Exhibit 4.2
MEMBER CONTROL AGREEMENT
OF
RED TRAIL ENERGY, LLC
THIS MEMBER CONTROL AGREEMENT is made as of the 24th day of September 2003,
by and among each of the undersigned:
RECITALS:
WHEREAS, the undersigned constitute all of the current members of Red Trail
Energy, LLC, a North Dakota limited liability company; and
WHEREAS, Section 10-32-50 of the North Dakota limited liability company act
authorizes a "member control agreement" as defined therein; and
WHEREAS, each of the undersigned wishes to enter into such an agreement;
and
NOW, THEREFORE, each of the undersigned agrees as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. The terms defined in this Article I (except as may be
otherwise expressly provided in this Agreement or unless the context otherwise
requires) shall, for all purposes of this Agreement, have the following
respective meanings:
"ACT" means the North Dakota limited liability company act contained in
North Dakota Statutes, Chapter 10-32.
"AGREEMENT" means this Member Control Agreement as hereafter amended from
time to time, including any schedules to the Agreement.
"BOARD" or "BOARD OF GOVERNORS" means the board of governors of the
Company.
"CAPITAL ACCOUNT" means the account of a Member which is maintained in
accordance with the provisions of Section 3.11 hereof.
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"CODE" means the Internal Revenue Code of 1986, as amended and any
successor thereto. Any reference herein to specific sections of the Code shall
be deemed to include a reference to any corresponding provisions of future law.
"COMPANY" means Red Trail Energy, LLC, a North Dakota limited liability
company.
"DISTRIBUTION" means a distribution to the Members of cash or other assets
of the Company, made from time to time pursuant to the provisions of this
Agreement.
"FINANCIAL RIGHTS" means a Member's rights to share in net income and net
losses and distributions with respect to a membership interest in accordance
with the terms of this Agreement, and the power to assign financial rights.
"GOVERNANCE RIGHTS" means all of a Member's rights as a Member in the
Company other than such Member's financial rights.
"GOVERNOR" means a natural person serving on the Board of Governors.
"MANAGER" means a person elected, appointed, or otherwise designated as a
manager by the Board of Governors, and any other person considered elected as a
manager pursuant to the Act.
"MEMBER" means a person reflected in the required records of the Company as
the owner of governance rights of a membership interest of the Company.
"MEMBERSHIP INTEREST" means a Member's interest in the Company consisting
of the number of units each member has divided by the total units held by all
members.
"NET INCOME" and "NET LOSS" mean the profits and losses of the Company, as
the case may be, as determined for federal income tax purposes as of the close
of each of the fiscal years of the Company.
"VOTING INTEREST" as to any Member means the "voting interest" reflected in
Section 3.1 hereafter for such Member.
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ARTICLE II.
FIRST GOVERNORS
2.1 First Governors. The first Governors of the Company shall be the
following, who are hereby elected to hold office until their successors are
elected and qualified pursuant to the Operating Agreement of the Company: ______
________________________________________________________________________________
_______________________________________________________________________________.
ARTICLE III.
FOUNDERS' CONTRIBUTIONS AND
PURCHASE OF MEMBERSHIP INTERESTS BY INVESTORS
3.1 Contribution of Founders. The "Founders" contemporaneously herewith
have each purchased membership units or made initial contributions as set forth
in Schedule A hereto.
3.2 Purchase of Membership Interests by Intrastate Investors. The parties
acknowledge that the Company plans to sell Membership Interests to interested
North Dakota investors who enter into a Subscription Agreement with such rights,
obligations, and preferences as the Board of Governors shall establish for such
Membership Interests. The parties understand that upon the sale of Membership
Interests to investors, their respective Membership Interests shall be diluted.
The names of the Members and their respective contributions and the agreed
value thereof are as follows:
Voting
Member Interest
------ --------
as per subscription Report ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
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Voting
Member Interest
------ --------
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
__________________________ ___%
Other than as set forth in Section 3.11, no additional contributions shall be
accepted or membership interests granted by the Board without the consent of
100% of the outstanding voting interests. Upon such consent and the issuance of
additional membership interests, Section 3.1 shall be appropriately amended.
3.3 Terms of Membership Interests. The Company will have one class of
Membership Interests as set forth below:
Class A member - Class to be owned by the Founders of the Company and
outside investors in the Company with such rights with respect to voting and
sharing in profits of the Company as determined by the Board of Governors from
time to time. All Membership Interests of the Company shall have the rights
provided by law, subject to any statement in this Agreement of the specific
rights or terms of such Membership Interests.
3.4 Democracy Rights.
A. Meetings. Meetings of the Company may be called by the Governors and
request, either in person or by certified mail, stating the purpose(s) of the
meeting, the Governors and Managers shall provide all Members within ten days
after receipt of said request, written notice, either in person or by mail, of a
meeting and the purpose of such meeting to be held on a date not less than
fifteen nor more than, sixty days after distribution of such notice, at a time
and place specified in the request, or if none is specified, at a time and place
convenient to Members.
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B. Voting Rights of Members.
1. The Company agreement must provide that a majority of the then
outstanding Company Interests may, without the necessity for concurrence by the
Governors and Managers, vote to:
(a) amend the Company agreement;
(b) dissolve the Company;
(c) remove the Governors and Managers and elect a new Governors and
Managers;
(d) Approve or disapprove the sale of all or substantially all of the
assets of the Company, when such sale is to be made other than in the
ordinary course of the Company's business;
2. Without concurrence of a majority of the outstanding Company
Interests, the Governors and Managers may not:
(a) amend the Company agreement except for amendments which do not
adversely affect the rights of Members;
(b) voluntarily withdraw as a Governors and Managers unless such
withdrawal would not affect the tax status of the Company and
would not materially adversely affect the Members;
(c) appoint a new Governor or Manager;
(d) sell all or substantially all of the Company's assets other than
in the ordinary course of the Company's business; or
(e) cause the merger or other reorganization of the Company.
3. With respect to any Company interests owned by the Governors and
Managers, the Governors and Managers may not vote or consent on matters
submitted to the Members regarding the removal of the Governors and Managers or
regarding any transaction between the Company and the Governors and Managers or
in determining the existence of the requisite membership interest of Company
interests necessary to approve a matter on which the Governors or Managers may
not vote or consent, any Company interest owned by the Governors or Managers
shall not be included.
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3.5 Allocation of Net Income and Net Losses. Net income and net losses
shall be allocated annually among the Members in proportion to their membership
interests.
3.6 Operating Distributions. Any distributions authorized by the Board
other than liquidating distributions pursuant to Section 3.5 shall be
distributed among the Members based on their membership interests, provided,
however, that the Board shall annually distribute cash to the members based on
their membership interests in an amount equal to the estimated member tax
liability, to the extent such a distribution is legally permitted.
3.7 Liquidating Distributions. If the Company is dissolved and (i)
dissolution is not avoided under Section 5.1 and (ii) its business is being
liquidated in accordance with statutes, the Company shall cease to carry on its
business, except to the extent necessary for the winding up of the business of
the Company. The Company shall thereafter be wound up and terminated as provided
by the Act. All tangible or intangible property of the Company, including money
remaining after the discharge of the debts, obligations, and liabilities of the
Company shall be distributed to the Members as follows:
(a) To the Members in proportion to, and to the extent of, the positive
balances in their capital accounts; and thereafter,
(b) To the Members in accordance with their membership interests.
3.8 Voting. Members shall be entitled to one vote per Membership Interest
in all major matters to be voted upon by the holders of Membership Interests.
Holders of Member Interests have no preemptive rights to subscribe for or to
purchase any additional Membership Interests. Membership Interests owned by
managers or governors may not be voted on where a conflict arises between such
managers and governors and the Company.
3.9 Capital Accounts. A capital account shall be established for each
Member and shall be maintained in accordance with Treasury regulation Section
1.704-1(b)(2)(iv). Any Member who shall receive any membership interest in the
Company or whose membership interest shall be increased by means of the transfer
to such member of any financial interest in the Company from another Member
shall have a capital account that has been appropriately adjusted to reflect
such transfer. No interest shall be paid by the Company on capital contributions
or on balances in Members' capital accounts.
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3.10 Additional Capital Contributions. Other than as set forth in this
Section 3.10, no Member shall have any obligation to make additional capital
contributions to the Company or to fund, advance, or lend monies which may be
necessary to pay deficits, if any, incurred by the Company during the term
hereof.
(a) Members may make loans to the Company from time to time, as authorized
by the Board. Any payment or transfer accepted by the Company from a
Member which is not a capital contribution complying with Section 3.1
or this Section 3.10 shall be deemed a loan and shall neither be
treated as a contribution to the capital of the Company for any
purpose hereunder, nor entitle such Member (as such) to any increase
in such Member's interest. Any such loan shall be repaid at such times
and with such interest (at rates not to exceed the maximum permitted
by law) as the Board and the lending Member shall reasonably agree.
(b) If, with respect to any real estate investment of the Company, the
Board of Governors determines that an additional contribution is
required (an "additional investment contribution"), each Member of
the Company shall timely contribute to the Company Member's pro rata
share of such additional investment contribution, determined in
accordance with his membership interest. In the event that a Member
(the "defaulting member") fails to make any payment, or installment
thereof, when due, of any contribution or other obligation under this
Section 3.10(b), the remaining Members, acting through a majority of
their interests, may enforce such obligation in such manner as may be
permitted by law. Without limiting the generality of the foregoing,
such members may, in their sole discretion, (i) bring an action at law
or in equity to enforce such obligation; (ii) assess interest on the
unpaid amount at the highest rate of interest then being charged to
the Company by any lender; and (iii) require the defaulting member,
provided such default shall not theretofore have been cured,
unconditionally and irrevocably to assign to one or more of the
remaining Members (determined in accordance with the next succeeding
sentence hereof) that portion of the defaulting Member's interest that
bears the same ratio to all of the defaulting Member's interest as the
remaining amount of unpaid contributions, whether due or not yet due,
of the defaulting Member bears to the total amount of contributions,
paid and unpaid, required to be made by the defaulting Member. If the
non-defaulting member
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requires assignment of all or a portion of a defaulting Member's
interest pursuant to subdivision (iii) above, each remaining Member
shall have the right to acquire such interest, determined as
aforesaid, in the proportion that its interest bears to the aggregate
interests of the remaining Members who desire to participate in such
purchase.
ARTICLE IV.
TAX MATTERS
4.1 Tax Characterization and Returns. The Members acknowledge that the
Company will be treated as a "partnership" for federal and North Dakota state
income tax purposes. Within ninety (90) days after the end of each fiscal year,
the Company will deliver to each person who was a Member at any time during such
fiscal year, a Form K-l and such other information, if any, with respect to the
Company as may be necessary for the preparation of such Member's federal or
state income tax (or information) returns, including a statement showing each
Member's share of income, gain or loss and credits for such fiscal year for
federal or state income tax purposes.
4.2 Accounting Decisions. All decisions as to accounting matters shall be
made by the Board or the Members pursuant to the Act. The Company may make or
revoke such elections as may be allowed pursuant to the Code, including the
election referred to in the Code to adjust the basis of Company property.
4.3 Tax Matters Partner. The Board shall designate a Member to act on
behalf of the Company as the "tax matters partner" within the meaning of the
Code.
4.4 Special Allocations. Anything elsewhere contained in this Article IV to
the contrary notwithstanding:
(a) MINIMUM GAIN CHARGEBACK. If for any Company fiscal year, there is a net
decrease in partnership minimum gain as determined in accordance with Treasury
Regulations Section 1.704-2 (i) (5), each Member shall be allocated items of
Company income and gain in accordance with Treasury Regulation Section
1.704-2(f) (1) (a "minimum gain chargeback") for such year (and, if necessary,
for subsequent years) in an amount equal to such member's share of such net
decrease of partnership minimum gain. For this purpose, a Member's share of the
net decrease in partnership minimum gain shall be determined under Treasury
Regulations Section 1.704-2(g)(2). This
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Section 4.4(a) is intended to comply with Treasury Regulation Section
1.704-(f)(1) and shall be interpreted consistently therewith.
(b) QUALIFIED INCOME OFFSET. If any Member at any time unexpectedly
receives any adjustment, allocation or distribution described in Treasury
Regulation Section 1.704-1(b) (2) (ii) (d) (4), Section 1.704-l(b) (2) (ii) (d)
(5), or Section 1.704-1(b) (2) (ii) (d) (6), and if such adjustment, allocation
or distribution results in a negative balance in such Member's capital account
in excess of the sum of (i) the amount such Member is obligated to restore to
the Company under this Agreement and (ii) the amount such Member is deemed to be
obligated to restore to the Company pursuant to the penultimate sentences of
Treasury Regulations Section 1.704-2(g) (1) (ii) and Section 1.704-2(i)(5), then
items of Company income and gain shall be specially allocated to such member so
as to eliminate, to the extent required by Treasury Regulation Section
1.704-1(b) (2) (ii) (d), such negative balance in his or her capital account as
quickly as possible.
(c) GROSS INCOME ALLOCATION. If any Member would have a negative balance in
his or her capital account at the end of any Company taxable year in excess of
the sum of (i) the amount such Member is obligated to restore to the Company
under this Agreement and (ii) the amount such Member is deemed to be obligated
to restore to the Company pursuant to the penultimate sentences of Treasury
Regulations Section 1.704-2 (g) (1) (ii) and Section 1.704-2 (i) (5), then such
Member shall be specifically allocated items of Company income (including gross
income) in the amount of such excess as quickly as possible.
(d) CURATIVE ALLOCATIONS. Any allocation to a Member under subparagraphs
(a) through (c) of this Section 4.4 (a "regulatory allocation") shall be taken
into account in determining subsequent allocations, so that the net amount of
regulatory allocations and all other items allocated under the provisions of
this Article IX shall, to the extent possible, be equal to the net amount that
would have been allocated to such Member under the provisions of this Article IV
if no regulatory allocation had been made.
4.5 Tax Allocations. In accordance with the Code and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and its fair market value as of the date of contribution.
In the event any Company asset is adjusted as a result of a revaluation
pursuant to Treasury Regulation Section 1.704-1(b) (2) (f),
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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 fair market value as of the date
of such revaluation in the same manner as under the Code and the Treasury
regulations thereunder. Any election or other decision relating to such
allocations shall be made by the Board in any manner that reasonably reflects
the purpose and intention of this Agreement.
Allocations pursuant to this Section 4.5 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 Member's capital account or share of income, profits,
gains, losses, expenses, deductions, credits or other items or distributions
pursuant to any provision of this Agreement.
ARTICLE V.
AGREEMENT TO AVOID DISSOLUTION
5.1 Dissolution Avoidance Consent. At the request of the Company and no
later than ninety (90) days after the occurrence of an event that terminates the
continued membership of another Member in the Company (including the events
enumerated in Section 00-00-000 of the Act), each remaining Member shall be
asked to consent to the continuation of the Company as a legal entity without
dissolution and to the continuation of its business, pursuant to the power set
forth in Article V of the Articles of Organization of the Company.
5.2 Status of Terminated Member if Dissolution is Avoided. If dissolution
is avoided under Section 5.1, then the Member whose interest has terminated
shall lose all governance rights and will be considered merely an assignee of
the financial rights owned before the termination of membership.
5.3 Status of Terminated Member if Dissolution is Not Avoided. If
dissolution is not avoided under Section 5.1, then the Member whose interest has
terminated shall retain all governance rights and financial rights owned before
the termination of the membership and may exercise those rights through the
winding up and termination of the Company.
5.4 Restoration of Governance Rights in Certain Cases. If dissolution is
avoided under Section 5.1, but the event that terminated the continued
membership of a Member in the Company was the death of such Member or a transfer
of such decedent Member's interest to or from his estate or to or from a trust
that has received such interest by reason of such death, then the governance
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rights associated with such interest shall be restored to such estate, trust or
transferee thereof for all purposes under this Agreement.
ARTICLE VI.
BUSINESS CONTINUATION AGREEMENT
6.1 Agreement to Continue Business. If an event of dissolution occurs and
dissolution is not avoided, the remaining Members shall have the right to
transfer the Company's assets and business to a successor limited liability
company and to continue its business in such successor as provided in North
Dakota Statutes, Section 00-00-000.
6.2 Procedures to Transfer and Continue Business. If the remaining Members
agree to continue the business of the Company, the Board shall organize a new
limited liability company (the "successor") under the Act and shall prepare a
plan of merger pursuant to which the Company shall be merged into the successor,
which shall be the surviving Company, and the membership interests of the
Members in the Company who do not dissent from the plan of merger shall be
converted on a pro rata basis into membership interests in the successor, having
substantially identical terms. If the plan of merger is approved, each Member
who does not dissent from the plan of merger agrees to execute any documents
required to effect the merger and create the membership interests in the
successor including, without limitation, a member control agreement among the
Members of the successor having terms substantially identical to the terms of
this Agreement. When approved by the members of the Company (including Members
voting pursuant to Section 00-00-000 of the Act), such merger shall be promptly
effected in accordance with law.
ARTICLE VII.
TRANSFERS OF INTERESTS
7.1 Restrictions on Transfers. No Member shall transfer all or any portion
of an interest without the prior written consent of the Board of Directors which
consent may be withheld in the sole discretion of the Board. Notwithstanding
anything contained herein to the contrary, no Member shall transfer any unit if,
in the determination of the Board, such transfer would cause the Company to be
treated as a publicly traded partnership, and any transfer of unit(s) not
approved by the Board of Directors or that would result in a violation of the
restrictions in this Agreement or applicable law shall be null and void with no
force or effect whatsoever, and the intended transferee shall acquire no rights
in such unit.
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7.2 Permitted Transfers. Subject to Section 7.1 above, any transfer of
units made in accordance with the following provisions will constitute a
"Permitted Transfer" for purposes of this Agreement.
(a) A transfer by a member and any related persons (as defined in the Code)
in one or more transactions during any thirty (30) calendar day period of
interests representing in the aggregate more than two percent (2%) of the total
interests in company.
(b) A transfer or series of related transfers by one or more members
(acting together) which involves the transfer of fifty percent (50%) or more of
the outstanding units; or
(c) Transfers of units effected through a qualified matching services
Program; or
(d) A transfer by gift or bequest only to a spouse or child of such
transferring member, or to a trust established for the benefit of such spouse or
child, or to an existing member of the company upon ten (10) days' prior written
notice to the company of such gift or bequest.
7.3 Conditions Precedent to Transfers. The Board of Directors, in its sole
discretion, may elect not to recognize any transfer of units unless and until
the company has received:
(a) an opinion of counsel (whose fees and expenses shall be borne by the
transferor) satisfactory in form and substance to the Board that such transfer
may be lawfully made without registration or qualification under applicable
state and federal securities laws, or such transfer is properly registered or
qualified under applicable state and federal securities laws and if, requested
by the company that such transfer will not cause the company to be treated as a
publicly traded partnership;
(b) such documents and instruments of conveyance executed by the transferor
and transferee as may be necessary or appropriate in the opinion of counsel to
the company to effect such transfer, except that in the case of a transfer of
units involuntarily by operation of law, the transfer shall be confirmed by
presentation of legal evidence of such transfer, in form and substance
satisfactory to the company;
(c) the transferor's membership certificate;
(d) the transferee's taxpayer identification number and sufficient
information to determine the transferee's initial tax
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basis in the interest transferred, and any other information reasonably
necessary to permit the company to file all required federal and state tax
returns and other legally required information statements or returns;
(e) evidence satisfactory in form and substance to the Board that the
transferee meets the maximum unit ownership limitation set forth in Section 4.3
of this Agreement; and
(f) other conditions on the transfer of units adopted by the Board from
time to time as it deems appropriate, in its sole discretion.
7.4 Redemption of Interests.
(a) A member (the "Requesting Member") may request redemption of his or her
interest upon not less than sixty (60) calendar days' prior written notice to
the Board of Directors. The Board, in its sole discretion, shall determine
whether to redeem such interest and the Board is under no obligation to redeem
any interest of any requesting member.
(b) Notwithstanding anything contained herein to the contrary, any
redemption pursuant to this Section 7.4 shall be subject to a determination by
the Board, in its sole discretion, that such redemption shall not cause the
company to be deemed a publicly traded partnership, and such redemption shall be
effected in accordance with this Agreement, the Code and applicable Treasury
Regulations, and shall be further subject to the prior approval of the Board
which may be withheld in its sole discretion.
7.5 Redemption Payment.
(a) Upon the redemption of a member under Section 7.4, the requesting
member shall be entitled to a payment equal to the fair market value of such
member's interest in the company as of the effective date of the (the
"Redemption Payment"); provided, however, if the remaining members of the
company agree to dissolve the company, then in no event shall such member be
entitled to a redemption payment, but such member will be entitled to such
member's share of the assets of the company.
(b) The redemption payment shall not be paid until at least sixty (60) days
after the company's receipt of the notice from the requesting member required
under Section 7.4(a) above. The redemption payment shall be paid in cash, or if
the redemption payment exceeds five thousand dollars ($5,000), the company shall
have the option to pay the redemption payment by paying five
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thousand dollars ($5,000) upon the effective date of the redemption and
executing a promissory note for the balance of the redemption payment. Such note
shall be dated and delivered on the effective date of the withdrawal and shall
be paid in five (5) equal annual installments due on the anniversary date of the
withdrawal and shall accrue interest per annum at a rate determined by the Board
which shall not be less than the then current prime rate established by any
major bank selected by the Board for loans to the bank's most creditworthy
commercial borrowers. The company may prepay the promissory note, in whole or in
part, at any time without penalty or premium.
(c) The redemption payment shall be increased or decreased, as the case may
be, by an amount equal to any indebtedness owed the requesting member by the
company, or the deduction of any indebtedness owed the company by the requested
member, or both. All rights of the member with respect to the interest,
including the right to vote such interest and to receive distributions, shall
terminate at closing, except for the member's right to receive payment therefor
upon the effective date of the redemption which shall be determined in
accordance with Section 7.6 below.
7.6 Effective Date of Transfer.
(a) Any transfer of a unit shall be deemed effective as of the day of the
month and year; (i) which the transfer occurs (as reflected by the form of
assignment); and (ii) the transferee's name and address and the nature and
extent of the transfer are reflected in the records of the company; provided,
however, the effective date of a transfer for purposes of allocation of profits
and losses and for distributions shall be determined pursuant to Section 7.6(b)
below. Any transferee of a unit shall take subject to the restrictions on
transfer imposed by this Agreement.
(b) The Board, in its sole discretion, may establish interim periods in
which transfers may occur (the "Interim Transfer Periods"); provided, however,
the Board shall provide members reasonable notice of the interim transfer
periods and advance notice of any change to the interim transfer periods. For
purposes of making allocations of profits and losses, and distributions, the
company will use the interim closing of the books method (rather than a daily
proration of profit or loss for the entire period) and recognize the transfer as
of the first day following the close of interim transfer period in which the
member complied with the notice, documentation and information requirements of
Article 7. All distributions on or before the end of the applicable interim
transfer period in which such requirements have been substantially complied with
shall be made to the transferor and all distributions
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thereafter shall be made to the transferee. The board has the authority to adopt
other reasonable methods and/or conventions.
(c) The Board shall have the power and authority to adopt another
reasonable method and/or convention with respect to such allocations and
distributions; provided, neither the company, the Board, any director nor any
member shall incur any liability for making allocations and distributions in
accordance with the provisions of this Section 7.6 (other than tax liabilities
which may be incurred by members), whether or not the Board or any director of
the company or any member has knowledge of any transfer or ownership of any
interest in the company.
7.7 Fair Market Value. Upon the redemption of an interest pursuant to
Section 7.4, the purchase price or redemption payment shall be equal to the fair
market value of the interest. "Fair market value" of an interest on any date
shall, unless otherwise specifically provided in this Agreement, be equal to the
most recent fair market valuation determination of the per unit value of the
company by the Board in good faith; provided, that such valuation shall be
calculated on a basis as consistent as practicable from period to period. The
Board may, in its sole discretion, employ the advice of independent and
qualified professionals in the determination of the fair market value, but is
not under any obligation to do so. The fair market value of the company shall be
determined at least annually. Valuations shall generally be performed, at the
discretion of the Board, as of the end of each fiscal year of the company's
operations at the annual meeting of the Board; however, the Board, in its sole
discretion, may have fair market valuations of the company performed at any time
or from time to time during any year and, except as otherwise specifically
provided in this Agreement, shall utilize the results of the most recent
valuation in determining the fair market value of an interest for purposes of
this agreement. No member or any party other than the Board shall have the right
to require or request that a new or more recent valuation be performed for
purposes of determining the fair market value of the company or an interest
hereunder. The company shall not establish the fair market value more than four
(4) times during the company's taxable year.
7.8 Pledged Units. Subject to Section 7.1 above, in the event that any
member pledges or otherwise encumbers 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 Article 7. In the event that
such pledgee or secured party becomes a member hereunder pursuant to the
exercise of such party's right under such pledge or
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hypothecation agreement, such pledgee or secured party shall be bound by all of
the terms and conditions of this Agreement. In such case, such pledgee or
secured party, and any transferee or purchaser of the units held by such pledgee
or secured party, shall not have any voting rights associated with 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.
7.9 Expenses. Except as otherwise expressly provided herein, all expenses
of the company incident to the admission of the transferee to the company as a
member shall be charged to and paid by the transferring member.
ARTICLE VIII.
MEMBER MANAGEMENT
8.1 Management by Members. Pursuant to Section 10-32-42, NDCC, the Members
may, by unanimous affirmative vote, take any action under the Act or this
Agreement that the Board may take thereunder.
ARTICLE IX.
AMENDMENTS
9.1 Amendment of Agreement. No change, modification or amendment of this
Agreement shall be valid or binding unless such change, modification or
amendment shall be in writing signed by 100% in voting interests of the Members;
provided, however, in no event may this Agreement be amended to provide for less
than unanimous consent to avoid dissolution under Section 5.1.
ARTICLE X.
MISCELLANEOUS
10.1 Governing Law. This Agreement and the rights of the parties hereunder
will be governed by, interpreted and enforced in accordance with the laws of the
State of North Dakota.
10.2 Binding Effect. This Agreement will be binding upon and inure to the
benefit of the Members and their respective distributees, successors, and
assigns.
10.3 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under the present or future laws effective
during the term of this Agreement, such provision will be fully severable; this
Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable
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provision had never comprised a part of this Agreement; and the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid, or unenforceable provision or by its
severance from this Agreement. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision, there will be added automatically as part of this
Agreement, a provision as similar in terms to such illegal, invalid, or
unenforceable provision as may be possible and be legal, valid and enforceable.
10.4 Making Counterparts. This Agreement may be executed in several
counterparts, each of which will be deemed an original but all of which will
constitute one and the same instrument. However, in making proof hereof, it will
be necessary to produce only one copy hereof signed by the party to be charged.
10.5 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby.
10.6 No Third Party Beneficiary. This Agreement is made solely and
specifically among and for the benefit of the parties hereto, and their
respective successors and assigns, and no other person will have any rights,
interest, or claims hereunder or be entitled to any benefits under or on account
of this Agreement as a third party beneficiary or otherwise.
10.7 Notices. Any notice to be given or to be served upon the Company or
any party hereto in connection with this Agreement must be in writing and will
be deemed to have been given and received when delivered to the address
specified by the Member at the address specified in the Company's required
records. Any Member or the Company may, at any time, by giving five (5) days
prior written notice to the other Members and the Company, designate any other
address in substitution of the forgoing address to which such notice will be
given.
IN WITNESS WHEREOF, the undersigned have executed this Agreement's of the
day and year first above written.
/s/ Xx X. XxXxxx /s/ Xxxx Xxxxxxxx
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/s/ Xxxxx Xxxx /s/ Xxxx Xxxxx
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/s/ Xxxx X. Xxxxxx
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/s/ Xxxx Xxxxxx
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/s/ Xxxx Xxxxxxx
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/s/ Xxxxxxx X. Xxxx
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/s/ Xxxxxxx X. Price
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/s/ Xxxx Xxxx
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