LIMITED LIABILITY COMPANY AGREEMENT OF NEW PE HOLDCO LLC

SECTION 10 REPRESENTATIONS OF MEMBERS		31
10.1	Organization; Authority.	31
10.2	No Conflict.	31
10.3	No Proceeding.	31
10.4	Enforceability.	31
10.5	Acquisition of Units.	31
10.6	Bank Holding Company Act.	32
SECTION 11 DISSOLUTION AND WINDING UP		32
11.1	Dissolution Events.	32
11.2	Winding Up.	32
11.3	Liquidator Distributions.	33
11.4	Deemed Distribution and Recontribution.	33
11.5	Rights of Members.	34
11.6	Notice of Dissolution/Termination.	34
11.7	Allocations During Period of Liquidation.	34
11.8	Character of Liquidating Distributions.	34
11.9	The Liquidator.	34
11.10	Form of Liquidating Distributions.	35
SECTION 12 INDEMNIFICATION		35
12.1	General.	35
12.2	Advancement of Expenses.	36
SECTION 13 MISCELLANEOUS		37
13.1	Notices.	37
13.2	Binding Effect.	37
13.3	Construction.	37
13.4	Time.	3 8
13.5	Headings.	38
13.6	Severability.	38
13.7	Incorporation by Reference.	38
13.8	Variation of Terms.	38
13.9	Governing Law.	3 8
13.10	Submission to Jurisdiction; Waiver of Jury Trial and Venue.	38
13.11	Counterpart Execution.	39
13.12	Specific Performance.	39
13.13	No Third Party Beneficiaries.	40
13.14	Entire Agreement.	40

 

 

(a) The Board shall consist of five (5) members (each, a “Manager”). The initial Managers as of the Effective Date are: Ned Kleinschmidt, Merrill Kramer, Alex Sorokin and Denis J. Taura, with one (1) vacancy to be filled, in accordance with Section 5.2(c) or 5.2(d), as applicable, upon the earlier to occur of the (i) exercise of the Call Option and (ii) expiration of the 90-day Call Option exercise period as provided in the Call Option Agreement. A Manager need not be a resident of the State of Delaware or a Member of the Company.

 

(b) Each of the initial Managers, including any Manager elected to fill the initial vacancy, shall hold office until the earlier of (i) the first anniversary of the Effective Date and until such Manager’s successor is designated or elected and qualified and (ii) his or her resignation, removal or death. Thereafter, each Manager shall hold office for a period of one (1) year (and until his or her successor is designated or elected and qualified) or such shorter period resulting from such Manager’s resignation, removal or death. New Managers shall be designated or elected, as applicable, prior to the end of the term of the existing Board, or as soon as practicable after the end of the term of the existing Board (each such period of designation and election, a “Board Election”). There is no limit on the number of terms a Manager may serve on the Board.

 

(c) Each Member holding at least twenty percent (20%) of the Units outstanding as of the Record Date for any Board Election (or as of the time a vacancy is to be filled pursuant to Section 5.3(c)) (a “Designating Member”) shall be entitled to designate one Manager (each such Manager, a “Designated Manager”) to serve on the Board for the ensuing term. At such time as the vacancy on the initial Board is to be filled, if the Call Option shall have been exercised for at least twenty percent (20%) of the Units then outstanding, the Call Option Counterparty shall be entitled to designate a Manager to fill such vacancy; if the Call Option has not been exercised, or was exercised for less than twenty percent (20%) of the Units then outstanding, the initial vacancy shall be filled in accordance with Section 5.2(d).

 

(d) Any Managers that are not designated in accordance with Section 5.2(c)  will be elected by the Members who are not Designating Members as of the Record Date for the applicable Board Election. Each such non-Designating Member may nominate one candidate (and if there are fewer nominees than the number of Managers to be elected, any non-Designating Member may nominate additional candidates). Each non-Designating Member may cast in favor of one or more nominees a number of votes, in the aggregate, equal to such Member’s number of Units multiplied by the number of Managers to be elected in such Board Election. Each Manager will be selected by plurality of the votes cast by the non-Designating Members.

 

 

 

 

(a)           The Company shall keep each of the following:

 

 (i)          separate books of account for the Company which shall show a true and accurate record of all costs and expenses incurred, all charges made, all credits made and received, and all income derived in connection with the conduct of the Company and the operation of the Business in accordance with this Agreement;

 

(b)           In accordance with Section 18-305 of the Act, but subject to Section 18-305(c) of the Act, any Member or its designated representatives for a proper purpose related to its position as a Member has the right to have reasonable access during normal business hours to and inspect and copy the contents of such books or records and such additional financial information, documents, books and records regarding the affairs of the Company. Prior to any inspection of such books and records, the Board may require the Member and the Member’s designated representatives to execute a confidentiality and non-disclosure agreement (with

operative provisions substantially in the form of the Confidentiality Provisions) with regard to the information to be inspected or copied.

 

 

The Board of the Company shall be responsible for causing the preparation and distribution of quarterly financial reports of the Company.

 

 

 (a)           Tax Elections. The Tax Matters Member shall, without any further consent of the Members being required (except as specifically required herein), make any and all elections for federal, state, local, and foreign tax purposes including, without limitation, any election, if permitted by applicable law: (i) to adjust the basis of Property pursuant to Code Sections 754, 734(b) and 743(b), or comparable provisions of state, local or foreign law, in connection with Transfers of Units and Company distributions; and (ii) with the consent of (A) a majority of the Board and (B) Members holding at least a Supermajority of the Units then outstanding, to extend the statute of limitations for assessment of tax deficiencies against the Members with respect to adjustments to the Company’s federal, state, local or foreign tax returns. To the extent provided in Code Sections 6221 through 6231 and similar provisions of federal, state, local, or foreign law, the Tax Matters Member shall represent the Company and the Members before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company or the Members in their capacities as Members, and to file any tax returns and execute any agreements or other documents relating to or affecting such tax matters, including agreements or other documents that bind the Members with respect to such tax matters or otherwise affect the rights of the Company and the Members. Pacific Ethanol Equity Holdings LLC is hereby specifically authorized to act as the “Tax Matters Member” under the Code and in any similar capacity under state or local law.

 

 (b)           Tax Information. Necessary tax information shall be delivered to each Member as soon as practicable after the end of each Fiscal Year.

 

 

 

 (a)           Amendments to this Agreement may be proposed by any Member. A proposed amendment shall be adopted and be effective as an amendment hereto if it receives the approval of a majority of the Board and Members holding at least a Supermajority of the Units then outstanding (or, if greater, Members holding not less than the minimum number of Units required for such action as otherwise provided herein, including without limitation in Section 6.8).

 

 (b)           Notwithstanding Section 8.1(a), this Agreement shall not be amended without the consent of each Member adversely affected if such amendment would (i) modify the limited liability of a Member, (ii) alter the interest of a Member in Profits, Losses, other items, or any Company distributions or (iii) modify Section 2.3(b) or otherwise require the making of an

 

additional Capital Contribution other than upon the terms set forth herein as of the Effective Date. The preceding sentence shall not apply to the conversion of the Company effected pursuant to Section 8.2.

 

 

 (a)           Notwithstanding anything to the contrary in this Agreement, the Company may, with the consents required by Section 6.8(c)(iii), change the form of organization in which the Company conducts its business from a limited liability company to a corporation (“Roll-Up Corporation”), either directly, through a merger with an existing corporation, or in any other manner elected by the Board, make all exchanges, and take all other actions, if any, as are reasonably necessary in connection with any conversion pursuant to this Section 8.2(a).

 

 (b)           The shares of capital stock of the corporation resulting from a conversion of the Company to a corporation pursuant to Section 8.2(a) shall be distributed among the Members so that each Member shall receive an amount of such capital stock having a fair market value equal to the amount that would have been distributed to such Member pursuant to Section 11.2 (after adjusting the Members’ Capital Accounts for the hypothetical gain or loss that would be realized by the Company if all of the assets and business, subject to all liabilities, of the Company had been sold immediately prior to the conversion pursuant to Section 11.10 for an aggregate fair market value equal to the aggregate fair market value of such capital stock), (ii) each Member receives the same class of capital stock in such corporation and (iii) each Member’s capital stock enjoys the same ownership rights (including payments, voting power and otherwise) as the other Members’ capital stock.

 

 

 

No Member may Transfer, offer to Transfer, or accept an offer from any proposed Transferee for, all or any amount of its Units to another Person except in accordance with the terms and conditions set forth in this SECTION 9. A Transfer completed in accordance herewith is referred to in this Agreement as a “Permitted Transfer”.

 

 

 (a)           Subject to Section 9.3(c), a Transfer shall not be treated as a Permitted Transfer unless and until all the following conditions are satisfied:

 

 (i)          The Transfer is made to a Permitted Transferee.

 

 (ii)         [Intentionally omitted.]

 

 (iii)        Except in the case of a Transfer involuntarily by operation of law, the Transferor and Transferee shall execute and deliver to the Company such documents and instruments of conveyance (including, without limitation, a Joinder Agreement) as may be reasonably necessary or appropriate in the opinion of counsel to the Company to effect such

Transfer (which, in the case of a Transfer in connection with the Call Option Counterparty’s exercise of the Call Option, shall be any such documentation required pursuant to the terms of the Call Option Agreement and a Joinder Agreement). In the case of a Transfer of Units involuntarily by operation of law, the Transfer shall be confirmed by presentation to the Company of legal evidence of such Transfer, in form and substance reasonably satisfactory to counsel to the Company. In all cases, Company shall be reimbursed by the Transferor and/or Transferee for all costs and expenses that it reasonably incurs in connection with such Transfer.

 

 (iv)        The Transferor and Transferee shall furnish the Company with the Transferee’s taxpayer identification number, sufficient information to determine the Transferee’s initial tax basis in the Units transferred, and any other information reasonably necessary to permit the Company to file all required federal and state tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Company shall not be required to make any distribution otherwise provided for in this Agreement with respect to any transferred Units until it has received such information.

 

 (v)         The Transfer shall not (A) cause the Company to be treated as a “publicly traded partnership” taxable as a corporation for federal income tax purposes, (B) cause the Company to be treated as a corporation for U.S. federal income tax purposes, (C) except in the case of (x) an Approved Sale or (y) any Transfer occurring prior to December 31, 2010 (including without limitation any Transfer resulting from the settlement of a Pending Trade or from the Call Option Counterparty’s exercise of the Call Option), cause the termination of the Company pursuant to Section 708(b)(1)(B) of the Code or (D) affect the Company’s existence as a limited liability company under the Act. The Board may, prior to the admission of a Transferee to the Company as a substituted Member in accordance with Section 9.5, require such Transferee to furnish an opinion of counsel in form and substance reasonably satisfactory to the Company that the Transfer of Units to the Transferee is in compliance with this Section  9.2(a)(v).

 

 (b)           No Member shall in any manner pledge, hypothecate or encumber, or grant options with respect to, his, her or its Units; provided that any Member may assign or pledge his, her or its Units as collateral for any loan (i) with the consent of at least four of the five Managers or (ii) made to the Company, PEH or any Plant LLC if required in connection with such a loan by Members holding a Super- Supermaj ority of the Units then outstanding (then each Member will enter into a pledge and/or security agreement (without recourse, except to the Units so pledged) in the same form as that entered into by Members holding a Super­Supermajority of the Units then outstanding).

 

 (c)           Members (excluding the Member proposing the applicable Transfer) holding a Super- Supermaj ority of the Units then outstanding may waive, with respect to any proposed Transfer, any of the conditions of a Permitted Transfer set forth herein and, upon the granting of such waiver, such proposed Transfer shall be a Permitted Transfer for purposes of this Agreement.

 

 (a)           Except as otherwise specifically provided herein, any purported Transfer of Units that is not a Permitted Transfer shall, to the fullest extent permitted by law, be null and void and of no force or effect whatever; provided that, if the Company is required to recognize a Transfer that is not a Permitted Transfer, the Units Transferred shall be strictly limited to the Transferor’s rights to allocations and distributions as provided by this Agreement with respect to the Transferred Units, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities for damages that the Transferor or Transferee of such Units may have to the Company.

 

 (b)           In the case of a Transfer or attempted Transfer of Units that is not a Permitted Transfer, the parties engaging or attempting to engage in such Transfer shall, to the fullest extent permitted by law, be liable to indemnify and hold harmless the Company and the other Members from all cost, liability, and damage that any of the Company or such indemnified Members may incur (including, without limitation, incremental tax liabilities, lawyers’ fees and expenses) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby.

 

 (c)           Exit Facility Members are subject to the Credit Agreement’s requirement that any assignment or participation of debt within the ninety (90) day period following the Effective Date be accompanied by an assignment of an equivalent proportion of the Units of such Exit Facility Member and of any of its Affiliates. Therefore, each Exit Facility Member shall not, during the ninety (90) day period following the Effective Date, Transfer any of the Units such Member received on the Effective Date in its capacity as an Exit Facility Member in accordance with Section 6.02(a) of the Reorganization Plan.

 

 

A Person who acquires Units pursuant to a Permitted Transfer but who is not admitted as a substituted Member pursuant to Section 9.5 shall be entitled only to allocations and distributions with respect to such Units in accordance with this Agreement, and shall have no right to any information or accounting of the affairs of the Company, shall not be entitled to inspect the books or records of the Company, and shall not have any of the rights of a Member under the Act or this Agreement.

 

 

Subject to the other provisions of this SECTION 9, a Transferee of Units may be admitted to the Company as a substituted Member only upon satisfaction of the conditions set forth in this Section 9.5:

 

 (a)           the Units with respect to which the Transferee is being admitted were acquired by means of a Permitted Transfer;

 

 (b)           the Transferee of Units (other than, with respect to clause (i) below, a Transferee that was a Member prior to the Transfer) shall, by written instrument in form and substance reasonably satisfactory to the Board (and, in the case of clause (ii) below, the Transferor Member), (i) accept and adopt the terms and provisions of this Agreement and (ii) assume the obligations of the Transferor Member under this Agreement with respect to the

Transferred Units. The Transferor Member shall be released from all such assumed obligations except (x) those obligations or liabilities of the Transferor Member prior to transfer arising out of a breach of this Agreement by the Transferor Member, (y) those obligations or liabilities of the Transferor Member based on events occurring, arising or maturing prior to the date of Transfer and (z) in the case of a Transfer to any of its Affiliates, any Capital Contribution or other financing obligation of the Transferor Member under this Agreement;

 

 (c)           the Transferee pays or reimburses the Company for all reasonable legal, filing, and publication costs that the Company incurs in connection with the admission of the Transferee as a Member with respect to the Transferred Units; and

 

(d)           except in the case of a Transfer involuntarily by operation of law, if required by the Board, the Transferee (other than a Transferee that was a Member prior to the Transfer) shall deliver to the Company evidence of the authority of such Person to become a Member and to be bound by all of the terms and conditions of this Agreement, and in all cases, the Transferee and Transferor shall each execute and deliver such other instruments as the Board reasonably deems necessary or appropriate to effect, and as a condition to, such Transfer, including amendments to the Certificate or any other instrument filed with the State of Delaware or any other state or governmental authority.

 

 

If any Units are Transferred during any Fiscal Year in compliance with the provisions of this SECTION 9, Profits, Losses, each item thereof, and all other items attributable to the Transferred Units for such Fiscal Year shall be divided and allocated between the Transferor and the Transferee by taking into account their varying holdings of Units during the calendar year in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Board. All distributions on or before the date of such Transfer shall be made to the Transferor, and all distributions thereafter shall be made to the Transferee. Solely for purposes of making such allocations and distributions, the Company shall recognize such Transfer not later than the end of the calendar month during which it is given notice of such Transfer, provided that, if the Company is given notice of a Transfer at least ten (10) Business Days prior to the Transfer, the Company shall recognize such Transfer as of the date of such Transfer, and provided further that if the Company does not receive a notice stating the date such Units were transferred and such other information as the Board may reasonably require within thirty (30) days after the end of the Fiscal Year during which the Transfer occurs, then all such items shall be allocated, and all distributions shall be made, to the Person who, according to the books and records of the Company, was the owner of the Units on the last day of such Fiscal Year. None of the Company, any Manager nor any Member shall incur any liability for making allocations and distributions in accordance with the provisions of this Section 9.6, whether or not the Company has knowledge of any Transfer of ownership of any Units.

 

 

 (a)           If at any time (or from time to time in any 120-day period; provided that any Permitted Transfer resulting from the settlement of a Pending Trade shall not be considered for purposes of applying this 120-day period) a Member (a “Tag-Along Seller”) agrees to

 

Transfer ten percent (10%) or more of the total Units then outstanding for value to any Permitted Transferee (other than an Affiliate of such Tag-Along Seller, a “Tag-Along Purchaser” and such sale a “Tag-Along Sale”), then, each other Member (each, a “Tag-Along Rightholder”) shall have the right to make an offer to sell to such Tag-Along Purchaser, upon the terms set forth in the Tag-Along Notice, a number of Units held by such Tag-Along Rightholder (the “Tag-Along Offered Units”) equal to the product obtained by multiplying (i) the aggregate number of Units intended to be sold by the Tag-Along Seller in such Tag-Along Sale by (ii) a fraction, the numerator of which is the number of Units owned by such Tag-Along Rightholder immediately prior to such Tag -Along Sale and the denominator of which is the total number of Units outstanding immediately prior to such Tag-Along Sale. Notwithstanding any other provision of this Section 9.7, any Tag-Along Sale must satisfy the conditions set forth in Section 9.2 and otherwise be a Permitted Transfer.

 

 (b)           The Tag-Along Seller intending to Transfer Units to a Tag-Along Purchaser shall give written notice to each Tag-Along Rightholder of each proposed Transfer by it that gives rise to the rights of the Tag-Along Rightholders set forth in this Section 9.7, at least fourteen (14) days prior to the proposed consummation of such transfer, setting forth the name of such Tag-Along Seller, the number of Units proposed to be sold by such Tag-Along Seller, the name and address of the proposed Tag-Along Purchaser, the proposed amount and form of consideration and terms and conditions of payment offered by such Tag-Along Purchaser, the percentage of Units that such Tag-Along Rightholder may sell to such Tag-Along Purchaser (determined in accordance with Section 9.7(a)) and the per Unit purchase price (or a reasonable estimate of the maximum and minimum per Unit purchase price) (the “Tag-Along Notice”). The tag-along rights provided by this Section 9.7 must be exercised by any Tag-Along Rightholder wishing to sell its Units within seven (7) Business Days following receipt of the Tag-Along Notice, by delivery of a written irrevocable offer (the “Tag-Along Rightholder’s Offer”) to the Tag-Along Seller indicating such Tag-Along Rightholder’s wish to have an amount of its Units included in the Tag-Along Sale and specifying the number of Tag-Along Offered Units (up to the maximum number of Tag-Along Offered Units as determined in accordance with Section 9.7(a)) it wishes to sell, provided that any Tag-Along Rightholder may waive its rights under this Section 9.7 prior to the expiration of such seven (7) Business Day period by giving written notice to the Tag-Along Seller, with a copy to the Company. Subject to the other terms herein, delivery of the Tag-Along Rightholder’s Offer will constitute an irrevocable commitment by such Tag-Along Rightholder to sell its Units on the terms set forth in such Tag-Along Rightholder’s Offer. The failure of a Tag-Along Rightholder to respond within such seven (7) Business Day period shall be deemed to be a waiver of such Tag-Along Rightholder’s rights under this Section 9.7 with respect to the transfer on the terms set forth in the Tag-Along Notice.

 

 (c)           The Tag-Along Seller shall attempt to obtain the inclusion in the proposed Tag-Along Sale of the entire number of Units that the Tag-Along Rightholders timely elect to have included in such Tag-Along Sale. If the Tag-Along Seller is unable to obtain such inclusion of all such Units, then (i) the number of Units to be sold in such Tag-Along Sale shall be allocated on a pro rata basis among the Tag-Along Seller and each Tag-Along Rightholder who shall have timely elected to participate in such Tag-Along Sale in proportion to the total number of Units offered and eligible to be sold in the Tag-Along Sale by each such Holder or (ii) the Tag-Along Seller shall be permitted to sell its Units in a Tag-Along Sale provided that it

purchases, for the same price and upon the same terms, from each Tag-Along Rightholder who shall have timely elected to participate in such Tag-Along Sale the number of Units that the Tag-Along Rightholder could have included in such Tag-Along Sale (in each case calculated on a fully-diluted basis).

 

 (d)           If (i) the Tag-Along Seller has not consummated the Tag-Along Sale within sixty (60) days of the delivery of the Tag-Along Notice (for any reason other than the failure of a Tag-Along Rightholder to sell its Units under this Section 9.7) or (ii) the principal terms and conditions of the Tag-Along Sale shall change, in any material respect, from those in the Tag-Along Notice, then the Tag-Along Notice and any Tag-Along Rightholder’s Offer shall be null and void, and it shall be necessary for a separate Tag-Along Notice to be furnished, and the terms and provisions of this Section 9.7 separately complied with, in order to consummate such proposed Tag-Along Sale pursuant to this Section 9.7; provided, however, that the Tag-Along Notice and the Tag-Along Rightholders’ Offers shall not be null and void if the Tag-Along Seller receives the unanimous written consent of each of the Tag-Along Rightholders agreeing to an extension and/or revised terms. Notwithstanding any other provision of this Section 9.7, there shall be no liability on the part of any Tag-Along Seller to any other Member arising from the failure of any Tag-Along Seller to consummate the Tag-Along Sale for any reason, and the decision to consummate such Tag-Along Sale shall be in the sole discretion of the Tag-Along Seller.

 

 

 (a)           Upon receiving the requisite approval, pursuant to Section 6.8, of a sale of greater than 50% of the Units then outstanding (including a purchase by merger) to a Permitted Transferee (an “Approved Sale”), the Company shall send written notice (the “Drag-Along Notice”) to the Members notifying them they will be required to sell their Units in such Approved Sale. Notwithstanding any other provision of this Section 9.8, any Approved Sale must satisfy the conditions set forth in Section 9.2 and otherwise be a Permitted Transfer.

 

 (b)           If the Approved Sale has not been consummated within ninety (90) days following delivery of the Drag-Along Notice, the Drag-Along Notice shall be null and void, each Member shall be released from his, her or its obligation under the Drag-Along Notice and it shall be necessary for a separate Drag-Along Notice to be furnished and the terms and provisions of this Section 9.8 separately complied with, in order to consummate such Approved Sale pursuant to this Section 9.8.

 

 

 (a)           Each Member participating in a proposed sale under Section 9.7 or 9.8 shall take or cause to be taken at the expense of the Company all such reasonable actions consistent with the terms of this Agreement as may be necessary or reasonably desirable in order expeditiously to consummate such sale and any related transactions, including without limitation: executing, acknowledging and delivering consents, assignments, waivers and other documents or instruments; furnishing information and copies of documents reasonably requested of it; and otherwise reasonably cooperating with the selling Members or the Company, as the case may be, and the prospective buyer. Without limiting the generality of the foregoing:

 (i)          with respect to proposed Tag-Along Sales, each such participating Member agrees to execute and deliver such agreements as may be reasonably specified by the selling Member or the Company, as the case may be, (so long as all Members will be subject to the same terms), including without limitation agreements to (A) make individual customary representations, warranties, covenants and other agreements as to, among other things, the unencumbered title to its Units and the power, authority and legal right to transfer such Units, (B) be severally, not jointly, liable with all other sellers (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and other agreements in respect of the Company and its subsidiaries and (C) be subject to confidentiality restrictions in respect of the business of the Company and its subsidiaries (with the operative provisions of such confidentiality restrictions substantially in the form of the Confidentiality Provisions); provided, however, that, with respect to representations, warranties and covenants of the type described in clause (B) above, the aggregate amount of such liability will not exceed the lesser of (1) such Member’s pro rata portion of any such liability, to be determined in accordance with such Member’s portion of the total amount of Units included in such sale and (2) the proceeds actually received by such Member in connection with such sale.

 

 (ii)         with respect to a proposed sale under Section 9.8 [Drag-Along] each such participating Member agrees to execute and deliver such agreements as may be reasonably specified by the selling Member or the Company, as the case may be, (so long as all Members will be subject to the same terms), including without limitation agreements to (A) make individual representations, warranties, covenants and other agreements that (y) are, in the case, acceptable to Members holding at least a Super-Supermajority of the Units then outstanding and (z) relate to, among other things, the unencumbered title to its Units and the power, authority and legal right to transfer such Units, (B) be severally, not jointly, liable with all other sellers (whether by purchase price adjustment, indemnity payments or otherwise) in respect of representations, warranties, covenants and other agreements in respect of the Company and its subsidiaries and (C) be subject to confidentiality restrictions in respect of the business of the Company and its subsidiaries (with the operative provisions of such confidentiality restrictions substantially in the form of the Confidentiality Provisions); provided, however, that, with respect to representations, warranties and covenants of the type described in clause (B) above, the aggregate amount of such liability will not exceed the lesser of (1) such Member’s pro rata portion of any such liability, to be determined in accordance with such Member’s portion of the total amount of Units included in such sale and (2) the proceeds actually received by such Member in connection with such sale.

 

 (b)           The closing of a sale pursuant to Section 9.7 or 9.8 will take place at such time and place as the selling Members or the Company, as the case may be, shall reasonably specify by notice to each participating Member. At the closing, in the case of a sale of Units, each participating Member shall deliver any certificates evidencing the Units to be sold by such Member, duly endorsed in blank by the Person(s) in whose name the certificate is issued or accompanied by a duly executed instrument of assignment separate from the certificate, free and clear of any liens or encumbrances, against delivery of the applicable consideration.

 

 (c)           In any sale pursuant to Section 9.7 or 9.8, the sale of Units by the selling Members shall be made on the same terms (including, without limitation, the per Unit price and the type of consideration to be received per Unit or each type of security being purchased) and

shall be subject to the same conditions, and all such selling Members shall receive the proceeds from such sale (allocated as provided herein) at the same time.

 

 

Each Member represents, warrants, agrees and acknowledges that:

 

10.1        Organization; Authority. (a) It is a corporation, limited liability company, partnership or other entity, as applicable, duly organized or formed and validly existing and in good standing under the laws of the jurisdiction of its organization or formation; (b) it has all requisite corporate, limited liability company, partnership or other entity power and authority to enter into this Agreement, to acquire and hold its Units and to perform its obligations hereunder; and (c) the execution, delivery and performance of this Agreement has been duly authorized by all necessary corporate, limited liability company, partnership or other entity action.

 

10.2        No Conflict. (a) Its execution and delivery of this Agreement and the performance of its obligations hereunder will not (i) conflict with, result in a breach of or constitute a default (or any event that, with notice or lapse of time, or both, would constitute a default) or result in the acceleration of any obligation under any of the terms, conditions or provisions of any other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets are subject, which conflict, breach, default or acceleration could reasonably be expected to materially and adversely affect the performance of its obligations hereunder, or (ii) conflict with or violate any of the provisions of its organizational documents, or violate any statute or any order, rule or regulation of any court or governmental or regulatory agency, body or official, which conflict or violation could reasonably be expected to materially and adversely affect the performance of its obligations hereunder; and (b) it has obtained any consent, approval, authorization or order of any court or governmental agency or body required for the execution, delivery and performance by it of its obligations hereunder, except where the failure of such Member to obtain any such consent, approval, authorization or order would not materially and adversely affect the performance of such Member’s obligations hereunder.

 

10.3        No Proceeding. There is no litigation, action, suit, investigation, proceeding by or before any governmental authority or arbitrator pending or, to its knowledge, threatened against such Member, which would prohibit its entering into, or that could materially and adversely affect its ability to perform its obligations under, this Agreement.

 

10.4        Enforceability. This Agreement is a binding agreement on the part of such Member enforceable against it in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to creditors’ rights and general principles of equity.

 

10.5        Acquisition of Units. It is acquiring its Units for its own account for investment purposes only and not with a view to the distribution or resale thereof, in whole or in part, and agrees that it will not Transfer all or any of its Units, or solicit offers to buy from or otherwise approach or negotiate in respect thereof with any Person or Persons whomsoever, all or any of its

Units in any manner that would violate or cause the Company or any Member to violate applicable federal or state securities laws.

 

10.6        Bank Holding Company Act.

 

 (a)           If, as of the date hereof or at any time hereafter, such Member holds five percent (5%) or more of the outstanding Units, such Member is not (a) subject to the U.S. Bank Holding Company Act of 1956, as amended from time to time (the “BHCA”), (b) directly or indirectly “controlled” (as that term is defined in the BHCA) by a company that is subject to the BHCA or (c) otherwise prohibited from owning, controlling or having the power to vote shares representing 5% or more of the Units outstanding from time to time.

 

 (b)           If any Member that holds, from time to time, five percent (5%) or more of the outstanding Units cannot, at any time hereafter, accurately make the representations set forth in clause (a) of this Section 10.6, then such Member shall be a “BHCA Member” for purposes of this Agreement including, without limitation, Section 6.11.

 

 

 

 (a)           Dissolution. The Company shall dissolve and shall commence winding up and liquidating upon the first to occur of any of the following (each a “Dissolution Event”):

 

 (i)          with the approval of a majority of the Board and Members holding at least a Super- Supermaj ority of the Units then outstanding, to dissolve, wind up, and liquidate the Company; or

 

 (ii)         a judicial determination that an event has occurred that makes it unlawful, impossible or impractical to carry on the Business pursuant to Section 18-802 of the Act; or

 

 (iii)        the termination of the legal existence of the last remaining Member of the Company or the occurrence of any other event which terminates the continued membership of the last remaining Member of the Company in the Company unless the Company is continued without dissolution in accordance with the Act.

 

The Members hereby agree that, notwithstanding any provision of the Act, the Company shall not dissolve prior to the occurrence of a Dissolution Event.

 

 

Upon the occurrence of a Dissolution Event, the Company shall continue solely for the purposes of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors and Members, and no Member shall take any action that is inconsistent with, or not necessary to or appropriate for, the winding up of the Company’s business and affairs, provided that all covenants contained in this Agreement and obligations provided for in

this Agreement shall continue to be fully binding upon the Members until such time as the Property has been distributed pursuant to this Section 11.2 and the Certificate has been canceled pursuant to the Act. The Liquidator shall be responsible for overseeing the winding up and dissolution of the Company, which winding up and dissolution shall, to the extent practical, be completed within ninety (90) days of the occurrence of the Dissolution Event. The Liquidator shall take full account of the Company’s liabilities and Property and shall cause the Property or the proceeds from the sale thereof, to the extent sufficient therefor, to be applied and distributed, to the maximum extent permitted by law, in the following order:

 

(a)           First, to creditors (including Members who are creditors, to the extent permitted by law) in satisfaction of all of the Company’s debts and other liabilities (whether by payment or the making of reasonable provision for payment thereof), other than liabilities for which reasonable provision for payment has been made and liabilities for distribution to members and former members under Section 18-601 or 18-604 of the Act;

 

(b)           Second, except as provided in this Agreement, to Members and former Members of the Company in satisfaction of liabilities for distribution under Section 18-601 or 18-604 of the Act; and

 

(c)           The balance, if any, to the Members pro rata based upon their respective holdings of the Units.

 

 

In the discretion of the Liquidator, a pro rata portion of the distributions that would otherwise be made to the Members pursuant to this SECTION 11 may be:

 

 

 

 

Notwithstanding any other provision of this SECTION 11, in the event the Company is liquidated within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no Dissolution Event has occurred, the Property shall not be liquidated, the Company’s debts and other liabilities shall not be paid or discharged, and the Company’s affairs shall not be wound up. Instead, solely for federal income tax purposes and state income tax purposes, if applicable, the Company shall be deemed to have distributed the Property in-kind to the Members, who shall be deemed to have taken subject to all debts of the Company and other liabilities all in accordance

with their respective Capital Accounts. Immediately thereafter, the Members shall be deemed to have recontributed the Property in-kind to the Company, which shall be deemed to have taken subject to all such liabilities.

 

 

Except as otherwise provided in this Agreement, each Member shall look solely to the Property of the Company for the return of its Capital Contribution and has no right or power to demand or receive Property other than cash from the Company. If the assets of the Company remaining after payment or discharge of the debts or liabilities of the Company are insufficient to return such Capital Contribution, except as otherwise provided in this Agreement, the Members shall have no recourse against the Company, any Manager or any other Member.

 

 

 (a)           In the event (i) a Dissolution Event occurs or (ii) an event occurs that would, but for provisions of Section 11. 1, result in a dissolution of the Company, the Board shall, within thirty (30) days thereafter, provide written notice thereof to each of the Members and, in the event set forth in clause (i) above, to all other parties with whom the Company regularly conducts business (as determined in the discretion of the Board) and shall publish notice thereof in a newspaper of general circulation in each place in which the Company regularly conducts business (as determined in the discretion of the Board).

 

 (b)           Upon completion of the distribution of the Company’s Property as provided in this SECTION 11, and the Liquidator causing the filing of the Certificate of Cancellation pursuant to Section 18-203 of the Act and taking all such other actions as may be necessary to terminate the Company, the Company shall be terminated.

 

 

Except as otherwise provided in Section 11.2, during the period commencing on the first day of the year during which a Dissolution Event occurs and ending on the date on which all of the assets of the Company have been distributed to the Members pursuant to Section 11. 2, the Members shall continue to share Profits, Losses, gain, loss and other items of Company income, gain, loss or deduction in the manner provided in SECTION 3.

 

 

All payments made in liquidation of the interest of a Member in the Company shall be made, to the maximum extent permitted by the Code, in exchange for the interest of such Member in Property pursuant to Code Section 736(b)(1), including the interest of such Member in Company goodwill.

 

 

 (a)           Definition. The “Liquidator” means a Person appointed by the Board to oversee the liquidation of the Company.

 (b)           Fees. The Company is authorized to pay a reasonable fee to the Liquidator for its services performed pursuant to this SECTION 11 and to reimburse the Liquidator for its reasonable costs and expenses incurred in performing those services.

 

 (c)           Indemnification. The Company shall, to the fullest extent permitted by law, indemnify, save harmless, and pay all judgments and claims against such Liquidator or any officers, directors, agents or employees of the Liquidator relating to any liability or damage incurred by reason of any act performed or omitted to be performed by the Liquidator, or any officers, directors, agents or employees of the Liquidator in connection with the liquidation of the Company, including reasonable attorneys’ fees incurred by the Liquidator, officer, director, agent or employee in connection with the defense of any action based on any such act or omission, which attorneys’ fees may be paid as incurred, except to the extent such liability or damage is caused by the fraud, intentional misconduct of, or a knowing violation of the laws by the Liquidator which was material to the cause of action.

 

 

For purposes of making distributions required by Section 11. 2, the Liquidator may determine whether to distribute all or any portion of the Property in-kind or to sell all or any portion of the Property and distribute the proceeds therefrom. In the case of an in-kind distribution of the Property, the Capital Accounts of the Members shall be adjusted in accordance with Section 1.704-1(b)(2)(iv)(e)(1) of the Regulations to reflect the manner in which the unrealized income, gain, loss and deduction inherent in the Property (that has not previously been reflected in the Capital Accounts) would be allocated among the Members if there were a taxable disposition of the Property for its fair market value (taking into account Code Section 7701(g)) on the date of the distribution.

 

 

 

 (a)           The Company, its receiver or its trustee, shall indemnify, to the fullest extent permitted by law, defend and save harmless each of the Members and each Manager, and their respective control persons, and the officers of the Company (each, an “Indemnitee”) who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) by reason of the fact that the Person is or was a Member or Manager, or their control persons, or an officer of the Company, or is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the Person in connection with such action, suit or proceeding, other than such expenses, judgments, fines and amounts arising from the gross negligence or willful misconduct of such Indemnitee.

 (b)           The Company, its receiver or its trustee, shall indemnify, to the fullest extent permitted by law, defend and save harmless each Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that the Person is or was a by reason of the fact that the Person is or was a Member or Manager, or their control persons, or an officer of the Company, or is or was serving at the request of the Company as a manager, director, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses (including reasonable attorneys' fees) actually and reasonably incurred by the Person in connection with the defense or settlement of such action or suit and except that no indemnification shall be made in respect of any claim, issue or matter (i) arising from the gross negligence or willful misconduct of such Indemnitee or (ii) as to which such Person shall have been adjudged to be liable to the Company, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses that the Court of Chancery or such other court may deem proper.

 

 (c)           The Company may purchase and pay for insurance as would be customary for any Person engaging in a similar business.

 

 (d)           Any indemnification may be made by the Company only as authorized in Section 12.1(a), only if authorized in the specific case by (i) the Board (excluding any Manager that is an Indemnitee) and (ii) Members (excluding the Indemnitee and his, her or its Affiliates, as applicable) holding at least a Supermajority of the Units then outstanding, provided that if the Company refuses or is unable to so indemnify the Indemnitee, within thirty (30) days after a written claim has been received by the Company, the Indemnitee may at any time thereafter initiate proceedings against the Company pursuant to Section 13.10 to recover the unpaid amount of the claim and, if successful, in whole or in part, the Indemnitee shall be entitled to be paid also the expense of prosecuting such proceeding. The Company may assert as a defense to any such action that the Indemnitee has not met the standards of conduct set forth herein for the Company to indemnify the Indemnitee for the amount claimed.

 

 (e)           Notwithstanding the foregoing, to the extent a present or former Member or officer has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) or (b) or in defense of any claim, issue or matter therein, such Indemnitee shall be indemnified, to the fullest extent permitted by law, against cost, expenses (including attorneys' fees), loss and damage actually and reasonably incurred by the Indemnitee in connection therewith.

 

 

The Company shall advance, to the extent funds are available or can be provided on behalf of the Company by PEH or any Plant LLC (subject to the restrictions contained in the Credit Agreement), all expenses incurred by an Indemnitee in connection with the investigation, defense, settlement or appeal of any civil or criminal action or proceeding referenced in Section 12.1. The Indemnitee shall repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that such Indemnitee is not entitled to be indemnified by the

Company as authorized hereby. The advances able to be made hereunder shall be paid by the Company to the Indemnitee within ten (10) days following delivery of a reasonable written request therefor by the Indemnitee to the Company.

 

 

 

Any notice, payment, demand, or communication required or permitted to be given by any provision of this Agreement shall be in writing and shall be deemed to have been delivered, given, and received for all purposes (i) if delivered personally to the Person or to an officer of the Person to whom the same is directed, or (ii) when the same is actually received, if sent either by registered or certified mail, postage and charges prepaid, or by facsimile or electronic mail, if (y) delivery by electronic mail is permitted by such Person (which it shall be, unless otherwise indicated on such Person’s signature page hereto) and (z) either (A) telephonic or electronic confirmation of delivery is obtained or (B) such facsimile or electronic mail is followed by a hard copy of the communication sent promptly thereafter by registered or certified mail, postage and charges prepaid, in each case addressed as follows, or to such other address as such Person may from time to time specify by notice to the Company: (a) if to the Company, to c/o JT Miller Group LLC, 777 Campus Commons Road #200, Sacramento, CA, 95825, facsimile ###-###-####, ***@***; and (b) if to any of the Members, to the notice address listed on such Member’s signature page to this Agreement, or such updated address of which such Member has notified the Company pursuant to Section 2.6.

 

 

 (a)            Except as otherwise provided in this Agreement, every covenant, term, and provision of this Agreement shall be binding upon and inure to the benefit of the Members and their respective successors, Transferees, and assigns.

 

 (b)            Except as expressly set forth in SECTION 12, nothing herein expressed or implied is intended to confer upon any Person, other than the parties hereto or their respective permitted assigns, successors, heirs and legal representatives, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

 

 (a)           Every covenant, term, and provision of this Agreement shall be construed simply according to its fair meaning and not strictly for or against any party.

 

 (b)           Many of the terms of this Agreement are intended to alter or extend provisions of the Act as they may apply to the Company or the Members. To the extent permitted by the Act, it is intended that the provisions of this Agreement shall override the provisions of the Act to the extent of any inconsistency or contradiction between them. Any failure of this Agreement to mention or specify the relationship of such terms to provisions of the Act that may affect the scope or application of such terms shall not be construed to mean that any such term is not intended to be an operating agreement provision authorized or permitted by the

Act or which in whole or in part alters, extends or supplants provisions of the Act as may be allowed thereby.

 

In computing any period of time pursuant to this Agreement, the day of the act, event or default from which the designated period of time begins to run shall not be included, but the time shall begin to run on the next succeeding day. The last day of the period so computed shall be included, unless it is a Saturday, Sunday or legal holiday, in which event the period shall run until the end of the next day which is not a Saturday, Sunday or legal holiday.

 

 

Section and other headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision hereof.

 

 

Except as otherwise provided in the succeeding sentence, every provision of this Agreement is intended to be severable, and, if any term or provision of this Agreement is illegal or invalid for any reason whatsoever, such illegality or invalidity shall not affect the validity or legality of the remainder of this Agreement. The preceding sentence of this Section 13.6 shall be of no force or effect if the consequence of enforcing the remainder of this Agreement without such illegal or invalid term or provision would be to cause any Member to lose the material benefit of its economic bargain.

 

 

Every exhibit, appendix, schedule, and other addendum attached to this Agreement and referred to herein is incorporated in this Agreement by reference unless this Agreement expressly otherwise provides.

 

 

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

 

 

The laws of the State of Delaware shall govern the validity of this Agreement, the construction of its terms, and the interpretation of the rights and duties arising hereunder, without regard to its conflicts of laws provisions.

 

 

 (a) SUBMISSION TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS

PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.

 

 (b)           WAIVER OF JURY TRIAL AND VENUE. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, (i) ANY AND ALL RIGHTS SUCH PARTY MAY HAVE TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR AND (ii) ANY OBJECTION THAT SUCH PARTY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN SECTION 13.10(a). EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

 

 (c)           Service of Process. Each party hereto agrees (i) that service of process may be effectuated by mailing a copy of the summons and complaint, or other pleading, by certified mail, return receipt requested, in accordance with Section 13.1 and (ii) to vote its Units to cause the Company at any time to make the consents, agreements and waivers contained in this Section 13.10 in respect of any action or proceeding against the Company by any Member.

 

 

This Agreement may be executed in any number of counterparts with the same effect as if all of the Members had signed the same document. All counterparts shall be construed together and shall constitute one agreement. This Agreement and any amendments hereto, to the extent signed and delivered by means of a facsimile machine or electronic transmission (including a PDF file), shall be treated in all manner and respects as an original Agreement and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party hereto shall raise the use of a facsimile machine or electronic transmission to deliver a signature or the fact that any signature was transmitted or communicated through the use of a facsimile machine or electronic transmission as a defense to the formation of a contract and each such party forever waives any such defense.

 

Each Member agrees with the other Members that the other Members would be irreparably damaged if any of the provisions of this Agreement are not performed in accordance with their specific terms and that monetary damages would not provide an adequate remedy in such event. Accordingly, it is agreed that, to the fullest extent permitted by law, in addition to any other remedy to which the nonbreaching Members may be entitled, at law or in equity, the nonbreaching Members shall be entitled to seek injunctive relief to prevent breaches of the provisions of this Agreement and specifically to enforce the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having subject matter jurisdiction thereof.

 

 

It is understood and agreed among the parties that this Agreement and the covenants made herein are made expressly and solely for the benefit of the parties hereto (including any Person admitted to the Company as provided in Section 2.2), and that no other Person, other than an Indemnitee under Section 12.1, shall be entitled or be deemed to be entitled to any benefits or rights hereunder, nor be authorized or entitled to enforce any rights, claims or remedies hereunder or by reason hereof.

 

 

This Agreement contains the entire understanding and agreement among the Members with respect to the subject matter hereof, and supersedes all prior agreements and all contemporaneous oral agreements. Other than the Credit Agreement (and the documents executed and delivered pursuant thereto and in connection therewith) and the Call Option Agreement, there are no other agreements, understandings, representations or warranties among the Members.