BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
(CONTAINS RESTRICTIONS ON TRANSFER
OF MEMBERSHIP INTERESTS)
DATED EFFECTIVE MAY 12, 2000
OPERATING AGREEMENT
OF
BADGER STATE ETHANOL, LLC
TABLE OF CONTENTS
SECTION 1: THE COMPANY 1
1.1 Formation. 1
1.2 Name. 1
1.3 Purpose; Powers. 1
1.4 Principal Place of Business. 2
1.5 Term. 2
1.6 Filings; Agent for Service of Process. 2
1.7 Title to Property. 3
1.8 Payments of Individual Obligations. 3
1.9 Independent Activities; Transactions with Affiliates. 3
1.10 Adoption of Business Plan. 3
1.11 Definitions. 4
SECTION 2: CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS 12
2.1 Original Capital Contributions; No Withdrawal. 12
2.2 Contribution Agreements. 12
2.3 Additional Capital Contributions; Additional Units. 13
2.4 Capital Accounts. 13
2.5 Unit Conversion 15
i
SECTION 3: ALLOCATIONS 15
3.1 Profits. 15
3.2 Losses. 15
3.3 Special Allocations. 15
3.4 Curative Allocations. 17
3.5 Loss Limitation. 17
3.6 Other Allocation Rules. 18
3.7 Tax Allocations: Code Section 704(c). 18
SECTION 4: DISTRIBUTIONS 20
4.1 Net Cash Flow. 20
4.2 Amounts Withheld. 20
4.3 Limitations on Distributions. 20
SECTION 5: MANAGEMENT 20
5.1 Director-Managed; Appointment of Directors. 20
5.2 Authority of Directors 21
5.3 Director as Agent; Director Actions. 23
5.4 Restrictions on Authority of Directors. 24
5.5 Duties and Obligations of Directors. 25
5.6 Chairman and Vice Chairman 25
5.7 General Manager. 26
5.8 Chief Financial Officer. 26
5.9 Secretary. 26
5.10 Vice President 27
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5.11 Delegation. 27
5.12 Execution of Instruments. 27
5.13 Limitation of Liability; Indemnification of Directors. 27
5.14 Compensation; Expenses of Directors; Loans 28
SECTION 6: ROLE OF MEMBERS 29
6.1 Rights or Powers. 29
6.2 Voting Rights. 29
6.3 Procedure for Consent; Call of Member Meeting. 29
6.4 Termination of Membership 30
6.5 Continuation of the Company 30
6.6 No Obligation to Purchase Membership Interest 30
6.7 Waiver of Dissenter's Rights 30
SECTION 7: [RESERVED] 31
SECTION 8: ACCOUNTING, BOOKS AND RECORDS 31
8.1 Accounting, Books and Records. 31
8.2 Reports. 32
8.3 Tax Matters. 33
8.4 Delivery to Members and Inspection. 33
SECTION 9: AMENDMENTS 34
9.1 Amendments. 34
SECTION 10: TRANSFERS 34
10.1 Restrictions on Transfers. 34
10.2 Permitted Transfers. 35
iii
10.3 Conditions to Permitted Transfers. 35
10.4 [RESERVED] 36
10.5 Prohibited Transfers. 37
10.6 Rights of Unadmitted Assignees. 37
10.7 Admission of Substituted Members. 37
10.8 Representations Regarding Transfers; Legend. 38
10.9 Distributions and Allocations in Respect of Transferred Units. 39
SECTION 11: [RESERVED] 39
SECTION 12: DISSOLUTION AND WINDING UP 39
12.1 Dissolution Events. 40
12.2 Winding Up. 40
12.3 Compliance With Certain Requirements of Regulations; Deficit
Capital Accounts. 41
12.4 Deemed Distribution and Recontribution. 41
12.5 Rights of Unit Holders. 41
12.6 Notice of Dissolution/Termination. 42
12.7 Allocations During Period of Liquidation. 42
12.8 Character of Liquidating Distributions. 42
12.9 The Liquidator. 42
12.10 Form of Liquidating Distributions. 43
SECTION 13: [RESERVED] 43
SECTION 14: MISCELLANEOUS 43
14.1 Notices. 43
14.2 Binding Effect. 44
iv
14.3 Construction. 44
14.4 Time. 44
14.5 Headings. 44
14.6 Severability. 44
14.7 Incorporation by Reference. 44
14.8 Variation of Terms. 45
14.9 Governing Law. 45
14.10 Waiver of Jury Trial. 45
14.11 Counterpart Execution. 45
14.12 Specific Performance. 45
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
OPERATING AGREEMENT
OF
BADGER STATE ETHANOL, LLC
THIS OPERATING AGREEMENT is entered into and shall be effective as of
the 12th day of May, 2000, by, between and among BADGER STATE ETHANOL, LLC, a
Wisconsin limited liability company (the "Company"); ▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇");
▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Malchine"; ▇▇▇▇▇▇ and Malchine are each a "Founding Member" and
together are referred to as the "Founding Members"); and each of the Persons who
are identified as Class C Members on the attached Exhibit A and who have
executed a counterpart of this Agreement and a Subscription Agreement; and each
of the Persons who are identified as Class B Members on the attached Exhibit A
and who have executed a counterpart of this Agreement and a Subscription
Agreement; and each of the Persons who are identified as Class A Members on the
attached Exhibit A and who have executed a counterpart of this Agreement and a
Subscription Agreement, pursuant to the provisions of the Act, on the following
terms and conditions:
SECTION 1
THE COMPANY
1.1 FORMATION.
The Founding Members formed the Company as a Wisconsin limited
liability company by filing Articles of Organization with the Wisconsin
Department of Financial Institutions on May 11, 2000 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 Badger State Ethanol, LLC and all
business of the Company shall be conducted in such name. The Directors may
change the name of the Company upon ten (10) days' notice to the Members.
1.3 PURPOSE; POWERS.
(a) The nature of the business and purposes of the Company are
(i) to own, construct, operate, lease, finance, contract with, and/or invest in
the Facilities or an portion thereof as agreed by the Members and 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 liability company may lawfully be engaged, as
determined by the Directors.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
(b) 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 set forth in Section 1.3(a) hereof 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 ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, 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 pursuant to Section
1.6(a) hereof, 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 12 hereof.
1.6 FILINGS; AGENT FOR SERVICE OF PROCESS.
(a) The Directors caused the Articles to be filed on May 11,
2000, in the office of the Department of Financial Institutions of the State of
Wisconsin in accordance with the provisions of the Act. The Company shall take
any and all other actions reasonably necessary to perfect and maintain the
status of the Company as a limited liability company under the laws of the State
of Wisconsin. The Directors shall cause amendments to be filed whenever required
by the Act.
(b) The Directors shall cause to be filed original or amended
articles of organization and shall take any and all other actions as may be
reasonably necessary to perfect and maintain the status of the Company as a
limited liability company or similar type of entity under the laws of any other
states or jurisdictions in which the Company engages in business.
(c) The name and address of the agent for service of process
on the Company in the State of Wisconsin shall be ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, or any successor as appointed by the Directors
upon ten (10) days' notice to the Members.
(d) Upon the dissolution and completion of the winding up and
liquidation of the Company, the Directors shall promptly execute and cause to be
filed Articles of Dissolution in accordance with the Act and the laws of any
other jurisdictions in which the Directors deem such filing necessary or
advisable.
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OPERATING AGREEMENT
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 PAYMENTS OF INDIVIDUAL OBLIGATIONS.
The 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.
(a) 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 Directors may deem appropriate in its discretion.
(b) 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.
(c) 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 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 ADOPTION OF BUSINESS PLAN.
At least 90 days prior to the beginning of each Fiscal Year, the
Directors shall prepare a business plan (the "Business Plan") for such Fiscal
Year. The Business Plan shall include an
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
annual budget for revenues, expenses, working capital reserves and capital
expenditures; any additional Capital Contributions anticipated to be required
for the operation of the Company's Business; and such other information,
plans, and strategies as the Directors deem advisable. If the Directors fail
to approve a Business Plan for any Fiscal Year as required hereunder, the
Business Plan previously in effect shall continue in effect, with appropriate
adjustments to reflect the then current rate of inflation, until such time as
a new Business Plan is adopted. The Business Plan may be reviewed by any
Member upon request therefor at the Company's principal office or, for a
nominal charge to cover copying, mailing and administrative costs, a copy of
the Business Plan will be mailed to such Member if requested.
1.11 DEFINITIONS.
Capitalized words and phrases used in this Agreement have the following
meanings:
"ACT" means Chapter 183 of the Wisconsin Statutes, as amended from time
to time (or any corresponding provision or provisions of any succeeding law).
"ADDITIONAL CAPITAL CONTRIBUTIONS" means, with respect to any Unit
Holder, the Capital Contributions made with respect to the Units held or
purchased by such Unit Holder pursuant to Section 2.3 hereof. In the event Units
are Transferred in accordance with the terms of this Agreement, the transferee
shall succeed to the Additional Capital Contributions of the transferor to the
extent they relate to the Transferred Units.
"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.
"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
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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, Directors, members, or persons
exercising similar authority with respect to such Person or entities.
"AGREEMENT" OR "OPERATING AGREEMENT" means this Operating Agreement of
Badger State Ethanol, LLC, as amended from time to time. Words such as "herein,"
"hereinafter," "hereof," "hereto" and "hereunder" refer to this Agreement as a
whole, unless the context otherwise requires.
"ARTICLES" means the Articles of Organization filed with the Wisconsin
Department of Financial Institutions for the purpose of forming the Company.
"ASSET CONTRIBUTION AGREEMENT" means an agreement between the Company
and a Member pursuant to which the Company has agreed that such Member shall
make its original non-cash (such as real or personal property) capital
contributions to the Company.
"ASSIGNEE" means a transferee of Units who is not admitted as a
substituted member pursuant to Section 10.7.
"BUSINESS PLAN" shall have the meaning set forth in Section 1.10
hereof.
"CAPITAL ACCOUNT" means the capital account maintained for each Unit
Holder in accordance with Section 2.4.
"CAPITAL CONTRIBUTIONS" means, with respect to any Unit Holder, the
amount of money (US Dollars) and the initial Gross Asset Value of any
Contributed Assets (other than money) contributed to the Company with respect to
the Units in the Company held or purchased by such Unit Holder, including
Additional Capital Contributions.
"CLASS A MEMBER" means any Person (i) whose name is set forth as such
on Exhibit A initially attached hereto or who has become a Class A Member
pursuant to the terms of this Agreement, and (ii) who is the owner of one or
more Class A Units. "CLASS A MEMBERS" means all such Persons.
"CLASS A UNIT(S)" means an ownership interest in the Company
representing a Capital Contribution made as provided in Section 2 in
consideration of Class A Units, including any and all benefits to which the
holder of such Units may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement.
"CLASS A UNIT HOLDER(S)" means the owner of one or more Class A Units,
regardless of whether they are Members.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
"CLASS B MEMBER" means any Person (i) whose name is referred to as such
in the first paragraph of this Agreement and who is listed on Exhibit A
initially attached hereto, or who has become a Class B Member pursuant to the
terms of this Agreement, and (ii) who is the owner of one or more Class B Units.
"CLASS B MEMBERS" means all such Persons.
"CLASS B UNIT(S)" means an ownership interest in the Company
representing a Capital Contribution made as provided in Section 2 in
consideration of Class B Units, including any and all benefits to which the
holder of such Units may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement.
"CLASS B UNIT HOLDER(S)" means the owner of one or more Class B Units
regardless of whether they are Members.
"CLASS C MEMBER" means any Person (i) whose name is referred to as such
in the first paragraph of this Agreement and who is listed on Exhibit A
initially attached hereto, or who has become a Class C Member pursuant to the
terms of this Agreement, and (ii) who is the owner of one or more Class C Units.
"CLASS C MEMBERS" means all such Persons.
"CLASS C UNIT(S)" means an ownership interest in the Company
representing a Capital Contribution made as provided in Section 2 in
consideration of Class C Units, including any and all benefits to which the
holder of such Units may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement.
"CLASS C UNIT HOLDER(S)" means the owner of one or more Class C Units
regardless of whether they are Members.
"CODE" means the United States Internal Revenue Code of 1986, as
amended from time to time.
"CONTRIBUTED ASSETS" of a Member shall have the meaning assigned in the
Asset Contribution Agreement, if any, between such Member and the Company.
"COMPANY" means the limited liability company formed pursuant to this
Agreement and the Articles and the limited liability company continuing the
business of this Company in the event of dissolution of the Company as herein
provided.
"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.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
"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.
"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.
"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
5.3(b)) and entitled to vote thereat.
"DISSOLUTION EVENT" shall have the meaning set forth in Section 12.1
hereof.
"EFFECTIVE DATE" means May 12, 2000.
"FACILITIES" shall mean the ethanol production and co-product
production facilities in Monroe, 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.
"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
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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.
"FISCAL QUARTER" means (i) the period commencing on May 11, 2000 and
ending on September 30, 2000, (ii) any subsequent 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 (iii) 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 12 hereof.
"FISCAL YEAR" means (i) the period commencing on May 11, 2000 and
ending on December 31, 2000, (ii) any subsequent twelve-month period commencing
on January 1 and ending on December 31 and (iii) 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 12 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.
"FOUNDING MEMBERS" shall mean collectively, ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇
▇▇▇▇▇▇▇▇.
"GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
"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 Members in the Company;
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
(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.
"ISSUANCE ITEMS" has the meaning set forth in Section 3.3(g) hereof.
"LIQUIDATION PERIOD" has the meaning set forth in Section 12.7 hereof.
"LIQUIDATOR" has the meaning set forth in Section 12.9(a) hereof.
"LOSSES" has the meaning set forth in the definition of "Profits"
and "Losses."
"MEMBERS" means all Class A Members, all Class B Members, and all Class
C Members when no distinction is required by the context in which the terms is
used herein. "MEMBER" means any one of the Members.
"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."
"MEMBERSHIP INTEREST" means collectively, the Membership Economic
Interest and Membership Voting Interest.
"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 and class 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.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
"MEMBERSHIP VOTING INTEREST" means collectively, a Member's right to
vote as set forth in this Agreement or required by the Act. The Membership
Voting Interest of a Member shall mean as to any matter to which the Member is
entitled to vote hereunder or as may be required under the Act, the right to one
(1) vote for each Unit registered in the name of such Member as shown in the
Membership Register so long as such Member is the registered owner of at least
five (5) Units, it being the intention of the Members and Company that only
registered owners of at least five (5) or more Units shall have Membership
Voting Interests in the Company; provided however that under no circumstances
shall any Member ever be entitled to more than one thousand (1,000) votes even
if such Member is the registered owner of more than 1,000 Units.
"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.
"NONRECOURSE DEDUCTIONS" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
"NONRECOURSE LIABILITY" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"OFFICER" OR "OFFICERS" has the meaning set forth in Section 5.11
hereof.
"PERMITTED TRANSFER" has the meaning set forth in Section 10.2
hereof.
"PERSON" means any individual, partnership (whether general or
limited), limited liability company, corporation, trust, estate, association,
nominee or other entity.
"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
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
pursuant to this definition of "Profits" and "Losses" shall be subtracted
from such taxable income or loss;
(iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value, the amount of such adjustment shall be treated as an item of gain
(if the adjustment increases the Gross Asset Value of the asset) or an item of
loss (if the adjustment decreases the Gross Asset Value of the asset) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses;
(iv) Gain or loss resulting from any disposition of Property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Property disposed
of, notwithstanding that the adjusted tax basis of such Property differs from
its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year, computed in
accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted tax basis of any
Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account in
determining Capital Accounts as a result of a distribution other than in
liquidation of a Unit Holder's interest in the Company, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) from the
disposition of such asset and shall be taken into account for purposes of
computing Profits or Losses; and
(vii) Notwithstanding any other provision of this definition, any items
which are specially allocated pursuant to Section 3.3 and Section 3.4 hereof
shall not be taken into account in computing Profits or Losses.
The amounts of the items of Company income, gain, loss or deduction
available to be specially allocated pursuant to Sections 3.3 and Section 3.4
hereof shall be determined by applying rules analogous to those set forth in
subparagraphs (i) through (vi) above.
"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.
"REGULATIONS" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations are amended from
time to time.
"REGULATORY ALLOCATIONS" has the meaning set forth in Section 3.4
hereof.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
"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.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"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.
"TAX MATTERS MEMBER" has the meaning set forth in Section 8.3(a)
hereof.
"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, sell, pledge or hypothecate or
otherwise dispose of.
"UNITS OR UNIT" means a Class A Unit or a Class B Unit or a Class C
Unit, or Units as the context may require.
"UNIT HOLDERS" means all Class A Unit Holders, all Class B Unit
Holders, and all Class C Unit Holders when no distinction is required by the
context in which the term is used herein. "UNIT HOLDER" means any one of the
Unit Holders.
"UNIT HOLDER NONRECOURSE DEBT" has the same meaning as the term
"partner nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
"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.
"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.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
SECTION 2
CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
2.1 ORIGINAL CAPITAL CONTRIBUTIONS.
The name, address, original Capital Contribution, and initial Units
quantifying the Membership Interest of each Member are set out in Exhibit A
attached hereto, and shall also be set out in the Membership Register.
2.2 CONTRIBUTION AGREEMENTS; CLASS A UNIT CONCENTRATION LIMIT.
The contributions made by each of the Members pursuant to Section 2.1
hereof shall be subject to the terms and provisions of the Subscription
Agreement or the Asset Contribution Agreement of each such Member. Each Member
shall execute, deliver and perform all obligations of such Member under its
Subscription Agreement or Asset Contribution Agreement, respectively.
Each Member shall make an original Capital Contribution to the Company
consisting of (a) in respect of the Class B Members and the Class C Members, the
amount of cash, in accordance with the terms and conditions of such Member's
Subscription Agreement; and (b) in respect of Class A Members, the amount of
cash or the value of other property (such value to be determined in the sole
discretion of the Directors) permitted by the Directors to be contributed to the
Company in accordance with the terms and conditions of such Member's
Subscription Agreement or Asset Contribution Agreement. The Directors shall
consider all subscriptions for Class A Units and shall in their sole discretion
and by majority vote of such Directors present, either accept or reject such
subscriptions. Upon acceptance of any subscription for Class A Units, the
Company shall enter into a Subscription Agreement and/or Asset Contribution
Agreement, and any agreement referred to therein, without requirement of any
further act, approval, or vote of any other Person and such agreements shall be
deemed to satisfy all requirements of this Agreement. Except upon the unanimous
consent of all Directors, at no time shall any Class A Unit Holder and any
Affiliate and Related Party of such Class A Unit Holder, together in the
aggregate, own, either directly or indirectly or beneficially, more than an
aggregate total of one thousand (1,000) of the issued and outstanding Class A
Units of the Company (herein, such limitation shall be referred to as the "Class
A Unit Concentration Limit"). At any time any Person exceeds and thereby
violates the Class A Unit Concentration Limit, the Directors shall have the
power by majority vote of such Directors to take any action in their sole
discretion to cure such violation.
2.3 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 ▇▇▇▇
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, LLC
OPERATING AGREEMENT
Holder's original Capital Contributions, and no Units shall be subject to any
calls, requests or demands for capital. Subject to Sections 5.4(b)(ii) and
(iii) hereof, 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 Class A Member unless such
Person is acquiring Class B Units in its capacity as a Class B Member in
accordance with this Agreement. Upon such Capital Contributions, the
Directors shall cause Exhibit A and the Membership Register to be
appropriately amended.
2.4 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 (A) such Unit Holder's Capital Contributions, (B) 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 (C)
the amount of any Company liabilities assumed by such Unit Holder or which are
secured by any Property distributed to such Unit Holder. The principal amount of
a promissory note which is not readily traded on an established securities
market and which is contributed to the Company by the maker of the note (or a
Unit Holder related to the maker of the note within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Account of
any Unit Holder until the Company makes a taxable disposition of the note or
until (and to the extent) principal payments are made on the note, all in
accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2);
(b) To each Unit Holder's Capital Account there shall be
debited (A) the amount of money and the Gross Asset Value of any Property
distributed to such Unit Holder pursuant to any provision of this Agreement, (B)
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 (c) 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.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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 12 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).
2.5 CLASS B ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
(a) CLASS B UNIT CONVERSION. At Financial Closing, all Class B Units
held by Class B Unit Holders shall be converted into Class A Units at the
conversion rate of one (1) Class A Unit for each Class B Unit held by such Class
B Unit Holder. From and after Financial Closing, there shall exist no
outstanding Class B Units of the Company. Upon such conversion, the Directors
shall cause Exhibit A attached hereto to be amended accordingly to reflect the
conversion of said Class B Unit Holder's Class B Units to Class A Units.
(b) CLASS C UNIT CONVERSION. At Financial Closing, all Class C Units
held by Class C Unit Holders shall be converted into Class A Units at the
conversion rate of one (1) Class A Unit for each Class C Unit held by such Class
C Unit Holder. From and after Financial Closing, there shall exist no
outstanding Class C Units of the Company. Upon such conversion, the Directors
shall cause Exhibit A attached hereto to be amended accordingly to reflect the
conversion of said Class C Unit Holder's Class C Units to Class A Units.
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.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
3.2 LOSSES.
After giving effect to the special allocations in Section 3.3 and 3.4
hereof, Losses for any Fiscal Year shall be allocated among the Unit Holders in
proportion to Units held.
3.3 SPECIAL ALLOCATIONS.
The following special allocations shall be made in the following order:
(a) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other provision of
this Section 3, if there is a net decrease in Company Minimum Gain during any
Fiscal Year, each Unit Holder shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years) in an amount equal to such Unit Holder's share of the net decrease in
Company Minimum Gain, determined in accordance with Regulations Section
1.704-2(g). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Unit
Holder pursuant thereto. The items to be so allocated shall be determined in
accordance with sections 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 of the
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
Member 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) 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).
(e) 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.
(f) [INTENTIONALLY OMITTED].
(g) 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
17
BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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(g).
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 Class A 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) Allocations of Profits and Losses to the Class A Unit
Holders shall be allocated among them in the ratio which each Class A Unit
Holder's Units bears to the total number of Class A Units issued and
outstanding. Allocations of Profits and Losses to the Class B Unit Holders shall
be allocated among them in the ratio which each Class B Unit Holder's Units
bears to the total number of Class B Units issued and outstanding. Allocations
of Profits and Losses to the Class C Unit Holders shall be allocated among them
in the ratio which each Class C Unit Holder's Units bears to the total number of
Class C Units issued and outstanding
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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.
SECTION 4
DISTRIBUTIONS
4.1 NET CASH FLOW.
Except as otherwise provided in Section 12 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
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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.
(a) The Company shall make no distributions to the Unit
Holders except as provided in this Section 4 and Section 12 hereof.
(b) A Unit Holder may not receive a distribution from the
Company to the extent that, after giving effect to the distribution, all
liabilities of the Company, other than liability to Unit Holders on account of
their Capital Contributions, would exceed the Gross Asset Value of the Company's
assets.
SECTION 5
MANAGEMENT
5.1 DIRECTOR-MANAGED; ELECTION OF DIRECTORS; COMMITTEES.
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. 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 three or more Directors and not by its
Members. Directors shall be Members. 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 number of Directors
serving the Company shall be determined initially by the Founding Members and
after Financial Closing, shall be determined by a majority vote of all Directors
then serving, and shall at all times from and after Financial Closing consist of
not less than five (5) nor more than seven (7) Directors.
The initial Directors, appointed by the Founding Members, shall be ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇. One (1) additional
Director shall not later than the Financial Closing, be appointed as the fifth
initial Director by the Founding Members, such Director to be determined in the
sole discretion of the Founding Members. The Founding Members shall each serve
as Directors for an initial term ending five (5) years after substantial
completion of the construction of the Facilities, and the other three (3)
initial Directors shall serve for an initial term ending three (3) years 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. Each other Director
shall serve for a term of three (3) years and until a successor is appointed and
has qualified, or until the earlier death, resignation, removal or
disqualification of the Director.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
So long as ▇▇▇▇▇, Inc., through itself or its shareholders and/or
employees, hold of record an aggregate of not less than two hundred fifty (250)
Class A Units at all times, then in such case ▇▇▇▇▇, Inc. shall be entitled to
appoint the successor to the Director seat initially held by ▇▇▇▇▇ ▇▇▇▇▇▇▇
(herein the "▇▇▇▇▇ Director") if and only if such successor is then a current
employee of ▇▇▇▇▇, Inc. In addition, so long as ICM, Inc., through itself or its
shareholders and/or employees, hold of record an aggregate of not less than two
hundred fifty (250) Class A Units at all times, then in such case ICM, Inc.
shall be entitled to appoint the successor to the Director seat initially held
by ▇▇▇▇ ▇▇▇▇▇▇ (herein the "ICM Director") if and only if such successor is then
a current employee of ICM, Inc. If and when the requirements for appointment of
the ▇▇▇▇▇ Director or the ICM Director, as the case may be, are no longer met,
then the successor to such Director position shall no longer be appointed but
instead shall be elected as set forth for the other Directors in the next
paragraph.
After the expiration of the initial terms of the Directors, at each
annual meeting of the Members, Directors (other than the ▇▇▇▇▇ Director and the
ICM Director who shall be appointed as set forth above) shall be elected for
staggered terms of three (3) years and until a successor is elected and
qualified.
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 who is the holder of record of at least twenty-five (25) Class A
Units and who is entitled to vote in the election of Directors may nominate one
or more persons for election as Directors at a meeting 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 sixty (60) days nor more than ninety (90)
days prior to a meeting date corresponding to the previous year's regular
meeting. 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 at least
twenty-five (25) Class A 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; and (vi) the
consent of each nominee to serve as a Director of the Company if so elected. 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,
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and if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded. The amendment or repeal of this
section or the adoption of any provision inconsistent therewith shall require
the approval of the Unit Holders representing at least a majority of the
outstanding Class A 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.
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.
5.2 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;
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(d) Execute any and all agreements, contracts, documents,
certifications, and instruments necessary or convenient in connection with the
management, maintenance, and operation of the business, or in connection with
managing the affairs of the Company, including, executing amendments to this
Agreement and the Articles in accordance with the terms of this Agreement, both
as Directors and, if required, as attorney-in-fact for the Members pursuant to
any power of attorney granted by the Members to the Directors;
(e) Borrow money and issue evidences of indebtedness
necessary, convenient, or incidental to the accomplishment of the purposes of
the Company, and secure the same by mortgage, pledge, or other lien on any
Company assets;
(f) Execute, in furtherance of any or all of the purposes of
the Company, any deed, lease, mortgage, deed of trust, mortgage note, promissory
note, ▇▇▇▇ 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;
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(m) Purchase, take, receive, subscribe for or otherwise
acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or
otherwise dispose of, and otherwise use and deal in and with, shares or other
interests in or obligations of domestic or foreign corporations, associations,
general or limited partnerships, other limited liability companies, or
individuals or direct or indirect obligations of the United States or of any
government, state, territory, government district or municipality or of any
instrumentality of any of them;
(n) Agree with any Person as to the form and other terms and
conditions of such Person's Capital Contribution to the Company and cause the
Company to issue Membership Economic Interests and Units in consideration of
such Capital Contribution; and
(o) Indemnify a Member or Directors or Officers, or former
Member 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.
5.3 DIRECTOR AS AGENT; DIRECTOR ACTIONS.
(a) 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.
(b) 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, ten (10) 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 now 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 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
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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.
(c) 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.
5.4 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) Confess a judgment against the Company in an
amount in excess of $250,000;
(iv) Possess Company Property, or assign rights in
specific Company Property, for other than a Company purpose; or
(v) 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) issue Class A Units at a purchase price of
less than $1,000 per Unit;
(iii) issue more than an aggregate of 20,000 Units;
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(iv) elect to dissolve the Company;
(v) adopt or materially modify any Business Plan;
(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.
(c) 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.
5.5 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 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.
5.6 CHAIRMAN AND VICE CHAIRMAN.
(a) 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.
(b) 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.
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5.7 GENERAL MANAGER; PRESIDENT AND CHIEF EXECUTIVE OFFICER (CEO).
Until provided otherwise by a resolution of the Directors, the Chairman
shall also act as the interim General Manager, President and CEO of the Company
(herein referred to as the "General Manager"; the titles of General Manager,
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 General Manager of the Company not later than the
commencement of operations of the Facilities, and such General Manager 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.
5.8 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 General Manager and the Directors,
whenever requested, an account of all such Manager's 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 General
Manager from time to time.
5.9 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 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.
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5.10 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 General Manager in the absence of the General
Manager.
5.11 DELEGATION.
Unless prohibited by a resolution of the Directors, the General
Manager, 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.
5.12 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 General Manager; or (iii) by such other person or persons as
may be designated from time to time by the Directors.
5.13 LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS.
(a) 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 a financial benefit to which the Director is not entitled; (ii)
liability under Section 183.0402 of the Act; (iii) a knowing violation of law;
(iv) acts or omissions involving fraud, bad faith, willful misconduct, or gross
negligence; or (iv) an act or omission occurring before the date when this
provision becomes effective.
(b) The Company, its receiver, or its trustee (in the case of
its receiver or trustee, to the extent of Company Property) shall indemnify,
save and hold harmless, and pay all judgments and claims against each Director
or officer or director of such 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.
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(c) 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.
(d) The Company shall indemnify, save harmless, and pay all
expenses, costs, or liabilities of any Director, if for the benefit of the
Company and in accordance with this Agreement, such Director makes any deposit
or makes any other similar payment or assumes any obligation in connection with
any Property proposed to be acquired by the Company and suffers any financial
loss as the result of such action.
(e) 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 Section 183.0403(4) of the Act.
(f) The Company may purchase and maintain insurance on behalf
of any Person in such Person's official capacity against any liability asserted
against and incurred by such Person in or arising from that capacity, whether or
not the Company would otherwise be required to indemnify the Person against the
liability.
5.14 COMPENSATION; EXPENSES OF DIRECTORS; LOANS
(a) Except as provided to either or both of the Founding
Members pursuant to any agreement between the Company and such Founding Member,
and except as otherwise approved by or pursuant to an agreement (as to Members)
or policy (as to Directors) approved by the 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.
(b) 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.
(c) 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
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OPERATING AGREEMENT
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, is the lending Member, the rate of interest and
the terms and conditions of such loan shall be no less favorable to the
Company than if the lender had been an independent third party. None of the
Members or their Affiliates shall be obligated to make any loan or advance to
the Company.
SECTION 6
ROLE OF MEMBERS
6.1 RIGHTS OR POWERS.
Except as otherwise expressly provided for in this Agreement, the
Members shall not have any right or power to take part in the management or
control of the Company or its business and affairs or to act for or bind the
Company in any way.
6.2 VOTING RIGHTS.
The Members shall have voting rights (and the Class A Members, the
Class B Members, and Class C Members shall have voting rights as a class) as
defined by the Membership Voting Interest of such Member and in accordance with
the provisions of this Agreement.
6.3 PROCEDURE FOR CONSENT; MEMBER MEETINGS; QUORUM AND PROXIES. In any
circumstances requiring the approval or consent of the Members as specified in
this Agreement, such approval or consent shall, except as expressly provided to
the contrary in this Agreement, be given or withheld in the sole and absolute
discretion of the Members and conveyed in writing to the Directors not later
than thirty (30) days after such approval or consent was requested by the
Directors. The Directors may require a response within a shorter time, but not
less than ten (10) days. Failure to respond in any such time period shall
constitute a vote which is consistent with the Directors' recommendation with
respect to the proposal. If the Directors receive the necessary approval or
consent of the Members to such action, the Directors shall be authorized and
empowered to implement such action without further authorization by the Members.
In addition to requesting approval or consent of the Members in writing,
approval or consent of the Members may also be obtained through a meeting of the
Members called by the Directors, to 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 30 days before the day on which the meeting is to be held.
Unit Holders representing an aggregate of not less than 25% of the Class A Units
may also in writing demand that a meeting of the Class A Members be called by
the Directors. Unit Holders representing an aggregate of not less than 25% of
the Class B Units may also in writing demand that a meeting of the Class B
Members be called by the Directors.
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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 place, given not less than fourteen
(14) 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 10.6 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.
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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.
SECTION 7
[RESERVED]
SECTION 8
ACCOUNTING, BOOKS AND RECORDS
8.1 ACCOUNTING, BOOKS AND RECORDS.
(a) The books and records of the Company shall be kept, and
the financial position and the results of its operations recorded, in accordance
with GAAP. The books and records shall reflect all the Company transactions and
shall be appropriate and adequate for the Company's business. The Company shall
maintain at its principal office all of the following:
(i) A current list of the full name and last
known business or residence address of each Member and Assignee set forth in
alphabetical order, together with the Capital Contributions, Capital Account
and Units of each Member and Assignee;
(ii) The full name and business address of each
Director;
(iii) A copy of the Articles and any and all
amendments thereto together with executed copies of any powers of attorney
pursuant to which the Articles or any amendments thereto have been executed;
(iv) Copies of the Company's federal, state, and
local income tax or information returns and reports, if any, for the six most
recent taxable years;
(v) A copy of this Agreement and any an all
amendments thereto together with executed copies of any powers of attorney
pursuant to which this Agreement or any amendments thereto have been executed;
(vi) Copies of the financial statements of the
Company, if any, for the six most recent Fiscal Years; and
(vii) The Company's books and records as they
relate to the internal affairs of the Company for at least the current and
past four Fiscal Years.
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(b) 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 has the right to have reasonable access to and inspect and
copy the contents of such books or records and shall also have reasonable
access during normal business hours to such additional financial information,
documents, books and records. 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.
8.2 REPORTS.
(a) IN GENERAL. 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.
(b) PERIODIC AND OTHER REPORTS. The Company shall cause to be
delivered to each Member the financial statements listed in clauses (i) and (ii)
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 (and, if required by any Member or its
Wholly Owned Affiliates for purposes of reporting under the Securities Exchange
Act of 1934, Regulation S-X), and such other reports as any Member may
reasonably request from time to time; PROVIDED that, if the Directors determine
that a request for such other reports is reasonable, then within thirty (30)
days thereof such other reports shall be provided at such requesting Member's
sole cost and expense. The monthly and quarterly financial statements referred
to in clause (ii) below may be subject to normal year-end audit adjustments.
(i) 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).
(ii) As soon as practicable following the end of
each of the first three Fiscal Quarters of each Fiscal Year (and in any event
not later than sixty (60) days after the end of each such Fiscal Quarter), a
balance sheet of the Company as of the end of such Fiscal Quarter and the
related statements of operations and cash flows for such Fiscal Quarter and
for the Fiscal Year to date, in each case, to the extent the Company was in
existence, setting forth in
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comparative form the corresponding figures for the prior Fiscal Year's Fiscal
Quarter and the interim period corresponding to the Fiscal Quarter and the
interim period just completed.
The quarterly or monthly statements described in clause (ii) above
shall be accompanied by a written certification of the chief financial officer
of the Company that such statements have been prepared in accordance with GAAP
consistently applied or this Agreement, as the case may be.
8.3 TAX MATTERS.
(a) TAX ELECTIONS. 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 including, without limitation, any election, if permitted by applicable
law: (i) to make the election provided for in Code Section 6231(a)(1)(B)(ii) or
take any other action necessary to cause the provisions of Code Sections 6221
through 6231 to apply to the Company [REFERS TO ELECTION BY CERTAIN "SMALL
PARTNERSHIPS" THAT ARE NOT COVERED BY THE TEFRA AUDIT RULES TO HAVE SUCH RULES
APPLY TO THEM] (ii) to adjust the basis of Property pursuant to Code Sections
754, 734(b) and 743(b), or comparable provisions of state, local or foreign law,
in connection with Transfers of Units and Company distributions; (iii) with the
consent of all of the Members, to extend the statute of limitations for
assessment of tax deficiencies against the Members with respect to adjustments
to the Company's federal, state, local or foreign tax returns; and (iv) to the
extent provided in Code Sections 6221 through 6231 and similar provisions of
federal, state, local, or foreign law, to 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. ▇▇▇▇ ▇▇▇▇▇▇▇▇
is specifically authorized to act as the "Tax Matters Member" under the Code and
in any similar capacity under state or local law; provided, however, that the
Directors shall have the authority to designate, remove and replace the Tax
Matters Member who shall act as the tax matters partner within the meaning of
and pursuant to Regulations Sections 301.6231(a)(7)-1 and -2 or any similar
provision under state or local law.
(b) TAX INFORMATION. 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.
8.4 DELIVERY TO MEMBERS AND INSPECTION.
(a) 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
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OPERATING AGREEMENT
maintained under Sections 8.1(a)(i), (ii), (iii) and (iv), a copy of this
Agreement and all amendments hereto.
(b) 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 8.1(a)(i) through
(vii); 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.
(c) Each Assignee shall have the right to information
regarding the Company only to the extent required by the Act.
SECTION 9
AMENDMENTS
9.1 AMENDMENTS.
(a) 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.
(b) Notwithstanding Section 9.1(a) hereof, 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 (ii) alter the
Membership Economic Interest of a Member.
SECTION 10
TRANSFERS
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OPERATING AGREEMENT
10.1 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 10. 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,
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.
10.2 PERMITTED TRANSFERS.
Subject to continuing compliance with the Class A Unit Concentration
Limit set forth in Section 2.2 of this Agreement, and subject to the conditions
and restrictions set forth in this Section 10, 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 Affiliate of another Member, or (iii) to any Affiliate of the transferor. Any
such Transfer set forth in this Section 10.2 and meeting the conditions set
forth in Section 10.3 below is referred to in this Agreement as a "PERMITTED
TRANSFER".
10.3 CONDITIONS TO PERMITTED TRANSFERS.
A Transfer shall not be treated as a Permitted Transfer under Section
10.2 hereof unless and until the Directors have approved such Transfer as set
forth in Section 10.2 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 (i) 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.
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(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 (a) such Units shall be registered
under the Securities Act, and any applicable state securities laws, or (b) 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 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 (or required, as the case may be) (i) immediately to Transfer only that
portion of its Units as may, in the opinion of such counsel, be transferred
without causing such a termination and (ii) to 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). In
determining whether a particular proposed Transfer will result in a termination
of the Company, counsel to the Company shall take into account the existence of
prior written commitments to
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OPERATING AGREEMENT
Transfer made pursuant to this Agreement and such commitments shall always be
given precedence over subsequent proposed Transfers.
(f) No notice or request initiating the procedures
contemplated by Section 10.3 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 10.3 other than the member approval
requirement set forth in Section 10.3(e).
10.4 [RESERVED]
10.5 PROHIBITED TRANSFERS.
Any purported Transfer of Units that is not a Permitted Transfer shall
be null and void and of no force or effect whatever; 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 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.
10.6 RIGHTS OF UNADMITTED ASSIGNEES.
A Person who acquires Units but who is not admitted as a substituted
Member pursuant to Section 10.7 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
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OPERATING AGREEMENT
books or records of the Company, and shall not have any of the rights of a
Member under the Act or this Agreement.
10.7 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 (other than, with respect to
clauses (i) below, a transferee that was a Member prior to the Transfer) shall,
by written instrument in form and substance reasonably satisfactory to the
Directors (and, in the case of clause (ii) below, the transferor Member), (i)
accept and adopt the terms and provisions of this Agreement, including this
Section 10, 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, including amendments to the Articles or any other instrument
filed with the State of Wisconsin or any other state or governmental authority.
10.8 REPRESENTATIONS REGARDING TRANSFERS; LEGEND.
(a) Each Member hereby covenants and agrees with the Company
for the benefit of the Company and all Members, that (i) it is not currently
making a market in Units and will not in the future make a market in Units, (ii)
it will not Transfer its Units on an established securities market, a secondary
market (or the substantial equivalent thereof) within the meaning of Code
Section 7704(b) (and any Regulations, proposed Regulations, revenue rulings, or
other official pronouncements of the Internal Revenue Service or Treasury
Department that may be promulgated or published thereunder), and (iii) in the
event such Regulations, revenue rulings, or
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
other pronouncements treat any or all arrangements which facilitate the
selling of Company interests and which are commonly referred to as "matching
services" as being a secondary market or substantial equivalent thereof, it
will not Transfer any Units through a matching service that is not approved
in advance by the Company. Each Member further agrees that it will not
Transfer any Units to any Person unless such Person agrees to be bound by
this Section 10.8(a) 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.
10.9 DISTRIBUTIONS AND ALLOCATIONS IN RESPECT OF TRANSFERRED UNITS.
If any Units are Transferred during any Fiscal Year in compliance with
the provisions of this Section 10, 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
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
with the provisions of this Section 10.9, whether or not the Directors or the
Company has knowledge of any Transfer of ownership of any Units.
SECTION 11
[RESERVED]
SECTION 12
DISSOLUTION AND WINDING UP
12.1 DISSOLUTION EVENTS.
(a) DISSOLUTION. The Company shall dissolve and shall commence
winding up and liquidating upon the first to occur of any of the following (each
a "DISSOLUTION EVENT"):
(i) The affirmative vote of a 75% majority in
interest of (1) the Class A Members; and (2) the Class B Members; and (3) the
Class C Members, to dissolve, wind up, and liquidate the Company; or
(ii) The entry of a decree of judicial dissolution
pursuant to the Act.
(b) The Members hereby agree that, notwithstanding any
provision of the Act, the Company shall not dissolve prior to the occurrence
of a Dissolution Event.
12.2 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 12.2 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 12.9 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
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OPERATING AGREEMENT
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.
12.3 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 12 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 12 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 12.2 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.
12.4 DEEMED DISTRIBUTION AND RECONTRIBUTION.
Notwithstanding any other provision of this Section 12, 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, the Company's Debts and other liabilities shall not be paid
or discharged, and the Company's affairs shall not be wound up.
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Instead, solely for federal income tax purposes, the Company shall be deemed
to have contributed all of its Property and liabilities to a new limited
liability company in exchange for an interest in such new company, and
immediately thereafter, the Company will be deemed to liquidate by
distributing such interest in the new company to the Unit Holders.
12.5 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.
12.6 NOTICE OF DISSOLUTION/TERMINATION.
(a) In the event a Dissolution Event occurs or an event occurs
that would, but for provisions of Section 12.1, result in a dissolution of the
Company, the Directors(s) shall, within thirty (30) days thereafter, provide
written notice thereof to each of the Unit Holders and to all other parties with
whom the Company regularly conducts business (as determined in the discretion of
the Directors(s)) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Company regularly conducts business (as
determined in the discretion of the Directors(s)).
(b) Upon completion of the distribution of the Company's
Property as provided in this Section 12, the Company shall be terminated, and
the Liquidator shall cause the filing of the Certificate of Dissolution in
accordance with the Act and shall take all such other actions as may be
necessary to terminate the Company.
12.7 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 12.2 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.
12.8 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.
12.9 THE LIQUIDATOR.
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
(a) DEFINITION. 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 Class A Members, the Liquidator may be the
Directors.
(b) FEES. The Company is authorized to pay a reasonable fee to
the Liquidator for its services performed pursuant to this Section 12 and to
reimburse the Liquidator for its reasonable costs and expenses incurred in
performing those services.
(c) INDEMNIFICATION. 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.
12.10 FORM OF LIQUIDATING DISTRIBUTIONS.
For purposes of making distributions required by Section 12.2 hereof,
the Liquidator may determine whether to distribute all or any portion of the
Property in-kind or to sell all or any portion of the Property and distribute
the proceeds therefrom.
SECTION 13
[RESERVED]
SECTION 14
MISCELLANEOUS
14.1 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
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BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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, to the address set forth in Section 2.1
hereof.
14.2 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.
14.3 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.
14.4 TIME.
In computing any period of time pursuant to this Agreement, the day of
the act, event or default from which the designated period of time begins to run
shall not be included, but the time shall begin to run on the next succeeding
day. The last day of the period so computed shall be included, unless it is a
Saturday, Sunday or legal holiday, in which event the period shall run until the
end of the next day which is not a Saturday, Sunday or legal holiday.
14.5 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.
14.6 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
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OPERATING AGREEMENT
such illegal or invalid term or provision would be to cause any Member to
lose the material benefit of its economic bargain.
14.7 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.
14.8 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.
14.9 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.
14.10 WAIVER OF JURY TRIAL.
Each of the Members irrevocably waives to the extent permitted by law,
all rights to trial by jury and all rights to immunity by sovereignty or
otherwise in any action, proceeding or counterclaim arising out of or relating
to this Agreement.
14.11 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.
14.12 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.
[THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
46
BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
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:
BADGER STATE ETHANOL, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------
Its: President
-----------------------------
FOUNDING MEMBERS:
/s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
47
BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
CLASS C MEMBER SIGNATURE PAGE
The undersigned, being all of the Class C Members of Badger State
Ethanol, LLC, each hereby agrees to be bound by all the terms and conditions of
the Badger State Ethanol, LLC Operating Agreement dated as of May 12, 2000.
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ STATE ETHANOL, LLC
OPERATING AGREEMENT
CLASS B MEMBER SIGNATURE PAGE
The undersigned, a Class B Member of Badger State Ethanol, LLC, hereby
agrees to be bound by all the terms and conditions of the Badger State Ethanol,
LLC Operating Agreement dated as of May 12, 2000.
Date of Execution: 9-29-00 /s/ ▇▇▇▇ ▇▇▇▇▇▇
---------------- --------------------------
▇▇▇▇ ▇▇▇▇▇▇
Date of Execution: 9-29-00 /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------- --------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Date of Execution: 9-29-00 /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------- --------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇
Date of Execution: 9-29-00 /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
---------------- --------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Date of Execution: Nov. 17, 2000 ICM, Inc.
----------------
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Its: Senior Vice President
----------------------
Date of Execution: 9-29-00 /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------- --------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Date of Execution: 9-29-00 /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------- --------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ STATE ETHANOL, LLC
OPERATING AGREEMENT
CLASS A MEMBER SIGNATURE PAGE
The undersigned, a Class A Member of Badger State Ethanol, LLC, hereby
agrees to be bound by all the terms and conditions of the Badger State Ethanol,
LLC Operating Agreement dated as of May 12, 2000.
Date of Execution:
------------------------- ----------------------------
Name:
BADGER STATE ETHANOL, LLC
OPERATING AGREEMENT
EXHIBIT A
BADGER STATE ETHANOL, LLC
NAMES OF UNIT HOLDERS [ADDRESSES ARE ON FILE IN MEMBERSHIP REGISTER],
CAPITAL CONTRIBUTION AND UNITS ISSUED
NAMES OF CLASS C UNIT HOLDERS CLASS C
----------------------------- UNITS CAPITAL CONTRIBUTION DATE OF CONTRIBUTION
ISSUED -------------------- --------------------
------
▇▇▇▇ ▇▇▇▇▇▇▇▇ 500 $10,000.00 5-17-2000
▇▇▇▇ ▇▇▇▇▇▇ 500 $10,000.00 5-17-2000
TOTAL CLASS C UNITS ISSUED 1,000
NAMES OF CLASS B UNIT HOLDERS CLASS B
----------------------------- UNITS CAPITAL CONTRIBUTION DATE OF CONTRIBUTION
ISSUED -------------------- --------------------
------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 300 $150,000.00 9-29-2000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 200 $100,000.00 9-29-2000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 28 $ 14,000.00 9-29-2000
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇ $ 6,000.00 9-29-2000
▇▇▇▇▇▇ ▇▇▇▇▇ 60 $ 30,000.00 9-29-2000
ICM, Inc. 100 $ 50,000.00 9-29-2000
▇▇▇▇ ▇▇▇▇▇▇ 20 $ 10,000.00 9-29-2000
TOTAL CLASS B UNITS ISSUED 720
NAMES OF CLASS A UNIT HOLDERS CLASS A
----------------------------- UNITS CAPITAL CONTRIBUTION DATE OF CONTRIBUTION
ISSUED -------------------- --------------------
------
