EXHIBIT 3.2
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
(FORM OF) FIFTH AMENDED AND RESTATED OPERATING AND
MEMBER CONTROL AGREEMENT
THIS FIFTH AMENDED AND RESTATED OPERATING AND MEMBER CONTROL AGREEMENT
(the "Agreement") is made and entered into as of ________, 2004 by Granite Falls
Community Ethanol Plant, LLC, a Minnesota limited liability company (the
"Company"). This document has been duly adopted by the Board of Governors of the
Company and supersedes and replaces the Fourth Amended and Restated Operating
Agreement and Member Control Agreement. This Agreement is binding retroactively
on all Members to the date of organization of the Company. The Effective Date of
this Fifth Amended and Restated Operating Agreement is ________________, 2004.
In consideration of the mutual covenants 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
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "Act" shall mean the Minnesota Limited Liability Company Act, as
amended from time to time.
1.2 "Affiliate" means and includes, with respect to another Person, any of
the following: i) any Person directly or indirectly owning, controlling, or
holding with power to vote ten percent or more of the outstanding voting
securities of such other Person, ii) any Person ten percent or more of whose
outstanding voting securities are directly or indirectly owned, controlled, or
held, with power to vote, by such other Person, iii) any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person, iv) any executive officer, governor, trustee or partner of such other
Person, or v) any legal entity on which such Person acts as an executive
officer, governor, trustee, or partner.
1.3 "Agreement" shall mean this Fifth Amended and Restated Operating and
Member Control Agreement, as originally executed or as amended, modified,
supplemented or restated from time to time.
1.4 "Capital Account Balance" shall have the meaning set forth in Section
5.1.
1.5 "Capital Contribution" shall mean, in the case of any Member as of any
date of determination, the aggregate amount of cash, property, or services
rendered, or a promissory note or other binding obligation to contribute cash or
property or to perform services that such Member shall have contributed to the
Company on or prior to such date and a Member's share of any of the Company's
liabilities as determined in accordance with the Code and Treasury Regulations
(or, if such Member is not the original holder of the Interest of such Member,
the Capital Contribution with respect to the Interest). In the event that any
capital is returned to a Member, such Member's Capital Contribution shall be
adjusted to reflect such return.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time and any successor statute or subsequent codification or
recodification of the federal income tax laws of the United States.
1.7 "Company" shall mean Granite Falls Community Ethanol Plant, LLC, a
Minnesota limited liability company, as such limited liability company may from
time to time be constituted, or any successor in interest for such limited
liability company.
1.8 "Distribution" shall mean any distribution pursuant to Section 5.4 by
the Company of cash to the Members or any Distribution in Kind.
1.9 "Distribution in Kind" shall have the meaning set forth in paragraph
(b) of Section 5.4.
1.10 "Financial Rights" means a Member's rights to share in Profits and
Losses and in Distributions.
1.11 "Governance Rights" means all a Member's rights as a member of the
Company other than Financial Rights and the right to assign Financial Rights.
1.12 "Governor" shall mean one or more Persons designated by the Members
to be members of the Board of Governors. The "Board of Governors" or "Board"
shall manage the Company as provided in Section 6.
1.13 "Interest" shall mean, in the case of any Member at any time, such
Member's share of the Profits and Losses of the Company at such time and the
right of such Member to receive distributions of the Company assets to which
such Member may be entitled as provided in this Agreement and applicable law,
and the right of such Member to vote and participate in the management of the
Company as provided in this Agreement (i.e., Governance and Financial Rights).
1.14 "Losses" shall mean the net losses and deductions of the Company
determined in accordance with accounting principles consistently applied from
year to year employed under the method of accounting adopted by the Company and
as reported separately or in the aggregate, as appropriate, on the tax return of
the Company filed for federal income tax purposes.
1.15 "Majority in Interest" shall mean the affirmative vote of those
Members holding more than fifty percent (50%) of the Percentage of Membership
Units in the Company. With respect to the Board, "Majority of the Board" shall
mean the affirmative vote of more than fifty percent (50%) of the Governors.
Except as otherwise provided in this Agreement, all actions requiring approval
or vote of Members shall be taken by and approved upon voting based upon
Membership Units and Percentage of Membership Units.
1.16 "Member" means a Person reflected in the required records of the
Company as the owner of one or more Membership Units of the Company who has
signed this Agreement, such Person's heirs, executors, administrators, personal
representatives and successors and any assigns of Membership Units, Governance
Rights or Financial Rights as permitted by the Act, the Articles of Organization
and this Agreement and as reflected in the required records of the Company. When
the Governance Rights and Financial Rights attributable to a Membership Unit
have been separated and such separation is reflected in the required records of
the Company, references to Member shall mean the holder of the Governance Rights
or Financial Rights related to such Membership Unit as appropriate in the
context.
1.17 "Officer" shall mean a Member or other Person designated by the Board
or Members as provided in Section 6.11.
1.18 "Person" shall mean an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an estate, an unincorporated
organization or any other entity or a government or any department or agency
thereof.
1.19 "Percentage Interest" means the percentage figure calculated by
dividing a Member's Capital Account Balance at any given time by the total sum
of the Capital Account Balances of all Members.
1.20 "Percentage of Memberships Units" means the percentage figure
calculated by dividing a Member's Membership Units at any given time by the
total Membership Units of the Company issued and outstanding.
1.21 "Pro Rata" means the ratio computed by dividing the Units of each
Member to whom a particular provision of this Agreement is stated to apply by
the aggregate of the Units of all Members to whom that provision is stated to
apply.
1.22 "Profits" shall mean the net income and gains of the Company
determined in accordance with accounting principles consistently applied from
year to year employed under the methods of accounting adopted by the Company and
as reported separately or in the aggregate, as appropriate, on the tax return of
the Company filed for federal income tax purposes. Profits includes taxable
income, capital gain, and income exempt from taxation.
1.23 "Publicly Traded Partnership" shall mean a partnership whose interest
are traded on an established securities market, or are readily tradable on a
secondary market (or the substantial equivalent thereof).
1.24 "Qualified Matching Service Program" shall mean a matching service
that satisfied the requirements of a qualified matching service within the
meaning of the Treasury Regulation Section 1.7704-1(g)(2), as amended from time
to time, during limited time periods specified and approved by Board from time
to time, in its sole discretion.
1.25 "Transfer" or derivations thereof, of a Unit or Interest means, as a
noun, the sale, assignment, exchange, pledge, hypothecation or other disposition
of a Unit or Interest, or any part thereof, directly or indirectly, or the sale,
assignment, exchange, pledge, hypothecation, or other disposition of a
controlling interest in the equity
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securities of a Member, and as a verb, voluntarily to transfer, sell, assign,
exchange, pledge, hypothecate or otherwise dispose of.
1.26 "Treasury Regulations" shall mean the regulations of the United
States Department of the Treasury pertaining to the income tax, as from time to
time in force.
1.27 "Units" or "Membership Units" means the unit of measurement used to
quantify the Members' ownership interests in the Company. The Board may issue an
unlimited number of Membership Units. Each Membership Unit consists of
Governance Rights and Financial Rights and the right to assign together or
separately such Governance Rights or Financial Rights in accordance with the
Act, the Articles of Organization and this Agreement. When the Governance Rights
and Financial Rights attributable to a Membership Unit have been separated and
such separation is reflected in the required records of the Company under the
Act, references to Membership Unit shall mean the Governance Rights or Financial
Rights related to such Membership Unit as appropriate in the context. Except as
otherwise provided in this Agreement, and unless the Board from time to time by
resolution fixes the relative rights and preferences of different classes or
series of Membership Units, all Membership Units shall be ordinary Membership
Units of one class, without series, with one vote per Membership Unit on all
matters and having equal rights and preferences in all other matters. No Member
shall have any preemptive rights to acquire additional Membership Units.
1.28 "Value" shall mean, with respect to any Capital Contributions or
Distributions, if cash, the amount of such cash, or if not cash, the value of
such Capital Contribution or Distribution calculated pursuant to paragraph (d)
of Section 5.4.
SECTION 2
INITIAL DATE, PARTIES AND TERMS OF AGREEMENT
2.1 Formation. The original parties to this Agreement organized a limited
liability company under the provisions of the Act by delivering Articles of
Organization to the Secretary of State of the State of Minnesota for filing. The
Board may take such further actions as it deems necessary or advisable to permit
the Company to conduct business as a limited liability company in any
jurisdiction. The rights and liabilities of the Members under the Agreement
shall be as provided by Minnesota law.
2.2 Name. The name of the Company shall be Granite Falls Community Ethanol
Plant, LLC, or any other name permitted by the Act as the Members shall
afterwards designate by appropriate amendment to the Company's Articles or
Organization.
2.3 Principal Office. The principal office of the Company shall be at
0000-000xx Xxxxxx, Xxxxx 0, Xxxxxxx Xxxxx, Xxxxxxxxx 00000 (P.O. Box 216) or
such place as the Board may, from time to time, designate by appropriate
amendment to the Company's Articles of Organization and/or this Agreement. The
Board may establish additional places of business for the Company when and where
required by the business of the Company.
2.4 Initial Date and Parties.
(a) This Agreement was first made on February 21, 2002 and was
initially agreed to by the Company and all persons who on that date were Members
of the Company.
(b) Ownership rights in the Company are measured by Units. The
Company shall maintain a membership register at its principal office or by a
duly appointed agent of the Company setting forth the name, address, capital
contribution and number of Units held by each Member which shall be modified
from time to time as Transfers occur or as additional Units are issued pursuant
to the provisions hereof.
2.5 Subsequent Parties. No person may become a Member of the Company
without first assenting to and signing this Agreement. Any act by the Company to
offer or provide member status, or reflect that status in the Company's required
records, automatically includes the condition that the person becoming a member
first assents to and signs this Agreement. Furthermore, no Member may offer to
assign or assign Governance Rights or Membership Units unless the assignee has
assented to and signed this Agreement.
2.6 Relationship with Articles of Organization. If a provision of this
Agreement differs from a provision of the Company's Articles of Organization,
then to the extent allowed by law, this Agreement shall govern.
2.7 Tax Matters and Partnership Status. The members acknowledge that the
Company will be treated as a "partnership" for federal and Minnesota state tax
purposes. The Members further intend, that as a result of this
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Agreement, and except for federal and state tax purposes, the Company shall not
be a partnership (including limited partnership) or joint venture; and no member
or governor shall be a partner or joint venturer of any other member. All
provisions of this Agreement, and the Company's Articles of Organization are to
be so construed.
2.8 Fiscal Year. The fiscal year of the Company shall begin on January 1st
of each year and end on December 31st of each year. The fiscal year in which the
Company shall terminate shall end on the date of termination of the Company.
2.9 Intent of this Agreement.
(a) The parties to this Agreement have reached an understanding
concerning various aspects of (i) their business relationship with each other
and (ii) the organization and operation of the Company and its business. They
wish to use rights created by statute to record and bind themselves to that
understanding.
(b) The parties intend for this Agreement to control, to the extent
stated or fairly implied, the business and affairs of the Company, including the
Company's governance structure and the Company's dissolution and winding up, as
well as the relations among the Company's Members.
2.10 Advice of Counsel. Each Person signing this Agreement:
(a) Understands that this Agreement contains legal binding
provisions;
(b) Has had the opportunity to consult with that Person's own
lawyer; and
(c) Has either consulted that lawyer or consciously decided not to
consult a lawyer.
SECTION 3
BUSINESS OF THE COMPANY
The Company may engage in any lawful business activity; and this Agreement
shall be construed in light of such purpose.
SECTION 4
CAPITAL CONTRIBUTIONS
4.1 Initial Paid-In Capital.
(a) Prior to the date of this Agreement, the initial Members of the
Company (the "Founders") contributed cash to the capital of the Company as set
forth in the required records of the Company.
(b) The Board of Governors, in its sole discretion, may from time to
time by majority vote, accept additional subscriptions for Membership Units in
the Company, or grant options, warrants or other rights to purchase or otherwise
acquire Membership Units, all on such terms as the Board may determine. Upon
acceptance of any such subscription, the Company shall promptly enter into a
subscription agreement (and any agreement referred to therein), without the
requirement of any further act, approval or vote of any other Person and such
subscription agreement will, along with execution of agreement to be bound by
this Agreement be deemed to satisfy all the conditions hereof.
(c) Each Founder shall be entitled, notwithstanding Section 10.1, to
Transfer such Founder's Interest on a one time basis to another Person and at
the Founder's discretion; provided, however, that the Transferee's ownership in
all respects complies with the terms hereof and the Transferee becomes bound by
all the terms and conditions set forth herein.
4.2 Additional Capital Contributions. No Member shall be required to make
any additional contributions to the capital of the Company. No Member shall be
obligated to satisfy any negative Capital Account Balance, except to the extent
expressly set forth herein. No Member shall be paid interest on any Capital
Contribution.
4.3 Maximum Ownership. There is no limit on the number of Units or
Percentage Interest that any Member may own.
4.4 Withdrawal or Reduction of Members' Capital Contributions.
(a) No Member has the right to withdraw all or any part of the
Member's Capital Contribution or to receive any return on any portion of the
Member's Capital Contribution, except as may be
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otherwise specifically provided in this Agreement. Under circumstances involving
a return of any Capital Contribution, no Member has the right to receive
property other than cash.
(b) Unless the Board from time to time by resolution fixes the
relative rights and preferences of different classes or series of Membership
Units, no Member shall have priority over any other Members, either as to the
return of Capital Contributions or as to Losses and Profits, or distributions,
except as otherwise provided herein.
4.5 Loans from Governors and Members. The Company may borrow money from
and enter into other transactions with any Governor or Member or their
Affiliates only in compliance with Section 6.14. Borrowing from or engaging in
other transactions with one or more Governors or Members does not obligate the
Company to provide comparable opportunities to other Governors or Members. Any
loan made by a Governor or Member to the Company shall be evidenced by a
promissory note made payable from the Company to such Governor or Member. Loans
by a Governor or Member to the Company shall not be considered Capital
Contributions and shall be repaid pursuant to Section 5.4(a) below.
4.6 Loans by Company to Members. Unless otherwise approved by the Board of
Governors, the Company will not make any loans to Members.
4.7 Prohibition on Loans to Governors and Executive Officers. Despite
anything otherwise in this Agreement to the contrary, the Company shall not,
directly or indirectly, including through any subsidiary, extend or maintain
credit, arrange for the extension of credit or renew an extension of credit, in
the form of a personal loan to or for any governor or executive officer.
SECTION 5
ALLOCATIONS AND DISTRIBUTIONS
5.1 Capital Accounts. A "Capital Account" shall be established for each
Member on the books of the Company and maintained in accordance with Section
1.704-1(b)(2) of the Treasury Regulations, as amended from time to time.
(a) To each Member's Capital Account shall be credited:
(i) the cash and the Value of any property other than cash
contributed by such Member to the capital of the Company;
(ii) such Member's allocable share of Profits, and any items
of income or gain which are specially allocated to the Member; and
(iii) the amount of any Company liabilities assumed by such
Member of which are secured by any property of the Company distributed to such
Member.
The principal amount of a promissory note which is not readily traded on
an established securities market and which is contributed to the Company by the
maker of the note shall not be credited to the Capital Account of any Member
until the Company makes a taxable disposition of the note or until (and only to
the extent) principal payments are made on the note.
(b) To each Member's Capital Account there shall be debited:
(i) the amount of cash and the Value of any property other
than cash distributed to such Member pursuant to section 5.4;
(ii) such Member's allocable share of Losses and any items of
expense or loss which are specially allocated to the Member; and
(iii) the amount of any liabilities of such Member assumed by
the Company or which are secured by any property contributed by such Member to
the Company.
Provided; however, all of the foregoing to be determined in accordance with the
rules set forth in Section 1.704-1(b)(2)(iv) of the Treasury Regulations, as
amended from time to time.
5.2 Allocation of Profits. Profits of the Company shall be allocated to
the Members according to their Percentage of Membership Units.
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5.3 Allocation of Losses. Losses of the Company shall be allocated to the
Members according to their Percentage of Membership Units.
5.4 Distributions.
(a) The Board of Governors shall determine, in its sole discretion,
whether to distribute or retain all or any portion of the Profits. The Governors
may distribute cash to the Members irrespective of Profits. All cash
distributions shall be made to the Members in accordance with paragraph (c) of
this Section 5.4; provided, however, no Member has a right to any distribution
prior to the dissolution of the Company without the approval of the Board;
provided, further, notwithstanding any other language herein no distributions in
dissolution will be made until all loans from all Members, including all
principal and interest, are repaid in full. Such repayments shall be made on a
Pro Rata basis. Nothing herein shall be construed as requiring the making of
distributions prior to the repayment of loans from unrelated parties.
(b) The Board may agree to distribute to the Members in kind any
property held by the Company. Any such distribution of property shall be
referred to herein as a "Distribution in Kind." The value of any such
Distribution in Kind at the time of such distribution shall be determined in
accordance with paragraph (d) of this Section 5.4 and such distribution shall be
made to the Members in accordance with paragraph (c) of this Section 5.4.
Distribution in Kind, made pursuant to this paragraph (b), shall be subject to
such restrictions and conditions as the Board shall have determined are
necessary or appropriate in order for such distributions to be made in
accordance with applicable law. Notwithstanding the foregoing, Distributions in
Kind shall not be allowed, unless they are (i) distributions of readily
marketable securities, (ii) distributions of cash from a liquidating trust
established for the dissolution of the Company and the liquidation of its assets
in accordance with this Agreement or (iii) distributions of in-kind property in
which the Members have been advised of the risks associated with such property,
the Members have been offered the election of receiving in-kind property
distributions and only the Members who accept the offer of in-kind property
actually receive in-kind property.
(c) Subject to Section 5.5, any distribution of Profits in
accordance with this Section 5.4, and any distribution, other than Profits or
cash pursuant to paragraph (a) of this Section 5.4 or Distribution in Kind
pursuant to paragraph (b) of Section 5.4, shall be made to the Members according
to their Percentage of Membership Units.
(d) The Value of any Distribution in Kind as of any date of
determination (or in the event such date is a holiday or other day that is not a
business day, as of the next preceding business day) shall be the estimated fair
market value of the property distributed.
(e) All distributions are subject to set-off by the Company for any
past-due obligation of the Members to the Company.
5.5 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 Board,
using any permissible method under Section 706 of the Code and the Treasury
Regulations thereunder.
(b) The Members are aware of the income tax consequences of the
allocations made by this Section 5 and hereby agree to be bound by the
provisions of this Section 5 in reporting their shares of Company income and
loss for income tax purposes.
(c) Unless approved by the Board, in advance, all Allocations and
Distributions (and K-1s reflecting the same) made by the Company shall be based
on the record ownership of Membership Units at the time for which such
allocations or distributions are attributable. For example, it shall be a
Member's responsibility in the event of a transfer of a Membership Interest in
the Company (permitted under this Agreement) to request Board approval with
respect to allocations or distributions being made to any transferee that arise
from allocations or distributions attributable to a prior year where, at year
end, the transferring member was the record owner of the Membership Units.
(d) Notwithstanding any provision herein to the contrary, in the
event of Termination and Dissolution of the Company, sale of substantially all
of its assets, or other action causing a distribution to Members other than in
the ordinary course of business of the Company, the Board shall be authorized
and shall adjust the distribution to any member (to include Founding Member) so
that the Member will receive first, a distribution based
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upon the Members Percentage Interest as required by law and generally accepted
principles of accounting, to the extent necessary to equalize all Members
Capital Account Balances, and thereafter by Percentage of Membership Units.
5.6 Transfer of Capital Accounts. In the event all or a portion of an
Interest in the Company is Transferred in accordance with the terms of the
Articles of Organization and this Agreement, the transferee shall succeed to
that portion of the Capital Account of the transferor which is allocable to the
transferred Interest.
SECTION 6
MANAGEMENT OF THE COMPANY
6.1 Management.
(a) The Company shall be managed by a Board of Governors whose
members are elected, designated or appointed in accordance with Section 6.1(c).
All powers of the Company shall be exercised by or under the authority of, and
the business affairs of the Company managed under the direction of the Board of
Governors in accordance with this Agreement. Individual Governors or Officers
designated by the Board from time to time may act for or on behalf of the
Company and execute all agreements on behalf of the Company and otherwise bind
the Company as to third parties without the consent of the Members or remainder
of the Board of Governors; provided, however, that with respect to those issues
requiring approval of the Members under the Act or as set forth in this
Agreement, such approval must first be obtained; and further provided, that
except for those acts for which the approval of the Board of Governors is
required by this Agreement, and except for those powers or acts specifically
reserved to the Board of Governors by this Agreement, the Board of Governors
shall have authority to appoint a management company to manage the business and
affairs of the Company in accordance with agreements reached by the Board and
any such management company from time to time.
(b) The salaries and other compensation, if any, of the Governors
for management services shall be fixed annually by a vote of a Majority of the
Board.
(c) The Board of Governors shall be comprised of natural persons as
stated in the Articles of Organization. The Board of Governors shall consist of
the following:
(i) Subject to Section 6.1(c)(vix), the Board of Governors
shall consist of seven (7) individuals.
(ii) So long as it is a member and holds no less than 20% of
the issued and outstanding Membership Units of the Company, Glacial Lakes
Energy, LLC ("Glacial Lakes") shall designate two (2) members to serve on the
Board of Governors (the "Glacial Lakes Appointees"), and an alternate (the
"Glacial Lakes Alternate") to serve as described below. Glacial Lakes shall
promptly appoint any replacements for such individuals if they resign and/or
retire from the Board of Governors or from service as an alternate. If a Glacial
Appointee is not available for, or during any part of, a meeting of the Board of
Governors or to take action in writing in lieu of such a meeting, the Glacial
Alternate is entitled to act as a Governor at such meeting, or during such part,
or to take such action in writing (but only on behalf of one Glacial Appointee,
if both are unavailable). In any event, if Glacial Lakes is no longer a member
of the Company or holds less than 20% of the issued and outstanding Membership
Units of the Company, then the Glacial Lakes Appointees and the Glacial Lakes
Alternate shall be deemed to have resigned and, unless the provisions of Section
6.1(c)(iii) apply, the Glacial Lakes Appointees shall be replaced as At-Large
Additional Governors under Section 6.1(c)(v).
(iii) If Glacial Lakes sells a number of its Membership Units
comprising at least 20% of the issued and outstanding Membership Units of the
Company to a single person or entity that is not an Affiliate of Glacial Lakes,
the buyer of such Membership Units (the "Glacial Successor") shall succeed to
Glacial Lakes' right to designate two (2) members to serve on the Board of
Governors (the "Glacial Successor Appointees"), and the alternate (the "Glacial
Successor Alternate"). The Glacial Successor's right to designate the Glacial
Successor Appointees and the Glacial Successor Alternate will terminate (and
such Appointees and Alternate shall be deemed to have resigned and the Glacial
Successor Appointees shall be replaced as At-Large Additional Governors under
Section 6.1(c)(v)) upon the earlier of (x) the sale or other disposition of all
or substantially all of the Glacial Successor's assets, (y) the sale or other
disposition (including whether by equity sale to, or merger or consolidation
with or into, another person or entity) of a majority of the capital securities,
or voting securities, of the Glacial Successor or (z) the date that the Glacial
Successor no longer holds at least 20% of the issued and outstanding
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Membership Units of the Company. Glacial Lakes shall have no other right to
assign the appointment of Governors or an alternate except as provided by this
Section 6.1(c)(iii).
(iv) So long as it is a member and holds no less than 5% of
the issued and outstanding Membership Units of the Company, Xxxxx, Inc.
("Xxxxx") shall designate one (1) member to serve on the Board of Governors (the
"Xxxxx Appointee"). Xxxxx shall promptly appoint any replacements for the Xxxxx
Appointee in the event of his or her resignation and/or retirement from the
Board of Governors. In the event that Xxxxx is no longer a member of the Company
or holds less than 5% of the issued and outstanding Membership Units in the
Company, then the Xxxxx Appointee shall be deemed to have resigned and Xxxxx'x
Appointee shall be replaced as an At-Large Additional Governor under Section
6.1(c)(v).
(v) The remaining four Governors (the "At-Large Governors"),
together with any Governor to be elected to fill a vacancy created by the deemed
resignation above of a former Glacial Lakes, Xxxxx or Glacial Successor
Appointee (an "At-Large Additional Governor") shall be elected by the members of
the Company. However, Glacial Lakes, Glacial Successor and Xxxxx shall not be
entitled to vote with respect to the election of the At-Large Governors or any
At-Large Additional Governor if Glacial Lakes, the Glacial Successor and/or
Xxxxx, as applicable, continues to have the right to separately appoint one or
more Governors above. The At-Large Governors and any At-Large Additional
Governors shall together (by majority vote of all such Governors) designate an
alternate (the "At-Large Alternate") to serve as follows. If any At-Large
Governor or At-Large Additional Governor is not available for, or during any
part of, a meeting of the Board of Governors or to take action in writing in
lieu of such a meeting, the At-Large Alternate is entitled to act as a Governor
at such meeting, or during such part, or to take such action in writing (but
only on behalf of one At-Large Governor or At-Large Additional Governor, if more
than one is unavailable). The At-Large Governors and any At-Large Additional
Governors shall together have the right to fill vacancies in the At-Large
Governor and At-Large Additional Governor positions by majority vote.
(vi) The manner of election as to the At-Large Governors and
any At-Large Additional Governors shall be by affirmative vote of a Majority in
Interest of the members (excluding Glacial Lakes, the Glacial Successor and
Xxxxx to the extent noted above) and as follows: at the First Annual Meeting of
Members after the date hereof, one (or if greater, one-third rounded down to the
nearest whole number) of the At-Large Governors and any At-Large Additional
Governors shall be elected for a 3-year term ("Class One"); at the Second Annual
Meeting of the Members after the date hereof, a second one (or if greater,
one-half rounded down to the nearest whole number) of the total number of
At-Large Governors and any At-Large Additional Governors that did not stand for
election in Class One shall be elected to 3-year term ("Class Two"); and at the
Third Annual Meeting of Members after the date hereof, the remaining At-Large
Governors and At-Large Additional Governors shall be elected for a 3-year term
("Class Three").
(vii) Each Governor shall serve until his or her successor is
duly elected or, if earlier, until such Governor's death, actual or deemed
resignation or removal.
(viii) Each alternate, as designated above, shall be entitled
to attend all Board functions and to receive and shall receive all information
provided to the Governors; provided, however, that if legal counsel to the
Company concludes that providing or sharing particular information with an
alternate would jeopardize the Company's attorney-client privilege, then the
Company may withhold such information from the alternate.
(vix) The right is reserved to the Board of Governors to
establish two (2) additional board seats upon such criteria as approved
unanimously by the Board of Governors.
6.2 Authority of the Board of Governors. In addition to and not in
limitation of any rights and powers conferred by law or other provisions of this
Agreement, and except as limited, restricted or prohibited by the express
provisions of this Agreement, the Board of Governors shall have and may exercise
on behalf of the Company, all powers and rights necessary, proper, convenient or
advisable to effectuate and carry out the purposes, business and objectives of
the Company. Such powers shall include, without limitation, the power to:
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(a) Expend Company funds in connection with the operation of the
Company's business or otherwise pursuant to this Agreement;
(b) Employ and dismiss from employment any and all employees,
agents, independent contractors, attorneys and accountants;
(c) Prosecute, settle or compromise all claims against third
parties, compromise, settle or accept judgment on, claims against the Company
and execute all documents and make all representations, admissions and waivers
in connection therewith;
(d) Borrow money on behalf of the Company from any Person, issue
promissory notes, drafts and other negotiable and nonnegotiable instruments and
evidences of indebtedness, secure payment of the principal of any such
indebtedness and the interest thereon by mortgage, pledge, property of the
Company, whether at the time owned or thereafter acquired;
(e) Hold, receive, mortgage, pledge, lease, transfer, exchange,
otherwise dispose of, grant options with respect to, and otherwise deal in the
exercise all rights, powers, privileges and other incidents of ownership or
possession with respect to all property of whatever nature held or owned by, or
licensed to, the Company;
(f) Lend any of the Company property with or without security;
(g) Have and maintain one or more offices within or without the
State of Minnesota;
(h) Open, maintain and close bank accounts and money market mutual
funds accounts, and draw checks and other orders for the payment of monies;
(i) Engage accountants, custodians, consultants and attorneys and
any and all other agents and assistants (professional and nonprofessional) and
pay such compensation in connection with such engagement that the Board of
Governors determines is appropriate.
(j) Enter into, execute, make, amend, supplement, acknowledge,
deliver and perform any and all contracts, agreements, licenses, and other
instruments, undertakings and understandings that the Board determines is
necessary, appropriate or incidental to carrying out the business of the
Company;
(k) Establish one or more committees of the Board, including an
audit committee in compliance with the Securities Exchange Act of 1934, as
amended, and a compensation committee.
(l) File a petition in bankruptcy on behalf of the Company; and
(m) Delegate to the Chairman, President and other Officers such
responsibility and authority as the Board deems necessary or appropriate from
time to time.
In exercising its powers, the Board of Governors may (i) rely upon and
shall be protected from acting or refraining from acting upon any resolution,
certificate, statement, instrument, opinion, report, or document believed by him
or her to be genuine and to have been signed or presented by the proper party or
parties; (ii) consult with counsel, accountants, and other experts selected by
him or her and any opinion of an independent counsel, accountant or expert shall
be full and complete authorization and protection in respect of any action taken
or suffered or omitted by the Board of Governors in good faith and in accordance
with such opinion; and (iii) execute any of his or her powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys.
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6.3 Obligations of the Board of Governors. The Board of Governors shall:
(a) Devote to the Company and apply to the accomplishment of Company
purposes so much of the Board of Governors time and attention as they determine
to be necessary or advisable to manage properly the affairs of the Company.
(b) Maintain accounting records from which a Company Capital Account
Balance can be determined for each Member;
(c) Execute, file, record or publish all certificates, statements
and other documents and do all things appropriate for the formation,
qualification and operation of the Company and for the conduct of its business
in all appropriate jurisdictions;
(d) Employ attorneys to represent the Company when necessary or
appropriate;
(e) Use their best efforts to maintain the status of the Company as
a "limited liability company" for state law purposes, and as a "partnership" for
federal income tax purposes;
(f) Have fiduciary responsibility for the safekeeping and use of all
funds and assets of the Company, and not employ or permit others to employ such
funds or assets (including any interest earned thereon) in any manner except for
the benefit of the Company; and
(g) Maintain a current list of the names, last known addresses and
Percentage Interest of each Member at the Company's principal office.
6.4 Resignation of Governor. Any Governor may resign as Governor of the
Company upon written notice to the Board of Governors.
6.5 Removal of a Governor. One or both of the Glacial Lakes Appointees may
be removed from time to time with or without cause by Glacial Lakes. One or both
of the Glacial Successor Appointees may be removed from time to time with or
without cause by the Glacial Successor. The Xxxxx Appointee may be removed from
time to time with or without cause by Xxxxx. Any other Governor may be removed
from time to time with or without cause by a Majority in Interest of Members.
However, Glacial Lakes, Glacial Successor and Xxxxx shall not be entitled to
vote with respect to the removal of any At-Large Governors or any At-Large
Additional Governor if Glacial Lakes, the Glacial Successor and/or Xxxxx, as
applicable, continues to have the right to separately appoint one or more
Governors under Section 6.1(c).
6.6 Board Voting Requirements for Certain Issues.
During such time that Glacial Lakes is a member of the Company and holds
at least 20% of the issued and outstanding Membership Units of the Company, the
following actions shall require the minimum vote, as set forth in each item, of
the full Board of Governors before such decisions are binding or effective on
the Company:
(i) Hiring of a manager or entering into an agreement to have
management services provided to the Company shall require a
two-thirds (2/3) vote.
(ii) The initial hiring of any marketer(s) or entering into an
agreement to have marketing services provided to the Company
(regarding the sale of ethanol, distillers grain, or any
other products produced or sold by the Company) shall
require a three-fourths (3/4) vote and any hiring thereafter
shall require a two-thirds (2/3) vote.
(iii) The sale, lease, exchange or other disposition of any assets
of the Company out of the ordinary course of business,
except for sales of ethanol, distillers grain, or any other
products produced or sold by the Company, the sale, lease,
exchange or other disposition of all or substantially all of
the Company's assets or the merger or consolidation of the
Company with or into any other Person shall require a
three-fourths (3/4) vote.
(iv) Construction, whether repair, remodeling or new, exceeding
an estimated cost of $1 million shall require a
three-fourths (3/4) vote.
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(v) Material changes (in excess of $50,000) in the plans or
specifications of the Company's proposed ethanol plant and
the contract to design and construct the plant shall require
a three-fourths (3/4) vote;
(vi) Approval of the amount and terms of debt financing and all
documents and agreements entered into in connection
therewith to construct and finance the start-up costs of the
proposed ethanol plant shall require a three-fourths (3/4)
vote;
(vii) The annual operating and capital budgets for each fiscal
year shall require a two-thirds (2/3) vote;
(viii) Any contract, obligation, liability, disbursement or lawsuit
settlement outside of the ordinary course of business in
excess of $100,000 which is not part of the then-current
fiscal year's approved Annual Operating or Capital Budget
(provided that necessary expenditures to meet operational
emergencies at the proposed ethanol plan may be incurred
prior to such approval if immediate action is required for
the safety or operation of the proposed plant shall require
a three-fourths (3/4) vote;
(ix) Any investment in excess of $100,000 which is not part of
the then current fiscal year's approval Annual Capital
Budget shall require a three-fourths (3/4) vote;
(x) Other than in connection with the Company's proposed initial
public offering of Membership Units, the acceptance of
additional capital contributions, the issuance of additional
Membership Units, or the issuance of options or warrants to
purchase Membership Units shall require a three-fourths
(3/4) vote;
(xi) The determination of the gross asset values of the Company
property shall require a three-fourths (3/4) vote;
(xii) Except as provided by Section 10 or in connection with the
Company's proposed initial public offering of Membership
Units, the admission of additional or substitute members and
the terms of such admission shall require a three-fourths
(3/4) vote;
(xiii) The sufficiency of any legal opinion required or the waiver
of any such legal opinion shall require a two-thirds (2/3)
vote;
(xiv) Any tax elections made under this Agreement shall require a
three-fourths (3/4) vote;
(xv) Any amendment to the Articles or this Agreement shall
require a three-fourths (3/4) vote;
(xvi) The employment or termination of legal counsel shall require
a unanimous vote and accounting and auditing firms a
two-thirds vote (provided, however, that at any time that
the Company is subject to the provisions of the
Xxxxxxxx-Xxxxx Act of 2002, the engagement and dismissal of
the Company's independent accountants shall vest solely with
the Company's Audit Committee);
(xvii) Entering into any new corn procurement agreement, or
amending the FCE Corn Procurement Agreement in effect on the
Effective Date of this Agreement, shall require a unanimous
vote.
6.7 Voting Requirements for Certain Items Reserved for Member Approval.
During such time that Glacial Lakes is a member of the Company and holds at
least 20% of the issued and outstanding Membership Units of the Company, the
following actions require Member approval (in addition to such other Member or
Board approvals required by this Agreement) of a minimum two-thirds (2/3) vote
of Membership Units of the Company at a meeting of Members at which at quorum is
present:
(i) Issue Membership Units in the Company (subsequent to the
final closing of the Company's proposed initial public
offering of Membership Units) at less than $1,000 per unit;
(ii) Sell, lease, exchange or otherwise dispose of all or
substantially all of the assets of the Company;
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(iii) Merger or consolidation of the Company with or into any
other Person;
(iv) A change in the business purpose of the Company; or
(v) Voluntary dissolution of the Company.
6.8 Meetings of the Board. Meetings of the Board may be called by the
Chairman of the Board or any two (2) Governors and shall be held at the
principal place of business of the Company, or elsewhere as the notice of such
meeting shall direct. Except as otherwise expressly provided in this Agreement,
the Articles, or the Act, the affirmative vote of a majority of the Governors
present at a duly convened meeting of the Board at which a quorum is present
shall constitute the act of the Board.
6.9 Place of Meeting. The Board may designate any place, either in or out
of the State of Minnesota, as the place of meeting for any meeting. If no
designation is made, the place of meeting shall be the Company's principal
office. Governors may attend any such meeting in person or by telephone or video
conference call.
6.10 Notice of Meeting. Written or oral notice of every meeting of the
Board, stating the place, date and hour of the meeting, and the purpose or
purposes for which the meeting is called, shall be given by the Secretary of the
Company to each other Governor at least seventy-two (72) hours prior to the
meeting, unless such notice is waived in accordance with Section 9 hereof.
6.11 Quorum. The presence of a Majority of the Governors shall constitute
a quorum for the transaction of business. If a quorum is not present at a
meeting, a majority of the Governors represented may adjourn the meeting from
time to time without further notice. If proper notice is not given, or waived,
there must be at least one (1) Governor of or appointed by Glacial Lakes present
in order to conduct business.
6.12 Officers.
(a) The Board may elect a Chairman, Vice Chairman, President, and
one or more Vice Presidents, from among its Governors. The Board shall elect a
Chief Manager, Treasurer and Secretary. Officers need not be Governors. Any two
(2) or more offices may be held by the same person.
(b) The Officers of the Company shall be elected annually by the
Board at the first meeting of the Board held after each annual meeting of
Members. If the election of Officers shall not be held at such meeting, such
election shall be held as soon thereafter as conveniently possible. Vacancies
may be filled or new offices created and filled at any meeting of the Board.
Each Officer shall hold office until his or her successor shall have been duly
elected and qualified or until his or her death, or until he or she shall resign
or shall been removed in the manner hereinafter provided. Election or
appointment of an Officer or agent shall not of itself create contract rights.
(c) Any Officer or agent may be removed by the Board at any time
with or without cause, but such removal does not affect the contract rights, if
any, with the Company of the person so removed.
(d) A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Board for the unexpired
portion of the term. An Officer may resign at any time by delivering notice to
the Company. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at a
later date and the Company accepts the future effective date, the Board may fill
the pending vacancy before the effective date if the Board provides that the
successor does not take office until the effective date.
6.13 Liabilities of Governors. In carrying out their duties hereunder, the
Governors shall not be liable to the Company or to any Member for any actions
taken in good faith and reasonably believed by them to be in the best interest
of the Company or in reliance of the provisions of this Agreement or the
Articles or for good faith errors of judgment. The Governors shall not be
expected to devote their full time and attention to the affairs of the Company,
but shall devote such amounts of time and attention as are reasonable and
appropriate in their good faith judgment under the circumstances prevailing from
time to time.
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6.14 Indemnification of the Governors, their Affiliates and Control
Persons.
(a) Neither the Governors nor any Officer shall be liable to the
Company or any Member for any act or omission based upon errors of judgment or
other fault in connection with the business or affairs of the Company if the
Board determines that such course of conduct was in the best interest of the
Company and did not result from the negligence or misconduct of such Governor or
Officer.
(b) To the fullest extent permitted by law, the Governors and
Officers (each such person being referred to herein as an "Indemnitee"), shall
be indemnified and held harmless by the Company from and against any and all
losses, claims, damages, settlements and other amounts arising from any and all
claims (including attorneys fees and expenses, as such fees and expenses are
incurred), demands, actions, suits or proceedings (civil, criminal,
administrative or investigative), in which they may be involved as a party or
otherwise, by reason of their management of the affairs of the Company whether
or not they continue to be such at the time any such liability or expense is
paid or incurred; provided that Indemnitee shall not be entitled to the
foregoing indemnification if a court or competent jurisdiction shall have
determined that such losses, claims, damages, liabilities, expense or such other
amounts resulted primarily from the negligence or misconduct of such Indemnitee.
The termination of a proceeding by judgment, order, settlement or conviction
upon a plea of nolo contendre or its equivalent, shall not, of itself, create
any presumption that such losses, claims, damages, liabilities, expenses or such
other amounts resulted primarily from the negligence or misconduct of any
Indemnitee or that the conduct giving rise to such liability, was not in the
best interest of the Company. The Company shall also indemnify any Indemnitee
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action by or in the right of the Company to procure a
judgment in its favor by reason of the fact that such Indemnitee is or was an
agent of the Company, against any losses, claims, damages, liabilities, expenses
or any other amounts incurred by such Indemnitee in connection with the defense
or settlement of such action; provided that no Indemnitee shall be entitled to
the foregoing indemnification if a court of competent jurisdiction shall have
determined that any such losses, claims, damages, liabilities, expenses or such
other amounts resulted from the negligence or misconduct of such Indemnitees. To
the extent permitted by law, the Company may advance any Indemnitee any expenses
(including, without limitation, attorneys' fees and expenses) incurred as a
result of any demand, action, suit or proceeding referred to in this paragraph
(b) provided that (i) the legal action relates to the performance of duties or
services by the Indemnitee on behalf of the Company, and (ii) the Indemnitee
gives a full recourse promissory note to the Company for the amounts of such
advances payable in the event that the Indemnitee is determined to be not
entitled to indemnification hereunder.
(c) The indemnification provided by paragraph (b) of this Section
6.13 shall not be deemed to be exclusive of any other rights to which an
Indemnitee may be entitled under any agreement as a matter of law, in equity or
otherwise, and shall continue as to an Indemnitee who has ceased to have an
official capacity and shall inure to the benefit of the heirs, successors and
administrators of such Indemnitee.
(d) Any indemnification pursuant to this section will be payable
only from the Company's net assets.
(e) Notwithstanding anything to the contrary contained in Section
6.13, the Company and any person acting as broker-dealer shall not be
indemnified for any losses, liabilities or expenses arising from or out of an
alleged violation of federal or state securities laws unless one or more of the
following conditions are met:
(i) There has been a successful adjudication on the merits of
each count involving alleged securities law violations as to the particular
indemnitee;
(ii) Such claims have been dismissed with prejudice on the
merits by a court of competent jurisdiction as to the particular indemnitee; or
(iii) A court of competent jurisdiction approves a settlement
of the claims against a particular indemnitee and finds that indemnification of
the settlement and related costs should be made, and the court of law
considering the request for indemnification has been advised of the position of
the Securities and Exchange Commission and the published position of any state
securities regulatory authority in which securities of the Company were offered
or sold as to indemnification for violations of securities laws.
(f) In addition to the provisions of Section 6.13(b) above, the
advancement of Company funds to an Affiliate for legal expenses and other costs
incurred as a result of any legal action for which indemnification is being
sought is permissible only if all of the following additional conditions are
satisfied:
-13-
(i) The legal action is initiated by a third party who is not
a Member, or the legal action is initiated by a Member and a court of competent
jurisdiction specifically approves such advancement; and
(ii) The promissory note to the Company for repayment of
advanced funds in cases where the Affiliate is found not to be entitled to
indemnification shall provide for repayment with the applicable legal rate of
interest thereon.
6.15 Transactions with the Governors or their Affiliates. Subject to the
other express provisions of this Agreement, the Board, on behalf of the Company,
may enter into contracts with the Governors, Officers or Members (or their
Affiliates), provided that any such transaction shall be on terms no more
favorable to the Governors, Officers or Members (or their Affiliates) than
generally afforded to non-affiliated parties in a similar transaction. All such
transactions shall be approved by a majority of the disinterested Governors if
such Governors, as fiduciaries, determine such self-dealing arrangements are in
the best interest of the Company.
6.16 Conflicts of Interest. Subject to the other express provisions of
this Agreement, the Governors at any time and form time to time may engage in
and possess interest in other business ventures of any and every type and
description, independently or with others, including one in competition with the
Company, with no obligation to offer to the Company or any other Member the
right to participate therein.
6.17 Limitations. Notwithstanding the other provisions of this Agreement
to the contrary, the Company shall comply with the following provisions:
(a) Lending Practices. On financing made available to the Company by
any Affiliate, the Affiliate may not receive interest in excess of the lesser of
the Affiliate's cost of funds or the amounts which would be charged by unrelated
lending institutions on comparable loans for the same purpose. The Affiliate
shall not impose a prepayment charge or penalty in connection with such
financing and the Affiliate shall not receive points or other financing charges.
The Affiliate shall be prohibited from providing Permanent Financing for the
Company. For purposes of this Section, "Permanent Financing" shall mean any
financing with a term in excess of 12 months. Despite the foregoing, any
Affiliate shall not be precluded from providing financing to the Company,
including Permanent Financing, on such terms, and with such interest, prepayment
charges or penalties and points or other financing charges, as are not less
favorable to the Company as the terms and conditions imposed by a non-Affiliate
lender to the Company participating in the same (or in the same series of), or
in similar, transactions with the Company.
(b) Sales and Leases to the Company. The Company shall not purchase
or lease assets in which an Affiliate has an interest unless the assets are sold
upon terms fair to the Company and at a price not to exceed the lesser of cost
or fair market value as determined by a person with no material current or prior
business or personal relationship with the Affiliate who is engaged to a
substantial extent in the business of rendering opinions regarding the value of
assets of the type held by the Company, and who is qualified to perform such
work. Notwithstanding the foregoing, the Affiliate may purchase assets in its
own name (and assume loans in connection therewith) and temporarily hold title
thereto, for the purposes of facilitating the acquisition of the assets, the
borrowing of money, obtaining financing for the Company or completion of
construction of the assets, provided that (i) the assets are purchased by the
Company for a price no greater than the cost of the assets to the Affiliate,
(ii) all income generated by, and expenses associated with, the assets so
acquired shall be treated as belonging to the Company and (iii) there are no
other benefits arising out of such transaction to the Affiliates apart from
compensation otherwise permitted by this Agreement.
Despite any of the above, this Section 6.17(b) shall not apply as to any
transaction described or contemplated in the Company's Registration Statement
(as defined in Section 8.1 hereof) to the extent such transaction is approved in
the manner described in Section 6.15 hereof. Without limitation, the exception
provided by this paragraph applies to (i) the proposed construction of the
Company's ethanol plant by Xxxxx, Inc. and (ii) the proposed supply of corn to
the Company by the Farmers Cooperative Elevator Company.
6.18 Rebates, Kickbacks and Reciprocal Arrangements. No rebates or
give-ups may be received by the Company nor may the Company participate in any
reciprocal business arrangements which would circumvent the other provisions of
this Agreement, including the restrictions on dealing with Affiliates. The
Company shall not directly or indirectly pay or award any commissions or other
compensation to any person engaged to sell Units or give investment advice to a
potential Member; provided, however, that this clause shall not prohibit the
payment to a registered broker-dealer or other properly licensed person of
normal sales commissions for selling Units.
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6.19 Commingling. The Company's funds shall not be commingled with the
funds of any other person except through a master fiduciary account pursuant to
which a separate sub-trust account is established for the benefit of the
Company.
6.20 Expenses and Payments. All expenses of the Company shall be billed to
and paid by the Company.
6.21 Investments in Other Companies. The Company shall be permitted to
invest in general partnerships or joint ventures with non-Affiliates that own
and operate specific assets. However, in the event of such an investment, the
Company must have an equity interest possessing the power to direct or cause the
direction of the management and policies of the general partnership or joint
venture including (i) review of all contracts entered into by the general
partnership or joint venture entity, (ii) causing a sale or refinancing of the
general partnership or joint venture entity's assets or its interest therein,
(iii) approval of budgets and major capital expenditures, (iv) the right to veto
any sale or refinancing of the general partnership or joint venture entity's
assets and (v) exercising a right of first refusal on any sale or refinancing by
the joint venture partner of its interest in the general partnership or joint
venture entity's assets. No duplicate fees shall be allowed with regard to the
management or operation of the general partnership or joint venture entity. All
other investments in other companies are prohibited.
SECTION 7
RIGHTS AND OBLIGATIONS OF MEMBERS
7.1 Limitation of Liability. Each Member's liability shall be limited as
set forth in this Agreement, the Act and other applicable law.
7.2 Company Debt Liability. A Member will not be personally liable for any
debts or losses of the Company beyond his or her respective Capital
Contributions except as provided in Section 7.6 or as otherwise required by law.
7.3 Liability to Third Parties. No Member or Governor is liable for the
debts, obligations or liabilities of the Company, whether arising in contract,
tort or otherwise, including under a judgment, decree or order of a court.
7.4 Lack of Authority. No Member (other than a Governor or an Officer as
provided under Section 6) has the authority or power to act for or on behalf of
the Company, to do any act that would be binding on the Company or to incur any
expenditures on behalf of the Company.
7.5 Member Liability to the Company. A Member who receives a Distribution
made by the Company in violation of this Agreement or the Act is liable to the
Company to the extent provided by the Act.
7.6 Representations and Warranties. Each Member hereby represents and
warrants to the Company that: (i) the Member has full power and authority to
execute and agree to this Agreement and to perform its obligations hereunder,
and that all actions necessary for the due authorization, execution, delivery
and performance of this Agreement by that Member have been duly taken; (ii) the
Member has duly executed and delivered this Agreement; and (iii) the Member's
authorization, execution, delivery, and performance of this Agreement do not
conflict with any other agreement or arrangement to which the Member is a party
or by which the Member is bound.
7.7 Member Information.
(a) In addition to the other rights specifically set forth in this
Agreement, each Member is entitled to the information to which that Member is
entitled to have access pursuant to the Act, under the circumstances therein
stated.
(b) The Members acknowledge that, from time to time, they may
receive information from or concerning the Company in the nature of trade
secrets, the release of which may damage the Company or Persons with which it
does business. Each Member shall hold in strict confidence any trade secret
information that it receives concerning the Company that is identified a being
confidential (and if that information is provided in writing, that is so marked)
and may not disclose it to any Person other than another Member or Governor,
except for disclosures (i) compelled by law (but the Member must notify a
Governor promptly of any request for that information, before disclosing it, if
legal and practicable); (ii) to Persons to whom that Member's Interest may be
transferred as permitted by this Agreement, but only if the recipients have
agreed to be bound by the provisions of this Section 7.7, or (iii) of
information that the Member also has received from a source independent of the
Company and the Member reasonably believes that source obtained the information
without breach of any obligation of confidentiality. The Members acknowledge
that breach of the provisions of this Section 7.7 may cause irreparable
-15-
injury to the Company for which monetary damages are inadequate, difficult to
compute, or both. Accordingly, the Members agree that the provisions of this
Section 7.7 may be enforced by specific performance.
7.8 Membership Certificates. "Membership Certificates" in the form
determined by the Board may be delivered representing all Interests to which
Members are entitled. If issued, such Member Certificates shall be separately
numbered, and shall be entered in the books of the Company and on the Membership
Register, as they are issued. Each Member Certificate shall state on the face
thereof the holder's name, the Interests and such other matters as may be
required by applicable laws. Each such Membership Certificate shall be signed by
a Governor of the Company. The signature of the Governor upon the Membership
Certificates may be by facsimile. Subject to Section 10, upon surrender to the
Company of a Membership Certificate for Interests duly endorsed or accompanied
by proper evidence of succession, assignment or authority to Transfer, it shall
be the duty of the Company to issue a new Membership Certificate to the person
entitled thereto, cancel the old Membership Certificate and record the
transaction upon its books and records and the Membership Register. Each Member
hereby agrees that the following legend, as the same may be amended by the Board
in its sole discretion, may be placed upon any counterpart of this Agreement,
the Articles, or any other document or instrument evidencing ownership of Units:
The sale, pledge, hypothecation, assignment or transfer of the ownership
interest represented by this CERTIFICATE OF OWNERSHIP is subject to the
terms and conditions of the Operating and Member Control Agreement of
Granite Falls Community Ethanol Plant, LLC, as amended from time to time.
Copies of the Operating and Member Control Agreement may be obtained upon
written request to the Board of Governors of Granite Falls Community
Ethanol Plant, LLC.
SECTION 8
MEETINGS OF MEMBERS
8.1 Voting Power. Except as otherwise provided herein, the affirmative
vote of Members holding a Majority of the total Percentage of Membership Units
represented at a meeting at which there is a quorum present shall be the act of
the Members. Commencing from and after the date of effectiveness (the
"Registration Statement Effective Date") of the Company's Registration Statement
on Form SB-2 filed with the U.S. Securities and Exchange Commission in February
2004, SEC File No. 333-112567 (the "Registration Statement"), the Members may,
to the extent permitted by law, effect the following transactions (and, except
as provided by Section 6.7, without any action by the Governors, despite any
contrary provision in this Agreement) by the affirmative vote of the holders of
a majority of the outstanding Membership Units: (i) the amendment of this
Agreement; (ii) the dissolution of the Company; (iii) the removal and/or
replacement of a Governor; or (iv) the approval or disapproval of the sale of
all or substantially all of the Company's assets not in the ordinary course of
business.
8.2 No Cumulative Voting. No Member shall be entitled to cumulative votes
for the election of Governors or otherwise.
8.3 Meetings of Members. The annual meeting of Members shall be held on
such date as the Board shall by resolution specify within a period commencing on
January 1 and ending on June 30 in each year, beginning with 2005. At each
annual meeting, Members shall conduct such business as may be properly presented
to such meeting. If the day fixed for the annual meeting shall be a legal
holiday, such meeting shall be held on the next succeeding business day. Special
meetings of Members of the Company may be called by the Chairman of the Board,
by any three (3) Governors, or by a Member or Members holding at least a ten
percent (10%) Percentage Interest and shall be held at the principal place of
business of the Company, or elsewhere as the notice of such meeting shall
direct. Members may attend any such meeting in person or by proxy.
8.4 Place of Meeting. The Board of Governors may designate any place,
either in or out of the State of Minnesota, as the place of meeting for any
meeting. If no designation is made, the place of meeting shall be the Company's
principal office.
8.5 Notice of Meetings. Written notice stating the date, time and place of
the meeting and, as to a special meeting, a description of the purpose or
purposes for which the meeting is called, shall be mailed or provided in person
not fewer than fifteen (15) nor more than sixty (60) calendar days before the
date of the meeting, by or at the direction of the Board of Governors to each
Member of record at time of notice entitled to vote at the meeting. If mailed,
such notice is effective when mailed addressed to the Member's address shown in
the Company's current record of Members, with postage prepaid.
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8.6 Quorum. The presence of Members holding 40% or more of the Percentage
of Membership Units in the Company in person or by proxy shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting,
a majority of the Percentage of Membership Units represented may adjourn the
meeting from time to time without further notice.
8.7 Matters Submitted for Member Vote Which Involve an Interested
Governor. A Governor may not vote or consent on matters submitted to the Members
regarding the removal of the Governor or regarding any transaction between the
Company and the Governor. In determining the existence of the requisite
percentage in interest of the Company necessary to approve a matter on which a
Governor may not vote or consent, the Membership Units owned by the Governor
shall be excluded.
SECTION 9
WAIVER AND CONSENT
9.1 Written Waiver. Whenever any notice whatsoever is required to be given
under the provisions of this Agreement or under the provisions of the Articles
or the Act, waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
9.2 Waiver by Attendance. A Member's or Governor's attendance at a meeting
of the Members or Governors, respectively: (i) waives objection to lack notice
or defective notice of the meeting, unless the Member or Governor at the
beginning of the meeting or promptly upon the Member's or Governor's arrival
objects to holding the meeting or transacting business at the meeting, and (ii)
waives objection to consideration of a particular matter at the meeting that is
not within the purpose or purposes described in the meeting notice, unless the
Member or Governor objects to considering the matter when it is presented.
9.3 Consent to Action Without Meeting. Any action required or permitted to
be taken by the Members or Managers by vote, pursuant to this Agreement or by
law, may be taken without a meeting as provided by law. Any action required or
permitted to be taken at a Board of Governors meeting may be taken by written
action signed by all of the Governors.
SECTION 10
TRANSFER OF MEMBERSHIP INTERESTS
10.1 Restrictions on Transfer. No Member shall Transfer all or any portion
of an Interest without the prior written consent of the Board of Governors which
consent may be withheld in the sole discretion of the Board. Notwithstanding
anything contained herein to the contrary, no Member shall Transfer any Unit if,
in the determination of the Board, such Transfer would cause the Company to be
treated as a Publicly Traded Partnership, and any Transfer of Unit(s) not
approved by the Board of Governors or that would result in a violation of the
restrictions in this Agreement or applicable law shall be null and void with no
force or effect whatsoever, and the intended transferee shall, acquire no rights
in such Unit.
10.2 Permitted Transfers. Subject to Section 10.1 above, any Transfer of
Units made in accordance with the following provisions will constitute a
"Permitted Transfer" for purposes of this Agreement.
(a) A Transfer by a Member and any related persons (as defined in
the Code) in one or more transactions during any thirty (30) calendar day period
of Interests representing in the aggregate more than two percent (2%) of the
total Interests in Company.
(b) A Transfer or series of related Transfers by one or more Members
(acting together) which involves the Transfer of fifty percent (50%) or more of
the outstanding Units; or
(c) Transfers of Units effected through a qualified Matching
Services Program; or
(d) A Transfer by gift or bequest only to a spouse or child of such
transferring Member, or to a trust established for the benefit of such spouse or
child, or to an existing Member of the Company upon ten (10) days prior written
notice to the Company of such gift.
10.3 Conditions Precedent to Transfers. The Board of Governors, in its
sole discretion, may elect not to recognize any Transfer of Units unless and
until the Company has received:
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(a) An opinion of Company counsel (whose fees and expenses shall be
borne by the Company), together if required by the Board as a condition of
Transfer, an opinion of the transferor's counsel (whose fees and expenses shall
be borne by the transferor), satisfactory in form and substance to the Board
that such Transfer may be lawfully made without registration or qualification
under applicable state and federal securities laws, or such Transfer is properly
registered or qualified under applicable state and federal securities laws and
if requested by the Company that such Transfer will not cause the Company to be
treated as a Publicly Traded Partnership;
(b) Such documents and instruments of conveyance executed by the
transferor and transferee as may be necessary or appropriate in the option of
counsel to the Company to effect such Transfer, except that in the case of a
Transfer of Units involuntarily by operation of law, the Transfer shall be
confirmed by presentation of legal evidence of such Transfer, in form and
substance satisfactory to the Company;
(c) The transferor's Membership Certificate;
(d) The transferee's taxpayer identification number and sufficient
information to determine the transferee's initial tax basis in the interests
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;
(e) Evidence satisfactory in form and substance to the Board that
the transferee meets the maximum Unit ownership limitation set forth in Section
4.3 of this Agreement; and
(f) Other conditions on the Transfer of Units adopted by the Board
from time to time as it deems appropriate in its sole discretion.
10.4 Death of Member.
(a) Upon the death of any Member, the estate or personal
representative of the deceased Member shall have the right and option to request
the Company repurchase the deceased Member's Interest subject to and in
accordance with the applicable Code and Treasury Regulations regarding Publicly
Traded Partnership. If the estate or personal representative exercises such
right and option the Company shall, subject to Section 10.4(b) below, purchase
the deceased Member's Interest at the Fair Market Value of such Interest in
effect at the date of death as determined in accordance with Section 10.10
below, and on the terms and conditions set forth in Section 10.5 and Section
10.6 below. This right and option may be exercised by the deceased Member's
estate or personal representative by providing written notice to the Company
within one hundred twenty (120) days after the date of the Member's death;
provided, however, the Company will not repurchase such interest earlier than
sixty (60) days after receipt of the written notice from the estate or personal
representative requesting the purchase.
(b) Any Transfer pursuant to this Section 10.4 shall be subject to a
determination by the Board that such Transfer shall not cause the Company to be
deemed a Publicly Traded Partnership, and such Transfer shall be affected in
accordance with this Agreement, the Code and applicable Treasury Regulations,
and shall be further subject to the prior approval of the Board which may be
withheld in its sole discretion.
10.5 Payment Terms. If the purchase price for an Interest transferred
pursuant to Section 10.4 above exceeds five thousand dollars ($5,000.00), the
Company shall have the option to pay for the Interest purchased by paying five
thousand dollars ($5,000.00) at Closing (as defined below) and executing a
promissory note for the balance of the purchase price. The promissory note shall
be paid in five (5) equal annual installments due on the anniversary date of the
Closing and shall accrue interest per annum at a rate determined by the Board
which shall not be less than the then current prime rate established by any
major bank selected by the Board for loans to the bank's most creditworthy
commercial borrowers. The Company may prepay the promissory note, in whole or in
part, at any time without penalty or premium.
10.6 Events in Connection with the Sale of Interests.
(a) If there is a sale of Interest under Section 10.4 of this
Agreement to the Company, the closing ("Closing") shall occur at a time mutually
agreeable to the parties and in accordance with the time periods set forth in
the applicable provision of this Agreement; provided, however, the Closing shall
not occur until at least sixty (60) days after the Company's receipt of notice
from the estate or personal representative requesting the Company repurchase the
deceased Member's Interest, but in no event later than one hundred twenty (120)
days after the date of the Company's receipt of such notice.
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(b) In the event of a sale of Interest under Section 10.4 of this
Agreement to the Company, the purchase price shall be increased or decreased, as
the case may be, by an amount equal to any indebtedness owed the deceased Member
by the Company, or the deduction of any indebtedness owed the Company by the
deceased Member, or both.
(c) In the event of the sale of Interests under this Agreement by a
Member, all rights of the Member with respect to the Interest, including the
right to vote such Interest and to receive distribution, shall terminate at
Closing, except for the Member's right to receive payment therefor.
10.7 Redemption of Interests.
(a) A Member (the "Requesting Member") may request redemption of his
or her Interest upon no less than sixty (60) calendar days' prior written notice
to the Board of Governors. The Board, in its sole discretion, shall determine
whether to redeem such Interest and the Board is under no obligation to redeem
any Interest or any Requesting Member.
(b) Notwithstanding anything contained herein to the contrary, any
redemption pursuant to this Section 10.7 shall be subject to a determination by
the Board, in its sole discretion, that such redemption shall not cause the
Company to be deemed a Publicly Traded Partnership, and such redemption shall be
affected in accordance with this Agreement, the Code and applicable Treasury
Regulations, and shall be further subject to the prior approval of the Board
which may be withheld in its sole discretion.
10.8 Redemption Payment.
(a) Upon the redemption of a Member under Section 10.7, the
Requesting Member shall be entitled to a payment equal to the Fair Market Value
of such Member's Interest in the Company as of the date of the Company's receipt
of the Member's request for redemption (the "Redemption Payment"); provided,
however, if the remaining Members of the Company agree to dissolve the Company
in accordance with Section 13.1 of this Agreement, then in no event shall such
Member be entitled to a Redemption Payment by such Member will be entitled to
such Member's share of the assets of the Company pursuant to Section 13.3 below.
(b) The Redemption Payment shall not be paid until at least sixty
(60) days after the Company's receipt of the notice from the Requesting Member
required under Section 10.7(a) above. The Redemption Payment shall be paid in
cash, or if the Redemption Payment exceeds five thousand dollars ($5,000), the
Company shall have the option to pay the Redemption Payment by paying five
thousand dollars ($5,000) upon the effective date of the redemption and
executing a promissory note for the balance of the Redemption Payment. Such note
shall be dated and delivered on the effective date of the withdrawal and shall
be paid in five (5) equal annual installments due on the anniversary date of the
withdrawal and shall accrue interest per annum at a rate determined by the Board
which shall not be less than the then current prime rate established by any
major bank selected by the Board for loans to the Bank's most creditworthy
commercial borrowers. The Company may prepay the promissory note, in whole or in
part, at any time without penalty or premium.
(c) The Redemption Payment shall be increased or decreased, as the
case may be, by an amount equal to any indebtedness owed the Requesting Member
by the Company, or the deduction of any indebtedness owed the Company by the
Requesting Member, or both. All rights of the Member with respect to the
Interest, including the rights to vote such Interest and to receive
distributions, shall terminate at Closing, except for the Member's right to
receive payment therefor upon the effective date of the redemption which shall
be determined in accordance with Section 10.9 below.
10.9 Effective Date of Transfer.
(a) Any Transfer of a Unit shall be deemed effective as of the day
of the month and year: (i) which the Transfer occurs (as reflected by the form
of assignment); and (ii) the transferee's name and address and the nature and
extent of the Transfer are reflected in the records of the Company; provided,
however, the effective date of a Transfer for purposes of allocation of Profits
and Losses and for Distributions shall be determined pursuant to Section 10.9(b)
below. Any transferee of a Unit shall take subject to the restrictions on
transfer imposed by this Agreement.
(b) The Board, in its sole discretion, may establish interim periods
in which transfers may occur (the "Interim Transfer Periods"); provided,
however, the Board shall provide Members reasonable notice of the Interim
Transfer Periods and advance notice of any change to the Interim Transfer
Periods. For purposes of making allocations of Profits and Losses, and
Distributions, the Company will use the interim closing of the books
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method (rather than a daily proration of profit or loss for the entire period)
and recognize the Transfer as of the first day following the close of Interim
transfer Period in which the Member complied with the notice, documentation and
information requirements of Article 10. All Distributions on or before the end
of the applicable Interim Transfer Period in which such requirements have been
substantially complied with shall be made to transferor and all Distributions
thereafter shall be made to the transferee. The Board the authority to adopt
other reasonable methods and/or conventions.
(c) The Board shall have the power and authority to adopt another
reasonable method and/or convention with respect to such allocations and
distributions; provided neither the company, the Board, any Governor nor any
Member shall incur any liability for making allocations and distributions in
accordance with the provisions of this Section 10.9 (other than tax liabilities
which may be incurred by Members), whether or not the Board or any Governor or
the Company or any Member has knowledge of any Transfer of ownership of any
Interest in the Company.
10.10 Fair Market Value. Upon the Transfer of any Interest pursuant to
Section 10.4, or the redemption of an Interest pursuant to Section 10.7, the
purchase price or Redemption Payment shall be equal to the Fair Market Value of
the Interest. "Fair Market Value" of an Interest on any date shall, unless
otherwise specifically provided in this Agreement, be equal to the most recent
fair market valuation determination of the per Unit value of the Company by the
Board in good faith; provided, that such valuation shall be calculated on a
basis as consistent as practicable from period to period. The Board may, in its
sole discretion, employ the advice of independent and qualified professionals in
the determination of the Fair Market Value, but is not under any obligation to
do so. The Fair Market Value of the Company shall be determined at least
annually. Valuations shall generally be preformed, at the discretion of the
Board, as of the end of each fiscal year of the Company's operations at the
annual meeting of the Board; however, the Board, in its sole discretion, may
have fair market valuations of the Company performed at any time or from time to
time during any year and, except as otherwise specifically provided in this
agreement, shall utilize the results of the most recent valuation in determining
the Fair market Value of an Interest for purposes of this Agreement. No Member
or any party other than the Board shall have the right to require or request
that a new or more recent valuation be performed for purposes of determining the
Fair Market Value of the Company or an Interest hereunder. The Company shall not
establish the Fair Market Value more than four (4) times during the Company's
taxable year.
10.11 Expenses. Except as otherwise expressly provided herein, all
expenses of the Company incident to the admission of the transferee to the
Company as a Member shall be charged to and paid by the transferring Member.
SECTION 11
RECORDS, FINANCIAL AND TAX REPORTING
11.1 Records and Accounting. The books of account and other records of the
Company shall be maintained at the Company's principal place of business. The
Company shall prepare its financial statements using generally accepted
accounting principles, consistently applied. The Board shall cause to be
prepared and distributed to the Members an annual report within 120 days after
the end of the Company's fiscal year. The annual report shall contain:
(a) a balance sheet as of the end of each fiscal year and statements
of income, Member's equity and cash flow for the year then ended, and
accompanied by an auditor's report containing an opinion of an independent
certified public accountant;
(b) a report of the material activities of the Company during the
period covered by the report; and
(c) a report setting forth distributions to Members for the period
covered which separately identifies distributions from (i) cash flow from
operations during the period, (ii) cash flow from operations during a prior
period which have been held as reserves, (iii) proceeds from the disposition of
Company assets and (iv) reserves from the gross proceeds of the offering
originally obtained from the Members.
The Company may alternatively satisfy the above requirements by
distributing to Members a copy of the Company's annual report on Form 10-K or
10-KSB as filed with the U.S. Securities and Exchange Commission.
11.2 Tax Information. The Board will use its best efforts to cause to be
delivered, within 75 days after the end of each fiscal year of the Company, to
the Members and Persons who were Members during such fiscal year all information
concerning the Company necessary to enable such Member or Person to prepare such
Member's (or
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Person's) Federal and state income tax returns for such fiscal year, including a
statement indicating such Member's (or Person's) share of Profits, Loses,
deductions and credits for such fiscal year for federal and state income tax
purposes, and the amount of any Distribution made to or for the account of such
Member or Person during such fiscal year pursuant to this Agreement.
11.3 Tax Returns. The Board shall cause income tax returns for the Company
to be prepared and timely filed in accordance with applicable law.
11.4 Tax Matter Member. The Board shall designate, from time to time, a
Member to perform all duties imposed by Sections 6221 and 6232 of the Code as
"tax matter partner" of the Company. The Company shall indemnify, to the full
extent permitted by law, the tax matter partner from and against any damages and
losses (including attorneys' fees) arising out of or incurred in connection with
any action taken or omitted to be taken by in carrying out responsibilities as
tax matter partner, provided such action taken or omitted to be taken does not
constitute fraud, gross negligence or willful misconduct.
11.5 Access to Books and Records.
(a) A Member of the Company shall be entitled to inspect and copy to
the extent provided by law and during regular business hours at the Company's
principal office the required records to be kept by the Company under the Act if
he or she gives the Company written notice of his or her demand at least five
business days before the date on which he or she wishes to inspect and copy.
(b) The Company shall update an alphabetical list of Members and
their addresses, business telephone numbers and Company ownership information
("the Member List") at least quarterly to reflect changes in the information
contained therein. The Company shall mail a copy of the Member List to any
Member properly requesting the Member List within ten days of the request. The
copy of the Member List shall be printed in alphabetical order, on white paper
and in a readily readable type size (in no event smaller than 10-point type).
The Company may charge a reasonable fee for copy work.
(c) The purposes for which a Member may request a copy of the Member
List include, without limitation, matters relating to Members' voting rights
under this Agreement and the exercise of Members' rights under federal proxy
laws.
(d) If the Company neglects or refuses to exhibit, produce or mail a
copy of the Member List as properly requested, the Company shall be liable to
any Member properly requesting the list for the costs, including attorneys'
fees, incurred by that Member for compelling the production of the Member List,
and for actual damages suffered by any Member by reason of such refusal or
neglect. It shall be a defense that the actual purpose and reason for the
requests for inspection or for a copy of the Member List is to secure such list
of Members or other information for the purpose of selling such list or copies
thereof, or of using the same for a commercial purpose other than in the
interest of the applicant as a Member relative to the affairs of the Company.
The Company may require the Member requesting the Member List to represent that
the list is not requested for a commercial purpose unrelated to the Member's
interest in the Company. The remedies provided hereunder to Members requesting
copies of the Member List are in addition to, and shall not in any way limit,
other remedies available to Members under federal law, or the laws of any state.
SECTION 12
FISCAL AFFAIRS
12.1 Elections.
(a) The Board of Governors may elect to adjust the basis of the
assets of the Company for federal income tax purposes in accordance with Section
754 of the Code in the event of a distribution of Company property as described
in Section 734 of the Code or a transfer by any Member of the Interest of such
Member in the Company as described in Section 743 of the Code.
(b) The Board of Governors, at any time and from time to time, may
also make such other tax elections as it deems necessary or desirable, in its
discretion.
12.2 Interim Closing of the Books. There shall be an interim closing of
the books of account of the Company (i) at any time a taxable year of the
Company shall end pursuant to the Code, and (ii) at any other time determined by
the Board of Governors to be required for good accounting practice or otherwise
appropriate under the circumstances.
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SECTION 13
TERMINATION AND DISSOLUTION
13.1 Events Requiring Termination and Dissolution. The Company shall be
dissolved upon the occurrence of any event, which would make unlawful the
continuing existence of the Company, or in accordance of the Act, as amended
from time to time (a "Liquidating Event").
13.2 Winding Up Period. Upon the occurrence of a Liquidating Event, the
Company shall continue solely for the purpose of winding up its affairs in an
orderly manner, liquidating its assets, and satisfying the claims of its credits
and Members. No Member shall take any action that is inconsistent with, or not
necessary to or appropriate for, the winding up the Company's business and
affairs. To the extent not inconsistent with the foregoing, all covenants and
obligations in this Agreement shall continue in full force and effect until such
time as the assets of the Company have been distributed pursuant to this Section
and the Company has terminated. The Board shall be responsible for overseeing
the winding up and liquidation of the Company, shall take full account of the
Company's liabilities and assets, shall cause the assets to be liquidated as
promptly as is consistent with obtaining the Value thereof, and shall cause the
proceeds therefrom, to the extent sufficient therefor, to be applied and
distributed in the manner required by the Act. Without limiting the generality
of the foregoing, the Board of Governors, in carrying out such winding up and
distribution, shall have full power and authority to sell the Company's assets,
or any part thereof, or to distribute the same in kind to the Members.
13.3 Distribution.
(a) Upon the occurrence of a Liquidating Event and the dissolution
of the Company, the affairs of the Company shall be wound up in accordance with
Section 13.2 above. The fair market value of the assets of the Company shall be
determined, with the Value of any real or personal property held by the Company
being determined in accordance with paragraph (d) of Section 5.4 and the fair
market value of any other assets held by the Company (other than cash) being
determined by an independent appraiser selected by the Board. Thereupon, the
assets of the Company shall be distributed in the following manner and order:
(i) to the claims of all creditors of the Company, including Members who are
creditors, to the extent permitted by law, in satisfaction of liabilities of the
Company, other than liabilities for distributions to Members; (ii) to Members
and former Members in satisfaction of liabilities for distribution, pursuant to
or as required by the Act, and (iii) subject to sections 5.4 and 5.5, to the
Members with positive Capital Account Balances in accordance with their
Percentage Interests. Each such Member entitled to a distribution of any assets
of the Company, pursuant to clause (iii) of this paragraph (a), shall receive
such Member's share of such assets in cash or, to the extent otherwise permitted
in this Agreement, in kind, and the portion of such share that is received in
cash may vary from Member to Member, all as the Board of Governors in their
discretion my decide. If distributions to any Member upon termination of the
Company are insufficient to return to such Member the full amount of such
Member's Capital Contribution, such Member shall have no recourse against the
Board of Governors, the Company or against any other Member.
(b) In the discretion of the Board, a Pro Rata portion of the
distributions that would otherwise be made to the Members pursuant to Section
13.3(a) hereof may be:
(i) distributed to the trust established for the benefit of
the Members for the purposes of liquidating Company assets, collecting amounts
owed to the Company and paying any contingent or unforeseen liabilities of the
Company or of the Members arising out of or in connection with the Company. The
assets of any such trust shall be distributed to the Members from time to time,
in the reasonable discretion of the Board, in the same proportions as the amount
distributed to such trust by the Company would otherwise have been distributed
to the Members pursuant to Section 13.3(a) hereof; or
(ii) 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 Members as soon as practicable.
13.4 Deficit Capital Account Balance. The Members shall have no liability
to the Company, to the other Members, or to the creditors of the Company on
account of any deficit balance in such Member's Capital Account Balance except
to the extent such deficit arises from the failure of the Member of the Member
to contribute the full amount of its Capital Contribution. The Company shall be
solely responsible for payment of liabilities to its creditors.
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SECTION 14
MISCELLANEOUS
14.1 Notices. All Notices or other communications under this Agreement
shall be in writing (unless otherwise expressly provided herein) and shall be
considered properly given if delivered by hand or mailed by first class United
States Mail, postage prepaid, addressed in care of the respective Members or
Governors at their last-known address. Notice may also be delivered by means of
a confirmed telecopy, provided the original of the notice is also promptly
deposited in the United States Mail, first class, postage prepaid, addressed to
the Members or Governors at such address. Notice of change of address shall be
given to the Company by hand or first class United States Mail, after the date
or receipt of which notice, the change of address shall be effective. Unless
actual receipt of a notice is required by an express provision hereof, any such
notice shall be deemed to be effective as of the earliest of (a) the date of
delivery or confirmed telecopy; or (b) the third business day following the date
of deposit with the United States Post Office or in a regularly maintained
receptacle for the deposit of United States Mail. Any refusal to accept delivery
of any such communication shall be considered successful delivery thereof.
14.2 Insurance. The Company may purchase and maintain insurance on behalf
of any person who is or was a Governor, Member, employee or agent of the Company
or is or was serving at the request of the Company as a Governor, member,
officer, governor, employee or agent of another limited liability company,
corporation, partnership, joint venture, trust, or other enterprise against any
liability asserted against such person and incurred in any such capacity or
arising out of his or her status as such.
14.3 Successors. This Agreement and all of the terms and provisions
thereof shall be binding upon the Governors and all Members and their respective
legal representatives, heirs, successors and permitted assigns.
14.4 Applicable Law. This Agreement and the rights and obligations of the
Members thereunder shall be construed and interpreted under the laws of the
State of Minnesota without regard to its conflict of law principals.
14.5 Amendments.
(a) Prior to the Registration Statement Effective Date, and unless
the Act or this Agreement requires differently, this Agreement may be modified
or amended upon the Super-Majority Vote of the Board of Governors or upon an
affirmative vote of two-thirds (2/3) of the total Percentage of Membership Units
represented at a meeting at which there is a quorum present. Upon the
modification or amendment of this Agreement, the Board shall promptly execute
such amendments or other documents as the Company deems appropriate to reflect
such amendments under the law of the State of Minnesota.
(b) "Super-Majority Vote" shall mean the affirmative vote of
two-thirds (2/3) or more of the Board of Governors.
(c) Beginning on the Registration Statement Effective Date, the
Board of Governors may take action under (a) above to modify or amend this
Agreement only if the modification or amendment does not adversely affect the
rights of Members. If the modification or amendment would adversely affect
Members' rights, then the modification or amendment must be approved by the
holders of a majority (or such greater proportion as otherwise required in this
Agreement) of the outstanding Membership Units.
14.6 Waiver of Partition. Each of the Members of the Company irrevocably
waives any right to maintain any action for partition with respect to the
property of the Company.
14.7 Company Property. The legal title to any real or personal property or
interest therein now or hereafter acquired by the Company shall be owned, held
or operated in the name of the Company, and no Member, individually, shall have
any ownership interest in such property.
14.8 Acceptance of Prior Acts by New Members. Each Person becoming a
Member, by becoming a Member, ratifies all action duly taken by the Company,
pursuant to the terms of this Agreement, prior to the date such person becomes a
Member.
14.9 Section Headings. The division of this Agreement into sections,
subsections and exhibits is for convenience of reference only and shall not
affect the interpretation or construction of this Agreement.
14.10 Severability. In the event that one or more of the provisions
contained in this Agreement or any portions thereof are unenforceable or are
declared invalid for any reason whatsoever, such enforceability or invalidity
shall not affect the enforceability or validity of the remaining terms or
portions of this Agreement, and each such unenforceable or invalid portion
hereof shall be severable from the remainder of this Agreement and the
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remainder of this Agreement shall be interpreted as if such unenforceable or
invalid provision or portion thereof had not been included as a part thereof.
14.11 Agreement for Further Execution. At any time or times, upon the
request of the Board, the Members agree to sign and swear to any certificate
required by the Act, to sign and swear to any amendment to or cancellation of
such certificate whenever such amendment or cancellation is required by law or
by this Agreement, and to cause the filing of any of the same of record wherever
such filing is required by law.
14.12 Time. Time is an essential element to the performance of this
Agreement by each Member.
14.13 Copies Reliable and Admissible. This Agreement shall be considered
to have been executed by a person if there exists a photocopy, facsimile copy,
or a photocopy of a facsimile copy of an original hereof or of a counterpart
hereof which has been signed by such person. Any photocopy, facsimile copy, or
photocopy of facsimile copy of this Agreement or a counterpart hereof shall be
admissible into evidence in any proceeding as though the same were an original.
14.14 Entire Agreement. This Agreement is the sole operating agreement of
the Company and constitutes the entire agreement among the parties; it
supersedes any prior agreements or understandings among the parties, oral or
written, all of which are hereby canceled.
14.15 Gender. Whenever the context shall require each term stated in
either the singular or plural shall include the singular and the plural, and the
masculine or neuter pronouns shall include the masculine, the feminine and the
neuter.
14.16 No Waiver. No failure or delay on the part of any Member in
exercising any rights under this Agreement, or in insisting on strict
performance of any covenant or condition contained in this Agreement, shall
operate as a waiver of any of such Member's rights hereunder.
14.17 Submission to Jurisdiction. Each of the parties to this Agreement
hereby submits to the jurisdiction of and agrees that suit will only be brought
in the state (Yellow Medicine County) or federal court sitting in the State of
Minnesota (the "Minnesota Court") in any action or proceeding arising out of or
relating to this Agreement or the transactions contemplated hereby. Each party
also agrees not to bring any action or proceeding arising out of or relating to
this Agreement or the transactions contemplated thereby in any other court
except as may be necessary to enforce any judgment or order of the Minnesota
Court. Each of the parties waives any defense of inconvenient forum to the
maintenance of any action or proceeding so brought and waives any bond, surety
or other security that might be required of any other party with respect
thereto.
14.18 Specific Performance. Each of the parties acknowledges and agrees
that the other party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the parties agrees that
the other parties shall be entitled, without posting a bond or other collateral,
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in the Minnesota Court, in addition
to any other remedy to which it may be entitled at law or in equity.
14.19 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
14.20 Creditors. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.
IN WITNESS WHEREOF, the undersigned has hereunto affixed its signature.
GRANITE FALLS COMMUNITY ETHANOL PLANT, LLC
By
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Xxxx Xxxxxx, Chairman
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