LIMITED LIABILITY COMPANY AGREEMENT
FOR
▇▇▇▇▇▇-HOLSUM FOODS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
Dated as of July 24, 1996
TABLE OF CONTENTS
Page
ARTICLE 1 - GENERAL PROVISIONS 1
1.1 Formation 1
1.2 Name 1
1.3 Filings; Registered Office and Statutory Agent 1
1.4 Principal Executive Office 2
1.5 Purpose 2
1.6 Company Powers 2
1.7 Term 3
1.8 Qualification in Other Jurisdictions 3
1.9 Definitions 3
ARTICLE 2 - MEMBERS 12
2.1 Members 12
2.2 Access to Books of Account 12
2.3 Confidential Information 13
2.4 Duty of Members to Cooperate 14
ARTICLE 3 - MANAGEMENT 15
3.1 Management 15
3.2 Members Committee 15
3.3 Powers of the Members Committee 16
3.4 Members Committee Meetings 18
3.5 Voting 19
3.6 Deadlock. Deadlock Resolution 20
3.7 Members 21
ARTICLE 4 - OFFICERS AND EMPLOYEES 21
4.1 Officers 21
4.2 Chief Executive Officer 21
4.3 Treasurer 21
4.4 Secretary 22
4.5 Executive Vice Presidents 22
ARTICLE 5 - INTENTIONALLY OMITTED 22
ARTICLE 6 - DISPUTE RESOLUTION 22
6.1 Dispute Resolution 22
ARTICLE 7 - BUY-SELL RIGHT 26
7.1 Buy-Sell 26
7.2 Certain Agreements 28
ARTICLE 8 - CAPITAL CONTRIBUTIONS 29
8.1 Capital Accounts 29
8.2 Initial Contributions of Capital 30
8.3 Additional Contributions by Members 30
8.4 Member Obligations 31
8.5 Withdrawals of Capital Accounts 31
8.6 Interest on Capital Accounts 31
8.7 Revaluation of Company Assets 31
8.8 Redetermination of Percentage Interests 32
8.9 Determination of Fair Market Value 32
(a) Selection of Appraisers 32
(b) Evaluation Procedures 33
(c) Fair Market Determination 33
(d) Selection of and Procedure for Third
Appraiser 34
(e) Alternative Determination of Fair Market 34
(f) Costs 34
(g) Conclusive Determination 35
(h) Initial Capital Contributions 35
ARTICLE 9 - ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS 35
9.1 Allocation of Profits and Losses 35
9.2 Allocation of Taxable Income and Loss 38
(a) General 38
(b) Section 704(c) Allocations 38
(c) Recapture 38
(d) Credits 38
(e) Conformity of Reporting 38
9.3 Distribution of Assets by the Company. 39
9.4 ▇▇▇▇▇▇ Deferred Tax Distributions 39
(a) Reversal through Depreciation 39
(b) Reversal through Disposition 40
ARTICLE 10 - TAX MATTERS AND REPORTS; ACCOUNTING 40
10.1 Filing of Tax Returns 40
10.2 Tax Matters Partner 40
10.3 Tax Reports to Current and Former Members 41
10.4 Accounting Records. Independent Audit 41
10.5 Fiscal Year 41
10.6 Tax Accounting Method 41
10.7 Withholding 41
10.8 Tax Elections 42
10.9 Prior Tax Information 42
ARTICLE 11 - TRANSFER AND ASSIGNMENT OF INTERESTS;
PUBLIC OFFERING; ADDITIONAL MEMBERS 42
11.1 Transfer and Assignment of Interests 42
11.2 Permitted Transfers 43
11.3 Assignment of Right to Appoint Committee Members 44
11.4 Right of First Refusal Procedures 44
11.5 Assignees and Substituted Members 45
11.6 Additional Members 46
ARTICLE 12 - DISSOLUTION AND LIQUIDATION 46
12.1 Events of Dissolution 46
12.2 Voluntary Dissolution 47
12.3 Buy-Sell Procedure Rights 47
12.4 Liquidation and Order of Dissolution 47
12.5 Liquidator 48
12.6 Termination of Company 49
12.7 Orderly Winding Up 49
ARTICLE 13 - INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS 49
13.1 Indemnification of the Members 49
13.2 Reimbursement and Indemnity 50
13.3 Exculpation 50
13.4 Indemnification Relating To Initial Contributions 51
ARTICLE 14 - MISCELLANEOUS 51
14.1 Notices 51
14.2 Governing Law 52
14.3 Amendments 52
14.4 Entire Agreement 52
14.5 Waiver of Partition 52
14.6 Consents 53
14.7 Successors 53
14.8 Counterparts 53
14.9 Severability 53
14.10 Survival 53
14.11 No Third Party Beneficiaries 53
LIMITED LIABILITY COMPANY AGREEMENT
FOR
▇▇▇▇▇▇-HOLSUM FOODS, LLC,
A DELAWARE LIMITED LIABILITY COMPANY
This Limited Liability Agreement of ▇▇▇▇▇▇-HOLSUM FOODS, LLC (the
"Company") is made as of July 24, 1996, by and between ▇▇▇▇▇▇ FOODS, INC., a
Delaware corporation ("▇▇▇▇▇▇") and HARVEST STATES COOPERATIVES, a Minnesota
corporation ("Harvest States"), each of which shall be a Member (as hereinafter
defined) from and after said date for all purposes hereof.
WHEREAS, ▇▇▇▇▇▇ and Harvest States have concluded that it will be in
their best interests to form a limited liability company for the purpose of
acquiring, owning and operating the Business hereinafter described and, in
furtherance thereof, ▇▇▇▇▇▇ and Harvest States wish to become Members in the
Company; and
NOW, THEREFORE, in consideration of the promises, mutual covenants and
agreements herein contained and in order to set forth the respective rights,
obligations and interests of the Members to one another and to the Company, the
Members hereby agree as follows:
ARTICLE 1
GENERAL PROVISIONS
1.1 Formation. ▇▇▇▇▇▇ and Harvest States hereby agree to form the
Company as a limited liability company under and pursuant to the Act (as
hereinafter defined), and this Agreement. Except as provided in this Agreement,
the rights, duties, liabilities and obligations of the Members and the
administration, dissolution, winding up and termination of the Company shall be
governed by the Act.
1.2 Name. The name of the Company shall be "▇▇▇▇▇▇-Holsum Foods, LLC".
The name of the Company may be changed with the unanimous approval of the
Members acting through the Members Committee.
1.3 Filings; Registered Office and Statutory Agent.
(a) The Members shall cause the Certificate to be filed with
the Secretary of State of Delaware and any other office in accordance
with the Act. The Members shall cause additional amendments to the
Certificate to be filed whenever required by the Act. The Members shall
take any and all other actions as may be reasonably necessary to
perfect and maintain the status of the Company as a limited liability
company under the Act.
(b) The registered office of the Company in the State of
Delaware required by the Act shall be c/o The Corporation Trust
Company, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇▇, as set forth in the Certificate, until such time as the
registered office is changed with the unanimous approval of the Members
acting through the Members Committee in accordance with the Act and the
filing of an amendment to the Certificate.
(c) The statutory agent of the Company in the State of
Delaware required by the Act shall be the Corporation Trust Company,
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ of ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
until such time as the statutory agent is changed with the unanimous
approval of the Members acting through the Members Committee in
accordance with the Act and the filing of an amendment to the
Certificate.
1.4 Principal Executive Office. The principal executive office for the
transaction of the business of the Company may be fixed upon the unanimous
approval of the Members acting through the Members Committee within or without
the State of Delaware.
1.5 Purpose. The purpose of the Company shall be to enter into the
Joint Venture Agreement (as hereinafter defined), acquire, own and operate
substantially all of the assets (real and personal, tangible and intangible),
businesses and operations of ▇▇▇▇▇▇ and the Holsum Foods division of Harvest
States ("Holsum") and Ventura Foods, L.L.C., a limited liability company under
the laws of the State of Delaware owned equally by ▇▇▇▇▇▇ and Harvest States
("Ventura Foods") and to conduct such other business activities as may from time
to time be unanimously approved by the Members acting through the Members
Committee (collectively the "Business"). The terms and conditions of the
acquisition of the Business shall be more fully described in the Joint Venture
Agreement.
1.6 Company Powers.
(a) The Company shall have the power: (i) to acquire and
operate the Business; (ii) to acquire or lease all equipment, supplies
and services and to make improvements necessary for the ownership,
operation, management and maintenance of the Business; (iii) to borrow
or raise money necessary for the acquisition, ownership, operation,
management and maintenance of the Business; (iv) to use any
contributions from the Members for such purposes; (v) to execute any
documents required in connection with the foregoing; (vi) to do any and
all acts and things which may be necessary, appropriate, proper,
advisable, incidental or convenient to or for the furtherance of the
Business as contemplated by this Agreement; and (vii) to take any other
action permissible under the Act in connection with the Business;
(b) The Company may enter into, deliver and perform all
contracts, agreements and other undertakings and engage in all
activities and transactions as may be necessary or appropriate to carry
out the foregoing purposes. Without limiting the foregoing, the Company
may:
(i) acquire, sell, lease, exchange, transfer, assign,
encumber, pledge or mortgage assets of the Business or
otherwise exercise all rights, powers, privileges and other
incidents of ownership or possession with respect to such
assets;
(ii) borrow or raise money and secure the payment of
any obligations of the Company by mortgage upon, or pledge or
hypothecation of, all or any part of the assets of the
Company;
(iii) engage personnel, whether part-time or
full-time, to do such acts as are necessary or advisable in
connection with the maintenance, operation and administration
of the Company and its investments; and
(iv) engage attorneys, independent accountants,
investment bankers, consultants or such other Persons as are
necessary or advisable.
1.7 Term. The term of the Company shall commence on the date that the
Certificate is executed and filed in the Office of the Secretary of State of the
State of Delaware pursuant to Section 18-201 of the Act. The duration of the
Company shall be perpetual, unless earlier dissolved as provided in Article 12,
or by applicable law.
1.8 Qualification in Other Jurisdictions. The Members acting through
the Members Committee shall cause the Company to be qualified, formed, or
registered under assumed or fictitious name statutes or similar laws in any
jurisdiction in which the Company owns property or engages in activities if such
qualification, formation or registration is necessary to permit the Company
lawfully to own property and engage in the Company's Business. The Members shall
execute, file and publish all such certificates, notices, statements or other
instruments necessary to permit the Company to engage in the Company's Business
as a limited liability company in all jurisdictions where the Company elects to
engage in or do Business.
1.9 Definitions. For purposes of this Agreement the following terms
have the following meanings unless indicated otherwise, all Article and Section
references are to Articles and Sections in this Agreement, and all Schedule
references are to Schedules to this Agreement:
"Acceptance" shall mean an unconditional written acceptance by a Member
of any Offer made pursuant to Section 7.1.
"Act" means Title 6 Chapter 18 of the Delaware Code (the Delaware
Limited Liability Company Act), as from time to time in effect in the State of
Delaware, or any corresponding provision or provisions of any succeeding or
successor law of such State; provided, however, that in the event that any
amendment to the Act, or any succeeding or successor law, is applicable to the
Company only if the Company has elected to be governed by the Act as so amended
or by such succeeding or successor law, as the case may be, the term "Act" shall
refer to the Act as so amended or to such succeeding or successor law only after
the appropriate election by the Company, if made, has become effective.
"Additional Member" means any additional Person admitted as a Member to
the Company pursuant to Article 11.
"Adjusted Capital Contributions" means, for each Member, the cumulative
amount of such Member's capital contributions to the Company which for purposes
of this definition shall be equal to the sum of (i) the amount of cash and the
Fair Market Value as of the date of contribution of any other property
contributed to the capital of the Company, plus (ii) the cumulative amount of
Adjusted Revaluation Gain, and less (iii) the cumulative amount of Adjusted
Revaluation Loss.
"Adjusted Revaluation Gain" or "Adjusted Revaluation Loss" means,
respectively, the Revaluation Gain or Revaluation Loss, as the case may be, with
respect to an asset being revalued which would have arisen had the basis used in
computing Revaluation Gain or Revaluation Loss been equal to the Capital Account
book basis of such asset immediately following the later of its contribution or
acquisition or any immediately preceding revaluation.
"Affiliate" means a Person that directly, or indirectly through one or
more intermediaries, controls, is controlled by or is under common control with
the Person specified. For purposes of this definition, the term "control"
(including the terms "controlling," "controlled by" and "under common control
with") of a Person means the possession, direct or indirect, of the power to (i)
vote in excess of 50% of the Voting Stock of such Person, or (ii) direct or
cause the direction of the management and policies of such Person, whether by
contract or otherwise. Anything hereinabove to the contrary notwithstanding,
under no circumstances shall the Company be deemed to be an Affiliate of ▇▇▇▇▇▇,
Harvest States or any of their respective Affiliates.
"Affiliate Transferee" means, with respect to a Member, a Wholly Owned
Affiliate of such Member to which an ownership interest of all or any part of
its Membership Interest has been transferred in accordance with Article 11
hereof.
"Agent" means any officer, director, Committee Member, employee,
partner, shareholder or agent of any Person.
"Agreement" means this Limited Liability Company Agreement, as it may
be amended, supplemented or restated from time to time.
"Appraiser" means any of the First Appraiser, the Second Appraiser and
the Third Appraiser as defined in Section 8.9 of this Agreement.
"Appraiser's Certificate" means a certificate prepared by an Appraiser,
executed on behalf of an Appraiser by a duly authorized officer thereof, and
setting forth such Appraiser's opinion as to the Fair Market Value of an asset.
"Asset Member" shall have the meaning set forth in Section 8.9(a) of
this Agreement.
"Asset Value" with respect to any Company asset means:
(a) The Fair Market Value when contributed of such asset
contributed to the Company by any Member;
(b) The Fair Market Value on the date of distribution of such
asset distributed by the Company to any Member as consideration for its
Membership Interest;
(c) The Fair Market Value of such asset upon a revaluation
pursuant to Section 8.7 of this Agreement; or
(d) The Basis of the asset in all other circumstances.
"Assignee" means the Person to whom a transfer of a Membership Interest
is made; an Assignee is not a Substituted Member unless and until the Assignee
complies with Section 11.5(b) of this Agreement.
"Basis" with respect to an asset means the adjusted basis from time to
time of such asset for United States federal income taxes purposes.
"Budget" means a one-year revenue, expense and capital expenditure
budget for the Company, as it may be amended from time to time in accordance
with the terms of this Agreement. Each such annual Budget shall include, in
respect of the Company for the next fiscal year, an income statement, balance
sheet and capital budget (with line item detail showing revenues and expenses
projected for the Business) prepared on an accrual basis for the Company for the
forthcoming fiscal year; a cash flow statement which shall show in reasonable
detail the receipts and disbursements (including without limitation, the
anticipated distributions) projected for the Company for the forthcoming fiscal
year and the amount of any corresponding cash deficiency or surplus, and the
amount and due dates of all required capital contributions, if any; and any
information reasonably available which could assist the Members in evaluating
such Budgets. Each such Budget shall be prepared on a basis consistent with the
Company's financial statements and the Business Plan approved by the Members
Committee.
"Business" shall have the meaning set forth in Section 1.5.
"Business Plan" means a rolling [three]-year business plan for the
Company, as it may be amended from time to time in accordance with the terms of
this Agreement, which shall include (i) an annual operating budget for each year
contemplated in the Business Plan; (ii) a [two]-year financial plan (including
financial view and financial commitment, such as capital contributions) for the
Company; and (iii) a detailed description of the key underlying assumptions and
key strategies. The Business Plan shall also include, for each year thereof, the
following details: information on the objectives and funding requirements
(including any proposed borrowings); methods and sources of financing,
including, with respect to compensation plans, monthly projected profit and loss
statements, monthly balance sheets, monthly projected cash flow statements,
capital expenditure budgets, departmental budgets, projected detailed personnel
requirements, annual key performance milestones for the business and any
proposed capital improvements or expansions; and detailed management plans.
"Buy-Sell Procedure" shall have the meaning set forth in Section 3.6(c)
of this Agreement.
"Capital Account" means the capital account maintained by the Company
for each Member as described in Section 8.1 of this Agreement.
"Certificate" means the certificate of formation filed with the
Secretary of State of the State of Delaware pursuant to the Act to form the
Company as originally executed and amended, modified or restated from time to
time.
"Closing" shall have the meaning set forth in Section 7.1(e) of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the limited liability company formed pursuant to this
Agreement and the Certificate.
"Confidential Information" means all documents and information
(including, without limitation, confidential and proprietary information with
respect to customers, sales, marketing, production, costs and the design and
development of new products or services) of each of the Company, the Members and
their respective Affiliates, except to the extent that such information can be
shown to have been (a) generally available to the public other than as a result
of a breach of the provisions of Section 2.4 of this Agreement; (b) already in
the possession of the receiving Person or its Agents without restriction and
prior to any disclosure in connection with the Company or pursuant to any of the
terms of this Agreement; (c) lawfully disclosed to the receiving Person or its
Agents by a third party who is free lawfully to disclose the same; or (d)
independently developed by the receiving Person without use of any Confidential
Information obtained in connection with the transactions leading up to and
contemplated by this Agreement and the operation of the Company or its
businesses.
"CPR" shall mean the CPR Institute for Dispute Resolution (formerly,
the Center for Public Resources).
"CPR Rules" shall mean the Rules for Non-Administered Arbitration of
International Disputes promulgated by CPR.
"Default Amount" shall have the meaning set forth in Section 8.3(b) of
this Agreement.
"Default Fee" shall have the meaning set forth in Section 8.3(b) of
this Agreement.
"Defaulting Member" shall have the meaning set forth in Section 8.3(b)
of this Agreement.
"Depreciation" for any fiscal year or other period means the cost
recovery or amortization deduction with respect to an asset for such year or
other period as determined for federal income tax purposes, provided that if the
Asset Value of such asset differs from its Basis at the beginning of such year
or other period, depreciation shall be determined by applying tax recovery
periods and methods to the Asset Value of the asset as provided in Income Tax
Regulation Section 1.704-l(b)(2)(iv)(g)(3).
"Dispute" shall have the meaning set forth in Section 6.1.
"Distribution Agreement" means the Master Distribution Agreement
between the Company and Mitsui & Co., Ltd., attached as Exhibit L to the Joint
Venture Agreement.
"Effective Date" means the date upon which the acquisition by the
Company of the Business shall have been consummated, pursuant to the Joint
Venture Agreement.
"Employment Agreement" means the employment agreement dated as of
January 1, 1996 between ▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇, assigned to and assumed by the
Company as of the Effective Date.
"Fair Market Value" means, with respect to any asset, as of the date of
determination, the cash price at which a willing seller would sell, and a
willing buyer would buy, each being apprised of all relevant facts and neither
acting under compulsion, such asset in an arm's-length negotiated transaction
with an unaffiliated third party without time constraints, all as determined
under Section 8.9 of this Agreement.
"GAAP" means generally accepted accounting principles, consistently
applied with prior periods.
"Harvest States Substituted Member" means any Substituted Member which
has acquired its Membership Interest from Harvest States or whose Membership
Interest was originally owned by Harvest States.
"Holsum" shall have the meaning set forth in Section 1.5 of this
Agreement.
"Income Tax Regulations" means the United States federal income tax
regulations, including temporary (but not proposed) regulations, promulgated
under the Code.
"Initial Offer" shall have the meaning set forth in Section 7.1(a) of
this Agreement.
"Initiating Member" shall have the meaning set forth in Section 7.1(a)
of this Agreement.
"Joint Venture Agreement" means the Joint Venture Agreement to be
entered into among ▇▇▇▇▇▇, Harvest States and the Company, pursuant to which
▇▇▇▇▇▇ and Harvest States shall, not later than September 30, 1996, transfer the
Business to the Company in consideration of their respective Membership
Interests in the Company.
"Lien" means, as to any Membership Interest, liens, encumbrances,
security interests and other rights, interests or claims of others therein
(including, without limitation, warrants, options, rights of first refusal,
rights of first offer, co-sale and similar rights).
"Liquidator" has the meaning set forth in Section 12.5.
"Member" means each of ▇▇▇▇▇▇ and Harvest States, and includes any
Person admitted as an Additional Member or Substituted Member of the Company
pursuant to Article 11 of this Agreement. ▇▇▇▇▇▇ and Harvest States shall be
admitted as Members of the Company on the date hereof. A Person who is not
admitted on the date hereof as a Member of the Company shall be deemed admitted
as a Member upon satisfaction of the requirements of Article 11.
"Membership Interest" means the interest and ownership of a Member in
the Company, including the Capital Account of such Member, its participation in
the profits and losses of the Company in accordance with its Percentage
Interest, and all of its other rights and obligations under this Agreement and
the Act, relating to the Company.
"Net Operating Available Cash" means at the time of determination, (a)
all cash and cash equivalents on hand in the Company, less (b) the Forecast Cash
Requirements, if any, of the Company, as determined by the Members [in a manner
consistent with an Approved Budget.] For purposes of this definition, "Forecast
Cash Requirements" means, for the twelve-month period following the date of
determination, the excess, if any, of (a) forecast capital expenditures, capital
contributions to other entities and other investments, acquisitions, cash income
tax payments and debt service (including principal and interest) requirements
and other non-cash credits to income, plus forecast cash reserves for future
operations or other requirements, over (b) forecast net income of the Company,
plus the sum of forecast depreciation, amortization, interest expenses, income
tax expenses and other non-cash charges to income, in each case to the extent
deducted in determining such net income, plus or minus forecast changes in
working capital, plus the forecast cash proceeds of dispositions of assets (net
of expenses), plus an amount equal to the forecast net proceeds or debt
financings.
"Non-Defaulting Members" shall have the meaning set forth in Section
8.3(b) of this Agreement.
"Offer" means the Initial Offer and any subsequent offer made pursuant
to Section 7.1 of this Agreement to the Initiating Member or the Other Member,
as the case may be, each of which offers shall comply with the following
requirements:
(a) Such offer shall be in writing, duly authorized, executed
and delivered, irrevocable and remain available for acceptance for a
period following receipt thereof by the Member to whom it was delivered
for a period at least equal to the lesser of (x) 60 days, or (y) the
period ending on the date, if any, upon which the offeree delivers a
subsequent Offer pursuant to Section 7.1 of this Agreement;
(b) Such offer shall be for cash only;
(c) Such offer shall be to purchase all, but not less than
all, of the Membership Interest held by the Member to whom it is
addressed;
(d) Such offer shall stipulate the Price of the Membership
Interest, the Total Value from which such Price was derived, and the
Percentage Interest of the Member to whom the offer is addressed.
"Offeree Members" means Members other than the Selling Member who must
be offered a right of first refusal to purchase the Selling Member's Membership
Interest all as provided in Section 11.4 of this Agreement.
"Other Member" shall have the meaning set forth in Section 7.1(a) of
this Agreement.
"Parent Entity" means, as to any Person, an Affiliate of which such
Person is a Wholly Owned Subsidiary.
"Percentage Interest" means, for each Member, the Percentage Interest
of the Member as set forth on Schedule I, as such Percentage Interests may be
modified pursuant to Section 8.8.
"Person" means any individual, corporation, partnership, limited
liability company, firm, joint venture, association, joint-stock company, trust,
estate, unincorporated organization, governmental or regulatory body or other
entity.
"Price" means a dollar amount determined by multiplying the Percentage
Interest of the Member to whom an Offer is addressed by the Total Value
stipulated in such Offer, provided that the Price stipulated in any Initial
Offer arising by reason of initiating the Buy-Sell Procedures under Section
3.6(c) of this Agreement shall be not less than the balance of the Capital
Account of the offeree, as reflected in the most recently available financial
statements of the Company.
"Prime Rate" means the per annum rate publicly announced by Union Bank
of California from time to time at its head office in San Francisco, California
as its "Reference Rate".
"Profits and Losses" for any fiscal year or other period means an
amount equal to the Company's taxable income for United States federal income
tax purposes for such year or period determined in accordance with Code Section
703(a) and the Income Tax Regulations thereunder with the following adjustments:
(a) All items of income, gain, loss, and deduction of the
Company required to be stated separately shall be included in taxable
income or loss;
(b) Income of the Company exempt from United States federal
income tax shall be treated as taxable income;
(c) Expenditures of the Company described in Code Section
705(a)(2)(B) or treated as such expenditures under Income Tax
Regulation Section 1.704-l(b)(2)(iv)(i) shall be subtracted from
taxable income;
(d) Revaluation Gain and Revaluation Loss shall be included;
(e) Gain or loss resulting from the disposition of property
from which gain or loss is recognized for United States federal income
tax purposes shall be determined with reference to the Asset Value of
such property; and
(f) Depreciation shall be determined based upon Asset Value
instead of as determined for United States federal income tax purposes.
"Public Offering" means an offering of securities of the Company
registered with the Securities and Exchange Commission with a total public
offering price of at least $5,000,000.
"Revaluation Gain" means the amount of gain which would have been
realized had there been a taxable disposition of any Company asset being
revalued under Section 8.7 of this Agreement for an amount of cash equal to such
asset's then Fair Market Value, determined in accordance with the provisions of
Section 8.9 of this Agreement.
"Revaluation Loss" means the amount of loss which would have been
realized had there been a taxable disposition of any Company asset being
revalued under Section 8.7 of this Agreement for an amount of cash equal to such
asset's then Fair Market Value, determined in accordance with the provisions of
Section 8.9 of this Agreement.
"Selling Member" means the Member proposing to transfer all or a part
of its Membership Interest, which transfer is subject to rights of first refusal
in the other Members as provided in Section 11.4 of this Agreement.
"Substituted Member" shall have the meaning set forth in Section 11.5
of this Agreement.
"Supply Agreement" means the Long Term Supply Agreement between the
Company and Harvest States, attached as Exhibit K to the Joint Venture
Agreement.
"Tax Matters Partner" means the Tax Matters Partner of the Company as
referred to in Section 10.2 of this Agreement.
"Taxes" means all taxes, charges, fees, levies or other assessments
imposed by any taxing authority, including, but not limited to, income, gross
receipts, excise, property, sales, use, transfer, payroll, license, ad valorem,
value added, withholding, social security, national insurance (or other similar
contributions or payments), franchise, estimated, severance and stamp taxes
(including any interest, fines, penalties or additions attributable to, or
imposed on or with respect to, any such taxes, charges, fees, levies or other
assessments) and "Tax Return" means any return, report, information return or
other document (including any related or supporting information) with respect to
Taxes.
"Total Value" means a dollar amount stipulated in the Offer by the
Offeror, in its sole discretion, to be the value of 100% of the Percentage
Interests of all Members, provided that in all Offers made subsequent to the
Initial Offer, the Total Value stipulated therein shall be at least 105% of the
Total Value stipulated in the most recent Offer received by the offeror from the
other Member with respect to the purchase of the Offeror's Membership Interest.
"Transfer" means as a verb to transfer, sell, assign, exchange, pledge,
give, hypothecate or otherwise convey or encumber all or any portion of a
Membership Interest, and, as a noun, any transfer, sale, assignment, exchange,
change, gift, hypothecation or other conveyance or encumbrance of all or any
portion of a Membership Interest.
"Ventura Foods" shall have the meaning set forth in Section 1.5 of this
Agreement.
"▇▇▇▇▇▇ Net Deferred Income Tax Liability" shall have the meaning as
defined in Article 1 of the Joint Venture Agreement.
"▇▇▇▇▇▇ Substituted Member" means any Substituted Member which has
acquired its Membership Interest from ▇▇▇▇▇▇ or whose Membership Interest was
originally owned by ▇▇▇▇▇▇.
"Wholly Owned Affiliate" means, as to any Person, a Parent Entity or
any Affiliate that is a Wholly Owned Subsidiary of such Parent Entity.
"Wholly Owned Subsidiary" means, as to any Person, a corporation or
other entity all of the capital stock or other equity interests of which
corporation or entity is at the time owned, directly or indirectly, through one
or more intermediaries, or both, by such Person.
ARTICLE 2
MEMBERS
2.1 Members. Each of the parties to this Agreement, and each Person
admitted as a Member of the Company pursuant to the Act and Article 11 of this
Agreement, shall be Members of the Company until they cease to be Members in
accordance with the provisions of the Act, the Certificate, or this Agreement.
The names of the Members shall be set forth in Schedule I hereto, as such
Schedule I may be amended from time to time.
2.2 Access to Books of Account. Each Member shall have the right at all
reasonable times during usual business hours to audit, examine, and make copies
or extracts of or from the complete books of account of the Company, including
but not limited to the books and records maintained in accordance with Section
10.4 and all other books and records of the Company. Such right may be exercised
through any Agent of such Member designated by it or by independent certified
public accountants or counsel designated by such Member. Each Member shall bear
all expenses incurred in any examination made for such Member's account.
2.3 Confidential Informaiton.
(a) The Company and each Member shall not use or disclose to
others any Confidential Information received from the Company or any
other Member for any purpose other than provided for in this Agreement,
and shall take or cause to be taken such precautions as are reasonably
necessary to prevent disclosure or use of Confidential Information to
others, except to or by (i) any lender to the Company, or (ii) any
Member or any of their respective Affiliates or Agents on a "need to
know" basis in connection with the transactions leading up to and
contemplated by this Agreement, including with respect to any
agreements or contracts between the Member and the Company, and the
operation of the Company and its Business, and such Member disclosing
Confidential Information pursuant to this Section 2.3 shall use, and
shall cause its Affiliates and Agents to use, such Confidential
Information only for the benefit of the Company in conducting the
Business or for any other specific purposes for which it was disclosed
to such party; provided that the disclosure of financial statements of,
or other information relating to, the Company shall not be deemed to be
the disclosure of Confidential Information (i) to the extent that any
Member is required by law or GAAP to disclose such financial statements
or other information or (ii) to the extent that in order to sustain a
position taken for tax purposes, any Member deems it necessary and
appropriate to disclose such financial statements or other information.
All Confidential Information disclosed in connection with the Company
or pursuant to this Agreement shall remain the property of the Person
whose property it was prior to such disclosure.
(b) No Confidential Information regarding the plans or
operations of any Member or any Affiliate thereof received or acquired
by or disclosed to any other Member or Affiliate thereof in the course
of the conduct of the Business, or otherwise as a result of the
existence of the Company, may be used by such other Member or Affiliate
thereof for any purpose other than for the benefit of the Company in
conducting the Business.
(c) In the event that a Member or anyone to whom a Member
transmits any Confidential Information becomes legally compelled (by
oral questions, interrogatories, requests for information or documents,
subpoena, investigative demand or similar process) to disclose any of
the Confidential Information, such Member will provide the other
Members and the Company with prompt written notice prior to disclosure
so that the other Members and the Company may seek a protective order
or other appropriate remedy and/or waive compliance with the provisions
of this Agreement. In the event that such protective order or other
remedy is not obtained, or that the Company and the other Members waive
compliance with the provisions of this Section 2.3, the Member or
Person who is compelled to disclose such Confidential Information will
take reasonable measures to minimize any required disclosure.
(d) Each Member who ceases to be such will, and will cause its
Affiliates, Representatives and Agents to, maintain the confidentiality
required by this Section 2.3 and to destroy or return upon request, all
documents and other materials, and all copies thereof, obtained by such
Member or on its behalf from either the Company or the other Members or
any of their Affiliates in connection with the transactions leading up
to and contemplated by this Agreement and the operation of the Company
and its Business, that are subject to such confidentiality obligations.
The obligations under this Section 2.3 shall survive the dissolution of
the Company for a period of five years.
(e) To the fullest extent permitted by law, if a Member or any
of its Affiliates or Agents breaches, or threatens to commit a breach
of, this Section 2.3, the other Members and the Company shall have the
right and remedy to have this Section 2.3 specifically enforced by and
pursuant to the arbitration provisions in Section 6.1, and to obtain
injunctive relief as authorized by Section 6.1, it being acknowledged
and agreed that money damages will not provide an adequate remedy to
such other Members or the Company. Nothing in this Section 2.3 shall be
construed to limit the right of any Member or the Company to collect
money damages in the event of breach of this Section 2.3.
2.4 Duty of Members to Cooperate. Each Member will, to the extent
permitted by applicable law and consistent with this Agreement, furnish such
information, execute such applications and similar documents as are required by
governmental authorities, and take such other action reasonably requested by the
other Members or the Members Committee and as may be necessary or reasonably
desirable in connection with the Business of the Company.
ARTICLE 3
MANAGEMENT
3.1 Management. The Business of the Company shall be managed by the
Members in accordance with this Article 3. Except as provided in Section 3.7,
all decisions concerning the management of the Company's Business shall be made
by the Members acting through the Members Committee and the officers of Company,
in each case as further described in Sections 3.2 and 3.3. Any Person not a
party to this Agreement which deals with the Company shall be entitled to rely
conclusively upon the power and authority of the Members Committee. Except upon
the express authorization or designation by the Members or the Members Committee
in accordance with this Agreement, no Member shall have any unilateral right or
authority to take any action on behalf of the Company with respect to third
parties.
3.2 Members Committee.
(a) The Members Committee of the Company shall be composed of
ten individuals, five of whom shall be appointed by ▇▇▇▇▇▇ and five of
whom shall be appointed by Harvest States (collectively the "Committee
Members" and individually a "Committee Member"). Each Committee Member
shall be an officer, director or employee of the appointing Member and
shall not be an officer or employee of the Company. The foregoing
restriction on qualifications of Committee Members shall be subject to
waiver and exceptions if approved by all Members. The Committee Members
shall serve without compensation.
(b) Each Member's initial Committee Members shall be as set
forth in Schedule II. Effective upon the giving of written notice
thereof to the other Members, any Member may, at any time, in its sole
discretion and with or without cause, replace any or all of its
appointed Committee Members with other individuals and may designate
one or more alternates for any or all of its Committee Members;
provided that such replacement Committee Members or alternates meet the
requirements provided in Section 3.2(a) above. Each Committee Member
shall serve on the Members Committee until his or her successor is
appointed, or until his or her earlier death, resignation or removal.
In the event that a Committee Member ceases to serve for any reason,
the Member that appointed such Committee Member shall promptly
designate a successor. Effective upon a Member ceasing to be a member
of the Company, the Committee Members representing such Member on the
Members Committee shall cease to be Committee Members.
3.3 Powers of the Members Committee.
(a) Without prejudice to the general powers of the Members to
manage the Business of the Company subject to Section 3.7, but subject
to any limitations contained in the Act, it is hereby expressly
declared that the Members delegate to the Members Committee the full
and complete authority, power and discretion to manage and control the
Business of the Company including the following powers, authority
duties:
(i) to cause the Company to enter into (a) the Joint
Venture Agreement and all other documents, instruments and
agreements in connection with the transfer of the Business of
the Company; (b) all credit agreements with the lenders and
other agreements or instruments relating thereto, with respect
to any loans or other financing obtained by the Company; (c)
the Supply Agreement with Harvest States; (d) the Distribution
Agreement with Mitsui & Co., Ltd.; and (e) the Employment
Agreement;
(ii) to change the scope of the Business of the
Company;
(iii) to adopt the annual Budgets and Business Plans
for the Company and the amendments thereto;
(iv) to approve the admission of an Additional Member
of the Company;
(v) to approve a merger or consolidation of the
Company with or into any other Person;
(vi) to approve the sale of all or substantially all
of the Company's assets;
(vii) to establish or dissolve any subsidiary of the
Company;
(viii) to require any additional capital
contributions and determine the form of such contributions;
(ix) to form or dissolve a joint venture, partnership
or any other similar arrangement between the Company and any
other Person;
(x) to appoint, replace or discharge the Chief
Executive Officer ("CEO") of the Company;
(xi) to appoint, replace or discharge the Chief
Operating Officer ("COO") (if any) and one or more of the
Executive Vice Presidents (other than the two Executive Vice
Presidents appointed by ▇▇▇▇▇▇ and Harvest States as set forth
in Section 4.4 of this Agreement) the Senior Vice Presidents
or the Vice Presidents, the Secretary, the Treasurer and the
other officers of the Company, in each case after receiving
the recommendation of the CEO of the Company;
(xii) to approve any acquisitions or disposition of
shares or bonds of any other equity or other interest in any
other Person or business enterprise;
(xiii) to authorize any acquisition of assets of any
other Person, or any disposition of assets of the Company,
except in the ordinary course of business;
(xiv) to borrow money or incur indebtedness in the
name of the Company and in connection therewith issue notes or
other debt securities of the Company and secure any such
indebtedness by mortgage, pledge or other lien excluding all
or any portion of the Company's assets;
(xv) to appoint or change the independent auditor of
the Company;
(xvi) except as otherwise provided in this Agreement,
to make any distribution to the Members of the Company;
(xvii) to bring and defend actions in law or at
equity and compromise, submit to arbitration, or settle all
claims in favor of or against the Company;
(xviii) to settle or compromise any claims against
the Company;
(xix) to make any accounting and income tax
elections, determinations or other decisions;
(xx) to appoint one or more subcommittees of the
Members Committee, such subcommittees to have such power and
authority as shall be delegated to them by the Members
Committee; and
(xxi) to establish, amend or abolish internal rules
of the Company with respect to the authority of the CEO and
other designated officers and to create, reorganize or abolish
departments and offices of the Company.
(b) The powers, authority and duties delegated to the Members
Committee in Section 3.3(a) above may be delegated by the Members
Committee to any sub-committee established by the Members Committee or
to any one or more officers of the Company, provided that any such
delegation with respect to the items enumerated in Section 3.3(a)(i)
through Section 3.3(a)(viii) shall require the unanimous affirmative
vote of all Committee Members then serving. Each Member, by execution
of this Agreement, agrees to, consents to, and acknowledges the
delegation of the powers, authority and duties of the Members to the
Committee Members in accordance with this Agreement, and to the actions
and decisions of the Committee Members within the scope of their
authority as provided herein.
3.4 Members Committee Meetings.
(a) The Members Committee shall hold regular meetings (at
least quarterly) at such time and place as shall be determined by the
Members Committee (or the Presiding Chairman of the Members Committee).
Special meetings of the Members Committee may be called at any time by
any Committee Member by delivering a notice of meeting in accordance
with Section 3.4(g) hereof. The CEO and other officers of the Company
may be invited by any Committee Member to attend and express their
respective opinions at meetings of the Members Committee.
(b) There shall be two Chairmen of the Members' Committee, one
of whom shall be appointed by ▇▇▇▇▇▇ from among its appointed Committee
Members and the other of whom shall be appointed by Harvest States from
among its appointed Committee Members. Each Chairman so appointed shall
serve as such at the pleasure of the Member appointing such Chairman
and until his respective successor is appointed by the Member who
appointed him. The Chairman appointed by ▇▇▇▇▇▇ shall serve as the
Presiding Chairman until December 31, 1997. The Chairman appointed by
Harvest States shall serve as the Presiding Chairman during calendar
year 1998, the next Chairman appointed by ▇▇▇▇▇▇ shall serve as the
Presiding Chairman during calendar year 1999, and so on, with the
Chairman appointed by each of ▇▇▇▇▇▇ and Harvest States alternating as
the Presiding Chairman, calendar year by calendar year. If the
Presiding Chairman shall be absent from any meeting of the Members
Committee, the other Chairman shall act as the Presiding Chairman in
his place. The Presiding Chairman shall establish the agendas for, and
regulate the proceedings of, meetings of the Members Committee, but
must include on such agendas matters requested by any Committee Member
in writing received at least two business days in advance of any
meeting.
(c) Committee Members may participate in a meeting of the
Members Committee by conference telephone or similar communications
equipment by means of which all Persons participating in the meeting
can hear each other, and such participation shall constitute presence
in person of such Committee Members at such meeting.
(d) Any action required or permitted to be taken at any
meeting of the Members Committee may be taken without a meeting upon
the unanimous written consent of all of the Committee Members.
(e) The Members Committee may appoint, from time to time, a
person to act as Secretary of one or more meetings of the Members
Committee ("Committee Secretary"). The Committee Secretary may or may
not be the same person as the Secretary of the Company described in
Section 4.4. The Committee Secretary shall prepare complete written
minutes of the meetings of the Members Committee and shall cause same
to be kept with the books and records of the Company. A duplicate copy
of such written minutes shall be provided to each Committee Member.
(f) A Committee Member shall have the right by written notice
to the Presiding Chairman to designate an alternate Person to attend
meetings of the Members Committee, instead and in place of such
Committee Member, and to exercise all of the functions of such
Committee Member. Any such alternate shall be deemed to be a Committee
Member for all purposes hereunder until such designation is revoked. A
Committee Member shall also have the right to give a written proxy to
any other Committee Member for a specific meeting to exercise all
voting rights of the Committee Member at such meeting.
(g) Notice of each regular meeting and each special meeting of
the Members Committee shall be given in writing to each Committee
Member at least fourteen (14) business days before such meeting.
Notices of special meetings shall contain a description, in reasonable
detail, of the items of business to be conducted at such meeting and no
business other than those items (unless expressly and unanimously
agreed to by all of the Committee Members) may be conducted at such
special meeting. The notice provisions of this Section 3.4(g) shall be
waived upon either the signing of a written waiver thereof or
attendance at a meeting by all of the Committee Members appointed by
each Member.
3.5 Voting. Except as provided in the next sentence, any action that
may be taken by the Members Committee, including without limitation in exercise
of the powers set forth in Section 3.3, shall require the affirmative vote of a
majority of Committee Members present (in person or by proxy) at the meeting;
provided that in the event that all Committee Members representing any Member
shall abstain from the vote on any matter (because of a conflict of interest or
for any other reason), the outcome of such vote shall be determined by the
affirmative vote of Committee Members representing the other Member entitled to
vote on such matter, and such vote shall constitute the act of the Members
Committee with respect to such matter. Notwithstanding the foregoing, any action
taken by the Members Committee with respect to the items enumerated in Section
3.3(a)(i) through Section 3.3(a)(viii) shall require the unanimous affirmative
vote of all Committee Members; provided that as long as there is any vacancy on
the Members Committee the affirmative vote of all of the Committee Members then
serving shall be sufficient. A quorum of any meeting of the Members Committee
shall require the presence (in person or by proxy) of at least six (6) Committee
Members. Each Committee Member shall be entitled to one vote regarding all
matters coming before the Members Committee and each Committee Member may vote
in the best interests of the Member who appointed him or her, and shall have no
duty to consider or to vote with regard to the best interests of the Company or
any other Member.
3.6 Deadlock. Deadlock Resolution.
(a) If the Members Committee fails to adopt, by the requisite
affirmative vote, the annual Budget and Business Plan for the Company
prior to the first day of any fiscal year of the Company, the Company
shall be operated in accordance with the annual Budget and Business
Plan for the next previous fiscal year of the Company until the Members
Committee adopts the annual Budget and Business Plan for the relevant
fiscal year.
(b) If the Members Committee fails to resolve, by the
requisite affirmative vote, any matter submitted thereto (other than
the annual Budget and Business Plan), within ninety (90) days after
such matter is first referred to the Members Committee, then each
Member shall appoint a delegate in order to resolve such disagreement.
Such delegates shall then meet as necessary to resolve such
disagreement and attempt to resolve such disagreement by mutual
agreement. If such delegates fail to resolve the disagreement within
ninety (90) days of their appointment, no action with respect to such
matter will be taken by the Company.
(c) If either ▇▇▇▇▇▇ or Harvest States shall give the other
written notice of its proposal that a Public Offering and/or the
incorporation of the Company take place, as contemplated by Section
11.2(c), each of them shall enter into good faith discussions with the
other concerning the proposed terms and conditions and the business,
legal and tax consequences to the Company and each other of the
proposal. If, within ninety (90) days after the giving of such notice
both ▇▇▇▇▇▇ and Harvest States shall have failed to consent to such
proposal, or some modification thereof, as contemplated by Paragraph
11.2(c), then, either ▇▇▇▇▇▇ or Harvest States (but no other Member)
shall have the right to initiate the buy-sell procedure described in
Article 7 of this Agreement (the "Buy-Sell Procedure"). If the Buy-Sell
Procedure is initiated pursuant to this Section 3.6(c), the Initial
Offer shall be not less than the balance of the capital account of the
Offeree Member, as set forth in Article 7.
3.7 Members. Notwithstanding anything contained herein to the contrary,
the Members reserve the right, power and authority by unanimous written consent
to take the following actions:
(a) to amend the Certificate;
(b) to amend the Agreement;
(c) to approve the dissolution or liquidation of the Company
other than as required by the Act;
(d) to direct the Members Committee to take any action or
make, modify or amend any decision.
ARTICLE 4
OFFICERS AND EMPLOYEES
4.1 Officers. The officers of this Company shall include a chief
executive officer ("CEO"), two Executive Vice Presidents, a Secretary, a
Treasurer and such other officers, including a chief operating officer ("COO"),
as the CEO shall recommend for the operation and management of this Company. The
powers, rights, duties and responsibilities of the officers shall be as provided
in this Agreement or determined by the Members Committee. The CEO shall
recommend to the Members Committee the appointment, discharge or replacement of
the COO (if any), the Secretary, the Treasurer and other officers (excluding the
Executive Vice Presidents appointed pursuant to section 4.4 below) of the
Company.
4.2 Chief Executive Officer. The CEO shall have the responsibility for
the general active day-to-day management of the business of the Company. The CEO
shall see that all orders and resolutions of the Members Committee are carried
into effect. Except to the extent otherwise directed by the Members Committee,
the CEO shall have the general powers and duties usually vested in the office of
the Chief Executive Officer of a Delaware corporation and shall have such other
powers and perform such other duties as may from time to time be prescribed by
the Members Committee.
▇▇▇▇ ▇▇▇▇▇ shall serve as the initial CEO of the Company until his
resignation or removal and subject to the terms of the Employment Agreement.
4.3 Treasurer. The Treasurer shall be the Chief Financial Officer of
the Company and shall have the care and custody of the Company's funds and
securities and shall disburse the funds of the Company as may be ordered from
time to time by the Members Committee or the CEO. The Treasurer shall keep or
cause to be kept full and accurate accounts of receipts and disbursements in
books belonging to the Company and shall deposit all moneys and other valuable
effects and all securities of the Company in the name and to the credit of the
Company in such depositories as may be designated from time to time by the
Members Committee. Except to the extent that some other person or persons may be
specifically authorized by the Members Committee to so do, the Treasurer shall
make, execute and endorse all checks and other commercial paper on behalf of the
Company. The Treasurer shall report the financial condition of the Company when
requested to do so by the Members Committee or the CEO and shall perform such
other duties as may from time to time be prescribed by the Members Committee or
the CEO.
4.4 Secretary. The Secretary shall keep or cause to be kept at the
principal executive office of the Company with the books and records of the
Company, or such other place as the CEO may order, a complete book of written
minutes of all proceedings of the Members and of the Members Committee, with the
time and place of holding, whether regular or special, and if special how
authorized, the notice thereof given, the names of those present and the number
of votes present or represented at Members' or Members Committee meetings, and
all written consents in lieu of meetings. The Secretary or an assistant
secretary, or, if they are absent or unable or refuse to act, any other officer
of the Company, shall give or cause to be given notice of all the meetings of
the Members required by the Agreement or by law to be given, and he or she shall
keep the seal of the Company, if any, in safe custody and shall have such other
powers and perform such other duties as may be prescribed by the CEO or by this
Agreement or by the Members Committee.
4.5 Executive Vice Presidents. Each of ▇▇▇▇▇▇ and Harvest States shall
have the right to appoint one Executive Vice President of the Company and
replace such Executive Vice President, at any time in its sole discretion. Such
Executive Vice Presidents shall have such compensation, powers and duties as
determined by the Members Committee. No such Executive Vice President, so
appointed by ▇▇▇▇▇▇ or Harvest States may be removed or replaced except by the
Member appointing him.
ARTICLE 5
INTENTIONALLY OMITTED
ARTICLE 6
DISPUTE RESOLUTION
6.1 Dispute Resolution. The Members desire to avoid all forms of
traditional litigation, subject to the provision for preliminary injunctive
relief described in Section 6.1(d) below. Any dispute, controversy or claim of
any nature whatsoever between the Members arising out of or relating to this
Agreement or the breach, termination or invalidity of this Agreement or any
related agreements, whether in contract, tort or equity, or under any statute or
regulation arising out of or relating to such agreements, the relationship
between or among the Members or any circumstances pertaining to the creation or
termination thereof, including without limitation, claims of discrimination,
breach of fiduciary duty, bad faith, or interference with other business
opportunities and including determining in the first instance the interpretation
or scope of this dispute resolution agreement and other preliminary
jurisdictional questions (a "Dispute"), shall be resolved in accordance with
this Article 6. All other remedies to which the Members (including their
respective Affiliates) may otherwise have been entitled, whether at law or in
equity, are hereby waived to the fullest extent allowed by law. The obligations
under this Article 6 shall survive the dissolution of the Company.
The preceding provision notwithstanding, if a Dispute arises out of
third-party litigation against any Member, these procedures shall not be
mandatory, and such Member shall have the right to engage in such litigation
with the third-party claimant and with other Members concerning such Dispute.
For purposes of this exception pertaining to Disputes arising out of third-party
litigation, a third-party means a party (i) which is not an Affiliate of a
Member, (ii) has no record or beneficial financial, ownership or other
significant interest in or with a Member and (iii) in which a Member has no
record or beneficial financial, ownership or other significant interest.
(a) Informal Dispute Resolution. The Members shall initially
attempt in good faith to resolve any Dispute promptly by confidential
negotiations between representatives of the Members with authority to
settle the matter. All such negotiations shall be treated as compromise
and settlement negotiations for purposes of the relevant rules of
evidence. Any Member making a claim shall give the other Member written
notice that the Member is invoking the dispute resolution procedures of
this Article 6 with respect to a specified Dispute. Within ten (10)
days after delivery of the written notice, the receiving Members shall
submit to the other Member a written response. The notice and the
response shall include (a) a statement of each Member's position and a
summary of arguments supporting that position, and (b) the name of the
Person(s) who will represent that Member and the name of any other
Person who will accompany the representative(s) to the meeting. Within
thirty (30) days after delivery of the written notice, the
representatives of both parties shall meet at a mutually acceptable
time and place (or failing such agreement at the Company's
headquarters), or confer by telephone and thereafter as often as they
reasonably deem necessary, to attempt to resolve the Dispute.
(b) Mediation. If the Dispute has not been resolved by
negotiation within forty-five (45) days of the initial written notice,
any Member may notify the other Members that it intends to submit such
Dispute to non-binding mediation under the then current model procedure
for mediation of business disputes promulgated by CPR. In such event
the Members shall mediate the Dispute. The Members shall promptly
attempt to agree upon a reputable and experienced mediation service.
Failing agreement within five (5) days after the notice of intent to
mediate has been given by a Member, the mediator will be selected in
accordance with the previously mentioned CPR procedure. Any such
mediation process shall be conducted in Los Angeles, California and
must be completed within seventy-five (75) days of delivery of the
initial written notice unless otherwise agreed by the Members.
(c) Formal Dispute Resolution.
(i) Any Dispute which remains unresolved seventy-five
(75) days after delivery of the initial written notice shall
be promptly resolved by final and binding arbitration. Such
arbitration shall be conducted pursuant to the CPR Rules
except to the extent herein otherwise provided. The place of
arbitration shall be Los Angeles, California unless all
Members which are parties to the arbitration agree to a
different locale. There shall be a single neutral and
impartial arbitrator appointed by CPR experienced in the
subject matter of the Dispute and who has not had a material
personal or financial relationship with any participant to the
Dispute or any Affiliate of any such participant in the
preceding three years, to be selected in accordance with the
CPR Rules. The arbitration shall be conducted in the English
language, provided that a witness may testify in another
language if the party calling such witness shall provide a
competent interpreter at such party's expense. The arbitrator
shall follow the laws of the State of California (without
regard to conflict of law provisions) in resolving any
Dispute, provided that any question concerning arbitrability
shall be governed exclusively by the United States Arbitration
Act as then in force. Each Member hereby waives any right to
and the arbitrator shall not have the power to award punitive,
exemplary, double or treble damages. The award of the
arbitrator shall be final and binding, and judgment on it may
be entered in any court having jurisdiction. The Members agree
that any decision or award resulting from proceedings in
accordance with this dispute resolution provision shall have
no preclusive or other effect in any other matter between the
Members or involving a third-party.
(ii) The arbitrator may consolidate an arbitration
under this Agreement with any other arbitration between the
Members if the subject of the Dispute arises out of or relates
essentially to the same facts or transaction(s). No other
person may be included in the arbitration of a Dispute,
whether by consolidation, joinder or in any other manner,
except by written consent of the Members which are parties to
the Dispute.
(d) Injunctive Relief. The Members agree that notwithstanding
anything to the contrary contained herein, any Member may seek a
temporary restraining order or a preliminary injunction from any court
of competent jurisdiction in order to prevent immediate and irreparable
injury, loss or damage; provided such Member has commenced in good
faith an informal dispute resolution proceeding pursuant to this
Article 6. The arbitrator once appointed shall have the power to modify
or vacate such temporary restraining order or preliminary injunction or
to issue a restraining order or injunction.
(e) Confidentiality. The dispute resolution proceedings
contemplated by this Article 6 shall be as confidential and private as
permitted by law. To that end, the Members shall not disclose the
existence, content or results of any proceedings conducted in
accordance with this provision, and materials submitted in connection
with such proceedings shall not be admissible in any other proceeding,
provided, however, that this confidentiality provision shall not
prevent a petition to vacate or enforce an arbitral award, and shall
not bar disclosures required by law.
(f) Limitations Period. The statutes of limitation of the
State of California shall be applicable to the arbitration of any
Dispute hereunder just as if such arbitration were a lawsuit between
the Members, except that all applicable statutes of limitation and
defenses based upon the passage of time shall be tolled during the
pendency of any informal dispute resolution or mediation under Sections
6.1(a) and (b).
ARTICLE 7
BUY-SELL RIGHT
7.1 Buy-Sell.
(a) For purposes of this Article 7, only Harvest States or
▇▇▇▇▇▇ may be the Initiating Member or Other Member for purposes of
delivering any Offer or Acceptance contemplated below. No Additional
Member or Substituted Member shall be entitled or obligated to sell any
part of its Membership Interest nor to purchase any part of the
Membership Interest of Harvest States or ▇▇▇▇▇▇ under this Article in
the event either Harvest States or ▇▇▇▇▇▇ initiate Buy-Sell Procedures
herein.
(b) If Harvest States or ▇▇▇▇▇▇ (the "Initiating Member")
shall have the right to initiate these Buy-Sell Procedures pursuant to
Section 3.6(c) or Section 12.3 of this Agreement, such right shall be
exercisable by written notice (the "Initial Offer") to the other Member
(the "Other Member"), to offer to buy the Other Member's Membership
Interest in the Company at a Price and upon the other terms specified
in the Initial Offer, including the Total Value from which such Price
was derived.
(c) Upon receipt of an Initial Offer pursuant to Section
7.1(a) or any subsequent Offer pursuant to Section 7.1(c), the Other
Member shall be obligated, within 60 days after such receipt, to do one
of the following:
(i) Deliver to the Initiating Member its Acceptance
of such Offer; or
(ii) Deliver to the Initiating Member an Offer to
purchase the Membership Interest in the Company held by the
Initiating Member at a Price, based upon a Total Value at
least equal to 105% of the Total Value specified in the
Initial Offer to the Other Member.
(d) Upon receipt of any Offer pursuant to Section 7.1(b), the
Initiating Member shall be obligated, within 60 days after such
receipt, to do one of the following:
(i) Deliver to the Other Member its Acceptance of
such Offer; or
(ii) Deliver to the Other Member an Offer to purchase
the Membership Interest in the Company held by the Other
Member at a Price based upon a Total Value at least equal to
105% of the Total Value specified in the most recent Offer to
the Initiating Member.
(e) The process set forth in Sections 7.1(b) and 7.1(c) above
shall continue, with each Member receiving an Offer to purchase its
Membership Interest in the Company being obligated, within 60 days of
receipt of such Offer, to accept same or offer to purchase the
Membership Interest of the other Member at a Price based upon a Total
Value at least equal to 105% of the Total Value specified in the most
recent Offer received from such other Member, until a Member accepts an
Offer. In the event a Member receiving an Offer fails, within 60 days
after receipt thereof, either to deliver its Acceptance of such Offer
or deliver a new Offer, as provided above, to purchase the Membership
Interest of the other Member, then such Member shall be conclusively
deemed to have accepted the Offer to purchase its Membership Interest
and to have delivered its Acceptance of such Offer to the other Member.
(f) Upon the delivery by a Member of an Acceptance of any
Offer delivered hereunder, the closing of the purchase to be made
pursuant thereto (the "Closing") shall take place on the date
established by the purchasing party (not less than 10 days nor more
than 120 days after delivery of such Acceptance), or, if federal or
applicable state agencies' approval for such assignment is required,
not more than thirty days after such approval has been obtained. At the
Closing, the purchasing Member and the selling Member shall deliver
such certificates and such assignment documents in customary form as
may be reasonably requested in order to consummate the transaction, and
the purchasing Member shall deliver the purchase price in immediately
available funds to such bank account as shall have been specified by
the selling Member at least three days prior to the closing (or, if no
such notice has been given, by delivery of a certified or bank check).
At such Closing, the selling Member shall sell and transfer its
Membership Interest to the purchaser free and clear of Liens other than
Liens arising out of Company financing and shall so warrant to the
purchasing Member. The selling Member shall also represent and warrant
to the purchasing Member that the selling Member has good and
marketable title to the Membership Interest being sold and transferred.
In addition, each of the selling Member and the purchasing Member shall
make customary representations and warranties to the other including
representations and warranties with respect to organization, valid
existence, authorization, and non-contravention. With respect to
obligations arising out of Company financing, the purchasing Member
shall, in addition to paying the Price as provided above, either (i)
satisfy or otherwise obtain release from all liability on the part of
the selling Member and its Affiliates with respect to all obligations
of the Company, including debt and lease obligations, which such
selling Member and/or its Affiliates shall have guaranteed, or (ii)
indemnify and hold harmless the selling Member and its Affiliates
against such liability and secure such indemnification with a letter of
credit or payment bond reasonably satisfactory to such selling Member.
7.2 Certain Agreements.
(a) The parties acknowledge that the intent of this Article 7
is, following an Initial Offer, to create a private auction between the
Members with increases in the Total Value (from which the offered Price
of a Membership Interest is derived) in 5% increments, until a Member
buys another Member's entire Membership Interest in the Company.
(b) In the event a Member accepts an Offer to sell its
Membership Interest and either the buyer or the seller fails timely to
consummate such purchase, then the non-defaulting party may seek
judicial redress in the courts of the State of California in and for
the County of Los Angeles against the defaulting party, where such
relief may include, but need not necessarily be limited to, an award of
damages, specific performance, and/or an injunction. In such case, the
Dispute Resolution provisions of Article 6 shall not apply. Without
limiting the foregoing, in such event the non-defaulting party may
elect to purchase the Membership Interest of the defaulting party at
the Price such non-defaulting party initially offered to purchase the
Membership Interest of the defaulting party either as the Initial Offer
or the immediately subsequent Offer to the Initial Offer.
(c) Notwithstanding the foregoing, a Member shall not be
entitled to make an Initial Offer or subsequent Offer pursuant to this
Article 7 if (i) such Member shall have ceased to be a member of the
Company by reason of its dissolution or the transfer of its Percentage
Interest (ii) such Member shall have become unable to pay its debts
generally as they become due or shall make a general assignment for the
benefit of creditors, or shall file a petition in bankruptcy, or shall
have been adjudicated or declared bankrupt or insolvent, or shall file
a petition or answer seeking, consenting to or acquiescing in any
reorganization, arrangement, adjustment, composition, readjustment,
liquidation, dissolution or similar relief under any present or future
statute, law or regulation, or shall file an answer admitting or not
contesting the material allegations of a petition or answer filed
against it for or proposing any such relief or if any proceeding
against such Member of the type referred to herein seeking any such
relief shall not have been dismissed within thirty (30) days after
commencement thereof or if a trustee, receiver or liquidator of such
Member or of any material part of such Member's assets or properties
shall be appointed with the consent or acquiescence of such Member, or
if any such appointment not so consented to or acquiesced in, shall
remain unvacated or unstayed or such trustee, receiver or liquidator
shall not have been dismissed or discharged for an aggregate of thirty
(30) days (whether or not consecutive), (iii) such Member shall be in
default with respect to any of its material obligations under this
Agreement (including without limitation failure to pay any amount when
due thereunder), or (iv) except for dissolutions under Sections 12.2(b)
and 12.2(c), the Company shall have been dissolved or be in the process
of dissolution and liquidation under the provisions of Article 12.
(d) Without limiting any of the foregoing, the Members shall
not, and shall cause each of their respective Affiliates not to, (i)
take any action the effect of which would prevent or frustrate the
carrying out of the procedures contemplated by this Article 7 or (ii)
at any time (whether before or after any termination of this Agreement)
make any assertion, claim or defense that this Article 7 or any of the
provisions hereof violate or are inconsistent with the terms of this
Agreement or any laws or public policies.
ARTICLE 8
CAPITAL CONTRIBUTIONS
8.1 Capital Accounts.
(a) A single capital account shall be maintained for each
Member (regardless of the class of interests owned by such Member and
regardless of the time or manner in which such interests were acquired)
in accordance with the capital accounting rules of section 704(b) of
the Code, and the Income Tax Regulations thereunder (including
particularly section 1.704-l(b)(2)(iv) of the Income Tax Regulations)
(a "Capital Account").
(b) In general, under such rules, a Member's Capital Account
shall be:
(i) Increased by (x) the amount of money contributed
by the Member to the Company (including the amount of any
make-up contributions made by such Member pursuant to Section
8.3(b) and the amount of any Company liabilities that are
assumed by such Member other than in connection with
distribution of Company property); (y) the Fair Market Value
(determined in accordance with Section 8.9(c) hereof) of
property contributed by the Member to the Company (net of
liabilities secured by such contributed property that the
Company is considered to assume or take subject to under
section 752 of the Code); and (z) allocations to the Member of
Company Profits; and
(ii) Decreased by (w) the amount of money distributed
to the Member by the Company (including the amount of such
Member's individual liabilities that are assumed by the
Company other than in connection with contribution of property
to the Company); (x) the Fair Market Value (determined in
accordance with Section 8.9 hereof) of property distributed to
the Member by the Company (net of liabilities secured by such
distributed property that such Member is considered to assume
or take subject to under section 752 of the Code); (y)
allocations to the Member of expenditures of the Company not
deductible in computing its taxable income and not properly
capitalized; and (z) allocations to the Member of Company
Losses; and
(iii) Increased or decreased by any Revaluation Gain
or Revaluation Loss determined under Section 8.7.
8.2 Initial Contributions of Capital. On or before the Effective Date,
▇▇▇▇▇▇ and Harvest States shall each make the contributions of assets and
liabilities to the Company as set forth on Schedule I hereto.
8.3 Additional Contributions by Members.
(a) In the event that the Members Committee determine that an
additional capital contribution, payable in cash or other property (or
combination thereof), is necessary or advisable, each Member will be
notified in writing by the Members Committee, at least sixty (60) days
prior to the date on which such capital contribution is payable (the
"Due Date"), of the amount of the capital contribution required from
each of them, on a pro rata basis, determined in accordance with such
Member's respective Percentage Interest, and the Due Date for such
capital contribution. Each such capital contribution shall be payable
in cash unless otherwise determined by vote of the Members Committee.
Such contributions, when made by a Member, shall be credited to such
Member's Capital Account.
(b) In the event that a Member fails to make a required
capital contribution on or prior to the Due Date thereof (a "Defaulting
Member"), the other Members, who have made their respective capital
contributions and are not Affiliate Transferees of the Defaulting
Member (the "Non-Defaulting Members"), within thirty (30) days
following the mailing of notice from the Company that payment from the
Defaulting Member has not been made, may (but shall not be obligated
to) [by a vote of the Non-Defaulting Members representing a majority of
the Percentage Interests of the Non-Defaulting Members exercise any or
all of the following remedies with respect to the contribution which
the Defaulting Member failed to make to the capital of the Company (a
"Default Amount"):
(i) Withdraw the required capital contributions
contributed by each of the Non-Defaulting Members from the
Company;
(ii) Pay to the Company the Default Amount on behalf
of the Defaulting Members;
provided that each of the Non-Defaulting Members shall be
required to contribute a portion of the Default Amount that is
equal to such Non-Defaulting Member's Percentage Interest
divided by the Percentage Interests of all Non-Defaulting
Members unless the Non-Defaulting Members otherwise agree to
contribute different percentages of the Default Amount. To the
extent that a Default Amount shall be paid in whole or in part
by one or more Non-Defaulting Members, the Capital Accounts of
the Non-Defaulting Members who make such payment and their
Percentage Interests shall be appropriately increased and the
Percentage Interest of the Defaulting Member shall be
appropriately decreased.
(iii) Initiate and maintain an action, under the sole
control of the Non-Defaulting Members, against the Defaulting
Member for the Default Amount and to pursue any available
remedy, including but not limited to seeking payment by the
Defaulting Member of such Default Amount or the unpaid portion
thereof and damages incurred by the Company in connection
therewith. The costs of any action commenced by the Company
pursuant to this Section 8.3(b)(iii) shall be paid by the
Company and shall be reimbursed by the Defaulting Member to
the Company and to the extent not so reimbursed shall be
deducted from such Defaulting Member's Capital Account and
Adjusted Capital Contributions.
8.4 Member Obligations. No Member shall have any obligation to restore
any portion of any deficit balance in such Member's Capital Account, whether
upon liquidation of its interest in the Company, liquidation of the Company or
otherwise.
8.5 Withdrawals of Capital Accounts. No Member shall be entitled to
withdraw any amount from its Capital Account prior to dissolution of the
Company.
8.6 Interest on Capital Accounts. No interest or compensation shall be
paid on or with respect to the Capital Account or capital contributions of any
of the Member, except as otherwise expressly provided herein.
8.7 Revaluation of Company Assets.
(a) The assets of the Company shall be revalued in accordance
with Section 8.9 hereof to their then Fair Market Values as of the date
of and immediately prior to (i) the acquisition of an additional
interest in the Company (including adjustments to Percentage Interests
arising as a result of a failure of any Member to make a required
capital contribution pursuant to Section 8.3 hereof) by any new or
existing Member in exchange for more than a de minimis capital
contribution to the Company, (ii) the distribution by the Company of
more than a de minimis amount of property as consideration for the
redemption of a portion (but not all) of a Member's interest in the
Company and (iii) the liquidation of a Member's entire interest in the
Company, or immediately prior to the distribution of Company assets in
liquidation of the Company within the meaning of Income Tax Regulations
section 1.704-l(b)(2)(ii)(g); provided, however, that no revaluation
shall occur if the Members Committee reasonably determines that a
revaluation would not materially affect the Capital Accounts of the
Members or that the cost of such revaluation would be disproportionate
to any benefit to be derived by the Members from such revaluation.
(b) Immediately prior to the distribution of any asset by the
Company, the Members Committee shall revalue such asset to its then
Fair Market Value.
(c) Any Revaluation Gain or Revaluation Loss arising from a
revaluation of any Company asset pursuant to this Section 8.7 shall
respectively be credited to or debited from the Members' Capital
Accounts in accordance with their respective Percentage Interests
immediately prior to the event giving rise to such revaluation.
8.8 Redetermination of Percentage Interests. The respective Percentage
Interests of each of the Members shall be redetermined immediately after the
election of the Non-Defaulting Members to contribute the Default Amount pursuant
to Section 8.3(b)(ii) or (b) the admission of an Additional Member pursuant to
Section 11.
8.9 Determination of Fair Market Value. The Fair Market Value, as of
the date of determination, of any asset shall be determined (a) by mutual
agreement of the Members or (b) if no such agreement is reached within ten days
of the relevant date of determination, as follows:
(a) Selection of Appraisers. Each of (A) the Member who is
either contributing an asset to the Company, receiving an asset as a
distribution from the Company or transferring an asset which is being
valued hereunder (or, if there is no such Member, ▇▇▇▇▇▇) (the "Asset
Member") and (B) the other Members shall designate by written notice to
the Company and each Member a firm of recognized national standing
familiar with appraisal techniques applicable to assets of the type
being evaluated to serve as an Appraiser pursuant to this Section 8.9
(the firms designated by the Asset Member and the other Members being
referred to herein as the "First Appraiser" and the "Second Appraiser,"
respectively) within five business days after the expiration of the ten
day period referred to in clause (b) above. In the event that either
the Asset Member or the other Members fail to designate its or their
Appraiser within the foregoing time period, the other(s) shall have the
right to designate such Appraiser by rectifying the failing party or
parties in writing of such designation (and the Appraiser so designated
shall be the First Appraiser or the Second Appraiser, as the case may
be).
(b) Evaluation Procedures. Each Appraiser shall be directed to
determine the Fair Market Value of the asset. Each Appraiser will also
be directed to deliver an Appraiser's Certificate to each Member on or
before the 30th day after their respective designation (the
"Certificate Date"), upon the conclusion of its evaluation, and each
Appraiser's Certificate once delivered may not be retracted or modified
in any respect. Each Appraiser shall keep confidential all information
disclosed by the Company in the course of conducting its evaluation,
and, to that end, will execute such customary documentation as the
Company may reasonably request with respect to such confidentiality
obligation. The Members shall cooperate in causing the Company to
provide each Appraiser with such information within the Company's
possession which may be reasonably requested in writing by the
Appraiser for purposes of its evaluation hereunder. The Appraisers
shall consult with each other in the course of conducting their
respective evaluations. Each Member shall have full access to each
Appraiser's work papers. Each Appraiser shall be directed to comply
with the provisions of this Section 8.9, and to that end each Member
shall provide to its respective Appraiser a complete and correct copy
of this Section 8.9 (and the definitions of capitalized terms used in
this Section 8.9 that are defined elsewhere in this Agreement).
(c) Fair Market Determination. The Fair Market Value of any
asset shall be determined on the basis of the Appraisers' Certificates
in accordance with the provisions of this subparagraph (iii), each of
which shall be simultaneously delivered to each Member. The higher of
the values set forth in the Appraisers' Certificates is hereinafter
referred to as the "Higher Value" and the lower of such values is
hereinafter referred to as the "Lower Value". If the Higher Value is
not more than 110% of the Lower Value, the Fair Market Value will be
the arithmetic average of such two Values. If the Higher Value is more
than 110% of the Lower Value, a third appraiser shall be selected in
accordance with the provisions of subparagraph (iv) below, and the Fair
Market Value shall be determined in accordance with the provisions of
subparagraph (v) below.
(d) Selection of and Procedure for Third Appraiser. If the
Higher Value is more than 110% of the Lower Value, then within seven
days after delivery to the Members of the Appraiser's Certificates, the
First Appraiser and the Second Appraiser shall agree upon and jointly
designate a third firm of recognized national standing familiar with
appraisal techniques applicable to assets of the type being evaluated
to serve as an appraiser pursuant to this Section &.9 (the "Third
Appraiser"), by written notice to each Member. If, within ten days
after delivery of the Appraiser's Certificates, as provided in clause
(iii) above, the First Appraiser and the Second Appraiser shall have
failed to so designate the Third Appraiser, then any Member may apply
to the American Arbitration Association to appoint the Third Appraiser
which shall be a firm of recognized national standing familiar with
appraisal techniques applicable to assets of the type being evaluated.
The Members shall direct the Third Appraiser to determine the Fair
Market Value of the asset (the "Third Value") in accordance with the
provisions of subparagraph (ii) above, and to deliver to the Members an
Appraiser's Certificate on or before the 30th day after the designation
of such Appraiser hereunder. The Third Appraiser shall be directed to
comply with the provisions of this Section 8.9, and to that end the
parties shall provide to the Third Appraiser a complete and correct
copy of this Section 8.5 (and the definitions of capitalized terms used
in this Section 8.9 that are defined elsewhere in this Agreement).
(e) Alternative Determination of Fair Market. Upon the
delivery of the Appraiser's Certificate of the Third Appraiser, the
Fair Market Value shall be determined as provided in this subparagraph
(v). The Fair Market Value shall be (w) the Lower Value, if the Third
Value is less than the Lower Value, (x) the Higher Value, if the Third
Value is greater than the Higher Value, (y) the arithmetic average of
the Third Value and the other Value (Lower or Higher) that is closer to
the Third Value if the Third Value falls within the range between (and
including) the Lower Value and the Higher Value and (z) the Third
Value, if the Lower Value and the Higher Value are equally close to the
Third Value.
(f) Costs. Each of the Asset Member and the other Members
shall bear the cost of the Appraiser designated by it or on its behalf.
If the Higher Value is not more than 115% of the Lower Value, or if the
Higher Value and the Lower Value are equally close to the Third Value,
each of the Asset Member and the other Members shall bear 50% of the
cost of the Third Appraiser, if any; otherwise, the party whose
Appraiser's determination of Fair Market Value is further away from the
Third Value shall bear the entire cost of the Third Appraiser. The
Members agree to pay when due the fees and expenses of the Appraisers
in accordance with the foregoing provisions.
(g) Conclusive Determination. To the fullest extent provided
by law, the determination of the Fair Market Value made pursuant to
this Section 8.9 shall be final and binding on the Company and the
Members and such determination shall not be appealable to or reviewable
by any court or arbitrator; provided that the foregoing shall not limit
a Member's rights to seek arbitration of the obligations of the other
Members and the Company hereunder.
(h) Initial Capital Contributions. The Members hereby agree that
the Fair Market Value of the ▇▇▇▇▇▇ Assets and the Holsum Assets, as
defined in the Joint Venture Agreement, shall be as specified in
Schedule I.
ARTICLE 9
ALLOCATION OF PROFITS AND LOSSES; DISTRIBUTIONS
9.1 Allocation of Profits and Losses.
(a) Company Profits and Losses, and items of income, gain,
loss and deduction included in determining Profits and Losses, shall be
allocated among the Members as provided in this Section. As set forth
in the definition of Profit and Loss, the amounts allocated under this
Section are determined by using Asset Value, which may be based on Fair
Market Value at the time of contribution or revaluation pursuant to
Section 8.7. The allocation of taxable income and loss is governed by
Section 9.2.
(b) Except as otherwise provided in this Section 9.1, Company
Profits, Losses and items of income, gain, loss and deduction included
in determining Profits and Losses shall be allocated among the Members
proportionately in accordance with their respective Percentage
Interests as set forth on Schedule I and, if applicable, as
redetermined under Section 8.8.
(c) Minimum Gain Chargeback. Notwithstanding anything to the
contrary in this Article 9, if there is a net decrease in "Partnership
Minimum Gain" or "Partner Nonrecourse Debt Minimum Gain" (as such terms
are defined in sections 1.704-2(b) and 1.704-2(i)(2), respectively, of
the Income Tax Regulations) during a Company taxable year, then each
Member shall be allocated items of Company income and gain for such
year (and, if necessary, for subsequent years), to the extent required
by, and in the manner provided in, section 1.704-2 of the Income Tax
Regulations.
This provision is intended to be a "minimum gain chargeback"
within the meaning of sections 1.704-2(f) and 1.704-2(i)(4) of the
Income Tax Regulations and shall be interpreted and implemented as
therein provided.
(d) Qualified Income Offset. Subject to the provisions of
Section 9.1(c), but otherwise notwithstanding anything to the contrary
in this Article 9, if any Member's Capital Account has a deficit
balance in excess of such Member's obligation to restore its Capital
Account balance, computed in accordance with the rules of paragraph
(b)(2)(ii)(d) of section 1.704-1 of the Income Tax Regulations
(including such Member's share of Partnership Minimum Gain and Partner
Nonrecourse Debt Minimum Gain as provided in sections 1.704-2(g) and
1.704-2(i)(5) of the Income Tax Regulations), then sufficient amounts
of income and gain (consisting of a pro rata portion of each item of
Company income, including gross income, and gain for such year) shall
be allocated to such Member in an amount and manner sufficient to
eliminate such deficit as quickly as possible. This provision is
intended to be a "qualified income offset" within the meaning of
section 1.704-l(b)(2)(ii)(d) of the Income Tax Regulations and shall be
interpreted and implemented as therein provided.
(e) Loans. Except as otherwise provided in Section 9.1(g), if
and to the extent any Member is deemed to recognize income as a result
of any loans described herein pursuant to the rules of sections 1272,
1273, 1274, 1274A, 7872, 482 or 483 of the Code, or any similar
provision now or hereafter in effect, any corresponding resulting
deduction of the Company shall be allocated to the Member who is
charged with the income. Subject to the provisions of section 704(c) of
the Code and Sections 9.1(c) (d) and (g) hereof, if and to the extent
the Company is deemed to recognize income as a result of any loans
described herein pursuant to the rules of sections 1272, 1273, 1274,
1274A, 7872, 482 or 403 of the Code, or any similar provision now or
hereafter in effect, such income shall be allocated to the Member who
is entitled to any corresponding resulting deduction.
(f) Change in Interests. Except as provided in Section 9.1(e)
hereof or as otherwise required by law, if the Company Interests of the
Members are changed herein during any taxable year, all items to be
allocated to the Members for such entire taxable year shall be prorated
on the basis of the portion of such taxable year which precedes each
such change and the portion of such taxable year on and after each such
change according to the number of days in each such portion, and the
items so allocated for each such portion shall be allocated to the
Members in the manner in which such items are allocated as provided in
this Article 9 during each such portion of the taxable year in
question.
(g) Losses.
(i) Items of deduction and loss attributable to
recourse liabilities of the Company (within the meaning of
section 1.752-l(a)(1) of the Income Tax Regulations, but
excluding "partner nonrecourse debt" within the meaning of
section 1.7042(b)(4) of the Income Tax Regulations) shall be
allocated among the Members in accordance with the ratio in
which the Members share the economic risk of loss (within the
meaning of section 1.752-2 of the Income Tax Regulations) for
such liabilities.
(ii) Items of deduction and loss attributable to
"Partner Nonrecourse Debt" within the meaning of section
1.704-2(b)(4) of the Income Tax Regulations shall be allocated
to the Members bearing the economic risk of loss with respect
to such debt in accordance with section 1.704-2(i) of the
Income Tax Regulations.
(iii) Items of deduction and loss attributable to the
Company's "Nonrecourse Liabilities" within the meaning of
section 1.704-2(b)(3) of the Income Tax Regulations shall be
allocated among the Members proportionately in accordance with
their Percentage Interests.
(iv) All other items of operating net loss ("Net
Loss") shall be allocated among the Members, proportionately
in accordance with their Percentage Interests, except that Net
Loss shall not be allocated to any Member to the extent it
would create a deficit balance in excess of such Member's
obligation to restore its capital account balance, computed in
accordance with the rules of section 1.704-l(b)(2)(ii)(d) of
the Income Tax Regulations (including such Member's share of
Partnership Minimum Gain and Partner Nonrecourse Debt Minimum
Gain as provided in sections 1.704-2(g) and 1.704-2(i)(5) of
the Income Tax Regulations). Any Net Loss which cannot be
allocated to a Member because of the limitation set forth in
the previous sentence shall be allocated first to the other
Members to the extent such other Members would not be subject
to such limitation and second any remaining amount to the
Members in the manner required by the Code and the Income Tax
Regulations.
(h) Purpose and Application. The purpose and the intent of the
special allocations provided for in Sections 9.1(c), (d), and (g) are
to comply with the provisions of sections 1.704-l(b) and 1.704-2 of the
Income Tax Regulations, and such special allocations are to be made so
as to accomplish that result. However, to the extent possible, the
Members in allocating items of income, gain, loss, or deduction among
the Members shall take into account the special allocations in such a
manner that the net amount of allocations to each Member shall be the
same as such Member's distributive share of Profits and Losses would
have been had the events requiring the special allocations not taken
place. The Members shall apply the provisions of this Section 9.1 in
whatever order they reasonably believe will minimize any economic
distortion that otherwise might result from the application of the
special allocations.
9.2 Allocation of Taxable Income and Loss.
(a) General. Items of income, gain, loss, and deduction
reported for federal income tax purposes shall be allocated in the same
manner as the corresponding items included in Profits and Losses and
allocated under Section 9.1, except as provided in this Section 9.2.
(b) Section 704(c) Allocations. A Member's distributive share
of income, gain, loss, or deduction with respect to any tangible
property with Asset Value that differs from Basis shall be determined
in accordance with the principles of the "remedial allocation method"
set forth in section 1.704-3(d) of the Income Tax Regulations. A
Member's distributive share of income, gain, loss, or deduction with
respect to any intangible property with Asset Value that differs from
Basis shall be determined in accordance with the principles of the
"traditional allocation method" set forth in section 1.704-3(b) of the
Income Tax Regulations.
(c) Recapture. Subject to the provisions of section 704(c) of
the Code and Sections 9.1 and 5.2(b) hereof, gain recognized (or deemed
recognized under the provisions hereof) upon the sale or other
disposition of Company property, which is treated as depreciation
recapture, shall be allocated to the Member who was entitled to deduct
such depreciation.
(d) Credits. Except as otherwise required by law, tax credits
shall be allocated among the Members pro rata in accordance with the
manner in which Company profits are allocated to the Members under this
Article 9, as of the time the credit property is placed in service or
if no property is involved, as of the time the credit is earned.
Recapture of any tax credit required by the Code shall be allocated to
the Members in the same proportion in which such tax credit WAS
allocated.
(e) Conformity of Reporting. The Members hereby agree to be
bound by the provisions of this Article 9 in reporting their shares of
Company income, loss, credits and other items for income tax purposes.
9.3 Distribution of Assets by the Company.
(a) Subject to any restrictions under applicable law, as
promptly as practical after the end of each quarter, but in any event
within thirty (30) days after the end of each quarter, the Company
shall estimate the Company's Net Profits and Net Operating Available
Cash for the fiscal year to date and shall distribute to the Members
the lesser of (i) 50% of the Company's estimated Net Profits and (ii)
all of the Company's estimated Net Operating Available Cash, in each
case reduced by any amounts distributed with respect to the fiscal year
to date. Subject to any restrictions under applicable law, as promptly
as practical after the end of the fiscal year but in any event within
sixty (60) days after the end of the fiscal year, the Company shall
distribute to the Members the lesser of (i) 50% of the Company's Net
Profits; and (ii) all Net Operating Available Cash of the Company (as
determined based on the Company's financial statements for the relevant
fiscal year), reduced by any amounts distributed to date to the Members
with respect to such fiscal year. Other distributions, whether in cash
or in kind, shall be made to the Members at such times and in such
amounts as shall be determined by the Members Committee. The amount of
any in-kind distribution shall be distributed on the basis of the
property's then Fair Market Value (determined in accordance with
Section 8.9 hereof).
(b) Except as provided in Section 5.3(c), distributions shall
be made among the Members in accordance with their respective
Percentage Interests at the time of such distribution.
(c) Upon liquidation of the Company, within the meaning of
Income Tax Regulations section 1.704-l(b)(2)(ii)(g), distributions
shall be made among the Members as provided in Section 12.4.
(d) All matters not expressly provided for by the terms of
Article 9 or elsewhere in this Agreement concerning the valuation of
any assets of the Company, the allocation of profits and losses and
items thereof (including credits) among the Members and accounting
procedures shall be agreed by the Members or referred to arbitration
under Article 6.
9.4 ▇▇▇▇▇▇ Deferred Tax Distributions. The Company shall make
distributions to ▇▇▇▇▇▇ to satisfy the Company's ▇▇▇▇▇▇ Net Deferred Income Tax
Liability. These distributions shall be determined as follows:
(a) Reversal through Depreciation. The Company shall make
distributions to ▇▇▇▇▇▇ on or before March 15 of each year equal to the
product of (i) the tax rate used in determining the ▇▇▇▇▇▇ Net Deferred
Income Tax Liability, and (ii) the excess of (x) depreciation that
would have been allocated to ▇▇▇▇▇▇ for the preceding year under
Section 9.1 if the Asset Value of property contributed by ▇▇▇▇▇▇ were
equal to the book value of such property on ▇▇▇▇▇▇'▇ Closing Balance
Sheet (as defined in the Joint Venture Agreement) on the contribution
date over (y) tax depreciation allocated to ▇▇▇▇▇▇ for the preceding
year in respect to such property under Section 9.2(b).
(b) Reversal through Dispostion. The Company shall make
distributions to ▇▇▇▇▇▇ on or before March 15 of each year equal to the
product of (i) the tax rate used in determining the ▇▇▇▇▇▇ Net Deferred
Income Tax Liability and (ii) the excess of gain or loss on
dispositions during the preceding year of ▇▇▇▇▇▇-contributed property
that would have been allocated to ▇▇▇▇▇▇ under Section 9.1 if Asset
Value had been equal to book value on the contribution date over tax
gain or loss allocated under Section 9.2(b).
ARTICLE 10
TAX MATTERS AND REPORTS; ACCOUNTING
10.1 Filing of Tax Returns. The Members Committee shall prepare and
file, or cause the accountants of the Company to prepare and file, all federal,
state and local Tax Returns for each tax year of the Company and shall upon
request, provide copies of such Tax Returns to each Member.
10.2 Tax Matters Partner.
(a) The "Tax Matters Partner" of the Company within the
meaning of section 6231(a)(7) of the Code shall be Harvest States.
Unless otherwise expressly provided herein, the Tax Matters Partner is
authorized to take any action that it determines to be necessary or
appropriate with respect to all tax matters, provided that the Tax
Matters Partner shall not have the authority to bind any other Member
to any consent, determination, resolution of a dispute or other legal
matter.
(b) The Tax Matters Partner shall promptly advise the other
Members of all audits or other actions by the Internal Revenue Service
and shall furnish to the Company and to each Member a copy of each
notice or other communication received by the Tax Matters Partner from
the Internal Revenue Service except such notice or communication sent
directly to the Members by the Internal Revenue Service. All expenses
incurred by the Tax Matters Partner in its capacity as such shall be
expenses of the Company and shall be paid by the Company.
(c) To the fullest extent permitted by law, the Company shall
indemnify Members on an after-tax basis against any liabilities
incurred while acting as the Tax Matters Partner of the Company but
only to the extent such Member acts within the scope of its authority
as Tax Matters Partner under this Agreement or the Tax Matters Partner
has acted in reliance on advice of the Company's tax accountants or
legal counsel or at the direction of the Members Committee. The Tax
Matters Partner shall not be indemnified against any liability
regarding Company tax matters arising by reason of the willful
misconduct, bad faith, gross negligence or reckless disregard of the
duties of the Tax Matters Partner.
10.3 Tax Reports to Current and Former Members. After the end of each
fiscal year, the Company shall, in a timely manner, prepare and mail, or cause
its accountants to prepare and mail, to each Member and, to the extent
necessary, to each former Member (or its legal representatives), a report
setting forth in sufficient detail such information as is required to be
furnished to members or partners by law (e.a., section 6031(b) of the Code and
the Income Tax Regulations thereunder) and as shall enable such Member or former
Member (or its legal representatives) to prepare their respective federal and
state income tax or informational returns in accordance with the laws, rules and
regulations then prevailing and, if requested, a full copy of the Company's Tax
Return.
10.4 Accounting Records. Independent Audit. Complete books and records
accurately reflecting the accounts, business, transactions and Members of the
Company shall be maintained and kept by the Company at the Company's principal
place of business. The accounting records of the Company shall be maintained to
assure preparation of the financial statements in accordance with GAAP. The
accounting records of the Company shall be audited by a firm of independent
certified public accountants selected by the Management Committee.
10.5 Fiscal Year. Except as may otherwise be required by the federal
tax laws, the fiscal year of the Company for both financial and tax reporting
purposes shall end on December 31.
10.6 Tax Accounting Method. The books and accounts of the Company shall
be maintained using the accrual method of accounting for tax purposes.
10.7 Withholding. Notwithstanding any other provision of this
Agreement, the Members Committee is authorized to take any action that it
determines to be necessary or appropriate to cause the Company to comply with
any federal, state and local withholding requirement with respect to any
allocation, payment or distribution by the Company to any Member or other
Person. All amounts withheld to satisfy any federal, state or local withholding
requirement with respect to a Member shall be treated as distributions to such
Member. If any such withholding requirement with respect to any Member exceeds
the amount distributable to such Member under this Agreement, or if any such
withholding requirement was not satisfied with respect to any amount previously
allocated or distributed to such Member, such Member and any successor or
assignee with respect to such Member's interest in the Company hereby, to the
fullest extent permitted by law, indemnifies and agrees to hold harmless the
Members and the Company for such excess amount or such withholding requirement,
as the case may be.
10.8 Tax Elections. Upon the request of a transferee of an Interest in
the Company or a distributee of a Company distribution, the Company shall make
the election under section 754 of the Code in accordance with applicable Income
Tax Regulations thereunder for the first fiscal year in which such election
could apply. The Company may seek to revoke such election (if made) if agreed to
by the Members Committee. In addition to the foregoing, the Members Committee
shall, determine whether to make any other available tax elections and select
any other appropriate tax accounting methods and conventions for any purpose
under this Agreement.
10.9 Prior Tax Information. Each Member agrees to deliver to the
Company all relevant information regarding Taxes that the Company will require
in order to comply with its own tax accounting and reporting requirements,
including without limitation schedules setting forth the fair market value and
tax basis of each asset that may from time to time be contributed by a Member to
the Company; provided, however, that no Member shall be required to disclose the
income tax returns of itself or any of its Affiliates.
ARTICLE 11
TRANSFER AND ASSIGNMENT OF INTERESTS;
PUBLIC OFFERING; ADDITIONAL MEMBERS
11.1 Transfer and Assignment of Interests. Except as provided in
Section 11.2, no Member shall be entitled to Transfer, all or any part of its
Membership Interest, including any economic interest therein except with the
prior written approval of each other Member, which approval may be given or
withheld as the other Members may determine in their sole discretion. Any
Transfer of a Membership Interest in contravention of this Article 11 shall be
null and void and of no force whatsoever. No Member, without the prior written
consent of the other Members, shall retire or withdraw from the Company.
11.2 Permitted Transfers. Notwithstanding Section 11.1, commencing with
the third anniversary of the Effective Date, the Members may Transfer all or any
part of their respective Membership Interests as follows:
(a) ▇▇▇▇▇▇ and Harvest States may each Transfer privately, at
any time and from time to time, a portion of their respective
Membership Interests free of any right of first refusal on the part of
any Member and without the consent of any Member, so long as
immediately after such Transfer, the transferor shall own not less than
25.5% of the outstanding Membership Interests in the Company.
(b) Subject to Section 11.2(a) above, and the procedures set
forth in Section 11.4, any Member who receives a bona fide written
offer to purchase all or a part of its Membership Interest may Transfer
all or any part of its Membership Interest in the Company in a case
other than that permitted under Section 11.2(a) or 11.2(c), subject,
however, to rights of first refusal in favor of the other Members. For
purposes of this paragraph 11.2(b), a right of first refusal shall mean
the right of the other Members to purchase the offering Member's
offered Membership Interest at a price and upon the terms and
conditions contained in a bona fide offer from a third party to
purchase such offered interest, all in accordance with the procedures
set forth in Section 11.4.
(c) Any Member may Transfer all or a part of its Member's
Interest in the Company free and clear of the restrictions and rights
of first refusal set forth in Sections 11.1, 11.2(a) and 11.2(b) above
pursuant to a Public Offering of securities of the Company by the
Company and/or by one or more Members of the Company, and all such
restrictions on Transfer and rights of first refusal shall terminate
upon the consummation of such Public Offering, provided that provided
that neither a Public Offering nor the incorporation of the Company in
connection therewith shall occur without the prior written consent of
(i) the holders of a majority of the Membership Interests, and (ii)
▇▇▇▇▇▇ and Harvest States. Nothing in this Paragraph 11.2(c) shall be
deemed to obligate either ▇▇▇▇▇▇ or Harvest States to consent to a
Public Offering or incorporate nor entitle either of them (or any other
Member) to have any of their respective Membership Interests or other
securities in the Company included in such Public Offering. ▇▇▇▇▇▇ and
Harvest States each acknowledge their interest in pursuing the
possibility of a Public Offering in the future and each agrees, upon
the request of the other, to discuss and consider in good faith the
feasibility of a Public Offering, recognizing that a Public Offering
may, as a practical matter, require the incorporation of the Company.
In any such discussion, the parties agree to consider (i) providing
preferential rights to the Members and/or their members or shareholders
to subscribe for the purchase of securities in the Public Offering, and
(ii) providing rights to the Members to have Company securities owned
by them included in the Public Offering, all subject to the approval of
the underwriters of the Public Offering. ▇▇▇▇▇▇ and Harvest States
acknowledge that the incorporation of the Company in connection with a
Public Offering may cause Harvest States and its members to lose the
benefit of certain tax exempt "patronage dividends". In agreeing to
discuss and consider in good faith the feasibility of a Public
Offering, Harvest States may take the loss of such benefit into account
as well as the benefits to be derived from a Public Offering by it and
its members.
11.3 Assignment of Right to Appoint Committee Members. In the event of
any transfer pursuant to Sections 11.2(a) or 11.2(b) above, the transferor
Member may, in its discretion, assign to the transferee the right to appoint one
or more representatives to the Members Committee out of the selling Member's
right to appoint five (5) such representatives provided that, so long as the
transferor Member retains an interest in the Company of at least 25.5%, such
transferor Member shall retain (and may not assign) its right to appoint at
least three (3) representatives to the Members Committee.
11.4 Right of First Refusal Procedures. If any Member (hereinafter
"Selling Member") should receive a bona fide written offer for the purchase of
all or any part of its Membership Interest in a transfer other than that
permitted under Section 11.2(a) or 11.2(c), the Selling Member shall give
written notice of said offer to the remaining Members ("Offeree Members"). The
Membership Interest being offered for sale shall be first offered for sale to
the Offeree Members at the same price and upon the same terms as that offered by
the offeror to the Selling Member. Each Offeree Members shall have the right to
purchase such percentage of the Membership Interest being offered for such as
the Percentage Interest owned by it to the total Percentage Interests owned by
all Offeree Members desiring to exercise their right of first refusal. The
purchasing Offeree Members shall exercise their right to purchase all of said
Membership Interest offered for sale by giving written notice of acceptance of
the offer to the Selling Member within sixty (60) days from receipt of written
notice of the offer as provided in this Section.
If the Offeree Members do not exercise their right to purchase
all of the Membership Interest offered for sale within the prescribed
sixty (60) day period, said Membership Interest may then be sold by the
Selling Member to the offeror upon the terms and conditions no more
favorable that set forth in the bona fide written offer; provided,
however, that said Membership Interest purchased by the offeror shall
remain subject to this Agreement; and provided, however, that such sale
shall be completed within one hundred twenty (120) days after the
failure of the Offeree Members to exercise their right to purchase such
Membership Interest, in which case any sale of such Membership Interest
shall again be subject to the terms of this right of first refusal.
11.5 Assignees and Substituted Members.
(a) In the event of a Transfer of part or all of any
Membership Interest permitted pursuant to the provisions of this
Article XI, the Assignee of such Membership Interest shall become a
Member hereunder upon and subject to compliance with Section 11.5(b).
If Section 11.5(b) is not complied with, the Person to whom such
Transfer is made shall not become a Member hereunder and shall be
considered only an Assignee of the Membership Interest and, as such,
shall only be entitled to share in those distributions, if any, in
which its assignor would be eligible. An Assignee who does not comply
with Section 11.5(b) shall have no right to require any information or
accounting of any transactions of the Company or inspect the Company
books and records.
(b) An Assignee of a Membership Interest pursuant to a
Transfer permitted under the provisions of this Article may become a
Substituted Member with all the rights and liabilities of its assignor
under the Agreement (except as limited by Section 11.3) if and only if
[] (i) the Assignee expressly assumes and agrees to be bound by the
Agreement, (ii) the appropriate instruments, documents, or statements,
if any, are prepared, executed, acknowledged, filed, recorded,
published and delivered as required by the law, (iii) the Assignee pays
or obligates itself to pay any and all reasonable expenses of the
Company connected with such substitution, and (iv) the Assignee causes
to be delivered to the Company, at its sole cost and expense, a
favorable opinion of legal counsel reasonably acceptable to the other
Members, to the effect that (1) the contemplated Transfer of such
Membership Interest to the Assignee will not violate any applicable
federal or state laws, including securities laws, (2) the Assignee has
the legal right, power and capacity to own the Membership Interest, (3)
the contemplated Transfer will not cause the Company to cease to be
classified as a partnership for federal tax purposes, and (4) the
contemplated Transfer will not cause any of the Members any material
adverse tax consequences. Upon compliance with all provisions hereof
applicable to such Person becoming a Member, all other Members agree to
execute and deliver such amendments hereto as are necessary to
constitute such Person a Member of the Company.
(c) Upon a Transfer by a Member of all or part of its
Membership Interest and substitution of a Substituted Member with
respect to all or such portion of its Membership Interest, the
transferring Member shall cease to be a Member to the extent of the
Membership Interest so Transferred.
(d) The admission of a Substituted Member shall not result in
the release of the Member who assigned the Membership Interest from any
liability that such transferor Member may have incurred prior to the
assignment and substitution.
11.6 Additional Members. With the unanimous consent of the Members,
acting by and through the Members Committee, the Company may issue additional
Membership Interests for such consideration and on such terms and conditions and
to such Persons as the Members, acting through the Members Committee, shall
unanimously approve, provided that (i) the Person or Persons to whom such
additional Membership Interests are to be issued ("Additional Members")
expressly assume and agree to be bound by this Agreement, (ii) the appropriate
instruments, documents or statements, if any, are prepared, executed,
acknowledged, filed, recorded, published and delivered as required by law, (iii)
if required by the Company, the Additional Member or Additional Members pays or
obligates itself or themselves to pay any and all reasonable expenses of the
Company incurred in connection with the issuance of such additional Membership
Interests, and (iv) the Company shall have received the favorable opinion of
legal counsel to the Company reasonably acceptable to the existing Members of
the Company to the effect that (1) the issuance of such additional Membership
Interests to such Additional Member or Additional Members will not violate any
applicable federal or state laws, including securities laws, (2) the Additional
Member or Additional Members have the legal right, power and capacity to own the
additional Membership Interests, (3) the issuance of the additional Membership
Interests will not cause the Company to cease to be classified as a partnership
for federal tax purposes, and (4) the issuance of such additional Membership
Interests will not cause any of the Members any material adverse tax
consequences.
ARTICLE 12
DISSOLUTION AND LIQUIDATION
12.1 Events of Dissolution. The Company shall be dissolved upon (a)
October 1, 1996 if the Effective Date shall not have occurred, (b) an election
to dissolve the Company pursuant to Section 12.2, (c) the expulsion, bankruptcy
or dissolution of a Member, or the occurrence of any other event that results in
a Member ceasing to be a Member of the Company under the Act; provided, the
Company shall not be dissolved and required to be wound up in connection with
any of the events specified in this clause (d) if within ninety (90) days after
the occurrence of such event, all of the remaining Members agree in writing to
continue the business of the Company and to the appointment, if necessary or
desired, effective as of the date of such event, of one or more additional
Members of the Company, (e) the entry of a decree of judicial dissolution
pursuant to Section 18-802 of the Act, and (vi) the unanimous written consent of
the Members.
12.2 Voluntary Dissolution. Either ▇▇▇▇▇▇ or Harvest States but no
other Member may elect, upon the occurrence of any of the following events, by
written notice to the Company and the other Members, to require the Company to
dissolve and wind up in accordance with the terms of this Article 12:
(a) If the other Member shall, for any reason, fail to make
all of the initial capital contributions required to be made by such
other Member under Section 8.2 and the Joint Venture Agreement, when
and as required by Section 8.2.
(b) If the Company shall at any time have cumulative losses,
as reflected in the most recent financial statements of the Company, in
excess of $25,000,000; or
(c) If the Company is unable to discharge its liabilities as
they become due.
12.3 Buy-Sell Procedure Rights. Upon the occurrence of any event
described in 12.2(b) or 12.2(c) above either ▇▇▇▇▇▇ or Harvest States may
initiate the Buy-Sell Procedure described in Article 7. If the Buy-Sell
Procedure has been or is initiated by a Member, then the Company shall not be
dissolved notwithstanding a request therefor under Section 12.2. Any initiation
of the Buy-Sell Procedure by a Member after a request for dissolution has been
made must take place on or before sixty (60) days following receipt by such
Member of the written notice requesting dissolution of the Company. If the
Buy-Sell Procedure is initiated pursuant to this Section 12.3, there shall be no
minimum Initial Offer.
12.4 Liquidation and Order of Dissolution. In all cases of dissolution
of the Company, the Business of the Company shall be continued to the extent
necessary to allow an orderly winding up of its affairs, including the
liquidation and termination of the Company pursuant to the provisions of this
Article 12, as promptly as practicable thereafter, and each of the following
shall be accomplished:
(a) The Liquidator shall cause to be prepared a statement
setting forth the assets and liabilities of the Company as of the date
of dissolution, a copy of which statement shall be furnished to each
Member.
(b) The property and assets of the Company shall be liquidated
by the Liquidator as promptly as possible, but in an orderly and
businesslike manner. The Liquidator may, in the exercise of its
business judgment, determine not to sell all or any portion of the
remaining assets of the Company, in which event such remaining assets
shall be distributed in kind pursuant to Section 12.4(d).
(c) Any gain or loss realized by the Company upon the sale of
its assets shall be deemed recognized and allocated to the Members in
the manner set forth in Article 9. To the extent that an asset is to be
distributed in kind, such asset shall be deemed to have been sold at
its Fair Market Value on the date of distribution, the gain or loss
deemed recognized upon such deemed sale shall be allocated in
accordance with Article 9 and the amount of the distribution shall be
considered to be such fair market value of the asset.
(d) The proceeds of sale and all other assets of the Company,
including Operating Cash Flow of the Company, shall be applied and
distributed as follows and in the following order of priority:
(i) To pay (or make reasonable provision for the
payment of) all creditors of the Company, including to the
extent permitted by law, Members or their Affiliates who are
creditors, in satisfaction of liabilities of the Company in
the order of priority provided by law, including expenses
relating to the dissolution and winding up of the affairs of
the Company (including, without limitation, expenses of
selling assets of the Company, discharging the liabilities of
the Company, distributing the assets of the Company and
terminating the Company as a limited liability company in
accordance with this Agreement and the Act); and
(ii) To the Members in proportion to their respective
positive Capital Account balances, as those balances are
determined after all adjustments to such Capital Accounts as
required by this Agreement for all periods immediately prior
to such distribution.
(iii) If the Company shall be dissolved by reason of
the failure of the Effective Date to occur prior to October 1,
1996, then, anything hereinabove to the contrary
notwithstanding, ▇▇▇▇▇▇ and Harvest States shall be liable for
all of the liabilities and expenses of the Company incurred
through the date of dissolution, in the proportions of 60% and
40%, respectively, subject to any rights or remedies each may
have against the other arising out of the Joint Venture
Agreement, this Agreement or any other matter.
12.5 Liquidator. The Members Committee is hereby named as the
Liquidator and the Chairman thereof is irrevocably appointed as the true and
lawful attorney in the name, place and stead of each of the Members, such
appointment being coupled with an interest, to make, execute, sign, acknowledge
and file with respect to the Company all papers which shall be necessary or
desirable to effect the dissolution, liquidation and termination of the Company
in accordance with the provisions of this Article. Notwithstanding the
foregoing, if either ▇▇▇▇▇▇ or Harvest States objects to the Members Committee
acting as the Liquidator, then the Members will cooperate in naming a third
party to act as Liquidator, or if the Members are unable to agree on a third
party Liquidator within thirty [30] days after the event of dissolution, either
Member may seek a court appointed Liquidator. Without limiting the foregoing,
the Liquidator shall, upon the final dissolution of the Company, file an
appropriate certificate to such effect in the proper governmental office or
offices under the Act as then in effect. Notwithstanding the foregoing, each
Member, upon the request of the Liquidator, shall promptly execute, acknowledge
and deliver all such documents, certificates and other instruments as the
Liquidator shall reasonably request to effectuate the proper dissolution,
liquidation and termination of the Company, including the winding up of the
Business of the Company.
12.6 Termination of Company. The Company shall be terminated upon (a)
completion of any dissolution and liquidation thereof pursuant to the provisions
of this Article, and (b) preparation, execution, acknowledgment, filing,
recordation, publication, delivery and/or cancellation of any instruments,
documents or statements if and as required by the Act, the Code or any other
applicable laws.
12.7 Orderly Winding Up. Notwithstanding anything to the contrary in
this Article 12 upon winding up and liquidation, if required to maximize the
proceeds of liquidation, the Members may, upon unanimous approval, transfer the
assets of the Company to a liquidating trustee or trustees.
ARTICLE 13
INDEMNIFICATION AND EXCULPATION; CERTAIN AGREEMENTS
13.1 Indemnification of the Members. The Company shall indemnify and
hold harmless the Members, the Committee Members, and their Affiliates, and
their respective Agents and/or the legal representatives of any of them, and
each other Person who may incur liability as a Member or otherwise in connection
with the management or ownership of the Company (each, an "Indemnified Party"),
against all liabilities and expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and as counsel fees)
reasonably incurred by him, her or it in connection with the investigation,
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, in which any Indemnified Party may be involved or with which he, she
or it may be threatened, while a Member or serving in such other capacity or
thereafter, by reason of its being or having been a Member, or by serving in
such other capacity, except with respect to any matter which constitutes willful
misconduct, bad faith, gross negligence or reckless disregard of the duties of
his office, or criminal intent. The Company shall have the right to approve any
counsel selected by any Indemnified Party and to approve the terms of any
proposed settlement. The rights accruing to a Member and each other Indemnified
Party under this Section 13.1 shall not exclude any other right to which it or
they may be lawfully entitled; provided that any right of indemnity or
reimbursement granted in this Section 13.1 or to which any Indemnified Party may
be otherwise entitled may only be satisfied out of the assets of the Company,
and no Member and no withdrawn Member shall be personally liable with respect to
any such claim for indemnity or reimbursement. Notwithstanding any of the
foregoing to the contrary, the provisions of this Section 13.1 shall not be
construed so as to provide for the indemnification of a Member or any other
Indemnified Party for any liability to the extent (but only to the extent) that
such indemnification would be in violation of applicable law or such liability
may not be waived, modified or limited under applicable law, but shall be
construed so as to effectuate the provisions of this Section 13.1 to the fullest
extent permitted by law.
13.2 Reimbursement and Indemnity. If a Member shall, pursuant to
authorization of or approval by the Members Committee or a final judgment of a
court of competent jurisdiction or in compliance with law or order of any
governmental agency, pay any amount on behalf of or for the account of the
Company with respect to any liability, obligation, undertaking, damage, or claim
for which the Company shall or may, pursuant to contract or applicable law, be
liable or responsible, or with respect to making good any loss or damage
sustained by, or paying any duty, cost, claim, or damage incurred by, the
Company, then the Company shall reimburse such Member for such amount as shall
have been so paid by such Member. If the Company shall fail fully to reimburse
such paying Member, the other Member shall indemnify such paying Member by
paying to it that share of the excess of (a) such payments over (b) the
aggregate reimbursement, if any, which such paying Member shall have received
from the Company in respect of such payments, as shall be proportionate to the
other Member's Percentage Interest. This Section 13.2 shall have no application
to any liability incurred by the Company to a Member pursuant to any contract
between the Company and such Member, including without limitation, the Long Term
Supply Agreement between the Company and Harvest States referred to in Section
2.7(c) of the Joint Venture Agreement.
13.3 Exculpation. No Officer, Committee Member, Company employee,
Member or Affiliate thereof or their respective Agents and/or the legal
representatives of any of them shall be liable to any Member or the Company for
mistakes of judgment or for any action or inaction which may cause or result in
any loss or damage to the Company or the other Members unless such action or
inaction constitutes fraud or willful misconduct. Each Member may (on its own
behalf or on the behalf of any Committee Member or Officer designated by such
Member, any Affiliates of such Member or their respective Agents and/or legal
representatives of any of them), consult with counsel, accountants and other
experts in respect of the Company's affairs and such Person shall be fully
protected and justified in any action or inaction which is taken in accordance
with the advice or opinion of such counsel, accountants or other experts;
provided that they shall have been selected with reasonable care. The Members
shall have no duties or obligations to the Company or the other Members unless
expressly imposed by this Agreement.
13.4 Indemnification Relating To Initial Contributions. ▇▇▇▇▇▇ and
Harvest States each hereby agree to indemnify and hold harmless each other from
and against any and all liability, loss or damage which shall result from the
failure of either of them, for any reason, to timely make the initial
contributions of capital to the Company required by Section 8.2. Such indemnity
shall include, but shall not be limited to, the reimbursement by the defaulting
party of the non-defaulting party for 100% of all organizational expenses
incurred by the non-defaulting party in connection with the Joint Venture
Agreement, this Agreement and the transactions contemplated thereby and hereby,
including but not limited to the expenses provided in Section 14.2 of the Joint
Venture Agreement to be reimbursed by the Company.
The indemnification provided for in this Section 13.4 shall apply only
in the case of the failure of either ▇▇▇▇▇▇ or Harvest States to timely make the
initial capital contributions required by Section 8.2 and shall not apply to
their respective obligations to contribute additional capital to the Company or
to any other of their respective obligations under this Agreement, preserving
unto each of ▇▇▇▇▇▇ and Harvest States, however, such rights as may be afforded
them under applicable law in the case of a breach of any of such other
obligations.
ARTICLE 14
MISCELLANEOUS
14.1 Notices. All notices, requests, demands or other communications
required by or otherwise with respect to this Agreement shall be in writing and
shall be deemed to have been duly given to any party (i) where delivered
personally (by courier service or otherwise), (ii) when delivered by facsimile
and confirmed by return facsimile, (iii) on the business day after the date sent
by a nationally recognized overnight courier service, or (iv) seven days after
being mailed by first-class, registered or certified mail, postage prepaid and
return receipt requested, in each case to the applicable addresses set forth
below:
If to Harvest States: Harvest States Cooperatives
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇. ▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Senior Vice President
Consumer Products Packaging
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: Harvest States Cooperatives
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇. ▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Legal Department
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇: ▇▇▇▇▇▇ Foods, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to: Mitsui & Co., Ltd.
2-1, Ohtemachi 1-chome
▇▇▇▇▇▇▇-▇▇
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇
Attention: General Manager
Oil Seeds, Oils &
Fats Division (TKPOZ)
Facsimile: ▇▇-▇-▇▇▇▇-▇▇▇▇
or to such other address or facsimile number as any party may have furnished to
the other parties in writing in accordance with this Section 14.1.
14.2 Governing Law. This Agreement shall be governed by, interpreted,
and construed in accordance with the laws of the State of Delaware, without
regard to Delaware choice of law provisions.
14.3 Amendments.
(a) This Agreement may be modified or amended only by an
instrument in writing signed by each Member, and, as so modified and
amended, shall inure to the benefit of all of the Members.
(b) ▇▇▇▇▇▇ and Harvest States acknowledge that in the event of
the admission of one or more Additional Members or Substituted Members
of the Company, appropriate revision of portions of this Agreement will
be necessary, to be mutually agreed by ▇▇▇▇▇▇ and Harvest States as a
condition of the admission of such Additional Member or Substituted
Member.
14.4 Entire Agreement. Except to the extent other agreements are
specifically referred to herein, this Agreement constitutes the entire agreement
between the Members with respect to the matters covered hereby and thereby and
supersedes all prior agreements, understandings, offers and negotiations, oral
or written.
14.5 Waiver of Partition. Each Member hereby irrevocably waives any
and all rights that it may have to maintain an action for partition of any of
the Company's property.
14.6 Consents. All consents, agreements and approvals required or
permitted by this Agreement shall be in writing and a signed copy thereof shall
be filed and kept with the books of the Company.
14.7 Successors. Subject to Articles 11, all rights and duties of the
Members hereunder shall inure to the benefit of and be binding upon their
respective successors and assigns.
14.8 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which shall
constitute one and the same instrument.
14.9 Severability. Each provision of this Agreement shall be considered
severable and if for any reason any provision which is not essential to the
effectuation of the basic purposes of the Agreement is determined by a court of
competent jurisdiction to be invalid or unenforceable and contrary to existing
or future applicable law, such invalidity shall not impair the operation of or
affect those provisions of this Agreement which are valid. In that case, this
Agreement shall be construed so as to limit any term or provision so as to make
it enforceable or valid within the requirements of any applicable law, and in
the event such term or provision cannot be so limited, this Agreement shall be
construed to omit such invalid or unenforceable provisions.
14.10 Survival. All indemnities and reimbursement obligations made
pursuant to this Agreement shall survive dissolution and liquidation of the
Company until expiration of the longest applicable statute of limitations
(including extensions and waivers) with respect to the matter for which a party
would be entitled to be indemnified or reimbursed, as the case may be.
14.11 No Third Party Beneficiaries. Nothing contained in this Agreement
is intended to, or shall, confer upon any Person other than the parties hereto
any rights or remedies hereunder.
IN WITNESS WHEREOF, the Members have executed this Limited Liability
Company Agreement as of the date first hereinabove written.
HARVEST STATES COOPERATIVES
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
▇▇▇▇▇▇ FOODS, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇
Title: President/CEO
EXHIBITS
Schedules
I Members; Capital Contributions; Percentage Interests
II Initial Committee Members
SCHEDULE I
INITIAL CAPITAL CONTRIBUTION OF MEMBERS
====================================================================================================
INITIAL CAPITAL CONTRIBUTION
----------------------- --------------------------------------------------- ========================
Percentage
Member Total Interest
----------------------- --------------------------------------------------- ========================
▇▇▇▇▇▇ The ▇▇▇▇▇▇ Assets described in the Joint Venture 60%
Agreement with an agreed Fair Market Value (net
of the ▇▇▇▇▇▇ Liabilities assumed by the Company)
of $40,544,000
======================= =================================================== ========================
Harvest States The Holsum Assets described in the Joint Venture 40%
Agreement with an agreed Fair Market Value (net
of the Holsum Liabilities assumed by the Company)
of $27,030,000
======================= =================================================== ========================
SCHEDULE II
INITIAL APPOINTEES TO MEMBERS COMMITTEE
WILSEY HARVEST STATES
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