OPERATING AGREEMENT OF TERRA INVESTMENT FUND II LLC
Exhibit 3.39
This Operating Agreement (this “Agreement”) is entered into between and among those
parties signatory hereto to be effective as of the 22nd day of December, 2008.
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall have the
following meanings:
“Accredited Investor” shall have the meaning ascribed to it under Rule 501(a) of
Regulation D promulgated under the Securities Act of 1933.
“Act” shall mean the Oklahoma Limited Liability Company Act, as now in effect or as
amended from time to time.
“Adjusted Capital Account Deficit” shall mean, with respect to any Member, the
deficit balance, if any, in the Member’s capital account as of the end of the relevant taxable
year, after giving effect to the following adjustments:
(i) | the deficit shall be decreased by the amounts which the Member is obligated to restore pursuant to Regulation Sections 1.704-2(g)(l) and 1.704-2(i)(5) (i.e., the Member’s share of Minimum Gain and Member Minimum Gain); and | ||
(ii) | the deficit shall be increased by the items described in Regulation Sections 1.704-l(b)(2)(ii)(d)(4), (5), and (6). |
“Agreement” shall mean this Operating Agreement, as amended from time to time.
“Articles of Organization” shall mean the Articles of Organization of the Company, as
amended from time to time.
“Book Value” shall mean tangible book value, as determined in accordance with
generally accepted accounting principles.
“Cash Flow” shall mean cash funds derived from operations of the Company (including
interest received on reserves), without reduction for any noncash charges, but less cash funds
used to pay current operating expenses and to pay or establish reasonable reserves for future
expenses, Debt payments, and capital improvements and replacements as determined by the Managers.
Cash Flow shall be increased by the reduction of any reserve previously established.
“Code” shall mean the Internal Revenue Code of 1986, as amended, or any corresponding
provision of any succeeding law.
“Common Member” means a Member owning Common-Units.
“Common Percentage Interests” means, with respect to any Common Member as of the time
referred to herein, that Common Member’s percentage ownership of Common Units of the Company
expressed as a percentage determined by dividing the total number of issued and outstanding Common
Units in the Company into the number of Common Units owned by that Common Member.
“Common Units” means a class of Units as provided for in this
Agreement.
“Company” shall mean Terra Investment Fund II LLC.
“Company Tax Credits” shall mean the state tax credits generated under the Oklahoma
Rural Venture Capital Formation Incentive Act and resulting from the Company’s investments in the
Venture made directly and through a SBCC as more particularly described in Section 2.4.
“Debt” shall mean (i) all indebtedness of the Company for borrowed money; (ii) all
indebtedness secured by a lien or other encumbrance on property of the Company, whether or not
such indebtedness shall have been assumed by the Company; and (iii) all obligations, contingent or
otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and
banker’s acceptances issued for the account of the Company.
“Involuntary Transfer” shall mean, with respect to any Member, any transfer which
occurs as a result of any of the following events:
(i) | an assignment for the benefit of creditors; | ||
(ii) | any bankruptcy or insolvency proceeding; | ||
(iii) | any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation; | ||
(iv) | the appointment of a trustee for, receiver for, or liquidation of the Member or of all or any substantial part of the Member’s properties; | ||
(v) | if the Member is an individual, the Member’s death, divorce or adjudication by a court of competent jurisdiction as incompetent to manage the Member’s person or property; | ||
(vi) | if the Member is acting as a Member by virtue of being a trustee of a trust, the termination of the trust; | ||
(vii) | if the Member is a partnership or limited liability company, the dissolution and commencement of winding up of the partnership or limited liability company or the lapse of ninety (90) days after notice to the partnership or limited liability company of the revocation without reinstatement of its charter; | ||
(viii) | if the Member is a corporation, the filing of a certificate of dissolution of the corporation or the lapse of ninety (90) days after notice to the corporation of the revocation without reinstatement of its charter; or |
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(ix) | if the Member is an estate, the distribution by the fiduciary of the estate’s entire interest in the Company. |
“Majority Vote of the Members” or “the Members by a Majority Vote” means the
affirmative vote of a majority of the Units outstanding at such time and entitled to vote,
regardless of whether those Units are represented at a meeting at which a vote will be taken, and
if reference is made to a class of Units, then the affirmative vote of a majority of the Units of
that class of Units outstanding at such time and entitled to vote.
“Manager” shall mean Terra International, Inc., a Delaware corporation, and any duly
elected successors. If there shall be only one Manager serving, all references in this Agreement
to “Managers” shall be deemed to refer to the single Manager.
“Member” shall mean any Person who is admitted as a Member of the Company pursuant to
this Agreement.
“Member Loan Nonrecourse Deductions” shall mean any Company deductions that would be
Nonrecourse Deductions if they were not attributable to a loan made or guaranteed by a Member
within the meaning of Regulation Section 1.704-2(i).
“Member Minimum Gain” has the meaning set forth in Regulation Section 1.704-2(i) for
“partner nonrecourse debt minimum gain.”
Membership Interest” means a Member’s limited liability company membership interest
in the Company, represented by one or more Units held by the Member.
“Minimum Gain” has the meaning set forth in Regulation Section 1.704-2(d). Minimum
Gain shall be computed separately for each Member in a manner consistent with the Regulation under
Code Section 704(b).
“Negative Capital Account” shall mean a capital account with a balance of less than
zero.
“Net Income” or “Net Loss” shall mean the net income or net loss with respect
to any accounting period of the Company determined in accordance with accounting principles
generally and consistently applied by the Company.
“Nonrecourse Deductions” has the meaning set forth in Regulation Section
1.704-2(b)(l). The amount of Nonrecourse Deductions for a taxable year of the Company equals the
net increase, if any, in the amount of Minimum Gain during that taxable year, determined according
to the provisions of Regulation Section 1.704-2(c).
“Percentage Interest” shall mean, as to a Member, a fraction, the numerator of which
is the number of Units held by that Member and the denominator of which is the number of all
issued and outstanding Units.
“Person” shall mean and includes any individual, corporation, partnership,
association, limited liability company, trust, estate, or other entity.
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“Preferred Cash Return” means aggregate, cumulative distributions of cash from the
Company to all Preferred Members pursuant to Section 6.2(i) hereof, and expressly excluding those
distributions from the Company pursuant to Section 6.1.1, in an amount sufficient to return to
each Preferred Member twelve and one-half percent (12.5%) of their Capital Contributions to the
Company.
“Preferred Cash Return Payout” means the time at which the Preferred Cash Return is
satisfied in full.
“Preferred Credit Return” means aggregate, cumulative allocations of Company Tax
Credits to all Preferred Members in an amount, based on the face value of the Company Tax Credits,
equal to 180% of all their Capital Contributions to the Company.
“Preferred Credit Return Payout” means the time at which the Preferred Credit Return
is satisfied in full.
“Preferred Member” means any Member owning Preferred Units.
“Preferred Percentage Interest” means, with respect to any Preferred Member as of the
time referred to herein, that Preferred Member’s percentage ownership of Preferred Units of the
Company expressed as a percentage determined by dividing the total number of issued and
outstanding Preferred Units in the Company into the number of Preferred Units owned by that
Preferred Member.
“Preferred Units” means a class of Units as provided for in this Agreement.
“Regulation” shall mean the income tax regulations, including any temporary or
proposed regulations, from time to time promulgated under the Code.
“RVCA” means the Oklahoma Rural Venture Capital Formation Incentive Act, Tit. 68 O.S.
§§2357.71 – 2357.76, as last amended in 2008 by Senate Xxxx 2129.
“SBCC” shall have the meaning set forth in Section 2.4.
“transfer” shall mean, when used in connection with the transfer of Units, any and
all means by which a Member may be divested of Units including, but not limited to, divestment by
sale, exchange, gift, assignment, grant of a security interest, or other form of conveyance,
whether voluntary or involuntary, by operation of law or otherwise, during lifetime or at death.
“Unit” means a unit of Membership Interest of a Member in the
Company.
“Venture” shall have the meaning set forth in Section 2.4.
1.2 Other Definitional Provisions. Capitalized terms used in this Agreement that
are not defined in this Article I have the meanings contained elsewhere in this Agreement.
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ARTICLE II
FORMATION AND NAME: OFFICE; PURPOSE; TERM
2.1 Formation. The Members agree to become members in a limited liability company
under the provisions of this Agreement and the Act. In order to maintain the Company as a limited
liability company under the laws of the State of Oklahoma, the Company shall from time to time take
all necessary or appropriate action, including the preparation, execution and filing of all
articles, amendments, certificates and other instruments as may be required from time to time to
comply with the Act and with all other laws governing the formation, operation, and continuation of
the Company in all jurisdictions where the Company conducts business. The Company shall, to the
extent permissible, elect to be treated as a partnership for federal, state and local income tax
purposes, and each Member in the Company shall file all tax returns and shall otherwise take all
tax and financial reporting positions in a manner consistent with such treatment, and no Member
shall take any action inconsistent with such treatment. The Company shall not be deemed a
partnership or joint venture for any other purpose.
2.2 Rules Governing the Company. The rights and obligations of the Members and the
business and affairs of the Company shall be governed first by the mandatory provisions of the Act
which may not be altered or varied, second by the Company’s Articles of Organization, third by this
Agreement, and fourth by the provisions of the Act which are not mandatory. In the event of any
conflict among the foregoing, the conflict shall be resolved in the order of priority set forth in
the preceding sentence.
2.3 Name of the Company. The name of the Company shall be “Terra Investment Fund II
LLC”. The Company may do business under that name and under any other name or names which the
Managers select. If the Company does business under a name other than that set forth in its
Articles of Organization, then the Company shall file a trade name certificate as required by law.
2.4 Purpose. The Company has been organized to make investments in Terra International
(Oklahoma) Inc., a Delaware corporation (the “Venture”). The Company will invest one-third
(l/3rd) of the investment proceeds it raises into entities which qualify as a “Qualified
Rural Small Business Capital Company” under the RVCA (each, a “SBCC”). In exchange for the
Company’s investments in each SBCC, the Company will receive at least 99.99% ownership of a
separate and preferred series of units of that SBCC. Each SBCC will in turn use 100% of the
investment proceeds received from the Company to make an investment in the Venture. The Company
will use its remaining available investment proceeds to make a direct investment in the Venture.
The investments made by the SBCCs and the Company in the Venture are intended to qualify for tax
credits provided under the RVCA. The Company may engage in any other lawful act or activity for
which limited liability companies may be formed under the Act and which is directly related to the
above mentioned investment activity with respect to the Venture. Notwithstanding anything herein to
the contrary, nothing set forth herein shall be construed as authorizing the Company to possess any
purpose or power, or to do any act or thing, forbidden by law to a limited liability company
organized under the laws of the State of Oklahoma.
2.5 Term. The term of existence of the Company shall be perpetual, unless terminated
in the manner provided herein or by operation of law.
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2.6 Principal Office. The principal office and place of business of the Company shall be
located at Terra Industries Inc., 000 0xx Xxxxxx, Xxxxx Xxxx, XX 00000, or any other place selected
by the Managers.
2.7 Resident Agent. The name and address of the Company’s resident agent in the State
of Oklahoma shall be J. Xxxxxxxxx Xxxxx, Xxxxxxx Xxxxxx Xxxxx & Xxxxxxx, 000 Xxxxxx X. Xxxx Xxxxxx,
0000 Bank of Xxxxxxxx Xxxxx, Xxxxxxxx Xxxx, Xxxxxxxx 00000.
2.8 Members. The name, present mailing address, taxpayer identification number, class
and number of Units owned by and initial Percentage Interest of each Member are set forth on
Exhibit “A”. Exhibit “A” shall be updated as appropriate including, without limitation, after each
capital contribution and after each transfer of all or any part of a Member’s Units.
2.9 Title to Company Property. All property owned by the Company, tangible or
intangible, shall be deemed to be owned by the Company as an entity, and no Member shall have any
ownership of such property individually. The Company may hold any of its assets in its own name or
in the name of its nominee, which nominee may be one or more individuals, partnerships, trusts or
other entities.
ARTICLE III
AUTHORIZATION AND DESCRIPTION OF UNITS
3.1 Units Generally. The Membership Interests of the Members shall be represented by
issued and outstanding Units. The Units shall be divided into one class of Preferred Units and one
class of Common Units, having such terms described in this Agreement. The Members shall have no
interest in the Company other than the Membership Interests conferred by this Agreement and
represented by the Units. The ownership of a Unit shall not entitle a Member to a partition or
division of any property of the Company or for any accounting.
3.2 Authorization and Issuance of Units. The Company hereby authorizes and issues that
number of Units, in such class, and to such Members as set forth on Schedule “A”. The Managers
will revise Schedule “A” from time to time to reflect any changes in the ownership or
classification of the Units.
3.3 No Unit Certificates. The Units of the Company are not certificated Units unless
otherwise determined by the Managers. If the Managers determine that the Units shall be
certificated, each Unit certificate shall be signed by a Manager of the Company, certifying the
number and class of Units owned by the holder of such Units. All certificates for each type and
class of Units shall be consecutively numbered or otherwise identified. The names of the Members to
whom the Units are issued, with the number and class of Units and date of issue, shall be entered
on the books of the Company. Units shall only be transferred on the books of the Company by the
holder of record or by such holder’s attorney duly authorized in writing, upon surrender to the
Company of the Unit Certificate(s) for such Units endorsed by the appropriate Person(s), with such
evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the
Company may require. In that event, provided all other conditions to transfer have been met, the
Company shall issue a new Unit Certificate to the Person entitled thereto, cancel the old
certificate(s), and record the transaction on its books.
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3.4 New Members from the Issuance of Units. In order for a Person who is not
already a Member to be admitted as a Member of the Company pursuant to the issuance of Units to
such Person, such Person shall have executed and delivered to the Managers a written undertaking to
be bound by the terms and conditions of this Agreement in the form approved by the Managers. Upon
the satisfaction of any other applicable conditions, including the receipt by the Company of
payment for the issuance of the Units, such Person shall be admitted as a Member.
ARTICLE IV
MEMBERS; CAPITAL; CAPITAL ACCOUNTS
4.1 Initial Capital Contributions. Upon the execution of this Agreement, the Members
shall contribute to the Company cash or other property in the amounts respectively set forth on
Exhibit “A”.
4.2 Additional Capital Contributions.
4.2.1 No Member shall be required to make capital contributions to the Company in
excess of the amount set forth opposite, his, her or its name on Exhibit “A”. If the
Managers at any time or from time to time determine that the Company requires additional
capital in furtherance of its business, then the Managers may propose to the Members a plan
for raising additional capital. Any such plan shall describe the proposed sources of the
additional capital, the terms upon which the additional capital will be raised, and the
proposed uses of the additional capital. The proposed plan will be implemented only if it
is approved by a Majority Vote of the Members.
4.2.2 If additional capital is sought from existing or newly admitted Members, then
the additional capital may be raised in the form of capital contributions which will be
credited to the capital accounts of the contributing Members, or the additional capital may
be raised in the form of loans, the amount of which will not be credited to the capital
accounts of the lending Members.
4.2.3 No Additional Capital Contribution Required. Except as provided in
Section 4.2.1, no Member shall be required to contribute any additional capital to the
Company.
4.3 Capital Accounts. A capital account shall be maintained for each Member in
accordance with Treasury Regulation Section 1.704-l(b) and any other laws governing the proper
maintenance of capital accounts for limited liability companies.
4.4 Capital Account Adjustments in the Event of a Transfer of a Member’s Units.
Upon a transfer (whether during lifetime or at death) of Units by any Member as permitted
hereunder, the capital account, or the appropriate portion thereof, of the transferor Member which
is attributable to the Units transferred will carry over to the transferee.
4.5 Capital Account Adjustments in Connection with Contributions and
Distributions. Upon the contribution of money or other property (other than a de
minimis amount) to the Company by an existing Member or by a newly admitted Member after the
original capital contributions, or
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upon the distribution of money or other property (other than a de minimis amount) to a Member, or
upon any transfer of any Units by a Member, the book value of the assets of the Company may, if the
Managers determine to do so, be adjusted to fair market value, and the capital account of each
Member shall then be adjusted accordingly. Such adjustments may be made only if it is determined
that they are in accordance with sound financial accounting principles. No such capital account
adjustments shall be made if such adjustment would be impermissible under the Treasury Regulations
promulgated under Section 704(b) of the Code.
4.6 Capital Account Adjustments Upon Distributions of Property in Kind. The Company
shall determine the fair market value of any Company asset distributed in kind, and shall credit or
charge to the capital account of each Member the Net Income or Net Loss that would have been
credited or charged to such Member if that asset had been sold at its fair market value as of the
date of distribution. Any such Net Income or Net Loss that would have been recognized by the
Company from such a deemed sale shall be allocated among the Members as provided for in Article IV,
and the distribution shall be treated as though the Company had distributed cash equal to the fair
market value of the assets so distributed in kind.
4.7 Other Matters Relating to Capital Contributions.
4.7.1 No Right to Make Capital Contributions. No Member shall be entitled to
make capital contributions to the Company except as expressly required or permitted under
this Agreement.
4.7.2 No Withdrawal. Except as provided in this Agreement, no Member shall be
entitled to withdraw from the Company, to receive a return of any part of that Member’s
capital contribution to the Company, or to receive property or assets other than cash in
return thereof, or to receive interest thereon.
4.7.3 Interest. No Member shall be paid any interest on any capital
contribution or any additional capital contribution to the Company.
4.8 Payment on Debt Treated as Loan. In the event any Member makes any payment with
respect to any Company indebtedness with respect to which that Member has personal liability, then
the amount or amounts so expended by that Member shall be treated as a loan by the Member to the
Company for which the Member shall be subrogated to the rights of the lender with respect to whose
loan the Member made the payment.
ARTICLE V
SHARING
5.1 Percentage Interests. The initial Percentage Interests of the Members are set
forth on Exhibit “A”.
5.2 Allocation of Net Income and Net Loss. After giving effect to the special
allocations set forth in Section 5.3 and the Regulatory Allocations in Section 5.4, Net Income and
Net Loss shall be allocated to the Members as follows:
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(i) Prior to the occurrence of the Preferred Cash Return Payout, all Net Income
shall be allocated to the holders of the Preferred Units in accordance with their
relative Preferred Percentage Interests; and
(ii) Upon and after the occurrence of the Preferred Cash Return Payout, all Net
Income and Net Loss shall be allocated among the Members in accordance with their
respective Percentage Interests.
5.3 Allocation of Company Tax Credits. Until the occurrence of the Preferred Credit
Return Payout, all Company Tax Credits shall be allocated to the Preferred Members in proportion to
their respective Preferred Percentage Interests. After the Preferred Credit Return Payout occurs,
the Company Tax Credits shall be allocated to the Common Members in accordance with their Common
Percentage Interest.
5.4 Regulatory Allocations.
5.4.1 Qualified Income Offset. No Member shall be allocated Net Loss or
deductions if the allocation causes a Member to have an Adjusted Capital Account Deficit. If
a Member receives (i) an allocation of Net Loss or deduction (or item thereof), or (ii) any
distribution which causes the Member to have an Adjusted Capital Account Deficit at the end
of any taxable year, then all items of income and gain of the Company (consisting of a pro
rata portion of each item of Company income, including gross income and gain) for that
taxable year shall be allocated to that Member before any other allocation is made of
Company items for that taxable year, in the amount and in proportions required to eliminate
the excess as quickly as possible. This Section 5.4.1 is intended to comply with, and shall
be interpreted consistently with, the “qualified income offset” provisions of the
Regulations promulgated under Code Section 704(b).
5.4.2 Minimum Gain Chargeback. Except as set forth in Regulation Sections
1.704-2(f)(2), (3), and (4), if, during any taxable year, there is a net decrease in Minimum
Gain or Member Minimum Gain, each Member, prior to any other allocation pursuant to this
Article IV, shall be specially allocated items of gross income and gain for such taxable
year (and, if necessary, subsequent taxable years) in an amount equal to that Member’s share
of the net decrease of Minimum Gain or Member Minimum Gain. Allocations of gross income and
gain pursuant to this Section 5.4.2 shall be made first from gain recognized from the
disposition of Company assets subject to nonrecourse liabilities (within the meaning of the
Regulations promulgated under Code Section 752), to the extent of the Minimum Gain or Member
Minimum Gain attributable to those assets, and thereafter, from a pro rata portion of the
Company’s other items of income and gain for the taxable year. It is the intent of the
parties hereto that any allocation pursuant to this Section 5.4.2 shall constitute a
“minimum gain chargeback” under Regulation Sections 1.704-2(f) or 1.704- 2(i)(4).
5.4.3 Contributed Property and Book-Ups. In accordance with Code Section 704(c)
and the Regulations thereunder, as well as Regulation Section 1.704-1(b)(2)(iv)(d)(3),
income, gain, loss, and deduction with respect to any property contributed (or deemed
contributed) to the Company shall, solely for tax purposes, be allocated among the Members
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so as to take account of any variation between the adjusted basis of the property to the Company
for federal income tax purposes and its fair market value at the date of contribution (or deemed
contribution). If the adjusted book value of any Company asset is adjusted as provided herein,
subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take
account of any variation between the adjusted basis of the asset for federal income tax purposes
and its adjusted book value in the manner required under Code Section 704(c) using the “traditional
method” described in the Regulations thereunder.
5.4.4 Code Section 754 Adjustment. To the extent an adjustment to the tax basis of any
Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required pursuant to
Regulation Section 1.704-l(b)(2)(iv)(m) to be taken into account in determining capital accounts,
the amount of the adjustment to the 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 basis), and the
gain or loss shall be specially allocated to the Members in a manner consistent with the manner in
which their capital accounts are required to be adjusted pursuant to that Section of the
Regulations.
5.4.5 Nonrecourse Deductions. Nonrecourse Deductions for a taxable year or other
period shall be specially allocated among the Members in proportion to their respective Percentage
Interests.
5.4.6 Member Loan Nonrecourse Deductions. Any Member Loan Nonrecourse Deduction for
any taxable year or other period shall be specially allocated to the Member who bears the risk of
loss with respect to the loan to which the Member Loan Nonrecourse Deduction is attributable in
accordance with Regulation Section 1.704-2(b).
5.4.7 Guaranteed Payments. To the extent any compensation paid to any Member by the
Company, including any fees payable to any Member for services provided to the Company, is
determined by the Internal Revenue Service not to be a guaranteed payment under Code Section 707(c)
or is not paid to the Member other than in the Person’s capacity as a Member within the meaning of
Code Section 707(a), the Member shall be specially allocated gross income of the Company in an
amount equal to the amount of that compensation, and the Member’s capital account shall be adjusted
to reflect the payment of that compensation.
5.4.8 Unrealized Receivables. If a Member’s Percentage Interest is reduced (provided
the reduction does not result in a complete termination of the Member’s Percentage Interest), the
Member’s share of the Company’s “unrealized receivables” and “substantially appreciated inventory”
(within the meaning of Code Section 751) shall not be reduced, so that, notwithstanding any other
provision of this Agreement to the contrary, that portion of the Net Income otherwise allocable
upon a liquidation or dissolution of the Company pursuant to Section 5.4 hereof which is taxable as
ordinary income (recaptured) for federal income tax purposes shall, to the extent possible without
increasing the total gain to the Company or to any Member, be specially allocated among the Members
in proportion to the deductions (or basis reductions treated as deductions) giving rise to such
recapture. Any questions as to the aforesaid allocation of ordinary income (recapture), to the
extent such
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questions cannot be resolved in the manner specified above, shall be resolved by the
Managers.
5.4.9 Withholding. All amounts required to be withheld pursuant to Code
Section 1446 or any other provision of federal, state, or local tax law shall be treated as
amounts actually distributed to the affected Members for all purposes under this Agreement.
5.4.10 Allocation of Tax Items. Except as otherwise provided herein, each item
of Net Income or Net Loss recognized by the Company for federal income tax purposes shall
be allocated among the Members in the same manner and proportion as each correlative item
of Net Income or Net Loss is allocated pursuant to the provisions of
this Article IV.
5.5 Liquidation and Dissolution. If the Company is liquidated, the assets of the
Company shall be distributed in accordance with the provisions of Section 11.5 below.
5.6 Allocations in Connection with Shifts in Percentage Interests. In the event of a
shift in the Percentage Interests of any Member for any reason, the allocations for that taxable
year will be made by the Managers in their discretion to take into account the varying Percentage
Interests of the Members for that year in whatever reasonable and consistently applied method the
Managers choose in accordance with applicable Regulations.
5.7 Functional Allocations. In the event and to the extent that any Member is charged
with any expenditure incurred by the Company other than in accordance with that Member’s Percentage
Interest, then that Member shall be allocated any expense or loss arising out of that expenditure.
ARTICLE VI
DISTRIBUTIONS
6.1 Generally.
6.1.1 Mandatory Distributions. The Company shall distribute, on or before April
15th of each calendar year, an amount of Cash Flow to the Members in proportion
to their respective Percentage Interests sufficient to allow the Members to pay applicable
federal and state income taxes on, and any estimated tax underpayment penalties directly
resulting from, the amount by which the Members’ distributive share of Net Income for the
preceding calendar year exceeds the amount of Cash Flow distributed to the Members during
the preceding calendar year. For purposes of computing such distributions, the Managers may
use any method which they deem in their good faith judgment to be reasonable and
appropriate, and the Managers are not required to inquire into the personal income tax
circumstances of any of the Members.
6.1.2 Discretionary Distributions of Cash Flow. Subject to Sections 6.1.1 and
6.1.3, the Managers may from time to time, in the Managers’ discretion, distribute Cash Flow
to the Members.
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6.1.3 Restrictions on Distributions. Notwithstanding anything to the contrary
herein, no distribution shall be made if the distribution is prohibited by the Act or if,
after giving effect to the distribution, the Company would not be able to pay its debts as
they become due in the usual course of business or where the Company’s total assets would
be less than the sum of its total liabilities.
6.1.4 No Duty to Make Distributions. The Company shall have no duty to make
distributions except as expressly provided in this Agreement.
6.2 Allocation of Distributions. Except for the liquidating distributions provided
in Article XI, distributions to be made by the Company on any date shall be made to the Members as
follows:
(i) Prior to the occurrence of the Preferred Cash Return Payout, all
distributions shall be made exclusively to the holders of the Preferred Units in
accordance with their relative Preferred Percentage Interests; and
(ii) Upon and after the occurrence of the Preferred Cash Return Payout, all
distributions shall be made to the Members in accordance with the Percentage
Interests.
ARTICLE VII
RIGHTS AND OBLIGATIONS OF MANAGERS
7.1 Management by Managers. Except as otherwise provided in this Agreement, the
Managers shall have the full and exclusive power and authority to manage and control the Company’s
business and affairs and make all decisions on behalf of the Company. The Managers shall exercise
control over all aspects of the Company’s business and shall have complete charge of all day-to-day
operations of the Company. The Managers, subject to the provisions of this Agreement (including,
but not limited to, Section 7.4 below), shall have full and exclusive authority to deal with the
property of the Company and to execute and deliver all agreements relating to the affairs of the
Company including, without limitation, the authority to execute and deliver: (i) instruments of
transfer of the Company’s property; (ii) checks, drafts and other orders in the payment of Company
debts; (iii) promissory notes, security agreements, mortgages, assignment of leases and rents,
financing statements and other instruments of indebtedness of the Company for borrowed funds; (iv)
deeds, contracts relating to the purchase or sale of property and other instruments; and (v) all
other instruments of any character relating to the affairs of the Company. Subject to the
restrictions set forth herein, the Managers shall specifically have the authority to execute
contracts, licenses and enter into agreements with third parties.
7.2 Appointment and Removal of Managers. The number of Managers of the Company shall
be fixed from time to time by the Majority Vote of the Members. The initial number of Managers
shall be one (1) and the initial Manager shall be Terra International, Inc., a Delaware
corporation. A Manager may be removed and/or replaced upon a Majority Vote of the Members. In the
event at any time there is no Manager appointed and serving, then all Members shall be deemed to be
Managers of the Company and shall have equal rights in all management decisions affecting
12
the Company. The resignation or removal of a Manager who is a Member shall not affect that Member’s
status as a Member of the Company.
7.3 Decisions by Managers and Signatures Required. All decisions of the Managers, if
more than one, shall be made by a majority vote of the Managers. Notwithstanding the foregoing, any
Manager, acting alone, and without necessity of the joinder by other Managers, may exercise any
power or authority conferred upon and approved by the Managers in the conduct of the Company’s
business and affairs.
7.4 Restrictions on Authority. Notwithstanding any provisions of this Agreement to the
contrary, without first obtaining unanimous approval from all Preferred Members, the Managers shall
not, on behalf of or in the name of the Company: (i) amend or repeal the Articles of Organization
or this Agreement; (ii) issue any additional Units or other forms of ownership interest in the
Company; (iii) sell all or substantially all of the assets of the Company, or authorize any merger,
acquisition, recapitalization or other reorganization, or sale of control of the Company; (iv) make
any change in the Company’s business purpose; or (v) incur any material obligation committing or
agreeing to do any of the foregoing.
7.5 Resignation. Any Manager of the Company may resign as a Manager at any time by
giving notice of such resignation to the Company. Any such resignation shall take effect at the
time specified therein, or if no time be specified, upon receipt thereof. The acceptance of such
resignation shall not be necessary to make it effective.
7.6 Business Records.
7.6.1 Income Tax Data. The Managers shall cause the Company to provide income tax
data to the Members on a timely basis sufficient to permit the Members to include their shares of
all tax items from the Company on their income tax returns.
7.6.2 Other Records. The Managers shall cause to be kept at the Company’s place
of business the following:
(a) a current list of the full name and last known business address of each Member
and Manager;
(b) copies of records that would enable a Member to determine the relative voting
rights of the Members;
(c) a copy of the Articles of Organization of the Company, together with any
amendments thereto;
(d) copies of the Company’s federal, state, and local income tax returns and reports
for the three most recent years;
(e) a copy of this Agreement, together with any amendments thereto; and
(f) copies of any financial statements of the Company for the three most recent
years.
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7.7 Compensation. Unless approved by a Majority Vote of the Members, the Managers, as
such, shall not receive any compensation for their services.
7.8 Time Devoted to Business. The Managers shall devote such part of their time as is
reasonably needed to manage the Company’s business.
7.9 Evidence of Manager’s Authority. Any Person transacting any business with the
Company may transact such business with any Manager, acting on behalf of the Company, without
necessity for inquiring into the authority of the Manager to so act on behalf of the Company,
unless the Manager does not have actual authority to act on behalf of the Company with respect to
that particular business and that Person has knowledge of the fact that the Manager lacks such
authority. The Company may from time to time prepare a certificate or designation of authority or
similar document which may be used by a Manager when transacting business of the Company. When a
Manager executes any document on behalf of the Company, the Manager may do so by signing his name,
followed by the word “Manager.” The Managers, if more than one, may delegate certain duties,
authority, and responsibilities among themselves as they may unanimously agree. Any such delegation
shall be in writing and signed by all Managers.
7.10 Manager’s Duty of Loyalty and Related Matters.
7.10.1 Duty of Loyalty. In matters related to the business and affairs of the
Company, the Managers in their capacity as such shall act solely for the benefit of the
Company and not for their personal benefit.
7.10.2 Duties of Good Faith and Fair Dealing. Each Manager, in the performance
of his duties as such, shall exercise such powers and otherwise perform such duties in good
faith, in the manner that each such Manager reasonably believes to be in the best interests
of the Company, and with such care, including reasonable inquiry, using ordinary prudence,
as a person in a like position would use under similar circumstances. In addition, each
Manager shall account to the Company and hold as trustee for it any profit or benefit
derived by such Manager, without the Majority Vote of the Common Members and the Majority
Vote of the Preferred Members, from any transaction connected with the conduct or winding up
of the Company or from any personal use by the Manager of the Company’s property.
7.10.3 Duty of Candor. Each Manager shall deal honestly with the Company and,
promptly after learning of any information that is material to the business and affairs of
the Company, he shall disclose such information to the Company and the Members.
7.10.4 Duty to Avoid Improper Personal Benefits. If any Manager directly or
indirectly receives from any Person a monetarily significant benefit, including cash, in
connection with the Manager’s activities as a Manager of the Company, the Manager shall
promptly transfer such benefit to the Company.
7.10.5 Duties in Doing Business with the Company. No Manager shall engage
directly or indirectly in any business arrangement or transaction with the Company on the
Manager’s own behalf or on behalf of a disclosed or undisclosed third party except to the
extent such transaction has been approved as set forth in Section 7.4.
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7.10.6 No Indemnification of Manager’s for Claims of Breach of this Section
7.10. No Manager shall be entitled to indemnification for expenses or damages, whether
under this Agreement or otherwise, incurred by the Manager as a result of the Manager’s
breach of any provision of this Section 7.10.
7.11 Liability of Managers. No Individual who is a Manager of the Company shall be
personally liable under any judgment of a court for any debt, obligation, or liability of the
Company, whether that liability or obligation arises in contract, tort, or otherwise, solely by
reason of being a Manager of the Company.
ARTICLE VIII
MEMBERS
8.1 Place of Meetings. All meetings of the Members shall be held at the principal
place of business of the Company or at such other place as shall be specified or fixed in the
notice or waiver of notice calling the meeting; provided that any or all Members may participate in
any such meeting by means of conference telephone or similar communications equipment pursuant to
Section 8.12.
8.2 Call of Meetings. A meeting of the Members for any proper purpose or purposes may
be called at any time by the Managers or by resolution approved by a Majority Vote of the Members.
Members may call a meeting by delivering to the Managers one or more written requests signed by the
requisite number of Members stating that the Members wish to call a meeting and indicating a
specific purpose for which the meeting is to be held. Only business within the purpose or purposes
described in the notice required by Section 8.3 may be conducted at a meeting of the Members.
8.3 Notice and Waiver Thereof. Written or printed notice stating the place, day and
hour of the meeting and the purpose or purposes for which the meeting is called, shall be delivered
not less than ten (10) days nor more than sixty (60) days before the date of the meeting, by or at
the direction of the Managers, to each Member entitled to vote at such meeting in accordance with
Section 14.1. Attendance of a Member at a meeting shall constitute a waiver of notice of the
meeting except where such Member attends for the express purpose of objecting to the transaction of
any business on the ground that the meeting is not lawfully called or convened. Notice of a meeting
may also be waived in writing. Attendance at a meeting is not a waiver of any right to object to
the consideration of matters required to be included in the notice of the meeting but not so
included, if the objection is expressly made at the meeting.
8.4 Quorum. A quorum shall be present at a meeting of Members if the holders of at
least sixty-five percent (65%) of all Percentage Interests are represented at the meeting in person
or by proxy. Once a quorum is present at a meeting of the Members, the subsequent withdrawal from
the meeting of any Member prior to adjournment or the refusal of any Member to vote shall not
affect the presence of a quorum at the meeting. If, however, such quorum shall not be present at
any meeting of the Members, the Members entitled to vote at such meeting shall have the power to
adjourn the meeting from time to time, without notice other than announcement at the meeting, until
Members holding at least sixty-five percent (65%) of the Percentage Interest shall be present or
represented.
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8.5 Voting.
8.5.1 Voting. All Members shall be entitled to vote at meetings of Members.
Members may vote either in person or by proxy at any meeting.
8.5.2 Voting Power. With respect to any matter other than a matter for which
this Agreement requires the affirmative vote of Members owning a specified percentage of
the issued and outstanding Units or, as the case may be, a specified percentage of the
issued and outstanding Units of a certain class, the affirmative vote of Members owning at
least 50% of the issued and outstanding Units shall be required to approve any matter
coming before or submitted to the Members.
8.5.3 Change in Voting Percentages. No provision of this Agreement requiring
that any action be taken only upon approval, vote or action of the Members owning a
specified percentage of all of the issued and outstanding Units or, as the case may be, a
specified percentage of all of the issued and outstanding Units of a certain class, may be
modified, amended or repealed unless such modification, amendment or repeal is approved by
Members owning at least such specified percentage of issued and outstanding Units, or, as
the case may be, at least the specified percentage of the issued and outstanding Units of a
certain class.
8.5.4 Registered Members. The Company shall be entitled to treat the owner of
record of any Units as the owner in fact of such Units for all purposes, and accordingly
shall not be bound to recognize any equitable or other claim to or interest in such Units on
the part of any other Person, whether or not it shall have express or other notice of such
claim or interest, except as expressly provided by this Agreement or the laws of the State
of Oklahoma.
8.6 Record Date. For the purpose of determining Members entitled to notice of, or to
vote at, any meeting of Members or any adjournment thereof, or entitled to receive a distribution,
or in order to make a determination of Members for any other proper purpose (other than determining
Members entitled to consent to action by Members proposed to be taken without a meeting of the
Members), the Managers may provide that the records of the Company shall be closed for a stated
period but not to exceed in any event thirty (30) days. If the records are closed for the purpose
of determining Members entitled to notice of, or to vote at, a meeting of the Members, such records
shall be closed ten (10) days immediately preceding such meeting. In lieu of closing the records,
the Managers may fix in advance a date as the record date for any such determination of Members,
such date in any case to be not more than thirty (30) days and, in the case of a meeting of
Members, not less than ten (10) days prior to the date on which the particular action requiring
such determination of Members is to be taken. If the records are not closed and if no record date
is fixed for the determination of Members entitled to notice of, or to vote at, a meeting of
Members or for the determination of Members entitled to receive a distribution, the date on which
the notice of meeting is mailed or the date on which the resolution of the Members declaring such
distribution is adopted, as the case may
be, shall be the record date for such determination of Members. When a determination of the
Members entitled to vote at any meeting of Members has been made as provided in this Section 8.7,
such determination shall apply to any adjournment thereof except where the determination has been
made through the closing of the records and the stated period of closing
16
has expired. The record date for determining Members entitled to consent to action in writing
without a meeting shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the Company by delivery to its registered
office, its principal place of business, or the Managers in accordance with Section 14.1.
8.7 Voting Lists. The Managers shall make, at least ten (10) days before each meeting
of Members, a complete list of the Members entitled to vote at such meeting, arranged in
alphabetical order, showing the address of and Units owned by each Member, which list for a period
of ten (10) days prior to such meeting shall be kept on file at the registered office or principal
place of business of the Company and shall be subject to inspection by any Member at any time
during usual business hours. Such list shall also be produced and kept open at the meeting and
shall be subject to inspection by any Member during the meeting. Failure to comply with these
requirements shall not affect the validity of any action taken at such meeting.
8.8 Adjournment. Notwithstanding the other provisions of the Articles of
Organization or this Agreement, the Common Members by a majority vote shall have the power to
adjourn such meeting from time to time, without any notice other than announcement of the time and
place of the holding of the adjourned meeting. If such meeting is adjourned by the Common Members,
such time and place shall be determined by a vote of the holders of a Majority Vote of those
Members. Upon the resumption of such adjourned meeting, any business may be transacted that might
have been transacted at the meeting as originally called.
8.9 Proxies. A Member entitled to vote may vote either in person or by proxy
executed in writing by the Member. A telegram, telex, cablegram, electronic transmission or similar
transmission by the Member, or a photographic, photostatic, facsimile, or similar reproduction of
a writing executed by such Member shall be treated as an execution in writing for purposes of this
Section 8.9. Proxies for use at any meeting of Members or in connection with the taking of any
action by written consent shall be filed with the Managers before or at the time of the meeting or
execution of the written consent, as the case may be. All proxies shall be received and taken
charge of and all ballots shall be received and canvassed by the Managers, who shall decide all
questions touching upon the qualification of voters, the validity of the proxies, and the
acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by
the Managers, to which event such inspector or inspectors shall decide all such questions. No proxy
shall be valid after eleven (11) months from the date of its execution unless otherwise provided in
the proxy. A proxy shall be revocable unless the proxy form conspicuously states that the proxy is
irrevocable and the proxy is coupled with an interest. Should a proxy designate two or more Persons
to act as proxies, unless that instrument shall provide to the contrary, a majority of such Persons
present at any meeting at which their powers thereunder are to be exercised shall have and may
exercise all the powers of voting or giving consents thereby conferred, or if only one be present,
then such powers may be exercised by that one; or, if an even number attend and a majority do not
agree on any particular issue, the Company shall not be required to recognize such proxy with
respect to such issue if such proxy does not specify how the Units that are the subject of such
proxy are to be voted with respect to such issue.
8.10 Conduct of Meeting. The Managers shall have full power and authority concerning
the
manner of conducting any meeting of the Members including, without limitation, the
determination of Persons entitled to vote, the existence of a quorum, the satisfaction of the
17
requirements of this Article VIII, the conduct of voting, the validity and effectiveness of any
proxies, and the determination of any controversies, votes or challenges arising in connection
with or during the meeting or voting.
8.11 Action by Written Consent. Any action required or permitted to be taken at any
meeting of Members may be taken without a meeting, without prior notice, and without a vote, if a
consent or consents in writing setting forth the action so taken shall be signed by the Members
owning not less than the minimum percentage of Units that would be necessary to take such action at
a meeting at which all Units entitled to vote on the action were present and voted. Every written
consent shall bear the date of signature of each Member who signs the consent. No written consent
shall be effective to take the action that is the subject of the consent unless, within sixty (60)
days after the date of the earliest dated consent delivered to the Company in the manner required
by this Section 8.11, a consent or consents signed by the holder or holders of not less than the
minimum Percentage Interests that would be necessary to take the action that is the subject of the
consent are delivered to the Company by delivery to its Managers. Delivery to the Company’s
principal place of business shall be addressed to the Managers. A telegram, telex, cable gram,
electronic transmission, or similar transmission by a Member, or a photographic, photostatic,
facsimile or similar reproduction of a writing signed by a Member, shall be regarded as signed by
the Member for purposes of this Section 8.11. Prompt notice of the taking of any action by Members
without a meeting by less than unanimous written consent shall be given to those Members who did
not consent in writing to the action. If any action by the Members is taken by written consent, any
certificate or document filed with the Secretary of State of Oklahoma, if any, as a result of the
taking of the action shall state, in lieu of any statement required by the Act concerning any vote
of Members, that written consent has been given in accordance with the provisions of this
Agreement.
8.12 Telephone and Similar Meetings. Members may participate in and hold a meeting by
means of conference telephone or similar communications equipment by means of which all Persons
participating in the meeting can hear each other. Participation in such meeting shall constitute
attendance and presence in person at such meeting, except where a Person participates in the
meeting for the express purpose of objecting to the transaction of any business on the ground that
the meeting is not lawfully called or convened.
8.13 Limitation of Liability. Except as otherwise provided in the Act or in this
Agreement, no Member will be obligated personally for any debt, obligation or liability of the
Company or of any other Member by reason of being a Member, whether arising in contract, tort or
otherwise. Except as otherwise provided in the Act, by law or expressly in this Agreement, no
Member will have any fiduciary or other duty to another Member with respect to the business and
affairs of the Company.
8.14 Rights of Members Relating to Company Information. Any Member of the Company
shall have the right upon demand and at such Member’s own expense to obtain, inspect, and make
copies of all Company books, files, and records required to be made available to Members under the
Act.
8.15 Restrictions on Power to Bind the Company. Except as otherwise provided herein,
no Member as such shall have the authority or power to act on behalf of or to bind the Company
or any other Member or to take any action which would adversely affect the limited liability of a
18
Member or affect the status of the Company as a partnership for federal income tax purposes. Any
Member who takes any action or binds the Company in violation of this Section 8.15 shall be solely
responsible for any loss or expense incurred by the Company as a result of the unauthorized action
and shall indemnify and hold the Company and the other Members harmless in respect of such loss or
expense.
ARTICLE IX
TRANSFERS OF UNITS AND
WITHDRAWAL BY A MEMBER
WITHDRAWAL BY A MEMBER
9.1 General Restrictions on Transfers. Except as otherwise permitted in this
Agreement, no Member may make or suffer to be made any transfer of all or any part of that Member’s
Units in the Company to any Person. Any purported transfer other than as permitted in this Article
IX shall be null and void and shall not be respected in any manner by the Company.
9.2 Permitted Transfers. The following transfers described in this Section 9.2 shall
be permitted transfers. Any Person to whom a Unit or Units is transferred as permitted hereunder is
referred to as a “Permitted Transferee.” However, any permitted transfer hereunder shall be
effective only upon compliance with the requirements of Section 9.3.1. Any Permitted Transferee
hereunder may become a Member of the Company only upon compliance with Section 9.4.
9.2.1 With Approval of Members. All or any part of a Member’s Units may be
transferred with the approval of the Managers, which approval may be withheld for any
reason.
9.2.2 To Grantor Trust. All or any part of a Member’s Units may be
transferred to or from a grantor trust which is revocable by the Member within the meaning
of Section 676(a) of the Code.
9.3 Requirements to Be Satisfied as a Condition to the Transfer of Units and Before
Distributions May Be Made to Any Permitted Transferee.
9.3.1 Requirements. Any Permitted Transferee shall be recognized as the
transferee of the transferred Units, but only if: (i) the Permitted Transferee of the Units
executes such documents as are satisfactory to the Company accepting and adopting this
Agreement; (ii) the transferor and the Permitted Transferee of the Units satisfy the Company
that the transfer is permissible under applicable state and federal securities laws and will
not
jeopardize the classification of the Company as a partnership for income tax purposes;
(iii) the transferor and the Permitted Transferee of the Units satisfy the Company that the
transfer is permitted under this Agreement; and (iv) the transferor and the Permitted
Transferee agree to pay all expenses reasonably incurred by the Company in connection with
the transfer.
9.3.2 Payment of Distributions. The Company shall, after notice of any transfer
pursuant to the provisions of this Article IX and after compliance by the transferor and
Permitted Transferee with Section 9.3.1, thereafter pay all further distributions on account
of the Units so transferred to the Permitted Transferee.
19
9.4 Permitted Transferee May Become a Member of the Company. Any Permitted Transferee
of all or any part of a Member’s Units in the Company who satisfies the requirements of Section
9.2.1 may become a Member of the Company only upon the affirmative vote of Members holding at least
50% of the issued and outstanding Units (excluding the Units of the Permitted Transferee). Any
Permitted Transferee who does not become a Member of the Company shall only be entitled to such
allocations and distributions with respect to the transferred Units in accordance with this
Agreement and 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, shall not be entitled to vote
on any matter submitted to the Members, and shall not have any of the rights of a Member under the
Act or this Agreement.
9.5 Involuntary Transfer. Upon the occurrence of an Involuntary Transfer, the
transferee (the “Involuntary Transferee”) (i) shall not become a Member and (ii) shall be
subject to the following mandatory call option. The Company shall have the option to purchase all,
but not less than all, of the Units held by the Involuntary Transferee by giving notice of exercise
(the “Call Notice”) to the Involuntary Transferee within one hundred eighty (180) days after the
Company receives written notice from the Involuntary Transferee or the transferor of the
Involuntary Transfer. The purchase price shall be an amount equal to the Book Value of the Units at
the time of the Involuntary Transfer. The closing shall occur on the date specified by the Company
in the Call Notice; provided, however, that the closing shall occur within ninety (90) days after
the Involuntary Transferee receives the Call Notice. The purchase price shall be paid in full in
cash at the closing. If the Company fails to exercise its call option within such one hundred
eighty (180) day period, the Company shall be deemed to have declined the call option; and the
Involuntary Transferee shall only be entitled to such allocations and distributions with respect to
the transferred Units and shall have no right to any information or accounting of the affairs of
the Company, shall not be entitled to inspect the books and records of the Company, shall not be
entitled to vote on any matter submitted to the Members, and shall not have any other rights of a
Member under the Act or this Agreement, unless the Involuntary Transferee is admitted as a Member
pursuant to Section 9.4.
9.6 Partial Invalidity. The Members each agree that all of the terms and provisions
contained in this Article IX are fair and reasonable and are necessary to protect the mutual rights
and interests of the Members. However, in the event it is determined that any restriction or
limitation on transferability of Units under this Article IX or the right on behalf of the Members
or the Company to repurchase any Units so transferred or proposed to be transferred should be
invalid or unenforceable for any reason, then that provision or those provisions herein which are
determined to be invalid or unenforceable shall be reformed and amended to the minimum extent
absolutely necessary to cause any such provision to be valid and enforceable. The purpose of this
provision is to prevent a determination of total invalidity or unenforceability of any such
provision, since that is contrary to the intent of the Members entering into this Agreement. In
the case of a transfer or attempted transfer that is not in compliance with this Article IX, the
parties engaging or attempting to engage in such transfer shall indemnify and hold harmless the
Company and the other Members from all costs, liabilities and damages that any of such indemnified
Persons may incur (including incremental tax liability and attorneys’ fees and expenses) as a
result of such transfer or attempted transfer and efforts to enforce the indemnity granted hereby.
Furthermore, any of the transferor’s rights to allocations and distributions as provided in this
Agreement with respect to the Units purported to be transferred may be applied (without limiting
any other legal or equitable rights of the Company or the other
20
Members) to satisfy the debts, obligations or liabilities for damages that the purported transfer
may have caused the Company or the other Members.
ARTICLE X
OBLIGATIONS OF CONFIDENTIALITY
10.1
Confidentiality. All information (the “Confidential
Information”) acquired by a
Member or Manager in connection with the Company shall be treated as confidential and each Member
and Manager shall take or cause to be taken such reasonable precautions as may be necessary to
prevent the disclosure thereof to any unauthorized Person. Notwithstanding the preceding
sentence, Confidential Information may be furnished to bona fide prospective purchasers of Units or
to consultants for evaluation purposes; provided that any Person furnished with the information
pursuant to this Section 10.1 agrees in writing not to communicate such information to any other
Person or use it for its own benefit or in a manner adverse to the interests of the Company or a
Member and the Company and its Members are expressly made third party beneficiaries of such
agreement. Nothing contained in this Section l0.l or otherwise shall prohibit any Member or
Manager from disclosing Confidential Information that is required by judicial or administrative
process or otherwise required by law. Furthermore, a Member may disclose to any and all Persons,
without limitation of any kind, the tax treatment and tax structure of the transactions described
herein and all materials of any kind (including opinions or other tax analyses) that are provided
to the Member relating to such tax treatment and tax structure.
10.2 Confidentiality Maintained by Other Persons. Each Member and Manager shall take
all reasonable steps to require its employees and consultants, and its Affiliates and their
employees and consultants, to be bound by the provisions of Section 10.1 in the same manner as the
Member and Manager is bound hereunder.
10.3 Use of Confidential Information. No Member or Manager shall make use of any
Confidential Information disclosed to him except for the purposes of the Company. Any written
material or tangible thing including or embodying any such Confidential Information is and remains
the property of the Company.
ARTICLE XI
DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY
11.1 Events of Dissolution. The Company shall be dissolved and its affairs shall be
wound up upon the occurrence of an Event of Dissolution. An Event of Dissolution shall occur upon
the earlier of:
(a) the expiration of the term of the Company, if any, as provided for in the
Articles of Organization or this Agreement;
(b) a Majority Vote of the Common Members and a Majority Vote of the Preferred
Members to dissolve the Company; or
(c) the entry of a decree of judicial dissolution of the Company under the Act.
21
11.2 Dissolution of the Company. In the event the Company is to be dissolved, the
Company shall not be terminated and liquidated until the Company has filed Articles of Dissolution
with the Secretary of State of Oklahoma and the assets of the Company shall have been distributed
in liquidation. Notwithstanding the dissolution of the Company, prior to the termination of the
Company, the business and affairs of the Company shall continue to be governed by this Agreement.
11.3 Manner of Liquidation. Upon dissolution of the Company, the Managers shall have
full and complete authority to liquidate the Company’s assets and liabilities in a reasonable
manner. Liquidating distributions need not be of a pro rata interest in each item of property
distributed, but instead distributions of cash or properties can be made non-pro rata as reasonably
determined by the Managers. All expenses of termination and
liquidation shall be treated as Company expenses. In the event there is no Manager then serving, then the Members shall appoint a
Person, which may but need not be a Member, to act as the liquidating agent of the Company.
11.4 Determination of Capital Accounts. Upon liquidation of the Company, all gains and
losses from the sale or exchange of the Company’s assets shall be credited and charged to the
Members for federal income tax purposes and capital account purposes as provided for in Article V.
All assets to be distributed in kind and not actually sold or exchanged shall be deemed sold or
exchanged with the gain or loss from such deemed sale or exchange being credited and charged to the
Members for federal income tax purposes and capital account purposes as provided for in Article V.
11.5 Liquidating Distributions. All liquidation proceeds shall be distributed in the
following order of priority:
(a) to the payment of all liabilities owed to creditors of the Company, including
liabilities owed to Members; then
(b) any remainder shall be paid in proportion to and to the extent of the relative
capital account balances of the Members.
ARTICLE XII
INDEMNIFICATION
12.1 Company Indemnity. The Company shall indemnify and hold harmless each Member
and Manager (an “Indemnitee”) from and against any and all losses, costs, damages, liabilities,
attorneys’ fees, judgments, fines, settlements, penalties and other expenses actually and
reasonably incurred by the Indemnitee (the “Indemnified Expenses”) in connection with
any and all claims, demands, actions, suits, or proceedings, whether civil or criminal,
administrative or
investigative, in which the Indemnitee is involved or threatened to be involved, as a
party or otherwise (the “Indemnified Claims”), by reason of the fact that the Indemnitee is or
was a Member or Manager of the Company, provided that (i) the Indemnitee’s conduct did not
constitute willful misconduct; (ii) the action is not based upon a breach of this Agreement
including, without limitation, a breach by a Manager of any of the provisions of Section 7.10;
(iii) the Indemnitee acted in good faith and in a manner which the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Company and within the scope of
such Indemnitee’s authority; and (iv) with respect to a criminal action or proceeding, the
Indemnitee had no reasonable cause to believe his or
22
her conduct was unlawful. Further, no indemnification shall be had which is not permitted under the
Act. To be eligible for indemnity hereunder, the Indemnitee shall have given notice to the Company
on a reasonably prompt basis of the existence, nature, and scope of the Indemnified Claims and
Indemnified Expenses as soon as the Indemnitee became aware thereof.
12.2 Advancement of Indemnified Expenses. Indemnified Expenses incurred by an
Indemnitee may, from time to time, be advanced by the Company prior to the final disposition of an
Indemnified Claim upon receipt by the Company of an undertaking by or on behalf of the Indemnitee
to repay such Indemnified Expenses if it shall ultimately be determined that such Person is not
entitled to be indemnified as authorized in this Article.
12.3 Non-Exclusivity. The indemnification provided by this Article shall be in
addition to any other rights to which the Indemnitee may be entitled under any agreement, vote of
the Members, as a matter of law or equity, or otherwise, and shall inure to the benefit of the
successors, assignees, heirs, personal representatives and administrators of the Indemnitee.
12.4 Insurance. The Company may purchase and maintain insurance, at the Company’s
expense, on behalf of any Indemnitees against any liability that may be asserted against or expense
that may be incurred by an Indemnitee in connection with the activities of the Company, regardless
of whether the Company would have the power to indemnify such Indemnitee against such liability
under the provisions of this Agreement.
ARTICLE XIII
BOOKS, RECORDS, ACCOUNTING, AND TAX ELECTIONS
13.1 Bank Accounts. All funds of the Company shall be deposited in a bank account or
accounts maintained in the Company’s name. The Managers shall determine the institution or
institutions at which the accounts will be opened and maintained, the types of accounts, and the
Persons who will have authority with respect to the accounts and the funds therein.
13.2 Annual Accounting Period. The annual accounting period of the Company shall be
its taxable year. The Company’s taxable year shall be selected by the Managers, subject to the
requirements and limitations of the Code.
13.3 Books and Records. The Managers shall cause adequate books and records to be kept
of all Company affairs, utilizing generally accepted accounting principles consistently applied.
The
Managers shall be responsible for the preparation and maintenance of such books and records,
as well as for the preparation and delivery of reports and tax information to the Members as
provided herein.
13.4 Financial Reporting. The Managers shall furnish to the Members within three (3)
months after the end of each calendar year of the Company an annual financial report of the
operations of the Company and a statement of financial condition as of the end of each calendar
year.
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13.5 Tax Returns. In order to enable the Members to prepare and timely file their
federal income tax returns with respect to Company affairs, the Managers shall furnish the Members
an informational return as promptly as practicable for each calendar year.
13.6 Inspection of Records. Any Member, upon five (5) business days prior written
notice addressed to the Manager, shall have the right during the usual business hours for the
Company to inspect the books and records of the Company. No Member shall use or permit to be used
or acquiesce in the use by others of any information so obtained to the detriment of the Company.
The Company, as a condition precedent to any Member’s inspection of the books and records of the
Company, may require the Member to indemnify the Company against any loss or damage which may be
suffered by it arising out of any unauthorized disclosure made or permitted to be made by such
Member of information obtained in the course of such inspection.
Furthermore, the inspecting Member
shall reimburse the Company for all reasonable costs and expenses incurred by the Company in
connection with such inspection and copying of the Company’s books and records and the production
and delivery of any other books or records.
13.7 Tax Matters Partner. The Managers shall select the Company’s tax matters partner
(“Tax Matters Partner”). The Tax Matters Partner shall have all powers and
responsibilities provided in Code Section 6221, et seq. The Tax Matters Partner shall keep all
Members informed of all notices from government taxing authorities which may come to the attention
of the Tax Matters Partner. The Company shall pay and be responsible for all reasonable third-party
costs and expenses incurred by the Tax Matters Partner in performing those duties. A Member shall
be responsible for any costs incurred by the Member with respect to any tax audit or tax-related
administrative or judicial proceeding against any Member, even though it relates to the Company.
The Tax Matters Partner may not compromise any dispute with the Internal Revenue Service without
the approval of the Members.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Notifications. Any notice, demand, consent, election, offer, approval, request,
or other communication (collectively a “notice”) required or permitted under this Agreement must
be in writing or by electronic transmission and either delivered personally, be sent by certified
or registered mail, postage prepaid, return receipt requested or be sent by facsimile, electronic
transmission or recognized overnight courier. Any notice to be given hereunder by the Company
shall be given by a Manager. A notice must be addressed to a Member at the Member’s last known
address on the records of the Company. A notice to the Company must be addressed to the Company’s
principal office. A notice delivered personally will be deemed given upon actual receipt. A notice
that is sent by mail will be deemed given three (3) business days after it is mailed. A notice
that is sent by facsimile, electronic transmission or recognized overnight courier will be deemed
given one (1) business day after the facsimile or electronic transmission is sent or delivery to
the courier, as the case may be. Any party may designate, by notice to all of the others,
substitute addresses or
addressees for notices; and, thereafter, notices are to be directed to those substitute
addresses or addressees. For purposes of this Section 14.1, “electronic transmission”
means any form of communication, not directly involving the physical transmission of paper, that
creates a
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record that may be retained, retrieved, and reviewed by a recipient thereof, and that may be
directly reproduced in paper form by such recipient through an automated process.
14.2 Specific Performance. The parties recognize that irreparable injury will result
from a breach of any provision of this Agreement and that money damages will be inadequate to fully
remedy the injury. Accordingly, in the event of a breach or threatened breach of one or more of the
provisions of this Agreement, any party who may be injured (in addition to any other remedies which
may be available to that party) shall be entitled to one or more preliminary or permanent orders
(i) restraining and enjoining any act which would constitute a breach, or (ii) compelling the
performance of any obligation which, if not performed, would constitute a breach.
14.3 Complete Agreement. This Agreement constitutes the complete and exclusive
statement of the agreement among the Members. It supersedes all prior written and oral statements,
including any prior representation, statement, condition, or warranty. Neither this Agreement nor
the Articles of Organization may be amended except upon a Majority Vote of the Common Members and a
Majority Vote of the Preferred Members,
14.4 Applicable Law. All questions concerning the construction, validity, and
interpretation of this Agreement and the performance of the obligations imposed by this Agreement
shall be governed by the internal law, not the law of conflicts, of the State of Oklahoma.
14.5 Section Titles. The headings herein are inserted as a matter of convenience only,
and do not define, limit, or describe the scope of this Agreement or the intent of the provisions
hereof.
14.6 Binding Provisions. This Agreement is binding upon, and inures to the benefit of,
the parties hereto and their respective heirs, executors, administrators, personal and legal
representatives, successors, and permitted assigns.
14.7 Jurisdiction and Venue. Any suit involving any dispute or matter arising under
this Agreement may only be brought in the United States District Court for the Western District of
Oklahoma or, if in state court, in Oklahoma County, Oklahoma. All Members hereby consent to the
exercise of personal jurisdiction by any such court with respect to any such proceeding.
14.8 Terms. Common nouns and pronouns shall be deemed to refer to the masculine,
feminine, neuter, singular, and plural, as the identity of the Person may in the context require.
14.9 Separability of Provisions. Each provision of this Agreement shall be considered
separable; and if, for any reason, any provision or provisions herein are determined to be
invalid and contrary to any existing or future law, such invalidity shall not impair the operation
of or affect those portions of this Agreement which are valid.
14.10 Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original and all of which, when taken together, constitute one and the
same document. The signature of any party to any counterpart shall be deemed a signature to, and
may be appended to, any other counterpart.
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14.11 Estoppel Certificate. Each Member shall, within ten (10) days after written
request by any Member or Manager, deliver to the requesting Person a certificate stating, to the
Member’s knowledge, that: (i) this Agreement is in full force and effect; (ii) this Agreement has
not been modified except by any instrument or instruments identified in the certificate; and (iii)
there is no default hereunder by the requesting Person, or if there is a default, the nature and
extent thereof.
14.12 No Partnership Intended for Nontax Purposes. The Members have formed the Company
under the Act, and expressly do not intend hereby to form a partnership under either the Oklahoma
Uniform Partnership Act or the Oklahoma Revised Uniform Limited Partnership Act. The Members do not
intend to be partners to one another, or partners to any third party. To the extent any Member, by
word or action, represents to another person that any other Member is a partner or that the Company
is a partnership, the Member making such wrongful representation shall be liable to any other
Member who incurs personal liability by reason of such representation. No statement or action of
any Member that occurred prior to the formation of the Company shall he construed to constitute the
formation of a partnership of that Member with any other Member or any third party. The Company
shall, to the extent permissible, elect to be treated as a partnership for federal, state and local
income tax purposes, and each Member and the Company shall file all tax returns and shall otherwise
take all tax and financial reporting positions in a manner consistent with such treatment and no
Member shall take any action inconsistent with such treatment. The Company shall not be deemed a
partnership or joint venture for any other purpose.
14.13 Approvals and Consents Must be in Writing. Whenever this Agreement calls for the
consent or approval of any Member or Members, such consent or approval shall be effective only if
it is in writing and signed by or or behalf of the Member who is granting such consent or approval.
14.14 Representations and Warranties by the Preferred Members.
14.14.1
Representations and Warranties Regarding Securities Laws Matters. By such Preferred Member’s execution hereof, each Preferred Member hereby
represents and warrants to the Company and each of the other Members that:
(a) such Preferred Member recognizes that the Company is only presently being
organized and has no financial or operating history and such Preferred Member
understands the nature of the investment such Preferred Member is making;
(b) such Preferred Member is an Accredited Investor and has such knowledge and
experience in financial and business matters that such Preferred Member is capable of
evaluating the merits and risks of this investment, and has so evaluated such merits
and risks;
(c) such Preferred Member understands that he must bear the economic risks of the
investment for an indefinite period of time and because the Units have not been
registered under the Securities Act of 1933, as amended, or the securities laws of
any state and, therefore, cannot be resold unless subsequently registered under such
laws, or unless an exemption from such registration is available;
(d) such Preferred Member will not resell, transfer or distribute the securities
being purchased hereunder without registration under the Securities Act of 1933, as
26
amended, and under the securities laws of any state or other applicable
jurisdiction or unless an exemption from said laws is available; and
(e) such Preferred Member is purchasing Preferred Units for investment and for such
Preferred Member’s own account only and not with a view to resell or otherwise
distribute the Units being purchased hereunder, and such Preferred Member does not
intend to divide his participation with others or to resell or otherwise dispose of
all or any part of such securities.
(f) Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities. Any representation to
the contrary is a criminal offense.
14.14.2 Representations and Warranties regarding Legal Representation. By
such Member’s execution hereof, each Member severally acknowledges and represents that Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, prepared this Agreement on behalf of and in the course of its
representation of Terra International, Inc. Further, each Member (other than “Terra International,
Inc.”) severally acknowledges and represents that:
(a) Such Member has been advised that a conflict of interest may exist between his
interests and those of Terra International, Inc. and the other Members;
(b) such Member has been advised by counsel for Terra International, Inc. to seek
the advice of independent legal counsel;
(c) such Member has had the opportunity to seek the advice of independent counsel;
(d) such Member has been advised by counsel for Terra International, Inc. that this
Agreement may have tax consequences;
(e) such Member has received no representations from counsel for Terra
International, Inc. concerning the tax consequences of this Agreement; and
(f) such Member has been advised by counsel for Terra International, Inc. to seek
the advice of independent tax counsel.
14.15 Business Days. If any time period for giving notice or taking action under this
Agreement expires on a day which is a Saturday, Sunday or holiday in the state in which the
Company’s chief executive office is located, the time period shall be automatically extended to the
business day immediately following such Saturday, Sunday or holiday.
14.16 No Strict Construction. The parties to this Agreement have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties to
this Agreement, and no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date set forth above.
MANAGER: | TERRA INTERNATIONAL, INC., a | |||||||
Delaware corporation | ||||||||
By: | /s/ Xxx Xxxxxxxxx
|
|||||||
MEMBER: |
||||||||
(If an Individual) | Print Name: | |||||||
MEMBER: |
||||||||
(If a limited liability company, | Print Name of Entity | |||||||
limited partnership, or other entity) |
||||||||
By: | ||||||||
Printed Name: | ||||||||
Printed Title: |
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