SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
Dated: March 7, 20008
SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
TABLE OF CONTENTS
Page
ARTICLE I. THE COMPANY...................................................................................1
1.1 Formation...................................................................................1
1.2 Name........................................................................................1
1.3 Purpose; Powers.............................................................................1
1.4 Principal Place of Business.................................................................1
1.5 Term........................................................................................1
1.6 Registered Agent............................................................................1
1.7 Title to Property...........................................................................1
1.8 Payment of Individual Obligations...........................................................2
1.9 Independent Activities; Transactions With Affiliates........................................2
1.10 Definitions................................................................................2
ARTICLE II. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS......................................................7
2.1 Initial Capital Contributions...............................................................7
2.2 Additional Capital Contributions; Additional Units..........................................7
2.3 Capital Accounts............................................................................8
ARTICLE III. ALLOCATIONS.................................................................................8
3.1 Profits.....................................................................................8
3.2 Losses......................................................................................8
3.3 Special Allocations.........................................................................8
3.4 Regulatory Allocations.....................................................................10
3.5 Loss Limitation............................................................................10
3.6 Other Allocation Rules.....................................................................10
3.7 Tax Allocations: Code Section 704(c).......................................................11
3.8 Tax Credit Allocations.....................................................................11
ARTICLE IV. DISTRIBUTIONS...............................................................................11
4.1 Net Cash Flow..............................................................................11
4.2 Amounts Withheld...........................................................................11
4.3 Limitations on Distributions...............................................................11
ARTICLE V. MANAGEMENT...................................................................................12
5.1 Directors..................................................................................12
5.2 Number of Directors........................................................................12
5.3 Election of Directors......................................................................12
5.4 Authority of Directors.....................................................................13
5.5 Director as Agent..........................................................................15
5.6 Restriction on Authority of Directors......................................................15
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5.7 Meetings...................................................................................17
5.8 Notice.....................................................................................17
5.9 Conduct of Meeting.........................................................................18
5.10 Quorum....................................................................................18
5.11 Manner of Acting; Informal Action.........................................................18
5.12 Presumption of Assent.....................................................................18
5.13 Removal of Directors......................................................................18
5.14 Vacancies.................................................................................18
5.15 Compensation..............................................................................18
5.16 Committees; Authority.....................................................................18
5.17 Voting; Potential Financial Interest......................................................19
5.18 Duties and Obligations of Directors.......................................................19
5.19 Chairman and Vice Chairman................................................................19
5.20 President and Chief Executive Officer.....................................................19
5.21 Chief Financial Officer...................................................................19
5.22 Secretary; Assistant Secretary............................................................20
5.23 Vice President............................................................................20
5.24 Delegation................................................................................20
5.25 Execution of Instruments..................................................................20
5.26 Limitation of Liability; Indemnification..................................................20
ARTICLE VI. MEMBERSHIP UNITS; MEMBERS...................................................................21
6.1 Membership Units.........................................................................21
6.2 Certificates; Surrender for Transfer.......................................................22
6.3 Members....................................................................................22
6.4 Additional Members.........................................................................22
6.5 Members' Voting Rights...................................................................22
6.6 Member Meetings............................................................................23
6.7 Place of Meeting...........................................................................23
6.8 Conduct of Meetings........................................................................23
6.9 Notice.....................................................................................23
6.10 Contents of Notice........................................................................23
6.11 Adjourned Meetings........................................................................24
6.12 Waiver of Notice..........................................................................24
6.13 Fixing of Record Date.....................................................................24
6.14 Quorum and Proxies........................................................................24
6.15 Voting; Action by Members.................................................................24
6.16 Continuation of the Company..............................................................24
6.17 No Member Right of Redemption or Return of Capital........................................24
6.18 Waiver of Dissenters Rights...............................................................24
6.19 Loans.....................................................................................25
6.20 Actions Without a Meeting by Members Holding Series B Units...............................25
ARTICLE VII. ACCOUNTING, BOOKS AND RECORDS..............................................................25
7.1 Accounting, Books and Records..............................................................25
7.2 Delivery to Members and Inspection.........................................................25
7.3 Reports....................................................................................26
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7.4 Tax Matters................................................................................26
7.5 Withholding..............................................................................27
ARTICLE VIII. AMENDMENTS................................................................................27
8.1 Amendments.................................................................................27
ARTICLE IX. TRANSFERS...................................................................................27
9.1 General Restrictions.....................................................................27
9.2 Not Binding Until Entered in Company Books...............................................28
9.3 Pledge of Units Allowed..................................................................28
9.4 Prohibited Transfers.......................................................................28
9.5 Indemnification..........................................................................28
9.6 Transferee Subject to Transfer Restrictions..............................................28
9.7 Unit Transfer Policy.....................................................................28
9.8 No Dissolution or Termination..............................................................28
9.9 Rights of Unadmitted Assignees.............................................................28
9.10 Admission of Substitute Members...........................................................29
9.11 Preemptive Rights of Series B Unit Holders...............................................29
ARTICLE X. DISSOLUTION AND WINDING UP..................................................................30
10.1 Dissolution...............................................................................30
10.2 Winding Up................................................................................30
10.3 Compliance with Certain Requirements of Regulations; Deficit Capital Accounts.............30
10.4 Deemed Distribution and Recontribution....................................................31
10.5 Rights of Unit Holders....................................................................31
10.6 Allocations During Period of Liquidation..................................................31
10.7 Character of Liquidating Distributions....................................................31
10.8 The Liquidator............................................................................31
10.9 Forms of Liquidating Distributions........................................................32
ARTICLE XI. MISCELLANEOUS...............................................................................32
11.1 Notices...................................................................................32
11.2 Binding Effect............................................................................32
11.3 Construction..............................................................................32
11.4 Headings..................................................................................32
11.5 Severability..............................................................................32
11.6 Incorporation By Reference................................................................32
11.7 Variation of Terms........................................................................32
11.8 Governing Law.............................................................................32
11.9 Waiver of Jury Trial......................................................................32
11.10 Counterpart Execution....................................................................33
11.11 Specific Performance.....................................................................33
11.12 No Third Party Rights....................................................................33
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SECOND AMENDED AND RESTATED
OPERATING AGREEMENT
OF
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
THIS SECOND AMENDED AND RESTATED OPERATING AGREEMENT (the "Agreement") is
entered into effective as of the 7th day of March, 2008, by and among Southwest
Iowa Renewable Energy, LLC, an Iowa limited liability company (the "Company"),
each of the Persons identified as Members on attached Exhibit "A," and any other
Persons that may from time-to-time be subsequently admitted as Members of the
Company in accordance with the terms of this Agreement. Capitalized terms used
but not otherwise defined herein shall have the meaning set forth in Section
1.10.
In consideration of the covenants and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I. THE COMPANY
1.1 Formation. The Company was formed as an Iowa limited liability company
by filing Articles of Organization with the Iowa Secretary of State on March 28,
2005. This Agreement amends and replaces in its entirety the Operating Agreement
of Company dated March 28, 2005.
1.2 Name. The name of the Company is "Southwest Iowa Renewable Energy,
LLC," and all business of the Company shall be conducted in such name.
1.3 Purposes; Powers. The nature of the business and purposes of the
Company are to: (i) own, construct, operate, lease, finance, contract with,
and/or invest in ethanol production and by-product production facilities; (ii)
process feedstock into ethanol and related by-products, and market such ethanol
and by-products; and (iii) engage in any other business and investment activity
in which an Iowa limited liability company may lawfully be engaged, as
determined by the Directors. The Company has the power to do any and all acts
necessary, appropriate, proper, advisable, incidental or convenient to, and in
furtherance of, the purposes of the Company as set forth in this Section 1.3 and
has, without limitation, any and all powers that may be exercised on behalf of
the Company by the Directors pursuant to Article V of this Agreement.
1.4 Principal Place of Business. The Company shall continuously maintain a
principal place of business in the State of Iowa, at such location 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 place of business.
1.5 Term. The term of the Company commenced on the date the Articles were
filed with the Iowa Secretary of State, and shall continue until the winding up
and liquidation of the Company and its business is completed following a
Dissolution Event as provided in Article X of this Agreement.
1.6 Registered Agent. The Company shall continuously maintain a registered
office and a registered agent for service of process in the State of Iowa and in
any other state in which it is required by law to do so. The name and address of
the Company's initial Registered Agent in Iowa shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇.
1.7 Title to Property. All Property owned by the Company shall be owned by
the Company as an entity and not in the name of any Member, and no Member shall
have any ownership interest in such
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Property, except as a Member of the Company. Each Member's interest in the
Company shall be personal property for all purposes.
1.8 Payment 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 business and
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
they deem appropriate in their discretion.
(b Neither this Agreement nor any activity undertaken pursuant hereto
shall: (i) prevent any Member or Director or their Affiliates 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 other Member; or (ii) require any Member or Director to permit
the Company or any other Director or Member or their Affiliates to participate
in any such activities. Except as expressly provided in this Section 1.9(b), 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) No contract or transaction between the Company and one or more of its
Members, or between the Company and any other Person in which one or more of the
Members is a director, manager or officer, or in which such Member has a
financial interest, shall be void or voidable (i) solely because of such
relationship, (ii) solely because a Director appointed or elected by such Member
is present at, or participates in, the meeting of the Directors at which such
contract or transaction is authorized, or (iii) solely because a Director
appointed or elected by such Member votes are counted for such authorization;
provided, however, the material facts as to the relationship are disclosed to
the Directors and a majority of the disinterested Directors authorize such
contract or transaction, regardless of whether the disinterested Directors
constitute a quorum.
1.10 Definitions. Capitalized words and phrases used in this Agreement have the
following meanings:
(a) "Act" means the Iowa Limited Liability Company Act, as amended from
time to time, or any corresponding provisions of any succeeding law.
(b) "Adjusted Capital Account Deficit" means, with respect to any Unit
Holder, the deficit balance, if any, in such Unit Holder's Capital Account as of
the end of the relevant Fiscal Year, after giving effect to the following
adjustments: (i) crediting 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 of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and
(ii) debiting to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations. The foregoing definition is intended to comply with the
provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
(c) "Affiliate" means, with respect to any Person or entity: (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person or entity; (ii) any officer, director, general partner, member or
trustee of any such Person or entity; or (iii) any Person or entity 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
2
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person or
entity, whether through the ownership of voting securities, by contract or
otherwise, or the power to elect a majority of the directors, managers, or
persons exercising similar authority with respect to such Person or entities.
(d) "Agreement" means the Company's Second Amended and Restated Operating
Agreement, as amended from time to time.
(e) "Articles" means the Company's Articles of Organization on file with
the Iowa Secretary of State's Office, as amended from time to time.
(f) "Assignee" means a transferee of Units who is not admitted as a
Substitute Member pursuant to Section 9.10 of this Agreement.
(g) "Capital Account" means the separate capital account maintained for
each Unit Holder in accordance with Section 2.3 of this Agreement.
(h) "Capital Contributions" means, with respect to any Member, the amount
of money (US Dollars), and the initial Gross Asset Value of any assets or
property other than money, contributed by the Member or such Member's
predecessors in interest to the Company, (net of liabilities secured by such
contributed property that the Company is considered to assume or take subject to
under Code Section 752) with respect to the Units held or purchased by such
Member, including additional Capital Contributions.
(i) "Code" means the United States Internal Revenue Code of 1986, as
amended from time to time.
(j) "Company" means Southwest Iowa Renewable Energy, LLC, an Iowa limited
liability company.
(k) "Company Minimum Gain" has the meaning given the term "partnership
minimum gain" in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
(l) "Debt" means: (i) any indebtedness for borrowed money or the deferred
purchase price of property as evidenced by notes, 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, contingent or otherwise, under direct or indirect guarantees
of indebtedness or obligations of the kinds referred to in clauses (i), (ii),
(iii), (iv) and (v), above. Notwithstanding the foregoing, however, Debt shall
not include obligations in respect of any accounts payable that are incurred in
the ordinary course of the Company's business and are not delinquent or are
being contested in good faith by appropriate proceedings.
(m) "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be an amount which bears
the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such Fiscal
Year bears to such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such
3
Fiscal Year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the
Directors.
(n) "Director" means any Person who: (i) is elected as a Director pursuant
to Article V of this Agreement or who has otherwise 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" mean 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.
(o) "Dissolution Event" shall have the meaning set forth in Section 10.1 of
this Agreement.
(p) "Effective Date" means March 7, 2008.
(q) "Facilities" means the ethanol and by-product production facilities to
be constructed and operated by the Company in or around Council Bluffs, Iowa.
(r) "Fiscal Year" means: (i) any twelve-month period commencing on October
1 and ending on September 30; and (ii) the period commencing on the immediately
preceding October 1 and ending on the date on which all Property is distributed
to the Unit Holders pursuant to Article X of this Agreement, 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.
(s) "GAAP" means generally accepted accounting principles in effect in the
United States of America from time to time.
(t) "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 of this Agreement shall be as
set forth in such Section; (ii) The Gross Asset Values of all Company assets
may, in the discretion of the Directors, 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) upon 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) upon 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) upon
the liquidation of the Company within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g); (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, as applicable, 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(g) of this Agreement; 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) of this
paragraph, 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.
(u) "Issuance Items" has the meaning set forth in Section 3.3(h) of this
Agreement.
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(v) "Liquidation Period" has the meaning set forth in Section 10.6 of this
Agreement.
(w) "Liquidator" has the meaning set forth in Section 10.8 of this
Agreement.
(x) "Member" means any Person: (i) whose name is set forth as such on
Exhibit "A" attached hereto or as it may be amended from time to time, or who
has become a Member pursuant to the terms of this Agreement; and (ii) who is the
owner of one or more Units and has not ceased to be a Member pursuant to the
terms of this Agreement. "Members" means all such Persons.
(y) "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 as required by the Act. The Membership Economic Interest of a Member is
quantified by the unit of measurement referred to herein as "Units."
(z) "Membership Interest" means collectively, the Membership Economic
Interest and the Membership Voting Interest.
(aa) "Membership Voting Interest" means collectively, a Member's right to
vote as set forth in this Agreement or as required by the Act.
(bb) "Net Cash Flow" means the gross cash proceeds of the Company less the
portion thereof used to pay or establish reserves for Company expenses, debt
payments, capital improvements, replacements and contingencies, all as
reasonably determined by the Directors, plus any reduction in the amount of
reserves, all as may be 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.
(cc) "New Securities" means Series A Units of the Company, and rights,
options or warrants to purchase Series A Units of the Company, and securities of
any type whatsoever that are, or may become, convertible or exchangeable into
Series A Units
(dd) "Nonrecourse Deductions" has the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
(ee) "Nonrecourse Liability" has the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
(ff) "Officer" has the meaning set forth in Section 5.24 of this Agreement.
(gg) "Permitted Transfer" has the meaning set forth in Section 9.1 of this
Agreement.
(hh) "Person" means any individual, general or limited partnership, joint
venture, limited liability company, corporation, trust, estate, association,
nominee or other entity.
(ii)"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"
5
shall be added to such taxable income or loss; (ii) Any expenditures of the
Company described in Code Section 705(a)(2)(b) or treated as Code Section
705(a)(2)(b) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i),
and not otherwise taken into account in computing Profits or Losses pursuant to
this definition of "Profits" and "Losses" shall be subtracted from such taxable
income or loss; (iii) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraphs (ii) or (iii) of the definition of Gross
Asset Value above, 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 Sections 3.3, 3.4 and 3.5 of this Agreement
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, 3.4 and 3.5 of this Agreement shall be
determined by applying rules analogous to those set forth in subparagraphs (i)
through (vi) above.
(jj) "Property" means all real and personal property owned or acquired by
the Company (including cash), and any improvements thereto, and shall include
both tangible and intangible property.
(kk) "Regulations" means the Income Tax Regulations, including Temporary
Regulations, promulgated under the Code, as such regulations are amended from
time to time.
(ll) "Regulatory Allocations" has the meaning set forth in Section 3.4 of
this Agreement.
(mm) "Securities Act" means the Securities Act of 1933, as amended.
(nn) "Series A Directors" has the meaning set forth in Section 5.3(d) of
this Agreement.
(oo) "Series B Directors" has the meaning set forth in Section 5.3(b) of
this Agreement.
(pp) "Series C Director" has the meaning set forth in Section 5.3(a) of
this Agreement.
(qq) "Series E Directors" has the meaning set forth in Section 5.3(c).
(rr) "Series A Units" means Units of the Company issued as described in
Section 6.1(a).
(ss) "Series B Units" means Units of the Company issued as described in
Section 6.1(b).
(tt) "Series C Units" means Units of the Company issued as described in
Section 6.1(c).
(uu) "Series E Units" means Units of the Company issued as described in
Section 6.1(d).
6
(vv) "Tax Matters Member" has the meaning set forth in Section 7.4 of this
Agreement.
(ww) "Transfer" means, as a noun, any voluntary or involuntary transfer,
sale, pledge or hypothecation or other disposition and, as a verb, to
voluntarily or involuntarily transfer, give, sell, exchange, assign, pledge,
bequest, hypothecate or otherwise dispose of.
(xx) ."Transfer Restrictions" means the restrictions on Transfer of Units
in Article IX and the Unit Transfer Policy attached as Exhibit "C."
(yy) "Unit" means an ownership interest in the Company issued in
consideration of a Capital Contribution made as provided in Article II of this
Agreement, issued in the form of Series A Units, Series B Units or such other
classes as issued pursuant to this Agreement.
(zz) "Unit Holder" means any Person who is the owner of one or more Units.
"Unit Holders" means all such Persons.
(aaa) "Unit Holder Nonrecourse Debt" has the same meaning as the term
"partner nonrecourse debt" in Section 1.704-2(b)(4) of the Regulations.
(bbb) "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.
(ccc) "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.
(ddd) "Unit Holder Register" means the register maintained by the Company
at its principal office or by the Company's duly appointed agent, setting forth
the name, address and Capital Contributions of each Unit Holder (or such Unit
Holder's predecessors in interest), and the number of Units, certificate
number(s) and date of issuance of Units issued to each Unit Holder, which
register shall be modified from time to time as additional Units are issued and
as Units are Transferred pursuant to this Agreement.
(eee) "Unit Transfer Policy" is the policy for Transferring Units attached
as Exhibit "C."
ARTICLE II. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS
2.1 Initial Capital Contributions. The name, address, Capital Contribution and
Units quantifying the Membership Interest of each of the Members are set forth
on Exhibit "A" attached hereto, and shall also be set forth on the Unit Holder
Register.
2.2 Additional Capital Contributions; Additional Units. No Unit Holder shall be
obligated to make any additional Capital Contributions to the Company or to pay
any assessment to the Company, other than any unpaid amounts on such Unit
Holder's original Capital Contributions, and no Units shall be subject to any
calls, requests or demands for capital. Subject to Section 5.6, additional Units
may be issued in consideration of Capital Contributions as agreed to between the
Directors and the Persons acquiring such Units.
7
2.3 Capital Accounts. A Capital Account shall be maintained for each Unit Holder
in accordance with the following provisions:
(a) To each Unit Holder's Capital Account there shall be credited: (i) such
Unit Holder's Capital Contributions; (ii) such Unit Holder's distributive share
of Profits and any items in the nature of income or gain which are specially
allocated pursuant to Sections 3.3, 3.4 and 3.5 of this Agreement; and (iii) the
amount of any Company liabilities assumed by such Unit Holder or which are
secured by any Property distributed to such Unit Holder;
(b) To each Unit Holder's Capital Account there shall be debited: (i) the
amount of money and the Gross Asset Value of any Property distributed to such
Unit Holder pursuant to any provision of this Agreement; (ii) such Unit Holder's
distributive share of Losses and any items in the nature of expenses or losses
which are specially allocated pursuant to Sections 3.3, 3.4 and 3.5 of this
Agreement; and (iii) the amount of any liabilities of such Unit Holder assumed
by the Company or which are secured by any Property contributed by such Unit
Holder to the Company;
(c) In the event Units are Transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Capital Account of the transferor
to the extent it relates to the Transferred Units; and
(d) In determining the amount of any liability for purposes of
subparagraphs (a) and (b) above, Code Section 752(c) and any other applicable
provisions of the Code and Regulations shall be taken into account.
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 therewith. In the event the Directors determine that it is prudent to
modify the manner in which 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 Article X of this Agreement upon the dissolution of the Company. The
Directors also shall make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section 1.704-1(b).
ARTICLE III. ALLOCATIONS
3.1 Profits. After giving effect to the special allocations in Sections 3.3, 3.4
and 3.5 of this Agreement, Profits for any Fiscal Year shall be allocated among
the Unit Holders in proportion to Units held.
3.2 Losses. After giving effect to the special allocations in Sections 3.3, 3.4
and 3.5 of this Agreement, 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
Article III, if there is a net decrease in Company Minimum Gain during any
Fiscal Year, each Unit Holder shall be specially allocated items of Company
7
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 Article III, if there is a net decrease in Unit Holder Nonrecourse Debt
Minimum Gain attributable to a Unit Holder Nonrecourse Debt during any Fiscal
Year, each Unit Holder who has a share of the Unit Holder Nonrecourse Debt
Minimum Gain attributable to such Unit Holder Nonrecourse Debt, determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of Company income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such Unit Holder's
share of the net decrease in Unit Holder Nonrecourse Debt Minimum Gain,
determined in accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the respective
amounts required to be allocated to each Unit Holder pursuant thereto. The items
to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4)
and 1.704-2(j)(2) of the Regulations. This Section 3.3(b) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Member unexpectedly receives
any adjustments, allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of
the Regulations, items of Company income and gain shall be specially allocated
to such Member in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, the Adjusted Capital Account Deficit as soon as
practicable, provided that an allocation pursuant to this Section 3.3(c) shall
be made only if and to the extent that the Member would have an Adjusted Capital
Account Deficit after all other allocations provided for in this Article III
have been tentatively made as if this Section 3.3(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Member has a deficit Capital
Account at the end of any Fiscal Year which is in excess of the sum of: (i) the
amount such Member is obligated to restore pursuant to any provision of this
Agreement; and (ii) the amount such Member is deemed to be obligated to restore
pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and
1.704-2(i)(5) of the Regulations, then in such circumstance each such Member
shall be specially allocated items of Company income and gain in the amount of
such excess as quickly as possible, provided that an allocation pursuant to this
Section 3.3(d) shall be made only if and to the extent that such Member would
have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Article III have been made as if Sections 3.3(c) and 3.3(d)
were not in this Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or
other period shall be specially allocated among the Members in proportion to
Units held.
(f) Unit Holder Nonrecourse Deductions. Any Unit Holder Nonrecourse
Deductions for any Fiscal Year shall be specially allocated to the Unit Holder
who bears the economic risk of loss with respect to the Unit Holder Nonrecourse
Debt to which such Unit Holder Nonrecourse Deductions are attributable in
accordance with Regulations Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted
tax basis of any Company asset, pursuant to Code Section 734(b) or Code Section
743(b) is required, pursuant to
9
Regulations Section 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Unit Holder in complete liquidation of such Unit Holder's
interest in the Company, the amount of such adjustment to Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Unit Holders in accordance with their
interests in the Company in the event Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the Unit Holder to whom such distribution
was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(h) Allocations Relating to Taxable Issuance of Company Units. Any income,
gain, loss or deduction realized as a direct or indirect result of the issuance
of Units by the Company to a Unit Holder (the "Issuance Items") shall be
allocated among the Unit Holders so that, to the extent possible, the net amount
of such Issuance Items, together with all other allocations under this Agreement
to each Unit Holder shall be equal to the net amount that would have been
allocated to each such Unit Holder if the Issuance Items had not been realized.
3.4 Regulatory 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 Unit Holders 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 Article III (other than the Regulatory Allocations), the
Directors shall make such offsetting special allocations of Company income,
gain, loss or deduction in whatever manner they determine appropriate so that,
after such offsetting allocations are made, each Unit Holder's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Unit Holder would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Sections 3.1, 3.2,
and 3.3(h).
3.5 Loss Limitation. Losses allocated pursuant to Section 3.2 of this Agreement
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 of this Agreement, 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 Profits, Losses and 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 Article III and hereby agree to be bound by the
provisions of this Article III 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
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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) Profits and Losses to the Unit Holders shall be allocated among the
Unit Holders in the ratio which each Unit Holder's Units bears to the total
number of Units issued and outstanding.
3.7 Tax Allocations; Code Section 704(c). In accordance with Code Section 704(c)
and the Regulations thereunder, income, gain, loss, and deduction with respect
to any Property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Unit Holders so as to take account of any
variation between the adjusted basis of such Property to the Company for federal
income tax purposes and its initial Gross Asset Value. In the event the Gross
Asset Value of any Company asset is adjusted pursuant to subparagraph (ii) of
the definition of Gross Asset Value in Section 1.10(t) of this Agreement,
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.
3.8 Tax Credit Allocations. All income tax credits with respect to the Company's
property or operations shall be allocated among the Members in accordance with
their respective Membership Interests for the Fiscal Year during which the
expenditure, production, sale or other event giving rise to such credits occurs.
This Section 3.8 is intended to comply with the applicable tax credit allocation
principles of Regulations Section 1.704-1(b)(4)(ii) and shall be interpreted
consistently therewith.
ARTICLE IV. DISTRIBUTIONS
4.1 Net Cash Flow. Subject to the terms and conditions of any applicable loan
covenants and restrictions, the Directors, in their sole discretion, shall make
distributions of Net Cash Flow, if any, to the Unit Holders in proportion to
Units held. 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, local or foreign government, any amounts required to
be so withheld, and shall allocate any such amounts to the Unit Holders with
respect to which such amount was withheld.
4.3 Limitations on Distributions. The Company shall make no distributions to the
Unit Holders except as provided in this Article IV and in Article X of this
Agreement. Notwithstanding any other provision, no distribution shall be made if
not permitted to be made under the Act.
11
ARTICLE V. MANAGEMENT
5.1 Directors. Except as otherwise provided in this Agreement or required by
law, the Directors shall direct the business and affairs and exercise all of the
powers of the Company, and shall adopt such policies, rules, regulations and
actions as they deem advisable. Subject to Section 5.6 of this Agreement and any
other express provisions of this Agreement to the contrary, the business and
affairs of the Company shall be managed by and under the direction of the
Directors and not by the Members.
5.2 Number of Directors. The number of Directors shall be fixed at seven (7).
5.3 Election of Directors.
(a) Members holding Series C Units shall have the right, voting as a class,
to elect one (1) Director. The Director elected by Members holding Series C
Units ("Series C Director") shall hold office indefinitely until a successor is
elected and qualified, or until the earlier death, resignation, removal or
disqualification of such Series C Director.
(b) Members holding Series B Units shall have the right, voting as a class,
to elect that number of Directors which bears the same proportion to the total
number of Directors of the Company as the total number of Series B Units owned
by such Members bears to the total number of Units of the Company then
outstanding, rounded to the nearest whole number of Directors; provided, that
Members holding Series B Units shall have the right to elect no fewer than one
(1) Director. By way of example and not for purposes of limitation: (i) if
Members holding Series B Units hold a number of Series B Units equal to 21% of
the total number of Units outstanding, then such class of Members shall have the
right to elect or appoint one (1) Director; and (ii) if Members holding Series B
Units hold a number of Series B Units equal to 35% of the total number of Units
outstanding, then such class of Members shall have the right to elect or appoint
two (2) Directors. Directors elected by Members holding Series B Units ("Series
B Directors") shall hold office indefinitely until a successor is elected and
qualified, or until the earlier death, resignation, removal or disqualification
of any such Series B Director. Unless otherwise approved by the remaining
Directors, at least one of the Directors elected by the Series B Members shall
be an officer of one of the Series B Members.
(c) Members holding Series E Units shall have the right, voting as a class,
to elect that number of Directors calculated in the following manner: (1) during
such time as the total number of Series B Units, Series E Units and any other
Units owned by such Members holding Series E Units equals or exceeds 21%, but is
less than 30%, of the total number of Units of the Company then outstanding,
then such Members holding Series E Units may elect one (1) Director, (2) during
such time as the total number of Series B Units, Series E Units and any other
Units owned by such Members holding Series E Units equals or exceeds 30%, but is
less than 40%, of the total number of Units of the Company then outstanding,
then such Members holding Series E Units may elect two (2) Directors, and (3)
during such time as the total number of Series B Units, Series E Units and any
other Units owned by such Members holding Series E Units equals or exceeds 40%
of the total number of Units of the Company then outstanding, then such Members
holding Series E Units may elect three (3) Directors; provided, that once
Members holding Series E Units shall have obtained the right to elect a Director
pursuant to the foregoing, the Members holding Series E Units shall thereafter
hold the right to elect no fewer than one (1) Director. Directors elected by
Members holding Series E Units ("Series E Directors") shall hold office
indefinitely until a successor is elected and qualified, or until the earlier
death, resignation, removal or disqualification of any such Series E Director.
The rights granted in this Section 5.3(c) to Members holding Series E Units
shall be in addition to, and shall not be in replacement of, any other rights
such Members may have to elect or appoint Directors as a result of such Member
holding any other Unit of the Company granting rights for such election or
appointment.
12
(d) Members holding Series A Units shall have the right, voting as a class,
to elect the remaining number of Directors ("Series A Directors") which are not
elected by the Members holding Series E Units, Series C Units, Members holding
Series B Units or other Series of Units that may be granted the right to elect a
Director(s). The initial Series A Directors have been elected to serve certain
terms and until a successor is elected and qualified, or until the earlier
death, resignation, removal or disqualification of any such Series A Director.
At the expiration of the term of the two (2) Series A Directors whose terms
expire in 2007, one (1) replacement of such Directors shall serve a term of
three (3) years and his/her replacement shall serve a term of four (4) years,
and the other replacement of such Directors shall serve a term of four (4)
years. At the expiration of the term of the initial Series A Director whose term
expires in 2008, the term for the replacement of such Director shall last four
(4) years. At the expiration of the term of the initial Series A Director whose
term expires in 2009, the term for the replacement of such Director shall last
four (4) years. Beginning in 2008, all newly elected Series A Directors shall
serve terms of four (4) years. If at any time the number of Series A Directors
is changed, the terms shall be adjusted, as necessary, so that approximately
one-fourth (1/4) of the Series A Directors are elected at each annual meeting of
the Members holding Series A Units.
(e) Nominees for a Director position up for election by any series of Units
shall be named by the then-current Directors elected by the particular series of
Units or by a nominating committee established by the Directors elected by the
particular series of Units. Nominations may also be made by any Member entitled
to vote in the election of Directors of the particular series of Units to be
elected. Any Member that intends to nominate a Person for election as a Series A
Director may do so only if written notice of such Member's intent to make such
nomination is given one hundred twenty (120) calendar days prior to the one year
anniversary of the date on which the Company delivered the prior year's proxy
statement or notice of annual meeting to Series A Members. Provided, however,
that for the first election of Series A Directors, such notice shall be
delivered not less than thirty (30) days prior to the date of the special or
annual meeting of the Members at which the election will be held. Each such
notice shall set forth: (i) the name and address of the Member who intends to
make the nomination; (ii) a representation that the Member is a holder of record
of Series A Units entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the Person specified in the
notice; (iii) the name, age, address and principal occupation/employment of each
nominee; (iv) a description of all arrangements or understandings between the
Member and each nominee and any other Person(s) pursuant to which such
nominations are to be made; (v) such other information regarding each nominee as
would be required to be included in a proxy statement filed pursuant to the
proxy rules of the Securities and Exchange Commission; (vi) the consent of each
nominee to serve as a Series A Director if so elected; and (vii) a nominating
petition signed and dated by the holders of at least five percent (5%) of the
then outstanding Series A Units and clearly setting forth the proposed nominee
as a candidate for the Series A Director's seat to be filled. 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 Series A Director. The presiding Officer of the meeting may, if
the facts warrant, determine that a nomination was not made in accordance with
the foregoing procedures, and if so determined, the defective nomination shall
be disregarded. The amendment or repeal of this Section 5.3 or the adoption of
any provision inconsistent therewith shall require the approval of a majority of
the Members holding Series A Units.
5.4 Authority of Directors. Subject to the limitations and restrictions set
forth in this Agreement and the Act, 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, and the further right and
power by resolution to delegate to the Officers or such other Persons as the
Directors deem appropriate, the right and power to do or perform, the following:
13
(a) Conduct the business and carry on the operations of the Company, 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
the Company 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, operate, sell,
convey, assign, mortgage and lease any real estate and any personal property
necessary, convenient, or incidental to the accomplishment of the purposes of
the Company;
(d) Execute any and all agreements, contracts, documents, certifications
and instruments necessary or convenient in connection with the management,
maintenance and operation of the business and 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 where permitted, 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, 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 and this Agreement;
(i) Contract on behalf of the Company for the employment and services of
employees and independent contractors, 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 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 or the Articles, 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
14
Directors or Officers in connection with activities arising out of, connected
with, or incidental to this Agreement, and engage counsel or others in
connection therewith;
(m) Purchase, take, receive, subscribe for or otherwise acquire, own, hold,
vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and
otherwise use and deal in and with, shares or other interests in or obligations
of domestic or foreign corporations, associations, general or limited
partnerships, other limited liability 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 Interests and Units in consideration for such Capital Contribution as
provided in Section 6.1(d); and
(o) Indemnify Members, Directors or Officers, or former Members, Directors
or Officers, and to make any other indemnification that is authorized by this
Agreement in accordance with, and to the fullest extent permitted by, the Act.
5.5 Director as Agent. Notwithstanding the power and authority of the Directors
to manage the business and affairs of the Company, no Director shall have
authority to act as agent for the Company for the purposes of its business
(including the execution of any instrument on behalf of the Company) unless the
Directors have authorized the Director to take such action.
5.6 Restrictions on Authority of Directors.
(a) Notwithstanding any provision in this Agreement to the contrary, 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 of this Agreement;
(ii) Knowingly engage in 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; or
(iii) Possess Company Property, or assign rights in specific Company
Property, for other than a Company purpose.
(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 sixty-six and
two-thirds percent (66 2/3%) of the Membership Voting Interests:
(i) Merge, consolidate, exchange, sell or otherwise dispose of all or
substantially all of the Property;
(ii) Make an election for the Company to be classified for income tax
purposes as an association taxable as a corporation;
15
(iii) Cause the Company to acquire any equity or debt securities of any
Director or Member or any of their Affiliates, or otherwise make loans
to any Director or Member or any of their Affiliates; or
(iv) Take any action to cause a Dissolution Event as defined in Section
10.1 (other than seeking approval of Members as provided in this
Section).
The actions specified herein as requiring the consent of the Members shall be in
addition to any actions by the Director that are specified in the Act as
requiring the consent or approval of the Members. Unless otherwise required by
this Agreement or the Act, any such required consent or approval may be given by
a vote of a majority of the Membership Voting Interests.
(c) The Directors shall not have authority to, and they covenant and agree
that they shall not cause the Company to, without the approval of all Members
holding Series B Units:
(i) Create or issue additional Series B Units or any additional series of
Units with rights senior to the Series B Units (provided that
allocating election of Directors from among Director seats currently
allocated to Series A Units in substantially the same manner as
Directors are allocated to Series B Units shall not be considered
senior rights);
(ii) Approve or propose any amendment to this Agreement that would
adversely impact the rights of the Series B Units;
(iii) Change the status of the Company from one in which management is
vested in one or more Directors to one in which management is vested
in the Members, or vice versa;
(iv) Repurchase or redeem any Series B Units;
(v) Cause the Company to voluntarily take any action that would cause a
bankruptcy of the Company; or
(vi) Approve the transfer or issuance of Units if (a) following such
Transfer or issuance, the transferee or recipient of such Units
(together with such transferee's or recipient's Affiliates) shall hold
more than 17 % of the total issued and outstanding Units of the
Company (provided that the foregoing shall not apply to any purchaser
approved by the Directors which purchases directly from the Company or
the Company's underwriter in a public offering), or (b) the transferee
or recipient or any of its Affiliates is a direct competitor in the
grain merchandising business of a Member holding Series B Units.
(d) The Directors shall not have authority to, and they covenant and agree
that they shall not cause the Company to, without the approval of all Members
holding Series C Units:
(i) Create or issue additional Series C Units or any additional series of
Units with rights senior to the Series C Units (provided that
allocating election of Directors from among Director seats currently
allocated to Series A Units in substantially the same manner as
Directors are allocated to Series B Units shall not be considered
senior rights);
16
(ii) Approve or propose any amendment to this Agreement that would
adversely impact the rights of the Series C Units; or
(iii) Repurchase or redeem any Series C Units.
(e) The Directors shall not have authority to, and they covenant and agree
that they shall not cause the Company to, without the approval of all Members
holding Series E Units:
(i) Create or issue additional Series E Units or any additional series of
Units with rights senior to the Series E Units (provided that
allocating election of Directors from among Director seats currently
allocated to Series A Units in substantially the same manner as
Directors are allocated to Series E Units shall not be considered
senior rights);
(ii) Approve or propose any amendment to this Agreement that would
adversely impact the rights of the Series E Units, including, without
limitation an increase in the number of Directors of the Company;
(iii) Change the status of the Company from one in which management is
vested in one or more Directors to one in which management is vested
in the Members, or vice versa;
(iv) Repurchase or redeem any Series E Units;
(v) Cause the Company to voluntarily take any action that would cause a
bankruptcy of the Company;
(vi) Approve the transfer or issuance of Units if (a) following such
Transfer or issuance, the transferee or recipient of such Units
(together with such transferee's or recipient's Affiliates) shall hold
more than 15% of the total issued and outstanding Units of the Company
(provided that the foregoing shall not apply to any purchaser approved
by the Directors which purchases directly or indirectly from the
Company or the Company's underwriter in a public offering), or (b) the
transferee or recipient or any of its Affiliates is a direct
competitor in the grain merchandising business of a Member holding
Series E Units.
5.7 Meetings. A regular meeting of the Directors shall be held, without other
notice than this Section, immediately after, and at the same place as, the
annual meeting of the Members. Additionally, the Directors may, by resolution,
prescribe the time and place for holding regular meetings and may provide that
such resolution constitutes notice thereof. If the Directors do not prescribe
the time and place for the holding of regular meetings, such regular meetings
shall be held at the time and place specified in the notice of each such regular
meeting. Unless otherwise prescribed by statute, special meetings may be called
by, or at the request of, the Chairman or any two (2) or more Directors. The
Directors may designate any location as the place of any regular or special
meeting. If no designation is made, the place of meeting shall be the principal
office of the Company.
5.8 Notice. Notice shall be given to each Director with respect to any special
meeting of the Directors, stating the date, time and place of the meeting. Such
notice shall be given at least two (2) days prior thereto and shall be in
writing, unless oral notice is reasonable under the circumstances. If mailed,
such notice shall be deemed to be delivered on the earlier of five (5) days
after deposit in the U.S. mail addressed to the Director's address as shown on
the Company's records with postage prepaid, or upon
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receipt. Any Director may waive notice of any meeting. Except as provided in the
next sentence, the waiver must be in writing, signed by the Director entitled to
notice, and filed with the minutes relating to the action taken. A Director's
attendance at a meeting shall constitute a waiver of notice of such meeting,
except where such Director attends the meeting for the express purpose of
objecting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Directors need be specified in
the notice or waiver of notice of such meeting.
5.9 Conduct of Meeting. All Directors, to the extent possible, shall personally
attend all Directors meetings. However, any Director may participate in any
regular or special meeting by any means of communication by which all Directors
participating may simultaneously hear each other during the meeting. A Director
participating in a meeting by this means is deemed to be present in person.
5.10 Quorum. A majority of the duly elected and qualified Directors shall
constitute a quorum for the transaction of business. If less than a quorum is
represented at a meeting, the Directors represented may adjourn the meeting and
reschedule it for a later date without further notice. At such adjourned and
rescheduled meeting at which a quorum is present or represented, any business
may be transacted which might have been transacted at the original meeting.
Directors present at a duly organized meeting may continue to transact business
until adjournment, notwithstanding the withdrawal of Directors to leave less
than a quorum.
5.11 Manner of Acting; Informal Action. Except as otherwise provided in this
Agreement, the act of a majority of the Directors at a meeting at which a quorum
is present shall be the act of the Directors. Unless otherwise provided by law,
any action required or permitted to be taken at a meeting of the Directors may
be taken without a meeting if a consent in writing setting forth the action so
taken is signed by all Directors entitled to vote with respect the subject
matter thereof.
5.12 Presumption of Assent. A Director present at a meeting shall be presumed to
have assented to action taken, unless the dissent of such Director is entered in
the minutes of the meeting or unless such Director files a written dissent to
such action with the other Directors before the adjournment thereof or forwards
such dissent by mail to the other Directors immediately after the adjournment
thereof. Such right to dissent shall not apply to a Director who voted in favor
of an action.
5.13 Removal of Directors. Members holding a Series of Units may remove a
Director representing that Series of Units, with or without cause, at a meeting
called for that purpose, if notice has been given that a purpose of the meeting
is such removal.
5.14 Vacancies. Any vacancy occurring in the Directors may be filled by the
affirmative vote of a majority of the remaining Directors of the Series of Units
that such vacant position serves to represent. A Director elected to fill a
vacancy shall be elected for the unexpired term of such Director's predecessor
in office.
5.15 Compensation. The Directors shall have authority to establish reasonable
compensation of all Directors for services to the Company as Directors, officers
or otherwise, and to provide for reimbursement to Directors of their reasonable
expenses of attending Directors' meetings.
5.16 Committees; Authority. The Directors may create such committees, and
appoint such Directors to serve on them, as the Directors deem appropriate. Each
committee must have two (2) or more Directors, who serve at the pleasure of the
Directors. The creation of a committee, and the appointment of Directors to
serve on it, must be approved by a majority of the Directors. The procedural
requirements for Director meetings under this Article V shall also apply to
committee meetings. Committees of the
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Directors may exercise only those aspects of the Directors' authority which are
expressly conferred by the Directors by express resolution. Notwithstanding the
foregoing, however, a committee may not, under any circumstances: (i) apportion
or authorize distributions; (ii) approve or propose any action for which the Act
requires Member approval; (iii) elect Officers; (iv) fill vacancies of Directors
or on any of its committees; (v) adopt, amend, or repeal the Articles or this
Agreement; (vi) approve a plan of merger; (vii) authorize or approve the
reacquisition of Units, except according to a formula or method prescribed by
the Directors; or (ix) authorize or approve the issuance or sale or contract for
sale of Units or determine the designation and relative rights, preferences, and
limitations of a class or series of Units. All such committees shall include at
least one (1) Series E Director, unless otherwise approved by Members holding
Series E Units or if such appointment is otherwise prohibited by applicable law
related to the independence of Directors.
5.17 Voting; Potential Financial Interest. No Director shall be disqualified
from voting on any matter 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 potential financial interest was reasonably disclosed at
the time of such vote.
5.18 Duties and Obligations of Directors. 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
Iowa 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 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.
5.19 Chairman and Vice Chairman. Unless provided otherwise by a resolution
adopted by the Directors, the Chairman shall be appointed by the Directors and
preside at meetings of the Members and the Directors; shall see that all orders
and resolutions of the Directors are carried into effect; may maintain records
of and certify proceedings of the Directors and Members; and shall perform such
other duties as may from time to time be prescribed by the Directors. The Vice
Chairman shall, in the absence or disability of the Chairman, perform the duties
and exercise the powers of the Chairman and shall perform such other duties as
the Directors or the Chairman may from time to time prescribe. The Directors may
designate more than one Vice Chairmen, in which case the Vice Chairmen shall be
designated by the Directors so as to denote which is most senior in office. Each
Chairman or Vice Chairman shall be chosen from individuals serving as Directors.
5.20 President and Chief Executive Officer. Until provided otherwise by a
resolution of the Directors, the Chairman shall also act as the interim
President and CEO of the Company (herein referred to as the "President"; the
titles of President and CEO shall constitute a reference to one and the same
office and Officer of the Company), and the Chairman may exercise the duties of
the office of Chairman using any such designations. The Directors shall appoint
someone other than the Chairman as the President of the Company not later than
the commencement of substantial operations of the Facilities, and such President
shall perform such duties as the Directors may from time to time prescribe,
including without limitation, the management of the day-to-day operations of the
Facilities.
5.21 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
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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 therefore; shall disburse Company funds and issue checks and drafts in
the name of the Company as ordered by the Directors, shall render to the
President and the Directors, whenever requested, an account of all such
transactions as Chief Financial Officer and of the financial condition of the
Company, and shall perform such other duties as may be prescribed by the
Directors or the President from time to time.
5.22 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(s) 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.
5.23 Vice President. The Company may have one or more Vice Presidents. If more
than one, the Directors shall designate which is most senior. The most senior
Vice President shall perform the duties of the President in the absence of the
President.
5.24 Delegation. Unless prohibited by a resolution of the Directors, the
President, Chief Financial Officer, Vice President and Secretary (individually,
an "Officer" and collectively, "Officers") may delegate in writing some or all
of the duties and powers of such Officer's management position to other Persons.
An Officer who delegates the duties or powers of an office remains subject to
the standard of conduct for such Officer with respect to the discharge of all
duties and powers so delegated.
5.25 Execution of Instruments. All deeds, mortgages, bonds, checks, contracts
and other instruments pertaining to the business and affairs of the Company
shall be signed on behalf of the Company by (i) the Chairman; or (ii) when
authorized by resolution(s) of the Directors, the President; or (iii) by such
other person or persons as may be designated from time to time by the Directors.
5.26 Limitation of Liability; Indemnification. To the maximum extent permitted
under the Act and other applicable law, no Member, Director or Officer shall be
personally liable for any debt, obligation or liability of the Company merely by
reason of being a Member, Director or Officer. Furthermore, to the maximum
extent permitted under the Act, the liability of Directors and Officers shall be
eliminated, and no Director or Officer shall be personally liable to the Company
or its Members for monetary damages for, any action taken, or any failure to
take action, as a Director or Officer, except for liability for any of the
following:
a. The amount of a financial benefit received by the Director or
Officer to which the Director or Officer is not entitled;
b. An intentional infliction of harm on the Company or its Members;
c. A violation of Section 807 of the Act;
d. An intentional violation of criminal law.
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To the maximum extent permitted under the Act and other applicable law, the
Company, its receiver, or its trustee (in the case of its receiver or trustee,
to the extent of Company Property) shall indemnify, save and hold harmless, and
pay all judgments and claims against each Director or Officer relating to any
liability or damage incurred by reason of any act performed or omitted to be
performed by such Director or Officer, in connection with the business of the
Company, including reasonable attorneys' fees incurred by such Director in
connection with the defense of any action based on any such act or omission,
which attorneys' fees may be paid as incurred, including all such liabilities
under federal and state securities laws as permitted by law. To the maximum
extent permitted under the Act and other applicable law, in the event of any
action by a Unit Holder against any Director or Officer, including a derivative
suit, the Company shall indemnify, save and hold harmless, and pay all costs,
liabilities, damages and expenses of such Director or Officer, including
reasonable attorneys' fees incurred in the defense of such action.
Notwithstanding the foregoing provisions, no Director or Officer shall be
indemnified by the Company to the extent prohibited or limited by the Act. The
Company may purchase and maintain insurance on behalf of any Director or Officer
in his or her official capacity against any liability described in this Section,
whether or not the Company would otherwise be required to indemnify such
Director or Officer against such liability.
ARTICLE VI. MEMBERSHIP UNITS; MEMBERS
6.1 Membership Units. The authorized capital of the Company shall consist solely
of the following classes of Units, having the rights, powers and preferences
herein described:
(a) The Company may issue Series A Units in such amounts, at such
times, to such Persons and on such other terms and conditions as the
Directors may determine. Ownership of one or more Series A Units shall
entitle a Member to the Membership Voting Interest, Membership Economic
Interest and other rights and obligation expressly set forth in this
Agreement.
(b) The Company may issue Series B Units in such amounts, at such
times, to such Persons and on such other terms and conditions as contained
in this Agreement. Ownership of one or more Series B Units shall entitle a
Member to the Membership Voting Interest, Membership Economic Interest and
other rights and obligation expressly set forth in this Agreement.
(c) Subject to Section 5.6(d), the Company may issue Series C Units in
such amounts, at such times, to such Persons and on such other terms and
conditions as the Directors may determine. Ownership of one or more Series
C Units shall entitle a Member to the Membership Voting Interest,
Membership Economic Interest and other rights and obligation expressly set
forth in this Agreement.
(d) The Company may issue Series E Units in such amounts, at such
times, to such Persons and on such other terms and conditions as contained
in this Agreement. Ownership of one or more Series E Units shall entitle a
Member to the Membership Voting Interest, Membership Economic Interest and
other rights and obligations expressly set forth in this Agreement.
(e) Other than as expressly set forth in this Agreement, Series A
Units, Series B Units, Series C Units and Series E Units shall have
identical rights. Except as provided in the following sentence, the special
rights pertaining to Series B Units as set forth in Sections 5.6(c) and
9.11 shall remain in effect so long as the original Holder of the Series B
Units and its Affiliates continue to own all Series B Units originally
purchased by them. From and after May 1, 2011, the original Holder of the
Series B Units and its Affiliates may sell up to 15% per annum (on a
cumulative basis) of the Series B Units originally purchased without
terminating the special rights pertaining to Series B Units as set forth in
Sections 5.6(c) and 9.11; provided, however, that once the original Holder
of Series B Units and its
21
Affiliates hold 25% or less of the Series B Units originally purchased,
such Units shall be automatically converted to Series A Units. It is
further provided that Series B Units transferred from the original Holder
and its Affiliates shall be automatically converted into and re-issued as
Series A Shares upon transfer. The provisions of the preceding three
sentences of this Section 6.1(c) shall not apply to transfers of Series B
Units among the original Holder of The Series B Units and its Affiliates.
(f) Series C Units transferred from the original Holders and their
Affiliates shall be automatically converted into and re-issued as Series A
Units upon transfer; further, that if the total of Series C Units that are
held by the original Holders of the Series C Units and their Affiliates is
less than eight-hundred thirty-three (833), all Series C Units shall be
automatically converted to Series A Units. This provision shall not apply
to transfers of Series C Units among the original Holders of the Series C
Units and their Affiliates.
(g) Additional and different classes of Membership Interests
represented by different Units may be created and issued to new or existing
Members on such terms and conditions as the Directors may determine. Such
additional and different classes may have different rights, powers and
preferences (including, without limitation, voting rights and distribution
preferences), which may be superior to those of existing Members. In the
event of creation of additional Membership Interests, Exhibit A shall be
updated as necessary by the Directors to reflect such Membership Interests
and the Directors shall amend this Agreement, and the Members hereby
consent to the amendment hereof, to reflect (a) the sale of additional
Membership Interests with such terms as the Board of Managers shall deem
appropriate, (b) the admission of additional Members. Except as expressly
set forth in this Agreement, Members shall have no preemptive rights to
acquire additional or newly created Units.
6.2 Certificates; Surrender for Transfer. Certificates representing Units shall
be in such form as shall be determined by the Directors, in their discretion. If
a certificate is lost, destroyed or mutilated, a new one may be issued upon such
terms and indemnity to the Company as the Directors may prescribe. No new
certificate shall be issued until the former certificate for a like number of
Units has been surrendered and canceled.
6.3 Members. Each Person who desires to become a Member must complete and
execute a signature page to this Agreement in the form of Exhibit "B" attached
hereto and such other documents as may be required by the Directors. Membership
Interests and Units of the Members shall be set forth on Exhibit "A" to this
Agreement, as amended from time to time.
6.4 Additional Members. Subject to the provisions of Sections 5.6(c), 5.6(e) and
9.10, no Person shall become a Member without the approval of the Directors. The
Directors may refuse to admit any Person as a Member in their sole discretion.
Any such admission must comply with the requirements described in this Agreement
and will be effective only after such Person has executed and delivered to the
Company such documentation as determined by the Directors to be necessary and
appropriate to effect such admission. All Members acknowledge that the admission
of additional Members may result in a dilution of a Member's Membership
Interest. Prior to admission as a Member, a prospective Member shall agree in
writing to be bound by this Agreement and shall execute and deliver to the
Company an Addendum to this Agreement in the form of Exhibit "B" attached
hereto. Upon the execution of such Addendum, such additional Member shall be
deemed to be a party to this Agreement as if such additional Member had executed
this Agreement on the original date hereof, and shall be bound by all of the
provisions set forth herein.
6.5 Members' Voting Rights. Each Member holding Series A Units shall be entitled
to one (1) vote for each Series A Unit registered in the name of such Member (as
shown in the Unit Holder Register) as to any matter for which a Member holding
Series A Units is entitled to vote under this Agreement or the
22
Act. Each Member holding Series B Units shall be entitled to one (1) vote for
each Series B Unit registered in the name of such Member (as shown in the Unit
Holder Register) as to any matter for which a Member holding Series B Units is
entitled to vote under this Agreement or the Act. Each Member holding Series C
Units shall be entitled to one (1) vote for each Series C Unit registered in the
name of such Member (as shown in the Unit Holder Register) as to any matter for
which a Member holding Series C Units is entitled to vote under this Agreement
or the Act. Each Member holding Series E Units shall be entitled to one (1) vote
for each Series E Unit registered in the name of such Member (as shown in the
Unit Holder Register) as to any matter for which a Member holding Series E Units
is entitled to vote under this Agreement or the Act. Unless a matter is
expressly reserved in this Agreement for the vote or approval of a particular
class of Units, each Member holding Units (regardless of class) shall be
entitled to vote thereon, with each Member entitled to one (1) vote for each
Unit registered in the name of such Member (as shown in the Unit Holder
Register). Members do not have cumulative voting rights as to any matter. Except
as otherwise expressly provided for in this Agreement, 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.
6.6 Member Meetings. Meetings of the Members shall be called by the Directors,
and shall be held at the principal office of the Company or at such other place
as shall be designated by the person calling the meeting. Members representing
an aggregate of not less than thirty percent (30%) of the Membership Voting
Interests may also in writing demand that the Directors call a meeting of the
Members. Regular meetings of the Members shall be held not less than once per
Fiscal Year.
6.7 Place of Meeting. The Directors, or in the absence of action by the
Directors, the Chairman, may designate any place as the place for any meeting of
the Members, unless by written consents, a majority of all Members entitled to
vote at the meeting designate a different place for the holding of such meeting.
If no designation is made by the Directors, the Chairman or by unanimous action
of the Members, the place of meetings shall be at the principal office of the
Company.
6.8 Conduct of Meetings. Subject to the discretion of the Directors, the Members
may participate in any Member meeting by means of telephone conference or
similar means of communication by which all participants in the meeting can hear
and be heard by all other participants.
6.9 Notice. Written notice stating the place and time of any annual or special
Member meeting shall be delivered or mailed not less than five (5) nor more than
sixty (60) days prior to the meeting date, to each Member of record entitled to
vote at such meeting as of the close of business on the day before said notice
is delivered or mailed. Such notices shall be deemed to be effective upon the
earlier of: (i) deposit postage-prepaid in the U.S. mail, addressed to the
Member at the Member's address as it appears on the Unit Holder Register, or
such other address as may have been provided in writing to the Company by a
Member; (ii) the date shown on the return receipt if sent by registered or
certified mail, return receipt requested; or (iii) actual receipt.
6.10 Contents of Notice. The notice of each Member meeting shall include a
description of the purpose(s) for which the meeting is called. If a purpose of
any Member meeting is to consider: (i) a proposed amendment to or restatement of
the Articles or Operating Agreement requiring Member approval; (ii) a plan of
merger or share exchange; (iii) the sale, lease, exchange or other disposition
of all, or substantially all of the Company's Property; (iv) the dissolution of
the Company; or (v) removal of a Director, then the notice must so state and
must be accompanied, as applicable, by a copy or summary of the (1) amendment(s)
to the Articles or Operating Agreement, (2) plan of merger or share exchange,
(3) documents relating to the transaction for the disposition of all the
Company's Property, and/or (4) plan and Articles of Dissolution.
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6.11 Adjourned Meetings. If any Member meeting is adjourned to a different date,
time or place, notice need not be given of the new date, time or place, if the
new date, time and place is announced at the meeting before adjournment;
provided that, if a new record date for the adjourned meeting is or must be
fixed, then notice must be given to new Members as of the new record date.
6.12 Waiver of Notice. Whenever any notice is required to be given to any Member
under the Act, the Articles or this Agreement, a waiver in writing, signed by
such Member shall be deemed equivalent to the giving of such notice.
Furthermore, a Member's attendance at a meeting waives any objection that the
Member might otherwise raise based on lack of notice or defective notice, unless
the Member: (i) objects at the outset of the meeting; or (ii) in the case of an
objection claiming that consideration of a particular matter is not within the
purposes described in the meeting notice, objects at the time such matter is
presented, and in either case, thereafter does not participate in the meeting.
6.13 Fixing of Record Date. For purposes of determining the Members entitled to
notice of, or to vote at, any Member meeting or any adjournment thereof, or for
purposes of determining the Members entitled to receive payment of any
distribution, or in order to make a determination of the Members for any other
purpose, the Directors may provide that the Unit Transfer books shall be closed
for a stated period, not to exceed sixty (60) days. If the Unit Transfer books
shall be closed for such purpose, such books shall be closed for at least ten
(10) days immediately preceding such meeting. In lieu of closing the Unit
Transfer books, the Directors may fix in advance a date as the record date for
any such determination of Members, such date in any case to be not more than
sixty (60) days, and in case of a meeting of Members not less than ten (10)
days, prior to the date on which the particular action requiring such
determination is to be taken. If the Unit Transfer books are not closed and no
record date is fixed for the determination, the date on which notice of the
meeting is mailed or the date on which the resolution of the Directors declaring
a dividend is adopted, as the case may be, shall be the record date for such
determination. When a determination of Members entitled to vote at any meeting
of the Members has been made as provided in this Section, such determination
shall apply to any adjournment thereof, unless the Directors fix a new record
date, which it must do if the meeting is adjourned to a date more than one
hundred twenty (120) days after the date fixed for the original meeting.
6.14 Quorum and Proxies. The presence (in person or by proxy or mail ballot) of
Members representing at least twenty five percent (25%) 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.
6.15 Voting; Action by Members. If a quorum is present, the affirmative vote of
a majority of the Membership Voting Interests represented at the meeting and
entitled to vote on the matter (including units represented in person, by proxy
or by mail ballot when authorized by the Directors) shall constitute the act of
the Members, unless the vote of a greater or lesser proportion or numbers is
otherwise required by this Agreement.
6.16 Continuation of the Company. The Company shall not be dissolved upon the
occurrence of any event that is deemed to terminate the continued membership of
a Member, but rather the Company shall continue without dissolution, and its
affairs shall not be required to be wound up.
6.17 No Member Right of Redemption or Return of Capital. Except as otherwise
provided in this Agreement or the Act, no Member or transferee of any Member
shall have any right to demand or receive a return of his/her/its Capital
Contribution or to require the redemption of his/her/its Units.
6.18 Waiver of Dissenters Rights. To the fullest extent permitted by the Act,
each Member hereby disclaims, waives and agrees not to assert: (i) any
dissenters' or similar rights under the Act; (ii) any right
24
to require partition or appraisal of the Company or of any of its assets, or to
cause the sale of any Company Property; or (iii) any right to maintain any
action for partition or to compel any sale with respect to such Member's Units,
or with respect to any Company Property.
6.19 Loans. Any Member or Affiliate may, with the consent of the Directors, lend
or advance money to the Company, in which case the amount of any such loan or
advance shall not be treated as a contribution to the capital of the Company but
rather shall be a debt due from the Company, repayable out of the Company's
cash, and shall have such other terms as approved by the Directors. None of the
Members or their Affiliates shall be obligated to make any loan or advance to
the Company.
6.20 Actions Without a Meeting by Members Holding Series B Units Any action
required or permitted to be taken at a meeting of the Members holding Series B
Units may be taken without a meeting, without notice and without a vote, if a
consent in writing, setting forth the action so taken, is signed by Members
holding the number of Series B Units required to approve such action. Such
consent will have the same force and effect as a vote of such Members. The
signed consent will be placed by the Secretary of the Company in the Company's
corporate records.
6.21 Actions Without a Meeting by Members Holding Series E Units. Any action
required or permitted to be taken at a meeting of the Members holding Series E
Units may be taken without a meeting, without notice and without a vote, if a
consent in writing, setting forth the action so taken, is signed by Members
holding the number of Series E Units required to approve such action. Such
consent will have the same force and effect as a vote of such Members. The
signed consent will be placed by the Secretary of the Company in the Company's
corporate records.
ARTICLE VII. ACCOUNTING, BOOKS AND RECORDS
7.1 Accounting, Books and Records; Audit Rights. 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 Company transactions and shall be appropriate and adequate for the
Company's business. The Company shall maintain at its principal place of
business: (i) a current list of the full name and last known 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 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 and information
returns and reports, if any, for the six (6) most recent taxable years; (v) a
copy of this Agreement and any and all amendments hereto, together with executed
copies of any powers of attorney pursuant to which this Agreement or any
amendments hereto have been executed; and (vi) copies of the financial
statements of the Company, if any, for the six (6) most recent Fiscal Years. The
Company shall use the accrual method of accounting in the preparation of its
financial reports and for tax purposes and shall keep its books and records
accordingly. Upon reasonable advance notice, the books and records of the
Company may be audited by an authorized representative of a Member holding
Series B Units or Series E Units at reasonable times during the term of this
Agreement and for one (1) year following termination of this Agreement. Any such
audit shall be at Member's expense and shall be conducted at the Company's
offices during its regular working hours. Such Member's representative shall be
allowed to make and retain copies of such books and records.
7.2 Delivery to Members and Inspection. Any Member or such Member's designated
representative shall have reasonable access during normal business hours to the
information and documents kept by the Company pursuant to Section 7.1 of this
Agreement. The rights granted to a Member pursuant to this
25
Section 7.2 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 amended from time to time. Upon the request of
any Member for purposes reasonably related to such Member's interest as a
Member, the Directors shall promptly deliver to the requesting Member, at the
expense of the requesting Member, a copy of the information required to be
maintained under Section 7.1 of this Agreement. Each Member has the right, upon
reasonable request for purposes reasonably related to such Member's interest as
a Member and for proper purposes, to: (i) inspect and copy during normal
business hours any of the Company records described in Section 7.1 of this
Agreement; and (ii) obtain from the Directors, promptly after their becoming
available, copies of the Company's federal, state and local income tax and
information returns for each Fiscal Year. Each Assignee shall have the right to
information regarding the Company only to the extent required by the Act.
7.3 Reports. The Chief Financial Officer of the Company shall be responsible for
causing the preparation of financial reports of the Company and the coordination
of financial matters of the Company with the Company's accountants. The Company
shall cause to be delivered to each Member the financial statements listed
below, prepared, in each case (other than with respect to Member's Capital
Accounts, which shall be prepared in accordance with this Agreement) in
accordance with GAAP consistently applied. Delivery of the financial statements
shall occur as soon as practicable following the end of each Fiscal Year and the
first three fiscal quarters of each such Fiscal Year (and in any event not later
than ten days prior to the date that an "accelerated filer" is required to file
its annual report on Form 10-K or its quarterly report on Form 10-Q for the
particular Fiscal Year or fiscal quarter, as the case may be, under the rules of
the U.S. Securities and Exchange Commission), and at such time as distributions
are made to the Unit Holders pursuant to Article X of this Agreement following
the occurrence of a Dissolution Event. The financial statements shall consist of
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 or fiscal quarter, together with appropriate
notes to such financial statements and supporting schedules. The Company's
financial statements for each Fiscal Year shall be audited and certified by the
Company's accountants, and in each case 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). Public access to the financial statements through
either the Company's or the Securities and Exchange Commission's website shall
constitute delivery pursuant to this Section 7.3.
7.4 Tax Matters. The Directors shall, without any further consent of the Unit
Holders being required (except as specifically required herein), make any and
all elections for federal, state, local and foreign tax purposes as the
Directors shall determine appropriate and shall have the right and authority 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. The Directors shall designate a Person to be specifically
authorized to act as the "Tax Matters Member" under the Code and in any similar
capacity under state or local law; provided, however, that the Directors shall
have the authority to designate, remove and replace the Tax 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. The Tax Matters Member shall receive no compensation for its
services. All third-party costs and expenses incurred by the Tax Matters Member
in performing its duties as such (including legal and accounting fees and
expenses) shall be borne by the Company. Nothing herein shall be construed to
restrict the Company from engaging an accounting firm to assist the Tax Matters
Member in discharging its duties hereunder. Necessary tax information shall be
delivered to each Unit Holder as soon as
26
practicable after the end of each Fiscal Year, but not later than three (3)
months after the end of each Fiscal Year.
7.5 Withholding. Each Unit Holder hereby authorizes the Company to withhold from
or pay on behalf of or with respect to such Unit Holder any amount of federal,
state, local or foreign taxes that the Directors determine that the Company is
required to withhold or pay with respect to any amount distributable or
allocable to such Unit Holder pursuant to this Agreement, including, without
limitation, any taxes required to be withheld or paid by the Company pursuant to
Code Section 1441, Code Section 1442, Code Section 1445 or Code Section 1446.
Any amount paid on behalf of or with respect to a Unit Holder shall constitute a
loan by the Company to such Unit Holder, which loan shall be repaid by such Unit
Holder within fifteen (15) days after notice from the Company that such payment
must be made unless (i) the Company withholds such payment from a distribution
that would otherwise be made to the Unit Holder or (ii) the Directors determine,
in their sole and absolute discretion, that such payment may be satisfied out of
the available funds of the Company that would, but for such payment, be
distributed to the Unit Holder. Each Unit Holder hereby unconditionally and
irrevocable grants to the Company a security interest in such Unit Holder's
Units to secure such Unit Holder's obligation to pay to the Company any amounts
owed to the Company pursuant to this Section 7.5. In the event that a Unit
Holder fails to pay any amounts owed to the Company when due, the Directors may,
in their sole and absolute discretion, elect to make the payment to the Company
on behalf of such defaulting Unit Holder, and in such event shall be deemed to
have loaned such amount to such defaulting Unit Holder and shall succeed to all
rights and remedies of the Company as against such defaulting Unit Holder
(including, without limitation, the right to receive distributions). Any amounts
payable by a Unit Holder hereunder shall bear interest at the prime rate as
reported in The Wall Street Journal (but not higher than the maximum lawful
rate) from the date such amount is due (i.e., fifteen (15) days after demand)
until such amount is paid in full. Each Unit Holder shall take such action as
the Company or the Directors shall request in order to perfect or enforce the
security interest created hereunder.
ARTICLE VIII. AMENDMENTS
8.1 Amendments. Amendments to this Agreement may be proposed by the Directors.
Following any such proposal, the Directors shall submit to the Members a
verbatim statement of any proposed amendment (provided that counsel for the
Company shall have approved of the same in writing as to form), and the
Directors shall include therewith 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. Subject to the provision of Sections
5.6(c), 5.6(d) and 5.6(e), a proposed amendment shall be adopted and be
effective as an amendment to this Agreement only if approved by the affirmative
vote of a majority of the Membership Voting Interests represented at a Member
meeting at which a quorum of the Members is present. Notwithstanding any
provision of this Section 8.1 to the contrary, this Agreement shall not be
amended without the consent of each Member adversely affected if such amendment
would modify the limited liability of a Member.
ARTICLE IX. TRANSFERS
9.1 General Restrictions. The Directors shall not approve, and the Company shall
not recognize for any purpose, any purported Transfer of Units (other than
Transfers of Units to an Affiliate of an existing Member, which shall be
automatically deemed to be approved by the Directors and recognized by the
Company) unless and until the Transfer Restrictions, consisting of the
provisions of this Article and the Unit Transfer Policy, have been satisfied or
the Directors have by resolution specifically waived any unsatisfied provision,
condition or restriction. A Transfer of Units approved by the Directors
(including those Transfers to an Affiliate of an existing Member as set forth
above) that satisfies the provisions and
27
conditions of the Transfer Restrictions (or if any unsatisfied condition is
waived), shall be referred to in this Agreement as a "Permitted Transfer."
9.2 Not Binding Until Entered in Company Books. A Transfer of Units (other than
Transfers of Units to an Affiliate of an existing Member, which shall be
automatically deemed approved by the Directors and recognized by the Company) is
not binding on the Company without the approval of the Directors and direction
by the Directors to enter the Transfer in the books and records of the Company.
9.3 Pledge of Units Allowed. Notwithstanding the Transfer Restrictions, a Unit
Holder may pledge, ▇▇▇▇▇ ▇ ▇▇▇▇ on all or any portion of its Units as security
for the payment of debt, provided that a subsequent foreclosure or transfer to
the secured party in lieu of foreclosure or otherwise shall be considered a
Transfer.
9.4 Prohibited Transfers. Any purported Transfer of Units that is not a
Permitted Transfer shall be null and void and of no force or effect whatsoever;
provided that, if the Company is required to recognize a Transfer that is not a
Permitted Transfer (or if the Directors, in their sole discretion, elect to
recognize a Transfer that is not a Permitted Transfer): (i) the transferee's
rights shall be strictly limited to the transferor's Membership Economic
Interests associated with such Units; and (ii) the Company may offset against
such Membership Economic Interests (without limiting any other legal or
equitable rights of the Company) any debts, obligations or liabilities for
damages that the transferor or transferee may have to the Company.
9.5 Indemnification. If a Transfer or attempted Transfer of Units is not a
Permitted Transfer, the Unit Holder and the prospective transferee engaging or
attempting to engage in the Transfer is liable to and shall indemnify and hold
harmless the Company and the other Unit Holders from all cost, liability, and
damage that the Company and any of the other Unit Holders may incur (including
incremental tax liabilities, lawyers' fees and expenses) as a result of the
Transfer or attempted Transfer and efforts to prohibit the transfer or enforce
the indemnity.
9.6 Transferee Subject to Transfer Restrictions. Units held by a transferee are
subject to the Transfer Restrictions subsequent to a transfer permitted under
this Article.
9.7 Unit Transfer Policy. The Unit Transfer Policy shall be consistent with this
Agreement and impose conditions and restrictions on Transfers to: (1) preserve
the tax status of the Company; (2) comply with state or federal securities laws;
(3) require appropriate information from the transferor and transferee regarding
the transfer; (4) require representations from the transferor and/or transferee
regarding the Transfer; and (5) allow the Directors to determine whether or not
the transferee is a competitor of the Company or the Company's Affiliates. The
Unit Transfer Policy also shall state the permitted method and conventions that
shall be used in allocating Profits, Losses, and each item of Profits, and
Losses and all other items attributable between the transferor and the
transferee. The Unit Transfer Policy is attached as Exhibit "C," and
incorporated as part of this Agreement. Subject to the provisions of Sections
5.6(c)(ii) and 5.6(e)(ii), the Unit Transfer Policy may be amended by the
Directors without Member approval.
9.8 No Dissolution or Termination. The Transfer of Units pursuant to the terms
of this Article IX shall not dissolve or terminate the Company. No Member shall
have the right to have the Company dissolved or to have such Member's Capital
Contribution returned except as provided in this Agreement.
9.9 Rights of Unadmitted Assignees. A Person who acquires Units but who is not
admitted as a Substitute Member pursuant to Section 9.10 of this Agreement 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 Interests with respect to such Units. In addition, such Person shall
28
have no right to any information or accounting of the affairs of the Company
except as required by the Act, shall not be entitled to inspect the books or
records of the Company, and shall not have any of the other rights of a Member
under the Act or this Agreement.
9.10 Admission of Substitute Members. Subject to the provisions of Sections
5.6(c) and 5.6(e), 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 shall, by written instrument in form and substance
reasonably satisfactory to the Directors, agree to be bound by all of the
terms and provisions of this Agreement, and assume the obligations of the
transferor Member hereunder with respect to the Transferred Units.
(b) The transferee shall pay for or reimburse the Company for all
reasonable legal, filing and publication costs incurred in connection with
the admission of the transferee as a Member.
(c) Except in the case of a Transfer involuntarily by operation of
law, if required by the Directors, the transferee shall deliver to the
Company evidence of his/her/its authority to become a Member.
(d) The transferee and transferor shall each execute and deliver such
other instruments as the Directors reasonably deem necessary or appropriate
in connection with such Transfer.
9.11 Preemptive Rights of Series B Unit Holders.
(a) Each Member holding Series B Units shall have the right to
purchase such Member's Pro Rata Share of any New Securities that the
Company may from time to time issue after the Effective Date. Such Member's
"Pro Rata Share" for purposes of this right is the ratio of (i) the number
of Series B Units held by the Member to (ii) the total number of Units of
the Company then outstanding.
(b) If the Company proposes to undertake an issuance of New
Securities, it shall give to each Holder of Series B Units written notice
of its intention to issue New Securities (the "Notice"), describing the
type of New Securities and the price and the general terms upon which the
Company proposes to issue such New Securities. Each Holder of Series B
Units shall have ten (10) business days from the date of actual receipt of
any such Notice to agree in writing to purchase up to such Holder's Pro
Rata Share of such New Securities for the price and upon the general terms
specified in the Notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased (not to exceed such
Holder's Pro Rata Share). Such Units shall be issued as Series B Units. If
any Holder of Series B Units fails to so agree in writing within such ten
(10) day period to purchase such Holder's full Pro Rata Share of an
offering of New Securities, then such Holder shall forfeit the right
hereunder to purchase that part of its Pro Rata Share of such New
Securities that such Holder did not so agree to purchase.
9.12 Preemptive Rights of Series E Unit Holders.
(a) Each Member holding Series E Units shall have the right to
purchase such Member's Pro Rata Share of any New Securities or any other
series of Units or equity securities that the Company may from time to time
issue after the Effective Date. Such Member's "Pro
29
Rata Share" for purposes of this right is the ratio of (i) the number of
Units (of any series) held by the Member to (ii) the total number of Units
of the Company then outstanding.
(b) If the Company proposes to undertake an issuance of New Securities
or any other series of Units or equity securities, it shall give to each
Holder of Series E Units written notice of its intention to issue such
securities (the "Series E Notice"), describing the type of securities and
the price and the general terms upon which the Company proposes to issue
such securities. Each Holder of Series E Units shall have ten (10) business
days from the date of actual receipt of any such Series E Notice to agree
in writing to purchase up to such Holder's Pro Rata Share of such
securities for the price and upon the general terms specified in the Series
E Notice by giving written notice to the Company and stating therein the
quantity of securities to be purchased (not to exceed) such Holder's Pro
Rata Share). If any Holder of Series E Units fails to so agree in writing
within such ten (10) business day period to purchase such Holder's full Pro
Rata Share of an offering of such securities, then such Holder shall
forfeit the right hereunder to purchase that part of its Pro Rata Share of
such securities that such Holder did not so agree to purchase.
ARTICLE X. DISSOLUTION AND WINDING UP
10.1 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 the members as required by Section 5.6(b)
to dissolve, wind up and liquidate the Company; or (ii) the entry of a decree of
judicial dissolution pursuant to the Act. The Members hereby agree that,
notwithstanding any provision of the Act, the Company shall not dissolve prior
to the occurrence of a Dissolution Event.
10.2 Winding Up. Upon the occurrence of a Dissolution Event, the Company shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets and satisfying the claims of its creditors and Members;
and no Member shall take any action that is inconsistent with, or not necessary
to or appropriate for, winding up of the Company's business and affairs.
Notwithstanding any provision in this Agreement to the contrary, the Members
acknowledge and agree that all covenants and obligations set forth this
Agreement shall continue to be fully binding upon the Members until such time as
the Property has been distributed pursuant to this Section 10.2 and Articles of
Dissolution have been filed pursuant to the Act. The Liquidator shall be
responsible for overseeing the prompt and orderly winding up and dissolution of
the Company. The Liquidator shall take full account of the Company's liabilities
and Property and shall cause the Property or the proceeds from the sale thereof
(as determined pursuant to Section 10.8 of this Agreement), to the extent
sufficient therefor, to be applied and distributed, to the maximum extent
permitted by law, in the following order: (i) first, to creditors (including
Members and Directors who are creditors, to the extent otherwise permitted by
law) in satisfaction of all of the Company's Debts and other liabilities
(whether by payment or the making of reasonable provision for payment thereof),
other than liabilities for which reasonable provision for payment has been made;
and (ii) second, except as provided in this Agreement, to Members in
satisfaction of liabilities for distributions pursuant to the Act; (iii) 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 1.10
of this Agreement, after giving effect to all contributions, distributions and
allocations for all periods.
10.3 Compliance with Certain Requirements of Regulations; Deficit Capital
Accounts. In the event the Company is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article X to the Unit Holders who have positive Capital Accounts in
30
compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Unit Holder
has a deficit balance in such Member's 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 Article X may be: (i) 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, in which
case the assets of any such trust shall be distributed to the Unit Holders from
time to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Unit Holders pursuant to Section 10.2 of
this Agreement; or (b) withheld to provide a reasonable reserve for Company
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Company, provided that such withheld
amounts shall be distributed to the Unit Holders as soon as practicable.
10.4 Deemed Distribution and Recontribution. Notwithstanding any other provision
of this Article X, 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.
10.5 Rights of Unit Holders. Except as otherwise provided in this Agreement,
each Unit Holder shall look solely to the Property of the Company for the return
of such Unit Holder's Capital Contribution and shall have no right or power to
demand or receive Property other than cash from the Company. If the assets of
the Company remaining after payment or discharge of the debts or liabilities of
the Company are insufficient to return such Capital Contribution, the Unit
Holders shall have no recourse against the Company or any other Unit Holder or
Directors.
10.6 Allocations During Period of Liquidation. During the period commencing on
the first day of the Fiscal Year during which a Dissolution Event occurs and
ending on the date on which all of the assets of the Company have been
distributed to the Unit Holders pursuant to Section 10.2 of this Agreement (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 Article III of this Agreement.
10.7 Character of Liquidating Distributions. All payments made in liquidation of
the interest of a Unit Holder shall be made in exchange for the interest of such
Unit Holder in Property pursuant to Section 736(b)(1) of the Code, including the
interest of such Unit Holder in Company goodwill.
10.8 The Liquidator. The "Liquidator" shall mean a Person appointed by the
Directors to oversee the liquidation of the Company. Upon the consent of a
majority of the Membership Voting Interests, the Liquidator may be the
Directors. The Company is authorized to pay a reasonable fee to the Liquidator
for its services performed pursuant to this Article X and to reimburse the
Liquidator for its reasonable costs and expenses incurred in performing those
services. The Company shall indemnify, save harmless, and pay all judgments and
claims against such Liquidator and any officers, directors, agents and 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 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 fraud, intentional misconduct, or a knowing
violation of the laws which was material to the cause of action.
31
10.9 Forms of Liquidating Distributions. For purposes of making distributions
required by Section 10.2 of this Agreement, 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.
ARTICLE XI. MISCELLANEOUS
11.1 Notices. Any notice, payment, demand, or communication required or
permitted to be given by any provision of this Agreement shall be in writing and
shall be deemed to have been delivered, given, and received for all purposes (i)
if delivered personally to the Person or to an officer of the Person to whom the
same is directed, or (ii) when the same is sent, if sent by regular or certified
mail, postage prepaid, or by facsimile, if such facsimile is followed by a hard
copy of the facsimile communication sent promptly thereafter by regular or
certified mail, postage prepaid, addressed as follows, or to such other address
as such Person may from time to time specify by notice to the Company: (a) If to
the Company, to the address determined pursuant to Section 1.4 of this
Agreement; (b) If to the Directors, to the address set forth on record with the
Company; (c) If to a Unit Holder, either to the address set forth in the Unit
Holder Register or to such other address that has been provided in writing to
the Company.
11.2 Binding Effect. Except as otherwise provided in this Agreement, every
covenant, term and provision of this Agreement shall be binding upon, and shall
inure to the benefit of, the Company and the Members, and their respective
heirs, representatives, successors, transferees, and assigns.
11.3 Construction. Every covenant, term, and provision of this Agreement shall
be construed simply according to its fair meaning and not strictly for or
against the Company or any Member.
11.4 Headings. Article, 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
of this Agreement.
11.5 Severability. Except as otherwise provided in the succeeding sentence,
every provision of this Agreement is intended to be severable, and if any term
or provision of this Agreement is illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the validity or legality of the
remainder of this Agreement. The preceding sentence of this Section 11.5 shall
be of no force or effect if the consequence of enforcing the remainder of this
Agreement without such illegal or invalid term or provision would be to cause
any Member to lose the material benefit of its economic bargain.
11.6 Incorporation By Reference. Every recital, exhibit, schedule and appendix
attached to this Agreement and referred to herein is hereby incorporated into
this Agreement by reference unless this Agreement expressly provides otherwise.
11.7 Variation of Terms. All terms and variations thereof used in this Agreement
shall be deemed to refer to masculine, feminine, or neuter, singular or plural,
as the context may require.
11.8 Governing Law. The laws of the State of Iowa shall govern the validity of
this Agreement, the construction of its terms, and the interpretation of the
rights and duties arising hereunder.
11.9 Waiver of Jury Trial. Each of the Members irrevocably waives, to the
fullest extent permitted by law, all rights to trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Agreement or the
business and affairs of the Company.
32
11.10 Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all of the Members had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
11.11 Specific Performance. Each Member acknowledges and agrees that the Company
and 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
Company and the non-breaching Members may be entitled hereunder, at law or in
equity, the Company and the non-breaching Members shall be entitled to
injunctive relief to prevent breaches of the provisions of this Agreement and to
specifically to enforce the terms and provisions of this Agreement.
11.12 No Third Party Rights. None of the provisions contained in this Agreement
shall be deemed to be for the benefit of or enforceable by any third parties,
including without limitation, any creditors of any Member or the Company.
DULY ADOPTED by the Company as of March 7, 2008.
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
By: /s/ ▇▇▇▇▇ ▇▇▇▇
----------------------------------------
Its: Chairman
----------------------------------------
33
EXHIBIT "A"
Membership List
Name and Address of Members Holding Series A Units Series A Units
------------------------------------------------------------------------ ---------------------------
TOTAL:
Name and Address of Members Holding Series B Units Series B Units
------------------------------------------------------------------------ ---------------------------
TOTAL:
Name and Address of Members Holding Series C Units Series C Units
------------------------------------------------------------------------ ---------------------------
TOTAL:
Name and Address of Members Holding Series E Units Series E Units
------------------------------------------------------------------------ ---------------------------
TOTAL:
1
EXHIBIT "B"
MEMBER SIGNATURE PAGE
ADDENDUM TO THE
SECOND AMENDED AND RESTATED OPERATING AGREEMENT
OF SOUTHWEST IOWA RENEWABLE ENERGY, LLC
The undersigned does hereby warrant, represent, covenant and agree that:
(i) the undersigned, as a condition to becoming a Member in Southwest Iowa
Renewable Energy, LLC, has received a copy of the Second Amended and Restated
Operating Agreement dated ________, 2006, and, if applicable, all amendments and
modifications thereto; (ii) the undersigned shall be subject to and comply with
all terms and conditions of such Second Amended and Restated Operating Agreement
in all respects, as if the undersigned had executed said Second Amended and
Restated Operating Agreement on the original date thereof; and (iii) the
undersigned is and shall be bound by all of the provisions of said Second
Amended and Restated Operating Agreement from and after the date of execution of
this Addendum.
Individuals: Entities:
----------------------------------------- -----------------------------------------
Name of Individual Member (Please Print) Name of Entity (Please Print)
---------------------------------------- -----------------------------------------
Signature of Individual Print Name and Title of Officer
--------------------------------------------- -----------------------------------------
Name of Joint Individual Member (Please Print) Signature of Officer
-------------------------------------
Signature of Joint Individual Member
Agreed to and Accepted on Behalf of the
Company and its Members:
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
By:
--------------------------------------------------
Its:
-------------------------------------------------
1
EXHIBIT "C"
UNIT TRANSFER POLICY
OF
SOUTHWEST IOWA RENEWABLE ENERGY, LLC
Section 1.1 Definitions, Applicability.
(a) Definitions. The definitions of the Second Amended and Restated
Operating Agreement of Southwest Iowa Renewable Energy, LLC (the "Operating
Agreement") apply to this Unit Transfer Policy (the "Policy").
(b) Applicability. This Policy and Article IX of the Operating Agreement
and the other applicable provisions of the Operating Agreement apply to all
Transfers of Units of the Company.
(c) Intent of Policy. It is the intent of this Policy as it relates to any
Transfers that: (1) the tax status of the Company is the same as for a
partnership; (2) this Company preserve its partnership tax status by complying
with Regulations, Section 1.7704-1, et seq., and any amendments; and (3) to the
extent possible, this Policy shall be read and interpreted to prohibit the free
transferability of Units.
Section 2.1. Complete Prohibition On Certain Transfers Of Units. Notwithstanding
any other provisions of this Policy, the following Transfers will be prohibited
and the Directors will have no authority to approve any of the following
Transfers:
(a) a Transfer in violation of the Securities Act or any state securities
or blue sky laws applicable to the Company or the Membership Interest to be
transferred;
(b) a Transfer that would cause the Company to be considered a publicly
traded partnership under Section 7704(b) of the Code;
(c) a Transfer that would cause the Company to lose its status as a
partnership for federal income tax purposes, taking into account all facts and
circumstances, including facts and circumstances that might not be directly
related to the proposed Transfer; or
(d) a Transfer that would cause a termination of the Company for federal
income tax purposes.
Section 3.1. Conditions To Permitted Transfers.
(a) Requirement. A Transfer shall not be treated as a Permitted Transfer
unless and until the conditions in this Section and Sections 5.6(c) and 5.6(e)
of the Operating Agreement are satisfied.
(b) Conveyance Documents. Except in the case of a Transfer involuntarily by
operation of law, the transferor and transferee shall execute and deliver to the
Company documents and instruments of conveyance as may be necessary or
appropriate in the opinion of legal counsel to the Company to affect 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 the Transfer, in form and substance satisfactory to legal 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 the Transfer.
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(c) Tax Information. 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. In addition, the transferee must
consent to the use of the method and convention of allocating Profits and Losses
and each item of profit and loss for the year of the transfer that is specified
in the Unit Transfer Policy. Without limiting the generality of the foregoing,
the Company shall not be required to make any Distribution otherwise provided
for in the Operating Agreement with respect to any Transferred Units until it
has received this information.
(d) Securities Compliance. Except in the case of a Transfer of Units
involuntarily by operation of law, either (1) the Units are registered under the
Securities Act, and any applicable state securities laws, or (2) if requested by
the Directors in their discretion, the transferor provides an opinion of legal
counsel, which opinion and legal counsel shall be reasonably satisfactory to the
Directors, to the effect that the Transfer is exempt from all applicable
registration requirements and that the Transfer will not violate any applicable
laws regulating the Transfer of securities.
(e) Does Not Cause Company To Be Investment Company. Except in the case of
a Transfer of Units involuntarily by operation of law, if requested by the
Directors in their sole discretion, the transferor shall provide an opinion of
legal counsel, which opinion and legal counsel shall be reasonably satisfactory
to the Directors, to the effect that the Transfer will not cause the Company to
be deemed to be an "investment company" under the Investment Company Act of
1940.
(f) Does Not Cause Company To Be Publicly Traded Partnership. Except in the
case of a Transfer of Units involuntarily by operation of law, if requested by
the Directors in their discretion, the transferor shall provide an opinion of
legal counsel, which opinion and legal counsel shall be reasonably satisfactory
to the Directors, to the effect that such Transfer will not cause the Company to
be deemed to be a "publicly-traded limited partnership" under applicable
provisions of the Code.
(g) Transferee Is Not A Competitor Of The Company. Except in the case of a
Transfer of Units involuntarily by operation of law, the Directors must
determine (in their sole discretion) that the transferee is not a competitor of
the Company or the Company's Affiliates, or an Affiliate of a competitor of the
Company or a Person who as a Unit Holder or Member would or may be detrimental
to the interests of the Company. The proposed transferor and proposed transferee
shall submit information requested by the Directors to make the determination.
(h) Tax Status Compliance. Unless otherwise approved by the Directors, a
Transfer of Units shall not be made except upon terms which would not, in the
opinion of legal counsel chosen by and mutually acceptable to the Directors and
the transferor, 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. In
determining whether a particular proposed Transfer will result in a termination
of the Company, legal counsel to the Company shall take into account the
existence of prior written commitments to Transfer and the commitments shall
always be given precedence over subsequent proposed Transfers.
(i) Suspension Of Transfers After Dissolution Event. No notice or request
initiating the procedures contemplated by this Section may be given by a Unit
Holder after a Dissolution Event has occurred.
(j) Directors May Waive Conditions. Subject to Section 2.1 of this Policy,
the Directors shall have the authority to waive any legal opinion or other
condition required in this Section; except that the
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Directors may not waive the conditions of Sections 5.6(c) and 5.6(e) of the
Operating Agreement or Section 3.1(g) of this Policy.
Section 3.2 Distributions And Allocations In Respect of Transferred Units. If
any Units are Transferred during any Fiscal Year in compliance with the
provisions of this Policy and Article IX, 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 to be effective not later than the
first day of the month following the month in which all documents to effectuate
the Transfer have been executed and delivered to the Company, provided that the
Company has received such documents at least 10 days prior to the first day of
the month, otherwise such items shall be allocated and distributed to the
transferor, 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 or entity who,
according to the books and records of the Company, was the owner of the Units on
the last day of such Fiscal Year. Neither the Company nor any Member shall incur
any liability for making allocations and distributions in accordance with the
provisions of this Section, whether or not the Directors or the Company has
knowledge of any Transfer of any Units. Unless and until a transferee is a
permitted transferee and such transferee is admitted as a Substitute Member
under Section 9.10 of the Operating Agreement, the proposed transferee shall
have no interest in the Company and shall not be treated as a Member for purpose
of any distribution, the allocation of Profits or Losses, the voting of Units or
for any other purpose.
Section 3.3. Other Rules Regarding Transfers.
(a) Tax Withholdings. Under the Operating Agreement, the Company is
authorized to withhold from payments and distributions, or with respect to
allocations to the Member, and to pay over to any federal, state and local
government or any foreign government, any amounts required to be so withheld
pursuant to the Code or any provisions of any other federal, state or local law,
or any foreign law, and shall allocate any such amounts to the Members with
respect to which such amount was withheld. In the event that a transferring
Member makes a transfer of all or a part of his/her/its Membership Interest
during the Company's tax year, amounts paid or withheld on behalf of such
transferring Member prior to the transfer, or in connection with the Membership
Interest being transferred, shall be due to the Company. Pursuant to the Policy
and Operating Agreement, the Company has the right, in its sole discretion to
either (a) require that the transferring Member deposit with the Company the
amount due, or the amount that is estimated to be due, in connection with the
Membership Interest being transferred, or (b) require that such payment be made
at any time after the transfer, upon demand by the Company.
(b) Market Of Units Not Made. A Unit Holder may not: (1) make a market in
Units; (2) Transfer its Units on an established securities market, a secondary
market (or the substantial equivalent of those markets) 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); and (3) in the event
the Regulations, revenue rulings, or other pronouncements treat any or all
arrangements which facilitate the selling of Company interests and which are
commonly referred to as "matching services" as being a secondary market or
substantial equivalent of a secondary market, Transfer any Units through a
matching service that is not approved in
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advance by the Company. A Unit Holder may not Transfer any Units to any Person
unless the Person agrees to be bound by the Transfer Restrictions and to
Transfer the Units only to Persons who agree to be similarly bound.
(c) Units Acquired For Unit Holder's Account. The acquisition of Units by a
Unit Holder shall be deemed to be a representation and warranty to the Company
and the other Unit Holders, that the Unit Holder's acquisition of Units is made
as principal for the Unit Holder's own account and not for resale or
distribution of the Units to others in violation of securities laws as
determined by the Company and its legal counsel.
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