribution Date”), an aggregate amount (the “Tax Distribution”) in cash equal to the excess, if any, of (A) the Company’s Tax Liability (as defined in clause (b) below) with respect to such taxable year over (B) the amounts previously distributed pursuant to this Section 4.3 with respect to such taxable year;

 

23

 

provided that, unless otherwise consented to by Continuing LLC Owner and Holdings, such tax distribution shall be increased, again ratably among the Members in accordance with their respective number of Common Units (with appropriate adjustments to the extent that such number changes within any calculation period, as determined by the Managing Member in its sole discretion), until each Member has received cash in an amount sufficient for each beneficial owner of such Member to satisfy its tax liability with respect to the net taxable income allocated by such Member to such beneficial owners in respect of such Member’s Company Interest (less such amounts previously distributed to such Member pursuant to the preceding clause (B)).  Notwithstanding the foregoing, Tax Distributions shall only be made for periods (or portions thereof) beginning on or after the date hereof.  For purposes of computing a Tax Distribution under this Section 4.3, salaries, bonuses, and any other payments in the nature of compensation shall not be taken into account, other than as an expense of the Company.

 

(b)                                 For purposes of this Section 4.3, the “Company’s Tax Liability” means, with respect to a taxable year (or portion thereof) beginning as of the first day of such taxable year (or portion thereof) and ending on the last day of the most recent relevant determination date, the product of (x) the Company’s taxable income as determined pursuant to section 703 of the Code (taking into account any deductions pursuant to section 199A of the Code), and (y) the highest combined marginal federal, state and local income and Medicare tax rate, taking into account, with respect to the determination of the federal income tax rate, the deductibility of state and local income and Medicare taxes (to the extent deductible), applicable to individuals (or, if higher, corporations) resident or domiciled in New York, New York (or any other jurisdiction within the United States with a higher rate, to the extent that the Managing Member, in its sole discretion, elects to use such higher rate).  A final accounting for Tax Distributions shall be made for each taxable year after the taxable income or loss of the Company has been determined for such taxable year, and the Company shall promptly thereafter make supplemental Tax Distributions (or future Tax Distributions will be reduced) to reflect any difference between estimates previously used in calculating the Company’s Tax Liability and the relevant actual amounts recognized.

 

(c)                                  Notwithstanding Section 4.3(a) or (d), if on a Tax Distribution Date there are not sufficient funds in the Company (or any of its U.S. Subsidiaries that are disregarded entities for U.S. federal income tax purposes) to distribute the full amount of the relevant Tax Distribution otherwise to be made or any credit agreements or other debt documents to which the Company (or any of its Subsidiaries) is a party do not permit the Company to receive from its Subsidiaries or distribute to each Member the full amount of each such Member’s portion of the Tax Distribution otherwise to be made to each such Member, then the distributions pursuant to this Section 4.3 on such Tax Distribution Date shall be made ratably among the Members in accordance with their respective number of Common Units to the extent of the available funds.

 

24

 

(d)                                 If, following an audit or examination, there is an adjustment that would affect the calculation of the Company’s taxable income or taxable loss for a given period or portion thereof after the date of this Agreement and such taxable income or taxable loss flows through to the Members, or in the event that the Company files an amended tax return which has such effect, then, subject to the availability of cash and any restrictions set forth in any credit agreements or other debt documents to which the Company (or any of its Subsidiaries that are disregarded entities for U.S. federal income tax purposes) is a party, the Company shall promptly recalculate the Company’s Tax Liability for the applicable period and make additional Tax Distributions ratably among the Members in accordance with their respective number of Common Units (increased by an additional amount estimated to be sufficient to cover any interest or penalties that would be imposed on the Company if it were an individual (or, if higher, a corporation) resident in New York, New York) to give effect to such adjustment or amended tax return.

 

(e)                                  Without the consent of the Continuing LLC Owner, the Company shall not incur additional indebtedness, enter into any new credit agreement or refinance any existing credit agreement that, in each case, have terms materially more restrictive in respect of the Company’s ability to make Tax Distributions than restrictions on Tax Distributions that exist immediately prior to the incurrence of additional indebtedness, the entry of a new credit agreement or the refinancing of an existing credit agreement.

 

Section 4.4  Withholding; Indemnification.  Each Member shall, to the fullest extent permitted by law, indemnify and hold harmless the Company, the Managing Member and each other Person who is or who is deemed to be the responsible withholding agent or paying agent for United States federal, state or local or non-U.S. income tax purposes against all claims, liabilities and expenses of whatever nature relating to the Company’s, the Managing Member’s or such other Person’s obligation to withhold and to pay over, or otherwise to pay, any withholding or other taxes payable by the Company, the Managing Member or any of their Affiliates with respect to such Member or as a result of such Member’s ownership of Units, Transfer of Units (including by Exchange) or participation in the Company.  Each Member hereby authorizes the Company and the Managing Member to withhold and to pay over, or otherwise to pay, any withholding or other taxes determined by the Managing Member to be payable by the Company, the Managing Member or any of their Affiliates (pursuant to any provision of United States federal, state or local or non-U.S. law) with respect to such Member or as a result of such Member’s ownership of Units, Transfer of Units (including by Exchange) or as a result of such Member’s participation in the Company; if and to the extent that the Company withholds or pays any such withholding or other taxes with respect to a Member (including, but not limited to, such Member’s pro rata share (based on the number of Units held) of any taxes imposed on the Company as a result of any income tax audit by any Governmental Entity), such Member shall be deemed for all purposes of this Agreement to have received a distribution from the Company as of the time such

 

25

 

withholding or other tax is paid (or, if earlier, required to be paid) with respect to such Member’s Company Interest, and, to the extent such taxes exceed the amount that would otherwise be distributable to such Member, as a demand loan payable by the Member to the Company with interest at a rate of LIBOR plus 450 basis points, compounded annually.  The Managing Member may, in its discretion, either demand payment of the principal and accrued interest on such demand loan at any time, and enforce payment thereof by legal process, or may withhold from one or more distributions to a Member amounts sufficient to satisfy such Member’s obligations under any such demand loan.  In the event that the Company receives a refund of taxes previously withheld, the economic benefit of such refund shall be apportioned among the Members in a manner reasonably determined by the Managing Member to offset the prior operation of this Section 4.4 in respect of such withheld taxes.

 

Section 4.5  Limitation.  Notwithstanding any other provision of this Agreement, the Company, and the Managing Member on behalf of the Company, shall not be required to make a distribution if such distribution to any Member or Assignee would violate the Act or other applicable law.

 

ARTICLE V
 ALLOCATIONS

 

Section 5.1  Allocations for Capital Account Purposes.

 

(a)                                 Allocations of Net Income and Net Losses.  Except as otherwise provided in this Agreement, Net Income and Net Losses (and, to the extent necessary, and if determined appropriate by the Managing Member in its sole discretion individual items of income, gain or loss or deduction of the Company) shall be allocated in a manner such that the Capital Account of each Member, after adjustment by such Member’s share of “minimum gain” and “partner minimum gain” (as such terms are used in Treasury Regulation Section 1.704-2) not otherwise required to be taken into account in such period, is, as nearly as possible, equal (proportionately) to the distributions that would be made to such Member pursuant to Section 7.2(c) if the Company were dissolved, its affairs wound up and its assets sold for cash equal to their then-prevailing Asset Values, all Company liabilities were satisfied (limited with respect to each non-recourse liability to the then-prevailing Asset Values of the assets securing such liability) and the net assets of the Company were distributed to the Members pursuant to this Agreement.

 

(b)                                 Regulatory Allocations.  Although the Members do not anticipate that events will arise that will require application of this Section 5.1(b), the provisions are included in this Agreement governing the allocation of income, gain, loss, deduction and credit (and items thereof) as may be necessary to provide that the Company’s allocation provisions contain a so-called “qualified income offset” and comply with all provisions relating to the allocation of so-called “non-recourse deductions” and “partner non-recourse deductions” and the chargeback thereof as set forth in the Treasury Regulations

 

26

 

under section 704(b) of the Code (such regulatory allocations, “Regulatory Allocations”); provided, however, that the Members intend that all Regulatory Allocations that may be required shall be offset by other Regulatory Allocations or special allocations of items so that the share of the Net Income and Net Loss of the Company of each Member will be the same as it would have been had the events requiring the Regulatory Allocations not occurred.  For this purpose the Managing Member, based on the advice of the Company’s auditors or tax counsel, is hereby authorized to make such special curative allocations as may be appropriate.

 

(c)                                  Deficit Capital Accounts.  No Member shall be required to pay to the Company, to any other Member or to any third party any deficit balance which may exist from time to time in the Member’s Capital Account.

 

(d)                                 Compliance with Section 704(b).  The allocations made pursuant to this Section 5.1 are intended to comply with the provisions of section 704(b) of the Code and the Treasury Regulations thereunder and, in particular, to reflect the Members’ economic interests in the Company, as set forth herein, and the Managing Member shall interpret this Section 5.1 in a manner consistent with such intention and shall make such adjustments to these allocations as the Managing Member determines to be necessary or appropriate.

 

Section 5.2  Allocations for Tax Purposes.

 

(a)                                 Tax Allocations.  Except as set forth below or as otherwise required by the Code or other applicable law, the income, gains, losses and deductions of the Company shall be allocated for federal, state and local income tax purposes among the Members in accordance with the allocation of such income, gains, losses and deductions among the Members for purposes of computing their Capital Accounts.

 

(b)                                 Contributed Assets.  In accordance with section 704(c) of the Code, income, gain, loss and deduction with respect to any property contributed (or deemed contributed for income tax purposes) to the Company with an adjusted basis for federal income tax purposes different from the initial Asset Value at which such property was accepted by the Company shall, solely for tax purposes, be allocated among the Members so as to take into account such difference in the manner required by section 704(c) of the Code and the applicable Treasury Regulations.  All tax allocations required by this Section 5.2 shall be made using any method described in Treasury Regulation section 1.704-3 as determined by the Managing Member.

 

(c)                                  Revalued Assets.  If the Asset Value of any asset of the Company is adjusted pursuant to Section 3.3(b), subsequent allocations of income, gain, loss and deduction with respect to such asset shall, solely for tax purposes, be allocated among the Members so as to take into account such adjustment in the same manner as under section 704(c) of the Code and the applicable Treasury Regulations.

 

27

 

(d)                                 Section 754 Election.  The Members intend that an election under section 754 of the Code be in effect for the Company (and any Subsidiary of the Company that is treated as a partnership for U.S. federal income tax purposes) for the taxable year that includes the date hereof.  The Company shall cause (1) such elections to be in effect for the taxable year that includes the date hereof and all subsequent taxable years of each of the Company and any Subsidiary described in the preceding sentence for so long as such entity is treated as a partnership for U.S. federal income tax purposes (and intends to make additional elections under section 754 of the Code in the event there is a termination (within the meaning of section 708 of the Code) of any such entity and such entity is treated as a partnership for U.S  federal income tax purposes following such termination) and (2) any new Subsidiary of the Company that is treated as a partnership for U.S. federal income tax purposes to have in effect an election under section 754 of the Code for so long as such entity is treated as a partnership for U.S. federal income tax purposes (and intends to make additional elections under section 754 of the Code in the event there is a termination (within the meaning of section 708 of the Code) of any such entity and such entity is treated as a partnership for U.S. federal income tax purposes following such termination).

 

(e)                                  Section 706 Determination.  For purposes of determining the items of Company income, gain, loss, deduction, or credit allocable to any Member with respect to any period, such items shall be determined on a daily, monthly, or other basis, as determined by the Managing Member using any permissible method under Code section 706 and the Treasury Regulations promulgated thereunder.

 

(f)                                   Incentive Unit Payment Tax Characterization.  Notwithstanding anything to the contrary contained in this Section 5.2, for federal, state and local income tax purposes, the Company and each Member agrees that an amount equal to each Incentive Unit Payment Contribution shall be characterized as a contribution to the capital by the Continuing LLC Owner to the Company, and that the fact that the Continuing LLC Owner has made such contribution shall be taken into account in making allocations pursuant to this Section 5.2.  Neither the Company nor any Member shall take a contrary position for tax purposes unless required by applicable law.

 

(g)                                  Section 5.2 Allocations.  Allocations pursuant to this Section 5.2 are solely for the purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Loss, distributions or other Company items pursuant to any provision of this Agreement.

 

28

 

ARTICLE VI
 MANAGEMENT

 

Section 6.1  Managing Member; Delegation of Authority and Duties.

 

(a)                                 Authority of Managing Member.  The business, property and affairs of the Company shall be managed under the sole, absolute and exclusive direction of the Managing Member, which may from time to time delegate authority to Officers or to others to act on behalf of the Company.  Without limiting the foregoing provisions of this Section 6.1(a), the Managing Member shall have the sole power to manage or cause the management of the Company, including the power and authority to effectuate the sale, lease, transfer, exchange or other disposition of any, all or substantially all of the assets of the Company (including the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company) or the merger, consolidation, reorganization or other combination of the Company with or into another entity, in each case, without the consent or approval of any other Member.  Holdings shall not be removed as Managing Member under any circumstances, except by its own election.

 

(b)                                 Members.  No Member who is not also a Managing Member, in his or her or its capacity as such, shall participate in or have any control over the business of the Company.  Except as expressly provided herein, the Units, other Equity Securities in the Company, or the fact of a Member’s admission as a member of the Company do not confer any rights upon the Members to participate in the management of the affairs of the Company.  Except as expressly provided herein, no Member who is not also a Managing Member shall have any right to vote on any matter involving the Company, including with respect to any merger, consolidation, combination or conversion of the Company, or any other matter that a Member might otherwise have the ability to vote or consent with respect to under the Act, at law, in equity or otherwise.  The conduct, control and management of the Company shall be vested exclusively in the Managing Member.  In all matters relating to or arising out of the conduct of the operation of the Company, the decision of the Managing Member shall be the decision of the Company.  Except as required by law, or expressly provided in Section 6.1(c) or by separate agreement with the Company, no Member who is not also a Managing Member (and acting in such capacity) shall take any part in the management or control of the operation or business of the Company in its capacity as a Member, nor shall any Member who is not also a Managing Member (and acting in such capacity) have any right, authority or power to act for or on behalf of or bind the Company in his or her or its capacity as a Member in any respect or assume any obligation or responsibility of the Company or of any other Member.

 

(c)                                  Delegation by Managing Member.  The Company may employ one or more Members from time to time, and such Members (including the Managing Member), in their capacity as employees or agents of the Company (and not, for clarity, in their

 

29

 

capacity as Members of the Company), may take part in the control and management of the business of the Company to the extent such authority and power to act for or on behalf of the Company has been delegated to them by the Managing Member.  To the fullest extent permitted by law, the Managing Member shall have the power and authority to delegate to one or more other Persons the Managing Member’s rights and powers to manage and control the business and affairs of the Company, including to delegate to agents and employees of a Member (including the Managing Member) or the Company (including Officers), and to delegate by a management agreement or another agreement with, or otherwise to, other Persons.  The Managing Member may authorize any Person (including any Member or Officer) to enter into and perform any document on behalf of the Company.

 

Section 6.2  Officers.

 

(a)                                 Designation and Appointment.  The Managing Member may, from time to time, employ and retain Persons as may be necessary or appropriate for the conduct of the Company’s business, including employees, agents and other Persons (any of whom may be a Member) who may be designated as Officers of the Company, with such titles as and to the extent authorized by the Managing Member.  Any number of offices may be held by the same Person.  In its discretion, the Managing Member may choose not to fill any office for any period as it may deem advisable.  Officers need not be residents of the State of Delaware or Members.  Any Officers so designated shall have such authority and perform such duties as the Managing Member may from time to time delegate to them.  The Managing Member may assign titles to particular Officers.  Each Officer shall hold office until his successor shall be duly designated and shall qualify or until his death or until he shall resign or shall have been removed in the manner hereinafter provided.  The salaries or other compensation, if any, of the Officers of the Company shall be fixed from time to time by the Managing Member.  Designation of an Officer shall not of itself create any employment or, except as provided in Section 6.4, contractual rights.

 

(b)                                 Resignation and Removal.  Any Officer may resign as such at any time.  Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time is specified, at the time of its receipt by the Managing Member.  The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.  All employees, agents and Officers shall be subject to the supervision and direction of the Managing Member and may be removed, with or without cause, from such office by the Managing Member and the authority, duties or responsibilities of any employee, agent or Officer of the Company may be suspended by or altered the Managing Member from time to time, in each case in the sole discretion of the Managing Member.

 

(c)                                  Duties of Officers.  The Officers, in the performance of their duties as such, shall owe to the Company duties of loyalty and care of the type owed by officers of a Delaware corporation pursuant to the laws of the state of Delaware.

 

30

 

Section 6.3  Liability of Members.

 

(a)                                 No Personal Liability.  Except as otherwise required by applicable law and as expressly set forth in this Agreement, no Member shall have any personal liability whatsoever in such Person’s capacity as a Member, whether to the Company, to any of the other Members, to the creditors of the Company or to any other third party, for the debts, liabilities, commitments or any other obligations of the Company or for any losses of the Company.  Except as otherwise required by the Act, each Member shall be liable only to make payments to the Company as provided for expressly herein.

 

(b)                                 Return of Distributions.  In accordance with the Act and the laws of the State of Delaware, a Member may, under the circumstances provided for in Sections 18-607 and 18-804 of the Act, be required to return amounts previously distributed to such Member.  It is the intent of the Members that no distribution to any Member pursuant to ARTICLE IV shall be deemed a return of money or other property paid or distributed in violation of the Act.  The payment of any such money or distribution of any such property to a Member shall be deemed to be a compromise within the meaning of Section 18-502(b) of the Act, and, to the fullest extent permitted by law, any Member receiving any such money or property shall not be required to return any such money or property to the Company or any other Person.  However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Member is obligated to make any such payment, such obligation shall be the obligation of such Member and not of any other Member.

 

(c)                                  No Duties.  Notwithstanding any other provision of this Agreement or any duty otherwise existing at law, in equity or otherwise, the parties hereby agree that the Members (including the Managing Member), shall, to the maximum extent permitted by law, including Section 18-1101(c) of the Act, owe no duties (including fiduciary duties) to the Company, the other Members or any other Person who is a party to or otherwise bound by this Agreement; provided, however, that nothing contained in this Section 6.3(c) shall eliminate the implied contractual covenant of good faith and fair dealing.  To the extent that, at law or in equity, any Member (including the Managing Member) has duties (including fiduciary duties) and liabilities relating thereto to the Company, to another Member or to another Person who is a party to or otherwise bound by this Agreement, the Members (including the Managing Member) acting under this Agreement will not be liable to the Company, to any such other Member or to any such other Person who is a party to or otherwise bound by this Agreement, for their good faith reliance on the provisions of this Agreement.  The provisions of this Agreement, to the extent that they restrict or eliminate the duties and liabilities relating thereto of any Member (including the Managing Member) otherwise existing at law, in equity or otherwise, are agreed by the parties hereto to replace to that extent such other duties and liabilities of the Members (including the Managing Member) relating thereto.  The Managing Member may consult with legal counsel, accountants and financial or other advisors and any act or

 

31

 

omission suffered or taken by the Managing Member on behalf of the Company or in furtherance of the interests of the Company in Good Faith in reliance upon and in accordance with the advice of such counsel, accountants or financial or other advisors will be full justification for any such act or omission, and the Managing Member will be fully protected in so acting or omitting to act so long as such counsel or accountants or financial or other advisors were selected with reasonable care.  Notwithstanding any other provision of this Agreement or otherwise applicable provision of law or equity, whenever in this Agreement the Managing Member is permitted or required to make a decision (i) in its “sole discretion” or “discretion” or under a grant of similar authority or latitude, the Managing Member shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall, to the fullest extent permitted by applicable law, have no duty or obligation to give any consideration to any interest of or factors affecting the Company or the other Members, or (ii) in its “Good Faith” or under another expressed standard, the Managing Member shall act under such express standard and shall not be subject to any other or different standards.

 

Section 6.4  Indemnification by the Company.  Subject to the limitations and conditions provided in this Section 6.4, each Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or arbitrative (each, a “Proceeding”), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such a Proceeding, by reason of the fact that he, she or it, or a Person of which he, she or it is the legal representative, is or was a Member or an Officer or a Tax Matters Member (each, an “Indemnified Person”), in each case, shall be indemnified by the Company to the fullest extent permitted by applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than such law permitted the Company to provide prior to such amendment) against all judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including reasonable attorneys’ fees and expenses) actually incurred by such Indemnified Person in connection with such Proceeding, appeal, inquiry or investigation, if such Indemnified Person acted in Good Faith.  Reasonable expenses incurred by an Indemnified Person who was, is or is threatened to be made a named defendant or respondent in a Proceeding shall be paid by the Company in advance of the final disposition of the Proceeding upon receipt of an undertaking by or on behalf of such Person to repay such amount if it shall ultimately be determined that he, she or it is not entitled to be indemnified by the Company.  Indemnification under this Section 6.4 shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder.  The rights granted pursuant to this Section 6.4 shall be deemed contract rights, and no amendment, modification or repeal of this Section 6.4 shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings, appeals, inquiries or investigations arising prior to any amendment, modification or repeal.  It is expressly acknowledged that the

 

32

 

indemnification provided in this Section 6.4 could involve indemnification for negligence or under theories of strict liability.  Notwithstanding the foregoing, no Indemnified Person shall be entitled to any indemnity or advancement of expenses in connection with any Proceeding brought (i) by such Indemnified Person against the Company (other than to enforce the rights of such Indemnified Person pursuant to this Section 6.4), any Member or any Officer, or (ii) by or in the right of the Company, without the prior written consent of the Managing Member.

 

Section 6.5  Investment Representations of Members.  Each Member hereby represents, warrants and acknowledges to the Company that:

 

(a)                                 such Member has such knowledge and experience in financial and business matters and is capable of evaluating the merits and risks of an investment in the Company and is making an informed investment decision with respect thereto;

 

(b)                                 such Member is acquiring Company Interests for investment only and not with a view to, or for resale in connection with, any distribution to the public or public offering thereof;

 

(c)                                  the execution, delivery and performance of this Agreement have been duly authorized by such Member or all necessary corporate or other entity action on the part of such Member;

 

(d)                                 the Common Units and shares of Class B Common Stock being delivered or cancelled pursuant to an Exchange are free and clear of all liens, encumbrances, rights of first refusal, and the like;

 

(e)                                  such Member has executed and provided the Company properly completed copies of IRS Form W-8 or W-9, as applicable, which are valid as of the date hereof, and will promptly provide any additional information or documentation requested by the Managing Member relating to tax matters (including any information reasonably requested in connection with ensuring compliance under FATCA); if any such information or documentation previously provided becomes incorrect or obsolete, such Member will promptly notify the Managing Member and provide applicable updated information and documentation;

 

(f)                                   such Member is not a disregarded entity for U.S. federal income tax purposes and is acquiring its Company Interest for its own account and is the sole beneficial owner thereof for U.S. federal income tax purposes; provided, however, that if at any time on or following the date hereof, such Member is treated as disregarded as an entity separate from its owner for U.S. federal income tax purposes (a “DRE”), then (i) none of such Member, such Member’s owner for U.S. federal income tax purposes (“Tax Owner”), or any other entity that is treated as a DRE of Tax Owner and that owns a direct or indirect interest in such Member (a “DRE Affiliate”) will create or issue, or participate

 

33

 

in the creation or issuance of, any “interest” in the Company within the meaning of Treasury Regulation section 1.7704-1(a)(2) and (ii) if as a result of (A) a Transfer, directly or indirectly, of all or any part of the ownership interests in such Member or any DRE Affiliate, (B) the issuance of any security or other instrument by such Member or any DRE Affiliate, or (C) such Member or any DRE Affiliate otherwise ceasing to be a DRE of Tax Owner (any such event described in clause (A), (B), or (C), a “Tax Transfer”), any part of the interests in the Company would be treated as being transferred within the meaning of Treasury Regulation section 1.7704-1(a)(3), then such Tax Transfer shall not be undertaken without the prior written consent of the Managing Member (which such consent may be withheld in its sole discretion); and

 

(g)                                  such Member’s taxable year-end is December 31 (or, in the case of a member of the Holdings Group, such Member has a 52-53 week taxable year ending on the last Tuesday of each calendar year) or has been otherwise indicated to the Managing Member in writing.

 

Section 6.6  Representations and Warranties of Holdings.  Holdings represents and warrants that:

 

(a)                                 it is a corporation duly incorporated and is existing in good standing under the laws of the State of Delaware;

 

(b)                                 it has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby and to issue the Common Stock in accordance with the terms hereof;

 

(c)                                  the execution and delivery of this Agreement by Holdings and the consummation by it of the transactions contemplated hereby (including the issuance of the Common Stock) have been duly authorized by all necessary action on the part of Holdings, including but not limited to all actions necessary to ensure that the acquisition of shares Common Stock pursuant to the transactions contemplated hereby, to the fullest extent of Holdings’ Board of Directors’ power and authority and to the extent permitted by law, shall not be subject to any “moratorium,” “control share acquisition,” “business combination,” “fair price” or other form of anti-takeover laws and regulations of any jurisdiction that may purport to be applicable to this Agreement or the transactions contemplated hereby (collectively, “Takeover Laws”); and

 

(d)                                 this Agreement constitutes a legal, valid and binding obligation of Holdings enforceable against Holdings in accordance with its terms, except as enforcement may be limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

 

34

 

ARTICLE VII
 WITHDRAWAL; DISSOLUTION; TRANSFER OF MEMBERSHIP INTERESTS; ADMISSION OF NEW MEMBERS

 

Section 7.1  Member Withdrawal.  No Member shall have the power or right to withdraw or otherwise resign or be expelled from the Company prior to the dissolution and winding up of the Company except pursuant to a Transfer permitted under this Agreement.

 

Section 7.2  Dissolution.

 

(a)                                 Events.  The Company shall be dissolved and its affairs shall be wound up on the first to occur of (i) the determination of the Managing Member to dissolve the Company, (ii) the entry of a decree of judicial dissolution of the Company under Section 18-802 of the Act or (iii) the termination of the legal existence of the last remaining Member or the occurrence of any other event which terminates the continued membership of the last remaining Member in the Company unless the Company is continued without dissolution in a manner permitted by the Act.

 

(b)                                 Actions Upon Dissolution.  When the Company is dissolved, the business and property of the Company shall be wound up and liquidated by the Managing Member or, in the event of the unavailability of the Managing Member or if the Managing Member shall so determine, such Member or other liquidating trustee as shall be named by the Managing Member.

 

(c)                                  Priority.  A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to this Section 7.2 to minimize any losses otherwise attendant upon such winding up.  Upon dissolution of the Company, the assets of the Company shall be applied in the following manner and order of priority:  (i) to creditors, including Members who are creditors, to the extent otherwise permitted by law, in satisfaction of liabilities of the Company (including all contingent, conditional or unmatured claims), whether by payment or the making of reasonable provision for payment thereof; and (ii) the balance shall be distributed in accordance with ARTICLE IV hereof.

 

(d)                                 Cancellation of Certificate.  The Company shall terminate when (i) all of the assets of the Company, after payment of or due provision for all debts liabilities and obligations of the Company, shall have been distributed to the Members in the manner provided for in this Agreement and (ii) the Certificate shall have been canceled in the manner required by the Act.

 

(e)                                  Return of Capital.  The liquidators of the Company shall not be personally liable for the return of capital contributions to the Company or any portion thereof to the

 

35

 

Members (it being understood that any such return shall be made solely from Company assets).

 

(f)                                   Hart Scott Rodino.  Notwithstanding any other provision in this Agreement, in the event the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), is applicable to any Member by reason of the fact that any assets of the Company will be distributed to such Member in connection with the winding up of the Company, the distribution of any assets of the Company shall not be consummated until such time as the applicable waiting periods (and extensions thereof) under the HSR Act have expired or otherwise been terminated with respect to each such Member.

 

Section 7.3  Transfer by Members.

 

(a)                                 Generally.  Except as otherwise provided in Section 7.3(b), no Person may, directly or indirectly, Transfer all or any portion of his Units or any Company Interest without the prior written consent of the Managing Member, which consent may be given or withheld in the Managing Member’s sole discretion.  Notwithstanding anything to the contrary in this Section 7.3, (i) each of the Members may exchange all or a portion of the Units owned by such Member in accordance with the Exchange Agreement or (ii) if the Managing Member and the exchanging Member shall mutually agree, Transfer such Units, together with a corresponding number of shares of Class B Common Stock, to the Managing Member for other consideration at any time.

 

(b)                                 Permitted Transferees.  Subject to Section 7.3(c), any Person shall have the right to transfer, at any time, all or any portion of the Units or Company Interests held by such Person to such Person’s Permitted Transferee so long as the Company is able to satisfy the 100-partner limitation under Treasury Regulation section 1.7704-1(h)(1)(ii) after such transfer, as determined by the Managing Member in its sole discretion exercised in good faith.  “Permitted Transferee” for these purposes shall be:

 

(i)                                     in the case of a Member that is an individual, (x) a Transferee for bona fide estate planning purposes, (y) any trust, partnership, limited liability company or other entity for the direct or indirect benefit of the Member and/or one or more members of his/her immediate family or (z) any immediate family member or other dependent of such Member;

 

(ii)                                  in the case of a Member that is a trust, (x) any individual that is a settlor or direct or indirect beneficiary of such trust and/or one or more members of the immediate family and/or other dependents of any such individual or (y) any trust, partnership or other entity for the direct or indirect benefit of any individual that is a settlor or direct or indirect beneficiary of such trust and/or one or more members of the immediate family and/or other dependents of any such individual;

 

36

 

(iii)                               in the case of a Member that is a partnership for U.S. federal income tax purposes, (x) its limited partners, members or stockholders (1) in a pro rata distribution or (2) in a distribution intended to permit such limited partner, member or stockholder to effect an exchange pursuant to the Exchange Agreement, or (y) any investment fund or other entity managed by the same entity that manages the Member (for so long as the Transferee and Transferor continue to be managed by the same entity); or

 

(iv)                              any Transferee with the prior written consent of the Managing Member (in each case, in its sole discretion).

 

(v)                                 For purposes of this Agreement, “immediate family” shall mean any relationship by blood, current or former marriage or adoption, not more remote than first cousin.

 

(c)                                  Conditions to Transfer.  In addition to the other requirements set forth in Section 7.3(a), unless waived by the Managing Member, no Transfer of all or any portion of Units or any Company Interest shall be made unless the following conditions are met:

 

(i)                                     The Transfer will not violate registration requirements under any federal or state securities laws;

 

(ii)                                  The Transfer is not made to any Person who lacks the legal right, power or capacity to own such Unit or other Company Interest;

 

(iii)                               The Transfer will not cause the Company to be treated as a “publicly traded partnership” within the meaning of section 7704 of the Code and the regulations promulgated thereunder;

 

(iv)                              The Transfer will not cause any portion of the assets of the Company to become “plan assets” of any “benefit plan investor” within the meaning of regulations issued by the U.S. Department of Labor at Section 2510.3-101 of Part 2510 of Chapter XXV, Title 29 of the Code of Federal Regulations as modified by Section 3(42) of the Employee Retirement Income Security Act of 1974, as amended from time to time;

 

(v)                                 The Transfer will not result in the Company being subject to the Investment Company Act of 1940, as amended;

 

(vi)                              The Transfer is not made prior to the expiration of the lock-ups imposed by the Underwriters, except as described in the Exchange Agreement or in the case of Transfers by Holdings to one or more of its Subsidiaries;

 

37

 

(vii)                           The Transferor also Transfers to the same Transferee a number of shares of Class B Common Stock equal to the number of Units Transferred to such Person; and

 

(viii)                        The Transferee shall have executed and delivered to the Managing Member such legal and/or tax opinions and written instruments (including copies of any instruments of Transfer and such Assignee’s consent to be bound by this Agreement as an Assignee) that are in a form satisfactory to the Managing Member, as determined in the Managing Member’s sole discretion.

 

For the avoidance of doubt, the restrictions on Transfer contained in this Section 7.3 shall not apply to the Transfer of any capital stock of the Managing Member; provided that no shares of Class B Common Stock may be Transferred unless a corresponding number of Units are Transferred therewith in accordance with this Agreement.

 

In addition, notwithstanding any contrary provision in this Agreement, to the extent the Managing Member shall determine that there is a material risk the Company (and interests in the Company) do not or will not meet the requirements of Treasury Regulation Section 1.7704-1(h), the Managing Member may impose such restrictions on the Transfer of Units or Company Interests as the Managing Member may determine to be necessary or advisable to avoid any material risk that the Company could be treated as a publicly traded partnership under section 7704 of the Code.

 

Any Transfer in violation of this Section 7.3 shall be null and void ab initio and of no effect, to the fullest extent permitted by law.  For purposes of this Section 7.3 only, the term “Transfer” includes any Pledge.  For the avoidance of doubt and notwithstanding anything to the contrary, any “disguised sale” described in Section 8.4(g) hereof shall be permitted hereunder.

 

(d)                                 Effect of Transfer in Violation of Agreement.  Each Member hereby acknowledges the reasonableness of the prohibition contained in this Section 7.3 in view of the purposes of the Company and the relationship of the Members.  Any purported Transfer in violation of this Agreement shall be null and void and ineffective to Transfer any Units or other interests in the Company and shall not be binding upon or be recognized by the Company, and any such purported Transferee shall not be treated as or deemed to be a Member for any purpose.  In the event that any Member shall at any time transfer Units in violation of any of the provisions of this Agreement, in addition to any other rights and remedies that the Company may be entitled to, at law or in equity, the Company shall have the right to obtain and be entitled to, an order restraining or enjoining such Transfer, it being expressly acknowledged and agreed that damages at law would be an inadequate remedy for a Transfer in violation of this Agreement.

 

38

 

(e)                                  Indirect Transfers.  The parties each acknowledge and agree that each Member (other than the Managing Member) shall not, for so long as it holds Units, without the prior written consent of the Managing Member, directly or indirectly (x) issue new equity of itself or equity-like rights, options, warrants or other rights to acquire equity or equity-like rights or any economic rights (including debt) of itself to any Person except to its initial owners or its Permitted Transferees or Permitted Transferees of its initial owners or (y) permit any Transfer of the limited liability company and/or economic interests in itself and/or equity interests or economic rights (including debt) of itself other than to its Permitted Transferees or as permitted by Section 7.3, provided, that the Continuing LLC Owner may from time to time issue new equity or equity-like rights or other economic rights (including Incentive Units) to employees, consultants, directors and officers of the Company and its Subsidiaries pursuant to the terms of the Continuing LLC Owner’s operating agreement or the LBM Acquisition, LLC Incentive Unit Appreciation Plan; each such employee, consultant, director or officer shall be deemed to be a Permitted Transferee of the Continuing LLC Owner for purposes of this Section 7.3(e).

 

Section 7.4  Admission or Substitution of New Members.

 

(a)                                 Admission.  Without the consent of any other Person, the Managing Member shall have the right to admit as a Substituted Member or an Additional Member, any Person who acquires a Company Interest, or any part thereof, from a Member or from the Company.  Concurrently with the admission of a Substituted Member or an Additional Member after the date hereof, the Managing Member shall forthwith (i) amend the Schedule of Members to reflect the name and address of such Substituted Member or Additional Member and to eliminate or modify, as applicable, the name and address of the Transferring Member with regard to the Transferred Units and (ii) cause any necessary papers to be filed and recorded and notice to be given wherever and to the extent required showing the substitution of a Transferee as a Substituted Member in place of the Transferring Member, or the admission of an Additional Member, in each case, at the expense, including payment of any professional and filing fees incurred, of such Transferor.  In addition, to the fullest extent permitted by law, the Transferring Member hereby indemnifies the Managing Member and the Company against any losses, claims, damages or liabilities to which the Managing Member, the Company, or any of their Affiliates may become subject arising out of or based upon any false representation or warranty made by, or breach or failure to comply with any covenant or agreement of, such Transferring Member or such Substituted Member in connection with such Transfer.

 

(b)                                 Conditions and Limitations.  The admission of any Person as a Substituted Member or an Additional Member shall be conditioned upon (i) such Person’s written acceptance and adoption of all the terms and provisions of this Agreement, either by (A) execution and delivery of a counterpart signature page to this Agreement countersigned by the Managing Member on behalf of the Company or (B) any other writing evidencing

 

39

 

the intent of such Person to become a Substituted Member or an Additional Member and such writing is accepted by the Managing Member on behalf of the Company.

 

(c)                                  Effect of Transfer to Substituted Member.  Following the Transfer of any Unit or Company Interest that is permitted under Section 7.3, the Transferee of such Unit or other Company Interest shall be treated as having made all of the capital contributions in respect of, as having been allocated all the items of income and loss allocated in respect of, and received all of the distributions received in respect of, such Unit or other Company Interest, shall succeed to the Capital Account balance associated with such Unit or other Company Interest, shall receive allocations and distributions under ARTICLE IV, ARTICLE V and Section 7.2 in respect of such Unit or other Company Interest and otherwise shall become a Substituted Member entitled to all the rights of a Member with respect to such Unit or other Company Interest.

 

Section 7.5  Additional Requirements.  Notwithstanding any contrary provision in this Agreement, for the avoidance of doubt, the Managing Member may impose such vesting requirements, forfeiture provisions, Transfer restrictions, minimum retained ownership requirements or other similar provisions with respect to any interests in the Company that are outstanding as of the date of this Agreement or are created hereafter, with the written consent of the holder of such Company Interests.  Such requirements, provisions and restrictions need not be uniform among holders of interests in the Company and may be waived or released by the Managing Member in its sole discretion with respect to all or a portion of the Company Interests owned by any one or more Members or Assignees at any time and from time to time, and such actions or omissions by the Managing Member shall not constitute the breach of this Agreement or of any duty hereunder or otherwise existing at law, in equity or otherwise.

 

Section 7.6  Bankruptcy.  Notwithstanding any other provision of this Agreement, the Bankruptcy of a Member shall not cause such Member to cease to be a member of the Company and upon the occurrence of such an event, the Company shall continue without dissolution.

 

ARTICLE VIII
 BOOKS AND RECORDS; FINANCIAL STATEMENTS AND OTHER INFORMATION; TAX MATTERS

 

Section 8.1  Books and Records.  The Company shall keep at its principal executive office (i) correct and complete books and records of account, (ii) minutes of the proceedings of meetings of the Members, (iii) a current list of the directors and officers of the Company and its Subsidiaries and their respective residence addresses, and (iv) a record containing the names and addresses of all Members, the total number of Units held by each Member, and the dates when they respectively became the owners of record thereof.  Any of the foregoing books, minutes or records may be in written form or in any other form capable of being converted into written form within a reasonable time.  Except

 

40

 

as expressly set forth in this Agreement, notwithstanding the rights set forth in Section 18-305 of the Act, to the fullest extent permitted by law, no Member shall have the right to obtain information from the Company.

 

Section 8.2  Information.

 

(a)                                 All determinations, valuations and other matters of judgment required to be made for ordinary course accounting purposes under this Agreement shall be made by the Managing Member and shall be conclusive and binding on all Members, their Successors in Interest and any other Person who is a party to or otherwise bound by this Agreement, and to the fullest extent permitted by law or as otherwise provided in this Agreement, no such Person shall have the right to an accounting or an appraisal of the assets of the Company or any successor thereto.

 

Section 8.3  Fiscal Year.  The Company’s fiscal year shall be the calendar year, except as determined by the Managing Member in its sole discretion or required under section 706 of the Code.

 

Section 8.4  Certain Tax Matters.

 

(a)                                 Preparation of Returns.  The Managing Member shall use commercially reasonable efforts to cause to be prepared all federal, state and local (and if required, non-U.S.) tax returns of the Company for each year for which such returns are required to be filed and shall use commercially reasonable efforts to cause such returns to be timely filed.  The Managing Member shall determine the appropriate treatment of each item of income, gain, loss, deduction and credit of the Company and the accounting methods and conventions under the tax laws of the United States of America, the several states and other relevant jurisdictions as to the treatment of any such item or any other method or procedure related to the preparation of such tax returns.  Except as specifically provided otherwise in this Agreement, the Managing Member may cause the Company to make or refrain from making any and all elections permitted by such tax laws.  The Managing Member shall (x) provide to each Member (i) for any calendar quarter, with an estimate of the taxable income or loss, effectively connected income (“ECI”) and unrelated business taxable income (“UBTI”) for such calendar quarter that such Member (or its beneficial owners) will be required to include in its taxable income, which estimate shall be provided at least 20 days prior to the date the such Member is required to file estimated tax returns, (ii) by October 15 of each taxable year, with an estimate of the taxable income or loss, ECI and UBTI of such Member to be reflected on the Internal Revenue Service and any applicable state or local Schedule K-1 of such Member for such taxable year and (iii) by January 15 of each taxable year, with an updated estimate of the taxable income or loss, ECI and UBTI to be reflected on the Internal Revenue Service and any applicable state or local Schedule K-1 of such Member for the prior taxable year, and (y) use commercially reasonable efforts to provide to all Members (A) by April 15 of each taxable year, an Internal Revenue Service Schedule K-1 for the prior taxable year

 

41

 

and (B) by May 15 of each taxable year, any applicable state or local Schedule K-1 equivalent for the prior taxable year.  Upon the written request of any Member, the Company shall provide any additional information reasonably necessary for the preparation of any federal, state, local and foreign income, franchise or other tax returns which may need to be filed by any Member.

 

(b)                                 Consistent Treatment.  Each Member agrees that it shall not, except as otherwise required by applicable law or regulatory requirement (i) treat, on its tax returns, any item of income, gain, loss, deduction or credit relating to its interest in the Company in a manner inconsistent with the treatment of such item by the Company as reflected on the Form K-1 or other information statement furnished by the Company to such Member for use in preparing its tax returns or (ii) file any claim for refund relating to any such item based on, or which would result in, such inconsistent treatment.  Except as otherwise required by applicable law, each Member that determines it is required by applicable law or regulatory requirement to take any of the actions described in clause (i) or (ii) of the preceding sentence shall provide thirty (30) day’s advance written notice to the Managing Member.

 

(c)                                  Duties of the Tax Matters Member.  The Company and each Member hereby designate the Managing Member (or such other Person as the Managing Member may designate) as the partnership representative of the Company for each taxable year of the Company, in accordance with section 6223 of the Code and any analogous provisions of state law, and, in each case, in such capacity is referred to as the “Tax Matters Member”.  The Tax Matters Member, on behalf of the Company and its Members, shall (subject to the terms of the Reorganization Agreement, the Exchange Agreement, and the Tax Receivable Agreements) be permitted to make any filing, election, settlement or determination under the Code, the Treasury Regulations, or any other law or regulation permitted by the Code, Treasury Regulations, law or regulation.  Any actions of the Tax Matters Member shall be final and binding upon the Company and all Members.  All expenses incurred by the Tax Matters Member in connection therewith (including attorneys’, accountants’ and other experts’ fees and disbursements) shall be expenses of, and payable by, the Company.  No Member shall have the right, without the consent of the Tax Matters Member (but subject to the terms of the Reorganization Agreement, the Exchange Agreement, and the Tax Receivable Agreements), to (1) participate in the audit of any Company tax return, (2) file any amended return or claim for refund in connection with any item of income, gain, loss, deduction or credit reflected on any tax return of the Company, (3) participate in any administrative or judicial proceedings conducted by the Company or the Tax Matters Member arising out of or in connection with any such audit, amended return, claim for refund or denial of such claim, or (4) appeal, challenge or otherwise protest any adverse findings in any such audit conducted by the Company or the Tax Matters Member or with respect to any such amended return or claim for refund filed by the Company or the Tax Matters Member or in any such administrative or judicial proceedings conducted by the Company or the Tax Matters Member.

 

42

 

(d)                                 Certain Filings.  Upon the Transfer of an interest in the Company (within the meaning of the Code), a sale of Company assets or a liquidation of the Company, the Members shall provide the Managing Member with information and shall make tax filings as reasonably requested by the Managing Member and required under applicable law.

 

(e)                                  FATCA.  Notwithstanding anything in this Agreement to the contrary, the Managing Member may take such actions as it determines necessary or appropriate (including causing a Member to withdraw from the Company under such terms and conditions established by the Managing Member) to comply with FATCA.  “FATCA” means (i) sections 1471 through 1474 of the Code or any successor provision that is substantively the equivalent thereof (and, in each case, any Treasury Regulations promulgated thereunder or official interpretations thereof), (ii) any similar legislation, regulations or guidance enacted in any jurisdiction that seeks to implement similar tax reporting and/or withholding tax regimes, and (iii) any treaty, agreement with any governmental authority or intergovernmental agreement related to any of the foregoing.  Each Member shall indemnify and hold harmless the Managing Member and the Company for any costs and expenses arising out of its failure to provide information, documentation, waivers or certifications requested by the Managing Member to satisfy any requirement imposed under FATCA.

 

ARTICLE IX
 MISCELLANEOUS

 

Section 9.1  Schedules.  The Managing Member may from time to time execute and deliver to the Members schedules which set forth information contained in the books and records of the Company and any other matters deemed appropriate by the Managing Member.  Such schedules shall be for information purposes only and shall not be deemed to be part of this Agreement for any purpose whatsoever.

 

Section 9.2  Governing Law.  This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice or conflict of laws provision or rule that would cause the application of the laws of any other jurisdiction. The parties hereto hereby declare that it is their intention that this Agreement shall be regarded as made under the laws of the State of Delaware and that the laws of said State shall be applied in interpreting its provisions in all cases where legal interpretation shall be required.

 

Section 9.3  Consent to Jurisdiction.

 

(a)                                 The parties irrevocably consent to the exclusive jurisdiction of the courts of the State of Delaware and of the federal courts sitting in the state of Delaware in connection with any action relating to this Agreement and each party agrees (i) to the extent such party is not otherwise subject to service of process in the State of Delaware,

 

43

 

to appoint and maintain an agent in the State of Delaware as such party’s agent for acceptance of legal process, and (ii) that, to the fullest extent permitted by applicable law, service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service, and that service made pursuant to (i) or (ii) above shall, to the fullest extent permitted by applicable law, have the same legal force and effect as if served upon such party personally within the State of Delaware. To the extent not prohibited by applicable law, each party hereto waives and agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding brought in the above-named courts, any claim that such party is not subject personally to the jurisdiction of such courts, that such party’s property is exempt or immune from attachment or execution, that such proceeding is brought in an inconvenient forum, that the venue of such proceeding is improper, or that this Agreement or the subject matter thereof, may not be enforced in or by such courts.

 

(b)                                 TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE), INQUIRY, PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE OTHER PARTIES HERETO THAT THIS SECTION 9.3(b) CONSTITUTES A MATERIAL INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 9.3(b) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

Section 9.4  Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective Successors in Interest; provided that no Person claiming by, through or under a Member (whether as such Member’s Successor in Interest or otherwise), as distinct from such Member itself, shall have any rights as, or in respect to, a Member (including the right to approve or vote on any matter or to notice thereof).

 

Section 9.5  Amendments and Waivers.  This Agreement may be amended, supplemented, waived or modified by the written consent of the Managing Member in its sole discretion without the approval of any other Member or other Person; provided that

 

44

 

except as otherwise provided herein (including in Section 3.2(a)), no amendment may materially and adversely affect the rights of a holder of Units, as such, other than on a pro rata basis with other holders of Units of the same class without the consent of such holder (or, if there is more than one such holder that is so affected, without the consent of a majority of such affected holders in accordance with their holdings of Units), provided further, however, that notwithstanding the foregoing, the Managing Member may, without the written consent of any other Member or any other Person, amend, supplement, waive or modify any provision of this Agreement and execute, swear to, acknowledge, deliver, file and record whatever documents may be required in connection therewith, to reflect:  (1) any amendment, supplement, waiver or modification that the Managing Member determines to be necessary or appropriate in connection with the creation, authorization or issuance of any class of Units or other Equity Securities in the Company or other Company securities in accordance with this Agreement; (2) the admission, substitution, withdrawal or removal of Members in accordance with this Agreement; (3) a change in the name of the Company, the location of the principal place of business of the Company, the registered agent of the Company or the registered office of the Company; (4) any amendment, supplement, waiver or modification that the Managing Member determines in its sole discretion to be necessary or appropriate to address changes in Treasury Regulations, legislation or interpretation; or (5) a change in the Fiscal Year of the Company and any other changes that the Managing Member determines to be necessary or appropriate as a result of a change in the Fiscal Year of the Company, including a change in the dates on which distributions are to be made by the Company; provided further, that the books and records of the Company shall be deemed amended from time to time to reflect the admission of a new Member, the withdrawal or resignation of a Member, the adjustment of the Units or other Company Interests resulting from any issuance, Transfer or other disposition of Units or other Company Interests, in each case that is made in accordance with the provisions hereof.  If an amendment has been approved in accordance with this agreement, such amendment shall be adopted and effective with respect to all Members.  Upon obtaining such approvals as may be required by this Agreement, and without further action or execution on the part of any other Member or other Person, any amendment to this Agreement may be implemented and reflected in a writing executed solely by the Managing Member and the other Members shall be deemed a party to and bound by such amendment.

 

Notwithstanding the foregoing, in addition to any other consent that may be required, any amendment of this Agreement that requires a holder of Common Units on the date hereof to make a capital contribution to the Company (including as a condition to maintaining any rights necessary to permit such holders to exercise their rights under the Exchange Agreement) shall require the consent of such holder of Common Units.

 

No failure or delay by any party in exercising any right, power or privilege hereunder (other than a failure or delay beyond a period of time specified herein) shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any

 

45

 

other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.

 

Section 9.6  Notices.  Whenever notice is required or permitted by this Agreement to be given, such notice shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by courier service, by fax (delivery receipt requested), by electronic mail or by registered or certified mail (postage prepaid, return receipt requested) to any Member at such Member’s address, e-mail address or facsimile number shown in the Company’s books and records, or, if given to the Company, at the following address:

 

LBM Midco, LLC
 1000 Corporate Grove Drive
 Buffalo Grove, Illinois  60089
 Fax: 877-787-5269

E-mail: michelle.pollock@uslbm.com

Attention: Michelle Pollock, Esq.

 

with a copy (which shall not constitute notice to the Company) to:

 

Debevoise & Plimpton
 919 Third Avenue
 New York, NY 10022
 E-mail:        mjhayes@debevoise.com

Fax: 212 521 7483

Attention: Morgan J. Hayes, Esq.

 

Each proper notice shall be effective upon any of the following: (a) personal delivery to the recipient, (b) when sent by facsimile to the recipient (with confirmation of receipt), (c) one Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid) or (d) three Business Days after being deposited in the mail (first class or airmail postage prepaid).

 

Section 9.7  Counterparts.  This Agreement may be executed simultaneously in two or more separate counterparts, any one of which need not contain the signatures of more than one party, but each of which shall be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto.

 

Section 9.8  Power of Attorney.  Each Member hereby irrevocably appoints the Managing Member as such Member’s true and lawful representative and attorney in fact, each acting alone, in such Member’s name, place and stead, (a) to make, execute, sign and file all instruments, documents and certificates which, from time to time, may be required to set forth any amendment to this Agreement or which may be required by this

 

46

 

Agreement or by the laws of the United States of America, the State of Delaware or any other state in which the Company shall determine to do business, or any political subdivision or agency thereof and (b) to execute, implement and continue the valid and subsisting existence of the Company or to qualify and continue the Company as a foreign limited liability company in all jurisdictions in which the Company may conduct business.  Such power of attorney is coupled with an interest, irrevocable and shall survive and continue in full force and effect notwithstanding the subsequent withdrawal from the Company of any Member for any reason and shall survive and shall not be affected by the disability, incapacity, bankruptcy or dissolution of such Member.  No power of attorney granted in this Agreement shall revoke any previously granted power of attorney.

 

Section 9.9  Entire Agreement.  Immediately prior to the IPO, the Managing Member shall enter into the Tax Receivable Agreements.  This Agreement, the Tax Receivable Agreements, the Exchange Agreement and the other documents and agreements referred to herein or entered into concurrently herewith embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein; provided that such other agreements and documents shall not be deemed to be a part of, a modification of or an amendment to this Agreement.  There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein.

 

Section 9.10  Remedies.  Each Member shall have all rights and remedies set forth in this Agreement and all rights and remedies that such Person has been granted at any time under any other agreement or contract and all of the rights that such Person has under any applicable law.  Any Person having any rights under any provision of this Agreement or any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a bond or other security) to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by applicable law.

 

Section 9.11  Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

Section 9.12  Creditors.  None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or any of its Affiliates, and no creditor who makes a loan to the Company or any of its Affiliates may have or acquire (except pursuant to the terms of a separate agreement executed by the Company in favor of such creditor) at any time as a result of making the loan any direct or indirect interest

 

47

 

in Company profits, losses, distributions, capital or property other than as a secured creditor.

 

Section 9.13  Waiver.  No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

 

Section 9.14  Further Action.  The parties agree to execute and deliver all documents, provide all information and take or refrain from taking such actions as may be necessary or appropriate to achieve the purposes of this Agreement.

 

Section 9.15  Delivery by Facsimile or Email.  This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or email with scan or facsimile attachment, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.  At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re execute original forms thereof and deliver them to all other parties.  No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or email to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or email as a defense to the formation or enforceability of a contract, and each such party forever waives any such defense.

 

[Signature Pages Follow]

 

48

 

IN WITNESS WHEREOF, the parties have executed this Amended and Restated Limited Liability Company Agreement as of the date first set forth above.

 

 

	
 
    	
MANAGING   MEMBER
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
US   LBM HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to LBM Midco, LLC — Amended and Restated Limited Liability Company Agreement]

 

 

	
MEMBER:
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
LBM ACQUISITION, LLC
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to LBM Midco, LLC — Amended and Restated Limited Liability Company Agreement]

 

 

Exhibit A

 

SCHEDULE OF MEMBERS

 

	
Member
    	
 
    	
Common Units
    	
 
    	
Percentage
   Interest
    	
 
    	
Address
    
	
US LBM Holdings, Inc.
    	
 
    	
 
    	
 
    	
 
    	
 
    	
US LBM Holdings, Inc.
   1000 Corporate Grove Drive
   Buffalo Grove, Illinois 60089
    
	
LBM Acquisition, LLC
    	
 
    	
 
    	
 
    	
 
    	
 
    	
c/o Kelso & Company
   320 Park Avenue, 24th Floor
   New York, New York 10022

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00281-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00281-of-00352.parquet"}]]