EXHIBIT 3.2
OPERATING AGREEMENT
OF
UNITED WISCONSIN GRAIN PRODUCERS, L.L.C.
DATED NOVEMBER 2, 0000
XXXXXX XXXXXXXXX GRAIN PRODUCERS, L.L.C. OPERATING AGREEMENT
(CONTAINS RESTRICTIONS ON TRANSFER OF MEMBERSHIP INTERESTS)
TABLE OF CONTENTS
Page
SECTION 1: THE COMPANY..........................................................................5
1.1 Formation...................................................................................5
1.2 Name........................................................................................5
1.3 Purchase; Powers............................................................................5
1.4 Principal Place of Business.................................................................6
1.5 Term........................................................................................6
1.6 Agent For Service of Process................................................................6
1.7 Title to Property...........................................................................6
1.8 Payment of Individual Obligations...........................................................6
1.9 Independent Activities; Transactions With Affiliates........................................6
1.10 Definitions................................................................................7
SECTION 2. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS.............................................13
2.1 Original Capital Contributions.............................................................13
2.2 Additional Capital Contributions; Additional Units.........................................13
2.3 Capital Accounts...........................................................................13
SECTION 3. ALLOCATIONS.........................................................................14
3.1 Profits....................................................................................14
3.2 Losses.....................................................................................14
3.3 Special Allocations........................................................................15
3.4 Curative Allocations.......................................................................16
3.5 Loss Limitation............................................................................17
3.6 Other Allocation Rules.....................................................................17
3.7 Tax Allocations: Code Section 704(c).......................................................17
3.8 Tax Credit Allocations.....................................................................18
SECTION 4. DISTRIBUTIONS.......................................................................18
4.1 Net Cash Flow..............................................................................18
4.2 Amounts Withheld...........................................................................18
4.3 Limitations on Distributions...............................................................18
SECTION 5. MANAGEMENT..........................................................................18
5.1 Directors..................................................................................18
5.2 Election of Directors......................................................................19
5.3 Committees.................................................................................20
5.4 Authority of Directors.....................................................................20
5.5 Director as Agent..........................................................................22
5.6 Restriction on Authority of Directors......................................................22
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5.7 Director Actions...........................................................................23
5.8 Duties and Obligations of Directors........................................................23
5.9 Chairman and Vice Chairman.................................................................24
5.10 President and Chief Executive Officer.....................................................24
5.11 Chief Financial Officer...................................................................24
5.12 Secretary; Assistant Secretary............................................................24
5.13 Vice President............................................................................25
5.14 Delegation................................................................................25
5.15 Execution of Instruments..................................................................25
5.16 Limitation of Liability; Indemnification of Directors.....................................25
5.17 Compensation; Expenses of Directors.......................................................26
5.18 Loans.....................................................................................26
SECTION 6. ROLE OF MEMBERS.....................................................................26
6.1 Rights of Powers...........................................................................26
6.2 Voting Rights..............................................................................26
6.3 Member Meetings; Quorum and Proxies........................................................26
6.4 Termination of Membership..................................................................27
6.5 Continuation of the Company................................................................27
6.6 No Obligation to Purchase Membership Interest..............................................27
6.7 Waiver of Dissenters Rights................................................................27
6.8 Limitation On Ownership....................................................................27
SECTION 7. ACCOUNTING, BOOKS AND RECORDS.......................................................27
7.1 Accounting, Books and Records..............................................................27
7.2 Reports....................................................................................28
7.3 Tax Matters................................................................................28
7.4 Delivery to Members and Inspection.........................................................29
SECTION 8. AMENDMENTS..........................................................................29
8.1 Amendments.................................................................................29
SECTION 9. TRANSFERS...........................................................................29
9.1 Restrictions on Transfers..................................................................29
9.2 Permitted Transfers........................................................................30
9.3 Conditions to Permitted Transfers..........................................................30
9.4 Prohibited Transfers.......................................................................31
9.5 Rights of Unadmitted Assignees.............................................................32
9.6 Admission of Substituted Members...........................................................32
9.7 Representations Regarding Transfers........................................................32
9.8 Distribution and Allocation in Respect of Transferred Units................................33
SECTION 10. DISSOLUTION AND WINDING UP........................................................33
10.1 Dissolution...............................................................................33
10.2 Winding Up................................................................................34
10.3 Compliance with Certain Requirements of Regulations; Deficit Capital Accounts.............34
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10.4 Deemed Distribution and Recontribution....................................................34
10.5 Rights of Unit Holders....................................................................35
10.6 Allocations During Period of Liquidation..................................................35
10.7 Character of Liquidating Distributions....................................................35
10.8 The Liquidator............................................................................35
10.8 Forms of Liquidating Distributions........................................................35
SECTION 11. MISCELLANEOUS......................................................................36
11.1 Notices...................................................................................36
11.2 Binding Effect............................................................................36
11.3 Construction..............................................................................36
11.4 Headings..................................................................................36
11.5 Severability..............................................................................36
11.6 Incorporation By Reference................................................................36
11.7 Variation of Terms........................................................................36
11.8 Governing Law.............................................................................36
11.9 Waiver of Jury Trial......................................................................37
11.10 Counterpart Execution....................................................................37
11.11 Specific Performance.....................................................................37
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OPERATING AGREEMENT
OF
UNITED
WISCONSIN GRAIN PRODUCERS, L.L.C.
THIS
OPERATING AGREEMENT (the "Agreement") is entered into and shall be
effective as of the 2nd day of November, 2001 (the "Effective Date"), by and
among UNITED
WISCONSIN GRAIN PRODUCERS, L.L.C., a
Wisconsin limited liability
company (the "Company"), each of the Persons who are identified as Members on
the attached Exhibit A and who have executed a counterpart of this Agreement and
a Subscription Agreement, and any other Persons as may from time-to-time be
subsequently admitted as a Member of the Company in accordance with the terms of
this Agreement. Capitalized terms not otherwise defined herein shall have the
meaning set forth in Section 1.10.
WHEREAS, the Company's organizers caused to be filed with the State of
Wisconsin, Articles of Organization of the Company pursuant to Chapter 183 of
the Code of
Wisconsin (the "Act"); and
WHEREAS, the Members desire to adopt this
Operating Agreement to set
forth the respective rights, duties, and responsibilities with respect to the
Company and its business and affairs.
NOW, THEREFORE, in consideration of the covenants and agreements
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. THE COMPANY
1.1 FORMATION. The initial Members formed the Company as a
Wisconsin limited
liability company by filing Articles of Organization with the State of
Wisconsin
on November 2, 2001 pursuant to the provisions of the Act. To the extent that
the rights or obligations of any Member are different by reason of any provision
of this Agreement than they would be in the absence of such provisions, this
Agreement shall, to the extent permitted by the Act, control.
1.2 NAME. The name of the Company shall be "United
Wisconsin Grain Producers,
L.L.C." and all business of the Company shall be conducted in such name.
1.3 PURCHASE; POWERS. The nature of the business and purposes of the Company
are (i) to own, construct, operate, lease, finance, contract with, and/or invest
in ethanol production and co-product production facilities as permitted under
the applicable laws of the State of
Wisconsin; (ii) to engage in the processing
of corn, grains and other feedstocks into ethanol and any and all related
co-products, and the marketing of all products and co-products from such
processing; and (iii) to engage in any other business and investment activity in
which a Wisconsin limited
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liability company may lawfully be engaged, as determined by the Directors. The
Company has the power to do any and all acts necessary, appropriate, proper,
advisable, incidental or convenient to or in furtherance of the purpose of the
Company as set forth in this Section 1.3 and has, without limitation, any and
all powers that may be exercised on behalf of the Company by the Directors
pursuant to Section 5 hereof.
1.4 PRINCIPAL PLACE OF BUSINESS. The Company shall continuously maintain an
office in Wisconsin. The principal office of the Company shall be at X0000
Xxxxxxx Xxxxx, Xxxxxx Xxx, Xxxxxxxxx 00000, or elsewhere as the Directors may
determine. Any documents required by the Act to be kept by the Company shall be
maintained at the Company's principal office.
1.5 TERM. The term of the Company commenced on the date the Articles of
Organization (the "Articles") of the Company were filed with the office of the
State of Wisconsin, and shall continue until the winding up and liquidation of
the Company and its business is completed following a Dissolution Event as
provided in Section 10 hereof.
1.6 AGENT FOR SERVICE OF PROCESS. The name and address of the agent for
service of process on the Company in the State of Wisconsin shall be Xxxxx
Xxxxx, N3432 Co. Trunk BB, Xxxxxxxx, Xxxxxxxxx 00000, or any successor as
appointed by the Directors.
1.7 TITLE TO PROPERTY. All Property owned by the Company shall be owned by
the Company as an entity and no Member shall have any ownership interest in such
Property in its individual name. Each Member's interest in the Company shall be
personal property for all purposes. At all times after the Effective Date, the
Company shall hold title to all of its Property in the name of the Company and
not in the name of any Member.
1.8 PAYMENT OF INDIVIDUAL OBLIGATIONS. Company's credit and assets shall be
used solely for the benefit of the Company, and no asset of the Company shall be
Transferred or encumbered for, or in payment of, any individual obligation of
any Member.
1.9 INDEPENDENT ACTIVITIES; TRANSACTIONS WITH AFFILIATES. The Directors shall
be required to devote such time to the affairs of the Company as may be
necessary to manage and operate the Company, and shall be free to serve any
other Person or enterprise in any capacity that the Director may deem
appropriate in its discretion. Neither this Agreement nor any activity
undertaken pursuant hereto shall (i) prevent any Member or Director or their
Affiliates, acting on their own behalf, from engaging in whatever activities
they choose, whether the same are competitive with the Company or otherwise, and
any such activities may be undertaken without having or incurring any obligation
to offer any interest in such activities to the Company or any Member, or (ii)
require any Member or Director to permit the Company or Director or Member or
its Affiliates to participate in any such activities, and as a material part of
the consideration for the execution of this Agreement by each Member, each
Member hereby waives, relinquishes, and renounces any such right or claim of
participation. To the extent permitted by applicable law and subject to the
provisions of this Agreement, the Directors are hereby authorized to cause the
Company to purchase Property from, sell Property to or otherwise deal with any
Member (including any Member who is also a Director), acting on its own behalf,
or any Affiliate of any Member; provided that any such purchase, sale or other
transaction shall be made on terms and
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conditions which are no less favorable to the Company than if the sale, purchase
or other transaction had been made with an independent third party.
1.10 DEFINITIONS. Capitalized words and phrases used in this Agreement have
the following meanings:
(a) "Act" means the Chapter 183 of the Code of Wisconsin, as amended
from time to time (or any corresponding provision or provisions of any
succeeding law).
(b) "Adjusted Capital Account Deficit" means, with respect to any Unit
Holder, the deficit balance, if any, in such Unit Holder's Capital Account as of
the end of the relevant Fiscal Year, after giving effect to the following
adjustments: (i) Credit to such Capital Account any amounts which such Unit
Holder is deemed to be obligated to restore pursuant to the next to the last
sentences in Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(ii) Debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations. The foregoing definition is intended to comply with the
provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
(c) "Affiliate" means, with respect to any Person (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person (ii) any officer, director, general partner, member or trustee of
such Person or (iii) any Person who is an officer, director, general partner,
member or trustee of any Person described in clauses (i) or (ii) of this
sentence. For purposes of this definition, the terms "controlling," "controlled
by" or "under common control with" shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person or entity, whether through the ownership of voting
securities, by contract or otherwise, or the power to elect at least 50% of the
directors, members, or persons exercising similar authority with respect to such
Person or entities.
(d) "Agreement" means this
Operating Agreement of United Wisconsin
Grain Producers, L.L.C., as amended from time to time.
(e) "Articles" means the Articles of Organization of the Company filed
with the State of Wisconsin, as same may be amended from time-to-time.
(f) "Assignee" means a transferee of Units who is not admitted as a
substituted member pursuant to Section 9.6.
(g) "Capital Account" means the separate capital account maintained for
each Unit Holder in accordance with Section 2.3.
(h) "Capital Contributions" means, with respect to any Member, the
amount of money (US Dollars) and the initial Gross Asset Value of any assets or
property (other than money) contributed by the Member (or such Member's
predecessor in interest) to the Company (net of liabilities secured by such
contributed property that the Company is considered to assume
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or take subject to under Code Section 752) with respect to the Units in the
Company held or purchased by such Member, including additional Capital
Contributions.
(i) "Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
(j) "Company" means United Wisconsin Grain Producers, L.L.C., a
Wisconsin limited liability company.
(k) "Company Minimum Gain" has the meaning given the term "partnership
minimum gain" in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
(l) "Debt" means (i) any indebtedness for borrowed money or the
deferred purchase price of property as evidenced by a note, bonds, or other
instruments, (ii) obligations as lessee under capital leases, (iii) obligations
secured by any mortgage, pledge, security interest, encumbrance, lien or charge
of any kind existing on any asset owned or held by the Company whether or not
the Company has assumed or become liable for the obligations secured thereby,
(iv) any obligation under any interest rate swap agreement, (v) accounts payable
and (vi) obligations under direct or indirect guarantees of (including
obligations (contingent or otherwise) to assure a creditor against loss in
respect of) indebtedness or obligations of the kinds referred to in clauses (i),
(ii), (iii), (iv) and (v), above provided that Debt shall not include
obligations in respect of any accounts payable that are incurred in the ordinary
course of the Company's business and are not delinquent or are being contested
in good faith by appropriate proceedings.
(m) "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Directors.
(n) "Directors" means any Person who (i) is referred to as such in
Section 5.1 of this Agreement or has become a Director pursuant to the Terms of
this Agreement, and (ii) has not ceased to be a Director pursuant to the terms
of this Agreement. "Directors" means all such Persons. For purposes of the Act,
the Directors shall be deemed to be the "managers" (as such term is defined and
used in the Act) of the Company. Unless otherwise stated in this Agreement, any
action taken by the Directors shall require the affirmative vote of a majority
of the Directors present at a meeting of the Directors (in person or by
telephonic or other electronic means as more specifically described in Section
5.7 and entitled to vote thereat.
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(o) "Dissolution Event" means (i) The affirmative vote of a 75%
majority in interest of the Members to dissolve, wind up, and liquidate the
Company; or (ii) The entry of a decree of judicial dissolution pursuant to the
Act.
(p) "Effective Date" means November 2, 2001.
(q) "Facilities" shall mean the ethanol production and co-product
production facilities in the tri-county area of Columbia, Dane, and Dodge
counties, Wisconsin, or such other location as may be determined by the
Directors to be constructed and operated by the Company pursuant to the Business
Plan.
(r) "Financing Closing" means the actual closing (execution and
delivery of all required documents) by the Company with its project lender(s)
providing for all debt financing, including senior and subordinated debt and any
other project financing characterized by debt obligations and repayable as debt
which is required by the project lender(s) or which is deemed necessary or
prudent in the sole discretion of the Directors.
(s) "Fiscal Quarter" means (i) any three-month period commencing on
each of January 1, April 1, July 1 and October 1 and ending on the last date
before the next such date and (ii) the period commencing on the immediately
preceding January 1, April 1, July 1, or October 1, as the case may be, and
ending on the date on which all Property is distributed to the Unit Holders
pursuant to Section 10 hereof.
(t) "Fiscal Year" means (i) any twelve-month period commencing on
January 1 and ending on December 31 and (ii) the period commencing on the
immediately preceding January 1 and ending on the date on which all Property is
distributed to the Unit Holders pursuant to Section 10 hereof, or, if the
context requires, any portion of a Fiscal Year for which an allocation of
Profits or Losses or a distribution is to be made.
(u) "GAAP" means generally accepted accounting principles in effect in
the United States of America from time to time.
(v) "Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows: (i) The
initial Gross Asset Value of any asset contributed by a Member to the Company
shall be the gross fair market value of such asset, as determined by the
Directors provided that the initial Gross Asset Values of the assets contributed
to the Company pursuant to Section 2.1 hereof shall be as set forth in such
section; (ii) The Gross Asset Values of all Company assets shall be adjusted to
equal their respective gross fair market values (taking Code Section 7701(g)
into account), as determined by the Directors as of the following times: (A) the
acquisition of an additional interest in the Company by any new or existing
Member in exchange for more than a de minimis Capital Contribution; (B) the
distribution by the Company to a Member of more than a de minimis amount of
Company property as consideration for an interest in the Company; and (C) the
liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided that an adjustment described in clauses (A) and
(B) of this paragraph shall be made only if the Directors reasonably determine
that such adjustment is necessary to reflect the relative economic interests of
the
9
Members in the Company; (iii) The Gross Asset Value of any item of Company
assets distributed to any Member shall be adjusted to equal the gross fair
market value (taking Code Section 7701(g) into account) of such asset on the
date of distribution as determined by the Directors; and (iv) The Gross Asset
Values of Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such adjustments are taken
into account in determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m) and subparagraph (vi) of the definition of "Profits" and
"Losses" or Section 3.3(c) hereof; provided, however, that Gross Asset Values
shall not be adjusted pursuant to this subparagraph (iv) to the extent that an
adjustment pursuant to subparagraph (ii) is required in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (iv). If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subparagraph (ii) or (iv), such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset, for purposes of computing Profits and Losses.
(w) "Issuance Items" has the meaning set forth in Section 3.3(f)
hereof.
(x) "Liquidation Period" has the meaning set forth in Section 10.6
hereof.
(y) "Liquidator" has the meaning set forth in Section 10.8 hereof.
(z) "Losses" has the meaning set forth in the definition of "Profits"
and "Losses."
(aa) "Member" means any person (i) whose name is set forth as such on
Exhibit "A" initially attached hereto or has become a Member pursuant to the
terms of this Agreement, and (ii) who is the owner of one or more Units.
(bb) "Members" means all such Members.
(cc) "Membership Economic Interest" means collectively, a Member's share
of "Profits" and "Losses," the right to receive distributions of the Company's
assets, and the right to information concerning the business and affairs of the
Company provided by the Act. The Membership Economic Interest of a Member is
quantified by the unit of measurement referred to herein as "Units."
(dd) "Membership Interest" means collectively, the Membership Economic
Interest and Membership Voting Interest.
(ee) "Membership Register" means the membership register maintained by
the Company at its principal office or by a duly appointed agent of the Company
setting forth the name, address, the number of Units, and Capital Contributions
of each Member of the Company, which shall be modified from time to time as
additional Units are issued and as Units are transferred pursuant to this
Agreement.
(ff) "Membership Voting Interest" means collectively, a Member's right
to vote as set forth in this Agreement or required by the Act. The Membership
Voting Interest of a Member
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shall mean as to any matter to which the Member is entitled to vote hereunder or
as may be required under the Act, the right to one (1) vote for each Unit
registered in the name of such Member as shown in the Membership Register.
(gg) "Net Cash Flow" means the gross cash proceeds of the Company less
the portion thereof used to pay or establish reserves for all Company expenses,
debt payments, capital improvements, replacements, and contingencies, all as
reasonably determined by the Directors. "Net Cash Flow" shall not be reduced by
depreciation, amortization, cost recovery deductions, or similar allowances, but
shall be increased by any reductions of reserves previously established.
(hh) "Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
(ii) "Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
(jj) "Officer" or "Officers" has the meaning set forth in Section 5.14
hereof.
(kk) "Permitted Transfer" has the meaning set forth in Section 9.2
hereof.
(ll) "Person" means any individual, partnership (whether general or
limited), joint venture, limited liability company, corporation, trust, estate,
association, nominee or other entity.
(mm) "Profits and Losses" mean, for each Fiscal Year, an amount equal to
the Company's taxable income or loss for such Fiscal Year, determined in
accordance with Code Section 703(a) (for this purpose, all items of income,
gain, loss, or deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication): (i) Any income of the Company that
is exempt from federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of "Profits" and
"Losses" shall be added to such taxable income or loss; (ii) Any expenditures of
the Company described in Code Section 705(a)(2)(b) or treated as Code Section
705(a)(2)(b) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Profits or Losses pursuant to
this definition of "Profits" and "Losses" shall be subtracted from such taxable
income or loss; (iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the asset) or an item of
loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses; (iv) Gain or loss resulting from any disposition of
Property with respect to which gain or loss is recognized for federal income tax
purposes shall be computed by reference to the Gross Asset Value of the Property
disposed of, notwithstanding that the adjusted tax basis of such Property
differs from its Gross Asset Value; (v) In lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation for
such Fiscal Year, computed in accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis of any Company asset
11
pursuant to Code Section 734(b) is required, pursuant to Regulations Section
1.704-(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts
as a result of a distribution other than in liquidation of a Unit Holder's
interest in the Company, the amount of such adjustment shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) from the disposition of such asset and
shall be taken into account for purposes of computing Profits or Losses; and
(vii) Notwithstanding any other provision of this definition, any items which
are specially allocated pursuant to Section 3.3 and Section 3.4 hereof shall not
be taken into account in computing Profits or Losses. The amounts of the items
of Company income, gain, loss or deduction available to be specially allocated
pursuant to Sections 3.3 and Section 3.4 hereof shall be determined by applying
rules analogous to those set forth in subparagraphs (i) through (vi) above.
(nn) "Property" means all real and personal property acquired by the
Company, including cash, and any improvements thereto, and shall include both
tangible and intangible property.
(oo) "Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations are
amended from time to time.
(pp) "Regulatory Allocations" has the meaning set forth in Section 3.4
hereof.
(qq) "Related Party" means the adopted or birth relatives of any Person
and such Person's spouse (whether by marriage or common law), if any, including
without limitation great-grandparents, grandparents, children (including
stepchildren and adopted children), grandchildren, and great-grandchildren
thereof, and such Person's (and such Person's spouse's) brothers, sisters, and
cousins and their respective lineal ancestors and descendants, and any other
ancestors and/or descendants, and any spouse of any of the foregoing, each trust
created for the exclusive benefit of one or more of the foregoing, and the
successors, assigns, heirs, executors, personal representatives and estates of
any of the foregoing.
(rr) "Securities Act" means the Securities Act of 1933, as amended.
(ss) "Subsidiary" means any corporation, partnership, joint venture,
limited liability company, association or other entity in which such Person
owns, directly or indirectly, fifty percent (50%) or more of the outstanding
equity securities or interests, the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
entity.
(tt) "Tax Matters Member" has the meaning set forth in Section 7.3
hereof.
(uu) "Transfer" means, as a noun, any voluntary or involuntary transfer,
sale, pledge or hypothecation or other disposition and, as a verb, voluntarily
or involuntarily to transfer, give, sell, exchange, assign, pledge, bequest or
hypothecate or otherwise dispose of.
(vv) "Units or Unit" means an ownership interest in the Company
representing a Capital Contribution made as provided in Section 2 in
consideration of the Units, including any
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and all benefits to which the holder of such Units may be entitled as provided
in this Agreement, together with all obligations of such Person to comply with
the terms and provisions of this Agreement.
(ww) "Unit Holders" means all Unit Holders.
(xx) "Unit Holder" means the owner of one or more Units.
(yy) "Unit Holder Nonrecourse Debt" has the same meaning as the term
"partner nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
(zz) "Unit Holder Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Unit Holder Nonrecourse Debt, equal to the Company Minimum Gain
that would result if such Unit Holder Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of
the Regulations.
(aaa) "Unit Holder Nonrecourse Deductions " has the same meaning as the
term "partner nonrecourse deductions" in Sections 1.704-2(i)(1) and
1.704-2(i)(2) of the Regulations.
SECTION 2. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
2.1 ORIGINAL CAPITAL CONTRIBUTIONS. The name, address, original Capital
Contribution, and initial Units quantifying the Membership Interest of each
initial Member are set out in Exhibit A attached hereto, and shall also be set
out in the Membership Register along with those Members admitted after to the
Effective Date.
2.2 ADDITIONAL CAPITAL CONTRIBUTIONS; ADDITIONAL UNITS. No Unit Holder shall
be obligated to make any additional Capital Contributions to the Company or to
pay any assessment to the Company, other than any unpaid amounts on such Unit
Holder's original Capital Contributions, and no Units shall be subject to any
calls, requests or demands for capital. Subject to Section 5.6, additional
Membership Economic Interests quantified by additional Units may be issued in
consideration of Capital Contributions as agreed to between the Directors and
the Person acquiring the Membership Economic Interest quantified by the
additional Units. Each Person to whom additional Units are issued shall be
admitted as a Member in accordance with this Agreement. Upon such Capital
Contributions, the Directors shall cause Exhibit A and the Membership Register
to be appropriately amended.
2.3 CAPITAL ACCOUNTS. A Capital Account shall be maintained for each Unit
Holder in accordance with the following provisions:
(a) To each Unit Holder's Capital Account there shall be credited (i)
such Unit Holder's Capital Contributions, (ii) such Unit Holder's
distributive share of Profits and any items in the nature of income
or gain which are specially allocated pursuant to Section 3.3 and
Section 3.4, and (iii) the amount of any Company liabilities assumed
13
by such Unit Holder or which are secured by any Property distributed
to such Unit Holder;
(b) To each Unit Holder's Capital Account there shall be debited (i) the
amount of money and the Gross Asset Value of any Property distributed
to such Unit Holder pursuant to any provision of this Agreement, (ii)
such Unit Holder's distributive share of Losses and any items in the
nature of expenses or losses which are specially allocated pursuant
to Section 3.3 and 3.4 hereof, and (iii) the amount of any
liabilities of such Unit Holder assumed by the Company or which are
secured by any Property contributed by such Unit Holder to the
Company;
(c) In the event Units are Transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital Account
of the transferor to the extent it relates to the Transferred Units;
and
(d) In determining the amount of any liability for purposes of
subparagraphs (a) and (b) above there shall be taken into account
Code Section 752(c) and any other applicable provisions of the Code
and Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Regulations
Section 1.704-1(b), and shall be interpreted and applied in a manner consistent
with such Regulations. In the event the Directors shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Company or any Unit Holders), are computed in order to comply
with such Regulations, the Directors may make such modification, provided that
it is not likely to have a material effect on the amounts distributed to any
Person pursuant to Section 10 hereof upon the dissolution of the Company. The
Directors also shall (i) make any adjustments that are necessary or appropriate
to maintain equality between the Capital Accounts of the Unit Holders and the
amount of capital reflected on the Company's balance sheet, as computed for book
purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and (ii)
make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with Regulations Section
1.704-1(b).
SECTION 3. ALLOCATIONS
3.1 PROFITS. After giving effect to the special allocations in Section 3.3
and Section 3.4 hereof, Profits for any Fiscal Year shall be allocated among the
Unit Holders in proportion to Units held.
3.2 LOSSES. After giving effect to the special allocations in Section 3.3 and
3.4 hereof, Losses for any Fiscal Year shall be allocated among the Unit Holders
in proportion to Units held.
14
3.3 SPECIAL ALLOCATIONS. The following special allocations shall be made in
the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of this
Section 3, if there is a net decrease in Company Minimum Gain during any Fiscal
Year, each Unit Holder shall be specially allocated items of Company income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an
amount equal to such Unit Holder's share of the net decrease in Company Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Unit Holder pursuant thereto. The items
to be so allocated shall be determined in accordance with sections 1.704-2(f)(6)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(a) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Unit Holder Minimum Gain Chargeback. Except as otherwise provided
in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision
of this Section 3, if there is a net decrease in Unit Holder Nonrecourse Debt
Minimum Gain attributable to a Unit Holder Nonrecourse Debt during any Fiscal
Year, each Unit Holder who has a share of the Unit Holder Nonrecourse Debt
Minimum Gain attributable to such Unit Holder Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Company income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such Unit Holder's
share of the net decrease in Unit Holder Nonrecourse Debt Minimum Gain,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Unit Holder pursuant thereto. The items
to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(b) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of
the Regulations, items of Company income and gain shall be specially allocated
to such Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit as soon as
practicable, provided that an allocation pursuant to this Section 3.3(c) shall
be made only if and to the extent that the Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Section 3 have
been tentatively made as if this Section 3.3(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a deficit
Capital Account at the end of any Fiscal Year which is in excess of the sum of
(i) the amount such Member is obligated to restore pursuant to any provision of
this Agreement, and (ii) the amount such Member is deemed to be obligated to
restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations, each such Member shall be specially
15
allocated items of Company income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this Section 3.3(d)
shall be made only if and to the extent that such Member would have a deficit
Capital Account in excess of such sum after all other allocations provided for
in this Section 3 have been made as if Section 3.3(c) and this Section 3.3(d)
were not in this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
or other period shall be specially allocated among the Members in proportion to
Units held.
(f) Unit Holder Nonrecourse Deductions. Any Unit Holder Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the Unit Holder
who bears the economic risk of loss with respect to the Unit Holder Nonrecourse
Debt to which such Unit Holder Nonrecourse Deductions are attributable in
accordance with Regulations Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset, pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as the result of a distribution to a Unit Holder in
complete liquidation of such Unit Holder's interest in the Company, the amount
of such adjustment to Capital Accounts shall be treated as an item of gain (if
the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Unit Holders in accordance with their interests in the Company in the event
Regulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Unit Holder to
whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) Allocations Relating to Taxable Issuance of Company Units. Any
income, gain, loss or deduction realized as a direct or indirect result of the
issuance of Units by the Company to a Unit Holder (the "Issuance Items") shall
be allocated among the Unit Holders so that, to the extent possible, the net
amount of such Issuance Items, together with all other allocations under this
Agreement to each Unit Holder shall be equal to the net amount that would have
been allocated to each such Unit Holder if the Issuance Items had not been
realized.
3.4 CURATIVE ALLOCATIONS. The allocations set forth in Sections 3.3(a),
3.3(b), 3.3(c), 3.3(d), 3.3(e), 3.3(f), 3.3(g) and 3.5 (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss or
deduction pursuant to this Section 3.4. Therefore, notwithstanding any other
provision of this Section 3 (other than the Regulatory Allocations), the
Directors shall make such offsetting special allocations of Company income,
gain, loss or deduction in whatever manner it determines appropriate so that,
after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 3.1, 3.2,
and 3.3(h). In exercising their discretion under this Section 3.4, the Directors
shall take into account future Regulatory Allocations under Sections 3.3(a) and
3.3(b) that, although not yet
16
made, are likely to offset other Regulatory Allocations previously made under
Sections 3.3(e) and 3.3(f).
3.5 LOSS LIMITATION. Losses allocated pursuant to Section 3.2 hereof shall
not exceed the maximum amount of Losses that can be allocated without causing
any Unit Holder to have an Adjusted Capital Account Deficit at the end of any
Fiscal Year. In the event some but not all of the Unit Holders would have
Adjusted Capital Account Deficits as a consequence of an allocation of Losses
pursuant to Section 3.2 hereof, the limitation set forth in this Section 3.5
shall be applied on a Unit Holder by Unit Holder basis and Losses not allocable
to any Unit Holder as a result of such limitation shall be allocated to the
other Unit Holders in accordance with the positive balances in such Unit
Holder's Capital Accounts so as to allocate the maximum permissible Losses to
each Unit Holder under Section 1.704-1(b)(2)(ii)(d) of the Regulations.
3.6 OTHER ALLOCATION RULES. (a) For purposes of determining the Profits,
Losses, or any other items allocable to any period, Profits, Losses, and any
such other items shall be determined on a daily, monthly, or other basis, as
determined by the Directors using any permissible method under Code Section 706
and the Regulations thereunder. (b) The Unit Holders are aware of the income tax
consequences of the allocations made by this Section 3 and hereby agree to be
bound by the provisions of this Section 3 in reporting their shares of Company
income and loss for income tax purposes. (c) Solely for purposes of determining
a Unit Holder's proportionate share of the "excess nonrecourse liabilities" of
the Company within the meaning of Regulations Section 1.752-3(a)(3), the Unit
Holders' aggregate interests in Company profits shall be deemed to be as
provided in the capital accounts. To the extent permitted by Section
1.704-2(h)(3) of the Regulations, the Directors shall endeavor to treat
distributions of Net Cash Flow as having been made from the proceeds of a
Nonrecourse Liability or a Unit Holder Nonrecourse Debt only to the extent that
such distributions would cause or increase an Adjusted Capital Account Deficit
for any Unit Holder. (d) Generally, allocations of Profits and Losses to the
Unit Holders shall be allocated among them in the ratio which each Unit Holder's
Units bears to the total number of Units issued and outstanding.
3.7 TAX ALLOCATIONS: CODE SECTION 704(c). In accordance with Code Section
704(c) and the Regulations thereunder, income, gain, loss, and deduction with
respect to any Property contributed to the capital of the Company shall, solely
for tax purposes, be allocated among the Unit Holders so as to take account of
any variation between the adjusted basis of such Property to the Company for
federal income tax purposes and its initial Gross Asset Value (computed in
accordance with the definition of Gross Asset Value). In the event the Gross
Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of
the definition of Gross Asset Value, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for federal income tax
purposes and its Gross Asset Value in the same manner as under Code Section
704(c) and the Regulations thereunder. Any elections or other decisions relating
to such allocations shall be made by the Directors in any manner that reasonably
reflects the purpose and intention of this Agreement. Allocations pursuant to
this Section 3.7 are solely for purposes of federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any Unit
Holder's Capital Account or share of Profits, Losses, other items, or
distributions pursuant to any provision of this Agreement.
17
3.8 TAX CREDIT ALLOCATIONS. All credits against income tax with respect to
the Company's property or operations, including the Small Ethanol Producer
Credit (as defined in the Code), if available, shall be allocated among the
Members in accordance with their respective membership interests in the Company
for the Fiscal Year during which the expenditure, production, sale, or other
event giving rise to the credit occurs. This Section 3.8 is intended to comply
with the applicable tax credit allocation principles of section
1.704-1(b)(4)(ii) of the Regulations and shall be interpreted consistently
therewith.
SECTION 4. DISTRIBUTIONS
4.1 NET CASH FLOW. Except as otherwise provided in Section 10 hereof, Net
Cash Flow, if any, shall be distributed to the Unit Holders in proportion to
Units held subject to, and to the extent permitted by, any loan covenants or
restrictions on such distributions agreed to by the Company in any loan
agreements with the Company's lenders from time to time in effect. In
determining Net Cash Flow, the Directors shall endeavor to provide for cash
distributions at such times and in such amounts as will permit the Unit Holders
to make timely payment of income taxes.
4.2 AMOUNTS WITHHELD. All amounts withheld pursuant to the Code or any
provision of any state, local or foreign tax law with respect to any payment,
distribution or allocation to the Company or the Unit Holders shall be treated
as amounts paid or distributed, as the case may be, to the Unit Holders with
respect to which such amount was withheld pursuant to this Section 4.2 for all
purposes under this Agreement. The Company is authorized to withhold from
payments and distributions, or with respect to allocations to the Unit Holders,
and to pay over to any federal, state and local government or any foreign
government, any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state or local law or any foreign law, and
shall allocate any such amounts to the Unit Holders with respect to which such
amount was withheld.
4.3 LIMITATIONS ON DISTRIBUTIONS. The Company shall make no distributions to
the Unit Holders except as provided in this Section 4 and Section 10 hereof.
Notwithstanding any other provision, no distribution shall be made if it is not
permitted to be made under the Act.
SECTION 5. MANAGEMENT
5.1 DIRECTORS. The Directors shall direct the business and affairs of the
Company, and shall exercise all of the powers of the Company except such as are
by this Agreement conferred upon or reserved to the Members. No person who is
not a Member may be a Director. The Directors shall adopt such policies, rules,
regulations, and actions not inconsistent with law or this Agreement, as it may
deem advisable. The management of the business and affairs of the Company shall
be directed by the Directors and not by its Members. The Directors of the
Company shall consist of a minimum of seven (7) and a maximum of fifteen (15)
members, and the number of Directors may be fixed or changed from time to time,
within that variable range,
18
by the Directors, in accordance with the provisions of this Section 5.1. The
Members may increase or decrease the number of Directors last approved and may
change from a variable range to a fixed number or visa versa by majority vote at
any annual or special meeting. Subject to Section 5.4 hereof or any other
express provisions hereof, the business and affairs of the Company shall be
managed by or under the direction of the Directors. The amendment or repeal of
this section or the adoption of any provision inconsistent therewith shall
require the approval of the Unit Holders representing at least a majority of the
outstanding Units.
5.2 ELECTION OF DIRECTORS. The initial Directors, appointed by the initial
Members, shall be the individuals set forth on Exhibit "B" attached hereto. The
initial Directors shall each serve as Directors for an initial term ending one
(1) year after substantial completion of the construction of the Facilities, and
in all cases until a successor is elected and qualified, or until the earlier
death, resignation, removal or disqualification of such Director. After the
expiration of the initial terms of the Directors, at each annual meeting of the
Members, Directors shall be elected by the Members for staggered terms of three
(3) years and until a successor is elected and qualified. The terms of Class I
Directors shall expire first, followed by those of Class II Directors, and then
Class III Directors. The initial Directors shall, by resolution, separately
classify each initial Director into a respective class, such classification to
serve as the basis for the staggering of terms among the initial and the
subsequent Directors thereafter. One or more nominees for Director positions up
for election shall be named by the then current Directors or by a nominating
committee established by the Directors. Nominations for the election of
directors may also be made by any Unit Holder entitled to vote generally in the
election of directors. However, any Unit Holder that intends to nominate one or
more persons for election as Directors at a meeting may do so only if written
notice of such Unit Holder's intent to make such nomination or nominations has
been given, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Company not less than thirty (30) days nor more
than ninety (90) days prior to the annual meeting of the Company. Each such
notice to the Secretary shall set forth: (i) the name and address of record of
the Unit Holder who intends to make the nomination; (ii) a representation that
the Unit Holder is a holder of record of Units of the Company entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) the name, age,
business and residence addresses, and principal occupation or employment of each
nominee; (iv) a description of all arrangements or understandings between the
Unit Holder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the Unit Holder; (v) such other information regarding each nominee proposed by
such Unit Holder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; (vi) the
consent of each nominee to serve as a Director of the Company if so elected, and
(vi) a nominating petition signed and dated by the holders of at least five
percent (5%) of the then outstanding Units and clearly setting forth the
proposed nominee as a candidate of the Director's seat to be filled at the next
election of Directors. The Company may require any proposed nominee to furnish
such other information as may reasonably be required by the Company to determine
the eligibility of such proposed nominee to serve as a Director of the Company.
The presiding Officer of the meeting may, if the facts warrant, determine that a
nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded. The amendment or
19
repeal of this section or the adoption of any provision inconsistent therewith
shall require the approval of the Unit Holders representing at least a majority
of the outstanding Units. Whenever a vacancy occurs other than from expiration
of a term of office or removal from office, a majority of the remaining
Directors shall appoint a new Director to fill the vacancy for the remainder of
such term.
5.3 COMMITTEES. A resolution approved by the affirmative vote of a majority
of the Directors may establish committees having the authority of the Directors
in the management of the business of the Company to the extent provided in the
resolution. A committee shall consist of one or more persons, who need not be
Directors, appointed by affirmative vote of a majority of the Directors present.
Committees may include a compensation committee and/or an audit committee, in
each case consisting of one or more independent Directors or other independent
persons. Committees are subject to the direction and control of, and vacancies
in the membership thereof shall be filled by, the Directors. A majority of the
members of the committee present at a meeting is a quorum for the transaction of
business, unless a larger or smaller proportion or number is provided in a
resolution approved by the affirmative vote of a majority of the Directors
present.
5.4 AUTHORITY OF DIRECTORS. Subject to the limitations and restrictions set
forth in this Agreement, the Directors shall direct the management of the
business and affairs of the Company and shall have all of the rights and powers
which may be possessed by a "manager" under the Act including, without
limitation, the right and power to do or perform the following and, to the
extent permitted by the Act or this Agreement, the further right and power by
resolution of the Directors to delegate to the Officers or such other Person or
Persons to do or perform the following:
(a) Conduct its business, carry on its operations and have and exercise
the powers granted by the Act in any state, territory, district or
possession of the United States, or in any foreign country which may
be necessary or convenient to effect any or all of the purposes for
which it is organized;
(b) Acquire by purchase, lease, or otherwise any real or personal
property which may be necessary, convenient, or incidental to the
accomplishment of the purposes of the Company;
(c) Operate, maintain, finance, improve, construct, own, grant operations
with respect to, sell, convey, assign, mortgage, and lease any real
estate and any personal property necessary, convenient, or incidental
to the accomplishment of the purposes of the Company;
(d) Execute any and all agreements, contracts, documents, certifications,
and instruments necessary or convenient in connection with the
management, maintenance, and operation of the business, or in
connection with managing the affairs of the Company, including,
executing amendments to this Agreement and the Articles in accordance
with the terms of this Agreement, both as Directors and, if required,
as attorney-in-
20
fact for the Members pursuant to any power of attorney granted by the
Members to the Directors;
(e) Borrow money and issue evidences of indebtedness necessary,
convenient, or incidental to the accomplishment of the purposes of
the Company, and secure the same by mortgage, pledge, or other lien
on any Company assets;
(f) Execute, in furtherance of any or all of the purposes of the Company,
any deed, lease, mortgage, deed of trust, mortgage note, promissory
note, xxxx of sale, contract, or other instrument purporting to
convey or encumber any or all of the Company assets;
(g) Prepay in whole or in part, refinance, recast, increase, modify, or
extend any liabilities affecting the assets of the Company and in
connection therewith execute any extensions or renewals of
encumbrances on any or all of such assets;
(h) Care for and distribute funds to the Members by way of cash income,
return of capital, or otherwise, all in accordance with the
provisions of this Agreement, and perform all matters in furtherance
of the objectives of the Company or this Agreement;
(i) Contract on behalf of the Company for the employment and services or
employees and/or independent contractors, such as lawyers and
accountants, and delegate to such Persons the duty to manage or
supervise any of the assets or operations of the Company;
(j) Engage in any kind of activity and perform and carry out contracts of
any kind (including contracts of insurance covering risks to Company
assets and Directors' and Officers' liability) necessary or
incidental to, or in connection with, the accomplishment of the
purposes of the Company, as may be lawfully carried on or performed
by a limited liability company under the laws of each state in which
the Company is then formed or qualified;
(k) Take, or refrain from taking, all actions, not expressly proscribed
or limited by this Agreement, as may be necessary or appropriate to
accomplish the purposes of the Company;
(l) Institute, prosecute, defend, settle, compromise, and dismiss
lawsuits or other judicial or administrative proceedings brought on
or in behalf of, or against, the Company, the Members or the
Directors or Officers in connection with activities arising out of,
connected with, or incidental to this Agreement, and to engage
counsel or others in connection therewith;
(m) Purchase, take, receive, subscribe for or otherwise acquire, own,
hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise
dispose of, and otherwise use and deal in and with, shares or other
interests in or obligations of domestic or foreign corporations,
associations, general or limited partnerships, other limited
liability
21
companies, or individuals or direct or indirect obligations of the
United States or of any government, state, territory, government
district or municipality or of any instrumentality of any of them;
(n) Agree with any Person as to the form and other terms and conditions
of such Person's Capital Contribution to the Company and cause the
Company to issue Membership Economic Interests and Units in
consideration of such Capital Contribution; and
(o) Indemnify a Member or Directors or Officers, or former Members or
Directors or Officers, and to make any other indemnification that is
authorized by this Agreement in accordance with, and to the fullest
extent permitted by, the Act.
5.5 DIRECTOR AS AGENT. Notwithstanding the power and authority of the
Directors to manage the business and affairs of the Company, no Director shall
have authority to act as agent for the Company for the purposes of its business
(including the execution of any instrument on behalf of the Company) unless the
Directors have authorized the Director to take such action. The Directors may
also delegate authority to manage the business and affairs of the Company
(including the execution of instruments on behalf of the Company) to such Person
or Persons (including to any Officers) designated by the Directors, and such
Person or Persons (or Officers) shall have such titles and authority as
determined by the Directors.
5.6 RESTRICTIONS ON AUTHORITY OF DIRECTORS. (a) The Directors shall not have
authority to, and they covenant and agree that they shall not, do any of the
following acts without the unanimous consent of the Members:
(i) Cause or permit the Company to engage in any activity that is not
consistent with the purposes of the Company as set forth in Section
1.3 hereof;
(ii) Knowingly do any act in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the
Company, except as otherwise provided in this Agreement;
(iii) Possess Company Property, or assign rights in specific Company
Property, for other than a Company purpose; or
(iv) Cause the Company to voluntarily take any action that would cause a
bankruptcy of the Company.
(b) The Directors shall not have authority to, and they covenant and agree that
they shall not cause the Company to, without the consent of a majority of the
Membership Voting Interests:
(i) Merge, consolidate, exchange or otherwise dispose of at one time
all or substantially all of the Property, except for a liquidating
sale of the Property in connection with the dissolution of the
Company;
(ii) Confess a judgment against the Company in an amount in excess of
$500,000;
22
(iii) Issue Units at a purchase price of less than $250.00 per Unit;
(iv) Issue more than an aggregate of 28,000 Units;
(v) Elect to dissolve the Company;
(vi) Cause the Company to acquire any equity or debt securities of any
Director or any of its Affiliates, or otherwise make loans to any
Director or any of its Affiliates.
The actions specified herein as requiring the consent of the Members shall be in
addition to any actions by the Directors which are specified in the Act as
requiring the consent or approval of the Members. Any such required consent or
approval may be given by a vote of a majority of the Membership Voting
Interests.
5.7 DIRECTOR ACTIONS. Meetings of the Directors shall be held at such times
and places as shall from time to time be determined by the Directors. Meetings
of the Directors may also be called by the Chairman of the Company or by any one
or more Directors. If the date, time, and place of a meeting of the Directors
has been announced at a previous meeting, no notice shall be required. In all
other cases, five (5) days' written notice of meetings, stating the date, time,
and place thereof and any other information required by law or desired by the
Person(s) calling such meeting, shall be given to each Director. Any Director
may waive notice of any meeting. A waiver of notice by a Director is effective
whether given before, at, or after the meeting, and whether given orally, in
writing, or by attendance. The attendance of a Director at any meeting shall
constitute a waiver of notice of such meeting, unless such Director objects at
the beginning of the meeting to the transaction of business on the grounds that
the meeting is not lawfully called or convened and does not participate
thereafter in the meeting. Any action required or permitted to be taken by the
Directors may also be taken by a written action signed by a two-thirds majority
of all Directors, provided that a copy of such written action shall be promptly
given to all Directors. The Directors may participate in any meeting of the
Directors by means of telephone conference or similar means of communication by
which all persons participating in the meeting can simultaneously hear each
other. Not less than fifty percent (50%) of the Directors shall constitute a
quorum for the transaction of business at any Director's meeting. Each Director
shall have one (1) vote at meetings of the Directors. The Directors shall take
action by the vote of a majority of all Directors. No Director shall be
disqualified from voting on any matter to be determined or decided by the
Directors solely by reason of such Director's (or his/her Affiliate's) potential
financial interest in the outcome of such vote, provided that the nature of such
Director's (or his/her Affiliate's) potential financial interest was reasonably
disclosed at the time of such vote.
5.8 DUTIES AND OBLIGATIONS OF DIRECTORS. The Directors shall cause the
Company to conduct its business and operations separate and apart from that of
any Director or any of its Affiliates. The Directors shall take all actions
which may be necessary or appropriate (i) for the continuation of the Company's
valid existence as a limited liability company under the laws of the State of
Wisconsin and each other jurisdiction in which such existence is necessary to
protect the limited liability of Members or to enable the Company to conduct the
business in which it is
23
engaged, and (ii) for the accomplishment of the Company's purposes, including
the acquisition, development, maintenance, preservation, and operation of
Company Property in accordance with the provisions of this Agreement and
applicable laws and regulations. Each Director shall have the duty to discharge
the foregoing duties in good faith, in a manner the Director believes to be in
the best interests of the Company, and with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. The
Directors shall be under no other fiduciary duty to the Company or the Members
to conduct the affairs of the Company in a particular manner.
5.9 CHAIRMAN AND VICE CHAIRMAN. Unless provided otherwise by a resolution
adopted by the Directors, the Chairman shall preside at meetings of the Members
and the Directors; shall see that all orders and resolutions of the Directors
are carried into effect; may maintain records of and certify proceedings of the
Directors and Members; and shall perform such other duties as may from time to
time be prescribed by the Directors. The Vice Chairman shall, in the absence or
disability of the Chairman, perform the duties and exercise the powers of the
Chairman and shall perform such other duties as the Directors or the Chairman
may from time to time prescribe. The Directors may designate more than one Vice
Chairmen, in which case the Vice Chairmen shall be designated by the Directors
so as to denote which is most senior in office.
5.10 PRESIDENT AND CHIEF EXECUTIVE OFFICER. Until provided otherwise by a
resolution of the Directors, the Chairman shall also act as the interim
President and CEO of the Company (herein referred to as the "President"; the
titles of President and CEO shall constitute a reference to one and the same
office and Officer of the Company), and the Chairman may exercise the duties of
the office of Chairman using any such designations. The Directors shall appoint
someone other than the Chairman as the President of the Company not later than
the commencement of operations of the Facilities, and such President shall
perform such duties as the Directors may from time to time prescribe, including
without limitation, the management of the day-to-day operations of the
Facilities.
5.11 CHIEF FINANCIAL OFFICER. Unless provided otherwise by a resolution
adopted by the Directors, the Chief Financial Officer of the Company shall be
the Treasurer of the Company and shall keep accurate financial records for the
Company; shall deposit all monies, drafts, and checks in the name of and to the
credit of the Company in such banks and depositories as the Directors shall
designate from time to time; shall endorse for deposit all notes, checks, and
drafts received by the Company as ordered by the Directors, making proper
vouchers therefor; shall disburse Company funds and issue checks and drafts in
the name of the Company as ordered by the Directors, shall render to the
President and the Directors, whenever requested, an account of all such
transactions as Chief Financial Officer and of the financial condition of the
Company, and shall perform such other duties as may be prescribed by the
Directors or the President from time to time.
5.12 SECRETARY; ASSISTANT SECRETARY. The Secretary shall attend all meetings
of the Directors and of the Members and shall maintain records of, and whenever
necessary, certify all proceedings of the Directors and of the Members. The
Secretary shall keep the required records of the Company, when so directed by
the Directors or other person or persons authorized to call such meetings, shall
give or cause to be given notice of meetings of the Members and of
24
meetings of the Directors, and shall also perform such other duties and have
such other powers as the Chairman or the Directors may prescribe from time to
time. An Assistant Secretary, if any, shall perform the duties of the Secretary
during the absence or disability of the Secretary.
5.13 VICE PRESIDENT. The Company may have one or more Vice Presidents. If more
than one, the Directors shall designate which is most senior. The most senior
Vice President shall perform the duties of the President in the absence of the
President.
5.14 DELEGATION. Unless prohibited by a resolution of the Directors, the
President, Chief Financial Officer, Vice President and Secretary (individually,
an "Officer" and collectively, "Officers") may delegate in writing some or all
of the duties and powers of such Officer's management position to other Persons.
An Officer who delegates the duties or powers of an office remains subject to
the standard of conduct for such Officer with respect to the discharge of all
duties and powers so delegated.
5.15 EXECUTION OF INSTRUMENTS. All deeds, mortgages, bonds, checks, contracts
and other instruments pertaining to the business and affairs of the Company
shall be signed on behalf of the Company by (i) the Chairman; or (ii) when
authorized by resolution(s) of the Directors, the President; or (iii) by such
other person or persons as may be designated from time to time by the Directors.
5.16 LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS. To the maximum
extent permitted under the Act and other applicable law, no Member or Director
of this Company shall be personally liable for any debt, obligation or liability
of this Company merely by reason of being a Member or Director or both. No
Director of this Company shall be personally liable to this Company or its
Members for monetary damages for a breach of fiduciary duty by such Director;
provided that this provision shall not eliminate or limit the liability of a
Director for any of the following: (i) receipt of an improper financial benefit
to which the Director is not entitled; (ii) liability for receipt of
distributions in violation of the articles of organization,
operating agreement,
or Section 183.0403 of the Act; (iii) a knowing violation of law; or (iv) acts
or omissions involving fraud, bad faith or willful misconduct. To the maximum
extent permitted under the Act and other applicable law, the Company, its
receiver, or its trustee (in the case of its receiver or trustee, to the extent
of Company Property) shall indemnify, save and hold harmless, and pay all
judgments and claims against each Director relating to any liability or damage
incurred by reason of any act performed or omitted to be performed by such
Director, officer, or director in connection with the business of the Company,
including reasonable attorneys' fees incurred by such Director, officer, or
director in connection with the defense of any action based on any such act or
omission, which attorneys' fees may be paid as incurred, including all such
liabilities under federal and state securities laws as permitted by law. To the
maximum extent permitted under the Act and other applicable law, in the event of
any action by a Unit Holder against any Director, including a derivative suit,
the Company shall indemnify, save harmless, and pay all costs, liabilities,
damages and expenses of such Director, including reasonable attorneys' fees
incurred in the defense of such action. Notwithstanding the foregoing
provisions, no Director shall be indemnified by the Company to the extent
prohibited or limited (but only to the extent limited) by the Act. The Company
may purchase and maintain insurance on behalf of any Person in such Person's
official capacity against any liability asserted against and incurred
25
by such Person in or arising from that capacity, whether or not the Company
would otherwise be required to indemnify the Person against the liability.
5.17 COMPENSATION; EXPENSES OF DIRECTORS. No Member or Director shall receive
any salary, fee, or draw for services rendered to or on behalf of the Company
merely by virtue of their status as a Member or Director, it being the intention
that, irrespective of any personal interest of any of the Directors, the
Directors shall have authority to establish reasonable compensation of all
Directors for services to the Company as Directors, Officers, or otherwise.
Except as otherwise approved by or pursuant to a policy approved by the
Directors, no Member or Director shall be reimbursed for any expenses incurred
by such Member or Director on behalf of the Company. Notwithstanding the
foregoing, by resolution by the Directors, the Directors may be paid as
reimbursement therefor, their expenses, if any, of attendance at each meeting of
the Directors. In addition, the Directors, by resolution, may approve from time
to time, the salaries and other compensation packages of the Officers of the
Company.
5.18 LOANS. Any Member or Affiliate may, with the consent of the Directors,
lend or advance money to the Company. If any Member or Affiliate shall make any
loan or loans to the Company or advance money on its behalf, the amount of any
such loan or advance shall not be treated as a contribution to the capital of
the Company but shall be a debt due from the Company. The amount of any such
loan or advance by a lending Member or Affiliate shall be repayable out of the
Company's cash and shall bear interest at a rate not in excess of the prime rate
established, from time to time, by any major bank selected by the Directors for
loans to its most creditworthy commercial borrowers, plus four percent (4%) per
annum. If the Directors, or any Affiliate of the Directors, are the lending
Member, the rate of interest and the terms and conditions of such loan shall be
no less favorable to the Company than if the lender had been an independent
third party. None of the Members or their Affiliates shall be obligated to make
any loan or advance to the Company.
SECTION 6. ROLE OF MEMBERS
6.1 RIGHTS OF POWERS. Except as otherwise expressly provided for in this
Agreement, the Members shall not have any right or power to take part in the
management or control of the Company or its business and affairs or to act for
or bind the Company in any way.
6.2 VOTING RIGHTS. The Members shall have voting rights as defined by the
Membership Voting Interest of such Member and in accordance with the provisions
of this Agreement.
6.3 MEMBER MEETINGS; QUORUM AND PROXIES. Meetings of the Members shall be
called by the Directors, and shall be held at the principal office of the
Company or at such other place as shall be designated by the person calling the
meeting. Notice of the meeting, stating the place, day and hour of the meeting,
shall be given to each Member in accordance with Section 14.1 hereof at least 10
days and no more than 60 days before the day on which the meeting is to be held.
Unit Holders representing an aggregate of not less than twenty-five percent
(25%) of the Units may also in writing demand that a meeting of the Members be
called by the Directors. Regular meetings of the Members shall be held not less
than once per Fiscal Year, at such time and place as determined by the Directors
upon written notice thereof stating the date, time and
26
place, given not less than ten (10) days nor more than sixty (60) days prior to
the meeting to every Member entitled to vote at such meeting. A Member may waive
the notice of meeting required hereunder by written notice of waiver signed by
the Member whether given before, during or after the meeting. Attendance by a
Member at a meeting is waiver of notice of that meeting, unless the Member
objects at the beginning of the meeting to the transaction of business because
the meeting is not lawfully called or convened and thereafter does not
participate in the meeting. The presence (in person or by proxy or mail ballot)
of at least thirty percent (30%) of the Membership Voting Interests is required
for the transaction of business at a meeting of the Members. Voting by proxy or
by mail ballot shall be permitted on any matter if authorized by the Directors.
6.4 TERMINATION OF MEMBERSHIP. The membership of a Member in the Company
shall terminate upon the occurrence of events described in the Act, including
registration and withdrawal. If for any reason the membership of a Member is
terminated, the Member whose membership has terminated loses all Membership
Voting Interests and shall be considered merely as assignee of the Membership
Economic Interest owned before the termination of membership, having only the
rights of an unadmitted Assignee provided for in Section 9.5 hereof.
6.5 CONTINUATION OF THE COMPANY. The Company shall not be dissolved upon the
occurrence of any event which is deemed to terminate the continued membership of
a Member. The Company's affairs shall not be required to be wound up. The
Company shall continue without dissolution.
6.6 NO OBLIGATION TO PURCHASE MEMBERSHIP INTEREST. No Member whose membership
in the Company terminates, nor any transferee of such Member, shall have any
right to demand or receive a return of such terminated Member's Capital
Contributions or to require the purchase or redemption of the Member's
Membership Interest. The other Members and the Company shall not have any
obligation to purchase or redeem the Membership Interest of any such terminated
Member or transferee of any such terminated Member.
6.7 WAIVER OF DISSENTERS RIGHTS. Each Member hereby disclaims, waives and
agrees, to the fullest extent permitted by law or the Act, not to assert
dissenters' or similar rights under the Act.
6.8 LIMITATION ON OWNERSHIP. Notwithstanding any other provision herein, no
Member shall directly or indirectly own or control more than thirty percent
(30%) of the issued and outstanding Units at any time. Units under indirect
ownership or control by a Member shall include Units owned or controlled by such
Member's Related Parties and Affiliates.
SECTION 7. ACCOUNTING, BOOKS AND RECORDS
7.1 ACCOUNTING, BOOKS AND RECORDS. The books and records of the Company shall
be kept, and the financial position and the results of its operations recorded,
in accordance with GAAP. The books and records shall reflect all the Company
transactions and shall be appropriate and adequate for the Company's business.
The Company shall maintain at its principal office all of
27
the following: (i) A current list of the full name and last known business or
residence address of each Member and Assignee set forth in alphabetical order,
together with the Capital Contributions, Capital Account and Units of each
Member and Assignee; (ii) The full name and business address of each Director;
(iii) A copy of the Articles and any and all amendments thereto together with
executed copies of any powers of attorney pursuant to which the Articles or any
amendments thereto have been executed; (iv) Copies of the Company's federal,
state, and local income tax or information returns and reports, if any, for the
six most recent taxable years; (v) A copy of this Agreement and any and all
amendments thereto together with executed copies of any powers of attorney
pursuant to which this Agreement or any amendments thereto have been executed;
and (vi) Copies of the financial statements of the Company, if any, for the six
most recent Fiscal Years. The Company shall use the accrual method of accounting
in preparation of its financial reports and for tax purposes and shall keep its
books and records accordingly. Any Member or its designated representative shall
have reasonable access during normal business hours to such information and
documents. The rights granted to a Member pursuant to this Section 8.1 are
expressly subject to compliance by such Member with the safety, security and
confidentiality procedures and guidelines of the Company, as such procedures and
guidelines may be established from time to time.
7.2 REPORTS. The chief financial officer of the Company shall be responsible
for causing the preparation of financial reports of the Company and the
coordination of financial matters of the Company with the Company's accountants.
The Company shall cause to be delivered to each Member the financial statements
listed below, prepared, in each case (other than with respect to Member's
Capital Accounts, which shall be prepared in accordance with this Agreement) in
accordance with GAAP consistently applied. As soon as practicable following the
end of each Fiscal Year (and in any event not later than ninety (90) days after
the end of such Fiscal Year) and at such time as distributions are made to the
Unit Holders pursuant to Section 12 hereof following the occurrence of a
Dissolution Event, a balance sheet of the Company as of the end of such Fiscal
Year and the related statements of operations, Unit Holders' Capital Accounts
and changes therein, and cash flows for such Fiscal Year, together with
appropriate notes to such financial statements and supporting schedules, all of
which shall be audited and certified by the Company's accountants, and in each
case, to the extent the Company was in existence, setting forth in comparative
form the corresponding figures for the immediately preceding Fiscal Year end (in
the case of the balance sheet) and the two (2) immediately preceding Fiscal
Years (in the case of the statements).
7.3 TAX MATTERS. The Directors shall, without any further consent of the Unit
Holders being required (except as specifically required herein), make any and
all elections for federal, state, local, and foreign tax purposes as the
Directors shall determine appropriate and represent the Company and the Unit
Holders before taxing authorities or courts of competent jurisdiction in tax
matters affecting the Company or the Unit Holders in their capacities as Unit
Holders, and to file any tax returns and execute any agreements or other
documents relating to or affecting such tax matters, including agreements or
other documents that bind the Unit Holders with respect to such tax matters or
otherwise affect the rights of the Company and the Unit Holders. The Directors
shall designate a Person to be specifically authorized to act as the "Tax
Matters Member" under the Code and in any similar capacity under state or local
law; provided, however, that the Directors shall have the authority to
designate, remove and replace the Tax
28
Matters Member who shall act as the tax matters partner within the meaning of
and pursuant to Regulations Sections 301.6231(a)(7)-1 and -2 or any similar
provision under state or local law. Necessary tax information shall be delivered
to each Unit Holder as soon as practicable after the end of each Fiscal Year of
the Company but not later than three (3) months after the end of each Fiscal
Year.
7.4 DELIVERY TO MEMBERS AND INSPECTION. Upon the request of any Member for
purposes reasonably related to the interest of that Person as a Member, the
Directors shall promptly deliver to the requesting Member, at the expense of the
requesting Member, a copy of the information required to be maintained under
Sections 7.1 and a copy of this Agreement and all amendments hereto. Each Member
has the right, upon reasonable request for purposes reasonably related to the
interest of the Person as a Member and for proper purposes, to: (i) inspect and
copy during normal business hours any of the Company records described in
Sections 7.1; and (ii) obtain from the Directors, promptly after their becoming
available, a copy of the Company's federal, state, and local income tax or
information returns for each Fiscal Year. Each Assignee shall have the right to
information regarding the Company only to the extent required by the Act.
SECTION 8. AMENDMENTS
8.1 AMENDMENTS. Amendments to this Agreement may be proposed by the Directors
or any Member. Following such proposal, the Directors shall submit to the
Members a verbatim statement of any proposed amendment, providing that counsel
for the Company shall have approved of the same in writing as to form, and the
Directors shall include in any such submission a recommendation as to the
proposed amendment. The Directors shall seek the written vote of the Members on
the proposed amendment or shall call a meeting to vote thereon and to transact
any other business that it may deem appropriate. A proposed amendment shall be
adopted and be effective as an amendment hereto only if approved by the
affirmative vote of a majority of the Membership Voting Interests of the
Members. Notwithstanding any provision of this Section 8.1 to the contrary, this
Agreement shall not be amended without the consent of each Member adversely
affected if such amendment would modify the limited liability of a Member, or
alter the Membership Economic Interest of a Member.
SECTION 9. TRANSFERS
9.1 RESTRICTIONS ON TRANSFERS. Except as otherwise permitted by this
Agreement, no Member shall Transfer all or any portion of its Units. In the
event that any Member pledges or otherwise encumbers all or any part of its
Units as security for the payment of a Debt, any such pledge or hypothecation
shall be made pursuant to a pledge or hypothecation agreement that requires the
pledgee or secured party to be bound by all of the terms and conditions of this
Section 9. In the event such pledgee or secured party becomes the Unit Holder
hereunder pursuant to the exercise of such party's rights under such pledge or
hypothecation agreement, such pledgee or secured party shall be bound by all
terms and conditions of this
Operating Agreement and all other agreements
governing the rights and obligations of Unit Holders. In such case, such pledgee
or secured party, and any transferee or purchaser of the Units held by such
pledgee or secured party,
29
shall not have any Membership Voting Interest attached to such Units unless and
until the Directors have approved in writing and admitted as a Member hereunder,
such pledgee, secured party, transferee or purchaser of such Units.
9.2 PERMITTED TRANSFERS. Subject to the conditions and restrictions set forth
in this Section 9, a Member may (a) at any time Transfer all or any portion of
its Units (i) to the transferor's administrator or trustee to whom such Units
are transferred involuntarily by operation of law, or (ii) without consideration
to or in trust for descendants of a Member; and (b) at any time following the
date on which substantial operations of the Facilities commences, Transfer all
or any portion of its Units (i) to any Person approved by a majority of the
Directors in writing, or (ii) to any other Member or to any Affiliate or Related
Party of another Member, or (iii) to any Affiliate or Related Party of the
transferor. Any such Transfer set forth in this Section 9.2 and meeting the
conditions set forth in Section 9.3 below is referred to in this Agreement as a
"Permitted Transfer".
9.3 CONDITIONS TO PERMITTED TRANSFERS. A Transfer shall not be treated as a
Permitted Transfer under Section 9.2 hereof unless and until the Directors have
approved such Transfer as set forth in Section 9.2 and the following conditions
are satisfied:
(a) Except in the case of a Transfer involuntarily by operation of law,
the transferor and transferee shall execute and deliver to the Company
such documents and instruments of conveyance as may be necessary or
appropriate in the opinion of counsel to the Company to effect such
Transfer. In the case of a Transfer of Units involuntarily by operation
of law, the Transfer shall be confirmed by presentation to the Company of
legal evidence of such Transfer, in form and substance satisfactory to
counsel to the Company. In all cases, the Company shall be reimbursed by
the transferor and/or transferee for all costs and expenses that it
reasonably incurs in connection with such Transfer.
(b) The transferor and transferee shall furnish the Company with the
transferee's taxpayer identification number, sufficient information to
determine the transferee's initial tax basis in the Units transferred,
and any other information reasonably necessary to permit the Company to
file all required federal and state tax returns and other legally
required information statements or returns. Without limiting the
generality of the foregoing, the Company shall not be required to make
any distribution otherwise provided for in this Agreement with respect to
any transferred Units until it has received such information.
(c) Except in the case of a Transfer of any Units involuntarily by
operation of law, either (i) such Units shall be registered under the
Securities Act, and any applicable state securities laws, or (ii) the
transferor shall provide an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Directors, to the effect that
such Transfer is exempt from all applicable registration requirements and
that such Transfer will not violate any applicable laws regulating the
Transfer of securities.
(d) Except in the case of a Transfer of Units involuntarily by operation
of law, the transferor shall provide an opinion of counsel, which opinion
and counsel shall be reasonably satisfactory to the Directors, to the
effect that such Transfer will not cause the
30
Company to be deemed to be an "investment company" under the Investment
Company Act of 1940.
(e) Unless otherwise approved by the Directors and a 75% majority in
interest of the Members, no Transfer of Units shall be made except upon
terms which would not, in the opinion of counsel chosen by and mutually
acceptable to the Directors and the transferor Member, result in the
termination of the Company within the meaning of Section 708 of the Code
or cause the application of the rules of Sections 168(g)(1)(B) and 168(h)
of the Code or similar rules to apply to the Company. If the immediate
Transfer of such Unit would, in the opinion of such counsel, cause a
termination within the meaning of Section 708 of the Code, then if, in
the opinion of such counsel, the following action would not precipitate
such termination, the transferor Member shall be entitled to (or
required, as the case may be) (i) immediately Transfer only that portion
of its Units as may, in the opinion of such counsel, be transferred
without causing such a termination and (ii) enter into an agreement to
Transfer the remainder of its Units, in one or more Transfers, at the
earliest date or dates on which such Transfer or Transfers may be
effected without causing such termination. The purchase price for the
Units shall be allocated between the immediate Transfer and the deferred
Transfer or Transfers pro rata on the basis of the percentage of the
aggregate Units being transferred, each portion to be payable when the
respective Transfer is consummated, unless otherwise agreed by the
parties to the Transfer. In the case of a Transfer by one Member to
another Member, the deferred purchase price shall be deposited in an
interest-bearing escrow account unless another method of securing the
payment thereof is agreed upon by the transferor Member and the
transferee Member(s).
(f) No notice or request initiating the procedures contemplated by
Section 9.3 may be given by any Member after a Dissolution Event has
occurred. No Member may sell all or any portion of its Units after a
Dissolution Event has occurred.
(g) No Person shall Transfer any Unit if, in the determination of the
Directors, such Transfer would cause the Company to be treated as a
"publicly traded partnership" within the meaning of Section 7704(b) of
the Code.
The Directors shall have the authority to waive any legal opinion or other
condition required in this Section 9.3 other than the member approval
requirement set forth in Section 9.3(e).
9.4 PROHIBITED TRANSFERS. Any purported Transfer of Units that is not a
Permitted Transfer shall be null and void and of no force or effect whatsoever;
provided that, if the Company is required to recognize a Transfer that is not a
Permitted Transfer (or if the Directors, in their sole discretion, elect to
recognize a Transfer that is not a Permitted Transfer), the Units Transferred
shall be strictly limited to the transferor's Membership Economic Interests as
provided by this Agreement with respect to the transferred Units, which
Membership Economic Interests may be applied (without limiting any other legal
or equitable rights of the Company) to satisfy any debts, obligations, or
liabilities for damages that the transferor or transferee of such Interest may
have to the Company. In the case of a Transfer or attempted Transfer of Units
that is not a Permitted Transfer, the parties engaging or attempting to engage
in such Transfer shall be liable to
31
indemnify and hold harmless the Company and the other Members from all cost,
liability, and damage that any of such indemnified Members may incur (including,
without limitation, incremental tax liabilities, lawyers' fees and expenses) as
a result of such Transfer or attempted Transfer and efforts to enforce the
indemnity granted hereby.
9.5 RIGHTS OF UNADMITTED ASSIGNEES. A Person who acquires Units but who is
not admitted as a substituted Member pursuant to Section 9.6 hereof shall be
entitled only to the Membership Economic Interests with respect to such Units in
accordance with this Agreement, and shall not be entitled to the Membership
Voting Interest with respect to such Units. In addition, such Person shall have
no right to any information or accounting of the affairs of the Company, shall
not be entitled to inspect the books or records of the Company, and shall not
have any of the rights of a Member under the Act or this Agreement.
9.6 ADMISSION OF SUBSTITUTED MEMBERS. As to Permitted Transfers, a transferee
of Units shall be admitted as a substitute Member provided that such transferee
has complied with the following provisions: (a) The transferee of Units shall,
by written instrument in form and substance reasonably satisfactory to the
Directors; (i) accept and adopt the terms and provisions of this Agreement,
including this Section 9, and (ii) assume the obligations of the transferor
Member under this Agreement with respect to the transferred Units. The
transferor Member shall be released from all such assumed obligations except (x)
those obligations or liabilities of the transferor Member arising out of a
breach of this Agreement, (y) in the case of a Transfer to any Person other than
a Member or any of its Affiliates, those obligations or liabilities of the
transferor Member based on events occurring, arising or maturing prior to the
date of Transfer, and (z) in the case of a Transfer to any of its Affiliates,
any Capital Contribution or other financing obligation of the transferor Member
under this Agreement; (b) The transferee pays or reimburses the Company for all
reasonable legal, filing, and publication costs that the Company incurs in
connection with the admission of the transferee as a Member with respect to the
Transferred Units; and (c) Except in the case of a Transfer involuntarily by
operation of law, if required by the Directors, the transferee (other than a
transferee that was a Member prior to the Transfer) shall deliver to the Company
evidence of the authority of such Person to become a Member and to be bound by
all of the terms and conditions of this Agreement, and the transferee and
transferor shall each execute and deliver such other instruments as the
Directors reasonably deem necessary or appropriate to effect, and as a condition
to, such Transfer.
9.7 REPRESENTATIONS REGARDING TRANSFERS. Each Member hereby covenants and
agrees with the Company for the benefit of the Company and all Members, that (i)
it is not currently making a market in Units and will not in the future make a
market in Units, (ii) it will not Transfer its Units on an established
securities market, a secondary market (or the substantial equivalent thereof)
within the meaning of Code Section 7704(b) (and any Regulations, proposed
Regulations, revenue rulings, or other official pronouncements of the Internal
Revenue Service or Treasury Department that may be promulgated or published
thereunder), and (iii) in the event such Regulations, revenue rulings, or other
pronouncements treat any or all arrangements which facilitate the selling of
Company interests and which are commonly referred to as "matching services" as
being a secondary market or substantial equivalent thereof, it will not Transfer
any Units through a matching service that is not approved in advance by the
Company. Each Member further agrees that it will not Transfer any Units to any
Person unless such Person agrees to be
32
bound by this Section 9.7 and to Transfer such Units only to Persons who agree
to be similarly bound. (b) Each Member hereby represents and warrants to the
Company and the Members that such Member's acquisition of Units hereunder is
made as principal for such Member's own account and not for resale or
distribution of such Units. Each Member further hereby agrees that the following
legend, as the same may be amended by the Directors in their sole discretion,
may be placed upon any counterpart of this Agreement, the Articles, or any other
document or instrument evidencing ownership of Units:
THE TRANSFERABILITY OF THE COMPANY UNITS REPRESENTED BY THIS DOCUMENT IS
RESTRICTED. SUCH UNITS MAY NOT BE SOLD, ASSIGNED, OR TRANSFERRED, NOR WILL ANY
ASSIGNEE, VENDEE, TRANSFEREE, OR ENDORSEE THEREOF BE RECOGNIZED AS HAVING
ACQUIRED ANY SUCH UNITS FOR ANY PURPOSES, UNLESS AND TO THE EXTENT SUCH SALE,
TRANSFER, HYPOTHECATION, OR ASSIGNMENT IS PERMITTED BY, AND IS COMPLETED IN
STRICT ACCORDANCE WITH, THE TERMS AND CONDITIONS SET FORTH IN THE
OPERATING
AGREEMENT AND AGREED TO BY EACH MEMBER.
9.8 DISTRIBUTION AND ALLOCATIONS IN RESPECT OF TRANSFERRED UNITS. If any
Units are Transferred during any Fiscal Year in compliance with the provisions
of this Section 9, Profits, Losses, each item thereof, and all other items
attributable to the Transferred Units for such Fiscal Year shall be divided and
allocated between the transferor and the transferee by taking into account their
varying interests during the Fiscal Year in accordance with Code Section 706(d),
using any conventions permitted by law and selected by the Directors. All
distributions on or before the date of such Transfer shall be made to the
transferor, and all distributions thereafter shall be made to the transferee.
Solely for purposes of making such allocations and distributions, the Company
shall recognize such Transfer not later than the end of the calendar month
during which it is given notice of such Transfer, provided that, if the Company
is given notice of a Transfer at least ten (10) Business Days prior to the
Transfer, the Company shall recognize such Transfer as of the date of such
Transfer, and provided further that if the Company does not receive a notice
stating the date such Units were transferred and such other information as the
Directors may reasonably require within thirty (30) days after the end of the
Fiscal Year during which the Transfer occurs, then all such items shall be
allocated, and all distributions shall be made, to the Person who, according to
the books and records of the Company, was the owner of the Units on the last day
of such Fiscal Year. Neither the Company nor any Member shall incur any
liability for making allocations and distributions in accordance with the
provisions of this Section 9.8, whether or not the Directors or the Company has
knowledge of any Transfer of ownership of any Units.
SECTION 10. DISSOLUTION AND WINDING UP
10.1 DISSOLUTION. The Company shall dissolve and shall commence winding up and
liquidating upon the first Dissolution Event to occur. The Members hereby agree
that, notwithstanding any provisions of the Act, the Company shall not dissolve
prior to the occurrence of a Dissolution Event.
33
10.2 WINDING UP. Upon the occurrence of a Dissolution Event, the Company shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Members,
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, the winding up of the Company's business and affairs,
PROVIDED that all covenants contained in this Agreement and obligations provided
for in this Agreement shall continue to be fully binding upon the Members until
such time as the Property has been distributed pursuant to this Section 10.2 and
the Articles have been canceled pursuant to the Act. The Liquidator shall be
responsible for overseeing the prompt and orderly winding up and dissolution of
the Company. The Liquidator shall take full account of the Company's liabilities
and Property and shall cause the Property or the proceeds from the sale thereof
(as determined pursuant to Section 10.8 hereof), to the extent sufficient
therefor, to be applied and distributed, to the maximum extent permitted by law,
in the following order: (a) First, to creditors (including Members and Directors
who are creditors, to the extent otherwise permitted by law) in satisfaction of
all of the Company's Debts and other liabilities (whether by payment or the
making of reasonable provision for payment thereof), other than liabilities for
which reasonable provision for payment has been made; and (b) Second, except as
provided in this Agreement, to Members in satisfaction of liabilities for
distributions pursuant to the Act; (c) Third, the balance, if any, to the Unit
Holders in accordance with the positive balance in their Capital Accounts
calculated after making the required adjustment set forth in clause (ii)(C) of
the definition of Gross Asset Value in Section 1.11 of this Agreement, after
giving effect to all contributions, distributions and allocations for all
periods.
10.3 COMPLIANCE WITH CERTAIN REQUIREMENTS OF REGULATIONS; DEFICIT CAPITAL
ACCOUNTS. In the event the Company is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), (a) distributions shall be made
pursuant to this Section 10 to the Unit Holders who have positive Capital
Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any
Unit Holder has a deficit balance in his Capital Account (after giving effect to
all contributions, distributions and allocations for all Fiscal Years, including
the Fiscal Year during which such liquidation occurs), such Unit Holder shall
have no obligation to make any contribution to the capital of the Company with
respect to such deficit, and such deficit shall not be considered a debt owed to
the Company or to any other Person for any purpose whatsoever. In the discretion
of the Liquidator, a pro rata portion of the distributions that would otherwise
be made to the Unit Holders pursuant to this Section 10 may be: (a) Distributed
to a trust established for the benefit of the Unit Holders for the purposes of
liquidating Company assets, collecting amounts owed to the Company, and paying
any contingent or unforeseen liabilities or obligations of the Company. The
assets of any such trust shall be distributed to the Unit Holders from time to
time, in the reasonable discretion of the Liquidator, in the same proportions as
the amount distributed to such trust by the Company would otherwise have been
distributed to the Unit Holders pursuant to Section 10.2 hereof; or (b) Withheld
to provide a reasonable reserve for Company liabilities (contingent or
otherwise) and to reflect the unrealized portion of any installment obligations
owed to the Company, provided that such withheld amounts shall be distributed to
the Unit Holders as soon as practicable.
10.4 DEEMED DISTRIBUTION AND RECONTRIBUTION. Notwithstanding any other
provision of this Section 10, in the event the Company is liquidated within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has
occurred, the Property shall not be liquidated,
34
the Company's Debts and other liabilities shall not be paid or discharged, and
the Company's affairs shall not be wound up.
10.5 RIGHTS OF UNIT HOLDERS. Except as otherwise provided in this Agreement,
each Unit Holder shall look solely to the Property of the Company for the return
of its Capital Contribution and has no right or power to demand or receive
Property other than cash from the Company. If the assets of the Company
remaining after payment or discharge of the debts or liabilities of the Company
are insufficient to return such Capital Contribution, the Unit Holders shall
have no recourse against the Company or any other Unit Holder or Directors.
10.6 ALLOCATIONS DURING PERIOD OF LIQUIDATION. During the period commencing on
the first day of the Fiscal Year during which a Dissolution Event occurs and
ending on the date on which all of the assets of the Company have been
distributed to the Unit Holders pursuant to Section 10.2 hereof (the
"Liquidation Period"), the Unit Holders shall continue to share Profits, Losses,
gain, loss and other items of Company income, gain, loss or deduction in the
manner provided in Section 3 hereof.
10.7 CHARACTER OF LIQUIDATING DISTRIBUTIONS. All payments made in liquidation
of the interest of a Unit Holder in the Company shall be made in exchange for
the interest of such Unit Holder in Property pursuant to Section 736(b)(1) of
the Code, including the interest of such Unit Holder in Company goodwill.
10.8 THE LIQUIDATOR. The "Liquidator" shall mean a Person appointed by the
Directors(s) to oversee the liquidation of the Company. Upon the consent of a
majority in interest of the Members, the Liquidator may be the Directors. The
Company is authorized to pay a reasonable fee to the Liquidator for its services
performed pursuant to this Section 10 and to reimburse the Liquidator for its
reasonable costs and expenses incurred in performing those services. The Company
shall indemnify, save harmless, and pay all judgments and claims against such
Liquidator or any officers, directors, agents or employees of the Liquidator
relating to any liability or damage incurred by reason of any act performed or
omitted to be performed by the Liquidator, or any officers, directors, agents or
employees of the Liquidator in connection with the liquidation of the Company,
including reasonable attorneys' fees incurred by the Liquidator, officer,
director, agent or employee in connection with the defense of any action based
on any such act or omission, which attorneys' fees may be paid as incurred,
except to the extent such liability or damage is caused by the fraud,
intentional misconduct of, or a knowing violation of the laws by the Liquidator
which was material to the cause of action.
10.9 FORMS OF LIQUIDATING DISTRIBUTIONS. For purposes of making distributions
required by Section 10.2 hereof, the Liquidator may determine whether to
distribute all or any portion of the Property in-kind or to sell all or any
portion of the Property and distribute the proceeds therefrom.
35
SECTION 11. MISCELLANEOUS
11.1 NOTICES. Any notice, payment, demand, or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
shall be deemed to have been delivered, given, and received for all purposes (i)
if delivered personally to the Person or to an officer of the Person to whom the
same is directed, or (ii) when the same is actually received, if sent either by
registered or certified mail, postage and charges prepaid, or by facsimile, if
such facsimile is followed by a hard copy of the facsimile communication sent
promptly thereafter by registered or certified mail, postage and charges
prepaid, addressed as follows, or to such other address as such Person may from
time to time specify by notice to the Members and the Directors: (a) If to the
Company, to the address determined pursuant to Section 1.4 hereof; (b) If to the
Directors, to the address set forth on record with the company; (c) If to a
Member, either to the address set forth in Section 2.1 hereof.
11.2 BINDING EFFECT. Except as otherwise provided in this Agreement, every
covenant, term, and provision of this Agreement shall be binding upon and inure
to the benefit of the Members and their respective successors, transferees, and
assigns.
11.3 CONSTRUCTION. Every covenant, term, and provision of this Agreement shall
be construed simply according to its fair meaning and not strictly for or
against any Member.
11.4 HEADINGS. Section and other headings contained in this Agreement are for
reference purposes only and are not intended to describe, interpret, define, or
limit the scope, extent, or intent of this Agreement or any provision hereof.
11.5 SEVERABILITY. Except as otherwise provided in the succeeding sentence,
every provision of this Agreement is intended to be severable, and, if any term
or provision of this Agreement is illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement. The preceding sentence of this Section 14.6 shall
be of no force or effect if the consequence of enforcing the remainder of this
Agreement without such illegal or invalid term or provision would be to cause
any Member to lose the material benefit of its economic bargain.
11.6 INCORPORATION BY REFERENCE. Every exhibit, schedule, and other appendix
attached to this Agreement and referred to herein is not incorporated in this
Agreement by reference unless this Agreement expressly otherwise provides.
11.7 VARIATION OF TERMS. All terms and any variations thereof shall be deemed
to refer to masculine, feminine, or neuter, singular or plural, as the identity
of the Person or Persons may require.
11.8 GOVERNING LAW. The laws of the State of Wisconsin shall govern the
validity of this Agreement, the construction of its terms, and the
interpretation of the rights and duties arising hereunder.
36
11.9 WAIVER OF JURY TRIAL. Each of the Members irrevocably waives to the
extent permitted by law, all rights to trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Agreement.
11.10 COUNTERPART EXECUTION. This Agreement may be executed in any number of
counterparts with the same effect as if all of the Members had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
11.11 SPECIFIC PERFORMANCE. Each Member agrees with the other Members that the
other Members would be irreparably damaged if any of the provisions of this
Agreement are not performed in accordance with their specific terms and that
monetary damages would not provide an adequate remedy in such event.
Accordingly, it is agreed that, in addition to any other remedy to which the
nonbreaching Members may be entitled, at law or in equity, the nonbreaching
Members shall be entitled to injunctive relief to prevent breaches of the
provisions of this Agreement and specifically to enforce the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having subject matter jurisdiction thereof.
IN WITNESS WHEREOF, the parties have executed and entered into this
Operating
Agreement of the Company as of the day first above set forth.
COMPANY:
UNITED WISCONSIN GRAIN PRODUCERS, L.L.C.
By:
-------------------------------------
Its: Chairman and President
----------------------
MEMBERS:
-------------------------------------- ---------------------------------------
Xxxx Xxxxx Xxx Xxxxxx
-------------------------------------- ---------------------------------------
Xxxxx X. Xxxxx Xxxxxxx X. Xxxxxx
-------------------------------------- ---------------------------------------
Xxxxxxx X. Xxxxxxxx Xxxxx Xxxxxxxxxxx
-------------------------------------- ---------------------------------------
Xxxxxx Xxxxx Xxxxxx X. Xxxxxx
37
-------------------------------------- ---------------------------------------
Xxxxx Xxxxx Berwyn X. Xxxxxx
38
EXHIBIT "A"
UNITED WISCONSIN GRAIN PRODUCERS, L.L.C.
INITIAL MEMBERSHIP LIST
NAME AND ADDRESS OF INITIAL MEMBERS UNITS
----------------------------------- -----
Xxxx Xxxxx, X000 Xxx. X, Xxxx Xxxxx, XX 00000 20
Xxx Xxxxxx, 000 Xxxx Xx., Xxxxxxxxxxx, XX 00000 20
Xxxxx X. Xxxxx, X0000 Xxxx Xx., Xxxxxxxx, XX 00000 00
Xxxxxxx X. Xxxxxx, X0000 Country Dr., Beaver Dam, WI 53916 00
Xxxxxxx X. Xxxxxxxx, X0000 Xxxxxx Xx., Xxxxxxxx, XX 00000 20
Xxxxx Xxxxxxxxxxx, X0000 Xxxxxxx Xxxxx, Xxxxxx Xxx, XX 00000 30
Xxxxxx Xxxxx, X00000 Xxxxx Xx., Xxxxxxxx, XX 00000 20
Xxxxxx X. Xxxxxx, 00000 Xxx. X, Xxxxxxxxxx, XX 00000 25
Xxxxx Xxxxx, X0000 Xx. Xxxxx XX, Xxxxxxxx, XX 00000 30
Berwyn X. Xxxxxx, X0000 Xxx. XX, Xxxxxx Xxx, XX 00000 20
39
EXHIBIT "B"
INITIAL BOARD OF DIRECTORS
NAME OF INITIAL BOARD OF DIRECTORS MEMBERS ADDRESS OF INITIAL BOARD OF DIRECTORS MEMBERS
------------------------------------------ ---------------------------------------------
Xxxx Xxxxx X000 Xxx. X, Xxxx Xxxxx, XX 00000
Xxx Xxxxxx 000 Xxxx Xx., Xxxxxxxxxxx, XX 00000
Xxxxx X. Xxxxx X0000 Xxxx Xx., Xxxxxxxx, XX 00000
Xxxxxxx X. Xxxxxx, Vice Chairman and Vice President X0000 Xxxxxxx Xx., Xxxxxx Xxx, XX 00000
Xxxxxxx X. Xxxxxxxx X0000 Xxxxxx Xx., Xxxxxxxx, XX 00000
Xxxxx Xxxxxxxxxxx, Secretary X0000 Xxxxxxx Xxxxx, Xxxxxx Xxx, XX 00000
Xxxxxx Xxxxx X00000 Xxxxx Xx., Xxxxxxxx, XX 00000
Xxxxxx X. Xxxxxx, Treasurer 00000 Xxx. X, Xxxxxxxxxx, XX 00000
Xxxxx Xxxxx, Chairman and President X0000 Xx. Xxxxx XX, Xxxxxxxx, XX 00000
Berwyn X. Xxxxxx X0000 Xxx. XX, Xxxxxx Xxx, XX 00000
40
