**Exhibit 3.1(ii)**

 

**AMENDED ANDRESTATED**

 

**OPERATING AGREEMENT**

 

**OF**

 

**SOUTH DAKOTA SOYBEAN PROCESSORS, LLC**

 

 

**February 15,2005**

 

 

**IMPORTANT — PLEASE NOTE THE FOLLOWING**

 

**BEFORE YOU EXECUTE THE COUNTERPART SIGNATUREPAGE TO THIS OPERATING AGREEMENT AND BECOME A MEMBER, YOU ARE URGED TO READTHIS AGREEMENT THOROUGHLY AND ASK ANY QUESTIONS THAT YOU MAY HAVE.*** **This Operating Agreementcontains many unique features and your rights may differ from thosetypically available to a shareholder of a corporation.  For example, you will be granted only onevote on matters submitted to a vote of members regardless of the number ofcapital units that you own and you will not have the right to vote byproxy.  You will also only be permitted tovote for members of the Board of Managers from the district in which youreside.*

 

**BY EXECUTING THE COUNTERPART SIGNATURE PAGE ANDBECOMING A MEMBER, YOU WILL BE BOUND BY THE PROVISIONS OF THIS OPERATINGAGREEMENT AND THE COMPANY’S ARTICLES OF ORGANIZATION, INCLUDING, WITHOUTLIMITATION, THE RESTRICTIONS ON THE DISPOSITION OF CAPITAL UNITS AND THEREDEMPTION PROVISIONS SET FORTH IN ARTICLE 4.**

 

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This Amended and RestatedOperating Agreement of South Dakota Soybean Processors, LLC (formerly, SoybeanProcessors, LLC), dated as of December 2, 2004, is executed and agreed to,for good and valuable consideration, by the Company (as defined below) and itsMembers (as defined below).

 

**ARTICLE 1**

**DEFINITIONS**

 

Asused in this Operating Agreement, the following terms have the followingmeanings:

 

1.1           “Act” means the South Dakota LimitedLiability Company Act and any successor statute, as amended from time to time.

 

1.2           “Affiliate” of any Person shall meanany other Person, directly or indirectly, controlling, controlled by, or undercommon control with, such Person; or if such Person is a partnership, anygeneral partner of such Person or a Person controlling any such generalpartner.  For purposes of thisdefinition, “control” (including “controlled by” and “under common control with”)shall mean the power, directly or indirectly, to direct or cause the directionof the management and policies of such Person whether through the ownership of voting securities, by contractor otherwise.

 

1.3           “Articles” means the Articles ofOrganization filed with the Secretary of State of South Dakota on October 12,2001, by which South Dakota Soybean Processors, LLC was organized as a SouthDakota limited liability company under and pursuant to the Act.

 

1.4           “Available Cash for Distribution”means the gross cash proceeds from Company operations, including the sale ofCompany property but excluding capital contributions and the proceeds ofCompany indebtedness, less the portion thereof used to pay or establishreserves for all Company expenses, debt payments, capital improvements,replacements and contingencies, all as determined by the Board of Managers inits sole discretion.  “Available Cash forDistribution” shall not be reduced by depreciation, amortization, cost recoverydeductions or similar allowances, but shall be increased by any reduction ofreserves previously established.

 

1.5           “Board of Managers” means theManagers acting as a group with the powers set forth in the Articles and thisOperating Agreement.

 

1.6           “Bankrupt Member” means (except tothe extent that the Board of Managers determines otherwise) any Member (a) thatmakes a general assignment for the benefit of creditors; (b) files avoluntary bankruptcy petition under Chapter 7 of the United States BankruptcyCode; (c) files a petition or answer seeking for the Member a liquidation,dissolution, or similar relief under any law; (d) files an answer or otherpleading admitting or failing to contest the material allegations of a petitionfiled against the Member in a proceeding of the type described in subclauses (a) through(c); (e) seeks, consents to, or acquiesces in the appointment of atrustee, receiver, or liquidator of the Member’s or of all or any substantialpart of the Member’s properties; or (f) against which an involuntarypetition has been filed and

 

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aproceeding seeking relief under Chapter 7 of the United States Bankruptcy Code,liquidation, dissolution, or similar relief under any law has been commencedand 90 days have expired without dismissal thereof or with respect to which,without the Member’s consent or acquiescence, a trustee, receiver, orliquidator of the Member or of all or any substantial part of the Member’sproperties has been appointed and 90 days have expired without the appointmenthaving been vacated or stayed, or 90 days have expired after the date ofexpiration of a stay, if the appointment has not previously been vacated.

 

1.7           “Capital Contribution” means anyactual contribution by a Member to the capital of the Company in the Reorganizationor through the purchase of Capital Units (but does not include subscribed for,but unpaid Capital Units).

 

1.8           “Capital Unit” or “Unit” meansCapital Units of the Company with the rights and privileges set forth in thisOperating Agreement, including Class A Capital Units, and any other classof Capital Units as may be approved and adopted by the Board of Managers.

 

1.9           “Capital Unit Transfer System” meansthe procedures set forth in Article 4 of this Operating Agreementgoverning all Dispositions of Capital Units.

 

1.10         “Class A Members” means holders ofClass A Capital Units who have executed and agreed to be bound by thisOperating Agreement.

 

1.11         “Code” means the Internal Revenue Codeof 1986 and any successor statute, as amended from time to time.

 

1.12         “Committed Capital” means$20,837,637.00 for 14,129,250 Class A Capital Units to be issued withrespect to Members receiving Class A Capital Units in the Reorganization,and, with respect to any additional Members, the purchase price of the CapitalUnits subscribed for in any subsequent offering pursuant to a subscriptionagreement that has been accepted by the Company, regardless of whether suchpurchase price has been fully paid.

 

1.13         “Company” means South Dakota SoybeanProcessors, LLC (formerly, Soybean Processors, LLC), a manager-managed SouthDakota limited liability company.

 

1.14         “Cooperative” means South DakotaSoybean Processors, a South Dakota cooperative corporation.

 

1.15         “Dispose,” “Disposing,” or “Disposition”means the sale, assignment, transfer, gift, exchange, or other disposition ofone or more Capital Units, whether voluntary or involuntary, but not themortgage, pledge, or grant of a security interest therein.

 

1.16         “Manager” means any natural Person whois a member of the Board of Managers of the Company, whether initially named inthe Articles or later elected as provided in this Operating Agreement.

 

1.17         “Member” means any Person who holds oneor more Capital Units and has executed this Operating Agreement, whetherinitially admitted as of the date of this Operating Agreement or later admittedto the Company as a Member as provided in this Operating Agreement.  Unless the context otherwise requires, theterm “Member” shall include any Member’s representative in event of the death,

 

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incapacity,or liquidation of the Member.  Except asspecifically stated otherwise, “Members” refers to all Class A Members.

 

1.18         “Member Agreement” means the agreementbetween each Member and the Cooperative requiring each Member to deliver to theCooperative on an annual basis soybeans owned by the Member.

 

1.19         “Ownership Percentage” with respect toany Member means the percentage of ownership of a Member determined by takingthe total Capital Units held by such Member divided by the aggregate totalnumber of issued and outstanding Capital Units.

 

1.20         “Person” includes an individual,partnership, limited partnership, limited liability company, foreign limitedliability company, trust, estate, corporation, foreign corporation,cooperative, custodian, trustee, executor, administrator, nominee or entity ina representative capacity.

 

1.21         “Proceeding” means any threatened,pending or completed action, suit or proceeding, whether civil, criminal, administrative,arbitrative or investigative.

 

1.22         “Quarter” means any of the three-monthperiods (choose one option: (1) ending on March 31, June 30, September 30and December 31, (2) beginning on January 1, April 1, July 1and October 1) which shall be the periods set by the Board of Managers forthe dates of permitted transfers for the transfer of Capital Units by Membersand other Persons, and may be used for other administrative matters.

 

1.23         “Reorganization” means the exchange ofall of the assets and liabilities of the Cooperative for the Class ACapital Units of the Company, the subsequent dissolution of the Cooperative anddistribution of the Company’s Class A Capital Units to the Cooperative’sshareholders in liquidation of the Cooperative, and the adoption of thisOperating Agreement concurrently therewith, all pursuant to the Plan ofReorganization dated December 10, 2001.

 

1.24         “Super Majority Vote” means, wheneverapplicable to a vote solely by the Managers and indicated in this OperatingAgreement, the affirmative vote of two-thirds of the total number of Managerselected to the Board of Managers, or whenever applicable to a vote solely bythe Members and indicated in this Operating Agreement, the affirmative vote oftwo-thirds of the Members voting on the matter at hand.

 

Otherterms defined herein have the meanings so given them.

 

**ARTICLE 2**

**ORGANIZATION**

 

2.1           Formation. The Company hasbeen organized as a South Dakota limited liability company by the filing ofArticles under and pursuant to the Act and the issuance of a certificate oforganization for the Company by the Secretary of State of South Dakota.

 

2.2           Name. The name of the Companyis South Dakota Soybean Processors, LLC and all Company business must beconducted in that name or such other names that comply with applicable law asthe Board of Managers may select from time to time.

 

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2.3           Registered Office; RegisteredAgent, Principal Office in the United States; Other Offices.  The registered office of the Company requiredby the Act to be maintained in the State of South Dakota shall be the office ofthe initial registered agent named in the Articles or such other office (whichneed not be a place of business of the Company) as the Board of Managers maydesignate from time to time in the manner provided by law.  The registered agent of the Company in theState of South Dakota shall be the initial registered agent named in theArticles or such other Person or Persons as the Board of Managers may designatefrom time to time in the manner provided by law.  The principal office of the Company in theUnited States shall be at such place as the Board of Managers may designatefrom time to time, which need not be in the State of South Dakota, and theCompany shall maintain records there as required by the Act and shall keep thestreet address of such principal office at the registered office of the Companyin the State of South Dakota.  TheCompany may have such other offices as the Board of Managers may designate fromtime to time.

 

2.4           Purpose.  The purposes of the Company are to own andoperate a soybean processing facility, to develop, own and/or operate otheragricultural product processing and marketing enterprises, and any otherpurpose allowed under South Dakota law.

 

2.5           Foreign Qualification.  Prior to the Company’s conducting business inany jurisdiction other than South Dakota, the Board of Managers shall cause theCompany to comply, to the extent procedures are available and those matters arereasonably within the control of the Board of Managers, with all requirementsnecessary to qualify the Company as a foreign limited liability company in thatjurisdiction.  At the request of theBoard of Managers, the Company’s officers (as specified in Article 7)shall execute, acknowledge, swear to, and deliver all certificates and otherinstruments conforming with this Operating Agreement that are necessary orappropriate to qualify, continue, and terminate the Company as a foreignlimited liability company in all such jurisdictions in which the Company mayconduct business.

 

2.6           Term. The Company commencedits existence on the date the Secretary of State of South Dakota issued acertificate of organization for the Company and shall continue in existenceuntil dissolved.

 

2.7           Mergers and Exchanges.  The Company may be a party to (a) amerger, (b) a consolidation, or (c) an exchange or acquisition,subject to the requirements of this Operating Agreement.  Consent to any such merger, consolidation,exchange or acquisition shall be by vote of the Members as set forth in Article 3.

 

2.8           No State-Law Partnership.  The Members intend that the Company not be apartnership (including, without limitation, a limited partnership) or jointventure for any purposes other than federal income and state income taxpurposes, and this Operating Agreement shall not be construed to suggestotherwise.

 

2.9           Fiscal Year.  After such time as the Reorganization iscompleted, the Company’s fiscal year shall end on December 31 of each yearor such other date as the Board of Managers shall determine.

 

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**ARTICLE 3**

**MEMBERS**

 

3.1           Members.

 

(a)           The initial Member of the Company isthe Cooperative, whose Capital Units are being distributed to the Cooperative’sshareholders in the Reorganization concurrently with the adoption of thisOperating Agreement.

 

(b)           Shareholders of the Cooperativereceiving Capital Units in the Reorganization shall be admitted as Memberswithout discretion of the Board Managers at such time as: (i) such Personhas submitted to the Company a counterpart signature page agreeing to bebound by this Operating Agreement, and (ii) such Person has consented tothe termination of such Person’s Member Agreement held by the Cooperative.  Until such time as a Person who acquiresCapital Units in the Reorganization becomes a Member in accordance with theforegoing, such Person shall receive the allocations of income, gain, losses,deductions, credits and distributions in accordance with Article 6 of thisOperating Agreement, but shall have no voting rights and such Person’s CapitalUnits shall become subject to optional redemption by the Company in accordancewith Section 4.3 of this Operating Agreement on the anniversary of the Reorganization.

 

(c)           Additional Persons may be admitted asMembers by acquiring a minimum of 2,500 Capital Units (i) from a Member ina Disposition in compliance with the provisions of this Operating Agreement,subject to Section 3.3, or (ii) directly from the Company if theCompany offers to issue additional Capital Units.

 

(d)           Any Person who satisfies therequirements of this Operating Agreement may be a Member unless the Personlacks capacity apart from the Act.

 

3.2           Representations and Warranties.  Each Member represents and warrants to theCompany and each other Member that:

 

(a)           if that Member is a corporation, itis duly organized, validly existing and in good standing under the laws of thestate of its incorporation and is duly qualified and in good standing as aforeign corporation in the jurisdiction of its principal place of business (ifnot incorporated therein);

 

(b)           if that Member is a limited liabilitycompany, it is duly organized, validly existing, and (if applicable) in goodstanding under the laws of the state of its organization and is duly qualifiedand (if applicable) in good standing as a foreign limited liability company inthe jurisdiction of its principal place of business (if not organized therein);

 

(c)           if that Member is a partnership,trust, or other entity, it is duly formed, validly existing, and (ifapplicable) in good standing under the laws of the state of its formation, andif required by law is duly qualified to do business and (if applicable) in goodstanding in the jurisdiction of its principal place of business (if not formedtherein), and the representations and warranties in clause (a), (b) or(c), as applicable, are true and correct with respect to each partner (otherthan limited partners), trustee or other member thereof;

 

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(d)           the Member has full corporate,limited liability company, partnership, trust, or other applicable power andauthority to execute and agree to this Operating Agreement and to perform itsobligations hereunder and all necessary actions by the board of directors,shareholders, managers, members, partners, trustees, beneficiaries or otherPersons necessary for the due authorization, execution, delivery andperformance of this Operating Agreement by that Member have been duly taken;

 

(e)           the Member has duly executed anddelivered this Operating Agreement; and

 

(f)            the Member’s authorization,execution, delivery and performance of this Operating Agreement does notconflict with any other agreement or arrangement to which that Member is aparty or by which it is bound.

 

3.3           Admission of Additional Members.  No Person shall become a Member without theapproval of the Board of Managers.  TheBoard of Managers may refuse to admit any Person as a Member in its solediscretion.  Additional Persons may beadmitted to the Company in the discretion of the Board of Managers.  Any such admission also must comply with therequirements described elsewhere in this Operating Agreement and will beeffective only after such Person has executed and delivered to the Company awritten document including such Person’s: (a) address for notices, (b) agreementto be bound by this Operating Agreement, (c) one time administrative feeof $200.00,  and (d) representationand warranty that the representations and warranties required of all Members inthis Operating Agreement are true and correct with respect to such Person.  The provisions of this section shallapply to any Person who acquires Capital Units directly from the Company or througha Disposition by a Member.

 

3.4           Interests in a Member.  A Member that is not a natural person may notcause or permit an interest, direct or indirect, in itself to be Disposed of inviolation of the Securities Act of 1933, as amended, or such that, after theDisposition, (a) the Company would be considered to have terminated withinthe meaning of Section 708 of the Code, or (b) without the consent ofthe Board of Managers, that Member shall cease to be controlled bysubstantially the same Persons who control it as of the date of its admissionto the Company.  On any breach of this Section 3.4,the Company shall have the option to redeem, and on exercise of that option thebreaching Member shall surrender, the breaching Member’s Capital Units inaccordance with Section 4.3 of this Operating Agreement.

 

3.5           Information.

 

(a)           In addition to the other rightsspecifically set forth in this Operating Agreement, each Member is entitled toall information to which that Member is entitled to have access pursuant to theAct under the circumstances and subject to the conditions therein stated.  Specifically, any Member and anydesignated representative thereof shall be permitted access to all records ofthe Company and may inspect and copy any of them.  The Company or its transfer agent shallmaintain as part of its books and records and shall make available forinspection by any Member or the Member’s designated agent at the home office ofthe Company upon the request of the Member an alphabetical list of the names,addresses, and telephone numbers of the Members of the Company along with thenumber of Capital Units held by each of them (the “Member List”).  The Member List shall be updated at leastquarterly to reflect changes in the information contained therein.  A copy of the Member List shall be mailed toany Member requesting the

 

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Member List within ten days of the request.  The copy of the Member List shall be printedin alphabetical order, on white paper, and in a readily readable type size (inno event smaller than 10-point type).  Areasonable charge for copy work may be charged by the Company.  The purposes for which a Member may request acopy of the Member List include, without limitation, matters relating toMembers’ voting rights.  If the officersor Managers of the Company neglect or refuse to exhibit, produce, or mail acopy of the Member List as requested, the officers and the Managers shall beliable to any Member requesting the list for the costs, including attorneys’fees, incurred by that Member for compelling the production of the Member List,and for actual damages suffered by any Member by reason of such refusal orneglect.  It shall be a defense that theactual purpose and reason for the requests for inspection or for a copy of theMember List is to secure such list of Members or other information for thepurpose of selling such list or copies thereof, or of using the same as acommercial purpose other than in the interest of the applicant as a Memberrelative to the affairs of the Company. The Company may require the Member requesting the Member List torepresent that the list is not requested for a commercial purpose unrelated tothe Member’s interest in the Company. The remedies provided hereunder to Members requesting copies of theMember List are in addition to, and shall not in any way limit, other remediesavailable to Members under federal law, or the laws of any state.

 

(b)           Notwithstanding the foregoing, theMembers acknowledge that from time to time, they may receive information fromor regarding the Company in the nature of trade secrets or that otherwise isconfidential, the release of which may be damaging to the Company or Personswith whom it does business.  Each Membershall hold in strict confidence any information it receives regarding theCompany that is identified as being confidential (and if that information isprovided in writing, that is so marked) and may not disclose it to any Personother than another Member, except for disclosures (i) compelled by law(but the Member must notify the Board of Managers promptly of any request forthat information before disclosing it, if practicable), (ii) to advisersor representatives of the Member or Persons who have acquired that Member’sCapital Units through a Disposition as permitted by this Operating Agreement,but only if the recipients have agreed to be bound by the provisions of thissection, or (iii) of information that the Member also has received from asource independent of the Company that the Member reasonably believes obtainedthat information without breach of any obligation of confidentiality.  The Members acknowledge that a breach of theprovisions of this section may cause irreparable injury to the Company forwhich monetary damages are inadequate, difficult to compute, or both.  Accordingly, the Members agree that theprovisions of this section may be enforced by specific performance.

 

3.6           Liabilities to Third Parties.  Except as otherwise expressly agreed inwriting, no Member shall be liable for the debts, obligations or liabilities ofthe Company, including under a judgment, decree or order of a court.

 

3.7           Withdrawal. A Member does nothave the right or power to withdraw from the Company as a Member, except as setforth in this Operating Agreement.

 

3.8           Lack of Authority.  No Member, other than a Member acting in hisor her capacity as an officer of the Company, has the authority or power to actfor or on behalf of the Company, to do any act that would be binding on theCompany, or to incur any expenditures on behalf of the Company, except with theprior consent of the Board of Managers.

 

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3.9           Classes and Voting.  Unless the Articles state to the contrary oras provided by this Operating Agreement, or any amendment hereto, there shallbe one class of Members.  The Board ofManagers may establish additional classes or groups of one or more Members.

 

(a)           *Class AMembers. *Class A Membersshall be entitled to vote on all matters coming to a vote of the Class AMembers.  Each Class A Member maycast only one vote on each matter brought to a vote of the Class AMembers, regardless of the number of Class A Capital Units owned.  All matters to be voted upon by the Class AMembers shall require the affirmative vote of the majority of the Class AMembers voting on the matter at hand, except that  (i) for matters to be voted upon under Section 3.9(b)(i)(ii) and(iii), a Super Majority Vote of the Class A Members voting on the matter athand shall be the Act of the Class A Members and (ii) the election ofindividuals serving on the Board of Managers under Section 3.9(b)(iv) shallbe determined by a vote of the plurality of the Class A Members votingfrom the individuals’ respective geographic districts in accordance with Section 8.4(a).

 

(b)           *Voting.*  Members shall only be entitled to vote on thefollowing matters: (i) the merger or consolidation of the Company withanother business entity or the exchange of interests in the Company for interestsin another company; (ii) the sale, lease, exchange or other disposition ofsubstantially all of the Company’s assets; (iii) voluntary dissolution ofthe Company; (iv) the election and removal of individuals serving on theBoard of Managers; (v) an increase or decrease in the number ofindividuals serving on the Board of Managers; (vi) a change in thegeographic boundaries of the districts from which Managers are elected; (vii) anamendment to the Articles or this Operating Agreement, (viii) other mattersthat are not the responsibility of the Board of Managers as provided herein;and (ix) any matters referred to a vote of the Members by the Board ofManagers.

 

3.10         Place and Manner of Meeting.  All meetings of the Members shall be held atsuch time and place, within or without the State of South Dakota, as shall bestated in the notice of the meeting or in a duly executed waiver of noticethereof.  Presence in person, or writtenballot, shall constitute participation in a meeting, except where a personparticipates in the meeting for the express purpose of objecting to thetransaction of any business on the ground that the meeting is not lawfullycalled or convened.

 

3.11         Conduct of Meetings.  All meetings of the Members shall be presidedover by the President.  All meetings ofthe Members shall be conducted in general accordance with the most recentedition of Roberts’ Rules of Order, or such other rules andprocedures as may be determined by the Board of Managers in its discretion.

 

3.12         Annual Meeting.  The annual meeting of the Members for thetransaction of all business which may come before the meeting shall be held ona date determined by the Board of Managers. Failure to hold the annual meeting at the designated time shall not begrounds for dissolution of the Company.

 

3.13         Special Meetings.  A special meeting of the Members may becalled at any time by the President or the Board of Managers.  A special meeting of the Members shall becalled by the Secretary upon the request of 10% of the Class AMembers.  Such request shall state thepurpose or purposes of such meeting and the matters proposed to be acted on atthe special meeting.

 

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3.14         Notice.  Written or printed notice stating the place,day and hour of the meeting and, in case of a special meeting, the purpose orpurposes for which the meeting is called, shall be delivered not less than 10nor more than 60 days before the date of the meeting either personally or bymail, by or at the direction of the President, the Secretary or the Board ofManagers to each Member entitled to vote at the meeting.  If mailed, such notice shall be deemed to bedelivered when deposited in the United States mail addressed to the Member atthe Member’s address as it appears on the records of the Company, with postagethereon prepaid.

 

(a)           If a purpose of any Member meeting isto consider any of the following matters, the notice must state such purpose:

 

(i)            a plan of merger, consolidation orexchange;

 

(ii)           the sale, lease, exchange or otherdisposition of all, or substantially all, of the Company’s assets;

 

(iii)          the voluntary dissolution of theCompany;

 

(iv)          the removal of any individual orindividuals of the Board of Managers;

 

(v)           the increase or decrease in thenumber of individuals that serve on the Board of Managers;

 

(vi)          a change in the geographic boundariesof the districts from which Managers are elected; or

 

(vii)         the amendment of the Articles.

 

(b)           The notice for any Member meetingrelating to any of the purposes listed in (a) above must be accompanied bya copy or summary of the respective:

 

(i)            plan of merger, consolidation orexchange;

 

(ii)           the transaction description for theproposed sale, lease, exchange or other disposition of all, or substantiallyall, of the Company’s assets;

 

(iii)          the plan of liquidation;

 

(iv)          identification of the individual orindividuals whose removal from the Board of Managers is sought.

 

(v)           identification of the size of theBoard of Managers proposed;

 

(vi)          identification of the proposedgeographic boundaries of the districts from which Managers are elected; or

 

(vii)         the proposed amendment to the Articles.

 

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3.15         Quorum of Members.  Ten percent of the first 100 Class A Memberspresent in person or by written ballot at the meeting and five percent ofadditional Class A Members represented in person or by written ballot,shall constitute a quorum at a meeting of the Members.  The Members present at a duly organizedmeeting at which a quorum is present may transact business until adjournment,notwithstanding the departure or withdrawal of enough Members to leave lessthan a quorum.

 

3.16         Closing Record Books and FixingRecord Data.  For the purpose ofdetermining Members entitled to notice of or to vote at any meeting of Membersor any adjournment thereof or in order to make a determination of Members forany other proper purpose, the Board of Managers may provide that the recordbooks shall be closed for a stated period not exceeding 10 days.  If the record books shall be closed for thepurpose of determining Members entitled to notice of or to vote at a meeting ofMembers, such books shall be closed for a period not exceeding 10 days immediatelypreceding such meeting.  In lieu ofclosing the record books, the Board of Managers may fix in advance a date asthe record date for any such determination of Members, such date in any case tobe not more than 60 days and in the case of a meeting of Members, not less than10 days prior to the date of which the particular action requiring suchdetermination of Members is to be taken. If the record books are not closed and no record date is fixed for thedetermination of Members entitled to notice of or to vote at a meeting ofMembers, the date on which notice of the meeting is mailed, as the case may be,shall be the record date for such determination of Members.  When a determination of Members entitled tovote at any meeting of Members has been made as provided in this section, suchdetermination shall apply to any adjournment thereof, except where thedetermination has been made through the closing of record books and the statedperiod of closing has expired.

 

3.17         Fixing Record Dates for Ballots byMail.  Unless a record date shall havepreviously been fixed or determined herein, whenever action by Members isproposed to be taken by written ballot without attendance being required at ameeting of Members, the Board of Managers may fix a record date for purposes ofdetermining Members entitled to vote by ballot on the action, which record dateshall be set by the Board of Managers not more than 60 days prior to thedeadline for returning ballots to the Company. If no record date has been fixed by the Board of Managers, the recorddate for determining Members entitled to vote by written ballot withoutrequiring attendance at a meeting of Members shall be at the close of businesson the tenth day preceding the mailing of the written ballots to the Members.

 

3.18         Proxies.  Voting by proxy shall not be allowed.

 

**ARTICLE 4**

**DISPOSITION OF CAPITAL UNITS**

 

4.1           General Restrictions on theDisposition of Capital Units.

 

(a)           No Disposition of Capital Units shallbe valid except as specifically provided in this Article 4.  To be valid, a Disposition must be approvedby the Board of Managers and comply with the Company’s Capital Units TransferSystem as adopted or approved by the Board of Managers, as it may be amendedfrom time to time.  The Capital UnitsTransfer System shall conform with Section 1.7704-1 et seq. of theTreasury Regulations as adopted or amended by the Internal Revenue Service fromtime to time, and it is the intent of this Operating Agreement that: (i) thetax status of this Company be the same as for a partnership, (ii) thisCompany preserve its partnership tax status by complying with Section 1.7704-1,et seq., and any amendments thereto, and (iii) to the extent possible,this Operating Agreement shall be read and interpreted to prohibit 

 

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thefree transferability of Capital Units. Any attempted Disposition by a Person of Capital Units or any otherinterest or right, or any part thereof, in or in respect of the Company, otherthan in accordance with this Article 4 and the Capital Units TransferSystem shall be, and is hereby declared, null and void *ab initio.*

 

(b)           The Board of Managers shallnot approve, and the Company shall not recognize for any purpose, any purportedDisposition of a Capital Unit unless and until the other applicable provisionsof this Article 4 have been satisfied, all conditions have been satisfiedunder the Capital Units Transfer System, and the Company has received allrequired documentation in the form adopted by the Board of Managers. If thePerson acquiring the Capital Units in the Disposition is not a Member, thensuch Person must also comply with Section 3.3 of this Operating Agreement.Dispositions of Capital Units, and the resulting admissions of new Members, ifapplicable, are effective as of the first day of the Quarter following theQuarter in which such matters are approved by the Board of Managers. Upon theDisposition of all or a portion of a Member’s Capital Units, the Company shalltransfer to the Member or Members who have acquired the Capital Units thatproportion of the capital account of the Member effecting the Disposition whichrelates to the transferred Capital Units, including amounts representingpreviously earned but undistributed income and gains. No partial Capital Unitsmay be subject to a Disposition. If a Person becomes the beneficial holder ofCapital Units but has not become a Member (whether due to such Person’s failureto sign this Operating Agreement or the Board of Managers’ refusal to acceptsuch Person as a Member upon a Disposition of Capital Units), such Person shallreceive the allocations of income, gain, losses, deductions, credits anddistributions in accordance with Article 6 of this Operating Agreementuntil such time as the Person becomes a Member or until such Person’s CapitalUnits are redeemed in accordance with Section 4.3 of this OperatingAgreement.  Such Person shall have no voting rights until such time as thePerson becomes a Member and complies with this Section 4.1.

 

(c)           The Board of Managers will notapprove any Disposition unless (i) either (a) the Disposition isregistered under the Securities Act of 1933, as amended, and any applicablestate securities laws or (b) the Company has determined that theDisposition is exempt from registration under those laws; and (ii) theCompany has determined that the Disposition, when added to the total of allother Dispositions within the preceding 12 months, would not result in theCompany being considered to have terminated within the meaning of the Code orlosing its partnership status and being taxed as a C corporation within themeaning of the Code.

 

(d)           Any Person admitted to the Companyupon a Disposition of Capital Units shall pay, or reimburse the Company for,all costs incurred by the Company in connection with the Disposition oradmission on or before the thirtieth day after the receipt by that Person ofthe Company’s invoice for the amount due. If payment is not made by the date due, the Person owing that amountshall pay interest on the unpaid amount from the date due until paid at thelegal rate of interest allowed under South Dakota law.

 

4.2           Tax Elections.  In the event of a Disposition of all or partof the Capital Units of any Member, the Company, in the sole discretion of theBoard of Managers, may elect pursuant to Section 754 of the Code (or anysuccessor provisions) to adjust the basis of the assets of the Company.

 

4.3           Redemption.  The Company shall have the right to redeemthe Capital Units of a Member or a Person who beneficially holds Capital Unitsupon any of the following occurrences:

 

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(a)           Whenever the Board of Managers byresolution, adopted in good faith and after due investigation, finds that anyof the following defaults under the Operating Agreement exist and have not beenremedied for a period of 24 months after providing written notice to thedefaulting Person identifying the default, describing how such default may becured and explaining the consequences of this redemption provision:

 

(i)            A Person who is not already a Memberbecomes the beneficial holder of Capital Units and fails to take such action asis necessary to become a Member in compliance with Sections 3.3 and 4.1 of thisOperating Agreement; or

 

(ii)           A Member or other Person becomes thebeneficial holder of less than 2,500 Capital Units and fails to either acquiresufficient additional Capital Units to comply with the minimum investmentrequirement set forth in Section 5.1(c) of this Operating Agreementor to dispose of the Capital Units; or

 

(iii)          A Member or other Person, and saidMember’s or other Person’s Affiliates, becomes the holder of more than 1.5percent of the issued and outstanding Capital Units and fails to dispose of asufficient number of Capital Units to comply with the maximum investment limitset forth in Section 5.1(d) of this Operating Agreement.

 

(b)           Whenever the Board of Managers byresolution, adopted in good faith and after due investigation, finds that aMember has caused damage or harm to the Company and the other Members as a result of such Member’s (i) intentionalor repeated violation of any of the provisions of the Articles or thisOperating Agreement (other than the defaults set forth in paragraph (a) above),or (ii) material breach of the terms and conditions of any contract withthe Company.

 

Ifthe Company exercises its right to redeem a Member’s or other Person’s CapitalUnits pursuant to any of the above, the redemption of a Member’s or otherPerson’s Capital Units shall be effective upon written notice by the Company tothe Member or other Person of such redemption following the satisfaction of allof the above conditions.  Upon surrenderof such Member’s or Person’s Capital Units certificate (or satisfactoryevidence of lost certificate), the Company shall then pay to such Member orPerson the greater of (i) $0.20 per Capital Unit or (ii) the originalpurchase price paid upon issuance of such Capital Units less cumulativedistributions paid with respect to such Capital Units through the date ofredemption.  Nothing in this section shallbe interpreted to limit or prevent the Company from seeking any legal orequitable relief that would otherwise be available to the Company.

 

**ARTICLE 5**

**CAPITAL CONTRIBUTIONS**

 

5.1           Class A Capital Units.

 

(a)           *Issuanceof Class A Units as Part of the Reorganization.*  As part of the Reorganization, 14,129,250 Class ACapital Units are being issued to the Cooperative in exchange for all of theCooperative’s assets and liabilities. The Cooperative is being dissolved and the Class A Capital Unitsare being distributed to the shareholders of the Cooperative in proportion tothe equity shares held by each shareholder of the Cooperative.  In the event any shareholder of the

 

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Cooperativefails to execute a counterpart signature page of the Operating Agreement,or fails to consent to the termination of the shareholder’s Member Agreement,the Company shall have the right to redeem such Person’s Class A CapitalUnits as provided in Section 4.3, in addition to any remedies otherwiseprovided by law.

 

(b)           *Dispositionof Class A Units following the Reorganization.*  After completion of the Reorganization, Class AMembers may Dispose of outstanding Class A Capital Units to any Person,subject to the other requirements of this Operating Agreement.  Class A Capital Units may only beDisposed of in increments of 250 Capital Units.

 

(c)           *MinimumInvestment.*  A Class AMember must always own at least 2,500 Class A Capital Units, and no Personwill be admitted as a Class A Member unless said Person holds at least2,500 Class A Capital Units.  If aPerson fails to meet this requirement, the Company may redeem the Class ACapital Units held by said Person as provided in Section 4.3.

 

(d)           *MaximumInvestment*.  After completionof the Reorganization, no Person and said Person’s Affiliates may at any timehold more than 1.5 percent of the issued and outstanding Class A CapitalUnits.  If a Person violates this limit,the Company may redeem the Class A Capital Units held by said Person inexcess of this limitation as provided in Section 4.3.

 

5.2           Additional Capital Units.  Additional Capital Units may be created andissued to new Members or to existing Members on such terms and conditions asthe Board of Managers may determine at the time of admission, and may includefor the creation of different classes or groups of Members, represented bydifferent classes of Capital Units, which Capital Units may have differentrights, powers, and duties.  If the Boardof Managers creates additional Capital Units, the Board of Managers mustspecify the terms of admission or issuance, including the amount of CommittedCapital proposed to be raised from the issuance of such Capital Units. Membersof the Company shall not have a preemptive right to acquire additional, newlycreated Capital Units of the Company.

 

5.3           Return of Contributions.  A Member is not entitled to the return of anypart of its Capital Contribution or to be paid interest in respect of eitherits capital account or its Capital Contribution.  A Capital Contribution is not a liability ofthe Company or of any Member.  Memberswill not be required to contribute or to lend any cash or property to theCompany to enable the Company to return any Member’s Capital Contribution.

 

5.4           Advances by Members.  If the Company does not have sufficient cashto pay its obligations, and the Company does not raise additional capitalpursuant to Section 5.3 hereof, any Member(s) that may agree to do so withthe consent of the Board of Managers, as appropriate, may advance all or partof the needed funds to or on behalf of the Company.  An advance described in this Section constitutesa loan from the Member to the Company, bears interest at the rate negotiatedwith the Board of Managers from the date of the advance until the date ofpayment and is not a Capital Contribution.

 

5.5           Capital Accounts.  A capital account shall be established andmaintained for each Member pursuant to the requirements of applicable federalincome tax regulations.  Each Member’scapital account shall be increased and decreased as follows:

 

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(a)           Each Member’s capital account shallbe increased by:  (i) the amount ofthe initial Capital Contribution made by the Member, (ii) the amount ofany additional Capital Contributions made by the Member, and (iii) anyincome and gains allocated to the Member pursuant to Article 6.

 

(b)           Each Member’s capital account shallbe decreased by: (i) any deductions and losses allocated to the Memberpursuant to Article 6, and (ii) the amount of any distributions bythe Company to the Member as of the time of the distribution.

AMember who has more than one Capital Unit shall have a single capital accountthat reflects all its Capital Units, regardless of the Class of CapitalUnits owned by that Member and regardless of the time or manner in which thoseCapital Units were acquired.  Upon theDisposition of a Capital Unit, that portion of the capital account of theMember effecting the Disposition that is attributable to the Capital Unitsubject to the Disposition shall carry over to the Person acquiring suchCapital Unit.

 

**ARTICLE 6**

**ALLOCATIONS AND DISTRIBUTIONS**

 

6.1           Allocations and Distributions.  Except as may be required by section 704(b) and (c) of the Code and the applicable Treasury Regulations, allitems of income, gain, loss, deduction, and credit of the Company shall beallocated among the Members, and distributions shall be made, in accordancewith this Article 6.

 

6.2           Distributions of Available Cash. 

 

(a)           Distributions of Available Cash forDistribution shall be made to the Members for each fiscal year of the Companyin accordance with the following provisions:

 

(i)            Tax Distribution.  To the Members in an aggregate amount equalto thirty percent of the Company’s net income for such fiscal year, asdetermined in accordance with generally accepted accounting principles andreported on the financial statements furnished to each Member pursuant to Section 8.21of this Operating Agreement.  Provided,however, that no distribution pursuant to this Section 6.2(a) (i) willbe made if the net income for such fiscal year does not exceed $500,000.00,unless the Board of Managers votes to make a distribution notwithstanding thatthe net annual income for such fiscal year does not exceed $500,000.00.

 

(ii)           Other Distributions.  Distributions in excess of the taxdistribution made under Section 6.2(a)(i) of this Operating Agreementfor any fiscal year may be made upon a vote of the Board of Managers.

 

(b)           Additional distributions, if any,including distributions in excess of Available Cash for Distribution, may bemade as the Board of Managers shall determine in its sole discretion.

 

(c)           All distributions shall be made toMembers ratably in proportion to their Ownership Percentages; provided, thatwith respect to Members whose Capital Units may have been transferred,forfeited, reduced or changed during such year, distributions shall be prorated in accordance with the proration of allocations among such other Membersmade with respect to such year under Section 6.6 of this OperatingAgreement.

 

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(d)           No distribution shall be made if thedistribution violates or causes the Company to default under the terms of anyof the Company’s credit facilities or debt instruments or violates Section 6.10of this Operating Agreement.

 

6.3           Allocations of Income, Gain, Loss,Deductions, and Credits.  Except asotherwise provided in this Article 6, all items of income, gain, loss,deductions, and credits for a fiscal year shall be allocated to the Membersratably in proportion to their Ownership Percentages.

 

6.4           Allocation of Gain or Loss Uponthe Sale of All or Substantially All of the Company’s Assets.  Notwithstanding the provisions of Section 6.3:

 

                                                (a)           *Allocation of Gain. *Income or gain from the sale or other disposition of all orsubstantially all of the Company’s assets shall be allocated among the Members,first, in such respective amounts as shall cause each Member’s CapitalAccount  (increased by such amounts ofincome or gain) to bear a ratio to the aggregate Capital Account balance of allMembers which, expressed as a percentage, is equal to such Member’s OwnershipPercentage, and, thereafter, ratably in proportion to their respectiveOwnership Percentages.

 

(b)           *Allocationof Loss. *Any loss from thesale or exchange of all or substantially all of the Company’s assets shall beallocated first, so as to equalize the capital account balances of all Membersholding the same number of Capital Units, and thereafter, the remaining lossesshall be allocated to the Members, ratably in proportion to their OwnershipPercentages.

 

6.5           Regulatory Allocations andAllocation Limitations. Notwithstanding the preceding provisions for allocating income, gains,losses, deductions and credits, the following limitations, regulatoryallocations and contingent reallocations are intended to comply with applicableincome tax Treasury Regulations under Section 704(b) of the Code andshall be so construed when applied.

 

(a)           *MinimumGain Chargeback.* Notwithstanding any other provision of this Section 6.5, if thereis a net decrease in Partnership Minimum Gain during any Company fiscal year,each Member shall be specially allocated items of Company income and gain forsuch year (and, if necessary, for subsequent years) in accordance with Section 1.704-2(f)(1) ofthe Treasury Regulations in an amount equal to such Member’s share of the netdecrease in Partnership Minimum Gain (determined in accordance with Section 1.704-2(g)(2) ofthe Treasury Regulations).  This Section 6.5(a) isintended to comply with the minimum gain chargeback requirement in the TreasuryRegulations and shall be interpreted consistently therewith.

 

(b)           *PartnerMinimum Gain Chargeback.* Except as otherwise provided in Section 1.704-2(i)(4) of theTreasury Regulations, notwithstanding any other provision of this Section 6.5,if there is a net decrease in Partner Nonrecourse Debt Minimum Gainattributable to a Partner Nonrecourse Debt during any Company fiscal year, eachMember who has a share of the Partner Nonrecourse Debt Minimum Gainattributable to such Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) ofthe Treasury Regulations, shall be specially allocated items of Company incomeand gain for such year (and, if necessary, for subsequent years) in an amountequal to such Member’s share of the net decrease in Partner Nonrecourse DebtMinimum Gain attributable to such Partner Nonrecourse Debt, determined inaccordance with Section 1.704-2(i)(4) of the TreasuryRegulations.  Allocations pursuant to theprevious sentence shall be made in proportion to the respective amountsrequired to be allocated to each Member pursuant

 

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thereto.  The items to be so allocated shall bedetermined in accordance with Sections 1.704-2(i)(4) and 1.704-2(j)(2) ofthe Treasury Regulations. This Section 6.5(b) is intended to complywith the minimum gain chargeback requirements in Section 1.704-2(i)(4) ofthe Treasury Regulations and shall be interpreted consistently therewith.

 

(c)           *QualifiedIncome Offset.*  In the event adeficit balance in a Member’s capital account in excess of the sum of (i) theamount such Member is obligated to restore or contribute to the Companypursuant to any provision of this Operating Agreement, and (ii) the amountsuch Member is deemed to be obligated to contribute pursuant to the penultimatesentences of Section 1.704-2(g)(1)(ii) and 1.704-2(i)(5) of theTreasury Regulations, is caused or increased because a Member receives anadjustment, allocation, or distribution described in Section 1.704-1(b)(2)(ii)(d) ofthe Treasury Regulations, such Member will be allocated items of Company incomeand gain in an amount and manner sufficient to eliminate such deficit balanceor such increase in the deficit balance, as quickly as possible, to the extentrequired in the Treasury Regulations. This Section 6.5(c) is intended, and shall be so construed, toprovide a “qualified income offset” within the meaning of Section 1.704-1(b)(2)(ii)(d) ofthe Treasury Regulations.

 

(d)           *GrossIncome Allocations.*  In theevent that a deficit balance in a Member’s capital account at the end of anyfiscal year is in excess of the sum of (i) the amount such Member isobligated to restore or contribute to the Company under this OperatingAgreement, and (ii) the amount such Member is deemed to be obligated torestore pursuant to the penultimate sentences of Treasury Regulations §§ 1.704-2(g)(1)(ii) and1.704-2(i)(5), the Member shall be specially allocated items of Company incomeand gain in the amount of such excess as quickly as possible, provided that anallocation pursuant to this Section 6.5(d) shall be made only if andto the extent that the Member would have a deficit balance in its capitalaccount in excess of such sum after all other allocations provided for in this Section havebeen made as if Section 6.5(c) and this Section 6.5(d) werenot in this Operating Agreement.

 

(e)           *NonrecourseDeductions.*  NonrecourseDeductions shall be specially allocated to the Members in proportion to theallocation of Losses under Section 6.3.

 

(f)            *PartnerNonrecourse Deductions.*  AnyPartner Nonrecourse Deductions for any fiscal year shall be specially allocatedto the Member who bears the economic risk of loss with respect to the PartnerNonrecourse Debt to which such Partner Nonrecourse Deductions are attributablein accordance with Section 1.704-2(i)(1) of the Treasury Regulations.

 

(g)           *Members’Shares of Excess Nonrecourse Debt.* The Members’ shares of excess Partnership Nonrecourse Debt within themeaning of Section 1.752-3(a)(3) of the Treasury Regulations shall bedetermined in accordance with the manner in which it is reasonably expectedthat the deductions attributable to such Partnership Nonrecourse Debt will beallocated.

 

(h)           *CurativeAllocations.*  The allocationsset forth in subsections (a), (b), (c), (d), (f) and (g) (the “RegulatoryAllocations”) are intended to comply with certain requirements of the TreasuryRegulations under Section 704(b). Notwithstanding any other provision of this Article 6 (other thanthe Regulatory Allocations), the Regulatory Allocations shall be taken intoaccount in allocating other items of income, gain or loss among the Members sothat, to the extent possible, the net amount of allocations of such items ofincome, gain or loss and the Regulatory Allocations to each Member shall beequal to the net amount that would have been allocated to

 

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suchMember if the Regulatory Allocations had not occurred.  For this purpose, future RegulatoryAllocations under Section 6.5(a) and (b) shall be taken intoaccount that, although not yet made, are likely to offset other RegulatoryAllocations made under Section 6.5(f) and (g).

 

6.6           Proration of Allocations.  All income, gains, losses, deductions andcredits for a fiscal year allocable with respect to any Members whose CapitalUnits may have been transferred, forfeited, reduced or changed during such yearshould be allocated based upon the varying interests of the Members throughoutthe year.  The precise manner in whichsuch allocations are made shall be determined by the Board of Managers in itssole discretion and shall be a manner of allocation, including an interimclosing of the books, permitted to be used for federal income tax purposes.

 

6.7           Consent to Allocation.  Each Member expressly consents to the methodsprovided herein for allocation of the Company’s income, gains, losses,deductions and credits.

 

6.8           Distributions in Kind.  Except as provided by this OperatingAgreement, a Member, regardless of the form of the Member’s CapitalContribution, may not demand or receive a distribution from this Company in anyform other than cash.

 

6.9           Right to Distributions.  A Member who is entitled to receive adistribution that has not been paid by the Company when due has the status of,and is entitled to all remedies available to, a creditor of the Company withrespect to such distribution.

 

6.10         Limitation on Distributions.

 

(a)           Notwithstanding anything to thecontrary in this Operating Agreement, the Company may not make a distributionto its Members to the extent that, immediately after giving effect to thedistribution, all liabilities of the Company, other than liabilities to Memberswith respect to their interests and liabilities for which the recourse ofcreditors is limited to specified property of the Company, exceed the fairvalue of the Company’s assets, except that the fair value of property that issubject to a liability for which recourse of creditors is limited shall beincluded in the Company’s assets only to the extent that the fair value of thatproperty exceeds that liability, or otherwise in violation of the Act.

 

(b)           A Member who receives a distributionthat is not permitted under this Operating Agreement has no liability to returnthe distribution unless the Member knew that the distribution was prohibitedunder the terms of this Operating Agreement or the Act.

 

**ARTICLE 7**

**OFFICERS**

 

7.1           Number of Officers.  The officers of the Board of Managers shallbe a President, one or more vice-presidents, and a Secretary, each of whomshall be appointed by the Board of Managers. The officers of the Company shall be a Chief Executive Officer and aChief Financial Officer.  The Board ofManagers shall appoint the Chief Executive Officer.  The Chief Executive Officer shall appoint theChief Financial Officer.  Such otherofficers and assistant officers as may be deemed necessary, including anyvice-presidents, may be appointed by the Board of Managers.  If specifically authorized by the Board ofManagers, an officer may appoint one or more officers or assistant officers forthe Board of Managers.  The sameindividual may simultaneously hold more than one office on the Board ofManagers.  A person

 

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mustbe a member of the Board of Managers and a Member of the Company orrepresentative owner of a Member of the Company to serve as an officer of theBoard of Managers.    A person need notbe a member of the Board of Managers or a Member of the Company orrepresentative of a Member of the Company to serve as an officer of theCompany.

 

7.2           Appointment and Term of Office.  The officers of the Board of Managers shallbe appointed by the Board of Managers for a term as determined by the Board ofManagers.  If no term is specified, theyshall hold office until the first meeting of the Board of Managers held afterthe next annual meeting of Members.  Ifthe appointment of officers shall not be made at such meeting, such appointmentshall be made as soon thereafter as is convenient.  Each officer shall hold office until theofficer’s successor shall have been duly appointed, until the officer’s death,or until the officer shall resign or shall have been removed in the mannerprovided in Section 7.3.  Thedesignation of a specified term does not grant to the officer any contractrights.  The Board of Managers can removethe officer at any time prior to the termination of such term, and the officershall be employed “at will,” unless otherwise provided by a signed contractwith the Company.  The officers of theCompany shall be appointed by the Board of Managers for a term as determined bythe Board of Managers.  If no term isspecified, they shall hold office until removed by the Board of Managers oruntil they resign.

 

7.3           Removal of Officers.  Any officer or agent of the Board of Managersmay be removed by a Super Majority Vote of the Board of Managers at any time,with or without cause.  The Board ofManagers by a Super Majority Vote may remove the Chief Executive Officer at anytime, with or without cause.  The ChiefExecutive Officer may remove the Chief Financial Officer at any time, with orwithout cause.  Any such removal shall bewithout prejudice to the contract rights, if any, of the person soremoved.  Appointment of an officer oragent shall not of itself create contract rights.

 

7.4           The Chief Executive Officer.  The Chief Executive Officer shall be theprincipal executive officer of the Company. The Chief Executive Officer may sign, with the Secretary or any otherproper officer of the Company authorized by the Board of Managers, contractsand other instruments, except in cases where the signing and execution thereofshall be expressly delegated by the Board of Managers or by this OperatingAgreement to some other officer or agent of the Company, or shall be requiredby law to be otherwise signed or executed, and in general shall perform allduties incident to the office of Chief Executive Officer and such other dutiesas may be prescribed by the Board of Managers from time to time.  Notwithstanding the previous sentence, theChief Executive Officer shall not have the authority to sign deeds, mortgagesor debt instruments, except in cases where the signing and execution thereofshall be expressly delegated to the Chief Executive Officer by the Board ofManagers, or for the borrowing of money in an amount not exceeding $50,000.00.

 

7.5           The Chief Financial Officer.  The Chief Financial Officer shall be theprincipal financial and accounting officer of the Company.  The Chief Financial Officer shall:

 

(a)           Have charge and custody of and beresponsible for all funds and securities of the Company;

 

(b)           Receive and give receipts for moneysdue and payable to the Company from any source whatsoever, and deposit all suchmoneys in the name of the Company in such banks, trust companies, or otherdepositaries as shall be selected by the Board of Managers; and

 

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(c)           In general, perform all of the dutiesincident to the office of Chief Financial Officer and such other duties as fromtime to time may be assigned to the Chief Financial Officer by the ChiefExecutive Officer.  If required by theBoard of Managers or the Chief Executive Officer, the Chief Financial Officershall give a bond for the faithful discharge of the Chief Financial Officer’sduties in such sum and with such surety or sureties as the Board of Managers orChief Executive Officer shall determine.

 

7.6           The President.  The President shall be the presiding officerof the Board of Managers.  The Presidentshall, when present, preside at all meetings of the Members and of the Board ofManagers.  The President may sign, withthe Secretary or any other proper officer of the Board of Managers or of theCompany authorized by the Board of Managers, deeds, mortgages, bonds,contracts, debt instruments or other instruments, which the Board of Managershave authorized to be executed, except in cases where the signing and executionthereof shall be expressly delegated by the Board of Managers to some otherofficer or agent of the Company, or shall be required by law to be otherwisesigned or executed.  The President maysign, with the Secretary or any other proper officer of the Board of Managersor of the Company authorized by the Board of Managers, Certificates for CapitalUnits of the Company and in general shall perform all duties incident to theoffice of President and such other duties as may be prescribed by the Board ofManagers from time to time.

 

7.7           The Vice-Presidents.  If appointed, in the absence of the Presidentor in the event of the President’s death, inability or refusal to act, theVice-President, or in the event there be more than one Vice-President, theVice-Presidents in the order designated at the time of their election, or inthe absence of any designation, then in the order of their appointment, shallperform the duties of the President, and when so acting, shall have all thepowers of and be subject to all the restrictions upon the President.  If there is no Vice-President, then anymember of the Board of Managers  shallperform such duties of the President.  AnyVice-President may sign, with the Secretary or an Assistant Secretary,certificates for shares of the Company the issuance of which have beenauthorized by resolution of the Board of Managers; and shall perform such otherduties as from time to time may be assigned to the Vice-President by thePresident or by the Board of Managers.

 

7.8           The Secretary.  The Secretary shall:

 

(a)           Keep the minutes of the proceedingsof the Members and of the Board of Managers in one or more books provided forthat purpose;

 

(b)           See that all notices are duly givenin accordance with the provisions of this Operating Agreement or as required bylaw;

 

(c)           Be the custodian of the Companyrecords and of any seal of the Company and if there is a seal of the Company,see that it is affixed to all documents the execution of which on behalf of theCompany under its seal is duly authorized;

 

(d)           When requested or required,authenticate any records of the Company;

 

(e)           Keep a register of the mailingaddress of each Member which shall be furnished to the Secretary by suchMember;

 

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(f)            Sign with the President, or aVice-President, certificates for Capital Units of the Company, the issuance ofwhich shall have been authorized by resolution of the Board of Managers;

 

(g)           Have general charge of the CapitalUnits transfer books of the Company; and

 

(h)           In general, perform all dutiesincident to the office of Secretary and such other duties as from time to timemay be assigned to the Secretary by the President or by the Board of Managers.

 

7.9           Assistant Secretaries.  The Assistant Secretaries, when authorized bythe Board of Managers, may sign with the President or a Vice-President,certificates for Capital Units of the Company the issuance of which shall havebeen authorized by a resolution of the Board of Managers.  The Assistant Secretaries , in general, shallperform such duties as shall be assigned to the Secretary, or by the Presidentor the Board of Managers.

 

7.10         Designation of Tax Matters Partner.  The Chief Financial Officer is designated asthe Tax Matters Partner of the Company, as provided in the Treasury Regulationspursuant to Section 6231 of the Code. Each Member, by the execution of this Agreement consents to suchdesignation of the Tax Matters Partner and agrees to execute, certify,acknowledge, deliver, swear to, file and record at the appropriate publicoffices such documents as may be necessary or appropriate to evidence suchconsent.  If at any time there is noChief Financial Officer, or if the Chief Financial Officer does not own CapitalUnits, the Board of Managers shall designate a Manager who owns Capital Unitsas the Tax Matters Partner of the Company.

 

7.11         Duties of Tax Matters Partner.

 

(a)           The Tax Matters Partner shallregister the Company as a “tax shelter” with the Internal Revenue Service ifsuch registration is required and shall provide the tax shelter registrationnumber to each Member.

 

(b)           To the extent and in the mannerprovided by applicable law and regulations, the Tax Matters Partner shallfurnish to the Secretary of the Treasury or his delegate (for the purposes ofSections 7.10 and 7.11 only, the “Secretary”) the name, address, profit’sinterest and taxpayer identification number of each Member.

 

(c)           To the extent and in the mannerprovided by applicable law and regulations, the Tax Matters Partner shall keepeach Member informed of the administrative and judicial proceedings for theadjustment at the Company level of any item required to be taken into accountby a Member for income tax purposes (such administrative proceeding referred tohereinafter as a “tax audit” and such judicial proceeding referred tohereinafter as “judicial review”).

 

(d)           If the Tax Matters Partner, on behalfof the Company, receives a notice with respect to a tax audit from theSecretary, the Tax Matters Partner shall forward a copy of such notice to theMembers who hold or held an interest in the profits or losses of the Company inthe taxable year to which the notice relates as required by law.

 

7.12         Authority of Tax Matters Partner.  The Tax Matters Partner is hereby authorized,but not required:

 

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(a)           To enter into any settlement with theInternal Revenue Service or the Secretary with respect to any tax audit orjudicial review, in which agreement the Tax Matters Partner may expressly statethat such agreement shall bind the other Members, except that such settlementagreement shall not bind any Member who (within the time prescribed pursuant tothe Code and Treasury Regulations thereunder) files a statement with theSecretary providing that the Tax Matters Partner shall not have the authorityto enter into a settlement agreement on behalf of such Member;

 

(b)           In the event that a notice of a finaladministrative adjustment at the Company level of any item required to be takeninto account by a Member for tax purposes (a “final” adjustment”) is mailed tothe Tax Matters Partner, to seek judicial review of such final adjustment, includingthe filing of a petition for readjustment with the Tax Court, the DistrictCourt of the United States for the district in which the Company’s principalplace of business is located, or the United States Court of Claims;

 

(c)           To intervene in any action brought byany other Member for judicial review of a final adjustment;

 

(d)           To file a request for anadministrative adjustment with the Secretary at any time and, if any part ofsuch request is not allowed by the Secretary, to file a petition for judicialreview with respect to such request;

 

(e)           To enter into an agreement with theInternal Revenue Service to extend the period for assessing any tax which isattributable to any item required to be taken into account by a Member for taxpurposes, or an item affected by such item;

 

(f)            To take any other action on behalfof the Members or the Company in connection with any administrative or judicialtax proceeding to the extent permitted by applicable law or regulations; and

 

(g)           To retain attorneys and accountantson an as-needed basis under such terms and conditions as determined solely bythe Tax Matters Partner.

 

7.13         Expenses of Tax Matters Partner.  The Company shall indemnify and reimburse theTax Matters Partner for all expenses, including legal and accounting fees,claims, liabilities, losses and damages incurred in connection with anyadministrative or judicial proceeding with respect to the tax liability of theMembers.  The payment of all suchexpenses shall be made before any distributions are made of Net Income fromOperations, or any discretionary reserves are set aside by the Board ofManagers.  The taking of any action andthe incurring of any expense by the Tax Matters Partner in connection with anysuch proceeding, except to the extent required by law, is a matter in the solediscretion of the Tax Matters Partner and the provisions on limitations ofliability of a Manager and indemnification set forth in Article 9 of thisAgreement shall be fully applicable to the Tax Matters Partner in his capacityas such.

 

7.14         Compensation.  The salaries and terms of employment of theChief Executive Officer and of the officers of the Board of Managers shall befixed from time to time by the Board of Managers.  The salaries and terms of employment of theother officers of the Company shall also be fixed from time to

 

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timeby the Board of Managers or person designated by the Board of Managers.  Officers of the Board of Managers who areMembers of the Company shall receive the same membership benefits that allother Members receive.  Officers of theCompany and officers of the Board of Managers may be reimbursed for reasonableexpenses incurred in carrying out their duties as officers.

 

**ARTICLE 8**

**MANAGEMENT**

 

8.1           Management by Board of Managers.

 

(a)           Except for situations in which theapproval of the Members is required by this Operating Agreement or bynonwaivable provisions of the Act, and subject to the provisions of Section 8.2,the powers of the Company shall be exercised by or under the authority of, andthe business and affairs of the Company shall be managed under the direction ofthe Board of Managers, and the Board of Managers may make all decisions andtake all actions for the Company not otherwise provided for in this OperatingAgreement, including, without limitation, the following:

 

(i)            To manage, supervise and conduct theday-to-day affairs of the Company.

 

(ii)           To direct the expenditure of thecapital and profits of the Company in furtherance of the Company’s purposes.

 

(iii)          To direct the investment of Companyfunds in any manner deemed appropriate or convenient by the Board of Managersto be in the best interests of the Company.

 

(iv)          To enter into operating agreements,joint participations, joint ventures, and partnerships with others containingsuch terms, provisions and conditions as the Board of Managers shall approve.

 

(v)           To cause the Company to borrow moneyfrom banks and other lending institutions for any Company purpose and inconnection therewith to mortgage, grant a security interest in or hypothecateall of the assets of the Company.

 

(vi)          To sell, dispose, abandon, trade orexchange assets (but not a sale, disposition, abandonment, trade, or exchangeof all or any substantial portion of the Company’s assets) of the Company, uponsuch terms and conditions and for such consideration as the Board of Managersdeems appropriate.

 

(vii)         To enter into agreements and contractswith any Member or an Affiliate of any Member and to give receipts, releasesand discharges with respect to all of the foregoing and any matters incidentthereto as the Board of Managers may deem advisable or appropriate; provided,however, that a majority of the disinterested Managers must determinethat the transaction is fair and reasonable to the Company and any such agreement or contract shall be on termsas favorable to the Company as could be obtained from any third party.

 

(viii)        To make distributions in accordance withand subject to the limitations set forth in Article 6 of this OperatingAgreement.

 

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(ix)           To amend this Operating Agreement inaccordance with the provision of Section 14.10.

 

(b)           Except as otherwise provided in thisOperating Agreement, all acts of the Board of Managers will be by majority voteof the disinterested Managers. The following acts shall require a SuperMajority Vote of the disinterested Managers:

 

(i)            The removal of the Chief ExecutiveOfficer of the Company pursuant to Section 7.3;

 

(ii)           The removal of a Manager pursuant to Section 8.6;and

 

(iii)          The approval of any action taken bythe Board of Managers in writing without a meeting of the Board of Managerspursuant to Section 8.14.

 

(c)           Notwithstanding the provisions of Section 8.1(a),the Board of Managers may not cause the Company to take any action set forth inSection 3.9(b), without first obtaining the required approval of theMembers.

 

(d)           For the purposes of this OperatingAgreement, a disinterested Manager shall be a Manager who does not have afinancial interest or affiliation in any contract or agreement to be approvedby the Board of Managers.  A Manager whohas a financial interest or affiliation in any contract or agreement shall notvote on such contract or agreement.  If aManager is an Affiliate or immediate family member (spouse, parent, child, orsibling) of a party with respect to which the Board of Managers intends to act,such Manager shall be deemed to be interested. A Manager shall not be prohibited from voting on the approval of anycontract which is made available to all Members of the Company, such as asoybean delivery or similar agreement shall not be prohibited from voting onthe approval of the Disposition of the Capital Units, and shall not beprohibited from voting on the approval of per diem and other compensation whichis made applicable to all Managers pursuant to Section 8.20.

 

8.2           Actions by Managers; Committees;Delegation of Authority and Duties.

 

(a)           In managing the business and affairsof the Company and in exercising its powers, the Board of Managers shall act (i) collectivelythrough meetings and written consents consistent with or as may be provided orlimited in other provisions of this Operating Agreement; (ii) throughcommittees pursuant to Section 8.2(b); and (iii) through Managers andofficers to whom authority and duties have been delegated pursuant to Section 8.2(c).

 

(b)           The Board of Managers may, from timeto time, designate one or more committees, each of which shall be comprised ofone or more members of the Board of Managers and/or the Members of theCompany.  Any such committee, to theextent provided in such resolution shall have and may exercise such authorityas is designated by the Board of Managers, subject to the limitations set forthin the Act.  At every meeting of any suchcommittee, unless otherwise provided by the Board of Managers, the presence ofa majority of all the committee members shall constitute a quorum, and theaffirmative vote of a majority of the committee members

 

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presentshall be necessary for the adoption of any resolution.  The Board of Managers may dissolve anycommittee at any time.

 

(c)           Any Person dealing with the Company,other than a Member, may rely on the authority of the Manager or any officer ofthe Company in taking any action in the name of the Company without inquiryinto the provisions of this Operating Agreement or compliance herewith,regardless of whether that action actually is taken in accordance with theprovisions of this Operating Agreement.

 

8.3           Registration and Transfer ofSecurities.  Securities and otherproperty owned by the Company shall be registered in the Company’s name, in anominee name, in any such case for the benefit of the Company.  Any transfer agent called upon to transferany securities to or from the name of the Company or such other names shall beentitled to rely on instructions or assignments signed by an officer of theCompany, or by any agent or custodian so authorized by the Board of Managers,on its behalf, without inquiry as to the authority of the person signing suchinstructions or assignments or as to the validity of any transfer to or fromthe name of the Company.  At the time oftransfer, any transfer agent is entitled to assume, unless it has actualknowledge to the contrary:

 

(a)           that the Company is still inexistence;

 

(b)           that this Operating Agreement is infull force and effect and has not been amended, unless the transfer agent hasreceived written notice to the contrary; and

 

(c)           that the person so signing isauthorized to sign on behalf of the Company.

 

8.4           Number; Term of Office; Election.

 

(a)           The number of initial Managers of theCompany shall be set at 21 until such time as the Members vote to change the numberof Managers serving on the Board of Managers. If the number of Managers is increased, the newly created Managerpositions shall be filled at the next annual meeting by election by theMembers.  If the number of Managers isdecreased, then the decrease shall coincide with an annual or special meetingand all Managers shall be subject to reelection by the Members.  Each initial Manager shall hold officeaccording to the provisions of Section 8.4(b) unless such Managerresigns, dies, or becomes disabled.

 

(b)           A person must be a Member or arepresentative owner of a Member of the Company to be elected to the Board ofManagers.  Each initial Manager shallserve on the Company’s Board of Managers until his term would have expired onthe Cooperative’s board of directors, resulting in staggered elections of sevenManagers annually.  Thereafter eachManager shall be elected to office by the Members for a term of three years oruntil the Manager’s earlier resignation or removal.  No Manager may serve more than threeconsecutive three year terms on the Board of Managers, and the original termsof the initial Managers’ as directors of the Cooperative shall be included incalculating length of service.  If aManager’s term expires, the Manager shall continue to serve until the Manager’ssuccessor shall have been elected and qualified.  If a Manager is appointed to complete anunexpired term, that portion of the unexpired term served shall not be countedwhen calculating the Manager’s length of service.

 

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(c)           At each annual meeting one Managershall be elected from each of seven geographic districts.  The seven geographic districts are thoseoriginally set by the board of directors of the Cooperative.  It is intended that each of the sevengeographic districts have approximately equal numbers of Members located ineach district.  Boundaries of districtsmay be changed by a majority vote of the Members at an annual or special meetingof the Members.  However, if the boundariesare changed by a vote taken at an annual meeting, the change of districtboundaries shall not be effective until adjournment of the annual meeting sothat the election of Managers to be held during said annual meeting shall becompleted under the former district boundaries.

 

(d)           If a representative of a Member thatis a partnership, firm, corporation, limited liability company, unincorporatedassociation or cooperative is seeking election to the Board of Managers, therepresentative owner of a Member of the Company shall seek election within thedistrict in which the Member is located. For the purpose of electing Managers, a Member shall be deemed to belocated in a given district if the Member’s principal residence is locatedwithin the district for a Member that is an individual, and if the Member’schief executive office is located within the district for a Member that is apartnership, firm, corporation, limited liability company, unincorporatedassociation or cooperative.  If a Manager’sprincipal residence or the Member’s chief executive office, whichever isapplicable, should change from one district to another during a Manager’s term,because of a change in location of the principal residence or chief executiveoffice, whichever is applicable, or because the Members vote to change theboundaries of a Manager’s district, said Manager may complete his or her term,but may not seek re-election within the former district upon completion of thecurrent term.

 

(e)           A Manager shall be elected by aplurality of the votes cast by the Members from the Manager’s district votingin the election, with each Member having one vote per position and nocumulative voting.  Other aspects of theelection process shall be determined by the Board of Managers in advance of theannual election.

 

8.5           Death or Disability of Managers.  Upon the death or disability of a Manager,the resulting vacancy on the Board of Managers may be filled in accordance withSection 8.8.

 

8.6           Removal.  Managers may be removed for any reason at anyannual or special meeting of Members by the affirmative vote of the majority ofthe Members.  The notice calling suchmeeting shall give notice of the intention to act upon such matter, and if thenotice so provides, the vacancy caused by such removal by the Members may befilled at such meeting by vote of the Members represented at such meeting.  Managers may also be removed for any reasonby a Super Majority Vote of the Board of Managers.  The vacancy caused by such removal by theBoard of Managers may be filled by the remaining members of the Board ofManagers as provided in Section 8.8 of this Operating Agreement.

 

8.7           Resignations. Any Manager mayresign at any time.  Such resignationshall be made in writing and shall take effect at the time specified therein,or, if no time be specified then at the time of its receipt by the President orthe Secretary.  The acceptance of aresignation shall not be necessary to make it effective, unless expressly soprovided in the resignation.

 

8.8           Vacancies.  Any vacancy occurring in the Board ofManagers (other than by reason of an increase in the number of Managers) may befilled by appointment through the affirmative vote of a majority of theremaining Managers, though less than a quorum of the Managers.  A Manager appointed by the Board of Managersto fill a vacancy shall serve until the next annual meeting or special meetingof

 

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Membersheld for the purpose of electing Managers, at which time, the Members shallelect a new Manager to serve for the remainder of the original unexpired termof the vacated position.  Any Managerposition to be filled by reason of an increase in the number of members on theBoard of Managers shall be filled by election at an annual meeting or at aspecial meeting of Members called for that purpose.

 

8.9           Place and Manner of Meetings.  Meetings of the Board of Managers, regular orspecial, may be held either within or without the State of South Dakota.  Managers may participate in such meetings bymeans of conference telephone or similar communications equipment by means ofwhich all persons participating in the meeting can hear each other, andparticipation in a meeting as provided herein shall constitute presence inperson at such meeting, except where a person participates in the meeting forthe express purpose of objecting to the transaction of any business on theground that the meeting is not lawfully called or convened.

 

8.10         First Meeting.  The first meeting of the newly elected Managersshall be held without further notice within 60 days following the annualmeeting of the Members, and at the same place, unless by unanimous consent ofthe Board of Managers then elected and serving, such time or place shall bechanged.

 

8.11         Regular Meeting of Board of Managers.  A regular meeting of the Board of Managersmay be held at such time as shall be determined from time to time by resolutionof the Board of Managers.

 

8.12         Special Meeting of Board of Managers.  The Secretary shall call a special meeting ofthe Board of Managers whenever requested to do so by the President, ChiefExecutive Officer, or by any three of the Managers.  Such special meeting shall be held at thetime specified in the notice of the meeting. Neither the business to be transacted at, nor the purpose of, anyspecial meeting need be specified in a notice or waiver of notice.

 

8.13         Notice of Board of Managers’Meetings.  All special meetings ofthe Board of Managers shall be held upon two 2 days’ written or oral notice statingthe date, place and hour of meeting delivered to each Manager either personallyor by facsimile transmission, or upon five days’ written notice by mail, at thedirection of the President, Chief Executive Officer, the Secretary, or Managerscalling the meeting.

 

8.14         Action Without Meeting.  Any action that can be taken at a meeting ofthe Board of Managers, or any action which may be taken at a meeting of theBoard of Managers, may be taken without a meeting if a consent in writing,setting forth the action so taken, shall be signed by a Super Majority Vote ofthe Board of Managers.  Such consentshall have the same force and effect as if adopted at a duly called meeting ofthe Board of Managers.

 

8.15         Quorum; Majority Vote.  At all meetings of the Board of Managers, amajority of the members of the Board of Managers shall constitute a quorum forthe transaction of business.  Except asotherwise provided in this Operating Agreement, the act of a majority of the Managerspresent at any meeting at which a quorum is present shall be the act of theBoard of Managers.  If a quorum shall notbe present at any meeting of the Board of Managers, the Managers presentthereat may adjourn the meeting from time to time, without notice other thanannouncement at the meeting, until a quorum is present.

 

8.16         Approval or Ratification of Acts orContracts. The Board of Managers in its discretion may submit any act orcontract for approval or ratification at any annual meeting of the Members, orat any special meeting of the Members called for the purpose of considering anysuch act or contract, and

 

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anyact or contract that shall be approved or be ratified by the Members shall beas valid and as binding upon the Company and upon all the Members as if itshall have been approved or ratified by every Member of the Company.

 

8.17         Interested Managers, Officers andMembers.  No contract or transactionbetween the Company and one or more of its Managers, officers, or Members, orany of their Affiliates, or between the Company and any other limited liabilitycompany, corporation, partnership, association or other organization in whichone or more of its Managers or Members are managers or officers or have afinancial interest, shall be void or voidable solely for this reason or solelybecause the Person is present at or participates in the meeting of the Board ofManagers or of a committee formed by the Board of Managers which authorizes thecontract or transaction.  Subject to 8.1(d),only disinterested Managers may vote on any particular matter or issue.

 

8.18         Expenses of the Company.

 

(a)           *Generaland Administrative Expenses.* All expenses of the Company shall be billed to and paid by theCompany.  The Managers may be reimbursedfor the actual cost of goods and services used for or by the Company.  Managers may be reimbursed for administrativeservices and costs incurred by the Manager that are incidental to the Manager’srole as a Manager of the Company and necessary to the prudent operation of theCompany; provided, the reimbursement shall be the lower of the Manager’s actualcost or the amount the Company would be required to pay persons other thanAffiliates for comparable administrative services in the same geographiclocation; and provided, further, that such costs are reasonably allocated tothe Company on the basis of assets, revenues, time records or other methodconforming with generally accepted accounting principles.  No reimbursement shall be permitted forservices for which the Manager is entitled to compensation by way of a separatefee.

 

(b)           *Organizationaland Reorganization Expenses.* Organization expenses incurred in connection with the formation of theCompany and all expenses in connection with the Reorganization will be chargedto and borne by the Company.  To theextent any such organization and reorganization expenses have been paid by theBoard of Managers, the Board of Managers will be reimbursed in a like amount bythe Company.  Notwithstanding any otherprovision hereof, the Company will pay and bear directly all legal, accountingand auditing expenses of the Company, taxes, if any, payable by the Company,interest costs of the Company, custodial fees, and extraordinary expenses,including litigation.

 

8.19         Procedure.  The Board of Managers shall keep regularminutes of its proceedings.  The minutesshall be placed in the minute book of the Company.

 

8.20         Compensation.  The members of the Board of Managers shallreceive per diem or other compensation for attending meetings and serving as aManager as determined by the Board of Managers. Managers who are Members of the Company shall receive the samemembership benefits that all other Members receive.  Managers may be reimbursed for reasonableexpenses incurred in carrying out their duties as Managers.

 

8.21         Reports of Financial and TaxInformation to Members.

 

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(a)           Financial Information.  Not later than ninety days after the end ofeach fiscal year of the Company, each Member will be furnished with an annualreport of the business and operations of the Company during such fiscal year,which annual report shall constitute the accounting of the Board of Managersfor the fiscal year.  The annual reportwill contain financial statements, including a balance sheet, statement ofoperations, statement of changes in Members’ equity and cash flows.  The annual report will include the amount andnature of any compensation paid to the officers and Managers and their Affiliatesduring the period, including a description of the services performed inrelation thereto, and will otherwise be in such form and have such content asthe Board of Managers deems proper.

 

(b)           Tax Information.  Appropriate tax information will be deliveredto each Member within ninety days after the end of each fiscal year.  In addition, concurrently with the deliveryof such information, there shall be furnished adequate information relating tothe Company’s operations to enable each Member to complete and file allfederal, state and local estimated tax returns that may be required of theMember.

 

**ARTICLE 9**

**INDEMNIFICATION**

 

9.1           Indemnification.  The Company shall indemnify an officer,Member, Manager, former Member, a former officer or a former Manager of theCompany against expenses actually and reasonably incurred by said person inconnection with the defense of an action, suit or proceeding, civil orcriminal, in which said person is made a party by reason  of being or having been such officer, Memberor Manager, except in relation to matters as to which such Person may beadjudged in the action, suit or proceeding to be liable to the Company under Section 9.2of this Operating Agreement.  Notwithstandinganything to the contrary above,

 

(a)           the Company shallnot provide for indemnification of an officer, Member or Manager for anyliability or loss suffered by an officer, Member or Manager, nor shall itprovide that an officer, Member or Manager be held harmless for any loss orliability suffered by the Company, unless all of the following conditions aremet:  (i) the Board of Managers hasdetermined, in good faith, that the course of conduct which caused the loss orliability was in the best interests of the Company; (ii) the officer,Member or Manager was acting on behalf of or performing services for theCompany; (iii) such liability or loss was not the result of (A) grossnegligence or misconduct if the person to be indemnified is an independentMember or Manager or (B) negligence or misconduct if the person to beindemnified is an officer or is not an independent Member or Manager; and (iv) suchindemnification or agreement to hold harmless is recoverable only out of theCompany’s net assets and not from Members; and

 

(b)           an officer, Memberor Manager shall not be indemnified by the Company for any losses, liabilitiesor expenses arising from or out of an alleged violation of federal or statesecurities laws by such party unless one or more of the following conditionsare met: (i) there has been a successful adjudication on the merits ofeach count involving alleged securities law violations as to the particularindemnitee; (ii) such claims have been dismissed with prejudice on themerits by a court of competent jurisdiction as to the particular indemnitee; or(iii) a court of competent jurisdiction approves a settlement of theclaims against a particular indemnitee and finds that indemnification of thesettlement and the related costs should be made, and the court considering therequest for indemnification has been advised of the position of the Securitiesand Exchange 

 

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Commission and of the published position of any state securitiesregulatory authority in which securities of the corporation were offered orsold as to indemnification for violations of securities laws.

 

9.2           Liability of Company.  To the full extent permitted by South Dakotalaw, no officer, Member or Manager shall be liable to the Company or itsMembers for monetary damages for an act or omission in such Person’s capacityas an officer, Member or Manager of the Company, except that this Article doesnot eliminate or limit the liability of an officer, Member or Manager to theextent the officer, Member or Manager is found liable for:

 

(a)           a breach of the dutyof loyalty to the Company or its Members;

 

(b)           an act or omissionnot in good faith that constitutes a breach of duty to the Company or itsMembers or an act or omission that involves (i) gross negligence ormisconduct if the person to be indemnified is an independent Member or Manager,(ii) negligence or misconduct if the person to be indemnified is anofficer or is not an independent Member or Manager, (iii) misconduct or (iv) aknown violation of the law;

 

(c)           a transaction fromwhich the officer, Member or Manager received an improper benefit whether ornot the benefit resulted from an action taken within the scope of the officer’sMember’s or Manager’s office; or

 

(d)           an act or omissionfor which the liability of an officer, Member or Manager is expressly providedfor by applicable statute.

 

9.3           Advance Payment.  The advancement of Company funds to anofficer, Member or Manager for legal expenses and other costs incurred as aresult of any legal action for which indemnification is being sought ispermissible only if all of the following conditions are satisfied: (i) thelegal action relates to acts or omissions with respect to the performance ofduties or services on behalf of the Company; (ii) the legal action isinitiated by a third party who is not a Member or the legal action is initiatedby a Member acting in his or her capacity as such and a court of competentjurisdiction specifically approves such advancement; and (iii) theofficer, Member or Manager undertakes to repay the advanced funds to theCompany, together with the applicable legal rate of interest thereon, in casesin which such officer, Member or Manager is found not to be entitled toindemnification.

 

9.4           Insurance.  The Company may purchase and maintaininsurance on behalf of any Person who is or was an officer, Member, Manager,employee, or agent of the Company, or is or was serving at the request of theCompany as an officer, Member, Manager, employee or agent of another limitedliability company, corporation, partnership, joint venture, trust or otherenterprise against any liability asserted against him or her and incurred byhim or her in any such capacity, provided, that no indemnification shall bemade under any policy of insurance for any act which could not be indemnifiedby the Company under this Article 9.

 

9.5           Prospective Amendment of Liabilityand Indemnity.  Any repeal oramendment of this Article by the Members or Board of Managers of theCompany shall be prospective only and shall not adversely affect any right ofan officer, Member or Manager to indemnification, or any limitation on theliability of an officer, Member or Manager of the Company existing at the timeof such repeal or amendment.

 

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9.6           Non-Exclusive Liability andIndemnity.  The provisions of this Article 9shall not be deemed exclusive of any other rights or limitations of liabilityor indemnity to which an officer, Member or Manager may be entitled under anyother provision of this Operating Agreement, or pursuant to any contract oragreement, the Act or otherwise.

 

**ARTICLE 10**

**CAPITAL UNIT CERTIFICATES**

 

10.1         Certificates For Membership.  Certificates representing Capital Units ofthe Company shall be in such form as shall be determined by the Board ofManagers. Such certificates shall be signed by the President or the VicePresident and by the Secretary or assistant Secretary.  All certificates for Membership shall beconsecutively numbered or otherwise identified. The name and address of the person to whom the certificate has beenissued shall be entered on the Capital Units transfer books of theCompany.  All certificates surrendered tothe Company for transfer shall be canceled and no new certificates shall beissued until the former certificate shall have been surrendered or cancelled,or until alternative provisions satisfactory to the Company have been made.

 

10.2         Transfer of Certificates.  Transfer of certificates of the Company shallbe made pursuant to this Operating Agreement only on the transfer books of theCompany by the holder of record thereof or by the holder’s legalrepresentative, who shall furnish proper evidence of authority to transfer, orby the Member’s attorney thereunto authorized by the power of attorney dulyexecuted and filed with the Secretary of the Company, and on surrender forcancellation of the certificate.  ThePerson in whose name the Certificate stands on the books of the Company shallbe deemed by the Company to be the owner thereof for all purposes.

 

10.3         Loss or Destruction of Certificates.In case of loss or destruction of any certificate, another certificate may beissued in its place upon proof of such loss or destruction, and upon giving asatisfactory bond of indemnity to the Company and to the transfer agent andregistrar, if any, of such certificate, in such sum as the Board of Managersmay provide.

 

10.4         Certificate Regulations.  The Board of Managers shall have the powerand authority to make such further rules and regulations not inconsistentwith the statutes of the State of South Dakota as they may deem expedientconcerning the issue, transfer, conversion and registration of certificates ofthe Company, including the appointment or designation of one or more transferagents and one or more registrars.  TheCompany may act as its own transfer agent and registrar.

 

10.5         Transfer of Membership.  Membership shall not be transferred exceptwith the approval and consent of the Board of Managers and in accordance withthe Capital Units Transfer System.

 

10.6         Legends.  The Board of Managers may provide for theplacement of legends on Capital Unit certificates to indicate restrictions ontransfer, or other restrictions or obligations contained herein.

 

**ARTICLE 11**

**BANKRUPTCY OF A MEMBER**

 

Subjectto this Article 11, if any Member becomes a Bankrupt Member, the BankruptMember’s Capital Units shall be offered for sale through the Capital UnitsTransfer System at a price reasonably low

 

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enoughto generate a sale.  The payment to bemade to the Bankrupt Member or its representative as a result of such salepursuant to this Article 11 is in complete liquidation and satisfaction ofall the rights and interest of the Bankrupt Member and its representative (andof all Persons claiming by, through, or under the Bankrupt Member and itsrepresentative) and in respect of the Company, including, without limitation,any Capital Units, any rights in specific Company property, and any rightsagainst the Company and (insofar as the affairs of the Company are concerned)against the Members, and constitutes a compromise to which all Members haveagreed.  If such a sale of the BankruptMember’s Capital Units is not completed, or not allowed by the BankruptcyCourt, then any Person who becomes the successor of the Bankrupt Member’sinterest in such Capital Units shall take such Capital Units subject in allrespects to this Operating Agreement, and the failure to comply with the termsand conditions hereof may result in the redemption of such Capital Unitspursuant to Section 4.3

 

**ARTICLE 12**

**DISSOLUTION**

 

12.1         Dissolution and Winding-Up.  The Company shall dissolve and its affairsshall be wound up on the first to occur of the following:

 

(a)           the consent of a Super Majority Voteof the Members;

 

(b)           an event that makes it unlawful forall or substantially all of the business of the Company to be continued, butany cure of illegality within 90 days after notice to the Company of the eventis effective retroactively to the date of the event for purposes of thissection;

 

(c)           on application by a Member or adissociated Member, upon entry of a judicial decree that:

 

(i)            the economic purpose of the Companyis likely to be unreasonably frustrated;

 

(ii)           it is not otherwise reasonablypracticable to carry on the Company’s business in conformity with theArticles  and this Operating Agreement;or

 

(iii)          the Managers or Members in control ofthe Company have acted, are acting, or will act in a manner that is illegal,oppressive, fraudulent  or unfairlyprejudicial to the petitioning Member**.**

 

12.2**        **Continuation.  Except upon application and receipt of ajudicial decree as provided in Section 12.1(c), no Member has the right todissociate from the Company.  The death,expulsion, bankruptcy or dissolution of a Member, or the occurrence of anyother event that terminates the continued membership of a Member in theCompany, shall not cause a dissolution of the Company.

 

**ARTICLE 13**

**LIQUIDATION AND TERMINATION**

 

13.1         Liquidation and Termination.  On dissolution of the Company, the Board ofManagers shall proceed diligently to wind up the affairs of the Company andmake any final distribution as provided in this Operating Agreement and theAct.  The costs of liquidation shall beborne as a Company expense.  Liquidationproceeds, if any, shall first be used to pay the Company’s obligations andliabilities.

 

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13.2         Application and Distribution ofProceeds on Liquidation.  Upon anevent of liquidation, the business of the Company shall be wound up, the Boardof Managers shall take full account of the Company’s assets and liabilities,and all assets shall be liquidated as promptly as is consistent with obtainingthe fair value thereof.  If any assetsare not sold, gain or loss shall be allocated to the Members in accordance withArticle 6 as if such assets had been sold at their fair market value atthe time of the liquidation.  If anyassets are distributed to a Member, rather than sold, the distribution shall betreated as a distribution equal to the fair market value of the asset at thetime of the liquidation.  The assets ofthe Company shall be applied and distributed in the following order ofpriority:

 

(a)           to the payment of all debts andliabilities of the Company, including all fees due the Members and Affiliates,and including any loans or advances that may have been made by the Members tothe Company, in the order of priority as provided by law;

 

(b)           to the establishment of any reservesdeemed necessary by the Board of Managers or the Person winding up the affairsof the Company for any contingent liabilities or obligations of the Company;

 

(c)           to the Members ratably in proportionto the credit balances in their respective capital accounts in an amount equalto the aggregate credit balances in the capital accounts after and includingall allocations to the Members under Article 6, including the allocationof any income, gain or loss from the sale, exchange or other disposition(including a deemed sale pursuant to this Section 13.2) of the Company’sassets.

 

13.3         Deficit Capital Account Balances.  Notwithstanding anything to the contrarycontained in this Operating Agreement, and notwithstanding any custom or rule oflaw to the contrary, to the extent that the deficit, if any, in the capitalaccount of any Member results from or is attributable to deductions and lossesof the Company (including non-cash items such as depreciation), ordistributions of money pursuant to this Operating Agreement to all Members inproportion to their respective Ownership Percentages, upon dissolution of theCompany such deficit shall not be an asset of the Company and such Membersshall not be obligated to contribute such amount to the Company to bring thebalance of such Member’s capital account to zero.

 

13.4         Articles of Dissolution.  On completion of the distribution of Companyassets as provided herein, the Company is terminated, and the Board of Managersshall file Articles of Dissolution with the Secretary of State of South Dakotaand take such other actions as may be necessary to terminate the Company.

 

**ARTICLE 14**

**GENERAL PROVISIONS**

 

14.1         Books and Records.  The Company shall maintain those books andrecords as provided by the Act, Section 3.5 of this Operating Agreementand as it may deem necessary or desirable. Subject to the provisions of Section 3.5 of this OperatingAgreement, every Member shall at all times have access to the books and recordsof the Company and may inspect and copy any of them.

 

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14.2         Headings.  The headings used in this Operating Agreementhave been inserted for convenience only and do not constitute matter to beconstrued in interpretation of this Operating Agreement.

 

14.3         Construction and Severability.  Whenever the context so requires, the genderof all words used in this Operating Agreement includes the masculine, feminine,and neuter, and the singular shall include the plural, and conversely.  All references to Articles and Sections referto articles and sections of this Operating Agreement, and all references toExhibits, if any, are to Exhibits attached hereto, if any, each of which ismade a part hereof for all purposes.  Ifany portion of this Operating Agreement shall be invalid or inoperative, then,so far as is reasonable and possible:

 

(a)           The remainder of this OperatingAgreement shall be considered valid and operative; and

 

(b)           Effect shall be given to the intentmanifested by the portion held invalid or inoperative.

 

14.4         Effect of Waiver or Consent.  A waiver or consent, express or implied, toor of any breach or default by any Person in the performance by that Person ofits obligations with respect to the Company is not a consent or waiver to or ofany other breach or default in the performance by that Person of the same orany other obligations of that Person with respect to the Company.  Failure on the part of a Person to complainof any act of any Person or to declare any Person in default with respect tothe Company, irrespective of how long that failure continues, does notconstitute a waiver by that Person of its rights with respect to that defaultuntil the applicable statute-of-limitations period has run.

 

14.5         Binding Effect.  Subject to the restrictions on Dispositionsset forth in this Operating Agreement, this Operating Agreement is binding onand inures to the benefit of the Members and their respective heirs, legalrepresentatives, successors and assigns.

 

14.6         Governing Law/Jurisdiction.  THIS AGREEMENT HAS BEEN EXECUTED IN SOUTH DAKOTAAND SHALL BE GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OFTHE STATE OF SOUTH DAKOTA.  THE MEMBERSCONSENT TO THE JURISDICTION OF THE COURTS OF THE STATES OF SOUTH DAKOTA ORMINNESOTA AND AGREE THAT ANY ACTION ARISING OUT OF OR TO ENFORCE THIS AGREEMENTMUST BE BROUGHT AND MAINTAINED IN SOUTH DAKOTA OR MINNESOTA.

 

14.7         Further Assurances.  In connection with this Operating Agreementand the transactions contemplated hereby, each Member shall execute and deliverany additional documents and instruments and perform any additional acts thatmay be necessary or appropriate to effectuate and perform the provisions ofthis Operating Agreement and those transactions.

 

14.8         Counterparts.  This Operating Agreement may be executed inany number of counterparts with the same effect as if all signing parties hadsigned the same document.  Allcounterparts shall be construed together and constitute the same instrument.

 

14.9         Conflicting Provisions.  To the extent that one or more provisions ofthis Operating Agreement appear to be in conflict with one another, then theBoard of Managers shall have the right to choose which of the conflictingprovisions are to be enforced.  Widelatitude is given to the Board of Managers in interpreting the provisions ofthis Operating Agreement to accomplish the purposes and objectives of theCompany, and the Board of Managers may apply this Operating Agreement in such a

 

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manneras to be in the best interest of the Company, in its sole discretion, even ifsuch interpretation or choice of conflicting provisions to enforce isdetrimental to one or more Members.

 

14.10       Amendments.  Amendments to the Articles may only be madeby the Members.  This Operating Agreementmay be amended by the Members.  ThisOperating Agreement may also be amended by the Board of Managers subject to thefollowing requirements:

 

(a)           The Board of Managers may not adopt,amend or repeal a provision in this Operating Agreement, if the Members in adopting,amending or repealing a provision in this Operating Agreement expressly providethat the Board of Managers may not amend or repeal the provision; and

 

(b)           The adoption, amendment or repeal ofany provision in this Operating Agreement by the Board of Managers must beapproved by the Members at the next annual meeting of Members, but saidprovision as adopted, amended or repealed by the Board of Managers shall remaineffective in any event until such annual meeting is held.  If the Members fail to approve at the nextannual meeting of the Members, the provision as adopted, amended or repealed bythe Board of Managers, said provision shall become null and void as of theclose of the annual meeting.

 

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