SECOND AMENDED AND RESTATED OPERATING AGREEMENT OF PRAIRIE CREEK ETHANOL, LLC Dated: Effective May 3, 2007
SECOND
AMENDED AND RESTATED OPERATING AGREEMENT
OF
PRAIRIE
CREEK ETHANOL, LLC
Dated:
Effective May
3, 2007
SECOND
AMENDED AND RESTATED OPERATING AGREEMENT
OF
PRAIRIE
CREEK ETHANOL, LLC
TABLE
OF CONTENTS
SECTION
1. THE COMPANY
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1
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1.1
Formation
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1
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1.2
Name
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1
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1.3
Purpose; Powers
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1
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1.4
Principal Place of Business
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2
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1.5
Term
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2
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1.6
Agent For Service of Process
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2
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1.7
Title to Property
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2
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1.8
Payment of Individual Obligations
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2
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1.9
Independent Activities; Transactions with Affiliates
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2
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1.10
Definitions
|
3
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|
SECTION
2. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
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9
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2.1
Original Capital Contributions
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9
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2.2
Additional Capital Contributions; Additional Units
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9
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2.3
Capital Account
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9
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SECTION
3. ALLOCATIONS
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10
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3.1
Profits
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10
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3.2
Losses
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10
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3.3
Special Allocations
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10
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3.4
Curative Allocations
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12
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3.5
Loss Limitation
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12
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3.6
Other Allocation Rules
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13
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3.7
Tax Allocations: Code Section 704(c)
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13
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3.8
Tax Credit Allocations
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13
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|
SECTION
4. DISTRIBUTIONS
|
13
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4.1
Net Cash Flow
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13
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4.2
Amounts Withheld
|
14
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4.3
Limitations on Distributions
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14
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|
SECTION
5. MANAGEMENT
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14
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5.1
Class A and Class B Directors
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14
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5.2
Number of Total Directors
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14
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5.3
Election and Appointment of Class A Directors
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15
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5.4
Appointment of Class B Directors and Terms
|
17
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5.5
Committees
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17
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5.6
Authority of Directors
|
18
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5.7
Director as Agent
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19
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5.8
Restrictions on Authority of Directors
|
20
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5.9
Director Meetings and Notice
|
21
|
ii
5.10
Action Without a Meeting
|
21
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5.11
Quorum; Manner of Acting
|
21
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5.12
Voting; Potential Financial Interest
|
21
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5.13
Duties and Obligations of Directors
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21
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5.14
Chairman and Vice President
|
22
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5.15
President
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22
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5.16
Chief Financial Officer
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22
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5.17
Secretary; Assistant Secretary
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22
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5.18
Vice President
|
23
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5.19
Delegation
|
23
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5.20
Execution of Instruments
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23
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5.21
Limitation of Liability; Indemnification of Directors
|
23
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5.22
Compensation; Expenses of Directors
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24
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5.23
Loans
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24
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|
SECTION
6. ROLE OF MEMBERS
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24
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6.1
One Membership Class
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24
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6.2
Members
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24
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6.3
Additional Members
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25
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6.4
Rights or Powers
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25
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6.5
Voting Rights of Members
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25
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6.6
Member Meetings
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25
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6.7
Conduct of Meetings
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25
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6.8
Notice of Meetings; Waiver
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25
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6.9
Quorum and Proxies
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25
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6.10
Voting; Action by Members
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26
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6.11
Record Date
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26
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6.12
Termination of Membership
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26
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6.13
Continuation of Company
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26
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6.14
No Obligation to Purchase Membership Interest
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26
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6.15
Waiver of Dissenters Rights
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26
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6.16
Limitation on Ownership
|
26
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|
SECTION
7. ACCOUNTING, BOOKS AND RECORDS
|
27
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|
7.1
Accounting, Books and Records
|
27
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|
7.2
Delivery to Members and Inspection
|
27
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7.3
Reports
|
27
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7.4
Tax Matters
|
28
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|
SECTION
8. AMENDMENTS
|
28
|
|
8.1
Amendments
|
28
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|
SECTION
9. TRANSFERS
|
28
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|
9.1
Restrictions on Transfers
|
29
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9.2
Permitted Transfers
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29
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9.3
Conditions Precedent to Transfers
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29
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9.4
Prohibited Transfers
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31
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9.5
No Dissolution or Termination
|
31
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9.6
Prohibition of Assignment
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31
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9.7
Rights of Unadmitted Assignees
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31
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iii
9.8
Admission of Substituted Members
|
32
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9.9
Representations Regarding Transfers
|
32
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|
9.10
Distribution and Allocations in Respect of Transferred
Units
|
33
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9.11
Additional Members
|
33
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|
SECTION
10. DISSOLUTION AND WINDING UP
|
34
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10.1
Dissolution
|
34
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10.2
Winding Up
|
34
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10.3
Compliance with Certain Requirements of Regulations; Deficit Capital
Accounts
|
34
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10.4
Deemed Distribution and Reconstruction
|
35
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10.5
Rights of Unit Holders
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35
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10.6
Allocations during Period of Liquidation
|
35
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10.7
Character of Liquidating Distributions
|
35
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10.8
The Liquidator
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36
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10.9
Forms of Liquidating Distributions
|
36
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SECTION
11. MISCELLANEOUS
|
36
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11.1
Notices
|
36
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11.2
Binding Effect
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36
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11.3
Construction
|
36
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11.4
Headings
|
36
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11.5
Severability
|
37
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11.6
Incorporation By Reference
|
37
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11.7
Variation of Terms
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37
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11.8
Governing Law
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37
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11.9
Waiver of Jury Trial
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37
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11.10
Counterpart Execution
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37
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11.11
Specific Performance
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37
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iv
SECOND
AMENDED AND RESTATED OPERATING AGREEMENT
OF
PRAIRIE
CREEK ETHANOL, LLC
THIS
SECOND AMENDED AND RESTATED OPERATING AGREEMENT (the
“Agreement”) is entered into and shall be effective as of the 3rd
day of
May, 2007 (the “Effective Date”),
by and
among PRAIRIE
CREEK ETHANOL, LLC,
an
Iowa
limited liability company (the “Company”), each of the Persons who are
identified as Members on the attached Exhibit A and who have executed a
counterpart of this Agreement and any other Persons as may from time-to-time
be
subsequently admitted as a Member of the Company in accordance with the terms
of
this Agreement. Capitalized terms not otherwise defined herein shall have the
meaning set forth in Section 1.10.
WHEREAS,
the
initial Members of the Company have formed a limited liability company under
the
laws of the State of Iowa by filing Articles of Organization pursuant to the
Iowa Limited Liability Company Act (the “Act”); and
WHEREAS,
the
Members desire to set forth the respective rights, duties, and responsibilities
with respect to the Company and its business and affairs.
NOW,
THEREFORE,
in
consideration of the covenants and agreements contained herein, and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION
1. THE COMPANY
1.1 Formation.
The
initial Members formed the Company as an Iowa limited liability company by
filing Articles of Organization with the Iowa Secretary of State on April 19,
2006 pursuant to the provisions of the Act. To the extent that the rights or
obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provisions, this Agreement
shall, to the extent permitted by the Act, control.
1.2 Name.
The name
of the Company shall be “Prairie Creek Ethanol, LLC” and all business of the
Company shall be conducted in such name.
1.3 Purpose;
Powers.
The
nature of the business and purposes of the Company are (i) to own, construct,
operate, lease, finance, contract with, and/or invest in ethanol production
and
co-product production facilities as permitted under the applicable laws of
the
State of Iowa; (ii) to engage in the processing of corn, grains and other
feedstocks into ethanol and any and all related co-products, and the marketing
of all products and co-products from such processing; and (iii) to engage in
any
other business and investment activity in which an Iowa limited liability
company may lawfully be engaged, as determined by the Directors. The Company
has
the power to do any and all acts necessary, appropriate, proper, advisable,
incidental or convenient to or in furtherance of the purpose of the Company
as
set forth in this Section 1.3 and has, without limitation, any and all powers
that may be exercised on behalf of the Company by the Directors pursuant to
Section 5 hereof.
1
1.4 Principal
Place of Business. The
Company shall continuously maintain an office in Iowa. The principal office
of
the Company shall be at 000 X Xxxxxx Xxxxxx, X.X. Xxx 000, Xxxxxxxxx, XX 00000,
or elsewhere as the Directors may determine. Any documents required by the
Act
to be kept by the Company shall be maintained at the Company’s principal office.
1.5
Term.
The term
of the Company commenced on the date the Articles of Organization (the
“Articles”) of the Company were filed with the office of the Iowa Secretary of
State, and shall continue until the winding up and liquidation of the Company
and its business is completed following a Dissolution Event as provided in
Section 10 hereof.
1.6
Agent
For Service of Process.
The name
and address of the agent for service of process on the Company in the State
of
Iowa shall be Xxxxxx Xxxxxx, 000 X. Xxxx Xxxxxx, Xxxxxxxxx, Xxxx 00000, or
any
successor as appointed by the Directors.
1.7
Title
to Property.
All
Property owned by the Company shall be owned by the Company as an entity and
no
Member shall have any ownership interest in such Property in its individual
name. Each Member’s interest in the Company shall be personal property for all
purposes. At all times after the Effective Date, the Company shall hold title
to
all of its Property in the name of the Company and not in the name of any
Member.
1.8 Payment
of Individual Obligations.
Company’s credit and assets shall be used solely for the benefit of the Company,
and no asset of the Company shall be Transferred or encumbered for, or in
payment of, any individual obligation of any Member.
1.9
Independent
Activities; Transactions with Affiliates.
The
Directors shall be required to devote such time to the affairs of the Company
as
may be necessary to manage and operate the Company, and shall be free to serve
any other Person or enterprise in any capacity that the Director may deem
appropriate in its discretion. Neither this Agreement nor any activity
undertaken pursuant hereto shall (i) prevent any Member or Director or their
Affiliates, acting on their own behalf, from engaging in whatever activities
they choose, whether the same are competitive with the Company or otherwise,
and
any such activities may be undertaken without having or incurring any obligation
to offer any interest in such activities to the Company or any Member, or (ii)
require any Member or Director to permit the Company or Director or Member
or
its Affiliates to participate in any such activities, and as a material part
of
the consideration for the execution of this Agreement by each Member, each
Member hereby waives, relinquishes, and renounces any such right or claim of
participation. To the extent permitted by applicable law and subject to the
provisions of this Agreement, the Directors are hereby authorized to cause
the
Company to purchase Property from, sell Property to or otherwise deal with
any
Member (including any Member who is also a Director), acting on its own behalf,
or any Affiliate of any Member; provided that any such purchase, sale or other
transaction shall be made on terms and condition which are no less favorable
to
the Company than if the sale, purchase or other transaction had been made with
an independent third party.
2
1.10
Definitions.
Capitalized words and phrases used in this Agreement have the following
meanings:
(a) “Act”
means the Iowa Limited Liability Company Act, as amended from time to time
(or
any corresponding provision or provisions of any succeeding law).
(b) “Adjusted
Capital Account Deficit” means, with respect to any Unit Holder, the deficit
balance, if any, in such Unit Holder’s Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments: (i)
Credit to such Capital Account any amounts which such Unit Holder is deemed
to
be obligated to restore pursuant to the next to the last sentences in Sections
1.704-2(g)(1) and l.704-2(i)(5) of the Regulations; and (ii) Debit to such
Capital Account the items described in Sections l.704-l(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5) and 1.704-l(b)(2)(ii)(d)(6) of the Regulations. The foregoing
definition is intended to comply with the provisions of Section
l.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
(c) “Affiliate”
means, with respect to any Person (i) any Person directly or indirectly
controlling, controlled by or under common control with such Person (ii) any
officer, director, general partner, member or trustee of such Person or (iii)
any Person who is an officer, director, general partner, member or trustee
of
any Person described in clauses (i) or (ii) of this sentence. For purposes
of
this definition, the terms “controlling,’ “controlled by” or “under common
control with” shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person or
entity, whether through the ownership of voting securities, by contract or
otherwise, or the power to elect at least 50% of the directors, members, or
persons exercising similar authority with respect to such Person or
entities.
(d) “Agreement”
means this Second Amended and Restated Operating Agreement of Prairie Creek
Ethanol LLC, as amended from time to time.
(e) “Articles”
means the Articles of Organization of the Company filed with the Iowa Secretary
of State, as same may be amended from time-to-time.
(f) “Assignee”
means a transferee of Units who is not admitted as a substituted member pursuant
to Section 9.7.
(g) “Capital
Account’ means the separate capital account maintained for each Unit Holder in
accordance with Section 2.3.
(h) “Capital
Contributions” means, with respect to any Member, the amount of money (US
Dollars) and the initial Gross Asset Value of any assets or property (other
than
money) contributed by the Member (or such Member’s predecessor in interest) to
the Company (net of liabilities secured by such contributed property that the
Company is considered to assume or take subject to under Code Section 752)
with
respect to the Units in the Company held or purchased by such Member, including
additional Capital Contributions.
3
(i) “Class
A
Directors’ means any Person who (i) is referred to as such in Section 5.1 of
this Agreement or has become a Class A Director pursuant to the terms of this
Agreement, and (ii) has not ceased to be a Class A Director pursuant to the
terms of this Agreement. “Class A Directors” means all such Persons.
(j) “Class
B
Directors” means any Person who (i) is referred to as such in Section 5.1 of
this Agreement, and (ii) has not ceased to be a Director pursuant to the terms
of this Agreement. “Class B Directors” means all such persons. The authority of
Class B Directors is limited as set forth in this Agreement.
(k) “Code”
means the United States Internal Revenue Code of 1986, as amended from time
to
time.
(l) “Company”
means Prairie Creek Ethanol, LLC, an Iowa limited liability company.
(m) “Company
Minimum Gain” has the meaning given the term “partnership minimum gain” in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
(n) “Debt”
means (i) any indebtedness for borrowed money or the deferred purchase price
of
property as evidenced by a note, bonds, or other instruments, (ii) obligations
as lessee under capital leases, (iii) obligations secured by any mortgage,
pledge, security interest, encumbrance, lien or charge of any kind existing
on
any asset owned or held by the Company whether or not the Company has assumed
or
become liable for the obligations secured thereby, (iv) any obligation under
any
interest rate swap agreement, (v) accounts payable and (vi) obligations under
direct or indirect guarantees of (including obligations (contingent or
otherwise) to assure a creditor against loss in respect of) indebtedness or
obligations of the kinds referred to in clauses (i), (ii), (iii), (iv) and
(v),
above provided that Debt shall not include obligations in respect of any
accounts payable that are incurred in the ordinary course of the Company’s
business and are not delinquent or are being contested in good faith by
appropriate proceedings.
(o) “Depreciation”
means, for each Fiscal Year, an amount equal to the depreciation, amortization,
or other cost recovery deduction allowable with respect to an asset for such
Fiscal Year, except that if the Gross Asset Value of an asset differs from
its
adjusted basis for federal income tax purposes at the beginning of such Fiscal
Year, Depreciation shall be an amount which bears the same ratio to such
beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such Fiscal Year bears to
such beginning adjusted tax basis; provided, however, that if the adjusted
basis
for federal income tax purposes of an asset at the beginning of such Fiscal
Year
is zero, Depreciation shall be determined with reference to such beginning
Gross
Asset Value using any reasonable method selected by the Directors.
(p) “Directors”
means Class A Directors and Class B Directors, collectively. For purposes of
the
Act, the Directors shall be deemed to be the “managers” (as such term is defined
and used in the Act) of the Company.
4
(q) “Dissolution
Event” shall have the meaning set forth in Section 10.1 hereof.
(r) “Effective
Date” means May 3, 2007.
(s) “Facilities”
shall mean the ethanol production and co-product production facilities near
Wesley, Iowa or such other location as may be determined by the Directors to
be
constructed and operated by the Company pursuant to the Business Plan.
(t) “Financing
Closing” means the actual closing (execution and delivery of all required
documents) by the Company with its project lender(s) providing for all debt
financing, including senior and subordinated debt and any other project
financing characterized by debt obligations and repayable as debt which is
required by the project lender(s) or which is deemed necessary or prudent in
the
sole discretion of the Directors.
(u) “Fiscal
Year” means (i) any twelve-month period commencing on January 1 and ending on
December 31 and (ii) the period commencing on the immediately preceding January
1 and ending on the date on which all Property is distributed to the Unit
Holders pursuant to Section 10 hereof, or, if the context requires, any portion
of a Fiscal Year for which an allocation of Profits or Losses or a distribution
is to be made.
(v) “GAAP”
means generally accepted accounting principles in effect in the United States
of
America from time to time.
(w) “Gross
Asset Value” means with respect to any asset, the asset’s adjusted basis for
federal income tax purposes, except as follows: (i) 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 Directors provided that
the initial Gross Asset Values of the assets contributed to the Company pursuant
to Section 2.1 hereof shall be as set forth in such section; (ii) The Gross
Asset Values of all Company assets shall be adjusted to equal their respective
gross fair market values (taking Code Section 7701(g) into account), as
determined by the Directors as of the following times: (A) 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; (B) the distribution by the Company
to a Member of more than a de minimis amount of Company property as
consideration for an interest in the Company; and (C) the liquidation of the
Company within the meaning of Regulations Section l.704-l(b)(2)(ii)(g), provided
that an adjustment described in clauses (A) and (B) of this paragraph shall
be
made only if the Directors reasonably determine that such adjustment is
necessary to reflect the relative economic interests of the Members in the
Company; (iii) The Gross Asset Value of any item of Company assets distributed
to any Member shall be adjusted to equal the gross fair market value (taking
Code Section 7701(g) into account) of such asset on the date of distribution
as
determined by the Directors; and (iv) The Gross Asset Values of Company assets
shall be increased (or decreased) to reflect any adjustments to the adjusted
basis of such assets pursuant to Code Section 734(b) or Code Section 743(b),
but
only to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Regulations Section l.704-l(b)(2)(iv)(m) and
subparagraph (vi) of the definition of “Profits” and “Losses” or Section 3.3(c)
hereof; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this subparagraph (iv) to the extent that an adjustment pursuant
to
subparagraph (ii) is required in connection with a transaction that would
otherwise result in an adjustment pursuant to this subparagraph (iv). If the
Gross Asset Value of an asset has been determined or adjusted pursuant to
subparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjusted
by the Depreciation taken into account with respect to such asset, for purposes
of computing Profits and Losses.
5
(x) “Issuance
Items” has the meaning set forth in Section 3.3(h) hereof.
(y) “Liquidation
Period” has the meaning set forth in Section 10.6 hereof.
(z) “Liquidator”
has the meaning set forth in Section 10.8 hereof.
(aa) “Losses”
has the meaning set forth in the definition of “Profits and Losses.”
(bb) “Member”
means any Person (i) whose name is set forth as such on Exhibit “A” initially
attached hereto or has become a Member pursuant to the terms of this Agreement,
and (ii) who is the owner of one or more Units.
(cc) “Members”
means all such Members.
(dd) “Membership
Economic Interest” means collectively, a Member’s share of “Profits” and
“Losses,” the right to receive distributions of the Company’s assets, and the
right to information concerning the business and affairs of the Company provided
by the Act. The Membership Economic Interest of a Member is quantified by the
unit of measurement referred to herein as “Units.”
(ee) “Membership
Interest” means collectively, the Membership Economic Interest and Membership
Voting Interest.
(ff) “Membership
Register” means the membership register maintained by the Company. at its
principal office or by a duly appointed agent of the Company setting forth
the
name, address, the number of Units, and Capital Contributions of each Member
of
the Company, which shall be modified from time to time as additional Units
are
issued and as Units are transferred pursuant to this Agreement.
(gg)
“Membership
Voting Interest” means collectively, a Member’s right to vote as set forth in
this Agreement or required by the Act. The Membership Voting Interest of a
Member shall mean as to any matter to which the Member is entitled to vote
hereunder or as may be required under the Act, the right to one (1) vote for
each Unit registered in the name of such Member as shown in the Membership
Register.
(hh)
“Net
Cash
Flow” means the gross cash proceeds of the Company less the portion thereof used
to pay or establish reserves for all Company expenses, debt payments, capital
improvements, replacements, and contingencies, all as reasonably determined
by
the Directors. “Net Cash Flow” shall not be reduced by depreciation,
amortization, cost recovery deductions, or similar allowances, but shall be
increased by any reductions of reserves previously established.
6
(ii) “Nonrecourse
Deductions” has the meaning set forth in Section l.704-2(b)(1) of the
Regulations.
(jj) “Nonrecourse
Liability”
has
the
meaning set forth in Section 1.704-2(b)(3) of the Regulations.
(kk) “Officer”
or “Officers” has the meaning set forth in Section 5.19 hereof.
(ll) “Permitted
Transfer” has the meaning set forth in Section 9.2 hereof.
(mm) “Person”
means any individual, partnership (whether general or limited), joint venture,
limited liability company, corporation, trust, estate, association, nominee
or
other entity.
(nn) “Profits
and Losses” mean, for each Fiscal Year, an amount equal to the Company’s taxable
income or loss for such Fiscal Year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss, or deduction required
to be stated separately pursuant to Code Section 703(a)(l) shall be included
in
taxable income or loss), with the following adjustments (without duplication):
(i) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profits or Losses pursuant to this
definition of “Profits” and “Losses” shall be added to such taxable income or
loss; (ii) Any expenditures of the Company described in Code Section
705(a)(2)(b) or treated as Code Section 705(a)(2)(b) expenditures pursuant
to
Regulations Section l.704-l(b)(2)(iv)(i), and not otherwise taken into account
in computing Profits or Losses pursuant to this definition of “Profits” and
“Losses” shall be subtracted from such taxable income or loss; (iii) In the
event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraphs (ii) or (iii) of the definition of Gross Asset Value, the amount
of such adjustment shall be treated as an item of gain (if the adjustment
increases the Gross Asset Value of the asset) or an item of loss (if the
adjustment decreases the Gross Asset Value of the asset) from the disposition
of
such asset and shall be taken into account for purposes of computing Profits
or
Losses; (iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value; (v) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in computing such taxable income
or
loss, there shall be taken into account Depreciation for such Fiscal Year,
computed in accordance with the definition of Depreciation; (vi) To the extent
an adjustment to the adjusted tax basis of any Company asset pursuant to Code
Section 734(b) is required, pursuant to Regulations Section 1.704
(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts
as a
result of a distribution other than in liquidation of a Unit Holder’s interest
in the Company, the amount of such adjustment shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) from the disposition of such asset and shall
be
taken into account for purposes of computing Profits or Losses; and (vii)
Notwithstanding any other provision of this definition, any items which are
specially allocated pursuant to Section 3.3 and Section 3.4 hereof shall not
be
taken into account in computing Profits or Losses. The amounts of the items
of
Company income, gain, loss or deduction available to be specially allocated
pursuant to Sections 3.3 and Section 3.4 hereof shall be determined by applying
rules analogous to those set forth in subparagraphs (i) through (vi) above.
7
(oo)
“Property”
means all real and personal property acquired by the Company, including cash,
and any improvements thereto, and shall include both tangible and intangible
property.
(pp) “Regulations”
means the Income Tax Regulations, including Temporary Regulations, promulgated
under the Code, as such regulations are amended from time to time.
(qq) “Regulatory
Allocations” has the meaning set forth in Section 3.4 hereof.
(rr) “Related
Party” means the adopted or birth relatives of any Person and such Person’s
spouse (whether by marriage or common law), if any, including without limitation
great-grandparents, grandparents, parents, children (including stepchildren
and
adopted children), grandchildren, and great-grandchildren thereof, and such
Person’s (and such Person’s spouse’s) brothers, sisters, and cousins and their
respective lineal ancestors and descendants, and any other ancestors and/or
descendants, and any spouse of any of the foregoing, each trust created for
the
exclusive benefit of one or more of the foregoing, and the successors, assigns,
heirs, executors, personal representatives and estates of any of the
foregoing.
(ss) “Securities
Act” means the Securities Act of 1933, as amended.
(tt) “Subsidiary”
means any corporation, partnership, joint venture, limited liability company,
association or other entity in which such Person owns, directly or indirectly,
fifty percent (50%) or more of the outstanding equity securities or interests,
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such entity.
(uu) “Tax
Matters Member” has the meaning set forth in Section 7.4 hereof.
(vv) “Transfer”
means, as a noun, any voluntary or involuntary transfer, sale, pledge or
hypothecation or other disposition and, as a verb, voluntarily or involuntarily
to transfer, give, sell, exchange, assign, pledge, bequest or hypothecate or
otherwise dispose of.
(ww) “Units
or
Unit” means an ownership interest in the Company representing a Capital
Contribution made as provided in Section 2 in consideration of the Units,
including any and all benefits to which the holder of such Units may be entitled
as provided in this Agreement, together with all obligations of such Person
to
comply with the terms and provisions of this Agreement.
(xx) “Unit
Holders” means all Unit Holders.
(yy) “Unit
Holder” means the owner of one or more Units.
8
(zz) “Unit
Holder Nonrecourse Debt” has the same meaning as the term “partner nonrecourse
debt” in Section l.704-2(b)(4) of the Regulations.
(aaa) “Unit
Holder Nonrecourse Debt Minimum Gain” means an amount, with respect to each Unit
Holder Nonrecourse Debt, equal to the Company Minimum Gain that would result
if
such Unit Holder Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section l.704-2(i)(3) of the Regulations.
(bbb) “Unit
Holder Nonrecourse Deductions” has the same meaning as the term “partner
nonrecourse deductions” in Sections l.704-2(i)(l) and l.704-2(i)(2) of the
Regulations.
SECTION
2.
CAPITAL
CONTRIBUTIONS; CAPITAL ACCOUNTS
2.1 Original
Capital Contributions.
The
name, address, original Capital Contribution, and initial Units quantifying
the
Membership Interest of each Member are set out in Exhibit A attached hereto,
and
shall also be set out in the Membership Register.
2.2 Additional
Capital Contributions; Additional Units.
No Unit
Holder shall be obligated to make any additional Capital Contributions to the
Company or to pay any assessment to the Company, other than any unpaid amounts
on such Unit Holder’s original Capital Contributions, and no Units shall be
subject to any calls, requests or demands for capital. Subject to Section 5.6,
additional Membership Economic Interests quantified by additional Units may
be
issued in consideration of Capital Contributions as agreed to between the
Directors and the Person acquiring the Membership Economic Interest quantified
by the additional Units. Each Person to whom additional Units are issued shall
be admitted as a Member in accordance with this Agreement. Upon such Capital
Contributions, the Directors shall cause Exhibit A and the Membership Register
to be appropriately amended.
2.3 Capital
Accounts.
A
Capital Account shall be maintained for each Unit Holder in accordance with
the
following provisions:
(a)
To
each Unit Holder’s Capital Account there shall be credited (i) such Unit
Holder’s Capital Contributions, (ii) such Unit Holder’s distributive share of
Profits and any items in the nature of income or gain which are specially
allocated pursuant to Section 3.3 and Section 3.4, and (iii) the amount of
any
Company liabilities assumed by such Unit Holder or which are secured by any
Property distributed to such Unit Holder;
(b)
To
each Unit Holder’s Capital Account there shall be debited (i) the amount of
money and the Gross Asset Value of any Property distributed to such Unit Holder
pursuant to any provision of this Agreement, (ii) such
Unit
Holder’s distributive share of Losses and any items in the nature of expenses or
losses which are specially allocated pursuant to Section 3.3 and 3.4 hereof,
and
(iii) the amount of any liabilities of such Unit Holder assumed by the Company
or which are secured by any Property contributed by such Unit Holder to the
Company;
(c)
In
the event Units are 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 Units; and
9
(d)
In
determining the amount of any liability for purposes of subparagraphs (a) and
(b) above there shall be taken into account Code Section 752(c) and
any
other applicable provisions of the Code and Regulations.
The
foregoing provisions and the other provisions of this Agreement relating to
the
maintenance of Capital Accounts are intended to comply with Regulations Section
1.704-1(b), and shall be interpreted and applied in a manner consistent with
such Regulations. In the event the Directors shall determine that it is prudent
to modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Unit Holders), are computed in order to comply
with such Regulations, the Directors may make such modification, provided that
it is not likely to have a material effect on the amounts distributed to any
Person pursuant to Section 10 hereof upon the dissolution of the Company. The
Directors also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Unit Holders and the
amount of capital reflected on the Company’s balance sheet, as computed for book
purposes, in accordance with Regulations Section l.704-l(b)(2)(iv)(q), and
(ii)
make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
SECTION
3. ALLOCATIONS
3.1
Profits.
After
giving effect to the special allocations in Section 3.3 and Section 3.4 hereof,
Profits for any Fiscal Year shall be allocated among the Unit Holders in
proportion to Units held.
3.2
Losses.
After
giving effect to the special allocations in Section 3.3 and 3.4 hereof, Losses
for any Fiscal Year shall be allocated among the Unit Holders in proportion
to
Units held.
3.3 Special
Allocations.
The
following special allocations shall be made in the following order:
(a) Minimum
Gain Chargeback. Except as otherwise provided in Section 1.704-2(f) of the
Regulations, notwithstanding any other provision of this Section 3, if there
is
a net decrease in Company Minimum Gain during any Fiscal Year, each Unit Holder
shall be specially allocated items of Company income and gain for such Fiscal
Year (and, if necessary, subsequent Fiscal Years) in an amount equal to such
Unit Holder’s share of the net decrease in Company Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each Unit Holder pursuant thereto. The items to be so
allocated shall be determined in accordance with sections l.704-2(f)(6) and
l.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with
the minimum gain chargeback requirement in Section 1.704-2(f) of the Regulations
and shall be interpreted consistently therewith.
(b) Unit
Holder Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this
Section 3, if there is a net decrease in Unit Holder Nonrecourse Debt Minimum
Gain attributable to a Unit Holder Nonrecourse Debt during any Fiscal Year,
each
Unit Holder who has a share of the Unit Holder Nonrecourse Debt Minimum Gain
attributable to such Unit Holder Nonrecourse Debt, determined in accordance
with
Section l.704-2(i)(5) of the Regulations, shall be specially allocated items
of
Company income and gain for such Fiscal Year (and, if necessary, subsequent
Fiscal Years) in an amount equal to such Unit Holder’s share of the net decrease
in Unit Holder Nonrecourse Debt Minimum Gain, determined in accordance with
Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence
shall be made in proportion to the respective amounts required to be allocated
to each Unit Holder pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections l.704-2(i)(4) and 1.704-2(j)(2) of the
Regulations. This Section 3.3(b) is intended to comply with the minimum gain
chargeback requirement in Section 1.704-2(i)(4) of the Regulations and shall
be
interpreted consistently therewith.
10
(c) Qualified
Income Offset. In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Sections l.704-1(b)(2)(ii)(d)(4),
1.704-l(b)(2)(ii)(d)(5),
or
l.704-l(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gain
shall be specially allocated to such Member in an amount and manner sufficient
to eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit as soon as practicable, provided that an allocation pursuant
to
this Section 3.3(c) shall be made only if and to the extent that the Member
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Section 3 have been tentatively made as if this Section
3.3(c) were not in the Agreement.
(d) Gross
Income Allocation. In the event any Member has a deficit Capital Account at
the
end of any Fiscal Year which is in excess of the sum of (i) the amount such
Member is obligated to restore pursuant to any provision of this Agreement;
and
(ii) the amount such Member is deemed to be obligated to restore pursuant to
the
penultimate sentences of Sections l.704-2(g)(1) and 1.704-2(i)(5) of the
Regulations, each such Member shall be specially allocated items of Company
income and gain in the amount of such excess as quickly as possible, provided
that an allocation pursuant to this Section 3.3(d) shall be made only if and
to
the extent that such Member would have a deficit Capital Account in excess
of
such sum after all other allocations provided for in this Section 3 have been
made as if Section 3.3(c) and this Section 3.3(d) were not in this
Agreement.
(e) Nonrecourse
Deductions. Nonrecourse Deductions for any Fiscal Year or other period shall
be
specially allocated among the Members in proportion to Units held.
(f) Unit
Holder Nonrecourse Deductions. Any Unit Holder Nonrecourse Deductions for any
Fiscal Year shall be specially allocated to the Unit Holder who bears the
economic risk of loss with respect to the Unit Holder Nonrecourse Debt to which
such Unit Holder Nonrecourse Deductions are attributable in accordance with
Regulations Section l.704-2(i)(l).
(g) Section
754 Adjustments. To the extent an adjustment to the adjusted tax basis of any
Company asset, pursuant to Code Section 734(b) or
Code
Section 743(b) is required, pursuant to Regulations Section
l.704-1(b)(2)(iv)(m)(2) or l.704-l(b)(2)(iv)(m)(4), to be taken into account
in
determining Capital Accounts as the result of a distribution to a Unit Holder
in
complete liquidation of such Unit Holder’s interest in the Company, the amount
of such adjustment to Capital Accounts shall be treated as an item of gain
(if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to
the
Unit Holders in accordance with their interests in the Company in the event
Regulations Section l.704-l(b)(2)(iv)(m)(2) applies, or to the Unit Holder
to
whom such distribution was made in the event Regulations Section
1.704-l(b)(2)(iv)(m)(4) applies.
11
(h) Allocations
Relating to Taxable Issuance of Company Units. Any income, gain, loss or
deduction realized as a direct or indirect result of the issuance of Units
by
the Company to a Unit Holder (the “Issuance Items”) shall be allocated among the
Unit Holders so that, to the extent possible, the net amount of such Issuance
Items, together with all other allocations under this Agreement to each Unit
Holder shall be equal to the net amount that would have been allocated to each
such Unit Holder if the Issuance Items had not been realized.
3.4 Curative
Allocations.
The
allocations set forth in Sections 3.3(a), 3.3(b), 3.3(c), 3.3(d), 3.3(e),
3.3(f), 3.3(g) and 3.5 (the ‘Regulatory Allocations”) are intended to comply
with certain requirements of the Regulations. It is the intent of the Members
that, to the extent possible, all Regulatory Allocations shall be offset either
with other Regulatory Allocations or with special allocations of other items
of
Company income, gain, loss or deduction pursuant to this Section 3.4. Therefore,
notwithstanding any other provision of this Section 3 (other than the Regulatory
Allocations), the Directors shall make such offsetting special allocations
of
Company income, gain, loss or deduction in whatever manner it determines
appropriate so that, after such offsetting allocations are made, each Member’s
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the Regulatory Allocations were not part
of the Agreement and all Company items were allocated pursuant to Sections
3.1,
3.2, and 3.3(h).
3.5 Loss
Limitation.
Losses
allocated pursuant to Section 3.2 hereof shall not exceed the maximum amount
of
Losses that can be allocated without causing any Unit Holder to have an Adjusted
Capital Account Deficit at the end of any Fiscal Year. In the event some but
not
all of the Unit Holders would have Adjusted Capital Account Deficits as a
consequence of an allocation of Losses pursuant to Section 3.2 hereof, the
limitation set forth in this Section 3.5 shall be applied on a Unit Holder
by
Unit Holder basis and Losses not allocable to any Unit Holder as a result of
such limitation shall be allocated to the other Unit Holders in accordance
with
the positive balances in such Unit Holder’s Capital Accounts so as to allocate
the maximum permissible Losses to each Unit Holder under Section
1.704-1(b)(2)(ii)(d) of the Regulations.
3.6
Other Allocation
Rules.
(a) For
purposes of determining the Profits, Losses, or any other items allocable to
any
period, Profits, Losses, and any such other items shall be determined on a
daily, monthly, or other basis, as determined by the Directors using any
permissible method under Code Section 706 and the Regulations thereunder. (b)
The Unit Holders are aware of the income tax consequences of the allocations
made by this Section 3 and hereby agree to be bound by the provisions of this
Section 3 in reporting their shares of Company income and loss for income tax
purposes. (c) Solely for purposes of determining a Unit Holder’s proportionate
share of the “excess nonrecourse liabilities” of the Company within the meaning
of Regulations Section l.752-3(a)(3), the Unit Holders’ aggregate interests in
Company profit shall be deemed to be as provided in the capital accounts. To
the
extent permitted by Section 1.704-2(h)(3) of the Regulations, the Directors
shall endeavor to treat distributions of Net Cash Flow as having been made
from
the proceeds of a Nonrecourse Liability or a Unit Holder Nonrecourse Debt only
to the extent that such distributions would cause or increase an Adjusted
Capital Account Deficit for any Unit Holder. (d) Allocations of Profits and
Losses to the Unit Holders shall be allocated among them in the ratio which
each
Unit Holder’s Units bears to the total number of Units issued and
outstanding.
12
3.7 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
Unit Holders 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 (computed in accordance with the definition of Gross Asset
Value). In the event the Gross Asset Value of any Company asset is adjusted
pursuant to subparagraph (ii) of the definition of Gross Asset Value, 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. Any elections or
other
decisions relating to such allocations shall be made by the Directors in any
manner that reasonably reflects the purpose and intention of this Agreement.
Allocations pursuant to this Section 3.7 are solely for purposes of federal,
state, and local taxes and shall not affect, or in any way be taken into account
in computing, any Unit Holder’s Capital Account or share of Profits, Losses,
other items, or distributions pursuant to any provision of this
Agreement.
3.8 Tax
Credit Allocations.
All
credits against income tax with respect to the Company’s property or operations,
including the Small Ethanol Producer Credit (as defined in the Code), if
available, shall be allocated among the Members in accordance with their
respective membership interests in the Company for the Fiscal Year during which
the expenditure, production, sale, or other event giving rise to the credit
occurs. This Section 3.8 is intended to comply with the applicable tax credit
allocation principles of section 1.704-l(b)(4)(ii) of the Regulations and shall
be interpreted consistently therewith.
SECTION
4. DISTRIBUTIONS
4.1 Net
Cash Flow.
The
Directors, in their discretion, shall make distributions of Net Cash Flow,
if
any, to the Members. Except as otherwise provided in Section 10 hereof, Net
Cash
Flow, if any, shall be distributed to the Unit Holders in proportion to Units
held subject to, and to the extent permitted by, any loan covenants or
restrictions on such distributions agreed to by the Company in any loan
agreements with the Company’s lenders from time to time in effect. In
determining Net Cash Flow, the Directors shall endeavor to provide for cash
distributions at such times and in such amounts as will permit the Unit Holders
to make timely payment of income taxes.
4.2
Amounts
Withheld.
All
amounts withheld pursuant to the Code or any provision of any state, local
or
foreign tax law with respect to any payment, distribution or allocation to
the
Company or the Unit Holders shall be treated as amounts paid or distributed,
as
the case may be, to the Unit Holders with respect to which such amount was
withheld pursuant to this Section 4.2 for all purposes under this Agreement.
The
Company is authorized to withhold from payments and distributions, or with
respect to allocations to the Unit Holders, and to pay over to any federal,
state and local government or any foreign government, any amounts required
to be
so withheld pursuant to the Code or any provisions of any other federal, state
or local law or any foreign law, and shall allocate any such amounts to the
Unit
Holders with respect to which such amount was withheld.
13
4.3 Limitations
on Distributions.
The
Company shall make no distributions to the Unit Holders except as provided
in
this Section 4 and Section 10 hereof. Notwithstanding any other provision,
no
distribution shall be made if it is not permitted to be made under the
Act.
SECTION
5. MANAGEMENT
5.1 Class
A and Class B Directors.
Except
as otherwise provided in this Agreement, the Directors shall direct the business
and affairs of the Company, and shall exercise all of the powers of the Company
except such powers as are by this Agreement conferred upon or reserved to the
Members. The Directors shall adopt such policies, rules, regulations, and
actions not inconsistent with law or this Agreement as they deem advisable.
The
management of the business and affairs of the Company shall be directed by
the
Directors, as the authority of Class A Directors and Class B Directors is
limited herein, and not by its Members. Subject to Section 5.8 hereof or any
other express provisions hereof, the business and affairs of the Company shall
be managed by or under the direction of the Directors. The amendment or repeal
of this section or the adoption of any provision inconsistent therewith shall
require the approval of a majority of the total outstanding Membership Voting
Interests.
5.2 Number
of Total Directors.
The
total number of Directors of the Company shall be a minimum of seven (7) and
a
maximum of Twenty-one (21), subject to the number of Class A Directors and
Class
B Directors appointed hereunder. The total number of Directors shall depend
upon
the number of Class B Directors appointed pursuant to Section 5.4 in
relation to the required number of Class A Directors necessary to maintain
a
majority of Class A Directors on the Board. Subject to the election and
appointment of the Class A Directors and the appointment of the Class B
Directors pursuant to the terms of this Agreement, the Members may increase
or
decrease the number of Directors last approved and may change from a variable
range to a fixed number or visa versa by majority vote at any annual or special
meeting. However, the relative ratio of the number of Class A Directors to
Class
B Directors shall always result in a majority of Class A Directors.
5.3 Election
and Appointment of Class A Directors.
(a) The
initial Class A Directors, appointed by the initial Members, shall be the
individuals set forth on Exhibit “B” attached hereto. The initial Class A
Directors shall serve for an initial term ending at the first annual or special
meeting of the Members following substantial completion of the construction
of
the Facilities, and in all cases until a successor is elected and qualified,
or
until the earlier death, resignation, removal or disqualification of any such
Class A Director. After the expiration of the initial terms of the Class A
Directors, four (4) Class A Directors shall be elected by the Members for
staggered terms of three (3) years and until a successor is elected and
qualified; provided,
however, that any Member who is authorized to appoint a Class B Director
pursuant to Section 5.3(c) shall not be entitled to vote for the election of
any
other Class A Directors that the Members are entitled to elect, and the Units
held by such Member shall not be included in determining a quorum or a majority
of the Membership Voting Interests for purposes of electing Class A Directors.
However, if additional Class A Directors are added to the Board of Directors
in
order to maintain a majority of Class A Directors relative to Class B Directors
pursuant to Section 5.3(c), then such additional Class A Directors shall also
be
elected by the Members after the expiration of the initial terms of the Class
A
Directors. The Class A Director positions to be elected shall be those positions
appointed by the initial Members at-large in Exhibit “B.” The initial Class A
Directors shall, by resolution adopted prior to the expiration of their initial
term, classify each such Class A Director position as Group I, Group II or
Group
III, with such classification to serve as the basis for the staggering of terms
among the elected Class A Directors. The terms of Group I Directors shall expire
first (initial term of one year with successors elected to three year terms
thereafter), followed by those of Group II Directors (initial term of two years
with successors elected to a three year terms thereafter), and then Group III
Directors (initial and subsequent terms of three years). The election of
Directors shall take place at each annual meeting of the Members.
14
(b)
Nominations
for Class A Directors.
One or
more nominees for Class A Director positions up for election shall be named
by
the then current Class A Directors or by a nominating committee established
by
the Class A Directors. Nominations for the election of Class A Directors may
also be made by any Member entitled to vote generally in the election of Class
A
Directors. However, any Member that intends to nominate one or more persons
for
election as Class A Directors at a meeting may do so only if written notice
of
such Member’s intent to make such nomination or nominations has been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Company not less than sixty (60) days nor more than ninety
(90)
days prior to the annual meeting of the Company. Each such notice to the
Secretary shall set forth:
(i)
|
the
name and address of record of the Member who intends to make the
nomination;
|
(ii)
|
a
representation that the Member is a holder of record of Units of
the
Company entitled to vote at such meeting and intends to appear in
person
or by proxy at the meeting to nominate the person or persons specified
in
the notice;
|
(iii)
|
the
name, age, business and residence addresses, and principal occupation
or
employment of each nominee;
|
(iv) |
a
description of all arrangements or understandings between the Member
and
each nominee and any other person or persons (naming such person
or
persons) pursuant to which the nomination or nominations are to be
made by
the Member;
|
15
(v) |
such
other information regarding each nominee proposed by such Member
as would
be required to be included in a proxy statement filed pursuant to
the
proxy rules of the Securities and Exchange Commission;
|
(vi) |
the
consent of each nominee to serve as a Class A Director of the Company
if
so elected; and a nominating petition signed and dated by the holders
of
at least five percent (5%) of the then outstanding Units and clearly
setting forth the proposed nominee as a candidate of the Class A
Director’s seat to be filled at the next election of Class A Directors.
|
The
Company may require any proposed nominee to furnish such other information
as
may reasonably be required by the Company to determine the eligibility of such
proposed nominee to serve as a Class A Director of the Company. The presiding
Officer of the meeting may, if the facts warrant, determine that a nomination
was not made in accordance with the foregoing procedures, and if he should
so
determine, he shall so declare to the meeting and the defective nomination
shall
be disregarded. The amendment or repeal of this Section or the adoption of
any
provision inconsistent therewith shall require the approval of a majority of
the
Membership Voting Interests. Whenever a vacancy occurs other than from
expiration of a term of office or removal from office, a majority of the
remaining Class A Directors shall appoint a new Class A Director to fill the
vacancy for the remainder of such term.
(c)
Special
Right of Appointment of Class A Directors for Certain Members. Commencing
with the first special meeting of the initial Members, the members Gold-Eagle
Cooperative, North Central Cooperative and Corn LP shall be entitled to appoint
one Class A Director each. Gold-Eagle Cooperative, North Central Cooperative
and
Corn LP shall be entitled at all times to appoint at least one Class A Director
throughout the duration of the Company, so long as they are Members. A Class
A
Director appointed by one of the Members under this section shall serve
indefinitely at the pleasure of the Member appointing him or her until a
successor is appointed, or until the earliest of the death, resignation, or
removal of the Class A Director. A Class A Director appointed under this section
may be removed for any reason by the Member appointing him or her upon written
notice to the Board of Directors, and such notice may be given at a meeting
of
the Board of Directors attended by the person appointed to fill the vacancy.
Any
such vacancy shall be filled within thirty days of its occurrence by the Member
having the right of appointment.
The
initial Members shall also appoint a minimum of four (4) Class A Directors
that
shall stand for election in accordance with Section 5.3(a) after the Facilities
are substantially completed. Class B Directors may be appointed to the Board
in
accordance with Section 5.4.
In
accordance with Section 5.2, Class A Directors shall always have a majority
of
Directors relative to Class B Directors. In the event the number of Class B
Directors equals or exceeds the number of Class A Directors, Gold-Eagle
Cooperative, North Central Cooperative and Corn LP shall have the right to
appoint additional Class A Directors, pursuant to the priority procedures set
forth in the subsequent paragraph herein, to the extent necessary to maintain
a
majority of Class A Directors relative to Class B Directors. All additional
Class A Directors appointed hereunder shall stand for election in accordance
with Section 5.3(a) after the Facilities are substantially completed.
16
In
the
event that Gold-Eagle Cooperative, North Central Cooperative and Corn LP are
entitled to appoint additional Class A Directors pursuant to the preceding
paragraph herein, Gold-Eagle Cooperative shall be entitled to appoint such
first
additional Class A Director, North Central Cooperative shall be entitled to
appoint such second additional Class A Director, and Corn LP shall be entitled
to appoint such third additional Class A Director. All additional Class A
Director appointments shall continue in the following order: Gold-Eagle
Cooperative, North Central Cooperative and Corn LP. This priority procedure
for
the appointment of additional Class A Directors shall continue in this order
as
is necessary to maintain a Class A Director majority on the Board of
Directors.
5.4 Appointment
of Class B Directors and Terms.
Each
Member that makes a Capital Contribution having a value equal to or greater
than
$5 million may appoint one (1) Person as a Class B Director, provided that
Gold-Eagle Cooperative, North Central Cooperative and Corn LP shall not be
entitled to appoint any Class B Directors regardless of their Capital
Contributions. This Section 5.4 shall only apply to Capital Contributions made
during the initial registered offering of the Company’s Units and not to Capital
Contributions or Transfers of Units made at a later time. In the event a Member
entitled to appoint a Class B Director pursuant to this Section 5.4 subsequently
transfers any Units, and the remaining Units held by the Member, if any, are
valued under GAAP at less than $5 million, such Member shall no longer be
entitled to appoint a Class B Director and the Director’s seat at issue shall be
eliminated. In the event that a Class B Director’s seat is eliminated pursuant
to this Section 5.4, if Gold-Eagle Cooperative, North Central Cooperative or
Corn LP has been entitled to appoint an additional Class A Director as provided
in the third paragraph of Section 5.3(c) hereof, one Class A Director’s seat
shall be eliminated, provided that Gold-Eagle Cooperative, North Central
Cooperative and Corn LP shall each at all times be entitled to appoint at least
one Class A Director. In the event that a Class A Director’s seat is eliminated
pursuant to this Section 5.4, the Board of Directors shall determine which
Class
A Director’s seat shall be eliminated hereunder. Each Class B Director appointed
hereunder shall serve as such at the discretion of such Member appointing him
or
her until his or her successor is appointed and qualified.
5.5
Committees.
A
resolution approved by the affirmative vote of a majority of the Directors
may
establish committees having the authority of the Directors in the management
of
the business of the Company to the extent consistent with this Agreement and
provided in the resolution. A committee shall consist of one or more persons,
who need not be Directors, appointed by affirmative vote of a majority of the
Directors present. Committees may include a compensation committee and/or an
audit committee, in each case consisting of one or more independent Directors
or
other independent persons. Committees are subject to the direction and control
of, and vacancies in the membership thereof shall be filled by, the Directors.
A
majority of the members of the committee present at a meeting is a quorum for
the transaction of business, unless a larger or smaller proportion or number
is
provided in a resolution approved by the affirmative vote of a majority of
the
Directors present.
5.6
Authority
of Directors.
Subject
to the limitations and restrictions set forth in this Agreement, the Directors
shall direct the management of the business and affairs of the Company and
shall
have all of the rights and powers which may be possessed by a “manager” under
the Act including, without limitation, the right and power to do or perform
the
following and, to the extent permitted by the Act or this Agreement, the further
right and power by resolution of the Directors to delegate to the Officers
or
such other Person or Persons to do or perform the following:
(a)
Conduct its business, carry on its operations and have and exercise the powers
granted by the Act in any state, territory, district or possession of the United
States, or in any foreign country which may be necessary or convenient to effect
any or all of the purposes for which it is organized;
17
(b)
Acquire by purchase, lease, or otherwise any real or personal property which
may
be necessary, convenient, or incidental to the accomplishment of the purposes
of
the Company;
(c)
Operate, maintain, finance, improve, construct, own, grant operations with
respect to, sell, convey, assign, mortgage, and lease any real estate and any
personal property necessary, convenient, or incidental to the accomplishment
of
the purposes of the Company;
(d)
Execute any and all agreements, contracts, documents, certifications, and
instruments necessary or convenient in connection with the management,
maintenance, and operation of the business, or in connection with managing
the
affairs of the Company, including, executing amendments to this Agreement and
the Articles in accordance with the terms of this Agreement, both as Directors
and, if required, as attorney-in-fact for the Members pursuant to any power
of
attorney granted by the Members to the Directors;
(e)
Borrow money and issue evidences of indebtedness necessary, convenient, or
incidental to the accomplishment of the purposes of the Company, and secure
the
same by mortgage, pledge, or other lien on any Company assets;
(f)
Execute, in furtherance of any or all of the purposes of the Company, any deed,
lease, mortgage, deed of trust, mortgage note, promissory note, xxxx of sale,
contract, or other instrument purporting to convey or encumber any or all of
the
Company assets;
(g)
Prepay in whole or in part, refinance, recast, increase, modify, or extend
any
liabilities affecting the assets of the Company and in connection therewith
execute any extensions or renewals of encumbrances or any or all of such
assets
(h)
Care
for and distribute funds to the Members by way of cash income, return of
capital, or otherwise, all in accordance with the provisions of this Agreement,
and perform all matters in furtherance of the objectives of the Company or
this
Agreement;
(i)
Contract on behalf of the Company for the employment and services of employees
and/or independent contractors, such as lawyers and accountants, and delegate
to
such Persons the duty to manage or supervise any of the assets or operations
of
the Company;
(j) Engage
in
any kind of activity and perform and carry out contracts of any kind (including
contracts of insurance covering risks to Company assets and Directors’ and
Officers’ liability) necessary or incidental to, or in connection
with the
accomplishment of the purposes of the Company, as may be lawfully carried on
or
performed by a limited liability company under the laws of each state in which
the Company is then formed or qualified;
18
(k)
Take,
or refrain from taking, all actions, not expressly proscribed or limited by
this
Agreement, as may be necessary or appropriate to accomplish the purposes of
the
Company;
(l)
Institute, prosecute, defend, settle, compromise, and dismiss lawsuits or other
judicial or administrative proceedings brought on or in behalf of, or against,
the Company, the Members or the Directors or Officers in connection with
activities arising out of, connected with, or incidental to this Agreement,
and
to engage counsel or others in connection therewith;
(m) Purchase,
take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ,
sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and
deal in and with, shares or other interests in or obligations of domestic or
foreign corporations, associations, general or limited partnerships, other
limited liability companies, or individuals or direct or indirect obligations
of
the United States or of any government, state, territory, government district
or
municipality or of any instrumentality of any of them;
(n)
Agree
with any Person as to the form and other terms and conditions of such Person’s
Capital Contribution to the Company and cause the Company to issue Membership
Economic Interests and Units in consideration of such Capital Contribution;
and
(o)
Indemnify a Member or Directors or Officers, or former Members or Directors
or
Officers, and to make any other indemnification that is authorized by this
Agreement in accordance with, and to the fullest extent permitted by, the Act.
5.7 Director
as Agent.
Notwithstanding the power and authority of the Directors to manage the business
and affairs of the Company, no Director shall have authority to act as agent
for
the Company for the purposes of its business (including the execution of any
instrument on behalf of the Company) unless the Directors have authorized the
Director to take such action. The Directors may also delegate authority to
manage the business and affairs of the Company (including the execution of
instruments on behalf of the Company) to such Person or Persons (including
to
any Officers) designated by the Directors, and such Person or Persons (or
Officers) shall have such titles and authority as determined by the Directors.
5.8
Restrictions
on Authority of Directors.
(a)
The
Directors shall not have authority to, and they covenant and agree that they
shall not, do any of the following acts without the unanimous consent of the
Members:
(i)
|
Cause
or permit the Company to engage in any activity that is not consistent
with the purposes of the Company as set forth in Section 1.3
hereof;
|
(ii)
|
Knowingly
do any act in contravention of this Agreement or which would make
it
impossible to carry on the ordinary business of the Company, except
as
otherwise provided in this
Agreement;
|
(iii) |
Possess
Company Property, or assign rights in specific Company Property,
for other
than a Company purpose; or
|
19
(iv) |
Cause
the Company to voluntarily take any action that would cause a bankruptcy
of the Company.
|
(b)
The
Directors shall not have authority to, and they covenant and agree that they
shall not cause the Company to, without the consent of a majority of the
Membership Voting Interests:
(i) |
Merge,
consolidate, exchange or otherwise dispose of at one time all
or
substantially all of the Property, except for a liquidating sale
of the
Property in connection with the dissolution of the Company;
|
(ii) |
Confess
a judgment against the Company in an amount in excess of $5,000,000;
|
(iii) |
Issue
Units at a purchase price that is less than thirty percent
(30%) of the
purchase price offered to investors in the Company’s initial registered
offering of Units filed with the Securities Exchange
Commission;
|
(iv) |
Issue
an aggregate number of Units that is greater than one hundred
twenty-five
percent (125%) of the maximum number of Units to be offered
to investors
in the Company’s initial registered offering of Units;
and
|
(v) |
Cause
the Company to acquire any equity or debt securities
of any Director or
any of its Affiliates, or otherwise make loans to any
Director or any of
its Affiliates.
|
The
actions specified herein as requiring the consent of the Members shall be in
addition to any actions by the Directors which are specified in the Act as
requiring the consent or approval of the Members. Any such required consent
or
approval may be given by a vote of a majority of the Membership Voting
Interests.
5.9 Director
Meetings and Notice.
Meetings
of the Directors shall be held at such times and places as shall from time
to
time be determined by the Directors. Meetings of the Directors may also be
called by the Chairman of the Company or by any three or more Class A Directors
or any two or more Class B Directors. If the date, time, and place of a meeting
of the Directors has been announced at a previous meeting, no notice shall
be
required. In all other cases, five (5) days’ written notice of meetings, stating
the date, time, and place thereof and any other Information required by law
or
desired by the Person(s) calling such meeting, shall be given to each
Director. Any Director may waive notice of any meeting. A waiver of notice
by a
Director is effective whether given before, at, or after the meeting, and
whether given orally, in writing, or by attendance. The attendance of a Director
at any meeting shall constitute a waiver of notice of such meeting, unless
such
Director objects at the beginning of the meeting to the transaction of business
on the grounds that the meeting is not lawfully called or convened and does
not
participate thereafter in the meeting.
20
5.10 Action
Without a Meeting.
Any
action required or permitted to be taken by the Directors may also be taken
by a
written action signed by all of the Directors authorized to vote on the matter
as provided by this Agreement, provided that a copy of such written action
shall
be promptly given to all such Directors. The Directors may participate in any
meeting of the Directors by means of telephone conference or similar means
of
communication by which all persons participating in the meeting can
simultaneously hear each other.
5.11 Quorum;
Manner of Acting.
Not less
than fifty percent (50%) of the Directors of each class of Directors authorized
to vote on a matter as provided by this Agreement shall constitute a quorum
for
the transaction of business at any Directors’ meeting. Each Director shall have
one (1) vote at meetings of the Directors. The Directors shall take action
by
the vote of a majority of the number of Directors constituting a quorum as
provided by this Agreement. All Class A Directors must vote in person except
as
provided in Section 5.10. Class B Directors may vote in person or by proxy
executed in writing by the Class B Director or by a duly authorized attorney-
in-fact. The proxy shall be filed with the Company before or at the time of
the
meeting. No proxy shall be valid more than three (3) months from the date of
its
execution, unless otherwise provided in the written proxy.
5.12 Voting;
Potential Financial Interest.
No
Director shall be disqualified from voting on any matter to be determined or
decided by the Directors solely by reason of such Director’s (or his/her
Affiliate’s) potential financial interest in the outcome of such vote, provided
that the nature of such Director’s (or his/her
Affiliate’s) potential financial interest was reasonably disclosed at the time
of such vote.
5.13 Duties
and Obligations of Directors.
The
Directors shall cause the Company to conduct its business and operations
separate and apart from that of any Director or any of its Affiliates. The
Directors shall take all actions 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 Iowa and each other jurisdiction in which such
existence is necessary to protect the limited liability of Members or to enable
the Company to conduct the business in which it is engaged, and (ii) for the
accomplishment of the Company’s purposes, including the acquisition,
development, maintenance, preservation, and operation of Company Property in
accordance with the provisions of this Agreement and applicable laws and
regulations. Each Director shall have the duty to discharge the foregoing duties
in good faith, in a manner the Director believes to be in the best interests
of
the Company, and with the care an ordinarily prudent person in a like position
would exercise under similar circumstances. The Directors shall be under no
other fiduciary duty to the Company or the Members to conduct the affairs of
the
Company in a particular manner.
5.14 Chairman
and Vice Chairman.
Unless
provided otherwise by a resolution adopted by the Directors, the Chairman shall
preside at meetings of the Members and the Directors; shall see that all orders
and resolutions of the Directors are carried into effect; may maintain records
of and certify proceedings of the Directors and Members; and shall perform
such
other duties as may from time to time be prescribed by the Directors. The Vice
Chairman shall, in the absence or disability of the Chairman, perform the duties
and exercise the powers of the Chairman and shall perform such other duties
as
the Directors or the Chairman may from time to time prescribe. The Directors
may
designate more than one Vice Chairman, in which case the Vice Chairmen shall
be
designated by the Directors so as to denote which is most senior in office.
21
5.15 President.
Until
provided otherwise by a resolution of the Directors, the Chairman shall also
act
as the interim President and CEO of the Company (herein referred to as the
“President”; the titles of President and CEO shall constitute a reference to one
and the same office and Officer of the Company), and the Chairman may exercise
the duties of the office of Chairman using any such designations. The Directors
shall appoint someone other than the Chairman as the President of the Company
not later than the commencement of operations of the Facilities, and such
President shall perform such duties as the Directors may from time to time
prescribe, including without limitation, the management of the day-to-day
operations of the Facilities.
5.16 Chief
Financial Officer.
Unless
provided otherwise by a resolution adopted by the Directors, the Chief Financial
Officer of the Company shall be the Treasurer of the Company and shall keep
accurate financial records for the Company; shall deposit all monies, drafts,
and checks in the name of and to the credit of the Company in such banks and
depositories as the Directors shall designate from time to time; shall endorse
for deposit all notes, checks, and drafts received by the Company as ordered
by
the Directors, making proper vouchers therefore; shall disburse Company funds
and issue checks and drafts in the name of the Company as ordered by the
Directors; shall render to the President and the Directors, whenever requested,
an account of all such transactions as Chief Financial Officer and of the
financial condition of the Company; and shall perform such other duties as
may
be prescribed by the Directors or the President from time to time. The Chief
Financial Officer may be someone who is not a Member or a Director.
5.17 Secretary;
Assistant Secretary.
The
Secretary shall attend all meetings of the Directors and of the Members and
shall maintain records of, and whenever necessary, certify all proceedings
of
the Directors and of the Members. The Secretary shall keep the required records
of the Company, when so directed by the Directors or other persons or persons
authorized to call such meetings, shall give or cause to be given notice of
meetings of the Members and of meetings of the Directors, and shall also perform
such other duties and have such other powers as the Chairman or the Directors
may prescribe from time to time. An Assistant Secretary, if any, shall perform
the duties of the Secretary during the absence or disability of the Secretary.
5.18 Vice
President.
The
Company may have one or more Vice Presidents, if more than one, the Directors
shall designate which is most senior. The most senior Vice President shall
perform the duties of the President in the absence of the President.
5.19 Delegation.
Unless
prohibited by a resolution of the Directors, the President, Chief Financial
Office, Vice President and Secretary (individually, an “Officer” and
collectively, “Officers”) may delegate
in writing some or all of the duties and powers of such Officer’s management
position to other Persons. An Officer who delegates the duties or powers of
an
office remains subject to the standard of conduct for such Officer with respect
to the discharge of all duties and powers so delegated.
5.20 Execution
of Instruments.
All
deeds, mortgages, bonds, checks, contracts and other instruments pertaining
to
the business and affairs of the Company shall be signed on behalf of the Company
by (i) the Chairman; or (ii) when authorized by resolution(s) of the Directors,
the President; or (iii) by such other person or persons as may be designated
from time to time by the Directors.
22
5.21 Limitation
of Liability; Indemnification of Directors.
To the
maximum extent permitted under the Act and other applicable law, no Member,
Director or Officer of this Company shall be personally liable for any debt,
obligation or liability of this Company merely by reason of being a Member,
Director, Officer or all of the foregoing. No Director or Officer of this
Company shall be personally liable to this Company or its Members for monetary
damages for a breach of fiduciary duty by such Director or Officer; provided
that this provision shall not eliminate or limit the liability of a Director
or
Officer for any of the following: (i) for any breach of the duty of loyalty
to
the Company or its Members; (ii) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law; or (iii)
for a
transaction from which the Director or Officer derived an improper personal
benefit or a wrongful distribution in violation of Section 807 of the Act.
To
the maximum extent permitted under the Act and other applicable law, the
Company, its receiver, or its trustee (in the case of its receiver or trustee,
to the extent of Company Property) shall indemnify, save and hold harmless,
and
pay all judgments and claims against each Director or Officer relating to any
liability or damage incurred by reason of any act performed or omitted to be
performed by such Director, or Officer, in connection with the business of
the
Company, including reasonable attorneys’ fees incurred by such Director or
Officer in connection with the defense of any action based on any such act
or
omission, which attorneys’ fees may be paid as incurred, including all such
liabilities under federal and state securities laws as permitted by law. To
the
maximum extent permitted under the Act and other applicable law, in the event
of
any action by a Unit Holder against any Director or Officer, including a
derivative suit, the Company shall indemnify, save harmless, and pay all costs,
liabilities, damages and expenses of such Director or Officer, including
reasonable attorneys fees incurred in the defense of such action.
Notwithstanding the foregoing provisions, no Director or Officer shall be
indemnified by the Company to the extent prohibited or limited (but only to
the
extent limited) by the Act. The Company may purchase and maintain insurance
on
behalf of any Person in such Person’s official capacity against any liability
asserted against and incurred by such Person in or arising from that capacity,
whether or not the Company would otherwise be required to indemnify the Person
against the liability.
5.22 Compensation;
Expenses of Directors.
No
Member or Director shall receive any salary, fee, or draw for services rendered
to or on behalf of the Company merely by virtue of their status as a Member
or
Director, it being the intention that, irrespective of any personal interest
of
any of the Directors, the Directors shall have authority to establish reasonable
compensation of all Directors for services to the Company as Directors,
Officers, or otherwise. Except as otherwise approved by or pursuant to a policy
approved by the Directors, no Member or Director shall be reimbursed for any
expenses incurred by such Member or Director on behalf of the Company.
Notwithstanding the foregoing, by resolution by the Directors, the Directors
may
be paid as reimbursement therefore, their expenses, if any, of attendance at
each meeting of the Directors. In addition, the Directors, by resolution, may
approve from time to time, the salaries and other compensation packages of
the
Officers of the Company.
5.23 Loans.
Any
Member or Affiliate may, with the consent of the Directors, lend or advance
money to the Company. If any Member or Affiliate shall make any loan or loans
to
the Company or advance money on its behalf, the amount of any such loan or
advance shall not be treated as a contribution to the capital of the Company
but
shall be a debt due from the Company. The amount of any such loan or advance
by
a lending Member or Affiliate shall be repayable out of the Company’s cash and
shall bear interest at a rate not in excess of the prime rate established,
from
time to time, by any major bank selected by the Directors for loans to its
most
creditworthy commercial borrowers, plus one percent (1%) per annum. If the
Directors, or any Affiliate of the Directors, is the lending Member, the rate
of
interest and the terms and conditions of such loan shall be no less favorable
to
the Company than if the lender had been an independent third party. None of
the
Members or their Affiliates shall be obligated to make any loan or advance
to
the Company.
23
SECTION
6. ROLE OF MEMBERS
6.1
One
Membership Class.
There
shall initially be one class of Membership Interests and one class of Units.
Additional classes of Membership Interests and Units may be created and issued
to new Members or to existing Members on such terms and conditions as the
Directors may determine and may include the creation of different classes of
Membership Interests represented by different classes of Units, which classes
may have different rights, powers and preferences, which rights, powers and
preferences may be senior to those of existing Members, including, without
limitation, voting rights and distribution preferences. Members shall have
no
preemptive rights to acquire additional or newly created Units of the Company.
6.2 Members.
Each
Person who desires to become a Member must complete and execute a signature
page
to this Agreement in the form of Exhibit C attached hereto and such other
documents as may be required by the Directors. Each prospective Member must
be
approved and admitted to the Company by the Board of Directors. The Membership
Interests of the Members shall be set forth on Exhibit “A” to this Agreement.
6.3 Additional
Members.
No
Person shall become a Member without the approval of the Directors. The
Directors may refuse to admit any Person as a Member in its sole discretion.
Any
such admission must comply with the requirements described in this Agreement
and
will be effective only after such Person has executed and delivered to the
Company such documentation as determined by the Directors to be necessary and
appropriate to effect such admission including the Member’s agreement to be
bound by this Agreement.
6.4
Rights
or Powers.
Except
as otherwise expressly provided for in this Agreement, the Members shall not
have any right or power to take part in the management or control of the Company
or its business and affairs or to act for or bind the Company in any way.
6.5 Voting
Rights of Members.
The
Members shall have voting rights as defined by the Membership Voting Interest
of
such Member and in accordance with the provisions of this Agreement. Members
do
not have a right to cumulate their votes for any matter entitled to a vote
of
the Members, including election of Directors.
6.6 Member
Meetings.
Meetings
of the Members shall be called by the Directors, and shall be held at the
principal office of the Company or at such other place as shall be designated
by
the person calling the meeting. Members representing an aggregate of not less
than thirty percent (30%) of the Membership Voting Interests may also in writing
demand that the Directors call a meeting of the Members. Regular meetings of
the
Members shall be held not less than once per Fiscal Year.
24
6.7 Conduct
of Meetings.
Subject
to the discretion of the Directors, the Members may participate in any meeting
of the Members by means of telephone conference or similar means of
communication by which all persons participating in the meeting can
simultaneously hear and speak with each other.
6.8
Notice
of Meetings; Waiver.
Notice
of the meeting, stating the place, day and hour of the meeting, shall be given
to each Member in accordance with Section 11.1 hereof at least 5 days and no
more than 60 days before the day on which the meeting is to be held. A Member
may waive the notice of meeting required hereunder by written notice of waiver
signed by the Member whether given before, during or after the meeting.
Attendance by a Member at a meeting is waiver of notice of that meeting, unless
the Member objects at the beginning of the meeting to the transaction of
business because the meeting is not lawfully called or convened and thereafter
does not participate in the meeting.
6.9 Quorum
and Proxies.
The
presence (in person or by proxy or mail ballot) of Members representing an
aggregate of at least twenty-five percent (25%) of the Membership Voting
Interests is required for the transaction of business at a meeting of the
Members. Voting by proxy or by mail ballot shall be permitted on any matter
if
authorized by the Directors.
6.10
Voting;
Action by Members. If
a
quorum is present, the affirmative vote of a majority of the Membership Voting
Interests represented at the meeting in person, by proxy or by mail ballot
shall
constitute the act of the Members, unless the vote of a greater or lesser
proportion or numbers is otherwise required by this Agreement.
6.11
Record
Date.
For the
purpose of determining Members entitled to notice of or to vote at any meeting
of Members or any adjournment of the meeting, or Members entitled to receive
payment of any distribution, or to make a determination of Members for any
other
purpose, the date on which notice of the meeting is mailed (or otherwise
delivered) or the date on which the resolution declaring the distribution is
adopted as the case may be, shall be the record date for determination of
Members.
6.12 Termination
of Membership.
The
membership of a Member in the Company shall terminate upon the occurrence of
events described in the Act, including registration and withdrawal. If for
any
reason the membership of a Member is terminated, the Member whose membership
has
terminated loses all Membership Voting Interests and shall be considered merely
as Assignee of the Membership Economic Interest owned before the termination
of
membership, having only the rights of an unadmitted Assignee provided for in
Section 9.10 hereof.
6.13 Continuation
of the Company.
The
Company shall not be dissolved upon the occurrence of any event which is deemed
to terminate the continued membership of a Member. The Company’s affairs shall
not be required to be wound up. The Company shall continue without dissolution.
25
6.14
No
Obligation to Purchase Membership Interest.
No
Member whose membership in the Company terminates, nor any transferee of such
Member, shall have any right to demand or receive a return of such terminated
Member’s Capital Contributions or to require the purchase or redemption of the
Member’s Membership Interest. The other Members and the Company shall not have
any obligation to purchase or redeem the Membership Interest of any such
terminated Member or transferee of any such terminated Member.
6.15 Waiver
of Dissenters Rights.
Each
Member hereby disclaims, waives and agrees, to the fullest extent permitted
by
law or the Act, not to assert dissenters’ or similar rights under the Act.
6.16 Limitation
on Ownership.
Notwithstanding any other provision herein, subsequent to the close of the
Company’s initial public offering of equity securities filed with the Securities
and Exchange Commission following the Company’s seed capital offering, no Member
shall directly or indirectly own or control more than ninety percent (90%)
of
the issued and outstanding Units at any time. Units under indirect ownership
or
control by a Member shall include Units owned or controlled by such Member's
Related Parties, Subsidiaries and Affiliates. For purposes of this Section
6.16,
the offering will close upon the earliest occurrence of any of the following:
(1) the Company’s acceptance of subscriptions for units equaling the maximum
amount as set forth in the Company’s registration statement or offering
memorandum; (2) one year from the effective date of the Company’s initial
registration statement or offering memorandum; or (3) the Company’s decision to
close any time after the acceptance of subscriptions for units equaling the
minimum amount as set forth in the Company’s registration statement or offering
memorandum.
SECTION
7. ACCOUNTING, BOOKS AND RECORDS
7.1 Accounting,
Books and Records.
The
books and records of the Company shall be kept, and the financial position
and
the results of its operations recorded, in accordance with GAAP. The books
and
records shall reflect all the Company transactions and shall be appropriate
and
adequate for the Company's business. The Company shall maintain at its principal
office all of the following: (i) A current list of the full name and last known
business or residence address of each Member and Assignee set forth in
alphabetical order, together with the Capital Contributions, Capital Account
and
Units of each Member and Assignee; (ii) The full name and business address
of
each Director; (iii) A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which the
Articles or any amendments thereto have been executed; (iv) Copies of the
Company’s federal, state, and local income tax or information returns and
reports, if any, for the six most recent taxable years; (v) A copy of this
Agreement and any an all amendments thereto together with executed copies of
any
powers of attorney pursuant to which this Agreement or any amendments thereto
have been executed; and (vi) Copies of the financial statements of the Company,
if any, for the six most recent Fiscal Years. The Company shall use the accrual
method of accounting in preparation
of its financial reports and for tax purposes and shall keep its books and
records accordingly.
7.2
Delivery
to Members and Inspection.
Any
Member or its designated representative shall have reasonable access during
normal business hours to the information and documents kept by the Company
pursuant to Section 7.1. The rights granted to a Member pursuant to this Section
7.2 are expressly subject to compliance by such Member with the safety, security
and confidentiality procedures and guidelines of the Company, as such procedures
and guidelines may be established from time to time. Upon the request of any
Member for purposes reasonably related to the interest of that Person as a
Member, the Directors shall promptly deliver to the requesting Member, at the
expense of the requesting Member, a copy of the information required to be
maintained under Section 7.1. Each Member has the right, upon reasonable request
for purposes reasonably related to the interest of the Person as a Member and
for proper purposes, to: (i) inspect and copy during normal business hours
any
of the Company records described in Section 7.1; and (ii) obtain from the
Directors, promptly after their becoming available, a copy of the Company’s
federal, state, and local income tax or information returns for each Fiscal
Year. Each Assignee shall have the right to information regarding the Company
only to the extent required by the Act.
26
7.3 Reports.
The
chief financial officer of the Company shall be responsible for causing the
preparation of financial reports of the Company and the coordination of
financial matters of the Company with the Company’s accountants. The Company
shall cause to be delivered to each Member the financial statements listed
below, prepared in each case (other than with respect to Member’s Capital
Accounts, which shall be prepared in accordance with this Agreement) in
accordance with GAAP consistently applied. As soon as practicable following
the
end of each Fiscal Year (and in any event not later than one hundred and twenty
(120) days after the end of such Fiscal Year) and at such time as distributions
are made to the Unit Holders pursuant to Section 10 hereof following the
occurrence of a Dissolution Event, a balance sheet of the Company as of the
end
of such Fiscal Year and the related statements of operations, Unit Holders’
Capital Accounts and changes therein, and cash flows for such Fiscal Year,
together with appropriate notes to such financial statements and supporting
schedules, all of which shall be audited and certified by the Company’s
accountants, and in each case, to the extent the Company was in existence,
setting forth in comparative form the corresponding figures for the immediately
preceding Fiscal Year end (in the case of the balance sheet) and the two (2)
immediately preceding Fiscal Years (in the case of the statements).
7.4 Tax
Matters.
The
Directors shall, without any further consent of the Unit Holders being required
(except as specifically required herein), make any and all elections for
federal, state, local, and foreign tax purposes as the Directors shall determine
appropriate and represent the Company and the Unit Holders before taxing
authorities or courts of competent jurisdiction in tax matters affecting the
Company or the Unit Holders in their capacities as Unit Holders, and to file
any
tax returns and execute any agreements or other documents relating to or
affecting such tax matters, including agreements or other documents that bind
the Unit Holders with respect to such tax matters or otherwise affect the rights
of the Company and the Unit Holders. The Directors shall designate a Person
to
be specifically authorized to act as the “Tax Matters Member” under the Code and
in any similar capacity under state or local law; provided, however, that the
Directors shall have, the authority to designate, remove and replace the Tax
Matters Member who shall act as the tax matters partner within the meaning
of
and pursuant to Regulations Sections 301.623 l(a)(7)-l and -2 or any similar
provision under state or local law. Necessary tax information shall be delivered
to each Unit Holder as soon as practicable after the end of each Fiscal Year
of
the Company but not later than three (3) months after the end of each Fiscal
Year.
27
SECTION
8. AMENDMENTS
8.1 Amendments.
Amendments to this Agreement may be proposed by the Board of Directors or any
Member. Following such proposal, the Board of Directors shall submit to the
Members a verbatim statement of any proposed amendment, providing that counsel
for the Company shall have approved of the same in writing as to form, and
the
Board of Directors shall include in any such submission a recommendation as
to
the proposed amendment. The Board of Directors shall seek the written vote
of
the Members on the proposed amendment or shall call a meeting to vote thereon
and to transact any other business that it may deem appropriate. A proposed
amendment shall be adopted and be effective as an amendment hereto only if
approved by the affirmative vote of a majority of the Membership Voting
Interests constituting a quorum of the Members. Notwithstanding any provision
of
this Section 8.1 to the contrary, this Agreement shall not be amended without
the consent of each Member adversely affected if such amendment would modify
the
limited liability of a Member, or alter the Membership Economic Interest of
a
Member.
SECTION
9. TRANSFERS
9.1 Restrictions
on Transfers.
Except
as otherwise permitted by this Agreement, no Member shall Transfer all or any
portion of its Units. In the event that any Member pledges or otherwise
encumbers all or any part of its Units as security for the payment of a Debt,
any such pledge or hypothecation shall be made pursuant to a pledge or
hypothecation agreement that requires the pledgee or secured party to be bound
by all of the terms and conditions of this Section 9.
In
the
event such pledgee or secured party becomes the Unit Holder hereunder pursuant
to the exercise of such party’s rights under such pledge or hypothecation
agreement, such pledgee or secured party shall be bound by all terms and
conditions of this Second Amended and Restated Operating Agreement and all
other
agreements governing the rights and obligations of Unit Holders. In such case,
such pledgee or secured party; and any transferee or purchaser of the Units
held
by such pledgee or secured party, shall not have any Membership Voting Interest
attached to such Units unless and until the Directors have approved in writing
and admitted as a Member hereunder, such pledgee, secured party, transferee
or
purchaser of such Units.
9.2 Permitted
Transfers.
Subject
to the conditions and restrictions set forth in this Section 9, a Unit Holder
may:
(a)
at
any time Transfer all or any portion of its Units:
(i)
to
the transferors administrator or trustee to whom such Units are transferred
involuntarily by operation of law or judicial decree, or;
(ii)
without consideration to or in trust for descendants or the spouse of a Member;
and
(b)
at
any time following the date on which substantial operations of the Facilities
commences, Transfer all or any portion of its Units:
(i)
to
any Person approved by the Directors in writing,
28
(ii)
to
any other Member or to any Affiliate or Related Party of another Member; or
(iii)
to
any Affiliate or Related Party of the transferor.
Any
such
Transfer set forth in this Section 9.2 and meeting the conditions set forth
in
Section 9.3 below is referred to in this Agreement as a “Permitted Transfer.”
9.3 Conditions
Precedent to Transfers.
In
addition to the conditions set forth above, no Transfer of a Membership Interest
shall be effective unless and until all of the following conditions have been
satisfied:
(a)
Except in the case of a Transfer involuntarily by operation of law, the
transferor and transferee shall execute and deliver to the Company such
documents and instruments of Transfer as may be necessary or appropriate in
the
opinion of counsel to the Company to effect such Transfer. In the case of a
Transfer of Units involuntarily by operation of law, the Transfer shall be
confirmed by presentation to the Company of legal evidence of such Transfer,
in
form and substance satisfactory to counsel to the Company. In all cases, the
transferor and/or transferee shall pay all reasonable costs and expenses
connected with the Transfer and the admission of the Transferee as a Member
and
incurred as a result of such Transfer, including but not limited to, legal
fees
and costs.
(b)
The
transferor and transferee shall furnish the Company with the transferee’s
taxpayer identification number, sufficient information to determine the
transferee’s initial tax basis in the Units transferred, and any other
information reasonably necessary to permit the Company to file all required
federal and state tax returns and other legally required information statements
or returns. Without limiting the generality of the foregoing, the Company shall
not be required to make any distribution otherwise provided for in this
Agreement with respect to any transferred Units until it has received such
information.
(c)
Except in the case of a Transfer of any Units involuntarily by operation of
law,
either (i) such Units shall be registered under the Securities Act, and any
applicable state securities laws, or (ii) the transferor may be required to
provide an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to the Directors, to the effect that such Transfer is exempt from
all applicable registration requirements and that such Transfer will not violate
any applicable laws regulating the Transfer of securities.
(d)
Except in the case of a Transfer of Units involuntarily by operation of law,
the
transferor may be required to provide an opinion of counsel, which opinion
and
counsel shall be reasonably satisfactory to the Directors, to the effect that
such Transfer will not cause the Company to be deemed to be an “investment
company” under the Investment Company Act of 1940.
(e)
Unless otherwise approved by the Directors and Members representing in the
aggregate a 75% majority of the Membership Voting Interests, no Transfer of
Units shall be made except upon terms which would not, in the opinion of counsel
chosen by and mutually acceptable to the Directors and the transferor Member,
result in the termination of the Company within the meaning of Section 708
of
the Code or cause the application of the rules of Sections l68(g)(l)(B) and
168(h) of the Code or similar rules to apply to the Company. If the immediate
Transfer of such Unit would, in the opinion of such counsel, cause a termination
within the meaning of Section 708 of the Code, then if, in the opinion of such
counsel, the following action would not precipitate such termination, the
transferor Member shall be entitled to (or required, as the case may be) (i)
immediately Transfer only that portion of its Units as may, in the opinion
of
such counsel, be transferred without causing such a termination and (ii) enter
into an agreement to Transfer the remainder of its Units, in one or more
Transfers, at the earliest date or dates on which such Transfer or Transfers
may
be effected without causing such termination. The purchase price for the Units
shall be allocated between the immediate Transfer and the deferred Transfer
or
Transfers pro rata on the basis of the percentage of the aggregate Units being
transferred, each portion to be payable when the respective Transfer is
consummated, unless otherwise agreed by the parties to the Transfer. In the
case
of a Transfer by one Member to another Member, the deferred purchase price
shall
be deposited in an interest-bearing escrow account unless another method of
securing the payment thereof is agreed upon by the transferor Member and the
transferee Member(s).
29
(f)
No
notice or request initiating the procedures contemplated by Section 9.3 may
be
given by any Member after a Dissolution Event has occurred. No Member may sell
all or any portion of its Units after a Dissolution Event has occurred.
(g)
No
Person shall Transfer any Unit if, in the determination of the Directors, such
Transfer would cause the Company to be treated as a “publicly traded
partnership” within the meaning of Section 7704(b) of the Code.
The
Directors shall have the authority to waive any legal opinion or other condition
required in this Section 9.3 other than the Member approval requirement set
forth in Section 9.3(e).
9.4 Prohibited
Transfers.
Any
purported Transfer of Units that is not permitted under this Section shall
be
null and void and of no force or effect whatsoever; provided that, if the
Company is required to recognize such a Transfer (or if the Directors, in their
sole discretion, elect to recognize such a Transfer), the Units Transferred
shall be strictly limited to the transferor’s Membership Economic Interests as
provided by this Agreement with respect to the transferred Units, which
Membership Economic Interests may be applied (without limiting any other legal
or equitable rights of the Company) to satisfy any debts, obligations, or
liabilities for damages that the transferor or transferee of such Interest
may
have to the Company. In the case of a Transfer
or attempted Transfer
of Units
that is not permitted under this Section, the parties
engaging or attempting to engage in such Transfer shall be liable to indemnify
and hold harmless the Company and the other Members from all cost, liability,
and damage that any of such indemnified Members may incur (including, without
limitation, incremental tax liabilities, lawyers fees and expenses) as a result
of such Transfer or attempted Transfer and efforts to enforce the indemnity
granted hereby.
9.5 No
Dissolution or Termination.
The
transfer of a Membership Interest pursuant to the terms of this Article shall
not dissolve or terminate the Company. No Member shall have the right to have
the Company dissolved or to have such Member’s Capital Contribution returned
except as provided in this Agreement.
30
9.6 Prohibition
of Assignment.
Notwithstanding the foregoing provisions of this Article, Transfer of a
Membership Interest may be made if the Membership Interest sought to be sold,
exchanged or transferred, when added to the total of all other Membership
Interests sold, exchanged or transferred within the period of twelve (12)
consecutive months prior thereto, would result in the termination of the company
under Section 708 of the Internal Revenue Code. In the event of a transfer
of
any Membership Interests, the Members will determine, in their sole discretion,
whether or not the Company will elect pursuant to Section 754 of the Internal
Revenue Code (or corresponding provisions of future law) to adjust the basis
of
the assets of the Company.
9.7 Rights
of Unadmitted Assignees.
A Person
who acquires Units but who is not admitted as a substituted Member pursuant
to
Section 9.8 hereof shall be entitled only to the Membership Economic Interests
with respect to such Units in accordance with this Agreement, and shall not
be
entitled to the Membership Voting Interest with respect to such Units. In
addition, such Person shall have no right to any information or accounting
of
the affairs of the Company, shall not be entitled to inspect the books or
records of the Company, and shall not have any of the rights of a Member under
the Act or this Agreement.
9.8 Admission
of Substituted Members.
As to
Permitted Transfers, a transferee of Units shall be admitted as a substitute
Member provided that such transferee has complied with the following provisions:
(a) The transferee of Units shall, by written instrument in form and substance
reasonably satisfactory to the Directors: (i) accept and adopt the terms and
provisions of this Agreement, including this Section 9, and (ii) assume the
obligations of the transferor Member under this Agreement with respect to the
transferred Units. The transferor Member shall be released from all such assumed
obligations except (x) those obligations or liabilities of the transferor Member
arising out of a breach of this Agreement, (y) in the case of a Transfer to
any
Person other than a Member or any of its Affiliates, those obligations or
liabilities of the transferor Member based on events occurring, arising or
maturing prior to the date of Transfer, and (z) in the case of a Transfer to
any
of its Affiliates, any Capital Contribution or other financing obligation of
the
transferor Member under this Agreement; (b) The transferee pays or reimburses
the Company for all reasonable legal, filing, and publication costs that the
Company incurs in connection with the admission of the transferee as a Member
with respect to the Transferred Units; and (c) Except in the case of a
Transfer involuntarily by operation of law, if required by the Directors, the
transferee (other than a transferee that was a Member prior to the Transfer)
shall deliver to the Company evidence of the authority of such Person to become
a Member and to be bound by all of the terms and conditions of this Agreement,
and the transferee and transferor shall each execute and deliver such other
instruments as the Directors reasonably deem necessary or appropriate to effect,
and as a condition to, such Transfer.
9.9
Representations
Regarding Transfers.
(a)
Each
Member hereby covenants and agrees with the Company for the benefit of the
Company and all Members, that (i)
it
is not
currently making a market in Units and will not in the future make a market
in
Units, (ii) it will not Transfer its Units on an established securities market,
a secondary market (or the substantial equivalent thereof) within the meaning
of
Code Section 7704(b) (and any Regulations, proposed Regulations, revenue
rulings, or other official pronouncements of the Internal Revenue Service or
Treasury Department that may be promulgated or published thereunder), and (iii)
in the event such Regulations, revenue rulings, or other pronouncements treat
any or all arrangements which facilitate the selling of Company interests and
which are commonly referred to as “matching services” as being a secondary
market or substantial equivalent thereof it will not Transfer any Units through
a matching service that is not approved in advance by the Company. Each Member
further agrees that it will not Transfer any Units to any Person unless such
Person agrees to be bound by this Section 9 and to Transfer such Units only
to
Persons who agree to be similarly bound.
31
(b)
Each
Member hereby represents and warrants to the Company and the Members that such
Member’s acquisition of Units hereunder is made as principal for such Member’s
own account and not for resale or distribution of such Units. Each Member
further hereby agrees that the following legend, as the same may be amended
by
the Directors in their sole discretion, may be placed upon any counterpart
of
this Agreement, the Articles, or any other document or instrument evidencing
ownership of Units:
THE
TRANSFERABILITY OF THE MEMBERSHIP UNITS REPRESENTED BY THIS DOCUMENT IS
RESTRICTED. SUCH UNITS MAY NOT BE SOLD, ASSIGNED, OR TRANSFERRED, NOR WILL
ANY
ASSIGNEE, VENDEE, TRANSFEREE OR ENDORSEE THEREOF BE RECOGNIZED AS HAVING
ACQUIRED ANY SUCH UNITS FOR ANY PURPOSES, UNLESS AND TO THE EXTENT SUCH SALE,
TRANSFER, HYPOTHECATION, OR ASSIGNMENT IS PERMITTED BY, AND IS COMPLETED IN
STRICT ACCORDANCE WITH, THE TERMS AND CONDITIONS SET FORTH IN THE OPERATING
AGREEMENT OF THE COMPANY AND AGREED TO BY EACH MEMBER.
THE
UNITS
REPRESENTED BY THIS DOCUMENT MAY NOT BE SOLD, OFFERED FOR SALE, OR TRANSFERRED
IN ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE
SECURITIES LAWS.
9.10 Distribution
and Allocations in Respect of Transferred Units.
If any
Units are Transferred during any Fiscal Year in compliance with the provisions
of this Section 9, Profits, Losses, each item thereof and all other items
attributable to the Transferred Units for such Fiscal Year shall be divided
and
allocated between the transferor and the transferee by taking into account
their
varying interests during the Fiscal Year in accordance with Code Section 706(d),
using any conventions permitted by law and selected by the Directors. All
distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the Company
shall recognize such Transfer not later than the end of the calendar month
during which it is given notice of such Transfer, provided that, if the Company
is given notice of a Transfer at least ten (10) Business Days prior to the
Transfer, the Company shall recognize such Transfer as of the date of such
Transfer, and provided further that if the Company does not receive a notice
stating the date such Units were transferred and such other information as
the
Directors may reasonably require within thirty (30) days after the end of the
Fiscal Year during which the Transfer occurs, then all such items shall be
allocated, and all distributions shall be made, to the Person who, according
to
the books and records of the Company, was the owner of the Units on the last
day
of such Fiscal Year. Neither the Company nor any Member shall incur any
liability for making allocations and distributions in accordance with the
provisions of this Section 9.10, whether or not the Directors or the Company
has
knowledge of any Transfer of ownership of any Units.
32
9.11 Additional
Members.
Additional Members may be admitted from time to time upon the approval of the
Directors. Any such additional Member shall pay such purchase price for
his/her/its Membership Interest and shall be admitted in accordance with such
terms and conditions, as the Directors shall approve. All Members acknowledge
that the admission of additional Members may result in dilution of a Member’s
Membership Interest. Prior to the admission of any Person as a Member, such
Person shall agree to be bound by the provisions of this Agreement and shall
sign and deliver an Addendum to this Agreement in the form of Exhibit C,
attached hereto. Upon execution of such Addendum, such additional Members shall
be deemed to be parties to this Agreement as if they had executed this Agreement
on the original date hereof, and, along with the parties to this Agreement,
shall be bound by all the provisions hereof from and after the date of execution
hereof. The Members hereby designate and appoint the Directors to accept such
additional Members and to sign on their behalf any Addendum in the form of
Exhibit C, attached hereto.
SECTION
10. DISSOLUTION AND WINDING UP
10.1 Dissolution.
The
Company shall dissolve and shall commence winding up and liquidating upon the
first to occur of any of the following (each a “DISSOLUTION EVENT”): (i) The
affirmative vote of a 75% majority
in interest of the Membership Voting Interests to dissolve, wind up, and
liquidate the Company; or (ii) The entry of a decree of judicial dissolution
pursuant to the Act. The Members hereby agree that, notwithstanding any
provision of the Act, the Company shall not dissolve prior to the occurrence
of
a Dissolution Event.
10.2 Winding
Up.
Upon
the occurrence of a Dissolution Event, the Company shall continue solely for
the
purposes of winding up its affairs in an orderly manner, liquidating its assets,
and satisfying the claims of its creditors and Members, and no Member shall
take
any action that is inconsistent with, or not necessary to or appropriate for,
the winding up of the Company’s business and affairs, provided that all
covenants contained in this Agreement and obligations provided for in this
Agreement shall continue to be fully binding upon the Members until such time
as
the Property has been distributed pursuant to this Section 10.2 and the Articles
have been canceled pursuant to the Act. The Liquidator shall be responsible
for
overseeing the prompt and orderly winding up and dissolution of the Company.
The
Liquidator shall take full account of the Company’s liabilities and Property and
shall cause the Property or the proceeds from the sale thereof (as determined
pursuant to Section 10.8 hereof), to the extent sufficient therefore, to be
applied and distributed, to the maximum extent permitted by law, in the
following order: (a) First, to creditors (including Members and Directors who
are creditors, to the extent otherwise permitted by law) in satisfaction of
all
of the Company’s Debts and other liabilities (whether by payment or the making
of reasonable provision for payment thereof), other than liabilities for which
reasonable provision for payment has been made; and (b) Second, except as
provided in this Agreement, to Members in satisfaction of liabilities for
distributions pursuant to the Act; (c) Third, the balance, if any, to the Unit
Holders in accordance with the positive balance in their Capital Accounts
calculated after making the required adjustment set forth in clause (ii)(C)
of
the definition of Gross Asset Value in Section 1.10 of this Agreement. after
giving effect to all contributions, distributions and allocations for all
periods.
33
10.3 Compliance
with Certain Requirements of Regulations; Deficit Capital
Accounts.
In the
event the Company is “liquidated” within the meaning of Regulations Section
1.704- l(b)(2)(ii)(g), (a) distributions shall be made pursuant to this Section
10 to the Unit Holders who have positive Capital Accounts in compliance with
Regulations Section l.704-l(b)(2)(ii)(b)(2). If any Unit Holder has a deficit
balance in his Capital Account (after giving effect to all contributions,
distributions and allocations for all Fiscal Years, including the Fiscal Year
during which such liquidation occurs), such Unit Holder shall have no obligation
to make any contribution to the capital of the Company with respect to such
deficit, and such deficit shall not be considered a debt owed to the Company
or
to any other Person for any purpose whatsoever. In the discretion of the
Liquidator, a pro rata portion of the distributions that would otherwise be
made
to the Unit Holders pursuant to this Section 10 may be: (a) Distributed to
a
trust established for the benefit of the Unit Holders for the purposes of
liquidating Company assets, collecting amounts owed to the Company, and paying
any contingent or unforeseen liabilities or obligations of the Company. The
assets of any such trust shall be distributed to the Unit Holders from time
to
time, in the reasonable discretion of the Liquidator, in the same proportions
as
the amount distributed to such trust by the Company would otherwise have been
distributed to the Unit Holders pursuant to Section 10.2 hereof or (b) Withheld
to provide a reasonable reserve for Company liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment obligations
owed to the Company, provided that such withheld amounts shall be distributed
to
the Unit Holders as soon as practicable.
10.4 Deemed
Distribution and Reconstitution.
Notwithstanding any other provision of this Section 10, in the event the Company
is liquidated within the meaning of Regulations Section l.704-1(b)(2)(ii)(g)
but
no Dissolution Event has occurred, the Property shall not be liquidated, the
Company’s Debts and other liabilities shall not be paid or discharged, and the
Company’s affairs shall not be wound up.
10.5 Rights
of Unit Holders.
Except
as otherwise provided in this Agreement, each Unit Holder shall look solely
to
the Property of the Company for the return of its Capital Contribution and
has
no right or power to demand or receive Property other than cash from the
Company. If the assets of the Company remaining after payment or discharge
of
the debts or liabilities of the Company are insufficient to return such Capital
Contribution, the Unit Holders shall have no recourse against the Company or
any
other Unit Holder or Directors.
10.6 Allocations
during Period of Liquidation.
During
the period commencing on the first day of the Fiscal Year during which a
Dissolution Event occurs and ending on the date on which all of the assets
of
the Company have been distributed to the Unit Holders pursuant to Section 10.2
hereof (the “Liquidation Period”), the Unit Holders shall continue to share
Profits, Losses, gain, loss and other items of Company income, gain, loss or
deduction in the manner provided in Section 3 hereof.
34
10.7 Character
of Liquidating Distributions.
All
payments made in liquidation of the interest of a Unit Holder in the Company
shall be made in exchange for the interest of such Unit Holder in Property
pursuant to Section 736(b) (l) of the Code, including the interest of such
Unit
Holder in Company goodwill.
10.8 The
Liquidator.
The
“Liquidator” shall mean a Person appointed by the Directors(s) to oversee the
liquidation of the Company. Upon the consent of a majority in interest of the
Members, the Liquidator may be the Directors. The Company is authorized to
pay a
reasonable fee to the Liquidator for its services performed pursuant to this
Section 10 and to reimburse the Liquidator for its reasonable costs and expenses
incurred in performing those services. The Company shall indemnify, save
harmless, and pay all judgments and claims against such Liquidator or any
officers, Directors, agents or employees of the Liquidator relating to any
liability or damage incurred by reason of any act performed or omitted to be
performed by the Liquidator, or any officers, Directors, agents or employees
of
the Liquidator in connection with the liquidation of the Company, including
reasonable attorneys’ fees incurred by the Liquidator, officer, Director, agent
or employee in connection with the defense of any action based on any such
act
or omission, which attorneys’ fees may be paid as incurred, except to the extent
such liability or damage is caused by the fraud, intentional misconduct. or
a
knowing violation of the laws by the Liquidator which was material to the cause
of action.
10.9 Forms
of Liquidating Distributions.
For
purposes of making distributions required by Section 10.2 hereof, the Liquidator
may determine whether to distribute all or any portion of the Property in-kind
or to sell all or any portion of the Property and distribute the proceeds
therefrom.
SECTION
11. MISCELLANEOUS
11.1 Notices.
Any
notice, payment, demand, or communication required or permitted to be given
by
any provision of this Agreement shall be in writing and shall be deemed to
have
been delivered, given, and received for all purposes (i) if delivered personally
to the Person or to an officer of the Person to whom the same is directed,
or
(ii) when the same is actually received, if sent either by registered or
certified mail, postage and charges prepaid, or by facsimile, if such facsimile
is followed by a hard copy of the facsimile communication sent promptly
thereafter by registered or certified mail, postage and charges prepaid,
addressed as follows, or to such other address as such Person may from time
to
time specify by notice to the Members and the Directors: (a) If to the Company,
to the address determined pursuant to Section 1.4 hereof; (b) If to the
Directors, to the address set forth on record with the company; (c) If to a
Member, either to the address set forth in Section 2.1 hereof.
11.2 Binding
Effect.
Except
as otherwise provided in this Agreement, every covenant, term, and provision
of
this Agreement shall be binding upon and inure to the benefit of the Members
and
their respective successors, transferees, and assigns.
35
11.3 Construction.
Every
covenant, term, and provision of this Agreement shall be construed simply
according to its fair meaning and not strictly for or against any Member.
11.4 Headings.
Section
and other headings contained in this Agreement are for reference purposes only
and are not intended to describe, interpret, define, or limit the scope, extent,
or intent of this Agreement or any provision hereof.
11.5
Severability.
Except
as otherwise provided in the succeeding sentence, every provision of this
Agreement is intended to be severable, and, if any term or provision of this
Agreement is illegal or invalid for any reason whatsoever, such illegality
or
invalidity shall not affect the validity or legality of the remainder of this
Agreement. The preceding sentence, of this Section 11.5 shall be of no force
or
effect if the consequence of enforcing the remainder of this Agreement without
such illegal or invalid term or provision would be to cause any Member to lose
the material benefit of its economic bargain.
11.6 Incorporation
By Reference.
Every
exhibit, schedule, and other appendix attached to this Agreement and referred
to
herein is not incorporated in this Agreement by reference unless this Agreement
expressly otherwise provides.
11.7 Variation
of Terms.
All
terms and any variations thereof shall be deemed to refer
to masculine,
feminine, or neuter, singular or plural, as the identity of the Person or
Persons may require.
11.8 Governing
Law.
The
laws of the State of Iowa shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties
arising hereunder.
11.9 Waiver
of Jury Trial.
Each of
the Members irrevocably waives to the
extent permitted by law, all rights to trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement.
11.10 Counterpart
Execution.
This
Agreement may be executed in any number of counterparts with the same effect
as
if all of the Members had signed the same document. All counterparts shall
be
construed together and shall constitute one agreement.
11.11 Specific
Performance.
Each
Member agrees with the other Members that the other Members would be irreparably
damaged if any of the provisions of this Agreement are not performed in
accordance with their specific terms and that monetary damages would not provide
an adequate remedy in such event. Accordingly, it is agreed that, in addition
to
any other remedy to which the nonbreaching Members may be entitled, at law
or in
equity, the nonbreaching Members shall be entitled to injunctive relief to
prevent breaches of the provisions of this Agreement and specifically to enforce
the terms and provisions hereof in any action instituted in any court of the
United States or any state thereof having subject matter jurisdiction thereof.
36
IN
WITNESS WHEREOF, the parties have executed and entered into this Second Amended
and Restated Operating Agreement of the Company as of the day first above set
forth.
COMPANY:
By:
/s/ Xxxx
Xxxxxx
Its:
Chairman
37
Exhibit
“A”
Prairie
Creek Ethanol, LLC
Initial
Membership List
Name
of Initial Members
|
Units
|
|
Gold-Eagle
Cooperative
|
884
|
|
Corn
LP
|
85
|
|
North
Central Cooperative
|
270
|
|
Xxxxxxx
Xxxxxxxxxxx
|
12
|
|
Xxxxxx
X. Christians
|
12
|
|
Xxxxx
X. Xxxxxx
|
8
|
|
Xxxxxxx
X. Xxxxxx
|
12
|
|
Xxxxxxx
X. Xxxxx
|
12
|
|
Xxxxxx
Xxxxx
|
12
|
|
Xxxxxx
Xxxx
|
12
|
|
Xxxx
X. Xxxxxxx
|
12
|
|
Xxxxxxx
X. Xxxxxx
|
12
|
|
Xxxx
Xxxxx
|
12
|
|
Xxxxxx
Xxxxxx Xxxxx
|
12
|
|
Xxxx
Xxxxxx
|
12
|
|
Xxxxxx
Xxxxxx
|
12
|
|
Xxxx
X. Xxxxxx
|
12
|
|
Xxxxx
X. Xxxxx, Xx.
|
12
|
|
Xxxx
Nail
|
12
|
|
Xxx
X. Xxxxxx
|
12
|
|
Xxxx
X. Xxxxxxxxx
|
12
|
|
Xxxx
Xxxxxxxx
|
12
|
|
Xxxxx
X. Xxxxxxxx
|
12
|
|
Xxxxxxx
Xxxxxx
|
4
|
|
Xxxxxx
Xxxxxxx
|
8
|
|
Xxxxxx
X. Xxxxxxx
|
12
|
38
Initial
Membership List (continued)
Name
of Initial Members
|
Units
|
|
Xxxxx
Xxxxxx
|
12
|
|
Xxxx
Xxxxxx
|
12
|
39
Exhibit
“B”
Initial
Board of Class A Directors
for
Prairie Creek Ethanol, LLC
Name
of Initial Director
|
|
Address
of Director
|
|
Method
of Appointment
|
Xxxx
Xxxxxx
|
0000
Xxxxxxxx Xxx., Xxxx, XX 00000
|
Appointed
by Gold-Eagle Coop
|
||
Xxxxxxx
Xxxxxx
|
0000
000xx
Xxx., Xxxxxx, XX 00000
|
Appointed
by initial Members at-large
|
||
Xxxx
Xxxxxx
|
0000
000xx
Xx., Xxxxxxx, XX 00000
|
Appointed
by initial Members at-large
|
||
Xxxxxx
Xxxxxx
|
0000
Xxxxx Xxx., Xxxxxxx, XX 00000
|
Appointed
by initial Members at-large
|
||
Xxx
Xxxxx
|
000
Xxxx Xx., Xxxxxx, XX 00000
|
Appointed
by Corn, LP
|
||
Xxxx
Xxxxx
|
000
000xx
Xx., Xxxxx, XX 00000
|
Appointed
by North Central Coop
|
||
Xxxx
Xxxxxx
|
0000
Xxxx Xxx., Xxxxxxx, XX 00000
|
Appointed
by initial Members at-large
|
40
EXHIBIT
“C”
MEMBERS
SIGNATURE PAGE
ADDENDA
TO
THE
SECOND
AMENDED AND RESTATED OPERATING AGREEMENT OF
PRAIRIE
CREEK ETHANOL, LLC
The
undersigned does hereby represent and warrant that the undersigned, as a
condition to becoming a Member of Prairie Creek Ethanol, LLC, has received
a
copy of the Second Amended and Restated Operating Agreement of Prairie Creek
Ethanol, LLC (“Operating Agreement”), dated May 3, 2007, and, if applicable, all
amendments and modifications thereto, and does hereby agree that the
undersigned, along with the other parties to the Operating Agreement, shall
be
subject to and comply with all terms and conditions of said Operating Agreement
in all respects as if the undersigned had executed said Operating Agreement
on
the original date thereof and that the undersigned is and shall be bound by
all
of the provisions of said Operating Agreement from and after the date of
execution hereof.
Individuals
|
Entities
|
|
Name
of Individual Member (Please Print)
|
Name
of Entity (Please Print)
|
|
Signature
of Individual
|
Print
Name and Title of Officer
|
|
Name
of Joint Individual Member (Please Print)
|
Signature
of Officer
|
|
Signature
of Joint Individual Member
|
||
Agreed
and accepted on behalf of the
|
||
Company
and its Members:
|
||
PRAIRIE
CREEK ETHANOL, LLC
|
||
BY:
|
||
|
||
ITS:
|
||
|
41