**Exhibit3.6**

 

**AMENDED AND RESTATED**

**OPERATING AGREEMENT**

**OF**

**LAKE AREA CORN PROCESSORS, LLC**

 

ThisAmended and Restated Operating Agreement of Lake Area Corn Processors, LLC, ishereby adopted and entered into as of the 17th day of February, 2005, for goodand valuable consideration, by the Company (as defined below) and the Members(as defined below).  This Amended andRestated Operating Agreement amends and restates in its entirety that certainAmended and Restated Operating Agreement dated December 14, 2004 by andamong the Company and the Members.

 

**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 mean anyother 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 ofvoting securities, by contract or otherwise.

 

1.3                                 “Articles” means the Articles of Organizationfiled with the Secretary of State of South Dakota on April 2, 2001, bywhich Lake Area Corn Processors, LLC was organized as a South Dakota limitedliability company under and pursuant to the Act.

 

1.4                                 “Board of Managers” means the Managers actingas a group with the powers set forth in the Articles and this OperatingAgreement.

 

1.5                                 “Bankrupt Member” means (except to the extentthat the Board of Managers determines otherwise) any Member (a) that makes ageneral assignment for the benefit of creditors; (b) files a voluntarybankruptcy petition under Chapter 7 of the United States Bankruptcy Code; (c)files a petition or answer seeking for the Member a

 

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liquidation, dissolution,or similar relief under any law; (d) files an answer or other pleadingadmitting or failing to contest the material allegations of a petition filed againstthe Member in a proceeding of the type described in subclauses (a) through (c);(e) seeks, consents to, or acquiesces in the appointment of a trustee,receiver, or liquidator of the Member’s or of all or any substantial part ofthe Member’s properties; or (f) against which an involuntary petition has beenfiled and a proceeding seeking relief under Chapter 7 of the United StatesBankruptcy Code, liquidation, dissolution, or similar relief under any law hasbeen commenced and 90 days have expired without dismissal thereof or withrespect to which, without the Member’s consent or acquiescence, a trustee,receiver, or liquidator of the Member or of all or any substantial part of theMember’s properties has been appointed and 90 days have expired without theappointment having been vacated or stayed, or 90 days have expired after thedate of expiration of a stay, if the appointment has not previously beenvacated.

 

1.6                                 “Capital Contribution” means any actualcontribution by a Member to the capital of the Company in the Reorganization orthrough the purchase of Capital Units (but does not include subscribed for, butunpaid Capital Units).

 

1.7                                 “Capital Unit” or “Unit” means Capital Unitsof the Company with the rights and privileges set forth in this OperatingAgreement, including Class A Capital Units, and any other class of CapitalUnits as may be approved and adopted by the Board of Managers.

 

1.8                                 “Capital Unit Transfer System” means theprocedures set forth in Article 4 of this Operating Agreement governingall Dispositions of Capital Units.

 

1.9                                 “Class A Members” means holders of Class ACapital Units who have executed and agreed to be bound by this OperatingAgreement.

 

1.10                           “Code” means the Internal Revenue Code of1986 and any successor statute, as amended from time to time.

 

1.11                           “Committed Capital” means $2.00 per Class ACapital Unit with respect to Members receiving Class A Capital Units in theReorganization, and, with respect to any additional Members, the purchase priceof the Capital Units subscribed for in any subsequent offering pursuant to asubscription agreement that has been accepted by the Company, regardless ofwhether such purchase price has been fully paid.

 

1.12                           “Company” means Lake Area Corn Processors,LLC (formerly, Lake Area Ethanol, LLC), a manager-managed South Dakota limitedliability company.

 

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1.13                           “Cooperative” means Lake Area Corn ProcessorsCooperative, a South Dakota cooperative corporation.

 

1.14                           “Corn Delivery Agreement” means the agreementbetween each Member and the Company requiring each Member to deliver to theCompany on an annual basis one bushel of corn per Capital Unit owned by theMember.

 

1.15                           “Dakota Ethanol” means Dakota Ethanol, LLC, aSouth Dakota limited liability company, formed for the purpose of constructing,owning and operating an ethanol production facility near Wentworth, SouthDakota.

 

1.16                           “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.

 

1.17                           “Manager” means any natural Person who is amember of the Board of Managers of the Company, whether initially named in theArticles or later elected as provided in this Operating Agreement.

 

1.18                           “Member” means any Person who holds one ormore Capital Units and has executed this Operating Agreement, whether initiallyadmitted as of the date of this Operating Agreement or later admitted to theCompany 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,incapacity, or liquidation of the Member. Except as specifically stated otherwise, “Members” refers to all Class AMembers.

 

1.19                           “Net Cash from Operations” means the grosscash proceeds from the Company’s investments, operations, sales, and otherdispositions of assets, including but not limited to investment assets (but notincluding sales and other dispositions of all or substantially all of theassets of the Company), less the portion thereof used to pay, or set aside for,the established reserves for all the Company’s expenses, debt payments, capitalimprovements, replacements and contingencies, all as determined by the Board ofManagers.  Net Cash from Operations shallnot be reduced by depreciation, amortization, cost recovery deductions, orsimilar allowances, but shall be increased by any reduction of reservespreviously established, but not expended, as authorized by the Board ofManagers.

 

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1.20                           “Ownership Percentage” with respect to anyMember means the percentage of ownership of a Member determined by taking thetotal Capital Units held by such Member divided by the aggregate total numberof issued and outstanding Capital Units.

 

1.21                           “Person” includes an individual, partnership,limited partnership, limited liability company, foreign limited liabilitycompany, trust, estate, corporation, foreign corporation, cooperative,custodian, trustee, executor, administrator, nominee or entity in arepresentative capacity.

 

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

 

1.23                           “Reorganization” means the exchange of all ofthe assets and liabilities of the Cooperative for the Class A Capital Units ofthe Company, the subsequent dissolution of the Cooperative and distribution ofthe Company’s Class A Capital Units to the Cooperative’s shareholders inliquidation of the Cooperative, and the adoption of this Operating Agreementconcurrently therewith, all pursuant to the Plan of Reorganization dated July 25,2001.

 

1.24                           “Super Majority Vote” means the affirmativevote of 75% of the total number of Managers elected to the Board of Managers.

 

1.25                           “Trimester” means any of the four-monthperiods ending on April 30, August 31 and December 31, which shallbe the periods set by the Board of Managers for delivery of corn to the Companyfor resale by the Company to Dakota Ethanol for processing in its ethanolplant, and may be used for other administrative matters.

 

Otherterms defined herein have the meanings so given them.

 

**ARTICLE 2**

**ORGANIZATION**

 

2.1                                 Formation. The Company has been organized as a South Dakota limited liabilitycompany by the filing of Articles under and pursuant to the Act and theissuance of a certificate of organization for the Company by the Secretary ofState of South Dakota.

 

2.2                                 Name. The name of the Company is Lake Area Corn Processors, LLC and allCompany business must be conducted in that name or such other names that complywith applicable law as the Board of Managers may select from time to time.

 

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2.3                                 Registered Office; Registered Agent,Principal Office in the United States; Other Offices.  Theregistered office of the Company required by the Act to be maintained in theState of South Dakota shall be the office of the initial registered agent namedin the Articles or such other office (which need not be a place of business ofthe Company) as the Board of Managers may designate from time to time in themanner provided by law.  The registeredagent of the Company in the State of South Dakota shall be the initialregistered agent named in the Articles or such other Person or Persons as theBoard of Managers may designate from time to time in the manner provided bylaw.  The principal office of the Companyin the United States shall be at such place as the Board of Managers maydesignate from time to time, which need not be in the State of South Dakota,and the Company shall maintain records there as required by the Act and shallkeep the street address of such principal office at the registered office ofthe Company in the State of South Dakota. The Company may have such other offices as the Board of Managers maydesignate from time to time.

 

2.4                                 Purpose.  The purpose of the Company isto own a membership interest in Dakota Ethanol, which will produce and marketethanol and ethanol co-products from its ethanol production facility locatednear Wentworth, South Dakota, and any other purpose allowed under South Dakotalaw.

 

2.5                                 Foreign Qualification. Prior to the Company’s conducting business in any jurisdiction otherthan South Dakota, the Board of Managers shall cause the Company to comply, tothe extent procedures are available and those matters are reasonably within thecontrol of the Board of Managers, with all requirements necessary to qualifythe Company as a foreign limited liability company in that jurisdiction.  At the request of the Board of Managers, theCompany’s officers (as specified in Article 7) shall execute, acknowledge,swear to, and deliver all certificates and other instruments conforming withthis Operating Agreement that are necessary or appropriate to qualify,continue, and terminate the Company as a foreign limited liability company inall such jurisdictions in which the Company may conduct business.

 

2.6                                 Term. The Company commenced its existence on the date the Secretary ofState of South Dakota issued a certificate of organization for the Company andshall continue in existence until dissolved.

 

2.7                                 Mergers and Exchanges.  TheCompany may be a party to (a) a merger, (b) a consolidation, or (c) anexchange or acquisition, subject to the requirements of this OperatingAgreement.  Consent to any such merger,consolidation, exchange or acquisition shall be by vote of the Members as setforth in Article 3.

 

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2.8                                 No State-Law Partnership.  TheMembers intend that the Company not be a partnership (including, withoutlimitation, a limited partnership) or joint venture for any purposes other thanfederal income and state income tax purposes, and this Operating Agreementshall not be construed to suggest otherwise.

 

2.9                                 Fiscal Year.  After such time as theReorganization is completed, the Company’s fiscal year shall end on December 31of each year or such other date as the Board of Managers shall determine.

 

**ARTICLE 3**

**MEMBERS**

 

3.1                                 Members.

 

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

 

(b)                                 Shareholders of the Cooperative receivingCapital Units in the Reorganization shall be admitted as Members withoutdiscretion of the Board Managers at such time as: (i) such Person has submittedto the Company a counterpart signature agreeing to be bound by this OperatingAgreement, and (ii) such Person has consented to the assignment of suchPerson’s Corn Delivery Agreement from the Cooperative to the Company.  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 theReorganization.

 

(c)                                  Additional Persons may be admitted as Membersby acquiring a minimum of 5,000 Capital Units (i) directly from the Company or(ii) from a Member in a Disposition in compliance with the provisions of thisOperating Agreement, subject to Section 3.3.

 

(d)                                 Any Person who satisfies the requirements ofthis Operating Agreement may be a Member unless the Person lacks capacity apartfrom the Act.

 

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3.2                                 Representations and Warranties.  EachMember represents and warrants to the Company and each other Member that:

 

(a)                                  if that Member is a corporation, it is dulyorganized, validly existing and in good standing under the laws of the state ofits incorporation and is duly qualified and in good standing as a foreigncorporation in the jurisdiction of its principal place of business (if notincorporated 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, orother entity, it is duly formed, validly existing, and (if applicable) in goodstanding under the laws of the state of its formation, and if required by lawis duly qualified to do business and (if applicable) in good standing in thejurisdiction of its principal place of business (if not formed therein), andthe representations and warranties in clause (a), (b) or (c), as applicable,are true and correct with respect to each partner (other than limitedpartners), trustee or other member thereof;

 

(d)                                 that the Member has full corporate, limitedliability company, partnership, trust, or other applicable power and authorityto execute and agree to this Operating Agreement and to perform its obligationshereunder and all necessary actions by the board of directors, shareholders, managers,members, partners, trustees, beneficiaries or other Persons necessary for thedue authorization, execution, delivery and performance of this OperatingAgreement by that Member have been duly taken;

 

(e)                                  that the Member has duly executed and deliveredthis Operating Agreement; and

 

(f)                                    that the Member’s authorization, execution,delivery and performance of this Operating Agreement does not conflict with anyother agreement or arrangement to which that Member is a party or by which itis bound.

 

3.3                                 Admission of Additional Members.  NoPerson shall become a Member without the approval of the Board ofManagers.  The Board of Managers mayrefuse to admit any Person as a Member in its sole discretion.  Additional Persons may be admitted to theCompany in the discretion of the Board of Managers.  Any such admission also

 

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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)agreement to be bound by this Operating Agreement, (c) execution of anassignment of the Person’s Corn Delivery Agreement from the Cooperative to the Companyor the execution of an original Corn Delivery Agreement, and(d) representation and warranty that the representations and warrantiesrequired of all Members in this Operating Agreement are true and correct withrespect to such Person.  The provisionsof this section shall apply to any Person who acquires Capital Unitsdirectly from the Company or through a Disposition by a Member.

 

3.4                                 Interests in a Member.  AMember that is not a natural person may not cause or permit an interest, director indirect, in itself to be Disposed of in violation of the Securities Act of1933, as amended, or such that, after the Disposition, (a) the Company would beconsidered to have terminated within the meaning of Section 708 of theCode or (b) without the consent of the Board of Managers, that Member shallcease to be controlled by substantially the same Persons who control it as ofthe date of its admission to the Company. On any breach of this Section 3.4, the Company shall have theoption to redeem, and on exercise of that option the breaching Member shallsurrender, the breaching Member’s Capital Units in accordance with Section 4.3of this Operating Agreement.

 

3.5                                 Information.

 

(a)                                  In addition to the other rights specificallyset forth in this Operating Agreement, each Member is entitled to allinformation to which that Member is entitled to have access pursuant to the Actunder the circumstances and subject to the conditions therein stated.  The Members agree, however, that, except asotherwise provided by law, the Board of Managers from time to time maydetermine, due to contractual obligations, business concerns, or otherconsiderations, that certain information regarding the business, affairs,properties and financial condition of the Company should be kept confidentialand not provided to some or all other Members, and that it is not just orreasonable for those Members or their assignees or representatives to examineor copy any such confidential information.

 

(b)                                 The Members acknowledge that from time to time,they may receive information from or regarding the Company in the nature oftrade secrets or that otherwise is confidential, the release of which may bedamaging to the Company or Persons with whom it does business.  Each Member shall hold in strict confidenceany information it receives regarding the Company that is identified as beingconfidential (and if that information is provided in writing, that is so

 

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marked)and may not disclose it to any Person other than another Member, except fordisclosures (i) compelled by law (but the Member must notify the Board ofManagers promptly of any request for that information before disclosing it, ifpracticable), (ii) to advisers or representatives of the Member or Persons whohave acquired that Member’s Capital Units through a Disposition as permitted bythis Operating Agreement, but only if the recipients have agreed to be bound bythe provisions of this section, or (iii) of information that the Member alsohas received from a source independent of the Company that the Memberreasonably believes obtained that information without breach of any obligationof confidentiality.  The Membersacknowledge that a breach of the provisions of this section may causeirreparable injury to the Company for which monetary damages are inadequate,difficult to compute, or both. Accordingly, the Members agree that the provisions of this section maybe enforced by specific performance.

 

3.6                                 Liabilities to Third Parties. Except as otherwise expressly agreed in writing, no Member shall beliable for the debts, obligations or liabilities of the Company, includingunder a judgment, decree or order of a court.

 

3.7                                 Withdrawal. A Member does not have the right or power to withdraw from theCompany as a Member, except as set forth in this Operating Agreement.

 

3.8                                 Lack of Authority.  NoMember, other than a Member acting in his or her capacity as an officer of theCompany, has the authority or power to act for or on behalf of the Company, todo any act that would be binding on the Company, or to incur any expenditureson behalf of the Company, except with the prior consent of the Board ofManagers.

 

3.9                                 Classes and Voting. Unless the Articles state to the contrary or as provided by this OperatingAgreement, or any amendment hereto, there shall be one class of Members.  The Board of Managers may establishadditional classes or groups of one or more Members.

 

(a)                                  *Class A Members.* ClassA Members shall be entitled to vote on all matters coming to a vote of theClass A Members.  Each Class A Member maycast only one vote on each matter brought to a vote of the Class A Members,regardless of the number of Class A capital units owned.  All matters voted upon by the Class A Membersshall require the affirmative vote of the majority of the Class A Membersvoting on the matter at hand, except that the election of individuals servingon the Board of Managers under Section 3.9(b)(iv) shall be determined by avote of the plurality of the Class A Members voting on the matter at hand. EachClass A

 

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Membershall be required to execute a Corn Delivery Agreement in a form approved bythe Board of Managers.

 

(b)                                 *Voting.* Members shall only be entitled to vote on the following matters:(i) the merger or consolidation of the Company with another businessentity or the exchange of interests in the Company for interests in anothercompany; (ii) the sale, lease, exchange or other disposition of substantially allof the Company’s assets; (iii) voluntary dissolution of the Company; (iv) theelection and removal of individuals serving on the Board of Managers; and (v)any matters referred to a vote of the Members by the Board of Managers.

 

3.10                           Place and Manner of Meeting.  Allmeetings of the Members shall be held at such time and place, within or withoutthe State of South Dakota, as shall be stated in the notice of the meeting orin a duly executed waiver of notice thereof. Presence in person, or by proxy or written ballot, shall constituteparticipation in a meeting, except where a person participates in the meetingfor the express purpose of objecting to the transaction of any business on theground that the meeting is not lawfully called or convened.

 

3.11                           Conduct of Meetings.  Allmeetings of the Members shall be presided over by the Chief ExecutiveOfficer.  All meetings of the Membersshall be conducted in general accordance with the most recent edition of Roberts’Rules of Order, or such other rules and procedures as may be determined bythe Board of Managers in its discretion.

 

3.12                           Annual Meeting.  Theannual meeting of the Members for the transaction of all business which maycome before the meeting shall be held on a date determined by the Board ofManagers.  Failure to hold the annualmeeting at the designated time shall not be grounds for dissolution of theCompany.

 

3.13                           Special Meetings.  Aspecial meeting of the Members may be called at any time by the Chief ExecutiveOfficer, the Board of Managers or by the Secretary upon the request of 10% ofthe Class A Members.  Such request shallstate the purpose or purposes of such meeting and the matters proposed to beacted on at the special meeting.

 

3.14                           Notice.  Written or printed noticestating the place, day and hour of the meeting and, in case of a specialmeeting, the purpose or purposes for which the meeting is called, shall bedelivered not less than 10 nor more than 60 days before the date of the meetingeither personally or by mail, by or at the direction of the Chief ExecutiveOfficer, the Secretary or the Board of Managers calling the meeting, to eachMember entitled to vote at the meeting. If mailed, such notice shall be deemed to be delivered when

 

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deposited in the UnitedStates mail addressed to the Member at the Member’s address as it appears onthe records of the Company, with postage thereon prepaid.

 

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

 

(i)                                     a plan of merger, consolidation or exchange;

 

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

 

(iii)                               the voluntary dissolution of the Company; or

 

(iv)                              the removal of any member or members of theBoard of Managers.

 

(b)                                 The notice for any Member meeting relating toany of the purposes listed in (a) above must be accompanied by a copy orsummary of the respective:

 

(i)                                     plan of merger, consolidation or exchange;

 

(ii)                                  the transaction description for the proposedsale, lease, exchange or other disposition of all, or substantially all, of theCompany’s assets;

 

(iii)                               the plan of liquidation; or

 

(iv)                              identification of the Manager or Managerswhose removal is sought.

 

3.15                           Quorum of Members.  Tenpercent of the Class A Members represented in person, by proxy or by writtenballot, 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                           Voting of Capital Units by Company.  ACapital Unit owned by another limited liability company, corporation or otherlegal entity, the majority of which is owned or controlled by this Company, anda Capital Unit held by this Company in a fiduciary capacity, shall not bevoted, directly or indirectly, at any meeting, and shall not be counted indetermining the total Capital Units of a class at any given time.

 

3.17                           Closing Record Books and Fixing Record Data.  Forthe purpose of determining Members entitled to notice of or to vote at anymeeting of Members or any

 

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adjournmentthereof or in order to make a determination of Members for any otherproper purpose, the Board of Managers may provide that the record books shallbe 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 daysimmediately preceding such meeting.  Inlieu of closing the record books, the Board of Managers may fix in advance adate as the record date for any such determination of Members, such date in anycase to be not more than 60 days and in the case of a meeting of Members, notless than 10 days prior to the date of which the particular action requiringsuch determination 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.

 

3.18                           Fixing Record Dates for Ballots by Mail. Unless a record date shall have previously been fixed or determinedherein, whenever action by Members is proposed to be taken by written ballotwithout attendance being required at a meeting of Members, the Board ofManagers may fix a record date for purposes of determining Members entitled tovote by ballot on the action, which record date shall be set by the Board of Managersnot more than 60 days prior to the deadline for returning ballots to theCompany.  If no record date has beenfixed by the Board of Managers, the record date for determining Membersentitled to vote by written ballot without requiring attendance at a meeting ofMembers shall be at the close of business on the tenth day preceding themailing of the written ballots to the Members.

 

3.19                           Proxies.  At all meetings of Members, aMember may vote by proxy executed in writing by the Member or by the Member’sduly authorized attorney-in-fact, except with respect to the election ofindividuals to the Board of Managers for which Members shall be required tovote in person or if permitted by the Board of Managers, by mail-in ballot.  Such proxy shall be filed with the Secretaryof the Company before or at the time of the meeting.  A proxy shall be considered filed with theCompany when received by the Company at its executive offices, unless laterrevoked.  No proxy shall be valid after11 months from the date of its execution, unless otherwise provided in theproxy.

 

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**ARTICLE 4**

**DISPOSITION OF CAPITAL UNITS**

 

4.1                                 General Restrictions on the Disposition ofCapital Units.

 

(a)                                  No Disposition of Capital Units shall bevalid 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) this Companypreserve its partnership tax status by complying with Section 1.7704-1, etseq., and any amendments thereto, and (iii) to the extent possible, thisOperating Agreement shall be read and interpreted to prohibit the freetransferability of Capital Units.  Anyattempted Disposition by a Person of Capital Units or any other interest orright, or any part thereof, in or in respect of the Company, other than inaccordance with this Article 4 and the Capital Units Transfer System shallbe, and is hereby declared, null and void *abinitio.*

 

(b)                                 The Board of Managers shall not approve, andthe Company shall not recognize for any purpose, any purported Disposition of aCapital Unit unless and until the other applicable provisions of this Article 4have been satisfied, all conditions have been satisfied under the Capital UnitsTransfer System, and the Company has received a completed transfer requestform, or such other written document, adopted by the Board of Managers.  If the Person acquiring the Capital Units inthe Disposition is not a Member, then such Person must also comply with Section 3.3of this Operating Agreement, including, without limitation, the execution of aCorn Delivery Agreement.  Dispositions ofCapital Units, and the resulting admission of new members, if applicable, areeffective as of the first day of the Trimester immediately following theTrimester in which such matters are approved by the Board of Managers. Upon theeffectiveness of a Disposition of all or a portion of a Member’s Capital Units,the Company shall transfer all, or the respective proportion of the capitalaccount of the Member effecting the Disposition to the Member or Members whohave acquired the Capital Units.  Nopartial Capital Units may 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 Corn Delivery Agreement, or the Board ofManagers’ refusal to accept such Person as a Member upon a Disposition ofCapital Units), such Person shall receive the allocations of income, gain,losses, deductions, credits and distributions in accordance with Article 6of this Operating Agreement until such time as the Person becomes a Member oruntil such Person’s Capital Units are redeemed in accordance with

 

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Section 4.3of this Operating Agreement.  Such Personshall have no voting rights until such time as the Person becomes a Member andcomplies with this Section 4.1.

 

(c)                                  The Board of Managers will not approve anyDisposition unless (i) either (a) the Disposition is registered under theSecurities Act of 1933, as amended, and any applicable state securities laws or(b) the Company has determined that the Disposition is exempt from registrationunder those laws; and (ii) the Company has determined that the Disposition,when added to the total of all other Dispositions within the preceding 12months, would not result in the Company being considered to have terminatedwithin the meaning of the Code or losing its partnership status and being taxedas a C corporation within the meaning of the Code.

 

(d)                                 Any Person admitted to the Company upon aDisposition of Capital Units shall pay, or reimburse the Company for, all costsincurred by the Company in connection with the Disposition or admission on orbefore the thirtieth day after the receipt by that Person of the Company’sinvoice for the amount due.  If paymentis not made by the date due, the Person owing that amount shall pay interest onthe unpaid amount from the date due until paid at the legal rate of interestallowed under South Dakota law.

 

4.2                                 Tax Elections.  Inthe event of a Disposition of all or part of the Capital Units of any Member,the Company, in the sole discretion of the Board of Managers, may electpursuant to Section 754 of the Code (or any successor provisions) toadjust the basis of the assets of the Company.

 

4.3                                 Redemption.  The Company shall have theright to redeem the Capital Units of a Member or a Person who beneficiallyholds Capital Units upon any of the following occurrences:

 

(a)                                  An attempt to Dispose of the Capital Units ina manner not in conformity with this Operating Agreement**.**

 

(b)                                 The failure of a Person who becomes thebeneficial holder of Capital Units to comply with Section 4.1 of thisOperating Agreement and become a Member within a 12-month period following thedate that the Person became a beneficial holder of the Capital Units.

 

(c)                                  The failure of a Person who becomes thebeneficial holder of less than 5,000 Capital Units to acquire the minimuminvestment requirement of 5,000

 

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CapitalUnits in accordance with Section 5.1(c) of this Operating Agreement within240 days of becoming the holder of less than 5,000 Capital Units.

 

(d)                                 Breach of the Member’s Corn DeliveryAgreement with respect to such Capital Units, and failure to cure such breachsubsequent to the giving of written notice by the Company as provided therein.

 

(e)                                  The Member becomes a Bankrupt Member and theCompany is not able to sell its Capital Units within 240 days through theCapital Units Transfer System.

 

Ifthe Company exercises its right to redeem a Member’s or Person’s Capital Unitspursuant to any of the above, upon receipt of such Member’s or Person’s CapitalUnit certificate, the Company shall pay to such Member or Person $0.20 perCapital Unit.  Upon redemption, any CornDelivery Agreement of such Member relating to such Capital Units shall becomenull and void.  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)                                  *Issuance of Class A Unitsas Part of the Reorganization.*  As part of the Reorganization, 7,405,000Class A Capital Units are being issued to the Cooperative in exchange for allof the Cooperative’s assets and liabilities. The Cooperative is being dissolved and the Class A Capital Units arebeing distributed to the shareholders of the Cooperative in proportion to theequity shares held by each shareholder of the Cooperative.  In the event any shareholder of theCooperative fails to execute a counterpart signature page of the OperatingAgreement, or fails to consent to the assignment to the Company of theshareholder’s Corn Delivery Agreement, the Company shall have the right toredeem such Person’s Class A Capital Units as provided in Section 4.3, inaddition to any remedies otherwise provided by law.

 

(b)                                 *Disposition of Class AUnits following the Reorganization.*  After completion of theReorganization, Class A Members may Dispose of outstanding Class A CapitalUnits to any Person, subject to the other requirements of this OperatingAgreement.  Class A Capital Units mayonly be Disposed of in increments of 500 Capital Units.  After completion of the Reorganization, no

 

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Personmay at any time hold more than ten percent of the issued and outstanding ClassA Capital Units.

 

(c)                                  *Minimum Investment.*  AClass A Member must always own at least 5,000 Class A Capital Units, and noPerson will be admitted as a Class A Member unless said Person holds at least5,000 Class A Capital Units.  If a Personbecomes the holder of fewer than 5,000 Class A Capital Units in a Disposition,the Person must within 240 days of becoming a holder either acquire additionalClass A Capital Units so that the total held by said Person is at least 5,000Class A Capital Units or the Person must dispose of the Class A Capital Unitsin accordance with the provisions of this Operating Agreement.  If the Person fails to meet either of therequirements of the previous sentence within the time provided, the Company mayredeem the Class A Capital Units held by said Person as provided in Section 4.3.

 

(d)                                 *Corn DeliveryRequirement. *To be admitted as a Class A Member, whetheracquiring Class A Capital Units in the Reorganization or through a Dispositionfrom a Member, a Person must either consent to the assignment of the Person’sCorn Delivery Agreement from the Cooperative to the Company or sign a new CornDelivery Agreement in a form approved by the Board of Managers from time totime, in addition to fulfilling all other membership criteria set forth in Section 3.3.

 

5.2                                 Additional Capital Units. Additional Capital Units may be created and issued to new Members or toexisting Members on such terms and conditions as the Board of Managers maydetermine at the time of admission, and may include for the creation ofdifferent classes or groups of Members, represented by different classes ofCapital Units, which Capital Units may have different rights, powers, andduties.  If the Board of Managers createsadditional Capital Units, the Board of Managers must specify the terms ofadmission or issuance, including the amount of Committed Capital proposed to beraised from the issuance of such Capital Units. Members of the Company shallnot have a preemptive right to acquire additional, newly created Capital Unitsof the Company.

 

5.3                                 Return of Contributions.  AMember is not entitled to the return of any part of its Capital Contribution orto be paid interest in respect of either its capital account or its CapitalContribution.  A Capital Contribution isnot a liability of the Company or of any Member.  Members will not be required to contribute orto lend any cash or property to the Company to enable the Company to return anyMember’s Capital Contribution.

 

5.4                                 Advances by Members.  Ifthe Company does not have sufficient cash to pay its obligations, and theCompany does not raise additional capital pursuant to Section

 

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5.3 hereof, any Member(s)that may agree to do so with the consent of the Board of Managers, asappropriate, may advance all or part of the needed funds to or on behalf of theCompany.  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.  Acapital account shall be established and maintained for each Member pursuant tothe requirements of applicable federal income tax regulations.  Each Member’s capital account shall beincreased and decreased as follows:

 

(a)                                  Each Member’s capital account shall beincreased by:  (i) the amount of theinitial Capital Contribution made by the Member, (ii) the amount of anyadditional Capital Contributions made by the Member, and (iii) any income andgains allocated to the Member pursuant to Article 6.

 

(b)                                 Each Member’s capital account shall bedecreased by: (i) any deductions and losses allocated to the Member pursuant toArticle 6, and (ii) the amount of any distributions by the Company to theMember 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 Capital Unitsowned 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 Codeand the applicable Treasury Regulations, all items of income, gain, loss,deduction, and credit of the Company shall be allocated among the Members, anddistributions shall be made, in accordance with this Article 6.

 

6.2                                 Distributions of Net Cash from Operations.  NetCash from Operations, if any, for any fiscal year, will be distributed to theMembers on not less than an annual basis in an amount sufficient to reduce theCompany’s cumulative Net Cash from Operations to $200,000.00, unless otherwisedetermined by a Super Majority Vote of the Board of Managers and provided thatany such distribution does not violate or cause the Company to default underthe terms of any of the Company’s credit facilities or debt instruments orviolate Section 6.10 of this Operating Agreement.  Additional

 

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distributions, if any,may be made as the Board of Managers shall determine in its solediscretion.  Distributions shall be madeto all Members ratably in proportion to their Ownership Percentages.

 

6.3                                 Allocations of Income, Gain, Loss,Deductions, and Credits.  Except as otherwise provided in this Article 6,all items of income, gain, loss, deductions, and credits for a fiscal yearshall be allocated to the Members ratably in proportion to their OwnershipPercentages.

 

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

 

(a)                                  *Allocation of Gain. *Any income or gain from the sale or exchange of all or substantiallyall of the Company’s assets shall be allocated, first, to those Members withcapital account balances less than the amounts of their respective CapitalContributions that have not previously been distributed, that amount of incomeor gain, if any, necessary to increase their capital account balances to theamount of their Capital Contributions not previously distributed; andthereafter, the remaining income or gain, if any, shall be allocated to theMembers, ratably in proportion to their Ownership Percentages.

 

(b)                                 *Allocation of Loss. *Any loss from the sale or exchange of all or substantially all of theCompany’s assets shall be allocated first, so as to equalize the capitalaccount balances of all Members holding the same number of Capital Units, andthereafter, the remaining losses shall be allocated to the Members, ratably inproportion to their Ownership Percentages.

 

6.5                                 Regulatory Allocations and AllocationLimitations.  Notwithstanding the preceding provisions forallocating income, gains, losses, deductions and credits, the followinglimitations, regulatory allocations and contingent reallocations are intendedto comply with applicable income tax Treasury Regulations under Section 704(b)of the Code and shall be so construed when applied.

 

(a)                                  *Minimum Gain 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)of the Treasury Regulations in an amount equal to such Member’s share of thenet decrease in Partnership Minimum Gain (determined in accordance with Section 1.704-2(g)(2)of the Treasury Regulations).  This Section 6.5(a)is intended to comply with the minimum gain

 

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chargebackrequirement in the Treasury Regulations and shall be interpreted consistentlytherewith.

 

(b)                                 *Partner Minimum GainChargeback.*  Except as otherwise provided in Section 1.704-2(i)(4)of the Treasury 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 Gain attributableto such Partner Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5)of the Treasury Regulations, shall be specially allocated items of Companyincome and gain for such year (and, if necessary, for subsequent years) in anamount equal to such Member’s share of the net decrease in Partner NonrecourseDebt Minimum Gain attributable to such Partner Nonrecourse Debt, determined inaccordance with Section 1.704-2(i)(4) of the Treasury Regulations.  Allocations pursuant to the previous sentenceshall be made in proportion to the respective amounts required to be allocatedto each Member pursuant thereto.  Theitems to be so allocated shall be determined in accordance with Sections1.704-2(i)(4) and 1.704-2(j)(2) of the Treasury Regulations. This Section 6.5(b)is intended to comply with the minimum gain chargeback requirements in Section 1.704-2(i)(4)of the Treasury Regulations and shall be interpreted consistently therewith.

 

(c)                                  *Qualified Income Offset.*  Inthe event a deficit balance in a Member’s capital account in excess of the sumof (i) the amount such Member is obligated to restore or contribute to theCompany pursuant to any provision of this Operating Agreement, and (ii) theamount such Member is deemed to be obligated to contribute pursuant to thepenultimate sentences of Section 1.704-2(g)(1)(ii) and 1.704-2(i)(5) ofthe Treasury Regulations, is caused or increased because a Member receives anadjustment, allocation, or distribution described in Section 1.704-1(b)(2)(ii)(d)of the Treasury Regulations, such Member will be allocated items of Companyincome and gain in an amount and manner sufficient to eliminate such deficitbalance or such increase in the deficit balance, as quickly as possible, to theextent required 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)of the Treasury Regulations.

 

(d)                                 *Gross Income Allocations.*  Inthe event that a deficit balance in a Member’s capital account at the end ofany fiscal 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 to restorepursuant to the penultimate sentences of Treasury Regulations

 

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§§ 1.704-2(g)(1)(ii)and 1.704-2(i)(5), the Member shall be specially allocated items of Companyincome and gain in the amount of such excess as quickly as possible, providedthat an allocation pursuant to this Section 6.5(d) shall be made only ifand to 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) were not inthis Operating Agreement.

 

(e)                                  *Nonrecourse Deductions.* Nonrecourse Deductions shall be specially allocated to the Members inproportion to the allocation of Losses under Section 6.3.

 

(f)                                    *Partner NonrecourseDeductions.*  Any Partner Nonrecourse Deductions for anyfiscal year shall be specially allocated to the Member who bears the economicrisk of loss with respect to the Partner Nonrecourse Debt to which such PartnerNonrecourse Deductions are attributable in accordance with Section 1.704-2(i)(1)of the Treasury Regulations.

 

(g)                                 *Members’ Shares of ExcessNonrecourse Debt.*  The Members’ shares of excess PartnershipNonrecourse Debt within the meaning of Section 1.752-3(a)(3) of theTreasury Regulations shall be determined in accordance with the manner in whichit is reasonably expected that the deductions attributable to such PartnershipNonrecourse Debt will be allocated.

 

(h)                                 *Curative Allocations.*  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 such Member if theRegulatory Allocations had not occurred. For this purpose, future Regulatory Allocations under Section 6.5(a)and (b) shall be taken into account that, although not yet made, are likely tooffset other Regulatory Allocations made under Section 6.5(f) and (g).

 

6.6                                 Proration of Allocations.  Allincome, gains, losses, deductions and credits for a fiscal year allocable withrespect to any Members whose Capital Units may have been transferred,forfeited, reduced or changed during such year should be allocated based uponthe varying interests of the Members throughout the year.  The precise

 

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mannerin which such allocations are made shall be determined by the Board of Managersin its sole discretion and shall be a manner of allocation, including aninterim closing of the books, permitted to be used for federal income taxpurposes.

 

6.7                                 Consent to Allocation.  EachMember expressly consents to the methods provided herein for allocation of theCompany’s income, gains, losses, deductions and credits.

 

6.8                                 Distributions in Kind. Except as provided by this Operating Agreement, a Member, regardless ofthe form of the Member’s Capital Contribution, may not demand or receive adistribution from this Company in any form other than cash.

 

6.9                                 Right to Distributions.  AMember who is entitled to receive a distribution that has not been paid by theCompany when due has the status of, and is entitled to all remedies availableto, a creditor of the Company with respect to such distribution.

 

6.10                           Limitation on Distributions.

 

(a)                                  Notwithstanding anything to the contrary inthis Operating Agreement, the Company may not make a distribution to itsMembers 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 distribution that isnot permitted under this Operating Agreement has no liability to return thedistribution unless the Member knew that the distribution was prohibited underthe terms of this Operating Agreement or the Act.

 

**ARTICLE 7**

**OFFICERS**

 

7.1                                 Number of Officers.  Theofficers of the Company shall be a Chief Executive Officer, a Chief FinancialOfficer, one or more vice-presidents, and a Secretary, each of whom shall beappointed by the Board of Managers.  Suchother officers 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 of

 

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Managers, an officer mayappoint one or more officers or assistant officers for the Company.  The same individual may simultaneously holdmore than one office in the Company.  APerson does not need to be a member of the Board of Managers nor a Member ofthe Company to serve as an officer of the Company.

 

7.2                                 Appointment and Term of Office.  Theofficers of the Company shall be appointed by the Board of Managers for a termas determined by the Board of Managers. If no term is specified, they shall hold office until the first meetingof the Board of Managers held after the next annual meeting of Members.  If the appointment of officers shall not bemade at such meeting, such appointment shall be made as soon thereafter as isconvenient.  Each officer shall holdoffice until the officer’s successor shall have been duly appointed, until theofficer’s death, or until the officer shall resign or shall have been removedin the manner provided in Section 7.3. The designation of a specified term does not grant to the officer anycontract rights.  The Board of Managerscan remove the officer at any time prior to the termination of such term, andthe officer shall be employed “at will,” unless otherwise provided by a signedcontract with the Company.

 

7.3                                 Removal of Officers.  Anyofficer or agent of the Company may be removed by a Super Majority Vote of theBoard of Managers at any time, with or without cause.  Appointment of an officer or agent shall notof itself create contract rights.

 

7.4                                 The Chief Executive Officer.  TheChief Executive Officer shall be the principal executive officer of theCompany.  The Chief Executive Officershall, when present, preside at all meetings of the Members and of the Board ofManagers.  The Chief Executive Officermay sign, with the Secretary or any other proper officer of the Companyauthorized by the Board of Managers, certificates for Capital Units of theCompany and in general shall perform all duties incident to the office of ChiefExecutive Officer and such other duties as may be prescribed by the Board ofManagers from time to time.

 

7.5                                 The Chief Financial Officer.  TheChief Financial Officer shall be the principal financial and accounting officerof the Company.  The Chief FinancialOfficer shall:

 

(a)                                  Have charge and custody of and be responsiblefor all funds and securities of the Company;

 

(b)                                 Receive and give receipts for moneys due andpayable to the Company from any source whatsoever, and deposit all such moneysin 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 Board ofManagers.  If required by the Board ofManagers, the Chief Financial Officer shall give a bond for the faithfuldischarge of the Chief Financial Officer’s duties in such sum and with suchsurety or sureties as the Board of Managers shall determine.

 

7.6                                 The Vice-Presidents.  Ifappointed, in the absence of the Chief Executive Officer or in the event of theChief Executive Officer’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 Chief Executive Officer, and when so acting, shallhave all the powers of and be subject to all the restrictions upon the ChiefExecutive Officer.  If there is noVice-President, then any member of the Board of Managers shall perform suchduties of the Chief Executive Officer. Any Vice-President may sign, with the Secretary or an AssistantSecretary, certificates for shares of the Company the issuance of which havebeen authorized by resolution of the Board of Managers; and shall perform suchother duties as from time to time may be assigned to the Vice-President by theChief Executive Officer or by the Board of Managers.

 

7.7                                 The Secretary.  TheSecretary shall:

 

(a)                                  Keep the minutes of the proceedings of theMembers and of the Board of Managers in one or more books provided for thatpurpose;

 

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

 

(c)                                  Be the custodian of the Company records andof any seal of the Company and if there is a seal of the Company, see that itis affixed to all documents the execution of which on behalf of the Companyunder its seal is duly authorized;

 

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

 

(e)                                  Keep a register of the mailing address ofeach Member which shall be furnished to the Secretary by such Member;

 

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

 

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(g)                                 Have general charge of the Capital Unitstransfer books of the Company; and

 

(h)                                 In general, perform all duties incident tothe office of Secretary and such other duties as from time to time may beassigned to the Secretary by the Chief Executive Officer or by the Board ofManagers.

 

7.8                                 Assistant Secretaries.  TheAssistant Secretaries, when authorized by the Board of Managers, may sign withthe Chief Executive Officer or a Vice-President, certificates for Capital Unitsof the Company the issuance of which shall have been authorized by a resolutionof the Board of Managers.  The AssistantSecretaries , in general, shall perform such duties as shall be assigned to theSecretary, or by the Chief Executive Officer or the Board of Managers.

 

7.9                                 Designation of Tax Matters Partner.  TheChief Financial Officer is designated as the Tax Matters Partner of theCompany, as provided in the Treasury Regulations pursuant to Section 6231of the Code.  Each Member, by theexecution of this Agreement consents to such designation of the Tax MattersPartner and agrees to execute, certify, acknowledge, deliver, swear to, fileand record at the appropriate public offices such documents as may be necessaryor appropriate to evidence such consent. If at any time there is no Chief Financial Officer, or if the ChiefFinancial Officer no longer owns Capital Units, the Board of Managers shalldesignate a Manager who owns Capital Units as the Tax Matters Partner of theCompany.

 

7.10                           Duties of Tax Matters Partner.

 

(a)                                  The Tax Matters Partner shall register theCompany as a “tax shelter” with the Internal Revenue Service if suchregistration is required and shall provide the tax shelter registration numberto each Member.

 

(b)                                 To the extent and in the manner provided byapplicable law and regulations, the Tax Matters Partner shall furnish to theSecretary of the Treasury or his delegate (for the purposes of Sections 7.10and 7.11 only, the “Secretary”) the name, address, profit’s interest andtaxpayer identification number of each Member.

 

(c)                                  To the extent and in the manner provided byapplicable law and regulations, the Tax Matters Partner shall keep each Memberinformed of the administrative and judicial proceedings for the adjustment atthe Company level of any item required to be taken into account by a Member forincome tax purposes (such

 

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administrativeproceeding referred to hereinafter as a “tax audit” and such judicialproceeding referred to hereinafter as “judicial review”).

 

(d)                                 If the Tax Matters Partner, on behalf of theCompany, receives a notice with respect to a tax audit from the Secretary, theTax Matters Partner shall forward a copy of such notice to the Members who holdor held an interest in the profits or losses of the Company in the taxable yearto which the notice relates as required by law.

 

7.11                           Authority of Tax Matters Partner.  TheTax Matters Partner is hereby authorized, but not required:

 

(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,including the filing of a petition for readjustment with the Tax Court, theDistrict Court of the United States for the district in which the Company’sprincipal place of business is located, or the United States Court of Claims;

 

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

 

(d)                                 To file a request for an administrativeadjustment with the Secretary at any time and, if any part of such request isnot allowed by the Secretary, to file a petition for judicial review withrespect to such request;

 

(e)                                  To enter into an agreement with the InternalRevenue 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;

 

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(f)                                    To take any other action on behalf of theMembers or the Company in connection with any administrative or judicial taxproceeding to the extent permitted by applicable law or regulations; and

 

(g)                                 To retain attorneys and accountants on anas-needed basis under such terms and conditions as determined solely by the TaxMatters Partner.

 

7.12                           Expenses of Tax Matters Partner.  TheCompany shall indemnify and reimburse the Tax Matters Partner for all expenses,including legal and accounting fees, claims, liabilities, losses and damagesincurred in connection with any administrative or judicial proceeding withrespect to the tax liability of the Members. The payment of all such expenses shall be made before any distributionsare made of Net Cash from Operations, or any discretionary reserves are setaside by the Board of Managers.  Thetaking of any action and the incurring of any expense by the Tax MattersPartner in connection with any such proceeding, except to the extent requiredby law, is a matter in the sole discretion of the Tax Matters Partner and theprovisions on limitations of liability of a Manager and indemnification setforth in Article 9 of this Agreement shall be fully applicable to the TaxMatters Partner in his capacity as such.

 

7.13                           Compensation.  Thesalaries and terms of employment of the officers of the Company shall be fixedfrom time to time by the Board of Managers. Officers who are Members of the Company shall receive the samemembership benefits that all other Members receive.  Officers 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 the approvalof the Members is required by this Operating Agreement or by nonwaivableprovisions of the Act, and subject to the provisions of Section 8.2, thepowers of the Company shall be exercised by or under the authority of, and thebusiness and affairs of the Company shall be managed under the direction of theBoard of Managers, and the Board of Managers may make all decisions and takeall actions for the Company not otherwise provided for in this OperatingAgreement, including, without limitation, the following:

 

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

 

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(ii)                                  To direct the expenditure of the capital andprofits of the Company in furtherance of the Company’s purposes.

 

(iii)                               To direct the investment of Company funds inany manner deemed appropriate or convenient by the Board of Managers to be inthe best interests of the Company.

 

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

 

(v)                                 To cause the Company to borrow money frombanks and other lending institutions for any Company purpose and in connectiontherewith to mortgage, grant a security interest in or hypothecate all of theassets of the Company.

 

(vi)                              To sell, dispose, abandon, trade or exchange(but not a sale, disposition, abandonment, trade, or exchange of all or anysubstantial portion of the Company’s assets) of the Company, upon such termsand conditions and for such consideration as the Board of Managers deemsappropriate.

 

(vii)                           To enter into agreements and contracts withany Member or an Affiliate of any Member and to give receipts, releases anddischarges with respect to all of the foregoing and any matters incident theretoas the Board of Managers may deem advisable or appropriate; provided, however,that any such agreement or contract shall be on terms as favorable to theCompany as could be obtained from any third party.

 

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

 

(ix)                                To amend this Operating Agreement and/or theArticles.

 

(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)                                     A decision to distribute Net Cash fromOperations other than in accordance with the requirements of Section 6.2;

 

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(ii)                                  The removal of any officer or agent of theCompany pursuant to Section 7.3;

 

(iii)                               Changing the number of Managers of theCompany pursuant to Section 8.4;

 

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

 

(v)                                 The amendment of this Operating Agreementand/or the Articles pursuant to Section 14.11.

 

(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(c), without first obtaining the required approval of theMembers.

 

(d)                                 For the purposes of this Operating Agreement,a disinterested Manager shall be a Manager who does not have a materialfinancial interest in any contract or agreement to be approved by the Board ofManagers.  A Manager who has a materialfinancial interest in any contract or agreement shall not vote on such contractor agreement.  A Manager’s interest in aCorn Delivery Agreement shall not be deemed to be a material financialinterest.  If a Manager is an Affiliateor immediate family member (spouse, parent, child, or sibling) of a party withrespect to which the Board of Managers intends to act, such Manager shall bedeemed to be interested.

 

8.2                                 Actions by Managers; Committees; Delegationof Authority and Duties.

 

(a)                                  In managing the business and affairs of theCompany and in exercising its powers, the Board of Managers shall act (i)collectively through meetings and written consents consistent with or as may beprovided or limited in other provisions of this Operating Agreement; (ii)through committees pursuant to Section 8.2(b); and (iii) through Managersand officers to whom authority and duties have been delegated pursuant to Section 8.2(c).

 

(b)                                 The Board of Managers may, from time to time,designate one or more committees, each of which shall be comprised of one ormore members of the Board of Managers, one or more members of the Company,and/or one or more non-members of the Board of Managers or of the Company.  Any such committee, to the extent provided insuch resolution shall have and may exercise such authority as is designated bythe Board of Managers, subject to limitations set forth in the Act.  At every meeting of such committee, unlessotherwise provided by the

 

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Boardof Managers, the presence of a majority of all the committee members shallconstitute a quorum, and the affirmative vote of the majority of the committeemembers present shall be necessary for the adoption of any resolution orrecommendation of any action. The Board of Managers may dissolve any committeeat any time.

 

(c)                                  Any Person dealing with the Company, otherthan a Member, may rely on the authority of the Manager or any officer of theCompany in taking any action in the name of the Company without inquiry intothe provisions of this Operating Agreement or compliance herewith, regardlessof whether that action actually is taken in accordance with the provisions ofthis Operating Agreement.

 

8.3                                 Registration and Transfer of Securities. Securities and other property owned by the Company shall be registeredin the Company’s name, in a nominee name, in any such case for the benefit ofthe Company.  Any transfer agent calledupon to transfer any securities to or from the name of the Company or suchother names shall be entitled to rely on instructions or assignments signed byan officer of the Company, or by any agent or custodian so authorized by theBoard of Managers, on its behalf, without inquiry as to the authority of theperson signing such instructions or assignments or as to the validity of anytransfer to or from the name of the Company. At the time of transfer, any transfer agent is entitled to assume,unless it has actual knowledge to the contrary:

 

(a)                                  that the Company is still in existence;

 

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

 

(c)                                  that the person so signing is authorized tosign on behalf of the Company.

 

8.4                                 Number; Term of Office; Election.

 

(a)                                  The number of initial Managers of the Companyshall be set at 12 until such time as the Board of Managers vote to change thenumber of Managers serving on the Board of Managers.  Thereafter, the number of Managers of theCompany shall be set by the Super Majority Vote of the Board of Managers.  If the number of Managers is increased, thenewly created Manager positions shall be filled at the next annual meeting byelection by the Members.  If the numberof Managers is decreased, then the decrease shall coincide with an annual orspecial meeting and all Managers shall be subject to reelection by theMembers.  Each initial Manager shall holdoffice according to the provisions of Section 8.4(b) unless such Managerresigns, dies, or becomes disabled.

 

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(b)                                 A person does not need to be a Member to beelected to the Board of Managers.  Eachinitial Manager shall serve on the Company’s Board of Managers until his termwould have expired on the Cooperative’s Board of Directors, resulting instaggered elections of four Managers annually. Thereafter each Manager shall be elected to office by the Members for aterm of three years or until his earlier resignation or removal.  No Manager may serve more than threeconsecutive three year terms on the Board of Managers; provided that theoriginal terms of the initial Managers’ prior to election by the Members shallnot be included in calculating length of service.  If a Manager’s term expires, the Managershall continue to serve until the Manager’s successor shall have been electedand qualified.  If a Manager is appointedto complete an unexpired term, that portion of the unexpired term served shallnot be counted when calculating the Manager’s length of service.

 

(c)                                  Managers shall be elected by a plurality ofthe votes cast by the Members voting in the election, with each Member havingone vote per position and no cumulative voting. Other aspects of the election process shall be determined by the Boardof Managers in advance of the annual election.

 

8.5                                 Death or Disability of Managers.  Uponthe death or disability of a Manager, the resulting vacancy on the Board ofManagers may be filled in accordance with Section 8.8.

 

8.6                                 Removal.  Managers may be removed forany reason at any annual or special meeting of Members by the affirmative voteof the majority of the Members.  Thenotice calling such meeting shall give notice of the intention to act upon suchmatter, and if the notice so provides, the vacancy caused by such removal bythe Members may be filled at such meeting by vote of the Members represented atsuch meeting.  Managers may also beremoved for any reason by 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 may resign at any time.  Such resignation shall be made in writing andshall take effect at the time specified therein, or, if no time be specifiedthen at the time of its receipt by the Chief Executive Officer or theSecretary.  The acceptance of a resignationshall not be necessary to make it effective, unless expressly so provided inthe resignation.

 

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8.8                                 Vacancies.  Any vacancy occurring in theBoard of Managers (other than by reason of an increase in the number ofManagers) may be filled by appointment through the affirmative vote of amajority of the remaining Managers, though less than a quorum of theManagers.  A Manager appointed by theBoard of Managers to fill a vacancy shall serve until the next annual meetingor special meeting of Members held for the purpose of electing Managers, atwhich time, the Members shall elect a new Manager to serve for the remainder ofthe original unexpired term of the vacated position.  Any Manager position to be filled by reasonof an increase in the number of members on the Board of Managers shall befilled by election at an annual meeting or at a special meeting of Memberscalled for that purpose.

 

8.9                                 Place and Manner of Meetings. Meetings of the Board of Managers, regular or special, may be heldeither 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.  Thefirst meeting of the newly elected Managers shall be held without furthernotice within 60 days following the annual meeting of the Members, and at thesame place, unless by unanimous consent of the Board of Managers then electedand serving, such time or place shall be changed.

 

8.11                           Regular Meeting of Board of Managers.  Aregular meeting of the Board of Managers may be held at such time as shall bedetermined from time to time by resolution of the Board of Managers.

 

8.12                           Special Meeting of Board of Managers.  TheSecretary shall call a special meeting of the Board of Managers wheneverrequested to do so by the Chief Executive Officer, or by 30% of theManagers.  Such special meeting shall beheld at the time specified in the notice of the meeting.  Neither the business to be transacted at, northe purpose of, any special meeting need be specified in a notice or waiver ofnotice.

 

8.13                           Notice of Board of Managers’ Meetings.  Allspecial meetings of the Board of Managers shall be held upon two 2 days’written or oral notice stating the date, place and hour of meeting delivered toeach Manager either personally or by facsimile transmission, or upon seven days’written notice by mail, at the direction of the Chief Executive Officer, theSecretary, or Managers calling the meeting.

 

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8.14                           Action Without Meeting.  Anyaction required by the Act to be taken at a meeting of the Board of Managers,or any action which may be taken at a meeting of the Board of Managers, may betaken without a meeting if a consent in writing, setting forth the action sotaken, shall be signed by the same number of Managers which would have beennecessary to approve such action if a meeting had been held.  Such consent shall have the same force andeffect as if adopted at a duly called meeting of the Board of Managers.

 

8.15                           Quorum; Majority Vote.  Atall meetings of the Board of Managers, a majority of the members of the Boardof Managers shall constitute a quorum for the transaction of business.  Except as otherwise provided in thisOperating Agreement, the act of a majority of the Managers present at anymeeting at which a quorum is present shall be the act of the Board ofManagers.  If a quorum shall not bepresent at any meeting of the Board of Managers, the Managers present thereatmay 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 or Contracts. The Board of Managers in its discretion maysubmit any act or contract for approval or ratification at any annual meetingof the Members, or at any special meeting of the Members called for the purposeof considering any such act or contract, and any act or contract that shall beapproved or be ratified by the Members shall be as valid and as binding uponthe Company and upon all the Members as if it shall have been approved orratified by every Member of the Company.

 

8.17                           Interested Managers, Officers and Members.  Nocontract or transaction between the Company and one or more of its Managers,officers, or Members, or any of their Affiliates, or between the Company andany other limited liability company, corporation, partnership, association orother organization in which one or more of its Managers or Members are managersor officers or have a financial interest, shall be void or voidable solely forthis reason or solely because the Person is present at or participates in themeeting of the Board of Managers or of a committee formed by the Board ofManagers which authorizes the contract or transaction.  Subject to 8.1(d), only disinterestedManagers may vote on any particular matter or issue.

 

8.18                           Expenses of the Company.

 

(a)                                  *General and AdministrativeExpenses.*  All expenses of the Company shall be billedto and paid by the Company.  The Managersmay be reimbursed for the actual cost of goods and services used for or by theCompany.  The Managers may be reimbursedfor the administrative services necessary to the prudent operation of

 

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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)                                 *Organizational andReorganization Expenses.*  Organization expenses incurred in connectionwith the formation of the Company and all expenses in connection with theReorganization will be charged to and borne by the Company.  To the extent any such organization andoffering expenses have been paid by the Board of Managers, the Board ofManagers will be reimbursed in a like amount by the Company.  Notwithstanding any other provision hereof,the Company will pay and bear directly all legal, accounting and auditingexpenses of the Company, taxes, if any, payable by the Company, interest costsof the Company, custodial fees, and extraordinary expenses, includinglitigation.

 

8.19                           Procedure.  The Board of Managers shallkeep regular minutes of its proceedings. The minutes shall be placed in the minute book of the Company.

 

8.20                           Compensation.  Themembers of the Board of Managers shall receive per diem or other compensationfor attending meetings and serving as a Manager as determined by the Board ofManagers.  Managers who are Members ofthe Company shall receive the same membership benefits that all other Membersreceive.  Managers may be reimbursed forreasonable expenses incurred in carrying out their duties as Managers.

 

**ARTICLE 9**

**INDEMNIFICATION**

 

9.1                                 Indemnification.  TheCompany shall indemnify an officer, Member, Manager, former Member, a formerofficer or a former Manager of the Company against expenses actually andreasonably incurred by said person in connection with the defense of an action,suit or proceeding, civil or criminal, in which said person is made a party byreason of being or having been such officer, Member or Manager, except inrelation to matters as to which such Person may be adjudged in the action, suitor proceeding to be liable to the Company under Section 9.2 of thisOperating Agreement.

 

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9.2                                 Liability of Company.  Tothe full extent permitted by South Dakota law, no officer, Member or Managershall be liable to the Company or its Members for monetary damages for an actor omission in such Person’s capacity as an officer, Member or Manager of theCompany, except that this Article does not eliminate or limit theliability of an officer, Member or Manager to the extent the officer, Member orManager is found liable for:

 

(a)                                  a breach of the duty of loyalty to theCompany or its Members;

 

(b)                                 an act or omission not in good faith thatconstitutes a breach of duty to the Company or its Members or an act oromission that involves gross negligence, intentional misconduct or a knownviolation of the law;

 

(c)                                  a transaction from which the officer, Memberor Manager received an improper benefit whether or not the benefit resultedfrom an action taken within the scope of the officer’s, Member’s or Manager’soffice; or

 

(d)                                 an act or omission for which the liability ofan officer, Member or Manager is expressly provided for by applicable statute.

 

9.3                                 Prospective Amendment of Liability andIndemnity.  Any repeal or amendment of this Article bythe Board of Managers of the Company shall be prospective only and shall notadversely affect any right of an officer, Member or Manager to indemnification,or any limitation on the liability of an officer, Member or Manager of theCompany existing at the time of such repeal or amendment.

 

9.4                                 Non-Exclusive Liability and Indemnity.  Theprovisions of this Article 9 shall not be deemed exclusive of any otherrights or limitations of liability or indemnity to which an officer, Member orManager may be entitled under any other provision of this Operating Agreement,or pursuant to any contract or agreement, the Act or otherwise.

 

**ARTICLE 10**

**CAPITAL UNIT CERTIFICATES**

 

10.1                           Certificates For Membership. Certificates representing Capital Units of the Company shall be in suchform as shall be determined by the Board of Managers. Such certificates shallbe signed by the Chief Executive Officer or the Vice President and by theSecretary or assistant Secretary.  Allcertificates for Membership shall be consecutively numbered or otherwiseidentified.  The name and address of theperson to whom the certificate has been issued shall be entered on the CapitalUnits transfer books of the Company.  Allcertificates surrendered to the Company for transfer shall be

 

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canceledand no new certificates shall be issued until the former certificateshall have been surrendered or cancelled.

 

10.2                           Transfer of Certificates. Transfer of certificates of the Company shall be made pursuant to thisOperating Agreement only on the transfer books of the Company by the holder ofrecord thereof or by the holder’s legal representative, who shall furnishproper evidence of authority to transfer, or by the Member’s attorney thereuntoauthorized by the power of attorney duly executed and filed with the Secretaryof the Company, and on surrender for cancellation of the certificate.  The Person in whose name the Certificatestands on the books of the Company shall be deemed by the Company to be theowner thereof for all purposes.

 

10.3                           Loss or Destruction of Certificates. In case of loss or destruction of anycertificate, another certificate may be issued in its place upon proof of suchloss or destruction, and upon giving a satisfactory bond of indemnity to theCompany and to the transfer agent and registrar, if any, of such certificate,in such sum as the Board of Managers may provide.

 

10.4                           Certificate Regulations.  TheBoard of Managers shall have the power and authority to make such further rulesand regulations not inconsistent with the statutes of the State of South Dakotaas they may deem expedient concerning the issue, transfer, conversion andregistration of certificates of the Company, including the appointment ordesignation of one or more transfer agents and one or more registrars.  The Company may act as its own transfer agentand registrar.

 

10.5                           Transfer of Membership. Membership shall not be transferred except with the approval and consentof the Board of Managers and in accordance with the Capital Units TransferSystem.

 

10.6                           Legends.  The Board of Mangers mayprovide for the placement of legends on Capital Unit certificates to indicaterestrictions on transfer, corn delivery obligations, or other restrictions orobligations 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, and if such a sale is not completed within 240 days after theMember becomes a Bankrupt Member, the Company shall have the option,exercisable by notice from the Company to the Bankrupt Member (or itsrepresentative) at any time after

 

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expiration of the 240 dayperiod, to redeem and cancel the Bankrupt Member’s Capital Units at a purchaseprice equal to $0.20 per Capital Unit or the lowest amount which may beapproved by the Bankruptcy Court.  Thepayment to be made to the Bankrupt Member or its representative pursuant tothis Article 11 is in complete liquidation and satisfaction of all therights and interest of the Bankrupt Member and its representative (and of allPersons 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.

 

**ARTICLE 12**

**DISSOLUTION**

 

12.1                           Dissolution and Winding-Up.  TheCompany shall dissolve and its affairs shall be wound up on the first to occurof the following:

 

(a)                                  the consent of a majority of the Members;

 

(b)                                 an event that makes it unlawful for all orsubstantially all of the business of the Company to be continued, but any cureof illegality within 90 days after notice to the Company of the event iseffective retroactively to the date of the event for purposes of this section;

 

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

 

(i)                                     the economic purpose of the Company is likelyto be unreasonably frustrated;

 

(ii)                                  it is not otherwise reasonably practicable tocarry on the Company’s business in conformity with the Articles and thisOperating Agreement; or

 

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

 

12.2**                          **Continuation. Except upon application and receipt of a judicial decree as provided in Section 12.1(c),no Member has the right to dissociate from the Company.  The death, expulsion, bankruptcy ordissolution of a Member, or the occurrence of any

 

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other event thatterminates the continued membership of a Member in the Company, shall not causea dissolution of the Company.

 

**ARTICLE 13**

**LIQUIDATION AND TERMINATION**

 

13.1                           Liquidation and Termination.  Ondissolution of the Company, the Board of Managers shall proceed diligently towind up the affairs of the Company and make any final distribution as providedin this Operating Agreement and the Act. The costs of liquidation shall be borne as a Company expense.  Liquidation proceeds, if any, shall first beused to pay the Company’s obligations and liabilities.

 

13.2                           Application and Distribution of Proceeds onLiquidation.  Upon an event of liquidation, the business ofthe Company shall be wound up, the Board of Managers shall take full account ofthe Company’s assets and liabilities, and all assets shall be liquidated aspromptly as is consistent with obtaining the fair value thereof.  If any assets are not sold, gain or lossshall be allocated to the Members in accordance with Article 6 as if suchassets had been sold at their fair market value at the time of theliquidation.  If any assets aredistributed to a Member, rather than sold, the distribution shall be treated asa distribution equal to the fair market value of the asset at the time of theliquidation.  The assets of the Companyshall be applied and distributed in the following order of priority:

 

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

 

(b)                                 to the establishment of any reserves deemednecessary by the Board of Managers or the Person winding up the affairs of theCompany for any contingent liabilities or obligations of the Company;

 

(c)                                  to the Members ratably in proportion to thecredit balances in their respective capital accounts in an amount equal to theaggregate credit balances in the capital accounts after and including allallocations to the Members under Article 6, including the allocation ofany 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 contrary contained in this OperatingAgreement, and notwithstanding any custom or rule

 

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of law to the contrary,to the extent that the deficit, if any, in the capital account of any Memberresults from or is attributable to deductions and losses of the Company(including non-cash items such as depreciation), or distributions of moneypursuant to this Operating Agreement to all Members in proportion to theirrespective Ownership Percentages, upon dissolution of the Company such deficitshall not be an asset of the Company and such Members shall not be obligated tocontribute such amount to the Company to bring the balance of such Member’scapital account to zero.

 

13.4                           Articles of Dissolution.  Oncompletion of the distribution of Company assets as provided herein, theCompany is terminated, and the Board of Managers shall file Articles ofDissolution with the Secretary of State of South Dakota and take such otheractions as may be necessary to terminate the Company.

 

**ARTICLE 14**

**GENERAL PROVISIONS**

 

14.1                           Books and Records.  TheCompany shall maintain those books and records as provided by the Act and as itmay deem necessary or desirable.  Allbooks and records provided for by the Act shall be open to inspection of theMembers from time to time and to the extent expressly provided by the Act, andnot otherwise.

 

14.2                           Headings.  The headings used in thisOperating Agreement have been inserted for convenience only and do notconstitute matter to be construed in interpretation of this OperatingAgreement.

 

14.3                           Construction and Severability. Whenever the context so requires, the gender of all words used in thisOperating Agreement includes the masculine, feminine, and neuter, and thesingular 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 Operating Agreementshall be considered valid and operative; and

 

(b)                                 Effect shall be given to the intent manifestedby the portion held invalid or inoperative.

 

14.4                           Effect of Waiver or Consent.  Awaiver or consent, express or implied, to or of any breach or default by anyPerson in the performance by that Person of its

 

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obligations with respectto the Company is not a consent or waiver to or of any other breach or defaultin the performance by that Person of the same or any other obligations of thatPerson with respect to the Company. Failure on the part of a Person to complain of any act of any Person orto declare any Person in default with respect to the Company, irrespective ofhow long that failure continues, does not constitute a waiver by that Person ofits rights with respect to that default until the applicablestatute-of-limitations period has run.

 

14.5                           Binding Effect. Subject to the restrictions on Dispositions set forth in this OperatingAgreement, this Operating Agreement is binding on and inures to the benefit ofthe Members and their respective heirs, legal representatives, successors andassigns.

 

14.6                           Governing Law/Jurisdiction.  THISAGREEMENT HAS BEEN EXECUTED IN SOUTH DAKOTA AND SHALL BE GOVERNED BY AND SHALLBE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF SOUTH DAKOTA.  THE MEMBERS CONSENT TO THE JURISDICTION OFTHE COURTS OF THE STATE OF SOUTH DAKOTA AND AGREE THAT ANY ACTION ARISING OUTOF OR TO ENFORCE THIS AGREEMENT MUST BE BROUGHT AND MAINTAINED IN SOUTH DAKOTA.

 

14.7                           Further Assurances.  Inconnection with this Operating Agreement and the transactions contemplatedhereby, each Member shall execute and deliver any additional documents andinstruments and perform any additional acts that may be necessary orappropriate to effectuate and perform the provisions of this Operating Agreementand those transactions.

 

14.8                           Notice to Members of Provisions of ThisAgreement.  By becoming a Member, each Memberacknowledges that it has actual notice of (a) all of the provisions of thisOperating Agreement, including, without limitation, the restrictions on theDisposition of Capital Units set forth in Article 4, and (b) all of theprovisions of the Articles.  Each Memberagrees that this Operating Agreement constitutes adequate notice of all suchprovisions, and each Member waives any requirement that any further noticethereunder be given.

 

14.9                           Counterparts.  ThisOperating Agreement may be executed in any number of counterparts with the sameeffect as if all signing parties had signed the same document.  All counterparts shall be construed togetherand constitute the same instrument.

 

14.10                     Conflicting Provisions.  Tothe extent that one or more provisions of this Operating Agreement appear to bein conflict with one another, then the Board of

 

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Managers shall have theright to choose which of the conflicting provisions are to be enforced.  Wide latitude is given to the Board ofManagers in interpreting the provisions of this Operating Agreement toaccomplish the purposes and objectives of the Company, and the Board ofManagers may apply this Operating Agreement in such a manner as to be in thebest interest of the Company, in its sole discretion, even if suchinterpretation or choice of conflicting provisions to enforce is detrimental toone or more Members.

 

14.11                     Amendments.  Amendments to this OperatingAgreement and/or the Articles may only be made by the Board of Managers, andshall require the Super Majority Vote of the Board of Managers.

 

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