**Exhibit3.2**

 

**AMENDEDAND RESTATED OPERATING AGREEMENTOFUNITED WISCONSIN GRAIN PRODUCERS, L.L.C.Dated April 9, 2005**

 

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**UNITEDWISCONSIN GRAIN PRODUCERS, L.L.C. AMENDED AND RESTATED OPERATING AGREEMENT**

(CONTAINS RESTRICTIONS ONTRANSFER OF MEMBERSHIP INTERESTS)

 

TABLE OF CONTENTS

 
| SECTION 1:  THE COMPANY                             |   |   |
|----------------------------------------------------------|--------|--------|
| 1.1 Formation                                            |   |   |
| 1.2 Name                                                 |   |   |
| 1.3 Purchase; Powers                                     |   |   |
| 1.4 Principal Place of Business                          |   |   |
| 1.5 Term                                                 |   |   |
| 1.6 Agent For Service of Process                         |   |   |
| 1.7 Title to Property                                    |   |   |
| 1.8 Payment of Individual Obligations                    |   |   |
| 1.9 Independent Activities; Transactions With Affiliates |   |   |
| 1.10 Definitions                                         |   |   |
|                                                     |   |   |
| SECTION 2. CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS  |   |   |
| 2.1 Original Capital Contributions                       |   |   |
| 2.2 Additional Capital Contributions; Additional Units   |   |   |
| 2.3 Capital Accounts                                     |   |   |
|                                                     |   |   |
| SECTION 3.  ALLOCATIONS                             |   |   |
| 3.1 Profits                                              |   |   |
| 3.2 Losses                                               |   |   |
| 3.3 Special Allocations                                  |   |   |
| 3.4 Curative Allocations                                 |   |   |
| 3.5 Loss Limitation                                      |   |   |
| 3.6 Other Allocation Rules                               |   |   |
| 3.7 Tax Allocations: Code Section 704(c)            |   |   |
| 3.8 Tax Credit Allocations                               |   |   |
|                                                     |   |   |
| SECTION 4.  DISTRIBUTIONS                           |   |   |
| 4.1 Net Cash Flow                                        |   |   |
| 4.2 Amounts Withheld                                     |   |   |
| 4.3 Limitations on Distributions                         |   |   |
|                                                     |   |   |
| SECTION 5.  MANAGEMENT                              |   |   |
| 5.1 Directors                                            |   |   |
| 5.2 Election of Directors                                |   |   |
| 5.3 Committees                                           |   |   |
| 5.4 Authority of Directors                               |   |   |
| 5.5 Director as Agent                                    |   |   |

 

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| 5.6  Restriction on Authority of Directors                       |   |   |
|------------------------------------------------------------------|--------|--------|
| 5.7  Director Actions                                            |   |   |
| 5.8  Duties and Obligations of Directors                         |   |   |
| 5.9  Chairman and Vice Chairman                                  |   |   |
| 5.10  President and Chief Executive Officer                      |   |   |
| 5.11  Chief Financial Officer                                    |   |   |
| 5.12  Secretary; Assistant Secretary                             |   |   |
| 5.13  Vice President                                             |   |   |
| 5.14  Delegation                                                 |   |   |
| 5.15  Execution of Instruments                                   |   |   |
| 5.16  Limitation of Liability; Indemnification of Directors      |   |   |
| 5.17  Compensation; Expenses of Directors                        |   |   |
| 5.18  Loans                                                      |   |   |
|                                                             |   |   |
| SECTION 6. ROLE OF MEMBERS                                  |   |   |
| 6.1  Rights of Powers                                            |   |   |
| 6.2  Voting Rights                                               |   |   |
| 6.3  Member Meetings; Quorum and Proxies                         |   |   |
| 6.4  Termination of Membership                                   |   |   |
| 6.5  Continuation of the Company                                 |   |   |
| 6.6  No Obligation to Purchase Membership Interest               |   |   |
| 6.7  Waiver of Dissenters Rights                                 |   |   |
| 6.8 Limitation on Ownership                                      |   |   |
|                                                             |   |   |
| SECTION 7. ACCOUNTING, BOOKS AND  RECORDS                   |   |   |
| 7.1  Accounting, Books and Records                               |   |   |
| 7.2  Reports                                                     |   |   |
| 7.3  Tax Matters                                                 |   |   |
| 7.4  Delivery to Members and Inspection                          |   |   |
|                                                             |   |   |
| SECTION 8. AMENDMENTS                                       |   |   |
| 8.1  Amendments                                                  |   |   |
|                                                             |   |   |
| SECTION 9. TRANSFERS                                        |   |   |
| 9.1  Restrictions on Transfers                                   |   |   |
| 9.2  Permitted Transfers                                         |   |   |
| 9.3  Conditions to Permitted Transfers                           |   |   |
| 9.4  Prohibited Transfers                                        |   |   |
| 9.5  Rights of Unadmitted Assignees                              |   |   |
| 9.6  Admission of Substituted Members                            |   |   |
| 9.7  Representations Regarding Transfers                         |   |   |
| 9.8  Distribution and Allocation in Respect of Transferred Units |   |   |
|                                                             |   |   |
| SECTION 10. DISSOLUTION AND WINDING UP                      |   |   |
| 10.1  Dissolution                                                |   |   |
| 10.2  Winding Up                                                 |   |   |

 

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| 10.3  Compliance with Certain Requirements of Regulations; Deficit Capital Accounts |   |   |
|-------------------------------------------------------------------------------------|--------|--------|
| 10.4  Deemed Distribution and Recontribution                                        |   |   |
| 10.5  Rights of Unit Holders                                                        |   |   |
| 10.6  Allocations During Period of Liquidation                                      |   |   |
| 10.7  Character of Liquidating Distributions                                        |   |   |
| 10.8  The Liquidator                                                                |   |   |
| 10.9  Forms of Liquidating Distributions                                            |   |   |
|                                                                                |   |   |
| SECTION 11. MISCELLANEOUS                                                      |   |   |
| 11.1  Notices                                                                       |   |   |
| 11.2  Binding Effect                                                                |   |   |
| 11.3  Construction                                                                  |   |   |
| 11.4  Headings                                                                      |   |   |
| 11.5  Severability                                                                  |   |   |
| 11.6  Incorporation By Reference                                                    |   |   |
| 11.7  Variation of Terms                                                            |   |   |
| 11.8  Governing Law                                                                 |   |   |
| 11.9  Waiver of Jury Trial                                                          |   |   |
| 11.10  Counterpart Execution                                                        |   |   |
| 11.11  Specific Performance                                                         |   |   |

 

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**AMENDEDAND RESTATED OPERATING AGREEMENTOFUNITED WISCONSIN GRAIN PRODUCERS, L.L.C.**

 

THIS AMENDED AND RESTATED OPERATING AGREEMENT(the “Agreement”) is entered into and shall be effective as of the 9thday of April, 2005 (the “Effective Date”), by and among UNITED WISCONSIN GRAINPRODUCERS, L.L.C., a Wisconsin limited liability company (the “Company”), eachof the Persons who are identified as Members on the attached Exhibit A and whohave executed a counterpart of this Agreement and a Subscription Agreement, andany other Persons as may from time-to-time be subsequently admitted as a Memberof the Company in accordance with the terms of this Agreement. Capitalizedterms not otherwise defined herein shall have the meaning set forth in Section 1.10.

 

WHEREAS, the Company’s organizers caused tobe filed with the State of Wisconsin, Articles of Organization of the Companypursuant to Chapter 183 of the Code of Wisconsin (the “Act”);

 

WHEREAS, the Members of the Company haveadopted an Operating Agreement of the Company dated November 2, 2001,pursuant to the Act;

 

WHEREAS, the Members desire to amend andrestate the Operating Agreement to revise and set forth the respective rights,duties, and responsibilities with respect to the Company and its business andaffairs.

 

NOW, THEREFORE, in consideration of thecovenants and agreements contained herein, and other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereto agree as follows:

 

SECTION 1.  THE COMPANY

 

1.1           Formation.  The initial Members formed the Company as aWisconsin limited liability company by filing Articles of Organization with theState of Wisconsin on November 2, 2001 pursuant to the provisions of theAct.  To the extent that the rights orobligations of any Member are different by reason of any provision of thisAgreement than they would be in the absence of such provisions, this Agreementshall, to the extent permitted by the Act, control.

 

1.2           Name.   The name of the Company shall be “UnitedWisconsin Grain Producers, L.L.C.” and all business of the Company shall beconducted in such name.

 

1.3           Purchase;Powers.   The nature of the businessand purposes of the Company are (i) to own, construct, operate, lease, finance,contract with, and/or invest in ethanol production and co-product productionfacilities as permitted under the applicable laws of the State of Wisconsin;

 

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(ii) to engage in the processing of corn, grains and other feedstocksinto ethanol and any and all related co-products, and the marketing of allproducts and co-products from such processing; and (iii) to engage in any otherbusiness and investment activity in which a Wisconsin limited liability companymay lawfully be engaged, as determined by the Directors.  The Company has the power to do any and allacts necessary, appropriate, proper, advisable, incidental or convenient to orin furtherance of the purpose of the Company as set forth in this Section 1.3and has, without limitation, any and all powers that may be exercised on behalfof the Company by the Directors pursuant to Section 5 hereof.

 

1.4           PrincipalPlace of Business.   The Companyshall continuously maintain an office in Wisconsin. The principal office of theCompany shall be at W7503 Country Drive, Beaver Dam, Wisconsin 53916, orelsewhere as the Directors may determine. Any documents required by the Act tobe kept by the Company shall be maintained at the Company’s principal office.

 

1.5           Term.   The term of the Company commenced on thedate the Articles of Organization (the “Articles”) of the Company were filedwith the office of the State of Wisconsin, and shall continue until the windingup and liquidation of the Company and its business is completed following aDissolution Event as provided in Section 10 hereof.

 

1.6           AgentFor Service of Process.   The nameand address of the agent for service of process on the Company in the State ofWisconsin shall be Kevin Roche, N3432 Co. Trunk BB, Columbus, Wisconsin 53925,or any successor as appointed by the Directors.

 

1.7           Titleto Property.   All Property owned bythe Company shall be owned by the Company as an entity and no Member shall haveany ownership interest in such Property in its individual name.  Each Member’s interest in the Company shallbe personal property for all purposes. At all times after the Effective Date, the Company shall hold title toall of its Property in the name of the Company and not in the name of anyMember.

 

1.8           Paymentof Individual Obligations.   Company’scredit and assets shall be used solely for the benefit of the Company, and noasset of the Company shall be Transferred or encumbered for, or in payment of,any individual obligation of any Member.

 

1.9           IndependentActivities; Transactions With Affiliates.  The Directors shall be required to devote such time to the affairs ofthe Company as may be necessary to manage and operate the Company, and shall befree to serve any other Person or enterprise in any capacity that the Directormay deem appropriate in its discretion. Neither this Agreement nor any activity undertaken pursuant hereto shall(i) prevent any Member or Director or their Affiliates, acting on their ownbehalf, from engaging in whatever activities they choose, whether the same arecompetitive with the Company or otherwise, and any such activities may beundertaken without having or incurring any obligation to offer any interest insuch activities to the Company or any Member, or (ii) require any Member orDirector to permit the Company or Director or Member or its Affiliates toparticipate in any such activities, and as a material part of the considerationfor the execution of this Agreement by each Member, each Member hereby waives,relinquishes, and renounces any such right or claim of participation.  To the extent permitted by applicable law andsubject to the provisions of this Agreement, the Directors are herebyauthorized to cause

 

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the Company to purchase Property from, sell Property to or otherwisedeal with any Member (including any Member who is also a Director), acting onits own behalf, or any Affiliate of any Member; provided that any such purchase,sale or other transaction shall be made on terms and conditions which are noless favorable to the Company than if the sale, purchase or other transactionhad been made with an independent third party.

 

1.10         Definitions.   Capitalized words and phrases used in thisAgreement have the following meanings:

 

(a)           “Act”means the Chapter 183 of the Code of Wisconsin, as amended from time to time(or any corresponding provision or provisions of any succeeding law).

 

(b)           “AdjustedCapital Account Deficit” means, with respect to any Unit Holder, the deficitbalance, if any, in such Unit Holder’s Capital Account as of the end of therelevant Fiscal Year, after giving effect to the following adjustments: (i)Credit to such Capital Account any amounts which such Unit Holder is deemed tobe obligated to restore pursuant to the next to the last sentences in Sections1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations; and (ii) Debit to suchCapital Account the items described in Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5)and 1.704-1(b)(2)(ii)(d)(6) of the Regulations. The foregoing definition is intended to comply with the provisions of Section 1.704-1(b)(2)(ii)(d)of the Regulations and shall be interpreted consistently therewith.

 

(c)           “Affiliate”means, with respect to any Person (i) any Person directly or indirectlycontrolling, controlled by or under common control with such Person (ii) anyofficer, director, general partner, member or trustee of such Person or (iii)any Person who is an officer, director, general partner, member or trustee ofany Person described in clauses (i) or (ii) of this sentence. For purposes ofthis definition, the terms “controlling,” “controlled by” or “under commoncontrol with” shall mean the possession, direct or indirect, of the power todirect or cause the direction of the management and policies of a Person orentity, whether through the ownership of voting securities, by contract orotherwise, or the power to elect at least 50% of the directors, members, orpersons exercising similar authority with respect to such Person or entities.

 

(d)           “Agreement”means this Operating Agreement of United Wisconsin Grain Producers, L.L.C., asamended from time to time.

 

(e)           “Articles”means the Articles of Organization of the Company filed with the State ofWisconsin, as same may be amended from time-to-time.

 

(f)            “Assignee”means a transferee of Units who is not admitted as a substituted memberpursuant to Section 9.6.

 

(g)           “CapitalAccount” means the separate capital account maintained for each Unit Holder inaccordance with Section 2.3.

 

(h)           “CapitalContributions” means, with respect to any Member, the amount of money (USDollars) and the initial Gross Asset Value of any assets or property (otherthan

 

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money) contributed by the Member (or such Member’s predecessor ininterest) to the Company (net of liabilities secured by such contributedproperty that the Company is considered to assume or take subject to under CodeSection 752) with respect to the Units in the Company held or purchased bysuch Member, including additional Capital Contributions.

 

(i)            “Code”means the United States Internal Revenue Code of 1986, as amended from time totime.

 

(j)            “Company”means United Wisconsin Grain Producers, L.L.C., a Wisconsin limited liabilitycompany.

 

(k)           “CompanyMinimum Gain” has the meaning given the term “partnership minimum gain” inSections 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 ofproperty as evidenced by a note, bonds, or other instruments, (ii) obligationsas lessee under capital leases, (iii) obligations secured by any mortgage,pledge, security interest, encumbrance, lien or charge of any kind existing onany asset owned or held by the Company whether or not the Company has assumedor become liable for the obligations secured thereby, (iv) any obligation underany interest rate swap agreement, (v) accounts payable and (vi) obligations underdirect or indirect guarantees of (including obligations (contingent orotherwise) to assure a creditor against loss in respect of) indebtedness orobligations of the kinds referred to in clauses (i), (ii), (iii), (iv) and (v),above provided that Debt shall not include obligations in respect of anyaccounts payable that are incurred in the ordinary course of the Company’sbusiness and are not delinquent or are being contested in good faith byappropriate 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 suchFiscal Year, except that if the Gross Asset Value of an asset differs from itsadjusted basis for federal income tax purposes at the beginning of such FiscalYear, Depreciation shall be an amount which bears the same ratio to suchbeginning Gross Asset Value as the federal income tax depreciation,amortization, or other cost recovery deduction for such Fiscal Year bears tosuch beginning adjusted tax basis; provided, however, that if the adjustedbasis for federal income tax purposes of an asset at the beginning of suchFiscal Year is zero, Depreciation shall be determined with reference to suchbeginning Gross Asset Value using any reasonable method selected by theDirectors.

 

(n)           “Directors”means any Person who (i) is referred to as such in Section 5.1 of thisAgreement or has become a Director pursuant to the Terms of this Agreement, and(ii) has not ceased to be a Director pursuant to the terms of thisAgreement.  “Directors” means all suchPersons.  For purposes of the Act, theDirectors shall be deemed to be the “managers” (as such term is defined andused in the Act) of the Company. Unless otherwise stated in this Agreement, anyaction taken by the Directors shall require the affirmative vote of a majorityof the Directors present at a meeting of the Directors (in person or bytelephonic or other electronic means as more specifically described in Section 5.7and entitled to vote thereat.

 

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(o)           “DissolutionEvent” means (i) The affirmative vote of a 75% majority in interest of theMembers to dissolve, wind up, and liquidate the Company; or (ii) The entry of adecree of judicial dissolution pursuant to the Act.

 

(p)           “EffectiveDate” means November 2, 2001.

 

(q)           “Facilities”shall mean the ethanol production and co-product production facilities in thetri-county area of Columbia, Dane, and Dodge counties, Wisconsin, or such otherlocation as may be determined by the Directors to be constructed and operatedby the Company pursuant to the Business Plan.

 

(r)            “FinancingClosing” means the actual closing (execution and delivery of all requireddocuments) by the Company with its project lender(s) providing for all debtfinancing, including senior and subordinated debt and any other projectfinancing characterized by debt obligations and repayable as debt which isrequired by the project lender(s) or which is deemed necessary or prudent inthe sole discretion of the Directors.

 

(s)           “FiscalQuarter” means (i) any three-month period commencing on each of January 1,April 1, July 1 and October 1 and ending on the last date beforethe next such date and (ii) the period commencing on the immediately preceding January 1,April 1, July 1, or October 1, as the case may be, and ending onthe date on which all Property is distributed to the Unit Holders pursuant to Section 10hereof.

 

(t)            “FiscalYear” means (i) any twelve-month period commencing on January 1 and endingon December 31 and (ii) the period commencing on the immediately precedingJanuary 1 and ending on the date on which all Property is distributed tothe Unit Holders pursuant to Section 10 hereof, or, if the contextrequires, any portion of a Fiscal Year for which an allocation of Profits orLosses or a distribution is to be made.

 

(u)           “GAAP”means generally accepted accounting principles in effect in the United Statesof America from time to time.

 

(v)           “GrossAsset Value” means with respect to any asset, the asset’s adjusted basis forfederal income tax purposes, except as follows: (i) The initial Gross AssetValue of any asset contributed by a Member to the Company shall be the grossfair market value of such asset, as determined by the Directors provided thatthe initial Gross Asset Values of the assets contributed to the Companypursuant to Section 2.1 hereof shall be as set forth in such section; (ii)The Gross Asset Values of all Company assets shall be adjusted to equal theirrespective gross fair market values (taking Code Section 7701(g) intoaccount), as determined by the Directors as of the following times: (A) theacquisition of an additional interest in the Company by any new or existingMember in exchange for more than a de minimis Capital Contribution; (B) thedistribution by the Company to a Member of more than a de minimis amount ofCompany property as consideration for an interest in the Company; and (C) theliquidation of the Company within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),provided that an adjustment described in clauses (A) and (B) of this paragraphshall be made only if the Directors reasonably determine that such adjustmentis necessary to reflect the relative economic interests of the

 

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Members in the Company; (iii) The Gross Asset Value of any item ofCompany assets distributed to any Member shall be adjusted to equal the grossfair market value (taking Code Section 7701(g) into account) of such asseton the date of distribution as determined by the Directors; and (iv) The GrossAsset Values of Company assets shall be increased (or decreased) to reflect anyadjustments 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 aretaken into account in determining Capital Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)and subparagraph (vi) of the definition of “Profits” and “Losses” or Section 3.3(c)hereof; provided, however, that Gross Asset Values shall not be adjustedpursuant to this subparagraph (iv) to the extent that an adjustment pursuant tosubparagraph (ii) is required in connection with a transaction that wouldotherwise result in an adjustment pursuant to this subparagraph (iv). If theGross Asset Value of an asset has been determined or adjusted pursuant tosubparagraph (ii) or (iv), such Gross Asset Value shall thereafter be adjustedby the Depreciation taken into account with respect to such asset, for purposesof computing Profits and Losses.

 

(w)          “IssuanceItems” has the meaning set forth in Section 3.3(f) hereof.

 

(x)            “LiquidationPeriod” has the meaning set forth in Section 10.6 hereof.

 

(y)           “Liquidator”has the meaning set forth in Section 10.8 hereof.

 

(z)            “Losses”has the meaning set forth in the definition of “Profits” and “Losses.”

 

(aa)         “Member”means any person (i) whose name is set forth as such on Exhibit “A” initiallyattached hereto or has become a Member pursuant to the terms of this Agreement,and (ii) who is the owner of one or more Units.

 

(bb)         “Members”means all such Members.

 

(cc)         “MembershipEconomic Interest” means collectively, a Member’s share of “Profits” and “Losses,”the right to receive distributions of the Company’s assets, and the right toinformation concerning the business and affairs of the Company provided by theAct. The Membership Economic Interest of a Member is quantified by the unit ofmeasurement referred to herein as “Units.”

 

(dd)         “MembershipInterest” means collectively, the Membership Economic Interest and MembershipVoting Interest.

 

(ee)         “MembershipRegister” means the membership register maintained by the Company at itsprincipal office or by a duly appointed agent of the Company setting forth thename, address, the number of Units, and Capital Contributions of each Member ofthe Company, which shall be modified from time to time as additional Units areissued and as Units are transferred pursuant to this Agreement.

 

(ff)           “MembershipVoting Interest” means collectively, a Member’s right to vote as set forth inthis Agreement or required by the Act. The Membership Voting Interest of aMember

 

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shall mean as to any matter to which the Member is entitled to votehereunder or as may be required under the Act, the right to one (1) vote foreach Unit registered in the name of such Member as shown in the MembershipRegister.

 

(gg)         “NetCash Flow” means the gross cash proceeds of the Company less the portionthereof used to pay or establish reserves for all Company expenses, debtpayments, capital improvements, replacements, and contingencies, all asreasonably determined by the Directors. “Net Cash Flow” shall not be reduced bydepreciation, amortization, cost recovery deductions, or similar allowances,but shall be increased by any reductions of reserves previously established.

 

(hh)         “NonrecourseDeductions” has the meaning set forth in Section 1.704-2(b)(1) of theRegulations.

 

(ii)           “NonrecourseLiability” has the meaning set forth in Section 1.704-2(b)(3) of theRegulations.

 

(jj)           “Officer”or “Officers” has the meaning set forth in Section 5.14 hereof.

 

(kk)         “PermittedTransfer” has the meaning set forth in Section 9.2 hereof.

 

(ll)           “Person”means any individual, partnership (whether general or limited), joint venture,limited liability company, corporation, trust, estate, association, nominee orother entity.

 

(mm)       “Profitsand Losses” mean, for each Fiscal Year, an amount equal to the Company’s taxableincome 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 bestated separately pursuant to Code Section 703(a)(1) shall be included intaxable income or loss), with the following adjustments (without duplication):(i) Any income of the Company that is exempt from federal income tax and nototherwise taken into account in computing Profits or Losses pursuant to thisdefinition of “Profits” and “Losses” shall be added to such taxable income orloss; (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 toRegulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken intoaccount in computing Profits or Losses pursuant to this definition of “Profits”and “Losses” shall be subtracted from such taxable income or loss; (iii) In theevent the Gross Asset Value of any Company asset is adjusted pursuant tosubparagraphs (ii) or (iii) of the definition of Gross Asset Value, the amountof such adjustment shall be treated as an item of gain (if the adjustmentincreases the Gross Asset Value of the asset) or an item of loss (if theadjustment decreases the Gross Asset Value of the asset) from the dispositionof such asset and shall be taken into account for purposes of computing Profitsor Losses; (iv) Gain or loss resulting from any disposition of Property withrespect to which gain or loss is recognized for federal income tax purposesshall be computed by reference to the Gross Asset Value of the Propertydisposed of, notwithstanding that the adjusted tax basis of such Propertydiffers from its Gross Asset Value; (v) In lieu of the depreciation,amortization, and other cost recovery deductions taken into account incomputing such taxable income or loss, there shall be taken into accountDepreciation for such Fiscal Year, computed in accordance with the definitionof Depreciation; (vi) To the extent an adjustment to the adjusted tax basis ofany Company asset

 

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pursuant to Code Section 734(b) is required, pursuant toRegulations Section 1.704-(b)(2)(iv)(m)(4), to be taken into account indetermining Capital Accounts as a result of a distribution other than inliquidation of a Unit Holder’s interest in the Company, the amount of suchadjustment shall be treated as an item of gain (if the adjustment increases thebasis of the asset) or loss (if the adjustment decreases such basis) from thedisposition of such asset and shall be taken into account for purposes ofcomputing Profits or Losses; and (vii) Notwithstanding any other provision ofthis definition, any items which are specially allocated pursuant to Section 3.3and Section 3.4 hereof shall not be taken into account in computingProfits or Losses. The amounts of the items of Company income, gain, loss ordeduction available to be specially allocated pursuant to Sections 3.3 and Section 3.4hereof shall be determined by applying rules analogous to those set forth insubparagraphs (i) through (vi) above.

 

(nn)         “Property”means all real and personal property acquired by the Company, including cash,and any improvements thereto, and shall include both tangible and intangibleproperty.

 

(oo)         “Regulations”means the Income Tax Regulations, including Temporary Regulations, promulgatedunder the Code, as such regulations are amended from time to time.

 

(pp)         “RegulatoryAllocations” has the meaning set forth in Section 3.4 hereof.

 

(qq)         “RelatedParty” means the adopted or birth relatives of any Person and such Person’sspouse (whether by marriage or common law), if any, including withoutlimitation great-grandparents, grandparents, children (including stepchildrenand adopted children), grandchildren, and great-grandchildren thereof, and suchPerson’s (and such Person’s spouse’s) brothers, sisters, and cousins and theirrespective lineal ancestors and descendants, and any other ancestors and/ordescendants, and any spouse of any of the foregoing, each trust created for theexclusive benefit of one or more of the foregoing, and the successors, assigns,heirs, executors, personal representatives and estates of any of the foregoing.

 

(rr)           “SecuritiesAct” means the Securities Act of 1933, as amended.

 

(ss)         “Subsidiary”means any corporation, partnership, joint venture, limited liability company,association or other entity in which such Person owns, directly or indirectly,fifty percent (50%) or more of the outstanding equity securities or interests,the holders of which are generally entitled to vote for the election of theboard of directors or other governing body of such entity.

 

(tt)           “TaxMatters Member” has the meaning set forth in Section 7.3 hereof.

 

(uu)         “Transfer”means, as a noun, any voluntary or involuntary transfer, sale, pledge orhypothecation or other disposition and, as a verb, voluntarily or involuntarilyto transfer, give, sell, exchange, assign, pledge, bequest or hypothecate orotherwise dispose of.

 

(vv)         “Unitsor Unit” means an ownership interest in the Company representing a CapitalContribution made as provided in Section 2 in consideration of the Units,including any

 

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and all benefits to which the holder of such Units may be entitled asprovided in this Agreement, together with all obligations of such Person tocomply with the terms and provisions of this Agreement.

 

(ww)       “UnitHolders” means all Unit Holders.

 

(xx)          “UnitHolder” means the owner of one or more Units.

 

(yy)         “UnitHolder Nonrecourse Debt” has the same meaning as the term “partner nonrecoursedebt” in Section 1.704-2(b)(4) of the Regulations.

 

(zz)          “UnitHolder Nonrecourse Debt Minimum Gain” means an amount, with respect to eachUnit Holder Nonrecourse Debt, equal to the Company Minimum Gain that wouldresult if such Unit Holder Nonrecourse Debt were treated as a NonrecourseLiability, determined in accordance with Section 1.704-2(i)(3) of theRegulations.

 

(aaa)       “UnitHolder Nonrecourse Deductions “ has the same meaning as the term “partnernonrecourse deductions” in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of theRegulations.

 

SECTION 2.  CAPITALCONTRIBUTIONS; CAPITAL ACCOUNTS

 

2.1           OriginalCapital Contributions.  The name,address, original Capital Contribution, and initial Units quantifying theMembership Interest of each initial Member are set out in Exhibit A attachedhereto, and shall also be set out in the Membership Register along with thoseMembers admitted after to the Effective Date.

 

2.2           AdditionalCapital Contributions; Additional Units.  No Unit Holder shall be obligated to make any additional CapitalContributions to the Company or to pay any assessment to the Company, otherthan any unpaid amounts on such Unit Holder’s original Capital Contributions,and no Units shall be subject to any calls, requests or demands for capital.Subject to Section 5.6, additional Membership Economic Interestsquantified by additional Units may be issued in consideration of CapitalContributions as agreed to between the Directors and the Person acquiring theMembership Economic Interest quantified by the additional Units. Each Person towhom additional Units are issued shall be admitted as a Member in accordancewith this Agreement. Upon such Capital Contributions, the Directors shall causeExhibit A and the Membership Register to be appropriately amended.

 

2.3           CapitalAccounts.   A Capital Account shallbe maintained for each Unit Holder in accordance with the following provisions:

 

(a)   Toeach Unit Holder’s Capital Account there shall be credited (i) such Unit Holder’sCapital Contributions, (ii) such Unit Holder’s distributive share of Profitsand any items in the nature of income or gain which are specially allocatedpursuant to Section 3.3 and Section 3.4, and (iii) the amount of anyCompany liabilities assumed

 

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by such Unit Holder or which are secured byany Property distributed to such Unit Holder;

 

(b)   Toeach Unit Holder’s Capital Account there shall be debited (i) the amount ofmoney and the Gross Asset Value of any Property distributed to such Unit Holderpursuant to any provision of this Agreement, (ii) such Unit Holder’sdistributive share of Losses and any items in the nature of expenses or losseswhich are specially allocated pursuant to Section 3.3 and 3.4 hereof, and(iii) the amount of any liabilities of such Unit Holder assumed by the Companyor which are secured by any Property contributed by such Unit Holder to theCompany;

 

(c)   Inthe event Units are Transferred in accordance with the terms of this Agreement,the transferee shall succeed to the Capital Account of the transferor to theextent it relates to the Transferred Units; and

 

(d)   Indetermining the amount of any liability for purposes of subparagraphs (a) and(b) above there shall be taken into account Code Section 752(c) and anyother applicable provisions of the Code and Regulations.

 

The foregoing provisions and the other provisions of this Agreementrelating to the maintenance of Capital Accounts are intended to comply withRegulations Section 1.704-1(b), and shall be interpreted and applied in amanner consistent with such Regulations. In the event the Directors shalldetermine that it is prudent to modify the manner in which the Capital Accounts,or any debits or credits thereto (including, without limitation, debits orcredits relating to liabilities which are secured by contributed or distributedproperty or which are assumed by the Company or any Unit Holders), are computedin order to comply with such Regulations, the Directors may make suchmodification, provided that it is not likely to have a material effect on theamounts distributed to any Person pursuant to Section 10 hereof upon thedissolution of the Company. The Directors also shall (i) make any adjustmentsthat are necessary or appropriate to maintain equality between the CapitalAccounts of the Unit Holders and the amount of capital reflected on the Company’sbalance sheet, as computed for book purposes, in accordance with Regulations Section 1.704-1(b)(2)(iv)(q),and (ii) make any appropriate modifications in the event unanticipated eventsmight otherwise cause this Agreement not to comply with Regulations Section 1.704-1(b).

 

SECTION 3.  ALLOCATIONS

 

3.1           Profits.   After giving effect to the specialallocations in Section 3.3 and Section 3.4 hereof, Profits for anyFiscal Year shall be allocated among the Unit Holders in proportion to Unitsheld.

 

3.2           Losses.   After giving effect to the specialallocations in Section 3.3 and 3.4 hereof, Losses for any Fiscal Yearshall be allocated among the Unit Holders in proportion to Units held.

 

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3.3           SpecialAllocations.   The following specialallocations shall be made in the following order:

 

(a)           MinimumGain Chargeback.  Except as otherwiseprovided in Section 1.704-2(f) of the Regulations, notwithstanding anyother provision of this Section 3, if there is a net decrease in CompanyMinimum Gain during any Fiscal Year, each Unit Holder shall be speciallyallocated items of Company income and gain for such Fiscal Year (and, ifnecessary, subsequent Fiscal Years) in an amount equal to such Unit Holder’sshare of the net decrease in Company Minimum Gain, determined in accordancewith Regulations Section 1.704-2(g). Allocations pursuant to the previoussentence shall be made in proportion to the respective amounts required to beallocated to each Unit Holder pursuant thereto. The items to be so allocatedshall 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 theminimum gain chargeback requirement in Section 1.704-2(f) of theRegulations and shall be interpreted consistently therewith.

 

(b)           UnitHolder Minimum Gain Chargeback.  Exceptas otherwise provided in Section 1.704-2(i)(4) of the Regulations,notwithstanding any other provision of this Section 3, if there is a netdecrease in Unit Holder Nonrecourse Debt Minimum Gain attributable to a UnitHolder Nonrecourse Debt during any Fiscal Year, each Unit Holder who has ashare of the Unit Holder Nonrecourse Debt Minimum Gain attributable to suchUnit Holder Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5)of the Regulations, shall be specially allocated items of Company income andgain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in anamount equal to such Unit Holder’s share of the net decrease in Unit HolderNonrecourse 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 tothe respective amounts required to be allocated to each Unit Holder pursuantthereto. The items to be so allocated shall be determined in accordance withSections 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)           QualifiedIncome Offset.  In the event any Memberunexpectedly receives any adjustments, allocations, or distributions describedin Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Company income and gainshall be specially allocated to such Member in an amount and manner sufficientto eliminate, to the extent required by the Regulations, the Adjusted CapitalAccount Deficit as soon as practicable, provided that an allocation pursuant tothis Section 3.3(c) shall be made only if and to the extent that theMember would have an Adjusted Capital Account Deficit after all otherallocations provided for in this Section 3 have been tentatively made asif this Section 3.3(c) were not in the Agreement.

 

(d)           GrossIncome Allocation.  In the event anyMember has a deficit Capital Account at the end of any Fiscal Year which is inexcess of the sum of (i) the amount such Member is obligated to restorepursuant to any provision of this Agreement, and (ii) the amount such Member isdeemed to be obligated to restore pursuant to the penultimate sentences ofSections 1.704-2(g)(1) and 1.704-2(i)(5) of the Regulations, each such Membershall be specially

 

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allocated items of Company income and gain in the amount of such excessas 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 deficitCapital Account in excess of such sum after all other allocations provided forin this Section 3 have been made as if Section 3.3(c) and this Section 3.3(d)were not in this Agreement.

 

(e)           NonrecourseDeductions.  Non recourse Deductions forany Fiscal Year or other period shall be specially allocated among the Membersin proportion to Units held.

 

(f)            UnitHolder Nonrecourse Deductions.  Any UnitHolder Nonrecourse Deductions for any Fiscal Year shall be specially allocatedto the Unit Holder who bears the economic risk of loss with respect to the UnitHolder Nonrecourse Debt to which such Unit Holder Nonrecourse Deductions areattributable in accordance with Regulations Section 1.704-2(i)(1).

 

(g)           Section 754Adjustments.  To the extent an adjustmentto the adjusted tax basis of any Company asset, pursuant to Code Section 734(b)or Code Section 743(b) is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2)or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining CapitalAccounts as the result of a distribution to a Unit Holder in completeliquidation of such Unit Holder’s interest in the Company, the amount of suchadjustment to Capital Accounts shall be treated as an item of gain (if theadjustment increases the basis of the asset) or loss (if the adjustmentdecreases such basis) and such gain or loss shall be specially allocated to theUnit Holders in accordance with their interests in the Company in the eventRegulations Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Unit Holderto whom such distribution was made in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4)applies.

 

(h)           AllocationsRelating to Taxable Issuance of Company Units. Any income, gain, loss or deduction realized as a direct or indirectresult of the issuance of Units by the Company to a Unit Holder (the “IssuanceItems”) shall be allocated among the Unit Holders so that, to the extentpossible, the net amount of such Issuance Items, together with all otherallocations under this Agreement to each Unit Holder shall be equal to the netamount that would have been allocated to each such Unit Holder if the IssuanceItems had not been realized.

 

3.4           CurativeAllocations.   The allocations setforth in Sections 3.3(a), 3.3(b), 3.3(c), 3.3(d), 3.3(e), 3.3(f), 3.3(g) and3.5 (the “Regulatory Allocations”) are intended to comply with certainrequirements of the Regulations. It is the intent of the Members that, to theextent possible, all Regulatory Allocations shall be offset either with otherRegulatory Allocations or with special allocations of other items of Companyincome, gain, loss or deduction pursuant to this Section 3.4. Therefore,notwithstanding any other provision of this Section 3 (other than theRegulatory Allocations), the Directors shall make such offsetting specialallocations of Company income, gain, loss or deduction in whatever manner itdetermines appropriate so that, after such offsetting allocations are made,each Member’s Capital Account balance is, to the extent possible, equal to theCapital Account balance such Member would have had if the RegulatoryAllocations were not part of the Agreement and all Company items were allocatedpursuant to Sections 3.1, 3.2, and 3.3(h). In exercising their discretion under this Section 3.4, theDirectors shall take into account future Regulatory Allocations under Sections3.3(a) and 3.3(b) that, although not yet

 

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made, are likely to offset other Regulatory Allocations previously madeunder Sections 3.3(e) and 3.3(f).

 

3.5           LossLimitation.   Losses allocatedpursuant to Section 3.2 hereof shall not exceed the maximum amount ofLosses that can be allocated without causing any Unit Holder to have anAdjusted Capital Account Deficit at the end of any Fiscal Year. In the eventsome but not all of the Unit Holders would have Adjusted Capital AccountDeficits as a consequence of an allocation of Losses pursuant to Section 3.2hereof, the limitation set forth in this Section 3.5 shall be applied on aUnit Holder by Unit Holder basis and Losses not allocable to any Unit Holder asa result of such limitation shall be allocated to the other Unit Holders inaccordance with the positive balances in such Unit Holder’s Capital Accounts soas to allocate the maximum permissible Losses to each Unit Holder under Section 1.704-1(b)(2)(ii)(d)of the Regulations.

 

3.6           OtherAllocation Rules.   (a) For purposesof determining the Profits, Losses, or any other items allocable to any period,Profits, Losses, and any such other items shall be determined on a daily,monthly, or other basis, as determined by the Directors using any permissiblemethod under Code Section 706 and the Regulations thereunder. (b) The UnitHolders are aware of the income tax consequences of the allocations made bythis Section 3 and hereby agree to be bound by the provisions of this Section 3in reporting their shares of Company income and loss for income tax purposes.(c) Solely for purposes of determining a Unit Holder’s proportionate share ofthe “excess nonrecourse liabilities” of the Company within the meaning ofRegulations Section 1.752-3(a)(3), the Unit Holders’ aggregate interestsin 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 Directorsshall endeavor to treat distributions of Net Cash Flow as having been made fromthe proceeds of a Nonrecourse Liability or a Unit Holder Nonrecourse Debt onlyto the extent that such distributions would cause or increase an AdjustedCapital Account Deficit for any Unit Holder. (d) Generally, allocations ofProfits and Losses to the Unit Holders shall be allocated among them in theratio which each Unit Holder’s Units bears to the total number of Units issuedand outstanding.

 

3.7           TaxAllocations:  Code Section 704(c).   In accordance with Code Section 704(c)and the Regulations thereunder, income, gain, loss, and deduction with respectto any Property contributed to the capital of the Company shall, solely for taxpurposes, be allocated among the Unit Holders so as to take account of anyvariation between the adjusted basis of such Property to the Company forfederal income tax purposes and its initial Gross Asset Value (computed inaccordance with the definition of Gross Asset Value). In the event the GrossAsset Value of any Company asset is adjusted pursuant to subparagraph (ii) ofthe definition of Gross Asset Value, subsequent allocations of income, gain,loss, and deduction with respect to such asset shall take account of anyvariation between the adjusted basis of such asset for federal income taxpurposes 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 tosuch allocations shall be made by the Directors in any manner that reasonablyreflects the purpose and intention of this Agreement. Allocations pursuant tothis Section 3.7 are solely for purposes of federal, state, and localtaxes 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, ordistributions pursuant to any provision of this Agreement.

 

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3.8           TaxCredit Allocations.  All creditsagainst income tax with respect to the Company’s property or operations,including the Small Ethanol Producer Credit (as defined in the Code), ifavailable, shall be allocated among the Members in accordance with theirrespective membership interests in the Company for the Fiscal Year during whichthe expenditure, production, sale, or other event giving rise to the creditoccurs.  This Section 3.8 isintended to comply with the applicable tax credit allocation principles of section 1.704-1(b)(4)(ii)of the Regulations and shall be interpreted consistently therewith.

 

SECTION 4.  DISTRIBUTIONS

 

4.1           NetCash Flow.  Except as otherwiseprovided in Section 10 hereof, Net Cash Flow, if any, shall be distributedto the Unit Holders in proportion to Units held subject to, and to the extentpermitted by, any loan covenants or restrictions on such distributions agreedto by the Company in any loan agreements with the Company’s lenders from timeto time in effect. In determining Net Cash Flow, the Directors shall endeavorto provide for cash distributions at such times and in such amounts as willpermit the Unit Holders to make timely payment of income taxes.

 

4.2           AmountsWithheld.   All amounts withheldpursuant to the Code or any provision of any state, local or foreign tax lawwith respect to any payment, distribution or allocation to the Company or theUnit Holders shall be treated as amounts paid or distributed, as the case maybe, to the Unit Holders with respect to which such amount was withheld pursuantto this Section 4.2 for all purposes under this Agreement. The Company isauthorized to withhold from payments and distributions, or with respect toallocations to the Unit Holders, and to pay over to any federal, state andlocal government or any foreign government, any amounts required to be sowithheld pursuant to the Code or any provisions of any other federal, state orlocal law or any foreign law, and shall allocate any such amounts to the UnitHolders with respect to which such amount was withheld.

 

4.3           Limitationson Distributions.   The Company shallmake no distributions to the Unit Holders except as provided in this Section 4and Section 10 hereof. Notwithstanding any other provision, no distribution shall be made if itis not permitted to be made under the Act.

 

SECTION 5.  MANAGEMENT

 

5.1           Directors.   The Directors shall direct the business andaffairs of the Company, and shall exercise all of the powers of the Companyexcept such as are by this Agreement conferred upon or reserved to the Members.  No person who is not a Member may be aDirector.  The Directors shall adopt suchpolicies, rules, regulations, and actions not inconsistent with law or thisAgreement as it may deem advisable. The management of the business and affairsof the Company shall be directed by the Directors and not by its Members. TheDirectors of the Company shall consist of a minimum of seven (7) and a maximumof fifteen (15) members, and the number of Directors may be fixed or changedfrom time to time, within that variable range,

 

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by the Directors, in accordance with the provisions of this Section 5.1.  The Members may increase or decrease thenumber of Directors last approved and may change from a variable range to afixed number or visa versa by the affirmative vote of a majority of theMembership Voting Interests represented at a meeting of the Members (in person,by proxy, or by mail ballot).  Subject toSection 5.4 hereof or any other express provisions hereof, the businessand affairs of the Company shall be managed by or under the direction of theDirectors.  The amendment or repeal ofthis section or the adoption of any provision inconsistent therewith shallrequire the approval of a majority of the Membership Voting Interestsrepresented at a meeting of the Members (in person, by proxy, or by mailballot).

 

5.2           Electionof Directors.   The initialDirectors, appointed by the initial Members, shall be the individuals set forthon Exhibit “B” attached hereto.  Theinitial Directors shall each serve as Directors for an initial term ending one(1) year after substantial completion of the construction of the Facilities,and in all cases until a successor is elected and qualified, or until theearlier death, resignation, removal or disqualification of such Director.  After the expiration of the initial terms ofthe Directors, at each annual meeting of the Members, Directors shall beelected by the Members for staggered terms of three (3) years and until a successoris elected and qualified. The terms of Class I Directors shall expire first,followed by those of Class II Directors, and then Class III Directors.  The initial Directors shall, by resolution,separately classify each initial Director into a respective class, suchclassification to serve as the basis for the staggering of terms among theinitial and the subsequent Directors thereafter.  One or more nominees for Director positionsup for election shall be named by the then current Directors or by a nominatingcommittee established by the Directors. Nominees for open Director positionsshall be elected by a plurality vote of the Members so that the nomineesreceiving the greatest number of votes relative to the votes cast for theircompetitors shall be elected Directors.  Nominationsfor the election of directors may also be made by any Unit Holder entitled tovote generally in the election of directors. However, any Unit Holder thatintends to nominate one or more persons for election as Directors at a meetingmay do so only if written notice of such Unit Holder’s intent to make suchnomination or nominations has been given, either by personal delivery or byUnited States mail, postage prepaid, to the Secretary of the Company not lessthan sixty (60) days nor more than ninety (90) days prior to the annual meetingof the Company.  Each such notice to theSecretary shall set forth: (i) the name and address of record of the UnitHolder who intends to make the nomination; (ii) a representation that the UnitHolder is a holder of record of Units of the Company entitled to vote at suchmeeting and intends to appear in person or by proxy at the meeting to nominatethe person or persons specified in the notice; (iii) the name, age, businessand residence addresses, and principal occupation or employment of eachnominee; (iv) a description of all arrangements or understandings between theUnit Holder and each nominee and any other person or persons (naming suchperson or persons) pursuant to which the nomination or nominations are to bemade by the Unit Holder; (v) such other information regarding each nomineeproposed by such Unit Holder as would be required to be included in a proxystatement filed pursuant to the proxy rules of the Securities and ExchangeCommission; (vi) the consent of each nominee to serve as a Director of theCompany if so elected, and (vi) a nominating petition signed and dated by theholders of at least five percent (5%) of the then outstanding Units and clearlysetting forth the proposed nominee as a candidate of the Director’s seat to befilled at the next election of Directors. The Company may require any proposednominee to furnish such other information as may reasonably be required by theCompany to

 

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determine the eligibility of such proposed nominee to serve as aDirector of the Company. The presiding Officer of the meeting may, if the factswarrant, determine that a nomination was not made in accordance with theforegoing procedure, and if he should so determine, he shall so declare to themeeting and the defective nomination shall be disregarded.   The amendment or repeal of this section orthe adoption of any provision inconsistent therewith shall require the approvalof the Unit Holders representing at least a majority of the Membership VotingInterests represented at a meeting of the Members (in person, by proxy, or bymail ballot).  Whenever a vacancy occursother than from expiration of a term of office or removal from office, amajority of the remaining Directors shall appoint a new Director to fill thevacancy for the remainder of such term.

 

5.3           Committees.   A resolution approved by the affirmativevote of a majority of the Directors may establish committees having theauthority of the Directors in the management of the business of the Company tothe extent provided in the resolution. A committee shall consist of one or morepersons, who need not be Directors, appointed by affirmative vote of a majorityof the Directors present. Committees may include a compensation committeeand/or an audit committee, in each case consisting of one or more independentDirectors or other independent persons. Committees are subject to the directionand control of, and vacancies in the membership thereof shall be filled by, theDirectors. A majority of the members of the committee present at a meeting is aquorum for the transaction of business, unless a larger or smaller proportionor number is provided in a resolution approved by the affirmative vote of amajority of the Directors present.

 

5.4           Authorityof Directors.   Subject to thelimitations and restrictions set forth in this Agreement, the Directors shalldirect the management of the business and affairs of the Company and shall haveall of the rights and powers which may be possessed by a “manager” under theAct including, without limitation, the right and power to do or perform thefollowing and, to the extent permitted by the Act or this Agreement, thefurther right and power by resolution of the Directors to delegate to theOfficers or such other Person or Persons to do or perform the following:

 

(a)   Conductits business, carry on its operations and have and exercise the powers grantedby the Act in any state, territory, district or possession of the UnitedStates, or in any foreign country which may be necessary or convenient toeffect any or all of the purposes for which it is organized;

 

(b)   Acquireby purchase, lease, or otherwise any real or personal property which may benecessary, convenient, or incidental to the accomplishment of the purposes ofthe Company;

 

(c)   Operate,maintain, finance, improve, construct, own, grant operations with respect to,sell, convey, assign, mortgage, and lease any real estate and any personalproperty necessary, convenient, or incidental to the accomplishment of thepurposes of the Company;

 

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(d)         Execute any and allagreements, contracts, documents, certifications, and instruments necessary orconvenient in connection with the management, maintenance, and operation of thebusiness, or in connection with managing the affairs of the Company, including,executing amendments to this Agreement and the Articles in accordance with theterms of this Agreement, both as Directors and, if required, asattorney-in-fact for the Members pursuant to any power of attorney granted bythe Members to the Directors;

 

(e)          Borrow money and issueevidences of indebtedness necessary, convenient, or incidental to theaccomplishment of the purposes of the Company, and secure the same by mortgage,pledge, or other lien on any Company assets;

 

(f)            Execute, infurtherance of any or all of the purposes of the Company, any deed, lease,mortgage, deed of trust, mortgage note, promissory note, bill of sale,contract, or other instrument purporting to convey or encumber any or all ofthe Company assets;

 

(g)         Prepay in whole or inpart, refinance, recast, increase, modify, or extend any liabilities affectingthe assets of the Company and in connection therewith execute any extensions orrenewals of encumbrances on any or all of such assets;

 

(h)         Care for and distributefunds to the Members by way of cash income, return of capital, or otherwise,all in accordance with the provisions of this Agreement, and perform allmatters in furtherance of the objectives of the Company or this Agreement;

 

(i)             Contract on behalf ofthe Company for the employment and services or employees and/or independentcontractors, such as lawyers and accountants, and delegate to such Persons theduty to manage or supervise any of the assets or operations of the Company;

 

(j)             Engage in any kind ofactivity and perform and carry out contracts of any kind (including contractsof insurance covering risks to Company assets and Directors’ and Officers’liability) necessary or incidental to, or in connection with, theaccomplishment of the purposes of the Company, as may be lawfully carried on orperformed by a limited liability company under the laws of each state in whichthe Company is then formed or qualified;

 

(k)          Take, or refrain fromtaking, all actions, not expressly proscribed or limited by this Agreement, asmay be necessary or appropriate to accomplish the purposes of the Company;

 

(l)             Institute, prosecute,defend, settle, compromise, and dismiss lawsuits or other judicial oradministrative proceedings brought on or in behalf of, or against, the Company,the Members or the Directors or Officers in connection with activities arisingout of, connected with, or incidental to this Agreement, and to engage counselor others in connection therewith;

 

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(m)       Purchase, take, receive,subscribe for or otherwise acquire, own, hold, vote, use, employ, sell,mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal inand with, shares or other interests in or obligations of domestic or foreigncorporations, associations, general or limited partnerships, other limitedliability companies, or individuals or direct or indirect obligations of theUnited States or of any government, state, territory, government district ormunicipality or of any instrumentality of any of them;

 

(n)         Agree with any Person asto the form and other terms and conditions of such Person’s CapitalContribution to the Company and cause the Company to issue Membership EconomicInterests and Units in consideration of such Capital Contribution; and

 

(o)         Indemnify a Member orDirectors or Officers, or former Members or Directors or Officers, and to makeany other indemnification that is authorized by this Agreement in accordancewith, and to the fullest extent permitted by, the Act.

 

5.5           Directoras Agent.   Notwithstanding the powerand authority of the Directors to manage the business and affairs of theCompany, no Director shall have authority to act as agent for the Company forthe purposes of its business (including the execution of any instrument onbehalf of the Company) unless the Directors have authorized the Director totake such action. The Directors may also delegate authority to manage thebusiness and affairs of the Company (including the execution of instruments onbehalf of the Company) to such Person or Persons (including to any Officers)designated by the Directors, and such Person or Persons (or Officers) shallhave such titles and authority as determined by the Directors.

 

5.6           Restrictionson Authority of Directors.   (a) TheDirectors shall not have authority to, and they covenant and agree that theyshall not, do any of the following acts without the unanimous consent of theMembers:

 

(i)                                                          Causeor permit the Company to engage in any activity that is not consistent with thepurposes of the Company as set forth in Section 1.3 hereof;

 

(ii)                                                       Knowinglydo any act in contravention of this Agreement or which would make it impossibleto carry on the ordinary business of the Company, except as otherwise providedin this Agreement;

 

(iii)                                                    PossessCompany Property, or assign rights in specific Company Property, for other thana Company purpose; or

 

(iv)                                                   Causethe Company to voluntarily take any action that would cause a bankruptcy of theCompany.

 

(b) The Directors shall not have authority to, and they covenant andagree that they shall not cause the Company to, without the consent of amajority of the Membership Voting Interests:

 

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(i)                                     Merge,consolidate, exchange or otherwise dispose of at one time all or substantiallyall of the Property, except for a liquidating sale of the Property inconnection with the dissolution of the Company;

 

(ii)                                  Confessa judgment against the Company in an amount in excess of $500,000;

 

(iii)                               IssueUnits at a purchase price of less than $250.00 per Unit;

 

(iv)                              Issuemore than an aggregate of 28,000 Units;

 

(v)                                 Electto dissolve the Company;

 

(vi)                              Causethe Company to acquire any equity or debt securities of any Director or any ofits Affiliates, or otherwise make loans to any Director or any of itsAffiliates.

 

The actions specified herein as requiring the consent of the Membersshall be in addition to any actions by the Directors which are specified in theAct as requiring the consent or approval of the Members.  Any such required consent or approval may begiven by a vote of a majority of the Membership Voting Interests.

 

5.7           DirectorActions.   Meetings of the Directorsshall be held at such times and places as shall from time to time be determinedby the Directors. Meetings of the Directors may also be called by the Chairmanof the Company or by any one or more Directors. If the date, time, and place ofa meeting of the Directors has been announced at a previous meeting, no noticeshall be required. In all other cases, five (5) days’ written notice ofmeetings, stating the date, time, and place thereof and any other informationrequired by law or desired by the Person(s) calling such meeting, shall begiven to each Director. Any Director may waive notice of any meeting. A waiverof notice by a Director is effective whether given before, at, or after themeeting, and whether given orally, in writing, or by attendance. The attendanceof a Director at any meeting shall constitute a waiver of notice of such meeting,unless such Director objects at the beginning of the meeting to the transactionof business on the grounds that the meeting is not lawfully called or convenedand does not participate thereafter in the meeting. Any action required orpermitted to be taken by the Directors may also be taken by a written actionsigned by a two-thirds majority of all Directors, provided that a copy of suchwritten action shall be promptly given to all Directors. The Directors mayparticipate in any meeting of the Directors by means of telephone conference orsimilar means of communication by which all persons participating in themeeting can simultaneously hear each other. Not less than fifty percent (50%)of the Directors shall constitute a quorum for the transaction of business atany Director’s meeting. Each Director shall have one (1) vote at meetings ofthe Directors. The Directors shall take action by the vote of a majority of allDirectors. No Director shall be disqualified from voting on any matter to bedetermined or decided by the Directors solely by reason of such Director’s (orhis/her Affiliate’s) potential financial interest in the outcome of such vote,provided that the nature of such Director’s (or his/her Affiliate’s) potentialfinancial interest was reasonably disclosed at the time of such vote.

 

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5.8           Dutiesand Obligations of Directors.  TheDirectors shall cause the Company to conduct its business and operationsseparate and apart from that of any Director or any of its Affiliates. TheDirectors shall take all actions which may be necessary or appropriate (i) forthe continuation of the Company’s valid existence as a limited liabilitycompany under the laws of the State of Wisconsin and each other jurisdiction inwhich such existence is necessary to protect the limited liability of Membersor to enable the Company to conduct the business in which it is engaged, and(ii) for the accomplishment of the Company’s purposes, including theacquisition, development, maintenance, preservation, and operation of CompanyProperty in accordance with the provisions of this Agreement and applicablelaws and regulations. Each Director shall have the duty to discharge theforegoing duties in good faith, in a manner the Director believes to be in thebest interests of the Company, and with the care an ordinarily prudent personin a like position would exercise under similar circumstances. The Directorsshall be under no other fiduciary duty to the Company or the Members to conductthe affairs of the Company in a particular manner.

 

5.9           Chairmanand President.   Unless providedotherwise by a resolution adopted by the Directors, the Chairman shall alsohold the office of President and all references herein to Chairman or President shall be deemed to refer to one and sameoffice and to one and the same officer of the Company.  The Chairman/President shall preside atmeetings of the Members and the Directors; shall see that all orders andresolutions of the Directors are carried into effect; may maintain records ofand certify proceedings of the Directors and Members; and shall perform suchother duties as may from time to time be prescribed by the Directors.  .

 

5.10         Presidentand Chief Executive Officer.   TheBoard of Directors shall appoint someone other than the Chairman/President asthe Chief Executive Officer of the Company with such appointment to be made nolater than commencement of operation of the Facilities.  The Chief Executive Officers shall performsuchduties as the Directors may from time to time prescribe, including withoutlimitation, the management of the day-to-day operations of the Facilities.

 

5.11         ChiefFinancial Officer.   Unless providedotherwise by a resolution adopted by the Directors, the Chief Financial Officerof the Company shall be the Treasurer of the Company and shall keep accuratefinancial records for the Company; shall deposit all monies, drafts, and checksin the name of and to the credit of the Company in such banks and depositoriesas the Directors shall designate from time to time; shall endorse for depositall notes, checks, and drafts received by the Company as ordered by theDirectors, making proper vouchers therefor; shall disburse Company funds andissue 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 accountof all such transactions as Chief Financial Officer and of the financialcondition of the Company, and shall perform such other duties as may beprescribed by the Directors or the President from time to time.

 

5.12         Secretary;Assistant Secretary.   The Secretaryshall attend all meetings of the Directors and of the Members and shallmaintain records of, and whenever necessary, certify all proceedings of theDirectors and of the Members. The Secretary shall keep the required records ofthe Company, when so directed by the Directors or other person or personsauthorized to call such meetings, shall give or cause to be given notice ofmeetings of the Members and of

 

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meetings of the Directors, and shall also perform such other duties andhave such other powers as the Chairman or the Directors may prescribe from timeto time. An Assistant Secretary, if any, shall perform the duties of theSecretary during the absence or disability of the Secretary.

 

5.13         ViceChairman and Vice President.   TheCompany shall have one Vice Chairman of the Board of Directors who shall alsohold the office of Vice President and all references herein to Vice Chairman orVice President shall be deemed to refer to one and the same office and to oneand the same officer of the Company.  Inthe absence or disability of the Chairman/President, the Vice Chairman/VicePresident shall preside at meetings of the Members and the Directors and shallperform such other duties as may from time to time be prescribed by theDirectors.

 

5.14         Delegation.   Unless prohibited by a resolution of theDirectors, the President, Chief Financial Officer, Vice President and Secretary(individually, an “Officer” and collectively, “Officers”) may delegate inwriting some or all of the duties and powers of such Officer’s managementposition to other Persons.  An Officerwho delegates the duties or powers of an office remains subject to the standardof conduct for such Officer with respect to the discharge of all duties andpowers so delegated.

 

5.15         Executionof Instruments.   All deeds,mortgages, bonds, checks, contracts and other instruments pertaining to thebusiness 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 designatedfrom time to time by the Directors.

 

5.16         Limitationof Liability; Indemnification of Directors.   To the maximum extent permitted under theAct and other applicable law, no Member or Director of this Company shall bepersonally liable for any debt, obligation or liability of this Company merelyby reason of being a Member or Director or both. No Director of this Companyshall be personally liable to this Company or its Members for monetary damagesfor a breach of fiduciary duty by such Director; provided that this provisionshall not eliminate or limit the liability of a Director for any of thefollowing: (i) receipt of an improper financial benefit to which the Directoris not entitled; (ii) liability for receipt of distributions in violation ofthe articles of organization, operating agreement, or Section 17-76,110 ofthe Act; (iii) a knowing violation of law; or (iv) acts or omissions involvingfraud, bad faith or willful misconduct. To the maximum extent permitted under the Act and other applicable law,the Company, its receiver, or its trustee (in the case of its receiver ortrustee, to the extent of Company Property) shall indemnify, save and holdharmless, and pay all judgments and claims against each Director relating toany liability or damage incurred by reason of any act performed or omitted tobe performed by such Director, officer, or director in connection with thebusiness of the Company, including reasonable attorneys’ fees incurred by suchDirector, officer, or director in connection with the defense of any actionbased on any such act or omission, which attorneys’ fees may be paid asincurred, including all such liabilities under federal and state securitieslaws as permitted by law. To the maximum extent permitted under the Act andother applicable law, in the event of any action by a Unit Holder against anyDirector, including a derivative suit, the Company shall indemnify, saveharmless, and pay all costs, liabilities, damages and expenses of suchDirector, including reasonable attorneys’ fees incurred in the defense of suchaction. Notwithstanding the foregoing provisions, no Director shall beindemnified by the Company to the extent prohibited or limited (but only to

 

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the extent limited) by the Act. The Company may purchase and maintaininsurance on behalf of any Person in such Person’s official capacity againstany liability asserted against and incurred by such Person in or arising fromthat capacity, whether or not the Company would otherwise be required toindemnify the Person against the liability.

 

5.17         Compensation;Expenses of Directors.   No Member orDirector shall receive any salary, fee, or draw for services rendered to or onbehalf of the Company merely by virtue of their status as a Member or Director,it being the intention that, irrespective of any personal interest of any ofthe Directors, the Directors shall have authority to establish reasonablecompensation of all Directors for services to the Company as Directors,Officers, or otherwise. Except as otherwise approved by or pursuant to a policyapproved by the Directors, no Member or Director shall be reimbursed for anyexpenses incurred by such Member or Director on behalf of the Company.Notwithstanding the foregoing, by resolution by the Directors, the Directorsmay be paid as reimbursement therefor, their expenses, if any, of attendance ateach meeting of the Directors. In addition, the Directors, by resolution, mayapprove from time to time, the salaries and other compensation packages of theOfficers of the Company.

 

5.18         Loans.   Any Member or Affiliate may, with theconsent of the Directors, lend or advance money to the Company.  If any Member or Affiliate shall make anyloan or loans to the Company or advance money on its behalf, the amount of anysuch loan or advance shall not be treated as a contribution to the capital ofthe Company but shall be a debt due from the Company. The amount of any suchloan or advance by a lending Member or Affiliate shall be repayable out of the Company’scash and shall bear interest at a rate not in excess of the prime rateestablished, from time to time, by any major bank selected by the Directors forloans to its most creditworthy commercial borrowers, plus four percent (4%) perannum.  If the Directors, or anyAffiliate of the Directors, is the lending Member, the rate of interest and theterms and conditions of such loan shall be no less favorable to the Companythan if the lender had been an independent third party.  None of the Members or their Affiliates shallbe obligated to make any loan or advance to the Company.

 

SECTION 6.  ROLE OF MEMBERS

 

6.1           Rightsof Powers.   Except as otherwiseexpressly provided for in this Agreement, the Members shall not have any rightor power to take part in the management or control of the Company or itsbusiness and affairs or to act for or bind the Company in any way.

 

6.2           VotingRights.   The Members shall havevoting rights as defined by the Membership Voting Interest of such Member andin accordance with the provisions of this Agreement.

 

6.3           MemberMeetings; Quorum and Proxies.  Meetings of the Members shall be called by the Directors, and shall beheld at the principal office of the Company or at such other place as shall bedesignated by the person calling the meeting. Notice of the meeting, stating the place, day and hour of the meeting,shall be given to each Member in accordance with Section 11.1 hereof atleast 10 days and no more than 60 days before the day on which the meeting isto be held. Unit Holders representing an aggregate of not less than twenty-fivepercent (25%) of the Units may also in writing demand that a meeting of theMembers be called by the Directors.

 

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Regular meetings of the Members shall be held not less than once perFiscal Year, at such time and place as determined by the Directors upon writtennotice thereof stating the date, time and place, given not less than ten (10)days nor more than sixty (60) days prior to the meeting to every Memberentitled to vote at such meeting. A Member may waive the notice of meetingrequired hereunder by written notice of waiver signed by the Member whethergiven before, during or after the meeting. Attendance by a Member at a meetingis waiver of notice of that meeting, unless the Member objects at the beginningof the meeting to the transaction of business because the meeting is notlawfully called or convened and thereafter does not participate in the meeting.The presence (in person or by proxy or mail ballot) of at least thirty percent(30%) of the Membership Voting Interests is required for the transaction ofbusiness at a meeting of the Members. Voting by proxy or by mail ballot shallbe permitted on any matter if authorized by the Directors.

 

6.4           Voting;Action by Members.   If a quorum ispresent, the affirmative vote of a majority of the Membership Voting Interestsrepresented at a meeting of the Members (in person, by proxy, or by mailballot) shall constitute the act of the Members, unless the vote of a greateror lesser proportion or numbers is otherwise required by this Agreement.

 

6.5           Terminationof Membership.   The membership of aMember in the Company shall terminate upon the occurrence of events describedin the Act, including registration and withdrawal. If for any reason themembership of a Member is terminated, the Member whose membership hasterminated loses all Membership Voting Interests and shall be considered merelyas assignee of the Membership Economic Interest owned before the termination ofmembership, having only the rights of an unadmitted Assignee provided for in Section 9.5hereof.

 

6.6           Continuationof the Company.   The Company shallnot be dissolved upon the occurrence of any event which is deemed to terminatethe continued membership of a Member. The Company’s affairs shall not berequired to be wound up. The Company shall continue without dissolution.

 

6.7           NoObligation to Purchase Membership Interest.   No Member whose membership in the Companyterminates, nor any transferee of such Member, shall have any right to demandor receive a return of such terminated Member’s Capital Contributions or torequire the purchase or redemption of the Member’s Membership Interest. Theother Members and the Company shall not have any obligation to purchase orredeem the Membership Interest of any such terminated Member or transferee ofany such terminated Member.

 

6.8           Waiverof Dissenters Rights.   Each Memberhereby disclaims, waives and agrees, to the fullest extent permitted by law orthe Act, not to assert dissenters’ or similar rights under the Act.

 

6.9           Limitation onOwnership.  Notwithstanding any otherprovision herein, no Member shall directly or indirectly own or control morethan thirty percent (30%) of the issued and outstanding Units at any time.  Units under indirect ownership or control bya Member shall include Units owned or controlled by such Member’s RelatedParties and Affiliates.

 

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SECTION 7.  ACCOUNTING,BOOKS AND RECORDS

 

7.1           Accounting,Books and Records.   The books andrecords of the Company shall be kept, and the financial position and theresults of its operations recorded, in accordance with GAAP. The books andrecords shall reflect all the Company transactions and shall be appropriate andadequate for the Company’s business. The Company shall maintain at itsprincipal office all of the following: (i) A current list of the full name andlast known business or residence address of each Member and Assignee set forthin alphabetical order, together with the Capital Contributions, Capital Accountand Units of each Member and Assignee; (ii) The full name and business addressof each Director; (iii) A copy of the Articles and any and all amendmentsthereto together with executed copies of any powers of attorney pursuant towhich the Articles or any amendments thereto have been executed; (iv) Copies ofthe Company’s federal, state, and local income tax or information returns andreports, if any, for the six most recent taxable years; (v) A copy of thisAgreement and any and all amendments thereto together with executed copies ofany powers of attorney pursuant to which this Agreement or any amendmentsthereto have been executed; and (vi) Copies of the financial statements of theCompany, if any, for the six most recent Fiscal Years. The Company shall usethe accrual method of accounting in preparation of its financial reports andfor tax purposes and shall keep its books and records accordingly. Any Memberor its designated representative shall have reasonable access during normalbusiness hours to such information and documents. The rights granted to aMember pursuant to this Section 8.1 are expressly subject to compliance bysuch Member with the safety, security and confidentiality procedures andguidelines of the Company, as such procedures and guidelines may be establishedfrom time to time.

 

7.2           Reports.   The chief financial officer of the Companyshall be responsible for causing the preparation of financial reports of theCompany and the coordination of financial matters of the Company with theCompany’s accountants. The Company shall cause to be delivered to each Memberthe financial statements listed below, prepared, in each case (other than withrespect to Member’s Capital Accounts, which shall be prepared in accordancewith this Agreement) in accordance with GAAP consistently applied.  As soon as practicable following the end ofeach Fiscal Year (and in any event not later than ninety (90) days after theend of such Fiscal Year) and at such time as distributions are made to the UnitHolders pursuant to Section 12 hereof following the occurrence of aDissolution Event, a balance sheet of the Company as of the end of such FiscalYear and the related statements of operations, Unit Holders’ Capital Accountsand changes therein, and cash flows for such Fiscal Year, together withappropriate notes to such financial statements and supporting schedules, all ofwhich shall be audited and certified by the Company’s accountants, and in eachcase, to the extent the Company was in existence, setting forth in comparativeform the corresponding figures for the immediately preceding Fiscal Year end(in the case of the balance sheet) and the two (2) immediately preceding FiscalYears (in the case of the statements).

 

7.3           TaxMatters.   The Directors shall,without any further consent of the Unit Holders being required (except asspecifically required herein), make any and all elections for federal, state,local, and foreign tax purposes as the Directors shall determine appropriateand represent the Company and the Unit Holders before taxing authorities orcourts of competent jurisdiction in

 

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tax matters affecting the Company or the Unit Holders in theircapacities as Unit Holders, and to file any tax returns and execute anyagreements or other documents relating to or affecting such tax matters,including agreements or other documents that bind the Unit Holders with respectto such tax matters or otherwise affect the rights of the Company and the UnitHolders.  The Directors shall designate aPerson to be specifically authorized to act as the “Tax Matters Member” underthe Code and in any similar capacity under state or local law; provided,however, that the Directors shall have the authority to designate, remove andreplace the Tax Matters Member who shall act as the tax matters partner withinthe meaning of and pursuant to Regulations Sections 301.6231(a)(7)-1 and -2 or any similar provision under state or locallaw. Necessary tax information shall be delivered to each Unit Holder as soonas practicable after the end of each Fiscal Year of the Company but not laterthan three (3) months after the end of each Fiscal Year.

 

7.4           Deliveryto Members and Inspection.   Upon therequest of any Member for purposes reasonably related to the interest of thatPerson as a Member, the Directors shall promptly deliver to the requestingMember, at the expense of the requesting Member, a copy of the informationrequired to be maintained under Sections 7.1 and a copy of this Agreement andall amendments hereto. Each Member has the right, upon reasonable request forpurposes reasonably related to the interest of the Person as a Member and forproper purposes, to: (i) inspect and copy during normal business hours any ofthe Company records described in Sections 7.1; and (ii) obtain from theDirectors, promptly after their becoming available, a copy of the Company’sfederal, state, and local income tax or information returns for each FiscalYear. Each Assignee shall have the right to information regarding the Companyonly to the extent required by the Act.

 

SECTION 8.  AMENDMENTS

 

8.1           Amendments.   Amendments to this Agreement may be proposedby the Directors or any Member. Following such proposal, the Directors shallsubmit to the Members a verbatim statement of any proposed amendment, providingthat counsel for the Company shall have approved of the same in writing as toform, and the Directors shall include in any such submission a recommendationas to the proposed amendment. The Directors shall seek the written vote of theMembers on the proposed amendment or shall call a meeting to vote thereon andto transact any other business that it may deem appropriate. A proposedamendment shall be adopted and be effective as an amendment hereto only ifapproved by the affirmative vote of a majority of the Membership VotingInterests represented at a Meeting of the Members (in person, by proxy, or bymail ballot). Notwithstanding any provision of this Section 8.1 to thecontrary, this Agreement shall not be amended without the consent of eachMember adversely affected if such amendment would modify the limited liabilityof a Member, or alter the Membership Economic Interest of a Member.

 

SECTION 9.  TRANSFERS

 

9.1           Restrictionson Transfers.   Except as otherwisepermitted by this Agreement, no Member shall Transfer all or any portion of itsUnits. In the event that any Member pledges or otherwise

 

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encumbers all or any part of its Units as security for the payment of aDebt, any such pledge or hypothecation shall be made pursuant to a pledge orhypothecation agreement that requires the pledgee or secured party to be boundby all of the terms and conditions of this Section 9. In the event suchpledgee or secured party becomes the Unit Holder hereunder pursuant to theexercise of such party’s rights under such pledge or hypothecation agreement,such pledgee or secured party shall be bound by all terms and conditions ofthis Operating Agreement and all other agreements governing the rights andobligations of Unit Holders. In such case, such pledgee or secured party, andany transferee or purchaser of the Units held by such pledgee or secured party,shall not have any Membership Voting Interest attached to such Units unless anduntil the Directors have approved in writing and admitted as a Memberhereunder, such pledgee, secured party, transferee or purchaser of such Units.

 

9.2           PermittedTransfers.   Subject to theconditions and restrictions set forth in this Section 9, a Member may (a)at any time Transfer all or any portion of its Units (i) to the transferor’sadministrator or trustee to whom such Units are transferred involuntarily byoperation of law, or (ii) without consideration to or in trust for descendantsof a Member; and (b) at any time following the date on which substantialoperations of the Facilities commences, Transfer all or any portion of itsUnits (i) to any Person approved by a majority of the Directors in writing, or(ii) to any other Member or to any Affiliate or Related Party of anotherMember, or (iii) to any Affiliate or Related Party of the transferor. Any suchTransfer set forth in this Section 9.2 and meeting the conditions setforth in Section 9.3 below is referred to in this Agreement as a “PermittedTransfer”.

 

9.3           Conditionsto Permitted Transfers.   A Transfershall not be treated as a Permitted Transfer under Section 9.2 hereofunless and until the Directors have approved such Transfer as set forth in Section 9.2and the following conditions are satisfied:

 

(a) Except in the case of a Transferinvoluntarily by operation of law, the transferor and transferee shall executeand deliver to the Company such documents and instruments of conveyance as maybe necessary or appropriate in the opinion of counsel to the Company to effectsuch Transfer. In the case of a Transfer of Units involuntarily by operation oflaw, the Transfer shall be confirmed by presentation to the Company of legalevidence of such Transfer, in form and substance satisfactory to counsel to theCompany. In all cases, the Company shall be reimbursed by the transferor and/ortransferee for all costs and expenses that it reasonably incurs in connectionwith such Transfer.

 

(b) The transferor and transferee shallfurnish the Company with the transferee’s taxpayer identification number,sufficient information to determine the transferee’s initial tax basis in theUnits transferred, and any other information reasonably necessary to permit theCompany to file all required federal and state tax returns and other legallyrequired information statements or returns. Without limiting the generality ofthe foregoing, the Company shall not be required to make any distributionotherwise provided for in this Agreement with respect to any transferred Unitsuntil it has received such information.

 

(c) Except in the case of a Transfer of anyUnits involuntarily by operation of law, either (i) such Units shall beregistered under the Securities Act, and any applicable state

 

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securities laws, or(ii) the transferor shall provide an opinion of counsel, which opinion andcounsel shall be reasonably satisfactory to the Directors, to the effect thatsuch Transfer is exempt from all applicable registration requirements and thatsuch Transfer will not violate any applicable laws regulating the Transfer ofsecurities.

 

(d) Except in the case of a Transfer of Unitsinvoluntarily by operation of law, the transferor shall provide an opinion ofcounsel, which opinion and counsel shall be reasonably satisfactory to theDirectors, to the effect that such Transfer will not cause the Company to bedeemed to be an “investment company” under the Investment Company Act of 1940.

 

(e) Unless otherwise approved by theDirectors and a 75% majority in interest of the Members, no Transfer of Unitsshall be made except upon terms which would not, in the opinion of counselchosen by and mutually acceptable to the Directors and the transferor Member,result in the termination of the Company within the meaning of Section 708of the Code or cause the application of the rules of Sections 168(g)(1)(B) and168(h) of the Code or similar rules to apply to the Company. If the immediateTransfer of such Unit would, in the opinion of such counsel, cause atermination within the meaning of Section 708 of the Code, then if, in theopinion of such counsel, the following action would not precipitate suchtermination, the transferor Member shall be entitled to (or required, as thecase may be) (i) immediately Transfer only that portion of its Units as may, inthe opinion of such counsel, be transferred without causing such a terminationand (ii) enter into an agreement to Transfer the remainder of its Units, in oneor more Transfers, at the earliest date or dates on which such Transfer orTransfers may be effected without causing such termination. The purchase pricefor the Units shall be allocated between the immediate Transfer and thedeferred Transfer or Transfers pro rata on the basis of the percentage of theaggregate Units being transferred, each portion to be payable when therespective Transfer is consummated, unless otherwise agreed by the parties tothe Transfer. In the case of a Transfer by one Member to another Member, thedeferred purchase price shall be deposited in an interest-bearing escrowaccount unless another method of securing the payment thereof is agreed upon bythe transferor Member and the transferee Member(s).

 

(f) No notice or request initiating theprocedures contemplated by Section 9.3 may be given by any Member after aDissolution Event has occurred. No Member may sell all or any portion of itsUnits after a Dissolution Event has occurred.

 

(g) No Person shall Transfer any Unit if, inthe determination of the Directors, such Transfer would cause the Company to betreated as a “publicly traded partnership” within the meaning of Section 7704(b)of the Code.

 

The Directors shall have the authority to waive any legal opinion orother condition required in this Section 9.3 other than the memberapproval requirement set forth in Section 9.3(e).

 

9.4           ProhibitedTransfers.   Any purported Transferof Units that is not a Permitted Transfer shall be null and void and of noforce or effect whatsoever; provided that, if the Company is

 

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required to recognize a Transfer that is not a Permitted Transfer (orif the Directors, in their sole discretion, elect to recognize a Transfer thatis not a Permitted Transfer), the Units Transferred shall be strictly limitedto the transferor’s Membership Economic Interests as provided by this Agreementwith respect to the transferred Units, which Membership Economic Interests maybe applied (without limiting any other legal or equitable rights of theCompany) to satisfy any debts, obligations, or liabilities for damages that thetransferor or transferee of such Interest may have to the Company. In the caseof a Transfer or attempted Transfer of Units that is not a Permitted Transfer,the parties engaging or attempting to engage in such Transfer shall be liableto indemnify and hold harmless the Company and the other Members from all cost,liability, and damage that any of such indemnified Members may incur(including, without limitation, incremental tax liabilities, lawyers’ fees andexpenses) as a result of such Transfer or attempted Transfer and efforts toenforce the indemnity granted hereby.

 

9.5           Rightsof Unadmitted Assigness.   A Personwho acquires Units but who is not admitted as a substituted Member pursuant to Section 9.6hereof shall be entitled only to the Membership Economic Interests with respectto such Units in accordance with this Agreement, and shall not be entitled tothe Membership Voting Interest with respect to such Units. In addition, suchPerson shall have no right to any information or accounting of the affairs ofthe Company, shall not be entitled to inspect the books or records of the Company,and shall not have any of the rights of a Member under the Act or thisAgreement.

 

9.6           Admissionof Substituted Members.   As toPermitted Transfers, a transferee of Units shall be admitted as a substituteMember provided that such transferee has complied with the followingprovisions: (a) The transferee of Units shall, by written instrument in formand substance reasonably satisfactory to the Directors; (i) accept and adoptthe terms and provisions of this Agreement, including this Section 9, and(ii) assume the obligations of the transferor Member under this Agreement withrespect to the transferred Units. The transferor Member shall be released fromall such assumed obligations except (x) those obligations or liabilities of thetransferor Member arising out of a breach of this Agreement, (y) in the case ofa Transfer to any Person other than a Member or any of its Affiliates, thoseobligations or liabilities of the transferor Member based on events occurring,arising or maturing prior to the date of Transfer, and (z) in the case of aTransfer to any of its Affiliates, any Capital Contribution or other financingobligation of the transferor Member under this Agreement; (b) The transfereepays or reimburses the Company for all reasonable legal, filing, andpublication costs that the Company incurs in connection with the admission ofthe transferee as a Member with respect to the Transferred Units; and (c)Except in the case of a Transfer involuntarily by operation of law, if requiredby the Directors, the transferee (other than a transferee that was a Memberprior to the Transfer) shall deliver to the Company evidence of the authorityof such Person to become a Member and to be bound by all of the terms andconditions of this Agreement, and the transferee and transferor shall eachexecute and deliver such other instruments as the Directors reasonably deemnecessary or appropriate to effect, and as a condition to, such Transfer.

 

9.7           RepresentationsRegarding Transfers.   Each Memberhereby covenants and agrees with the Company for the benefit of the Company andall Members, that (i) it is not currently making a market in Units and will notin the future make a market in Units, (ii) it will not Transfer its Units on anestablished securities market, a secondary market (or the substantialequivalent

 

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thereof) within the meaning of Code Section 7704(b) (and anyRegulations, proposed Regulations, revenue rulings, or other officialpronouncements of the Internal Revenue Service or Treasury Department that maybe promulgated or published thereunder), and (iii) in the event suchRegulations, revenue rulings, or other pronouncements treat any or allarrangements which facilitate the selling of Company interests and which arecommonly referred to as “matching services” as being a secondary market orsubstantial equivalent thereof, it will not Transfer any Units through amatching service that is not approved in advance by the Company. Each Memberfurther agrees that it will not Transfer any Units to any Person unless suchPerson agrees to be bound by this Section 9.7 and to Transfer such Unitsonly to Persons who agree to be similarly bound. (b) Each Member herebyrepresents and warrants to the Company and the Members that such Member’sacquisition of Units hereunder is made as principal for such Member’s ownaccount and not for resale or distribution of such Units. Each Member furtherhereby agrees that the following legend, as the same may be amended by theDirectors in their sole discretion, may be placed upon any counterpart of thisAgreement, the Articles, or any other document or instrument evidencingownership of Units:

 

THE TRANSFERABILITY OF THE COMPANY UNITS REPRESENTED BY THIS DOCUMENTIS RESTRICTED. SUCH UNITS MAY NOT BE SOLD, ASSIGNED, OR TRANSFERRED, NOR WILLANY ASSIGNEE, VENDEE, TRANSFEREE, OR ENDORSEE THEREOF BE RECOGNIZED AS HAVINGACQUIRED ANY SUCH UNITS FOR ANY PURPOSES, UNLESS AND TO THE EXTENT SUCH SALE,TRANSFER, HYPOTHECATION, OR ASSIGNMENT IS PERMITTED BY, AND IS COMPLETED INSTRICT ACCORDANCE WITH, THE TERMS AND CONDITIONS SET FORTH IN THE OPERATINGAGREEMENT AND AGREED TO BY EACH MEMBER.

 

9.8           Distributionand Allocations in Respect of Transferred Units.   If any Units are Transferred during any FiscalYear in compliance with the provisions of this Section 9, Profits, Losses,each item thereof, and all other items attributable to the Transferred Unitsfor such Fiscal Year shall be divided and allocated between the transferor andthe transferee by taking into account their varying interests during the FiscalYear in accordance with Code Section 706(d), using any conventionspermitted by law and selected by the Directors. All distributions on or beforethe date of such Transfer shall be made to the transferor, and alldistributions thereafter shall be made to the transferee. Solely for purposesof making such allocations and distributions, the Company shall recognize suchTransfer to be effective as of the first day of the month following the monthin which all documents to effectuate the transfer have been executed anddelivered to the Company, provided that, if the Company does not receive anotice stating the date such Units were transferred and such other informationas the Directors may reasonably require within thirty (30) days after the endof the Fiscal Year during which the Transfer occurs, then all such items shallbe allocated, and all distributions shall be made, to the Person who, accordingto the books and records of the Company, was the owner of the Units on the lastday of such Fiscal Year. Neither the Company nor any Member shall incur anyliability for making allocations and distributions in accordance with theprovisions of this Section 9.8, whether or not the Directors or theCompany has knowledge of any Transfer of ownership of any Units.

 

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SECTION 10.  DISSOLUTION ANDWINDING UP

 

10.1         Dissolution.   The Company shall dissolve and shallcommence winding up and liquidating upon the first Dissolution Event tooccur.  The Members hereby agree that,notwithstanding any provisions of the Act, the Company shall not dissolve priorto the occurrence of a Dissolution Event.

 

10.2         WindingUp.   Upon the occurrence of aDissolution Event, the Company shall continue solely for the purposes ofwinding up its affairs in an orderly manner, liquidating its assets, andsatisfying the claims of its creditors and Members, and no Member shall takeany action that is inconsistent with, or not necessary to or appropriate for,the winding up of the Company’s business and affairs, PROVIDED that allcovenants contained in this Agreement and obligations provided for in thisAgreement shall continue to be fully binding upon the Members until such timeas the Property has been distributed pursuant to this Section 10.2 and theArticles have been canceled pursuant to the Act. The Liquidator shall beresponsible for overseeing the prompt and orderly winding up and dissolution ofthe Company. The Liquidator shall take full account of the Company’sliabilities and Property and shall cause the Property or the proceeds from thesale thereof (as determined pursuant to Section 10.8 hereof), to theextent sufficient therefor, to be applied and distributed, to the maximum extentpermitted by law, in the following order: (a) First, to creditors (includingMembers and Directors who are creditors, to the extent otherwise permitted bylaw) 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 beenmade; and (b) Second, except as provided in this Agreement, to Members insatisfaction of liabilities for distributions pursuant to the Act; (c) Third,the balance, if any, to the Unit Holders in accordance with the positivebalance in their Capital Accounts calculated after making the requiredadjustment set forth in clause (ii)(C) of the definition of Gross Asset Valuein Section 1.11 of this Agreement, after giving effect to allcontributions, distributions and allocations for all periods.

 

10.3         Compliancewith Certain Requirements of Regulations; Deficit Capital Accounts.   In the event the Company is “liquidated”within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g), (a)distributions shall be made pursuant to this Section 10 to the UnitHolders who have positive Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).If any Unit Holder has a deficit balance in his Capital Account (after givingeffect to all contributions, distributions and allocations for all FiscalYears, including the Fiscal Year during which such liquidation occurs), suchUnit Holder shall have no obligation to make any contribution to the capital ofthe Company with respect to such deficit, and such deficit shall not beconsidered a debt owed to the Company or to any other Person for any purposewhatsoever. In the discretion of the Liquidator, a pro rata portion of the distributionsthat would otherwise be made to the Unit Holders pursuant to this Section 10may be: (a) Distributed to a trust established for the benefit of the UnitHolders for the purposes of liquidating Company assets, collecting amounts owedto the Company, and paying any contingent or unforeseen liabilities orobligations of the Company. The assets of any such trust shall be distributedto the Unit Holders from time to time, in the reasonable discretion of theLiquidator, in the same proportions as the amount distributed to such trust bythe Company would otherwise have been distributed to the Unit Holders pursuantto Section 10.2 hereof; or (b) Withheld to provide a reasonable reservefor Company liabilities (contingent or otherwise) and to reflect the unrealizedportion of any

 

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installment obligations owed to the Company, provided that suchwithheld amounts shall be distributed to the Unit Holders as soon aspracticable.

 

10.4         DeemedDistribution and Recontribution.  Notwithstanding any other provision of this Section 10, in theevent 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, andthe Company’s affairs shall not be wound up.

 

10.5         Rightsof Unit Holders.   Except asotherwise provided in this Agreement, each Unit Holder shall look solely to theProperty of the Company for the return of its Capital Contribution and has noright 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 debtsor liabilities of the Company are insufficient to return such CapitalContribution, the Unit Holders shall have no recourse against the Company orany other Unit Holder or Directors.

 

10.6         AllocationsDuring Period of Liquidation.  During the period commencing on the first day of the Fiscal Year duringwhich a Dissolution Event occurs and ending on the date on which all of theassets of the Company have been distributed to the Unit Holders pursuant to Section 10.2hereof (the “Liquidation Period”), the Unit Holders shall continue to shareProfits, Losses, gain, loss and other items of Company income, gain, loss ordeduction in the manner provided in Section 3 hereof.

 

10.7         Characterof Liquidating Distributions.   Allpayments made in liquidation of the interest of a Unit Holder in the Company shallbe made in exchange for the interest of such Unit Holder in Property pursuantto Section 736(b)(1) of the Code, including the interest of such UnitHolder in Company goodwill.

 

10.8         TheLiquidator.   The “Liquidator” shallmean a Person appointed by the Directors(s) to oversee the liquidation of theCompany. Upon the consent of a majority in interest of the Members, theLiquidator may be the Directors. The Company is authorized to pay a reasonablefee to the Liquidator for its services performed pursuant to this Section 10and to reimburse the Liquidator for its reasonable costs and expenses incurredin performing those services. The Company shall indemnify, save harmless, andpay all judgments and claims against such Liquidator or any officers, directors,agents or employees of the Liquidator relating to any liability or damageincurred by reason of any act performed or omitted to be performed by theLiquidator, or any officers, directors, agents or employees of the Liquidatorin connection with the liquidation of the Company, including reasonableattorneys’ fees incurred by the Liquidator, officer, director, agent oremployee in connection with the defense of any action based on any such act oromission, which attorneys’ fees may be paid as incurred, except to the extentsuch liability or damage is caused by the fraud, intentional misconduct of, ora knowing violation of the laws by the Liquidator which was material to thecause of action.

 

10.9         Formsof Liquidating Distributions.   Forpurposes of making distributions required by Section 10.2 hereof, theLiquidator may determine whether to distribute all or any portion of the

 

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Property in-kind or to sell all or any portion of the Property anddistribute the proceeds therefrom.

 

SECTION 11.  MISCELLANEOUS

 

11.1         Notices.   Any notice, payment, demand, orcommunication required or permitted to be given by any provision of thisAgreement shall be in writing and shall be deemed to have been delivered,given, and received for all purposes (i) if delivered personally to the Personor to an officer of the Person to whom the same is directed, or (ii) when thesame is actually received, if sent either by registered or certified mail,postage and charges prepaid, or (iii) if sent by facsimile, email, or otherelectronic transmission, when such transmission is electronically confirmed ashaving been successfully transmitted. If sent by registered or certified mail, thenthe notice, payment, demand or communication must be addressed as follows, orto such other address as such Person may from time to time specify by notice tothe Members and the Directors: (a) If to the Company, to the address determinedpursuant to Section 1.4 hereof; (b) If to the Directors, to the addressset forth on record with the company; (c) If to a Member, either to the addressset forth in Section 2.1 hereof.

 

11.2         BindingEffect.   Except as otherwiseprovided in this Agreement, every covenant, term, and provision of thisAgreement shall be binding upon and inure to the benefit of the Members andtheir respective successors, transferees, and assigns.

 

11.3         Construction.   Every covenant, term, and provision of thisAgreement shall be construed simply according to its fair meaning and not strictlyfor or against any Member.

 

11.4         Headings.   Section and other headings contained inthis Agreement are for reference purposes only and are not intended todescribe, interpret, define, or limit the scope, extent, or intent of thisAgreement or any provision hereof.

 

11.5         Severability.   Except as otherwise provided in thesucceeding sentence, every provision of this Agreement is intended to beseverable, and, if any term or provision of this Agreement is illegal orinvalid for any reason whatsoever, such illegality or invalidity shall notaffect the validity or legality of the remainder of this Agreement. Thepreceding sentence of this Section 14.6 shall be of no force or effect ifthe consequence of enforcing the remainder of this Agreement without suchillegal or invalid term or provision would be to cause any Member to lose thematerial benefit of its economic bargain.

 

11.6         IncorporationBy Reference.   Every exhibit,schedule, and other appendix attached to this Agreement and referred to hereinis not incorporated in this Agreement by reference unless this Agreementexpressly otherwise provides.

 

11.7         Variationof Terms.   All terms and anyvariations thereof shall be deemed to refer to masculine, feminine, or neuter,singular or plural, as the identity of the Person or Persons may require.

 

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11.8         GoverningLaw.   The laws of the State ofWisconsin shall govern the validity of this Agreement, the construction of itsterms, and the interpretation of the rights and duties arising hereunder.

 

11.9         Waiverof Jury Trial.   Each of the Membersirrevocably waives to the extent permitted by law, all rights to trial by juryin any action, proceeding or counterclaim arising out of or relating to thisAgreement.

 

11.10       CounterpartExecution.   This Agreement may beexecuted in any number of counterparts with the same effect as if all of theMembers had signed the same document. All counterparts shall be construedtogether and shall constitute one agreement.

 

11.11       SpecificPerformance.   Each Member agreeswith the other Members that the other Members would be irreparably damaged ifany of the provisions of this Agreement are not performed in accordance withtheir specific terms and that monetary damages would not provide an adequateremedy in such event. Accordingly, it is agreed that, in addition to any otherremedy to which the nonbreaching Members may be entitled, at law or in equity,the nonbreaching Members shall be entitled to injunctive relief to prevent breachesof the provisions of this Agreement and specifically to enforce the terms andprovisions hereof in any action instituted in any court of the United States orany state thereof having subject matter jurisdiction thereof.

 

IN WITNESS WHEREOF, the parties have executed and entered into thisOperating Agreement of the Company as of the day first above set forth.

 

 
| COMPANY:                                 |
|------------------------------------------|
|                                     |
| UNITED WISCONSIN GRAIN PRODUCERS, L.L.C. |
|                                     |
|                                     |
| By:                                      | /s/ J.F.  Robertson |   |
| Its:                                     | Chairman and President |   |
|                                          |  |  |  |

 

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EXHIBIT “A”

 

**UnitedWisconsin Grain Producers, L.L.C.Membership List**

 

See official Membership Register maintainedat the principal office of the Company and available upon request.

 

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EXHIBIT “B”

 

**Initial Board of Directors**

 
| **Name of Initial Board of Directors Members**       | ** ** | **Address of Initial Board of  Directors Members** |
|------------------------------------------------------|------------|----------------------------------------------------|
|                                                 |       |                                               |
| Carl Benck                                           |       | W722 Hwy. Z, Fall River, WI 53952                  |
|                                                 |       |                                               |
| Cal Dalton                                           |       | 407 Lake St., Pardeeville, WI 53954                |
|                                                 |       |                                               |
| Jerry H. Franz                                       |       | W5354 Hall Rd., Poynette, WI 53955                 |
|                                                 |       |                                               |
| Charles W. Hammer, Vice Chairman and Vice  President |       | W7503 County Dr., Beaver Dam, WI 53916             |
|                                                 |       |                                               |
| William W. Herrmann                                  |       | W2553 Duborg Rd., Columbus, WI 53925               |
|                                                 |       |                                               |
| Nancy Kavazanjian, Secretary                         |       | W7503 County Drive, Beaver Dam, WI 53916           |
|                                                 |       |                                               |
| Robert Lange                                         |       | W11715 Behan Rd., Columbus, WI 53925               |
|                                                 |       |                                               |
| Robert J. Miller, Treasurer                          |       | 35460 Hwy. K, Oconomowoc, WI 53066                 |
|                                                 |       |                                               |
| Kevin Roche, Chairman and President                  |       | N3432 Co. Trunk BB, Columbus, WI 53925             |
|                                                 |       |                                               |
| Berwin G. Westra                                     |       | N8693 Cty. FW, Beaver Dam, WI 53916                |

 

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