Exhibit 10.5
OPERATING AGREEMENT
of
AGRILIANCE LLC
THIS OPERATING AGREEMENT (this "Agreement") is made and entered into
as of this 4th day of January 2000, by and among UNITED COUNTRY BRANDS, LLC
("UCB"), a Delaware limited liability company, CENEX HARVEST STATES COOPERATIVES
("CHS"), a cooperative corporation organized under the laws of Minnesota,
FARMLAND INDUSTRIES, INC. ("FII"), a cooperative corporation organized under the
laws of Kansas, and LAND O' LAKES, INC. ("LOL"), a cooperative corporation
organized under the laws of Minnesota.
PREMISES
WHEREAS, UCB, FII and CHS and LOL have caused Agriliance LLC (the
"Company") to be formed as a limited liability company under the Delaware
Limited Liability Company Act and do hereby adopt this Operating Agreement as
the limited liability company agreement of the Company within the meaning of
Section 18-101(7) of the Act.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements contained herein, the parties hereto agree as follows:
ARTICLE I ORGANIZATION
1.1 Principal Office. The principal office of the Company shall
be located at such place as the Managers, as hereinafter defined, may
determine from time to time.
1.2 Registered Office and Registered Agent. The location of the
registered office and the name of the registered agent of the Company in the
State of Delaware shall be as stated in the Certificate of Formation for the
Company (the "Certificate of Formation") or as shall be determined from time to
time by the Managers and on file in the appropriate public offices of the State
of Delaware pursuant to applicable provisions of law.
ARTICLE II DEFINITIONS
As used in this Agreement, capitalized terms shall have the meanings
set forth in the Articles, Sections or Subsections referred to in the
definitions appendix, attached hereto, and
"Agreement" means this Operating Agreement, as amended from time to
time.
"Agro Distribution" means Agro Distribution, LLC, a Delaware limited
liability company.
"Agro/Transition Expenses" means any expenses of any nature
whatsoever (including, without limitation, severance costs, "stay" bonuses,
relocation costs, costs of closure of facilities, and environmental expenses)
which relate to the assets or business of Agro Distribution and which are
associated with the formation and capitalization of the JV-CPS Business or
reorganization of its operations following its formation, or which are
transition expenses associated with the formation and capitalization of the
JV-CPS Business or reorganization of its operations following its formation).
"Crop Protection Business" means the business, conducted on a
wholesale basis only, of marketing, sale and distribution of crop protection
products (including micronutrients, surfactants, adjuvants and any other such
products sold by WilFarm prior to the Company's formation, if such products are
sold by the Company in connection with the Crop Protection Business) and
services, the sale of the winter wheat seed inventories contributed by WilFarm
to the Company, the services to be rendered by the Company to LOL's seed
business as described in the Seed Agreement between LOL, Farmland and WilFarm
dated as of the January 4, 2000, all as carried on by the Company, and any other
services performed or offered by WilFarm prior to the formation of the Company.
"Members" means LOL, CHS, FII and UCB and the persons who are
hereafter admitted as members of the Company in accordance with this Agreement
until LOL, CHS, FII, UCB or any such persons shall cease to be members of the
Company pursuant to this Agreement.
"Non-Crop Protection Business" means all business carried on by
Agriliance LLC except the Crop Protection Business.
"Interest" means the entire ownership interest of a Member in the
Company at any particular time, including, without limitation, the right of such
Member to any and all benefits to which a Member may be entitled as provided in
this Agreement and under law, together with the obligations of such Member to
comply with all of the terms and provisions set forth in this Agreement and
under law.
ARTICLE III PURPOSE AND POWERS OF THE COMPANY
The Company shall engage in the business of owning, operating and
managing the assets and business of a wholesale agronomy company and in such
other businesses as the Members may from time to time determine in accordance
with the provisions of this Agreement. The Company shall have all powers and
rights of a Delaware limited liability company as provided in the Delaware
Limited Liability Company Act, as amended from time to time (the "Act").
ARTICLE IV TERM OF THE COMPANY
The term of the Company shall be perpetual.
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ARTICLE V COMPANY ACCOUNTING
5.1 Fiscal Year. The fiscal and taxable year of the Company
shall end on the last day of August of each year unless otherwise designated
by the Members.
5.2 Accounting Method. The Company books of account shall be
maintained and its income, gains, losses, deductions and credits shall be
reported, for financial and tax accounting purposes, on the accrual method of
accounting, applied consistently and in accordance with generally accepted
accounting principles. The Company shall construct and maintain its accounting
records and systems to account for, and shall report all aspects of the Crop
Protection Business (as defined above) and the Non-Crop Protection Business as
separate profit centers. The Company shall also construct and maintain its
accounting records and systems to account for the Agro/Transition Expenses and
shall report the Agro/Transition Expenses as part of the reporting for the Crop
Protection Business.
5.3 Books and Records.
5.3.1 Records. The Company shall keep at its principal office
or, if none has been established by the Managers, at its registered office, the
following:
(a) A current list of the full name and last known business or
mailing address of each Member and Manager, both past and present;
(b) A copy of the Certificate of Formation, and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which any amendment has been executed;
(c) Copies of the Company's federal, state, and local income
tax returns and reports, if any, for the three (3) most recent years;
(d) Copies of this Agreement and copies of any financial
statements of the Company for the three (3) most recent years;
(e) Minutes of all meetings of the Managers;
(f) Minutes of every annual and special meeting of the
Members; and
(g) Any written consents obtained from the Members or
Managers.
5.3.2 Access. Each Member (or such Member's designated
representative) shall have the right during ordinary business hours to inspect
and copy (at such Member's own expense) all books and records of the Company
(including all subsidiaries of the Company of which the Company owns a voting
interest in excess of 50%). WECO shall have the right during ordinary business
hours to inspect and copy on a reasonable basis (at WECO" own expense) all books
and records of the Company (including all subsidiaries of the Company of which
the Company owns a voting interest in excess of 50%), other than those relating
solely to the non-
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Crop Protection Business.
5.4 Reports. As soon as reasonably practicable after the end of each
month and fiscal year of the Company, the Company shall cause to be prepared and
delivered to each Member an income statement and balance sheet of the Company as
of the end of such month or fiscal year. The financial statements of the Company
for each fiscal year shall be compiled and audited by an independent public
accountant retained by the Company. As soon as reasonably practicable after the
end of each month and fiscal year of the Company, the Company shall cause to be
prepared and delivered to WECO an income statement and balance sheet of the Crop
Protection Business, as of the end of such month or fiscal year. Such income
statement and balance sheet for each fiscal year shall either be audited by a
nationally recognized accounting firm or shall be prepared using procedures
which have been agreed upon with such a firm and are disclosed as part of the
income statement and balance sheet for such fiscal year.
5.5 Tax Returns. The Company shall cause to be prepared and timely
filed all federal, state and local income tax returns or other returns or
statements required by applicable law. Copies of all tax returns shall be
furnished for review and approval by each Member at least fifteen (15) days
prior to the due date for filing and reasonable efforts shall be made to avoid
filing extensions.
5.6 Section 754 Election.
(a) In the event a distribution of Company assets occurs which
satisfies the provisions of Section 734 of the Code upon the decision of the
Managers, the Company may elect, pursuant to Section 754 of the Code, to adjust
the basis of the Company's property to the extent allowed by such Section 734
and shall cause such adjustments to be made and maintained.
(b) In the event a transfer of an interest occurs which satisfies
the provisions of Section 743 of the Code, upon the decision of the purchasing
party, the Company shall elect, pursuant to Section 754 of the Code, to adjust
the basis of the Company's property to the extent allowed by such Section 743
and shall cause such adjustments to be made and maintained.
5.7 Tax Matters Member. The Managers shall designate from time to
time a Member to serve as the "Tax Matters Member" of the Company under the
Code.
5.8 Bank Accounts. All funds of the Company shall be deposited in a
separate bank, money market or similar account(s) approved by the Managers and
in the Company's name. Withdrawals therefrom shall be made only by persons
authorized to do so by the Managers.
5.9 Xxxxxx-Xxxxx Right to Audit. Xxxxxx-Xxxxx Company, a California
corporation ("WECO"), shall have the right to audit all of the books and records
of the Crop Protection Business (including those relating to the Agro/Transition
Expenses) and the other business of the Company to the extent necessary to
confirm the net income, adjusted Net Income (Loss) and EBITDA of the Crop
Protection Business. Such audit shall be at the cost of WECO unless the audit
accurately discloses a variance in excess of a 5% deficiency to WECO, in which
case the reasonable cost of the audit shall be borne by the Company.
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ARTICLE VI MEMBERS MEETINGS
6.1 Meetings of Members, Place of Meetings. Meetings of the Members
may be held for any purpose or purposes, unless otherwise prohibited by statute
or by the Certificate of Formation. All meetings of the Members shall be held at
one of the headquarters facilities of the Company in Kansas City, Missouri or
Inver Grove Heights, Minnesota or at such other place as shall be designated
from time to time by the Managers and stated in the notice of the meeting or in
a duly executed waiver of the notice thereof.
6.2 Quorum. All Members shall constitute a quorum at all meetings of
Members for the transaction of any business, except as otherwise provided under
the Act, or in this Agreement.
6.3 Special Meetings. Special meetings of the Members may be
held for any purpose or purposes, unless otherwise prohibited by statute, and
may be called by any Manager or by any Member as provided in Section 6.5
below.
6.4 Action Without Meeting. Any action required or permitted to be
taken at any annual or special meeting of Members of the Company may be taken
without a meeting if the action is evidenced by one or more written consents
describing the action taken, signed by each Member entitled to vote.
6.5 Notice. Written notice stating the place, day and hour of the
meeting and, in the case of a special meeting, the purpose for which the meeting
is called, shall be delivered to each Member entitled to vote at such meeting
not less than ten (10) days nor more than fifty (50) days before the date of the
meeting, either personally or by mail, by or at the direction of any Manager or
person calling the meeting. Notice to Members, if mailed, shall be deemed
delivered as to any Member when deposited in the United States mail, addressed
to the Member at its usual place of business or last known address, with postage
prepaid.
6.6 Waiver of Notice. When any notice is required to be given to any
Member hereunder, a waiver thereof in writing signed by the person entitled to
such notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice. By attending a meeting, a Member (a)
waives objection to lack of notice or defect of notice of such meeting unless
the Member, at the beginning of the meeting, objects to the holding of the
meeting or the transacting of business at the meeting, and (b) waives objection
to consideration at such meeting of a particular matter not within the purpose
or purposes described in the notice of the meeting unless the Member objects to
considering the matter when it is presented.
ARTICLE VII MANAGEMENT AND CONTROL
7.1 Election of Managers. Except as provided below, UCB and LOL
shall each have the right to designate two (2) Managers for the Company (each a
"Manager" and collectively the "Managers"). Each Manager shall hold office until
such Manager's successor has been designated by the Members by whom such Manager
was designated or until such Manager's earlier death, resignation or removal.
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7.2 Vacancies. Any vacancies in the Manager positions designated and
elected by a Member shall be filled by the election and designation by such
Member of a replacement Manager.
7.3 Removal of Managers; Resignations. The Manager designated and
elected by a Member may be removed from such position at any time with or
without cause, by the Member that elected and designated such Manager. A Manager
may resign at any time upon giving thirty (30) days prior notice to all the
other Managers.
7.4 Powers of the Managers. The business and affairs of the Company
shall be managed by or under the direction of the Managers. In addition to the
powers and authority conferred upon them by this Agreement, the Certificate of
Formation and the Act, the Managers collectively may exercise all of the powers
of the Company and do all such lawful acts and things that are not by statute or
by the Certificate of Formation or by this Agreement directed or required to be
exercised or done by the Members. Notwithstanding the foregoing, the Managers,
by reason of their being managers, are not agents of the Company and do not have
any authority to take any actions or execute any instruments on behalf of
Company or otherwise act for or bind the Company.
7.5 Voting Requirement. Each Manager shall have one vote on all
matters to come before the Managers. Unless otherwise required by law or in
this Agreement, the unanimous vote of the Managers is necessary in order for
there to be a valid act or decision of the Managers
7.6 Election of Chairman and Executive Officer. The Managers at
their first meeting shall select a Chairman to preside at that meeting.
Thereafter, the Chair shall alternate between UCB and LOL from meeting to
meeting on a Manager-by-Manager basis, whether such meeting be a regular meeting
or special meeting of the Managers or a regular or special meeting of the
Members. The terms of such Managers as Chairman shall be from immediately after
a meeting through the completion of the next held meeting, and all matters to be
undertaken by the Chairman during such time period shall be the obligation of
the then acting Chair (the "Chairman"). The Chairman shall preside at meetings
of the Managers and the Members. The Managers may elect one or more executive
officers (the "Executive Officer"), who shall serve at the pleasure of the
Managers.
7.7 Powers of Executive Officer. The Executive Officer (if one is
elected) shall be responsible, subject to direction and control of the Managers,
for running the day-to-day business operations of the Company. Except as
otherwise provided herein, the Executive Officer (if one is elected) shall carry
into effect the Business Plan and all directions and resolutions of the
Managers, shall have authority to take any and all actions on behalf of the
Company and, except to the extent otherwise required by the Act, if authorized
by the Managers, may execute all bonds, notes, debentures, mortgages and other
instruments and agreements for and in the name of the Company. Notwithstanding
the foregoing, except as specifically authorized by the Business Plan or by
policy adopted unanimously by the Managers, the following actions may be taken
by the Chairman or the Executive Officer (if one is elected) on behalf of the
Company and only upon the approval or direction of a majority of the Managers:
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(a) The purchase, lease or other acquisition or the sale, lease or
other disposition of or the creation of any lien or encumbrance, upon (i) any
personal property with a cost or market value, whichever is greater (or
aggregate cost or market value in the case of related items or transactions) in
excess of $100,000 for dispositions and $250,000 for acquisitions, or (ii) any
real property;
(b) The creation of any obligation of the Company as a surety,
guarantor or accommodation party to any obligation;
(c) The confession of any judgment, the making of any assignment for
the benefit of creditors or the institution of any bankruptcy proceedings
against the Company, which for purposes of this Agreement shall mean the entry
of an order for relief under the United States Bankruptcy Code;
(d) Any act contrary to an earlier decision of the Managers; or
(e) Any decision which by any provision of this Agreement is
required to be made by the Members or the Managers.
7.8 Notice of Meetings; Waiver of Notice.
7.8.1 Regular Meeting. Regular meetings of the Managers may be
held without notice on a rotating basis from meeting to meeting at the
headquarters offices of the Members, at such times as fixed by resolution
adopted by all of the Managers or at such times and places either within or
without the States of Missouri or Minnesota as shall from time to time be fixed
by resolution adopted by all of the Managers. Any business may be transacted at
a regular meeting.
7.8.2 Special Meetings.
(a) Special meetings of the Managers may be called at
any time by any of the Managers. The place shall be at one of the Company's
headquarters facilities as set forth in the notice, unless all of the Managers
consent to another place.
(b) Written or printed notice of each special meeting
of the Managers, stating the place, day and hour of the meeting and purpose or
purposes thereof, shall be mailed to each Manager addressed to him at his
residence or usual place of business at least ten (10) days before the day on
which the meeting is to be held or shall be sent to him by telegram, facsimile
or delivered to him personally, at least eight (8) days before the day on which
the meeting is to be held. If mailed, such notice shall be deemed to be
delivered when it is deposited in the United States mail with postage thereon
addressed to the Manager at his residence or usual place of business. If given
by telegraph, such notice shall be deemed to be delivered when it is delivered
by the telegraph company. If given by facsimile, such notice shall be deemed to
have been delivered when confirmation of receipt of the facsimile is printed by
the sender's facsimile machine. The notice may be given by any person having
authority to call the meeting.
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7.8.3 Waiver of Notice. Whenever any notice is required to be
given hereunder, a written waiver thereof, signed by the person entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular meeting of the Managers need be specified in any written waiver of
notice, but the business to be transacted at, or the purpose of, any special
meeting of the Managers shall be specified in any written waiver of notice.
7.9 Meetings by Conference Telephone or Similar Communications
Equipment. The Managers may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant hereto shall constitute presence in person at such meeting.
7.10 Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Managers may be taken without a meeting if written
consent thereto is signed by all of the Managers and such written consent is
filed with the books and records of the Company.
7.11 Compensation. The Managers may, by resolution, fix the
compensation to be paid the Managers for serving as Managers of the Company and
may, by resolution, provide for reimbursement of expenses incurred by Managers
in attending such meetings. The Managers shall also fix the compensation to be
paid to the Executive Officer of the Company for acting in such capacity.
7.12 Conflicts of Interest. As to any matter before the Managers in
which a Member has a direct or indirect interest which is or may be material,
the nature of that interest shall be disclosed to the other Managers and
recorded in the minutes of the Managers' meeting or in a recital in an action by
unanimous written consent. The Company shall not engage in any transaction or
arrangement with a party affiliated with the Company or with any Member which is
not on arms' length terms which are at least as favorable to the Company as
similar terms obtainable from an unrelated party.
7.13 Liability of Managers. Except in the case where the Managers
are guilty of fraud, gross negligence, misconduct, reckless disregard of duty or
a criminal act which is a felony, the Managers shall not be liable to the
Company or any other Member for any loss, damage, liability or expense suffered
by the Company or any other Member on account of any action taken or omitted to
be taken by him as a Manager.
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7.14 Indemnification.
(a) Except as provided in Section 7.12 above, each Member and
Manager shall indemnify and hold the Company and its Members harmless from and
against any loss or damage incurred by it or them as a result of any agreement,
contract, instrument, obligation or act legally binding the Company that was
incurred or performed by such Member or Manager outside the scope of the
authority granted to such Member or Manager pursuant to this Agreement.
(b) To the fullest extent permitted by law, each Manager, Executive
Officer, officer and employee of the Company (individually, an "Indemnitee")
shall be indemnified, held harmless and defended by the Company from and against
any and all losses, claims, damages, liabilities, whether joint or several,
expenses (including legal fees and expenses), judgments, fines and other amounts
paid in settlement, incurred or suffered by such Indemnitee, as a party or
otherwise, in connection with any threatened, pending or completed claim,
demand, action, suit or proceeding, whether civil, criminal, administrative or
investigative, and whether formal or informal, arising out of or in connection
with the business or the operation of the Company and by reason of the
Indemnitee's status as a Manager, Executive Officer, officer or employee of the
Company regardless of whether the Indemnitee continues to be a Manager,
Executive Officer, officer or employee of the Company at the time any such loss,
claim, damage, liability or other expense is paid or incurred if (i) the
Indemnitee acted in good faith and in a manner he or she reasonably believed to
be in the best interests of the Company and, with respect to any criminal
proceeding, had no reasonable cause to believe that his or her conduct was
unlawful, (ii) the Indemnitee's conduct did not constitute intentional
misconduct or a material breach of the terms of this Agreement and (iii) the
Indemnitee's conduct did not involve a transaction from which the Manager,
Executive Officer, officer or employee of the Company derived an improper
personal benefit. The termination of any action, suit or proceeding by judgment,
order, settlement or upon a plea of nolo contendere, or its equivalent, shall
not, of itself, create a presumption that the Indemnitee acted in a manner
contrary to the standards specified in clauses (i), (ii) or (iii) of this
Section 7.13(b).
(c) To the fullest extent permitted by law, expenses incurred by an
Indemnitee in defending any claim, demand, action, suit or proceeding subject to
this Section 8.1 shall, from time to time, be advanced by the Company prior to
the final disposition of such claim, demand, action, suit or proceeding upon
receipt by the Company of an undertaking by or on behalf of the Indemnitee to
repay such amount unless it is determined that such Indemnitee is entitled to be
indemnified therefor pursuant to this Section 7.13.
(d) The indemnification provided by this Section 7.13 shall be in
addition to any other rights to which any Indemnitee may be entitled under any
other agreement, pursuant to any vote of the Managers, as a matter of law or
otherwise, and shall inure to the benefit of the heirs, legal representatives,
successors, assigns and administrators of the Indemnities.
(e) Any indemnification under this Section 7.13 shall be satisfied
solely out of the assets of the Company and no Indemnitee shall have any
recourse against any Member with respect to such indemnification.
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(f) An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.13 merely because the Indemnitee had an interest in
the transaction with respect to which the indemnification applies, if the
transaction was not otherwise prohibited by the terms of this Agreement and the
conduct of the Indemnitee satisfied the conditions set forth in Section 7.13(b).
(g) The Company may, but shall have no obligation to, purchase and
maintain insurance covering any potential liability of the Indemnitees for any
actions or omissions for which indemnification is permitted hereunder, including
such types of insurance (including extended coverage liability and casualty and
workers' compensation) as would be customary for any person engaged in a similar
business, and may name the Indemnitees as additional insured parties thereunder.
7.15 Indemnification Procedures: Survival.
(a) Promptly after receipt by an Indemnitee of notice of the
commencement of any action that may result in a claim for indemnification
pursuant to Section 7.13, the Indemnitee shall notify the Company in writing
within thirty (30) days thereafter; provided, however, that any omission so to
notify the Company will not relieve it of any liability for indemnification
hereunder as to the particular item for which indemnification may then be sought
(except to the extent that the failure to give notice shall have been materially
prejudicial to the Company) nor from any other liability that it may have to any
Indemnitee. The Company shall have the right to assume sole and exclusive
control of the defense of any claim for indemnification pursuant to Section 8.1,
including the choice and direction of any legal counsel.
(b) An Indemnitee shall have the right to employ separate counsel in
any action as to which indemnification may be sought under any provision of this
Agreement and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnitee unless (i) the
Company has agreed in writing to pay such fees and expenses, (ii) the Company
has failed to assume the defense thereof and employ counsel within a reasonable
period of time after being given the notice required above or (iii) the
Indemnitee shall have been advised by its counsel that representation of such
Indemnitee and other parties by the same counsel would be inappropriate under
applicable standards of professional conduct (whether or not such representation
by the same counsel has been proposed) due to actual or potential differing
interests between them. It is understood, however, that to the extent more than
one Indemnitee is entitled to employ separate counsel at the Company's expense
pursuant to clause (iii) above, the Company shall, in connection with any one
such action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of only one separate firm of
attorneys at any time for all such Indemnitees having actual or potential
differing interests with the Company, unless but only to the extent the
Indemnitees have actual or potential differing interests with each other.
(c) The Company shall not be liable for any settlement of any such
action effected without its written consent, but if settled with such written
consent, or if there is a final. judgment against the Indemnitee in any such
action, the Company agrees to indemnify and hold
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harmless the Indemnitee to the extent provided above from and against any loss,
claim, damage, liability or expense by reason of such settlement or judgment.
(d) The indemnification obligations set forth in Section 7.13 and
this Section 7.14 shall survive the termination of this Agreement.
7.16 Other Business Ventures.
(a) LOL, LOL/CHS, CHS, WilFarm and Farmland each agree not to
directly or indirectly engage in the wholesale marketing of fertilizer and
agricultural chemicals except through the Company in the territory of North
America during the time it, or an entity of which it is a material owner,
remains a member of the Company and for a period of four years thereafter.
(b) The Parties believe that the restrictive covenant contained in
this Section 7.15 is reasonable. However, if any court having jurisdiction shall
at any time hereafter hold this restriction to be unenforceable or unreasonable,
whether as to scope, territory or period of time specified herein, and if such
court shall declare or determine the scope, territory or period of time which it
deems to be reasonable, such scope, territory or period of time shall be deemed
to be reduced to that declared or determined by said court to be reasonable.
(c) Each Party recognizes that in the event of violation of the
terms of the above covenant, the other Parties will suffer irreparable damages
and that it will be difficult if not impossible to compute actual damages
sustained by such Parties as the result of such unauthorized competition.
Therefore, the Parties agree that each Party shall be entitled to apply to a
court of competent jurisdiction to enjoin any breach, threatened or actual, of
the covenants contained herein.
(d) Notwithstanding (a) and (b) above, the termination of any
noncompete covenant contained in the Joint Venture shall effectively terminate
any noncompete obligations under this Agreement.
ARTICLE VIII SPECIFIC VOTING REQUIREMENTS
8.1.
8.1.1 Preparation. At least sixty (60) days prior to the
beginning of each fiscal year for the Company, the management of the Company
shall prepare, approve and submit to the Managers a business plan for such
fiscal year which, subject to approval by the Members, may be amended from time
to time by the Managers (the "Business Plan"). Such Business Plan shall include
an annual budget for expenses, revenues, working capital reserves, and capital
expenditures; any additional capital contributions needed from Members for the
operation of the business; and method of setting the transfer price for products
purchased by the Company from any Member or Farmland Industries, Inc. or CF
Industries. Provided, the Business Plan shall not include any provision for
capital expenditures other than in the ordinary course of business, sales of
assets other than in the ordinary course of business, the incurrence of any
long-term indebtedness, or any other provision requiring special approval as
provided below.
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8.1.2 Adoption. The Business Plan, or amendments, as adopted
by the Managers, shall be adopted on behalf of the Company only if approved by a
unanimous vote of the Members.
8.1.3 Sale of Products. Unless approved by a unanimous vote of
the Members, products produced by or on behalf of the Company shall not be sold
or distributed by the Company to any person other than a Member, members and
patrons of Members and such other persons as are approved by the Members. No
Member shall be under any restrictions on the sale or distribution of any
product acquired or received from the Company.
8.1.4 Expansion. Any capital expenditures for the purpose of
expanding production of the Company or on behalf of the Company, for purchasing
additional production facilities, for purchasing additional inventory, or for
the purpose of changing the types of products to be produced by or on behalf of
Members shall require the unanimous approval of the Members.
8.1.5 Sale of Assets. The sale of assets of the Company other
than in the ordinary course of business shall require the unanimous approval of
the Members.
8.1.6 Liabilities. The Company shall not incur any
indebtedness, other than in the ordinary course of business, without the
unanimous approval of the Members.
8.1.7 Additional Capital Contributions. Any requirements
for Additional Capital Contributions, other than as included in a duly
approved Business Plan, shall require the unanimous approval of the Members.
8.1.8 Amendments. Amendments to the Certificate of
Formation or this Agreement shall require the unanimous approval of the
Members.
8.1.9 Admission of an Additional Member. The admission or
qualification of any additional Member other than the Members that are parties
to this Agreement shall require the unanimous approval of the Members.
8.1.10 Appointment, Replacement or Discharge of Executive
Officer. The appointment, replacement or the discharge of a Executive
Officer shall require the unanimous approval of the Members.
8.1.11 Distributions of Net Cash Flow. The distribution of
any amounts of Net Cash Flow, as described in and authorized under Paragraph
13.1, must be approved by all Members.
8.1.12 Income Tax or Accounting Elections. Income tax or
special accounting elections must be approved by all Members.
12
ARTICLE IX PERCENTAGE INTERESTS
In exchange for the capital contribution provided for in Article X,
the Members shall have the following percentage interests ("Percentage
Interest"):
UCB 50%
LOL 38.75%
Farmland 9.795%
CHS 1.455%
ARTICLE X CAPITAL CONTRIBUTIONS AND LOANS
10.1 Capital Contributions. Each Member shall make an aggregate
contribution to the capital of the Company of cash, perpetual beneficial use of
assets and goodwill ("Capital Contributions") as agreed by FII, CHS and LOL.
10.2 Additional Capital Contributions.
10.2.1 Time. If additional amounts are required from the
Members ("Additional Capital Contributions"), either pursuant to a duly adopted
Business Plan or as approved by the Members, the amount from each Member shall
be in proportion to the Interests held by each such Member. The due dates for
making the Additional Capital Contributions shall be specified in writing by the
Managers; provided, however, such due date shall be at least thirty (30) days
from the date notice was given to all Members unless waived by all Members.
10.2.2 Default. In the event a Member fails to make all or a
portion of a required Additional Capital Contribution on the due date (a
"Defaulting Member"), the amount due from such Defaulting Member shall bear
interest at the Default Interest Rate until paid by such Defaulting Member, or
until an amount equal to such Defaulting Member's Additional Capital
Contribution, together with such interest, has been withheld from distributions
from the Company otherwise due the Defaulting Member. If one or more of the
Members has advanced to the Company the amount due as an Additional Capital
Contribution by the Defaulting Member, such Member or Members shall receive the
amount advanced, together with interest at the Default Interest Rate per annum,
from the Defaulting Member and from first distributions (if any) from the
Company to such Defaulting Member. If no Member advances such amounts, any
interest paid by the Defaulting Member or from such distributions shall be paid
pro rata to all of those Members who made their respective Additional Capital
Contributions. For purposes of this Section, "Default Interest Rate" shall mean
a rate equal to the Interest Rate, as hereinafter defined, plus three percent
(3%).
10.2.3 Default Purchase Option. In the event a Defaulting
Member has not made its Additional Capital Contribution, plus interest thereon,
within the time periods set forth
13
below, those Members who advanced the amounts due from such Defaulting Member
(or, if no Member advanced such amounts, those Members who timely made their
respective Additional Capital Contributions) shall have the option to purchase
all or any portion of the Interest owned by the Defaulting Member, on the
following terms and conditions (the "Option"):
10.2.3.1 The purchase price for the proportionate Interest
owned by the Defaulting Member shall be equal to the Interest Value determined
as follows: Interest Value = (i) the initial capital contribution and the value
of any other contribution (which shall be established as of the time of such
contribution) and any prior Additional Capital Contributions by the Defaulting
Member with respect to such Interests, plus accrued but unpaid interest (if any)
thereon as provided in Subsection 14.1.1, divided by the total number of
Interests held by such Member, minus (ii) all prior cash distributions to such
Member with respect to such Interests pursuant to Section 14.1.2, plus (iii)
such Member's allocable share of any undistributed Net Cash Flow with respect to
such Interests.
10.2.3.2 At the option of the Member exercising the Option
("Purchasing Member"), the proportionate Interest Value will be based on the net
fair market value of the Company as a going concern (after payment of all
indebtedness of the Company and after payment of all distributions pursuant to
Subsections 14.1.1 and 14.1.2) as if the Company's assets had then been sold at
fair market value. To determine fair market value, the Members shall select a
mutually acceptable investment banker or qualified consultant to determine the
fair market value. If the Members cannot agree upon such person, the Company's
regular independent accountant shall select such person, but shall not select a
person theretofore objected to by one of the Members. The investment banker or
consultant shall determine the fair market value of the Company (without the
capital contributions at issue). The investment banker or consultant may engage
such professionals, including appraisers, as he deems necessary in order to make
such determination.
10.2.3.3 For purposes of the Option, the time periods during
which a Member shall make an Additional Capital Contribution or be subject to
the Option shall be as follows:
(a) Six (6) months from the date of notice by the Managers to all
Members with respect to Additional Capital Contributions which are included in a
duly approved Business Plan.
(b) One (1) year from the date of such notice with respect to any
other Additional Capital Contributions.
10.2.3.4 The Option may be exercised after the expiration of
the applicable time period set forth in Subsection 10.2.4 upon ten (10) days'
written notice to the Defaulting Member but will terminate if the Defaulting
Member has either made all required contributions or all required contributions
have been withheld from distributions due the Defaulting Member.
10.2.3.5 In the event more than one (1) Member exercises the
Option, the number of Interests to be purchased by each Member shall be in
proportion to the Interests owned by such Member to the Interests owned by all
Members exercising the Option.
14
10.2.3.6 The purchase price shall be paid as follows:
(a) A down payment equal to twenty percent (20%) of the purchase
price shall be paid upon closing, which shall be within ten (10) days of the
final determination of the Interest Value;
(b) The balance, together with interest at the Prime Rate, shall be
paid in four (4) equal annual installments of principal, plus accrued interest,
with the first such payment due one (1) year from the date of purchase. For
purposes of this Agreement, "Prime Rate" shall be the base lending rate as
published by The Wall Street Journal as the base rate on corporate loans at
large money center commercial banks, plus two percent (2%) computed on a daily
basis (the "Interest Rate"). Prepayment of all or any portion thereof shall be
permitted without penalty; and
(c) All payments shall be made to the Company which shall be paid or
credited, as applicable, to the Company or to the Members who have advanced such
sum on behalf of the Defaulting Member, as applicable, pursuant to Subsection
10.2.2, prior to any payment to the Defaulting Member.
10.3 Capital Withdrawal Rights, Interest and Priority. Prior to the
dissolution and termination of the Company, no Member shall be entitled to
withdraw or reduce such Member's Capital Account or to receive any distributions
from the Company, other than distributions as provided in Article XIV hereof.
Except as provided in Article XIV, no Member shall be entitled to receive or be
credited with any interest on the balance in such Member's Capital Account at
any time. No Member shall have any priority over any other Member as to the
return of the balance in such Member's Capital Account.
10.4 Loans. Any Member may make a loan to the Company in such
amounts, at such times and on such terms and conditions as may be approved by
the Managers. Loans by any Member to the Company shall not be considered as
contributions to the capital of the Company.
10.5 Limited Liability. Except as otherwise provided above, no
Member shall be liable for the debts, liabilities, contracts, or any other
obligations of the Company. Except as otherwise provided by applicable state law
or this Agreement, a Member shall be liable only to make its Capital
Contributions and shall not be required to lend any funds to the Company or,
after its Capital Contributions have been paid, to make any additional Capital
Contributions to the Company. No Member shall have any personal liability for
the repayment of any Capital Contributions of any other Member.
10.6 Debit Balance in Capital Account. A debit balance in a Member's
Capital Account, whether occasioned by distributions and withdrawals in excess
of such Member's share of Company profits or by charging such Member for such
Member's share of Company losses or by any other circumstance, shall not
constitute a liability of such Member to the Company or to the other Members,
except upon termination of the Company or liquidation of such Member's interest
in the Company, as hereinafter provided.
15
ARTICLE XI TRANSFERS OF INTERESTS
11.1 General.
11.1.1 Voluntary Sale or Transfer. No Member may sell,
transfer, assign, give, mortgage, alienate, pledge, hypothecate or otherwise
encumber or dispose of all or any part of such Member's Interest, voluntarily,
involuntarily or by operation of law, without the unanimous written consent of
all Members. Any purported encumbrance or disposition of any Interests in
violation of the terms of this Agreement shall be null and void and of no
effect.
11.1.2 Transfer by Legal Process. Upon any involuntary
Transfer of all or any portion of the Units of a Member pursuant to a levy of
execution, foreclosure of pledge, garnishment, attachment, divorce decree,
bankruptcy or other legal process (or by operation of law resulting from the
death, disability, liquidation, dissolution or winding up of a Member), such
Member shall cease to be a Member, but any successor in title to the transferred
Units shall have no right to become a Member or vote in any Company matters
unless admitted as a Member by written unanimous consent of the other Members.
If such successor does not become a Member, such successor shall be merely an
assignee within the meaning of Section 18-702(b) of the Act.
11.1.3 Assignment of Right to Distributions. Each Member shall
have the right to sell, transfer or assign, for cash, or cash and notes, by a
written instrument its right to receive distributions of cash or other property
from the Company; provided that any such assignment is not secured by the
Interests and further provided that such an assignee shall not be substituted as
a Substitute Member in place of any Member.
11.2 Resignation and Withdrawal of Member. No Member may resign or
withdraw from the Company without the unanimous written consent of the other
Members.
ARTICLE XII ALLOCATIONS OF PROFITS AND LOSSES
AND OTHER TAX AND ACCOUNTING PROVISIONS
12.1 Accounting Tax Definitions.
"Adjusted Capital Account Deficit" shall mean, with respect to
any Member, the deficit balance, if any, in such Member's Capital Account as of
the end of the relevant fiscal year, after giving effect to the following
adjustments: (a) increased for any amounts such Member is unconditionally
obligated to restore and the amount of such Member's share of Company Minimum
Gain and Member Minimum Gain after taking into account any changes during such
year; and (b) reduced by the items described in Treas. Reg. Section
1.704-1(b)(2)(ii)(d)(4), (5) and (6).
"Capital Accounts." A separate Capital Account shall be
maintained for each Member. Each Member's Capital Account shall be (a) increased
by (i) the amount of money
16
contributed by such Member, (ii) the fair market value of property contributed
by such Member (net of liabilities secured by such contributed property that the
Company is considered to assume or take subject to under Code Section 752),
(iii) allocations to such Member, pursuant to Article XII, of Company income and
gain (or items thereof), and (iv) to the extent not already netted out under
clause (b)(ii) below, the amount of any Company liabilities assumed by the
Member or which are secured by any property distributed to such Member; and (b)
decreased by (i) the amount of money distributed to such Member, (ii) the fair
market value of property distributed to such Member (net of liabilities secured
by such distributed property that such Member is considered to assume or take
subject to under Code Section 752), (iii) allocations to such Member, pursuant
to Article XII, of Company loss and deduction (or items thereof), and (iv) to
the extent not already netted out under clause (a)(ii) above, the amount of any
liabilities of the Member assumed by the Company or which are secured by any
property contributed by such Member to the Company.
In the event any interest in the Company is transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the transferred
interest.
The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Treas. Reg. Section 1.704-1(b) and Treas. Reg. Section 1.704-2, and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the Chairman determines that it is prudent to modify the manner in which
the Capital Accounts, or any increases or decreases thereto, are computed in
order to comply with such Regulations, the Chairman may cause such modification
to be made without the consent of the Members, provided that it is not likely to
have a material effect on the amounts distributable to any Member upon the
dissolution of the Company. The Chairman may make any appropriate modifications
to this Agreement's provisions without the consent of the Members in the event
unanticipated events might otherwise cause this Agreement not to comply with
Treas. Reg. Section 1.704-1(b) and Treas. Reg. Section 1.704-2.
"Capital Asset" shall have the meaning given such term in the
Code, as hereinafter defined.
"Capital Reserve" shall mean such amount as is determined in
the Business Plan to be established and maintained by the Company for use for
working capital, debt service, future investments and for such other purposes as
the Managers deem necessary or advisable.
"Capital Transaction Proceeds" means any and all proceeds from
(a) the sale or other disposition of a Capital Asset of the Company, or (b) the
refinancing of the Company, reduced by any expenses incurred by the Company in
connection with such
17
transaction and Company liabilities paid in connection with such transaction.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Company Minimum Gain" shall have the same meaning as
partnership minimum gain set forth in Treas. Reg. Section 1.704-2(d)(1).
"Credits" means all investment tax credits or other business
tax credits allowed by the Code with respect to activities of the Company or its
assets.
"Gross Asset Value" means, with respect to any asset, the
asset's adjusted basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a
Member to the Company shall be the gross fair market value of such asset, as
determined by the contributing Member and the Company;
(b) The Gross Asset Values of all Company assets shall be
adjusted to equal their respective gross fair market values, as determined by
the Managers, as of the following times: (i) the acquisition of an additional
interest in the Company by any new or existing Member in exchange for more than
a de minimis Capital Contribution; and (ii) the termination of the Company for
federal income tax purposes pursuant to Code Section 708(b)(1)(B); and
(c) If the Gross Asset Value of an asset has been determined or
adjusted pursuant to paragraph (b) above, such Gross Asset Value shall
thereafter be adjusted by the depreciation taken into account with respect to
such asset for purposes of computing Income and Losses.
"Income" and "Loss" means, respectively, for each fiscal year
or other period, an amount equal to the Company's taxable income or loss for
such year or period, determined in accordance with Code Section 703(a), except
that for this purpose (a) all items of income, gain, deduction or loss required
to be separately stated by Code Section 703(a)(1) shall be included in taxable
income or loss; (b) tax exempt income shall be added to taxable income or loss;
(c) any expenditures described in Code Section 705(a)(2)(B) (or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Treas. Reg. Section
1.704-1(b)(2)(iv)(i)) and not otherwise taken into account in computing taxable
income or loss shall be subtracted; (d) taxable income or loss shall be adjusted
to reflect any item of income or loss specifically allocated to a Member, (e)
rebates shall be allocated to an accounting period in a manner consistent with
the past practice of
18
WilFarm, and (f) income shall include any patronage dividends received by the
Company.
"Member Minimum Gain" shall have the same meaning as the
term "partner nonrecourse debt minimum gain" as set forth in Treas. Reg. Section
1.704-2(i)(3).
"Member Nonrecourse Debt" shall have the same meaning as
partner nonrecourse debt set forth in Treas. Reg. Section 1.704-2(b)(4).
"Member Nonrecourse Deductions" shall have the same meaning as
partner nonrecourse deductions set forth in Treas. Reg. Section 1.704-2(i)(2).
Generally, the amount of Member Nonrecourse Deductions with respect to a Member
Nonrecourse Debt for a fiscal year equals the net increase during the year in
the amount of the Member Minimum Gain (determined in accordance with Treas. Reg.
Section 1.704-2(i)) reduced (but not below zero) by the aggregate amount of any
distributions made during the fiscal year proceeds of Member Nonrecourse Debt
and are allocable to an increase in Member Minimum Gain determined in accordance
with Treas. Reg. Section 1.704-2(i).
"Net Cash Flow" of the Company shall be determined for each
Company fiscal year in accordance with sound, cash basis accounting principles,
and shall consist of (a) all cash receipts of the Company during such year, from
whatever source, whether or not taxable (excluding Capital Transaction Proceeds
and Capital Contributions by Members), plus (b) any cash that becomes available
during such year by reason of a reduction in the working Capital Reserve of the
Company referred to below, less (c) all cash expenditures as provided for in the
Business Plan for such fiscal year and cash losses of the Company during such
year, whether capital or current, tax deductible or nondeductible (excluding
only distributions to Members), and less (d) any additions during such year to
the Company's working Capital Reserve as approved by all Members.
"Nonrecourse Deduction" shall have the same meaning as
nonrecourse deductions set forth in Treas. Reg. Section 1.704-2(c). Generally,
the amount of Nonrecourse Deductions for a fiscal year equals the net increase,
if any, in the amount of Company Minimum Gain, determined according to the
provisions of Treas. Reg. Section 1.704-2(d), during such year reduced (but not
below zero) by the aggregate distributions made during the year of proceeds of a
Nonrecourse Liability that are allocable to the increased in Company Minimum
Gain, determined in accordance with Treas. Reg. Section 1.704-2(c) and (h).
"Nonrecourse Liability" means a Company liability with
respect to which no Member bears the economic risk of loss as determined
under Treas. Reg. Section 1.752-1(a)(2) and 1.752-2.
19
"Regulations" mean Treasury Regulations issued pursuant to the
Internal Revenue Code of 1986, as amended.
12.2 Allocation of Income and Losses. Except as provided in Sections
12.3 through 12.13 hereof, all income and loss for any fiscal year of the
Company shall be allocated to the Members in proportion to their Percentage
Interests:
12.3 Other Allocation Rules.
For purposes of determining the Income, Losses, or any other items
allocable to any period, Income, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by the Managers
using any permissible method under Code Section 706 and the Regulations
thereunder.
Except as otherwise provided in this Agreement, all items of Company
income, gain, loss, deduction, and any other allocations not otherwise provided
for shall be divided among the Members in the same proportions as they share
Income or, Losses, as the case may be, for the year.
The Members are aware of the income tax consequences of the
allocations made by this Article XII and hereby agree to be bound by the
provisions of this Article XII in reporting their shares of Company income and
loss for income tax purposes.
Notwithstanding the foregoing allocations, for a period of three (3)
years from the date hereof, all gains and losses from the sale of the assets
acquired from Terra Industries, Inc. or its affiliates pursuant to an Asset
Purchase Agreement dated May 3, 1999, by entities contributed by CHS to
Agriliance, which would otherwise be allocated to UCB or Farmland, shall be
allocated to CHS or, in the event CHS is not a Member, to UCB for the benefit of
CHS. Such allocations shall not be limited to the net income of the Company and,
notwithstanding anything herein to the contrary, may result in an adjusted
capital account deficit to the extent of such allocation
12.4 Minimum Gain Chargeback. Notwithstanding any other provision of
this Article XII, if there is a net decrease in Company Minimum Gain during a
Company taxable year, each Member shall be allocated items of income and gain
for such year (and, if necessary, for subsequent years) in that Member's share
of the net decrease in Company Minimum Gain during such year (hereinafter
referred to as the "Minimum Gain Chargeback Requirement"). A Member's share of
the net decrease in Company Minimum Gain is the amount of the total decrease
multiplied by the Member's percentage share of the Company Minimum Gain at the
end of the immediately preceding taxable year. A Member is not subject to the
Minimum Gain Chargeback Requirement to the extent: (1) the Member's share of the
net decrease in Company Minimum Gain is caused by a guarantee, refinancing or
other change in the debt instrument causing it to become partially or wholly
recourse debt or a Member Nonrecourse Debt, and the Member bears the economic
risk of loss for the newly guaranteed, refinanced or otherwise changed
liability; (2) the Member contributes capital to the Company that is used to
repay the Nonrecourse Debt and the Member's share of the net decrease in Company
Minimum Gain
20
results from the repayment; or (3) the Minimum Gain Chargeback Requirement would
cause a distortion and the Commissioner of the Internal Revenue Service waives
such requirement.
A Member's share of Company Minimum Gain shall be computed in
accordance with Treasury Regulation Section 1.704-2(g) and as of the end of any
Company taxable year shall equal: (1) the sum of the Nonrecourse Deductions
allocated to that Member up to that time and the distributions made to that
Member up to that time of proceeds of a Nonrecourse Debt allocable to an
increase of Company Minimum Gain, minus (2) the sum of that Member's aggregate
share of net decrease in Company Minimum Gain plus that Member's aggregate share
of decreases resulting from revaluations of Property subject to Nonrecourse
Debts. In addition, a Member's share of Company Minimum Gain shall be adjusted
for the conversion of recourse and Member Nonrecourse Debts into Nonrecourse
Debts in accordance with Treasury Regulation Section 1.704-2(g)(3). In computing
the above, amounts allocated or distributed to the Member's predecessor in
interest shall be taken into account.
12.5 Member Minimum Gain Chargeback. Notwithstanding any other
provision of this Article XII other than Section 12.5, if there is a net
decrease in Member Minimum Gain during a Company taxable year, each Member who
has a share of the Member Minimum Gain (determined under Treasury Regulation
Section 1.704-2(i)(5) as of the beginning of the year) shall be allocated items
of income and gain for such year (and, if necessary, for subsequent years) equal
to that Member's share of the net decrease in Member Minimum Gain. In accordance
with Treasury Regulation Section 1.704-2(i)(4), a Member is not subject to this
Member Minimum Gain Chargeback requirement to the extent the net decrease in
Member Minimum Gain arises because the liability ceases to be Member Nonrecourse
Debt due to a conversion, refinancing or other change in the debt instrument
that causes it to be partially or wholly a Nonrecourse Debt. The amount that
would otherwise be subject to the Member Minimum Gain Chargeback requirement is
added to the Member's share of Company Minimum Gain.
12.6 Qualified Income Offset. In the event any Member unexpectedly
receives an adjustment, allocation or distribution described in Treas. Reg.
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases such
Member's Adjusted Capital Account Deficit, items of Company income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate such Adjusted Capital Account Deficit as quickly as possible,
provided that an allocation under this Section 12.6 shall be made if and only to
the extent such Member would have an Adjusted Capital Account Deficit after all
other allocations under this Article XII have been made.
12.7 Nonrecourse Deductions. Nonrecourse Deductions for any
fiscal year or other period shall be allocated to the Members in proportion
to their respective Percentage Interest.
12.8 Member Nonrecourse Deductions. Any Member Nonrecourse
Deduction shall be allocated to the Member who bears the risk of loss with
respect to the loan to which such Member Nonrecourse Deductions are
attributable in accordance with Treas. Reg. Section 1.704-2(i).
12.9 Curative Allocations. Any special allocations of items of
income, gain,
21
deduction or loss pursuant to Sections 12.4, 12.5, 12.6, 12.7, 12.8 and 12.10
shall be taken into account in computing subsequent allocations of income and
gain pursuant to this Article XII, so that the net amount of any items so
allocated and all other items allocated to each Member pursuant to this Article
XII shall, to the extent possible, be equal to the net amount that would have
been allocated to each such Member pursuant to the provisions of this Article
XII if such adjustments, allocations or distributions had not occurred. No
allocations pursuant to Sections 12.4 and 12.5 shall be made prior to the
Company taxable year during which there is a net decrease in Company Minimum
Gain or Member Minimum Gain, respectively. In addition, allocations pursuant to
this Section 12.9 with respect to Nonrecourse Deductions in Section 12.7 and
Member Nonrecourse Deductions in Section 12.8 shall be deferred to the extent
the Members reasonably determine that such allocations are likely to be offset
by subsequent allocations of Company Minimum Gain or Member Minimum Gain,
respectively.
12.10 Loss Allocation Limitation. Notwithstanding the other
provisions of this Article XII, unless otherwise agreed to by the Managers, no
Member shall be allocated Loss in any taxable year which would cause or increase
an Adjusted Capital Account Deficit as of the end of such taxable year.
12.11 Share of Nonrecourse Liabilities. Solely for purposes of
determining a Member's proportionate share of the "excess nonrecourse
liabilities" of the Company within the meaning of Treas. Reg. Section
1.752-3(a)(3), each Member's interest in Company Income is equal to its
respective Applicable Percentage Interests.
12.12 Compliance with Regulation. The foregoing provisions are
intended to comply with Treas. Regs. Sections 1.704-1(b), 1.704-2 and
1.752-l through 1.752-5, and shall be interpreted and applied in a manner
consistent with such Regulations. In the event it is determined by the Managers
that it is prudent or advisable to amend this Agreement in order to comply with
such regulations, the Managers are empowered to amend or modify Sections 12.4
through 12.11 of this Agreement notwithstanding any other provision of this
Agreement.
12.13 Tax Allocations: Code Section 704(c). In accordance with Code
Section 704(c) and the Regulations thereunder, income, gain, loss, and deduction
with respect to any property contributed to the capital of the Company shall,
solely for tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the Company for
federal income tax purposes and its initial Gross Asset Value.
In the event the Gross Asset Value of any Company asset is
adjusted, subsequent allocations of income, gain, loss, and deduction with
respect to such asset shall take account of any variation between the adjusted
basis of such asset for federal income tax purposes and its Gross Asset Value in
the same manner as under Code Section 704(c) and the Regulations thereunder.
The Members hereby agree that any allocations described in
this Section 12 relating to tax allocations under Section 704(c) shall be
determined in accordance with the traditional method of making Section 704(c)
allocations with curative allocations as described in Regulation Section
1.704-3(c). Allocations pursuant to this Section 12.13 are solely for purposes
22
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 Income,
Losses, other items or distributions pursuant to any provisions of this
Agreement.
ARTICLE XIII DISTRIBUTIONS
13.1 Net Cash Flow. Net Cash Flow, if any, shall be distributed, at
such times as the Managers may determine, but not less frequently than monthly,
in the following order and, priority:
First, to those Members who have made Additional Capital
Contributions, after reduction for amounts distributed to such Member under
Subsection 14.2.1, a distribution equal to the Interest Rate per annum on such
Additional Capital Contribution. Such amount, if possible, shall be distributed
monthly. Any amounts distributable under this Subsection 13.1.1 shall be
cumulative.
Second, to those Members who have made Additional Capital
Contributions, after reduction for amounts distributed to such Member under
Subsection 13.2.2, an amount equal to such Additional Capital Contributions.
The balance, if any, to the Members in proportion to the Interests
owned by such Member.
13.2 Capital Transactions Proceeds. Capital transactions
proceeds shall be distributed, at such times as the Managers may determine,
in the following order and priority:
13.2.1 First, to the Members entitled to distributions under
Section 13.1.1, an amount equal to amounts distributable under Section 13.1.1
theretofore not distributed.
13.2.2 Second, to the Members who made Additional Capital
Contributions, an amount equal to the excess, if any, of (a) the Additional
Capital Contributions of Members, over (b) the sum of all prior distributions to
such Members pursuant to Section 13.1.2 hereof and this Section 13.2.2.
13.2.3 The balance, if any, to the Members in proportion to the
Percentage Interests of each Member.
13.3 Amounts Withheld. All amounts withheld pursuant to the Code or
any provision of any state or local tax law with respect to any payment or
distribution to the Members shall be treated as amounts distributed to the
Members for all purposes under this Agreement.
ARTICLE XIV DISSOLUTION AND TERMINATION
14.1 Events Causing Dissolution. The Company shall be dissolved
upon the unanimous written agreement of the Members to dissolve.
23
14.2 Effect of Dissolution. Except as otherwise provided in this
Agreement, upon the dissolution of the Company, the Managers shall take such
actions as may be required pursuant to the Act and shall proceed to wind up,
liquidate and terminate the business and affairs of the Company. In connection
with such winding up, the Managers shall have the authority to liquidate and
reduce to cash (to the extent necessary or appropriate) the assets of the
Company as promptly as is consistent with obtaining a fair market value
therefor, to apply and distribute the proceeds of such liquidation and any
remaining assets in accordance with the provisions of Section 15.3 below, and to
do any and all acts and things authorized by, and in accordance with, the Act
and other applicable laws for the purpose of winding up and liquidation.
14.3 Application of Proceeds. Upon dissolution and liquidation of
the Company, the assets of the Company, after providing for the payment of all
liabilities, shall be applied and distributed in the order of priority set forth
in Article XIII.
ARTICLE XV MISCELLANEOUS
15.1 Amendments. Except as otherwise provided herein, this Agreement
shall not be modified or amended in any manner other than by the unanimous
written agreement of the Members.
15.2 Title to Assets. Title to all other assets acquired by the
Company shall be held in the name of the Company. No Member shall individually
have any ownership interest or rights in any other assets of the Company, except
indirectly by virtue of such Member's ownership of an Interest. No Member shall
have any right to seek or obtain a partition of the real property or other
assets of the Company, nor shall any Member have the right to any specific
assets of the Company upon the liquidation of or any distribution from the
Company.
15.3 Nature of Interest in the Company. A Member's Interest
shall be personal property for all purposes.
15.4 Organizational Expenses. The Company shall pay all
organizational expenses incurred in connection with the creation and
formation of the Company. Such expenses may be paid directly by the Company
or may be reimbursed by the Company to the Members.
15.5 Office. Except for the Notices required by Articles VI and VII
which shall be governed by those Sections, all notices or other communications
required or permitted under this Agreement shall be in writing and shall be
delivered personally, telegraphed, telecopied. (facsimile) or telexed or sent by
registered, certified or express mail, postage prepaid as hereinafter provided.
Any such notice or other communication, if mailed by prepaid first class mail at
any time other than during a general discontinuance of postal service due to
strike, lockout or otherwise, shall be deemed to have been received on the
fourth Business Day, as hereinafter defined, after the postmarked date thereof,
or if sent by facsimile or other means of electronic communication, shall be
deemed to have been received on the Business Day following the sending, or if
delivered by hand, shall be deemed to have been received at the time it is
delivered to the applicable address noted below either to the individual
designated below or to an individual at such address having apparent authority
to accept deliveries on behalf of the
24
addressee. Notice of change of address shall also be governed by this Section.
In the event of a general discontinuance of postal service due to strike,
lockout or otherwise, notices or other communications shall be delivered by hand
or sent by facsimile or other means of electronic communication and shall be
deemed to have been received in accordance with this Section. Notice and other
communications shall be addressed as follows:
IF TO UCB:
Xx. Xxxxxx X. Xxxxx
Farmland Industries, Inc.
0000 Xxxxx Xxx Xxxxxxxxxx
P.O. Box 7305, Dept. 65
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
With a copy to:
Xxxxxx Xxxxx, Esq.
Farmland Industries, Inc.
0000 Xxxxx Xxx Xxxxxxxxxx
P.O. Box 7305, Dept. 62
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
and
Mr. Xxxx Xxxxxxx
CENEX HARVEST STATES COOPERATIVES
XX Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Cenex Harvest States Cooperatives
XX Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000
IF TO LAND O' LAKES
Xx. Xxxxx Xxxxxxxxx
Land O' Lakes, Inc.
X.X. Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000-0000
With a copy to:
Xxxx Xxxxxx, Esq.
25
Land O'Lakes, Inc.
X.X. Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000-0000
IF TO CHS
Mr. Xxxx Xxxxxxx
CENEX HARVEST STATES COOPERATIVES
X.X. Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000
With a copy to:
Xxxxx X. Xxxxxxxx, Esq.
Cenex Harvest States Cooperatives
X.X. Xxx 00000
Xx. Xxxx, Xxxxxxxxx 00000
If to FII
Xx. Xxxxxx Xxxxx
Farmland Industries, Inc.
0000 Xxxxx Xxx Xxxxxxxxxx
P.O. Box 7305, Dept. 65
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
With a copy to:
Xxxxxx Xxxxx, Esq.
Farmland Industries, Inc.
0000 Xxxxx Xxx Xxxxxxxxxx
P.O. Box 7305, Dept. 62
Xxxxxx Xxxx, Xxxxxxxx 00000-0000
For the purposes hereof, "Business Day" means any day, other than Saturday,
Sunday or any statutory holiday.
15.6 Waiver of Default. No consent or waiver, express or implied, by
the Company or a Member with respect to any breach or default by another Member
hereunder shall be deemed or construed to be a consent or waiver with respect to
any other breach or default by such Member of the same provision or any other
provision of this Agreement. Failure on the part of the Company or a Member to
complain of any act or failure to act of another Member or to declare such
15.7 No Third Party Rights. None of the provisions contained in this
Agreement shall be for the benefit of or enforceable by any third parties,
including creditors of the Company.
26
other Member in default shall not be deemed or constitute a waiver by the
Company or the Member of any rights hereunder; provided, however, that WECO is
an intended third party beneficiary of Sections 5.3 and 5.4 and shall have the
right to enforce its rights under Sections 5.3 and 5.4 directly against the
Company.
15.8 Entire Agreement. This Agreement (together with the Certificate
of Formation) contains the entire agreement between the Members relative to the
formation, operation and continuation of the Company, and this Agreement shall
not be altered, modified or changed except by a written document duly executed
by all parties hereto at the time of such alteration, modification or change.
15.9 Severability. In the event any provision of this Agreement is
held to be illegal, invalid or unenforceable to any extent, the legality,
validity and enforceability of the remainder of this Agreement shall not be
affected thereby and shall remain in full force and effect and shall be enforced
to the greatest extent permitted by law.
15.10 Assignment. This Agreement and the rights and obligations
hereunder shall not be assignable by any of the parties.
15.11 Governing. This Agreement and the rights and obligations of
the parties hereto shall be governed by and construed in accordance with the
laws of the state of Delaware, without regard to conflict of law.
15.12 Jurisdiction. Each Member hereby irrevocably submits itself to
the jurisdiction of the States of Missouri or Minnesota, and to the jurisdiction
of the Federal District Courts for the District of Xxxxxxx County, Missouri or
Xxxxxx County, Minnesota, for the purpose of any suit, action, or other
proceeding arising out of or relating to this Agreement. Each Member hereby
agrees that it will not bring or file any suit, action, or other proceeding
arising out of or relating to this Agreement in a venue other than the two
listed above.
15.13 Binding Agreement. Subject to the restrictions on the
disposition of Interests herein contained, the provisions of this Agreement
shall be binding upon, and inure to the benefit of, the parties hereto and their
respective heirs, personal representatives, successors and permitted assigns.
15.14 Headings. The headings of the Articles, Sections and
Subsections of this Agreement are for convenience only and shall not be
considered in construing or interpreting any of the terms or provisions hereof.
15.15 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one agreement that is binding upon all of the parties hereto,
notwithstanding that all parties are not signatories to the same counterpart.
15.16 Interpretation. Words of the masculine gender shall be deemed
to include the feminine and neuter genders, and vice versa, where applicable.
Words of the singular number shall be deemed to include the plural number, and
vice versa, where applicable.
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
UNITED COUNTRY BRANDS
By: Farmland Industries, Inc.
(as Member)
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Print Name: Xxxxxx X. Xxxxx
Title: Executive Vice President &
Chief Operating Officer
By: Cenex Harvest States Cooperatives
(as Member)
By: /s/ Xxxx X. Xxxxxxx
--------------------------
Print Name: Xxxx X. Xxxxxxx
Title: President
-----------------------
LAND O'LAKES, INC.
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------------
Print Name Xxxxx Xxxxxxxxx
--------------------------------
Title Chief Operating Officer, Ag Services
-------------------------------------
CENEX HARVEST STATES COOPERATIVES
By: /s/ Xxxx X. Xxxxxxx
--------------------------------------
Print Name Xxxx X. Xxxxxxx
--------------------------------
Title President
-------------------------------------
FARMLAND INDUSTRIES, INC.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------------
Print Name Xxxxxx X. Xxxxx
-------------------------------------
Title Executive Vice President &
-------------------------------------
Chief Operating Officer
28
