Document:

exv10w20

 

Exhibit 10.20

AGASSIZ ENERGY, LLC

CODE OF ETHICS FOR SENIOR FINANCIAL OFFICERS

     At Agassiz Energy, LLC (“Agassiz “ or the “Company”) the honesty, integrity and sound judgment
of Agassiz ’s senior financial officers, which includes Agassiz ’s chief executive officer, chief
financial officer or controller and other persons performing similar functions (the “Senior
Financial Officers”), is fundamental to the financial reporting process and the reputation and
success of Agassiz . Agassiz ’s Senior Financial Officers hold an important and elevated role in
corporate governance in that they are uniquely capable and empowered to ensure that all
stakeholders’ interests are appropriately balanced, protected and preserved. Because of this
special role, each of the Senior Financial Officers agrees to be bound by this Code of Ethics for
Senior Financial Officers and each agrees that he or she will:

	 	i.	 	Act with honesty and integrity and ethically handle actual or
apparent conflicts of interest in personal and professional relationships
involving Agassiz or its business.
	 
	 	ii.	 	Provide information that is accurate, complete, objective,
relevant, timely and understandable to ensure full, fair, accurate, timely and
understandable disclosure in reports and documents that Agassiz files with, or
submits to, government agencies, including the Securities and Exchange
Commission (the “SEC”) and in other public communications.
	 
	 	iii.	 	Comply with applicable laws, rules and regulations of federal,
state, provincial and local governments, and other appropriate private and
public regulatory agencies, affecting Agassiz’s business and its conduct in
business matters.
	 
	 	iv.	 	In all matters affecting Agassiz’s business and its conduct in
business matters, act in good faith, responsibly, with due care, competence and
diligence, without misrepresenting material facts or allowing his/her
independent judgment to be subordinated.
	 
	 	v.	 	Respect the confidentiality of information acquired in the
course of his/her work for Agassiz except when authorized or otherwise legally
obligated to disclose. Confidential information acquired in the course of
his/her work for Agassiz shall not be used for personal advantage.
	 
	 	vi.	 	Proactively promote and be an example of ethical behavior as a
responsible partner among peers in Agassiz’s working environment.
	 
	 	vii.	 	Achieve responsible use of and control over all Agassiz assets
and resources employed or entrusted to him/her.

     Each of the Senior Financial Officers are expected to adhere to this Code of Ethics for Senior
Financial Officers at all times. Any violations of either of these Codes shall be promptly
reported. If any Senior Financial Officer is found to be in violation of this Code of Ethics for

 

 

Senior Financial Officers, such person will be subject to disciplinary action, which may
include termination of employment. It is against Agassiz policy to retaliate against any employee
for good faith reporting of violations of this Code of Ethics for Senior Financial Officers.

     The Board of Governors (or, if permitted under applicable SEC rules), and so appointed by the
Board of Governors, the Audit Committee of the Board of Governors) shall have the sole
discretionary authority to approve any amendment to or waiver of this Code of Ethics for Senior
Financial Officers. Any such amendment to or waiver of this Code of Ethics for Senior Financial
Officers shall be publicly disclosed in the manner specified by SEC rules.

     This Code of Ethics for Senior Financial Officers has been adopted by the Board of Governors
of Agassiz Energy, LLC, effective April 16, 2007.

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Exhibit 4.2

MEMBER CONTROL AGREEMENT

RED TRAIL ENERGY, LLC

     THIS MEMBER CONTROL AGREEMENT is made as of the 24th day of September, 2003, by and among each
of the undersigned:

RECITALS:

     WHEREAS, the undersigned constitute all of the current members of Red Trail Energy, LLC, a
North Dakota limited liability company; and

     WHEREAS, Section 10-32-50 of the North Dakota limited liability company act authorizes a
“member control agreement” as defined therein; and

     WHEREAS, each of the undersigned wishes to enter into such an agreement; and

     NOW, THEREFORE, each of the undersigned agrees as follows:

ARTICLE I.

DEFINITIONS

     1.1 Definitions. The terms defined in this Article I (except as may be otherwise
expressly provided in this Agreement or unless the context otherwise requires) shall, for all
purposes of this Agreement, have the following respective meanings:

     “Act” means the North Dakota limited liability company act contained in North Dakota Statutes,
Chapter 10-32.

     “Agreement” means this Member Control Agreement as hereafter amended from time to time,
including any schedules to the Agreement.

     “Board” or “Board of Governors” means the board of governors of the Company.

     “Capital Account” means the account of a Member which is maintained in accordance with the
provisions of Section 3.11 hereof.

     “Code” means the Internal Revenue Code of 1986, as amended and any successor thereto. Any
reference herein to specific sections of the Code shall be deemed to include a reference to any
corresponding provisions of future law.

     “Company” means Red Trail Energy, LLC, a North Dakota limited liability company.

     “Distribution” means a distribution to the Members of cash or other assets of the Company,
made from time to time pursuant to the provisions of this Agreement.

     “Financial Rights” means a Member’s rights to share in net income and net losses and
distributions with respect to a membership interest in accordance with the terms of this Agreement,
and the power to assign financial rights.

     “Governance Rights” means all of a Member’s rights as a Member in the Company other than such
Member’s financial rights.

     “Governor” means a natural person serving on the Board of Governors.

     “Manager” means a person elected, appointed, or otherwise

 

 

designated as a manager by the Board of Governors, and any other person considered elected as
a manager pursuant to the Act.

     “Member” means a person reflected in the required records of the Company as the owner of
governance rights of a membership interest of the Company.

     “Membership Interest” means a Member’s interest in the Company consisting of the number of
units each member has divided by the total units held by all members.

     “Net Income” and “Net Loss” mean the profits and losses of the Company, as the case may be, as
determined for federal income tax purposes as of the close of each of the fiscal years of the
Company.

ARTICLE II.

FIRST GOVERNORS

     2.1 First Governors. The first Governors of the Company shall be the following, who
are hereby elected to hold office until their successors are elected and qualified pursuant to the
Operating Agreement of the Company:

	 	 	 	 	 
	 

	 	William DuToit
	 	Fred Braun
	 

	 	Duane Zent
	 	William Price
	 

	 	Ambrose Hoff
	 	Jody Hoff
	 

	 	Mark Erickson
	 	Troy Jangula
	 

	 	Mike Appert
	 	Jeff Herr
	 

	 	William Cornatzer
	 	Leo Bachmeier
	 

	 	Tim Gross
	 	Gene Rudolf
	 

	 	Ron Aberle
	 	Donald Streifel
	 

	 	Ronald Knutson
	 	Charles Kraemer
	 

	 	Kenny Meier
	 	Marlyn Richter
	 

	 	Grant Hoovestol	 	 

ARTICLE III.

FOUNDERS’ CONTRIBUTIONS AND

PURCHASE OF MEMBERSHIP INTERESTS BY INVESTORS

     3.1 Contribution of Founders. The “Founders” contemporaneously herewith have each purchased
membership units or made initial contributions as set forth in Schedule A hereto.

     3.2 Purchase of Membership Interests by Intrastate Investors. The parties acknowledge
that the Company plans to sell Membership Interests to interested North Dakota investors who enter
into a Subscription Agreement with such rights, obligations, and preferences as the Board of
Governors shall establish for such Membership Interests. The parties understand that upon the sale
of Membership Interests to investors, their respective Membership Interests shall be diluted.

     The names of the Members and their respective percentage contributions and the agreed value
thereof are as follows:

     SEE ATTACHMENT “A”

Other than as set forth in this Section, no additional contributions shall be accepted or
membership interests granted by the Board without the consent of 100% of the outstanding
voting interests. Upon such consent and the issuance of additional membership interests,
Section

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     3.1 shall be appropriately amended.

     3.3 Terms of Membership Interests. The Company will have one class of Membership
Interests as set forth below:

     Class A member — Class to be owned by the Founders of the Company and outside investors in the
Company with such rights with respect to voting and sharing in profits of the Company as determined
by the Board of Governors from time to time. All Membership Interests of the Company shall have the
rights provided by law, subject to any statement in this Agreement of the specific rights or terms
of such Membership Interests.

     3.4 Democracy Rights.

          A. Meetings. Meetings of the Company may be called by the Governors and request, either in
person or by certified mail, stating the purpose(s) of the meeting, the Governors and Managers
shall provide all Members within ten days after receipt of said request, written notice, either in
person or by mail, of a meeting and the purpose of such meeting to be ‘held on a date not less than
fifteen nor more than sixty days after distribution of such notice, at a time and place specified
in the request, or if none is specified, at a time and place convenient to Members.

          B. Voting Rights of Members.

          l. The Company agreement must provide that a majority of the then outstanding Company
Interests may, without the necessity for concurrence by the Governors and Managers, vote to:

     (a) amend the Company agreement;

     (b) dissolve the Company;

     (c) remove the Governors and Managers and elect new Governors and Managers;

     (d) Approve or disapprove the sale of all or substantially all of the assets of the
Company, when such sale is to be made other than in the ordinary course of the Company’s
business;

          2. Without concurrence of a majority of the outstanding Company Interests, the Governors and
Managers may not:

          (a) amend the Company agreement except for amendments which do not adversely affect the rights
of Members;

          (b) voluntarily withdraw as Governors and Managers unless such withdrawal would not affect the
tax status of the Company and would not materially adversely affect the Members;

          (c) sell all or substantially all of the Company’s assets other than in the ordinary course of
the Company’s business, or

          (d) cause the merger or other reorganization of the Company.

          3. With respect to any Company interests owned by the Governors and Managers, the Governors
and Managers may not vote or consent on matters submitted to the Members regarding the removal of
the Governors and Managers or regarding any transaction between the Company and the Governors and
Managers or in determining the existence of the requisite membership interest of Company interests
necessary to approve a matter on which the Governors or Managers may not vote or consent, any Company interest owned
by the Governors or

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Managers shall not be included.

     3.5 Allocation of Net Income and Net Losses. Net income and net losses shall be
allocated annually among the Members in proportion to their units of membership.

     3.6 Operating Distributions. Any distributions authorized by the Board other than
liquidating distributions pursuant to Section 3.5 shall be distributed among the Members based on
their units of membership, provided, however, that the Board shall annually distribute cash to the
members based on their units of membership in an amount equal to the estimated member tax
liability, to the extent such a distribution is legally permitted.

     3.7 Liquidating Distributions. If the Company is dissolved and (i) dissolution is not
avoided under Section 5.1 and (ii) its business is being liquidated in accordance with statutes,
the Company shall cease to carry on its business, except to the extent necessary for the winding up
of the business of the Company. The Company shall thereafter be wound up and terminated as provided
by the Act. All tangible or intangible property of the Company, including money remaining after the
discharge of the debts, obligations, and liabilities of the Company shall be distributed to the
Members as follows:

     (a) To the Members in proportion to, and to the extent of, the positive balances in their
capital accounts; and thereafter,

     (b) To the Members in accordance with their units of membership.

     3.8 Voting. Members shall be entitled to one vote per Class A Membership Unit owned in
all matters coming to a vote of the members. Holders of Member Units have no preemptive rights to
subscribe for or to purchase any additional Membership Units. Membership Units owned by managers or
governors may not be voted on where a conflict arises between such managers and governors and the
Company.

     3.9 Capital Accounts. A capital account shall be established for each Member and shall
be maintained in accordance with Treasury regulation § 1.704-1(b)(2)(iv). Any Member who shall
receive any membership interest in the Company or whose membership interest shall be increased by
means of the transfer to such member of any financial interest in the Company from another Member
shall have a capital account that has been appropriately adjusted to reflect such transfer. No
interest shall be paid by the Company on capital contributions or on balances in Members’ capital
accounts.

     3.10 Additional Capital Contributions. No Member shall have any obligation to make
additional capital contributions to the Company or to fund, advance, or lend monies which may be
necessary to pay deficits, if any, incurred by the Company during the term hereof.

ARTICLE IV.

TAX MATTERS

     4.1 Tax Characterization and Returns. The Members acknowledge that the Company will be
treated as a “partnership” for federal and North Dakota state income tax purposes. Within ninety
(90) days after the end of each fiscal year, the Company will deliver to each person who was a
Member at any time during such fiscal year, a Form K-1 and such other information, if any, with
respect to the Company as may be necessary for the preparation of such Member’s federal or

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state income tax (or information) returns, including a statement showing each Member’s share of income, gain or loss and
credits for such fiscal year for federal or state income tax purposes.

     4.2 Accounting Decisions. All decisions as to accounting matters shall be made by the
Board or the Members pursuant to the Act. The Company may make or revoke such elections as may be
allowed pursuant to the Code, including the election referred to in the Code to adjust the basis of
Company property.

     4.3 Tax Matters Partner. The Board shall designate a Member to act on behalf of the
Company as the “tax matters partner” within the meaning of the Code.

     4.4 Special Allocations. Anything elsewhere contained in this Article IV to the
contrary notwithstanding:

     (a) Minimum Gain Chargeback. If for any Company fiscal year, there is a net decrease in
partnership minimum gain as determined in accordance with Treasury Regulations § 1.704-2(i)(5),
each Member shall be allocated items of Company income and gain in accordance with Treasury
Regulation § 1.704-2(f)(1) (a “minimum gain chargeback”) for such year (and, if necessary, for
subsequent years) in an amount equal to such member’s share of such net decrease of partnership
minimum gain. For this purpose, a Member’s share of the net decrease in partnership minimum gain
shall be determined under Treasury Regulations § 1.704-2(g)(2). This Section 4.4(a) is intended to
comply with Treasury Regulation § 1.704-(f)(1) and shall be interpreted consistently therewith.

     (b) Qualified Income Offset. If any Member at any time unexpectedly receives any adjustment,
allocation or distribution described in Treasury Regulation § 1.704-1(b)(2)(ii)(d)(4), §
1.704-1(b)(2) (ii)(d)(5), or § 1.704-1(b)(2)(ii)(d)(6), and if such adjustment, allocation or
distribution results in a negative balance in such Member’s capital account in excess of the sum of
(i) the amount such Member is obligated to restore to the Company under this Agreement and (ii) the
amount such Member is deemed to be obligated to restore to the Company pursuant to the penultimate
sentences of Treasury Regulations § 1.704-2(g)(1)(ii) and § 1.704-2(i)(5), then items of Company
income and gain shall be specially allocated to such member so as to eliminate, to the extent
required by Treasury Regulation § 1. 704-1(b)(2)(ii)(d), such negative balance in his or her
capital account as quickly as possible.

     (c) Gross Income Allocation. If any Member would have a negative balance in his or her capital
account at the end of any Company taxable year in excess of the sum of (i) the amount such Member
is obligated to restore to the Company under this Agreement and (ii) the amount such Member is
deemed to be obligated to restore to the Company pursuant to the penultimate sentences of Treasury
Regulations § 1.704-2(g)(1)(ii) and § 1.704-2(i)(5), then such Member shall be specifically
allocated items of Company income (including gross income) in the amount of such excess as quickly
as possible.

     (d) Curative Allocations. Any allocation to a Member under subparagraphs (a) through (c) of
this Section 4.4 (a “regulatory allocation”) shall be taken into account in determining subsequent
allocations, so that the net amount of regulatory allocations and all other items allocated under
the provisions of this Article IX shall, to the extent possible, be equal to the net amount that
would have been allocated to such Member under the provisions of

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this Article IV if no regulatory allocation had been made.

     4.5 Tax Allocations. In accordance with the Code and the Treasury Regulations
thereunder, income, gain, loss and deduction with respect to any property contributed to the
capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take
account of any variation between the adjusted basis of such property to the Company for federal
income tax purposes and its fair market value as of the date of contribution.

     In the event any Company asset is adjusted as a result of a revaluation pursuant to Treasury
Regulation § 1.704-1(b)(2)(f), subsequent allocations of income, gain, loss and deduction with
respect to such asset shall take account of any variation between the adjusted basis of such asset
for federal income tax purposes and its fair market value as of the date of such revaluation in the
same manner as under the Code and the Treasury regulations thereunder. Any election or other
decision relating to such allocations shall be made by the Board in any manner that reasonably
reflects the purpose and intention of this Agreement.

     Allocations pursuant to this Section 4.5 are solely for purposes of federal, state and local
taxes and shall not affect, or in any way be taken into account in computing any Member’s capital
account or share of income, profits, gains, losses, expenses, deductions, credits or other items or
distributions pursuant to any provision of this Agreement.

ARTICLE V.

AGREEMENT TO AVOID DISSOLUTION

     5.1 Dissolution Avoidance Consent. An event that terminates the continued membership
of a member shall not cause the company to be dissolved unless it is the last or sole member of the
company. After the occurrence of an event that terminates the continued membership of another
Member in the Company (including the events enumerated in Section 10-32-109 of the Act), each
remaining Member may be asked to consent to the continuation of the Company as a legal entity
without dissolution and to the continuation of its business, pursuant to the power set forth in
Article V of the Articles of Organization of the Company.

     5.2 Status of Terminated Member if Dissolution is Avoided. If dissolution is avoided
under Section 5.1, then the Member whose interest has terminated shall lose all governance rights
and will be considered merely an assignee of the financial rights owned before the termination of
membership.

     5.3 Status of Terminated Member if Dissolution is Not Avoided. If dissolution is not
avoided under Section 5.1, then the Member whose interest has terminated shall retain all
governance rights and financial rights owned before the termination of the membership and may
exercise those rights through the winding up and termination of the Company.

     5.4 Restoration of Governance Rights in Certain Cases. If dissolution is avoided under
Section 5.1, but the event that terminated the continued membership of a Member in the Company was
the death of such Member or a transfer of such decedent Member’s interest to or from his estate or
to or from a trust that has received such interest by reason of such death, then the governance
rights associated with such interest shall be restored to such estate, trust or transferee thereof for all purposes under this Agreement.

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ARTICLE VI.

BUSINESS CONTINUATION AGREEMENT

     6.1 Agreement to Continue Business. If an event of dissolution occurs and dissolution
is not avoided, the remaining Members shall have the right to transfer the Company’s assets and
business to a successor limited liability company and to continue its business in such successor as
provided in North Dakota Statutes, Section 10-32-108.

     6.2 Procedures to Transfer and Continue Business. If the remaining Members agree to
continue the business of the Company, the Board shall organize a new limited liability company (the
“successor”) under the Act and shall prepare a plan of merger pursuant to which the Company shall
be merged into the successor, which shall be the surviving Company, and the membership interests of
the Members in the Company who do not dissent from the plan of merger shall be converted on a pro
rata basis into membership interests in the successor, having substantially identical terms. If the
plan of merger is approved, each Member who does not dissent from the plan of merger agrees to
execute any documents required to effect the merger and create the membership interests in the
successor including, without limitation, a member control agreement among the Members of the
successor having terms substantially identical to the terms of this Agreement. When approved by the
members of the Company (including Members voting pursuant to Section 10-32-102 of the Act), such
merger shall be promptly effected in accordance with law.

ARTICLE VII.

TRANSFERS OF INTERESTS

     7.1 Restrictions on Transfers. No Member shall transfer all or any portion of an
interest without the prior written consent of the Board of Directors which consent may be withheld
in the sole discretion of the Board. Notwithstanding anything contained herein to the contrary, no
Member shall transfer any unit if, in the determination of the Board, such transfer would cause the
Company to be treated as a publicly traded partnership, and any transfer of unit(s) not approved by
the Board of Directors or that would result in a violation of the restrictions in this Agreement or
applicable law shall be null and void with no force or effect whatsoever, and the intended
transferee shall acquire no rights in such unit.

     7.2 Permitted Transfers. Subject to Section 7.1 above, any transfer of units made in
accordance with the following provisions will constitute a “Permitted Transfer” for purposes of
this Agreement.

     (a) A transfer by a member and any related persons (as defined in Section 267(b), or 707 (b)
(1) of the Internal Revenue Code) in one or more transactions during any thirty (30) calendar day
period of interests representing in the aggregate more than two percent (2%) of the total interests
in company.

     (b) A transfer or series of related transfers by one or more members (acting together) which
involves the transfer of fifty percent (50%) or more of the outstanding units; or

     (c) Transfers of units effected through a qualified matching services program; or,

     (d) A transfer by gift or bequest only to a spouse or child

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of such transferring member, or to a trust established for the benefit of such spouse or child, or to an existing member
of the company upon ten (10) days’ prior written notice to the company of such gift or bequest.

     7.3 Conditions Precedent to Transfers. The Board of Directors, in its sole discretion,
may elect not to recognize any transfer of units unless and until the company has received:

     (a) an opinion of counsel (whose fees and expenses shall be borne by the transferor)
satisfactory in form and substance to the Board that such transfer may be lawfully made without
registration or qualification under applicable state and federal securities laws, or such transfer
is properly registered or qualified under applicable state and federal securities laws and if,
requested by the company that such transfer will not cause the company to be treated as a publicly
traded partnership;

     (b) such documents and instruments of conveyance executed by the transferor and transferee as
may be necessary or appropriate in the opinion of counsel to the company to effect such transfer,
except that in the case of a transfer of units involuntarily by operation of law, the transfer
shall be confirmed by presentation of legal evidence of such transfer, in form and substance
satisfactory to the company;

     (c) the transferor’s membership certificate;

     (d) the transferee’s taxpayer identification number and sufficient information to determine
the transferee’s initial tax basis in the interest transferred, and any other information
reasonably necessary to permit the company to file all required federal and state tax returns and
other legally required information statements or returns; and

     (e) other conditions on the transfer of units adopted by the Board from time to time as it
deems appropriate, in its sole discretion.

     7.4 Redemption of Interests.

     (a) A member (the “Requesting Member”) may request redemption of his or her interest upon not
less than sixty (60) calendar days’ prior written notice to the Board of Directors. The Board, in
its sole discretion, shall determine whether to redeem such interest and the Board is under no
obligation to redeem any interest of any requesting member.

     (b) Notwithstanding anything contained herein to the contrary, any redemption pursuant to this
Section 7.4 shall be subject to a determination by the Board, in its sole discretion, that such
redemption shall not cause the company to be deemed a publicly traded partnership, including but
not limited to violation of the Regulation Section 1.7704-1 (f) (3) limitation on transfers other
than certain private transfers described in Regulation Section 1.7704-1 (e), and such redemption
shall be effected in accordance with this Agreement, the Code and applicable Treasury Regulations,
and shall be further subject to the prior approval of the Board which may be withheld in its sole
discretion.

     7.5 Redemption Payment.

     (a) Upon the redemption of a member under Section 7.4, the requesting member shall be entitled
to a payment equal to the fair market value of such member’s interest in the company as of the

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effective date of such payment; provided, however, if the remaining members of the company agree to
dissolve the company, then in no event shall such member be entitled to a redemption payment, but
such member will be entitled to such member’s share of the assets of the company.

     (b) At least (60) sixty days after the company’s receipt of the notice from the requesting
member required under Section 7.4 (a) above, the company shall establish a redemption or repurchase
price, after which the redemption payment shall be paid in cash, or if the redemption payment
exceeds five thousand dollars ($5,000), the company shall have the option to pay the redemption
payment by paying five thousand dollars ($5,000) upon the effective date of the redemption and
executing a promissory note for the balance of the redemption payment. Such note shall be dated and
delivered on the effective date of the withdrawal and shall be paid in five (5) equal annual
installments due on the anniversary date of the withdrawal and shall accrue interest per annum at a
rate determined by the Board which shall not be less than the then current prime rate established
by any major bank selected by the Board for loans to the bank’s most creditworthy commercial
borrowers. The company may prepay the promissory note, in whole or in part, at any time without
penalty or premium.

     (c) The redemption payment shall be increased or decreased, as the case may be, by an amount
equal to any indebtedness owed the requesting member by the company, or the deduction of any
indebtedness owed the company by the requested member, or both. All rights of the member with
respect to the interest, including the right to vote such interest and to receive distributions,
shall terminate at closing, except for the member’s right to receive payment therefor upon the
effective date of the redemption which shall be determined in accordance with Section 7.6 below.

     7.6 Effective Date of Transfer.

     (a) Any transfer of a unit shall be deemed effective as of the day of the month and year; (i)
which the transfer occurs (as reflected by the form of assignment); and (ii) the transferee’s name
and address and the nature and extent of the transfer are reflected in the records of the company;
provided, however, the effective date of a transfer for purposes of allocation of
profits and losses and for distributions shall be determined pursuant to Section 7.6(b) below. Any
transferee of a unit shall take subject to the restrictions on transfer imposed by this Agreement.

     (b) The Board, in its sole discretion, may establish interim periods in which transfers may
occur (the “Interim Transfer Periods”); provided, however, the Board shall provide
members reasonable notice of the interim transfer periods and advance notice of any change to the
interim transfer periods. For purposes of making allocations of profits and losses, and
distributions, the company will use the interim closing of the books method (rather than a daily
proration of profit or loss for the entire period) and recognize the transfer as of the first day
following the close of interim transfer period in which the member complied with the notice,
documentation and information requirements of Article 7. All distributions on or before the end of
the applicable interim transfer period in which such requirements have been substantially complied
with shall be made to the transferor and all distributions thereafter shall be made to the
transferee. The board has the authority to adopt other reasonable methods and/or conventions.

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     (c) The Board shall have the power and authority to adopt another reasonable method and/or
convention with respect to such allocations and distributions; provided, neither the company, the
Board, any director nor any member shall incur any liability for making allocations and
distributions in accordance with the provisions of this Section 7.6 (other than tax liabilities
which may be incurred by members), whether or not the Board or any director of the company or any
member has knowledge of any transfer or ownership of any interest in the company.

     7.7 Fair Market Value. Upon the redemption of an interest pursuant to Section 7.4, the
purchase price or redemption payment shall be equal to the fair market value of the interest. “Fair
market value” of an interest on any date shall, unless otherwise specifically provided in this
Agreement, be equal to the most recent fair market valuation determination of the per unit value of
the company by the Board in good faith; provided, that such valuation shall be calculated on a
basis as consistent as practicable from period to period. The Board may, in its sole discretion,
employ the advice of independent and qualified professionals in the determination of the fair
market value, but is not under any obligation to do so. The fair market value of the company shall
be determined at least annually. Valuations shall generally be performed, at the discretion of the
Board, as of the end of each fiscal year of the company’s operations at the annual meeting of the
Board; however, the Board, in its sole discretion, may have fair market valuations of the company
performed at any time or from time to time during any year and, except as otherwise specifically
provided in this Agreement, shall utilize the results of the most recent valuation in determining
the fair market value of an interest for purposes of this agreement. No member or any party other
than the Board shall have the right to require or request that a new or more recent valuation be
performed for purposes of determining the fair market value of the company or an interest
hereunder. The company shall not establish the fair market value more than four (4) times
during the company’s taxable year.

     7.8 Pledged Units. Subject to Section 7.1 above, in the event that any member pledges
or otherwise encumbers any part of its units as security for the payment of a debt, any such pledge
or hypothecation shall be made pursuant to a pledge or hypothecation agreement that requires the
pledgee or secured party to be bound by all of the terms and conditions of this Article 7. In the
event that such pledgee or secured party becomes a member hereunder pursuant to the exercise of
such party’s right under such pledge or hypothecation agreement, such pledgee or secured party
shall be bound by all of the terms and conditions of this Agreement. In such case, such pledgee or
secured party, and any transferee or purchaser of the units held by such pledgee or secured party,
shall not have any voting rights associated with such units unless and until the directors have
approved in writing and admitted as a member hereunder, such pledgee, secured party, transferee or
purchaser of such units.

     7.9 Expenses. Except as otherwise expressly provided herein, all expenses of the
company incident to the admission of the transferee to the company as a member shall be charged to
and paid by the transferring member.

10

 

ARTICLE VIII.

AMENDMENTS

     8.1 Amendment of Agreement. No change, modification or amendment of this Agreement
shall be valid or binding unless such change, modification or amendment shall be in writing signed
by 2/3rds of voting interests of the Members; provided, however, in no event may this Agreement be
amended to provide for less than unanimous consent to avoid dissolution under Section 5.1

ARTICLE IX.

MISCELLANEOUS

     9.1 Governing Law. This Agreement and the rights of the parties hereunder will be
governed by, interpreted and enforced in accordance with the laws of the State of North Dakota.

     9.2 Binding Effect. This Agreement will be binding upon and inure to the benefit of
the Members and their respective distributees, successors, and assigns.

     9.3 Severability. If any provision of this Agreement is held to be illegal, invalid,
or unenforceable under the present or future laws effective during the term of this Agreement, such
provision will be fully severable; this Agreement will be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement will remain in full force and effect and will not be
affected by the illegal, invalid, or unenforceable provision or by its severance from this
Agreement. Furthermore, in lieu of such illegal, invalid, or unenforceable provision, there will be
added automatically as part of this Agreement, a provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and be legal, valid and enforceable.

     9.4 Making Counterparts. This Agreement may be executed in several counterparts, each
of which will be deemed an original but all of which will constitute one and the same instrument.
However, in making proof hereof, it will be necessary to produce only one copy hereof signed by the
party to be charged.

     9.5 Additional Documents and Acts. Each Member agrees to execute and deliver such
additional documents and instruments and to perform such additional acts as may be necessary or
appropriate to effectuate, carry out and perform all of the terms, provisions, and conditions of
this Agreement and the transactions contemplated hereby.

     9.6 No Third Party Beneficiary. This Agreement is made solely and specifically among
and for the benefit of the parties hereto, and their respective successors and assigns, and no
other person will have any rights, interest, or claims hereunder or be entitled to any benefits
under or on account of this Agreement as a third party beneficiary or otherwise.

     9.7 Notices. Any notice to be given or to be served upon the Company or any party
hereto in connection with this Agreement must be in writing and will be deemed to have been given
and received when delivered to the address specified by the Member at the address specified in the
Company’s required records. Any Member or the Company may, at any time, by giving five (5) days
prior written notice to the other Members and the Company, designate any other address in
substitution of the forgoing address to which such notice will be given.

     IN
WITNESS WHEREOF, the undersigned has executed this Agreement as of the day and year first above written, and as amended.

11

 

     IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the day and year first
above written, and as amended.

GOVERNORS:

RED TRAIL ENERGY LLC

	 	 	 
	/s/ Ambrose R. Hoff
 

Ambrose Hoff	 	
/s/ Jody Hoff
 

Jody Hoff
	/s/ Duane Zent
 

Duane Zent	 	
/s/ William Price
 

William Price
	/s/ Wm N DuToit
 

William DuToit	 	
/s/ Fred Braun
 

Fred Braun
	/s/ Mark Erickson
 

Mark Erickson	 	
/s/ Troy Jangula
 

Troy Jangula
	/s/ Mike Appert
 

Mike Appert	 	
/s/ Jeff Herr
 

Jeff Herr
	/s/ William Cornatzer
 

William Cornatzer	 	
/s/ Leo Bachmeier
 

Leo Bachmeier
	/s/ Tim Gross
 

Tim Gross	 	
/s/ Gene F Rudolf
 

Gene Rudolf
	/s/ Ron Aberle
 

Ron Aberle	 	
/s/ Donald Streifel
 

Donald Streifel
	 

 

Ronald Knudson	 	
/s/ C. W. Kramer
 

Charles Kraemer
	/s/ Kenny Meier
 

Kenny Meier	 	
/s/ Marlyn Richter
 

Marlin Richter
	/s/ Grant Hoovestol
 

March Madness	 	 

12

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