GFGY Granite Falls Energy LLC (CE)

FINANCIAL INFORMATION

Pro Forma Information

Due to the fact that the Reclassification will save the Company $435,000, an amount which the Company believes is not material, no pro forma financial information showing the effect of the Reclassification on the Company's financial statements has been prepared. The Company determined that the $435,000 in anticipated cost savings represents approximately 1.8% of the Company’s annual net income for Fiscal Year 2021 (the Company’s most recent fiscal year results) and approximately 5.5% of the Company’s net income for its second fiscal quarter of Fiscal Year 2022 (the Company's most recent interim period). Further, the Company believes that because the Reclassification and Proposed Operating Agreement would result in a decrease in the Company’s general expenses, management believes that the pro forma financial statements would not be material for the Company’s unit holders who will be asked to vote on the Reclassification and the Proposed Operating Agreement.

Members are encouraged to read the Company’s audited balance sheets as of October 31, 2021 and 2020, and the related statements of operations, changes in Members’ equity, and cash flows for each of the years in the two-year period ended October 31, 2021, all of which are incorporated herein by reference to such financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2021, and Form 10-K/A filed with the SEC on January 31, 2022 and February 28, 2022, respectively, and exhibited hereto as Exhibit 99.1. Members should also read the unaudited balance sheets as of April 30, 2022, and the related statement of operations and statement of cash flows for the fiscal quarter ended April 30, 2022, which are incorporated herein by reference to such unaudited financial statements included in the Company’s Quarterly Report on Form 10-Q for the period ended April 30, 2022, filed with the SEC on June 14, 2022, and exhibited hereto as Exhibit 99.2.

SPECIAL FACTORS RELATED TO THE RECLASSIFICATION AND DEREGISTRATION

Overview of the Reclassification Transaction

This proxy statement is being furnished in connection with the solicitation of proxies for a Special Meeting at which our members will be asked to consider and vote upon amendments to the Current Operating Agreement.  If approved and adopted, the amendments to our Operating Agreement contained in the Proposed Seventh Amended and Restated Operating Agreement will, among other things, result in a reclassification of our Units into three separate and distinct classes, Class A, Class B and Class C.

If the Seventh Amended and Restated Operating Agreement is approved and adopted, Units held by members holding 21 or more Units will be reclassified as Class A Units, Units held by members holding at least 10 but no more than 20 Units will be reclassified as Class B Units, and Units held by members holding 9 or fewer Units will be reclassified as Class C Units.  We intend, immediately following the reclassification, to terminate the registration of our Units with the SEC and suspend further reporting under the Securities Exchange Act of 1934, as amended. Units will retain their classification permanently after the reclassification transaction is implemented.  This means, for example, that if someone acquired five Class A Units at a later date without owning any other Units, those Units would remain Class A Units in the hands of the acquirer even though the acquirer owns less than 21 total Units.

If the Seventh Amended and Restated Operating Agreement is approved and adopted by our members at the Special Meeting and implemented by our Board of Governors, the Unit reclassification transaction will generally affect our members as follows:

The effects of the reclassification transaction are described more fully below under “Reclassification and Deregistration—Effects of the Reclassification Transaction on Members of GFE” beginning on page 27 and the effects on the Company are described more fully below under “Reclassification and Deregistration—Effects of the Reclassification Transaction on GFE; Plans or Proposals after the Reclassification Transaction” beginning on page 25.

Background of the Reclassification Transaction

As an SEC reporting company, we are required to prepare and file with the SEC, among other items, the following:

Our management and several of our employees expend considerable time and resources preparing and filing these reports and we believe that such time and resources could be beneficially redirected to other areas of our operations that would allow management and those employees to focus more of their attention on our business. Also, as a reporting company, we are required to disclose information to the public, including to actual or potential competitors that may be helpful to the competitors in challenging our business operations and to take market share, employees and customers away from the Company. In addition, the costs associated with these reports and other filing obligations comprise a significant corporate overhead expense.  These costs include, but are not limited to, securities counsel fees, auditor fees, annual board meeting fees, costs of printing and mailing documents, and word processing and filing costs.  Our registration and reporting related costs have been increasing over the years due to the requirements imposed by the Sarbanes-Oxley Act of 2002 (“SOX”), including Section 404 of SOX, which requires us to include in our Annual Report on Form 10-K our management’s report on, and assessment of, the effectiveness of our internal controls over financial reporting.  We expect these costs to continue to increase especially as the SEC recently proposed climate-related disclosure rules that would require analysis and disclosure of all greenhouse gas emissions by the Company. We estimate that our costs and expenses incurred in connection with SEC reporting for 2022 will be approximately $435,000.

As of the Record Date, we had 30,606 Units issued and outstanding, held by approximately 989 current Unit holders of record.  Of our approximately 989 Unit holders of record, we believe approximately 774 or 78.3%, hold 20 or fewer units.  Our Board of Governors and management believe that the recurring expense and burden of our SEC-reporting requirements described above are not cost efficient for GFE.  Becoming a non-SEC reporting company will allow us to avoid these costs and expenses.  In addition, once our SEC reporting obligations are suspended, we will not be subject to the provisions of the Sarbanes-Oxley Act of 2002 or the liability provisions of the Securities Exchange Act of 1934, as amended, and our officers will not be required to certify the accuracy of our financial statements under SEC rules.

There can be many advantages to being a public company, possibly including a higher value for our units, a more active trading market and the enhanced ability of the Company to raise capital or make acquisitions.  However, there is a limited market for our units and, in order to avoid being taxed as a corporation under the publicly traded partnership rules under Section 7704 of the Internal Revenue Code, our Units cannot be traded on an established securities market or be readably tradable in a secondary market, thereby assuring that there will continue to be a limited market for our Units.  We have therefore not been able to effectively take advantage of these benefits.  Based on the limited number of Units available and the trading restrictions we must observe under the Internal Revenue Code, we believe it is highly unlikely that our Units would ever achieve an active and liquid market comprised of many buyers and sellers.  In addition, as a result of our limited trading market and our status as a limited liability company, we are unlikely to be well-positioned to use our public company status to raise capital in the future through sales of additional securities in a public offering or to acquire other business entities using our Units as consideration.

In February 2022 we contacted our legal counsel regarding the benefits and detriments of terminating the registration of our Units under federal securities laws and suspending our SEC reporting obligations and the requirements and methods available to accomplish the same.  On March 8, 2022, our Board announced its intention to pursue amendment and restatement of the Current Operating Agreement to reclassify the Company’s Units for the purpose of discontinuing registration with the SEC. On March 8, 2022, the Board issued a letter to the Company’s members regarding the proposed reclassification and the Company’s plan to survey the members regarding each member’s status as an accredited investor. From March through June 2022, our Board evaluated the results of the membership survey and continued discussions regarding the costs associated with going private and the ongoing costs of remaining an SEC-reporting company. Our Board concluded that the Company receives little benefit in being a public company but incurs significant expense to meet the public company reporting requirements.  In particular, there is little trading volume with our Units.  Our Board of Governors discussed these burdens and costs and lack of benefits, and it became clear that the recurring expense and burden of our SEC reporting requirements are not cost efficient and that becoming a non-SEC reporting company would allow us to avoid these costs and expenses.  Our Board concluded that the benefits of being an SEC-reporting company are substantially outweighed by the burden on management, the expense related to the SEC reporting obligations and the burden on the Company’s ability to explore long-term strategies while being a public reporting company.

Our Board considered the requirements for going private as well as the alternatives available for a going private transaction, including a reverse unit split, self-tender offer whereby unit holders owning less than a certain number of units would be “cashed out,” and a reclassification of our units in order to reduce our number of record holders to below 300.  Because our cash resources to effect such a transaction are limited and we believe many of our members feel strongly about retaining their equity interest in the Company, management and our Board found the prospect of effecting a going private transaction by reclassifying our Units an attractive option.

At a meeting of our Board held on February 17, 2022, and attended by our legal counsel, our Board discussed the business considerations for engaging in a going private transaction, highlighting the advantages and disadvantages and issues raised in a going private transaction.  Specifically, the Board discussed the following advantages of going private:

At this meeting, the Board also considered the potential negative consequences of this transaction to our members, and in particular, our smaller members who, following the approval and adoption of the Seventh Amended and Restated Operating Agreement, will be Class B and Class C members:

Additionally, at the meeting, the process and mechanism for going private was discussed.  The Board discussed the possibility of forming an independent special committee to evaluate the reclassification transaction.  However, the Board believed that the fact that our Board would be treated the same as the other members and that no consideration had been given to the Unit cutoff number relative to the Unit ownership of the Board members, a special committee for the reclassification transaction was not needed.  The Board also discussed requiring approval of the transaction by a majority of unaffiliated members and considered the fact that the interests of the members whose Units will be reclassified as Class B or Class C Units are different from the interests of the members whose Units will be reclassified as Class A Units may create actual or potential conflicts of interest in connection with the reclassification transaction.  However, because affiliated and unaffiliated members would be treated identically in terms of the approval process of the reclassification transaction, the Board believed a special vote was not necessary.

After this discussion, the Board agreed that it is in the best interest of the Company to move forward with the going private transaction and instructed counsel to proceed with preparing the documents needed, including the proposed Seventh Amended and Restated Operating Agreement, to reclassify our Units in order to no longer be a public reporting company.

Effective July 21, 2022, our Board of Governors unanimously approved the amendments to our Operating Agreement contained in the Seventh Amended and Restated Operating Agreement effecting the reclassification of our Units and recommended that our members approve and adopt the same. The approval of the Seventh Amended and Restated Operating Agreement and recommendation to the members was based upon the factors discussed above.

Reasons for the Reclassification Transaction; Fairness of the Reclassification Transaction; Board Recommendation

GFE’s Reasons for the Reclassification

As a small company whose Units are not listed on any exchange or traded on any quotation system, we have struggled to maintain the costs associated with being a public company, while not enjoying many of the benefits associated with being a public company.  We expect our costs associated with our reporting obligations to increase in the future as the SEC has issued proposed rules requiring public companies to include climate-related disclosures in their periodic reports. Finally, in order for the Company to maximize the long-term value of membership in the Company, it is necessary to explore various potential options with third parties including both equity and debt financing options.  We believe that the exploration of these options will be better suited for a private company as the reporting of such transactions may create a disadvantage in our bargaining and negotiation powers in such transactions.  We are undertaking the reclassification transaction at this time to end our SEC reporting obligations, which will enable us to save the Company and our members the substantial costs associated with being a reporting company, especially as we anticipate these costs to increase. The specific factors considered in electing at this time to undertake the reclassification transaction and become a non-SEC reporting company are as follows:

We considered that some of our members may prefer to continue as members of an SEC reporting company, which is a factor weighing against the reclassification transaction.  However, we believe that the disadvantages of remaining a public company subject to the registration and reporting requirements of the SEC outweigh any advantages.  There is a limited market for our Units and, in order to avoid being taxed as a corporation under the publicly traded partnership rules under Section 7704 of the Internal Revenue Code, our Units cannot be traded on an established securities market or be readily tradable in a secondary market, thereby assuring that there will continue to be a limited market for our Units. We have no present intention to raise capital through sales of securities in a public offering in the future or to acquire other business entities using our Units as the consideration for such acquisition.  Accordingly, we are not likely to make use of any advantage that our status as an SEC reporting company may offer.

The Board realized that many of the benefits of a going private transaction, such as eliminating costs associated with SEC reporting obligations and allowing management and employees to focus on core business initiatives, have been in existence for some time.  However, once the Board felt the impact over time of the increasingly stringent regulation brought on by the Sarbanes-Oxley Act and the expanded reporting requirements of larger reporting companies faced by the Company over the past few fiscal years including anticipated future costs for complying with any future climate-related disclosures, the Board began to seriously consider a transaction that would result in the deregistration of our Units.   See “Reclassification and Deregistration—Background of the Reclassification Transaction” beginning on page 12.

Other than the cost savings and other benefits associated with becoming a non-SEC reporting company, as outlined above and as described in the discussion under “Reclassification and Deregistration—Purpose and Structure of the Reclassification Transaction” on page 24, we do not have any other purpose for engaging in the reclassification transaction at this particular time.

In view of the wide variety of factors considered in connection with its evaluation of the reclassification transaction, our Board of Governors did not find it practicable to, and did not, quantify or otherwise attempt to assign relative weights to the specific factors it considered in reaching its determination.

The reclassification transaction, if completed, will have different effects on Class A members, Class B members, and Class C members.  You should read “Reclassification and Deregistration—Reasons for the Reclassification Transaction; Fairness of the Reclassification Transaction; Board Recommendation—Our Position as to the Fairness of the Reclassification Transaction” beginning on page 18 and “Reclassification and Deregistration—Effects of the Reclassification Transaction on Members of GFE” beginning on page 27 for more information regarding the effects of the reclassification transaction.

We considered various alternative transactions to accomplish the proposed transaction, including a tender offer, a Unit repurchase on the open market or a reverse Unit split whereby members owning less than a certain number of Units would be “cashed out,” but ultimately elected to proceed with the reclassification because these alternatives could be more costly, might not have effectively reduced the number of members below 300, and would not allow all members to retain an equity interest in GFE.  We have not recently received any proposal from third parties for any business combination transactions, such as a merger, consolidation or sale of all or substantially all of our assets. Our Board did not seek any such proposal because these types of transactions are inconsistent with the narrower purpose of the proposed transaction, which is to discontinue our SEC reporting obligations.  Our Board believes that by implementing the reclassification transaction, our management will be better positioned to focus on transactions to maximize our long-term goals, attention on our customers and core business initiatives, and our expenses will be reduced. See “Reclassification and Deregistration—Purposes and Structure of the Reclassification Transaction” beginning on page 24 for further information as to why this reclassification transaction structure was chosen by our Board.

Our Position as to the Fairness of the Reclassification Transaction

Based on a careful review of the facts and circumstances relating to the reclassification transaction, our Board of Governors believes that the Seventh Amended and Restated Operating Agreement and the going private transaction are substantively and procedurally fair to all our members.  Our Board of Governors unanimously approved the reclassification transaction and has unanimously recommended that our unit holders vote “FOR” the approval and adoption of the Seventh Amended and Restated Operating Agreement that will, among other things, effect the reclassification.

In concluding that the terms and conditions of the going private transaction are substantively fair to unaffiliated members, our Board of Governors considered a number of factors.  In its consideration of both the procedural and substantive fairness of the transaction, our Board considered the potential effect of the transaction as it relates to all unaffiliated members generally, to members whose Units will be reclassified as Class B or Class C Units and to members whose Units will be reclassified as Class A Units.  Because the transaction will affect members differently only to the extent that some will receive Class A Units in the reclassification transaction, some will receive Class B Units and some will receive Class C Units, these are the only groups of members with respect to which the Board considered the relative fairness and the potential effects of the reclassification transaction.  See “Reclassification and Deregistration—Effects of the Reclassification Transaction on Members of GFE” beginning on page 27.

Substantive Fairness

The factors that our Board of Governors considered positive for our unaffiliated members, including both those that will have their Units reclassified as Class A Units as well as those who will have their Units reclassified as Class B or Class C Units, include the following:

In addition to the positive factors applicable to all our unaffiliated members set forth above, the factors that our Board of Governors considered positive for those unaffiliated members whose Units are being reclassified as Class B or Class C Units included:

In addition to the positive factors applicable to all of our unaffiliated members set forth above, the factors that the Board of Governors considered positive for the unaffiliated members whose Units are being reclassified as Class A Units included:

Our Board considered each of the foregoing factors to weigh in favor of the substantive fairness of the reclassification transaction to our unaffiliated members, whether their Units will be reclassified as Class A, Class B or Class C Units.

The Board is aware of, and has considered, the impact of certain potentially countervailing factors on the substantive fairness of the reclassification transaction to our unaffiliated members whose Units will be reclassified as Class B or Class C Units.  In particular, the factors that our Board of Governors considered as potentially negative for those members receiving Class B or Class C Units included:

The factors that our Board of Governors considered as potentially negative for the unaffiliated members whose Units will be reclassified as Class A Units included:

The factors that our Board of Governors considered as potentially negative for our unaffiliated members included:

Our Board of Governors believes that these potentially countervailing factors did not, individually or in the aggregate, outweigh the overall substantive fairness of the reclassification transaction to our unaffiliated members and that the foregoing factors are outweighed by the positive factors previously described.

In reaching a determination as to the substantive fairness of the reclassification transaction, we did not consider the liquidation value of our assets, the current or historical market price of those Units, our net book value, or our going concern value to be material.   We did not consider the net book value in that the reclassification transaction and subsequent deregistration of our units will have only an insignificant effect on the overall net book value of our Units. In addition, neither the economic rights nor preferences of our unaffiliated members will change and will remain the same as our affiliated members as a result of the reclassification transaction.  Additionally, our unaffiliated members are afforded the right to participate in our profits and losses on the same basis as our affiliated members and none of our unaffiliated members are being cashed out as a part of the reclassification transaction.

We did not consider the current market prices in that our Units are not traded on a public market but instead are traded in privately negotiated transactions, in which the current market price may or may not be determinative.  Any effect that the reclassification transaction has on the current market price will be the same for our unaffiliated members and affiliated members alike.

We did not consider the historical market prices in that we do not expect the reclassification transaction to have any effect on the historical market prices.  Our Units are not traded on a public market and are instead traded only in privately negotiated transactions and thus the historical market prices may or may not be determinative of actual prices.

We did not consider the going concern value in that the going concern value will be determined by the market at the time of a sale, merger or other form of business combination.  The reclassification transaction will have only an insignificant effect on the Company’s value on a going forward basis – a $435,000 per year savings – and will not be determinative of the going concern value. In addition, our Seventh Amended and Restated Operating Agreement provides all our members, both affiliated and unaffiliated, an equal vote per Unit with respect to any future mergers or dispositions of all or substantially all the Company’s assets.

We did not consider liquidation value in that the Company believes the reclassification transaction will not have a material effect on the liquidation value of our Units.  Pursuant to our Seventh Amended and Restated Operating Agreement, the rights of our unaffiliated members, like our affiliated members, will not change and all our members will be afforded the right to continue to share equally in the liquidation of the Company’s assets and in any residual funds allocated to our members.  In addition, our Seventh Amended and Restated Operating Agreement provides all our members, both affiliated and unaffiliated, an equal vote per Unit in the dissolution of the Company.

We did not consider any repurchases of Units by the Company over the past two years in that the Company has not repurchased any Units during such period.

We also did not consider any report, opinion, or appraisal or firm offer by unaffiliated parties. Neither the Company nor any of the members of our Board of Governors or management received any reports, opinions, appraisals or firm offers from any outside party relating to the reclassification transaction or the fairness of the consideration to be received by our members.

Procedural Fairness

We believe the reclassification transaction is procedurally fair to our unaffiliated members, whether their Units will be reclassified as Class A, Class B or Class C Units. In concluding that the reclassification transaction is procedurally fair to our unaffiliated members, the Board of Governors considered a number of factors.  The factors that our Board of Governors considered positive for our unaffiliated members included the following:

Our Board of Governors considered each of the foregoing factors to weigh in favor of the procedural fairness of the reclassification transaction to all our unaffiliated members, whether the Units of such members are reclassified as Class A Units, Class B Units or Class C Units.

The Board is aware of, and has considered, the impact of the following potentially countervailing factors, which affect both our smaller unaffiliated members whose Units will be reclassified as Class B or Class C Units as well as those members whose Units will be reclassified as Class A Units to the same degree, on the procedural fairness of the reclassification transaction:

Our Board of Governors believes that the foregoing potentially countervailing factors did not, individually or in the aggregate, outweigh the overall procedural fairness of the reclassification transaction to our unaffiliated members, whether their Units will be reclassified as Class A, Class B or Class C Units, and the foregoing factors are outweighed by the procedural safeguards previously described.  In particular, with reference to the lack of a special committee, the Board felt that the consideration of the transaction by the full Board, whose sole conflict of interest is a relatively insignificant increase in aggregate voting unit ownership following the reclassification transaction, was a sufficient procedural safeguard that made it unnecessary to form a special committee or retain an independent fairness advisor.

We therefore believe that the reclassification transaction is substantively and procedurally fair to our unaffiliated members, for the reasons and factors described above.  In reaching this determination, we have not assigned specific weights to particular factors, and we considered all factors as a whole.  None of the factors that we considered led us to believe that the reclassification transaction is unfair to our unaffiliated members whether their Units will be reclassified as Class A, Class B or Class C Units.

In reaching its conclusion that the reclassification transaction is fair to our unaffiliated members, whether their Units will be reclassified as Class A, Class B or Class C Units, the Board did not consider the current or historical market price of our units, our going concern value, our net book value or the liquidation value of our assets to be material. Our Board did not believe these factors to be material because our members are not being “cashed out” in connection with the reclassification transaction, and we will continue to have the same number of Units outstanding with identical economic rights and preferences.  As a result, our smaller members will continue to hold an equity interest in GFE as Class B or Class C members and will therefore participate equally, and on the same basis that they would participate absent a reclassification transaction, with the holders of our Class A Units in our profits, losses and the receipt of distributions.  Instead of the foregoing factors, the Board subjectively considered the collective advantages of the Class B or Class C Units, including the right of our Class B members to elect governors, and the right of our Class B members and Class C members to transfer Units more freely than Class A members. The Board also subjectively considered the relative disadvantages of the three Classes, including the limitations on voting and decision-making in the case of the Class B and Class C Units.  In addition, the Board evaluated the benefits shared by all the Class A, Class B and Class C Units, such as the ability to vote upon certain events such as dissolution, merger and sale of all or substantially all of the Company’s assets, the ability to benefit from the cost savings associated with the reclassification transaction and the opportunity to share in our future growth and earnings.

We have not made any provision in connection with the reclassification transaction to grant our unaffiliated members access to our Company files beyond the access granted generally under our current Operating Agreement, which is described below, or to obtain counsel or appraisal services at our expense.  Nor did we request or receive any reports, opinions or appraisals from any outside party relating to the reclassification transaction or the monetary value of the Class A Units, Class B Units or Class C Units.  Our members are not being “cashed out” in connection with the reclassification transaction, and we will continue to have the same number of Units outstanding with the identical economic rights and preferences.  As a result, our smaller members will continue to hold an equity interest in GFE as Class B or Class C members and will therefore participate equally, and on the same basis that they would participate absent a reclassification transaction, with the holders of our Class A Units in our profits and losses and the receipt of distributions.   With respect to our unaffiliated members’ access to our Company files, our Board determined that this Proxy Statement, together with our other filings with the SEC and information they may obtain pursuant to our current Operating Agreement, provide adequate information for our unaffiliated members.  Under Minnesota law and our Operating Agreement, subject to compliance with our safety, security and confidentiality procedures and guidelines, our members have rights to review lists of our members and governors, copies of our articles/certificate of organization, operating agreements, and tax returns and financial statements for the six most recent fiscal years.  Any member may inspect and copy these records during normal business hours if they have a proper purpose reasonably related to their interest as a member of GFE.  Members may also, at their own expense and for a purpose reasonably related to their interest as a member, request copies of the lists of our members and governors, our articles/certificate of organization, tax returns, financial statements and operating agreements.  With respect to obtaining counsel or appraisal services at our expense, the Board did not consider these actions necessary or customary.  In deciding not to adopt these additional procedures for access to our company files or to obtain counsel or appraisal services for our members at our expense, the Board also took into account factors such as GFE’s size and the cost of such procedures.

We have not structured the transaction to require the approval of at least a majority of unaffiliated members. Because our affiliated and unaffiliated members will be treated identically in terms of the approval process of the reclassification transaction, the Board believes a special vote is not necessary.  In addition, the governors have not retained an unaffiliated representative to act solely on behalf of unaffiliated members.  Again, because our affiliated and unaffiliated members will be treated identically in terms of the approval process of the reclassification transaction, the Board believes an unaffiliated representative is unnecessary.

Board Recommendation

Our Board of Governors believes the terms of the reclassification transaction are fair and in the best interests of our unit holders and unanimously recommends that you vote “FOR” the Reclassification of the Units as set forth in this proxy statement. Additionally, our Board of Governors unanimously recommends that you vote “FOR” the adjournment or postponement of the Special Meeting, if necessary or appropriate, for the purpose, among others, of soliciting additional proxies if there are not sufficient votes at the time of the Special Meeting to approve the Reclassification.

Purpose and Structure of the Reclassification Transaction

The purposes of the reclassification transaction are to:

For further background on the reasons for undertaking the reclassification transaction at this time, see “Reclassification and Deregistration—Overview of the Reclassification Transaction” beginning on page 11 and “Reclassification and Deregistration—Reasons for the Reclassification Transaction; Fairness of the Reclassification Transaction; Board Recommendation” beginning on page 15.

The structure of the reclassification transaction will give all our members the opportunity to retain an equity interest in GFE and therefore to participate in any future growth and earnings of the Company.  Because we are not cashing out any of our members, this structure minimizes the costs of our becoming a non-SEC reporting company while achieving the goals outlined in this Proxy Statement.

Our Board elected to structure the transaction to take effect at the record unit holder level, meaning that we will look at the number of Units registered in the name of a single holder to determine how that holder’s Units will be reclassified.  The Board chose to structure the transaction this way in part because it determined that this method would provide us with the best understanding at the effective time of how many members would receive Class B or Class C Units because we will be able to have a complete and final list of all record unit holders at the effective time of the reclassification.  In addition, the Company sent a letter to its members notifying them that they had until [insert date, 2022] to make transfers of Units prior to the proposed reclassification of Units. The purpose of this letter was to allow members the opportunity to make transfers prior to the proposed reclassification so that they could own the requisite number of Units to be in their desired Class, which our Board felt would enhance the substantive fairness of the transaction to all members.  Although providing this flexibility generated an element of uncertainty, in that the reclassification, if approved, may not have eliminated as many of our Class A members as anticipated, our Board felt that the threshold ratio of 21 or more units allowed a sufficient margin for members to transfer their Units in or out of street name.  Overall, our Board determined that structuring the reclassification transaction as one that would affect members at the record holder level would be the most efficient and cost-effective way to achieve its goals of deregistration, notwithstanding any uncertainty that may have been created by giving members the flexibility to transfer their holdings through [insert date, 2022]. Because the “trading window” ending [insert date, 2022] [is now closed] [alternative language – will close on insert date], we do not expect permitting any further Unit transfers through the date of the Special Meeting. For further background on the alternative structures considered by our Board of Governors please see “Reclassification and Deregistration—Background of the Reclassification Transaction” beginning on page 12 and “Reclassification and Deregistration—Reasons for the Reclassification Transaction; Fairness of the Reclassification Transaction; Board Recommendation” beginning on page 15.

Effects of the Reclassification Transaction on GFE; Plans or Proposals after the Reclassification Transaction

The reclassification transaction will have various positive and negative effects on GFE, which are described below.

Effect of the Proposed Transaction on Our Outstanding Units.

Our current Operating Agreement does not authorize us to issue any additional classes of Units.  The amendments to our Operating Agreement will authorize the issuance of three separate and distinct classes of Units, Class A, Class B, and Class C Units. As of the Record Date, the number of outstanding units was 30,606. Based upon our best estimates, if the reclassification transaction had been consummated as of the Record Date, approximately 23,763 Units would be reclassified as Class A Units, approximately 5,051 Units would be reclassified as Class B Units, and approximately 1,792 Units would be reclassified as Class C Units.  The total number of Class A holders of record would be approximately 215, the total number of Class B holders of record would be approximately 396 and the total number of Class C holders of record would be approximately 378.  We have no other current plans, arrangements or understandings to issue any Units as of the date of this proxy statement.

Termination of Securities Exchange Act Registration and Reporting Requirements

Upon the completion of the reclassification transaction, we expect that our current class of registered Units, which will be reclassified as Class A Units, will be held by fewer than 300 record unit holders and each of the Class B and Class C Units will be held by fewer than 500 record unit holders.  Accordingly, our obligation to continue to file periodic reports with the SEC will be suspended pursuant to Rule 12h-3 of the Securities Exchange Act of 1934, as amended.

The suspension of these filing requirements will substantially reduce the information required to be furnished by us to our members and to the SEC.  Therefore, we anticipate that we will eliminate costs and avoid future costs associated with these filing requirements, which we estimate to be approximately $435,000 on an annual basis.  These costs are broken down as follows:

We will apply for termination of the registration of our Units and suspension of our SEC reporting obligations as soon as practicable following completion of the reclassification transaction.  Following completion of the reclassification transaction, we intend to continue to make available to our unit holders annual financial information about GFE.

Potential Registration of the Class B or Class C Units or Discontinuation of our Suspended Duty to Report.

After the reclassification transaction, we anticipate that there will be up to approximately 396 Class B and 378 Class C unit holders of record.  If the number of record holders of our Class B Units or our Class C Units exceeds 500 on the last day of any given fiscal year, GFE will be required to register the Class B or Class C Units under Section 12(g) of the Securities Exchange Act.  As a result, we would be subject to all of the reporting and disclosure obligations under the Securities Exchange Act and the Sarbanes-Oxley Act to which we are currently subject. For this reason, the proposed amendments to our current Operating Agreement contained in the Seventh Amended and Restated Operating Agreement include a provision that denies the Company the authority to allow any transfer of Class B or Class C Units if it will result in the Class B or Class C Units being held by 500 or more respective holders of record.  We do not expect any significant change in the number of record holders of Class B or Class C Units in the near term that will obligate us to register our Class B or Class C Units.

Similarly, if the number of our Class A unit holders of record reaches or exceeds 300 on the last day of any given fiscal year, the suspension of our duty to file reports under Section 15(d) of the Securities Exchange Act would be discontinued, and as a result, we would be again subject to the reporting and disclosure obligations under the Securities Exchange Act and the Sarbanes-Oxley Act to which we are currently subject.  For this reason, the Seventh Amended and Restated Operating Agreement also contains a provision that denies the Company the authority to allow any transfer of Class A Units if it will result in the Class A Units being held by 300 or more holders of record. We estimate that following the reclassification transaction, we will have 215 Class A unit holders of record and do not anticipate any significant change in the number of Class A unit holders of record that would obligate us to resume our periodic reporting with the SEC.

Effect on Trading of Units

Our Units are not traded on an exchange and are not otherwise actively traded, although we utilize a qualified matching service on our website, an alternative trading system as defined by the SEC.  Persons interested in buying or selling Units first contact the Company offices with notice of their desire to buy or sell Units.  Their offer to buy or sell Units is then posted on the Company website with their contact information.  Persons interested in buying or selling Units as listed on the website are encouraged to contact the offeror or to negotiate transaction details.  Once the terms of the transaction are agreed upon, the member will contact the Company to arrange the transfer of the Units according to the qualified matching service rules and procedures we have put in place at the Company.

Because we will no longer be required to maintain current public information by filing reports with the SEC, and because our Units will only be tradable in privately negotiated transaction, the liquidity of our Units may be reduced following the reclassification transaction.  We do expect however that trading of our Units will continue to be facilitated through our qualified matching service on our website following consummation of the reclassification transaction.  In order to comply with all tax and securities laws for the continued operation of the qualified matching service, in some cases we may be required to maintain and make available information similar in nature to the information we were required to file with the SEC while we were a reporting company.  We may continue to incur expenses to meet these requirements and maintain our qualified matching service. Alternatively, we may instead elect to utilize the services of a third-party alternative trading system/qualified matching service brokerage service.

Financial Effects of the Reclassification Transaction

We expect that the professional fees and other expenses related to the reclassification transaction of approximately $150,000 will not have any material adverse effect on our liquidity, results of operations or cash flow.  See “Reclassification and Deregistration—Fees and Expenses” beginning on page 34 for a description of the fees and expenses we expect to incur in connection with the reclassification transaction.  See “Reclassification and Deregistration—Financing of the Reclassification Transaction” on page 32 for a description of how the reclassification transaction will be financed.

Effect on Conduct of Business after the Transaction

We expect our business and operations to continue as they are currently being conducted and, except as disclosed below, the transaction is not anticipated to have any effect upon the conduct of our business.

Effect on Our Governors and Executive Officers

It is not anticipated that the reclassification transaction will have any effect on our governors and executive officers, other than with respect to their relative Unit ownership of the various Classes if the reclassification transaction is approved. Units will be issued to our governors and executive officers on the same basis as for our unaffiliated members. Assuming no intervening change to their record ownership of Units, five of our governors beneficially own at the record holder level more than 21 Units, and therefore, such Units will be reclassified as Class A Units if the Reclassification is implemented. Additionally, assuming no intervening change to their record ownership of Units, three of our governors also beneficially own at the record holder level between 10 and 20 Units, and therefore, such Units will be reclassified as Class B Units if the Reclassification is implemented. Two of our governors (including one alternate governor) and one executive officer beneficially own at the record holder level 9 or fewer Units, and therefore, such Units will be reclassified as Class C Units if the Reclassification is implemented.

The percentage of Units retaining the right to vote for governors (i.e., Class A and Class B Units) that will be beneficially owned by governors and executive officers of the Company as a group will increase from approximately 4.91% to approximately 5.17% after the reclassification of Units.

The annual compensation paid by us to our officers and governors will not increase as a result of the reclassification transaction, nor will the reclassification transaction result in any material alterations to any existing employment agreements with our officers.

Plans or Proposals

Other than as described in this Proxy Statement, neither we nor our management have any current plans or proposals to effect any extraordinary corporate transaction, such as a merger, reorganization or liquidation, to sell or transfer any material amount of our assets, to change our Bboard of Governors or management, to change materially our indebtedness or capitalization or otherwise to effect any material change in our corporate structure or business.  As stated throughout this proxy statement, we believe there are significant advantages in effecting the reclassification transaction and becoming a non-reporting company.  Although our management does not presently have any intention to enter into any transaction described above, there is always a possibility that we may enter into such an arrangement or transaction in the future, including, but not limited to, entering into a merger or acquisition transaction, making a public or private offering of our Units or entering into any other arrangement or transaction the Board may deem appropriate and in the best interests of the Company.

Effects of the Reclassification Transaction on Members of GFE

The general effects of the reclassification transaction on the members of GFE are described below.

Effects of the Reclassification Transaction on Affiliated and Unaffiliated Class A Members

The reclassification transaction will have both positive and negative effects on the Class A members. All of these changes will affect affiliated and unaffiliated Class A members in the same way. The Board of Governors of GFE considered each of the following effects in determining to approve the reclassification transaction.

Benefits:

As a result of the reclassification transaction, the Class A members will:

Detriments:

As a result of the reclassification transaction, the Class A members will:

Effects of the Reclassification Transaction on Affiliated and Unaffiliated Class B Members

The reclassification transaction will have both positive and negative effects on the Class B members. All of these changes will affect affiliated and unaffiliated Class B members in the same way. The Board of Governors of GFE considered each of the following effects in determining to approve the reclassification transaction.

Benefits:

As a result of the reclassification transaction, the Class B members will:

Detriments:

As a result of the reclassification transaction, the Class B members will:

Effects of the Reclassification Transaction on Affiliated and Unaffiliated Class C Members

The reclassification transaction will have both positive and negative effects on the Class C members. All of these changes will affect affiliated and unaffiliated Class C members in the same way. The Board of Governors of GFE considered each of the following effects in determining to approve the reclassification transaction.

Benefits:

As a result of the reclassification transaction, the Class C members will:

Detriments:

As a result of the reclassification transaction, the Class C members will:

Effects of the Reclassification Transaction on Affiliated Members

In addition to the effects of the reclassification transaction on unit holders generally, which are described in the previous section, the reclassification transaction will have some additional effects on our governors and executive officers. As used in this proxy statement, the term “affiliated members” means any member who is a governor or executive officer of GFE and the term “unaffiliated member” means any member other than an affiliated member.

As a result of the reclassification transaction, our affiliated members will:

Record and Beneficial Ownership of Membership Units of GFE

It is important that our members understand how units that are held by them in “street name” will be treated for purposes of the reclassification transaction described in this Proxy Statement. Members who have transferred their units of GFE into a brokerage or custodial account are no longer shown on our membership register as the record holder of these Units. Instead, the brokerage firms or custodians typically hold all units of GFE that its clients have deposited with it through a single nominee; this is what is meant by “street name.”  If that single nominee is the Unit holder of record of 21 or more Units, then the Units registered in that nominee’s name will be reclassified as Class A Units. At the end of this transaction, these beneficial owners will continue to beneficially own the same number of Units as they did at the start of this transaction. If you hold your Units in “street name,” you should talk to your broker, nominee or agent to determine how they expect the reclassification transaction to affect you. Because other “street name” holders who hold through your broker, agent or nominee may have adjusted their holdings prior to the reclassification transaction, you may have no way of knowing how your Units will be reclassified in the transaction.

Interests of Certain Persons in the Reclassification Transaction

Our governors and executive officers who are also members will participate in the reclassification transaction in the same manner and to the same extent as all of our other members.  Assuming no intervening change to their record ownership of Units, five of our governors beneficially own at the record holder level more than 21 Units, and therefore, such Units will be reclassified as Class A Units if the Reclassification is implemented. Additionally, assuming no intervening change to their record ownership of Units, three of our governors beneficially own at the record holder level between 10 and 20 Units, and therefore, such Units will be reclassified as Class B Units if the Reclassification is implemented. Two of our governors (including one alternate governor) and one executive officer beneficially own at the record holder level 9 or fewer Units, and therefore, such Units will be reclassified as Class C Units if the Reclassification is implemented.

Because of the voting restrictions placed on Class B and Class C Units, the governors may experience a larger relative percentage of voting power than they previously held.  This represents a potential conflict of interest because our governors unanimously approved the reclassification transaction and are recommending that you approve it.  Despite this potential conflict of interest, the Board believes the proposed reclassification transaction is fair to all of our members for the reasons discussed in the proxy statement.

The fact that five of our governors’ percentage ownership of Class A Units will increase relative to such governor’s percentage ownership of all Units prior to the reclassification transaction was not a consideration in the Board’s decision to approve the reclassification transaction or in deciding its terms, including setting the 21 Class A Unit threshold. In this regard, the governors as a group will be treated exactly the same as other members.  In addition, the Board determined that any potential conflict of interest created by the governors’ ownership of our Class A Units is relatively insignificant.  The increase in each governor’s percentage ownership of our Class A Units resulting from the reclassification transaction relative to such governor’s percentage ownership of all Units prior to the reclassification transaction is expected to be insignificant.  As a group, as of the Record Date these governors and executive officers collectively beneficially held and had voting power over approximately 1,502 Units, or 4.91% of our Units. If the reclassification transaction is approved, our governors and executive officers would collectively hold and have voting power over approximately 6.1% of the Class A Units and 5.17% of the total Class A and Class B Units combined. This is very unlikely to have a practical effect on their collective ability to control the Company.

Our Board of Governors was aware of the actual or potential conflicts of interest discussed above and considered them along with the other matters that have been described in this proxy statement under the captions “Reclassification and Deregistration—Background of the Reclassification Transaction” beginning on page 12, “Reclassification and Deregistration—Reasons for the Reclassification Transaction; Fairness of the Reclassification Transaction; Board Recommendation,” beginning on page 15 and “Reclassification and Deregistration—Effects of the Reclassification Transaction on Members of GFE” beginning on page 27.

Except as provided in this paragraph, none of our executive officers or governors has indicated to us that he or she intends to sell some or all of his Units or acquire Units during the period between the public announcement of the reclassification transaction and the effective date of the reclassification transaction.  In addition, except as provided in this paragraph, none of these individuals has indicated his or her intention to divide his Units among different record holders, or combine his or her Units in the name of a single record holder, during the period between the public announcement of the reclassification transaction and the effective date of the reclassification transaction.

Our governor, Bruce LaVigne, is the beneficial owner of 500 of our Units, which are attributable to him based on the direct ownership of all 500 Units by his spouse, Debra LaVigne. On June 14, 2022, legal counsel representing Debra LaVigne, provided notice to the Company of potential claims that Ms. LaVigne is considering bringing against the Company including claims relating to the going private transaction described in this proxy statement. As such, our governor, Bruce LaVigne, may have an interest in the reclassification and amendment and restated of our Current Operating Agreement, arising from the potential claims alleged by his spouse. However, as of the date of this proxy statement, there are no formal legal proceedings filed with respect to the potential claims Ms. LaVigne has communicated to the Company and our legal counsel. The Company intends to vigorously defend itself against any potential claims alleged by Ms. LaVigne.

Financing of the Reclassification Transaction

We estimate that the reclassification transaction will cost approximately $150,000, consisting of professional fees and other expenses payable by or related to the reclassification transaction.  See “Reclassification and Deregistration—Fees and Expenses” beginning on page 34 for a breakdown of the expenses associated with the reclassification transaction.  We intend to pay the expenses of the reclassification transaction with working capital.

Material Federal Income Tax Consequences of the Reclassification Transaction

The following is a summary of the U.S. federal income tax consequences of the Unit reclassification to the Company and to members of the Company who are U.S. holders (as defined below). The discussion does not purport to consider all aspects of U.S. federal income taxation that might be relevant to particular members. The discussion is based on current law, which is subject to change, possibly with retroactive effect. The discussion applies only to U.S. holders who hold Units as capital assets. This discussion does not apply to certain types of holders (such as U.S. holders who acquired Units under an employee benefit plan, insurance companies, tax-exempt organizations and retirement plans (including, without limitation, 401(k) plans), banks and other financial institutions, traders, broker-dealers, dealers in securities or foreign currencies, S corporations, partnerships or mutual funds, persons who hold or have held Units as part of a straddle or a hedge, integrated constructive sale or conversion transaction for tax purposes, persons subject to alternative minimum tax or persons with a functional currency other than the U.S. dollar) who may be subject to special rules. In addition, this discussion does not address the tax consequences to a member who, for U.S. federal income tax purposes, is not a U.S. holder. Any member who is not a U.S. holder may be subject to different tax consequences than those described below and is urged to consult its tax advisors regarding its tax treatment under U.S. and non-U.S. tax laws. This discussion does not address any state, local or foreign tax consequences of the reclassification of the Units.

For purposes of this discussion, a “U.S. holder” is any individual, corporation, estate or trust that is a beneficial holder of a Unit and that is for U.S. federal income tax purposes:

If a partnership or other pass-through entity holds Units, the tax treatment of a partner or owner of such partnership or other pass-through entity generally will depend upon the status of the partner or owner and the activities of the partnership or pass-through entity. Accordingly, we urge partnerships and other pass-through entities that hold Units and partners or owners in such partnerships or pass-through entities to consult their tax advisors regarding the tax consequences to them of the Unit reclassification.

Federal Income Tax Consequences to the Company

The reclassification of Units pursuant to the adoption of the Seventh Amended and Restated Operating Agreement will likely be treated as a tax-free “recapitalization” for federal income tax purposes. As a result, we believe that the reclassification will not have any material federal income tax consequences to the Company. The Unit reclassification will not affect the status of the Company as a partnership for federal income tax purposes.

Federal Income Tax Consequences to Members

The Unit reclassification will have the following federal income tax consequences for most members:

The discussion of anticipated material United States federal income tax consequences of the reclassification transaction set forth above is based upon present law, which is subject to change possibly with retroactive effect. You should consult your tax advisor as to the particular federal, state, local, foreign and other tax consequences of the reclassification, in light of your specific circumstances.

Appraisal and Dissenters’ Rights

Under Minnesota law, you do not have appraisal rights in connection with the reclassification transaction.  Moreover, pursuant to our current Operating Agreement, you have waived any dissenter’s rights that may have otherwise been available.  Other rights or actions under Minnesota law or federal or state securities laws may exist for members who can demonstrate that they have been damaged by the reclassification transaction. Although the nature and extent of these rights or actions are uncertain and may vary depending upon facts or circumstances, member challenges to actions of the Company in general are related to the fiduciary responsibilities of limited liability company officers and governors and to the fairness of limited liability company transactions.

Regulatory Requirements

In connection with the reclassification transaction, we will be required to make a number of filings with, and obtain a number of approvals from, various federal and state governmental agencies, including, complying with federal and state securities laws, which includes filing this Proxy Statement on Schedule 14A and a transaction statement on Schedule 13E-3 with the SEC.

Fees and Expenses

We will be responsible for paying the reclassification transaction related fees and expenses, consisting primarily of fees and expenses of our attorneys, and other related charges.  We estimate that our expenses will total approximately $150,000, assuming the reclassification transaction is completed.  This amount consists of the following estimated fees:

THE SEVENTH AMENDED AND RESTATED OPERATING AGREEMENT

Overview of Amendments Regarding Unit Reclassification

The Company is organized as a Minnesota limited liability company under Chapter 322C of the Minnesota Revised Uniform Limited Liability Company Act (the “Act”). As such, the principal document establishing the rights and duties of the members of the Company, the provisions under which the Company is governed and operated, the methods used to allocate our profits and losses and maintain members’ capital accounts, the timing and manner in which cash distributions are made to investors, the limitations on members’ ability to transfer their membership interests, the events causing the Company to dissolve and the actions to be taken in that event, along with a number of other matters, are set forth in a document called an operating agreement. The Company adopted the existing operating agreement, which is entitled the “Sixth Amended and Restated Operating Agreement,” on March 23, 2017. We refer to the Company’s Sixth Amended and Restated Operating as the “Current Operating Agreement” or “Operating Agreement” throughout this proxy statement. As the Company issued Units representing membership interests in the Company to persons admitted as members, each of those members became a party to the Operating Agreement and, as such, is bound by the terms of the Operating Agreement. Among other things, the Current Operating Agreement provides that the interests of all members are designated by a single class of membership interest referred to as a “Unit.” As a result, the rights and privileges of all members under the Current Operating Agreement are the same. The principal provisions of the Operating Agreement that relate to the rights and duties of the members and the characteristics of the Units are described below under “Description of Units—Terms of the Existing Units.”

The Unit reclassification would be implemented through a proposed group of interrelated amendments to the Company’s Operating Agreement that, if adopted, will: (a) result in the existing single class of Units being divided into three separate classes of Units, which will be designated Class A Units, Class B Units and Class C Units, (b) establish the distinct rights and obligations of these three classes of Units and (c) provide how the existing class of Units will be reclassified as the new classes of Units. Under the Seventh Amended and Restated Operating Agreement, members receiving Class A Units will retain largely the same rights and be subject to the same restrictions as they currently have as holders of the existing Units. However, the rights of members receiving Class B Units and Class C Units will change substantially and, among other things, they will have more limited voting rights and more limited rights to propose amendments to the operating agreement, nominate governors, and call meetings of members than they currently have as the holders of the existing Units. However, holders of Class B and Class C Units will be subject to less stringent requirements for the transfer of their Units if the Seventh Amended and Restated Operating Agreement is approved and adopted.

The Unit reclassification will not change the rights of any member with respect to cash distributions, rights upon liquidation of the Company, or the allocation of Company profits and losses. Each class of Units created pursuant to the Unit reclassification will have the same right to receive cash distributions from the Company, if any, to receive Company assets upon liquidation of the Company and to be allocated Company profits and losses, on a pro rata basis based on the number of Units held by a member. As a result, each class of Units created as a result of the Unit reclassification will have economic rights which are the same as the existing single class of Units. The specific rights and obligations of the Class A, Class B and Class C Units are described in more detail below under the headings “Description of Units —Terms of the Class A Units,” “Description of Units —Terms of the Class B Units” and “Description of Units —Terms of the Class C Units.”

Description of Amendments Regarding Unit Reclassification

The Unit reclassification would be implemented through a proposed group of interrelated amendments to the Company’s Operating Agreement that, if adopted, will (a) result in the existing single class of Units being divided into three separate classes of Units, which will be designated Class A Units, Class B Units and Class C Units, (b) establish the distinct rights and obligations of these three classes of Units and (c) provide how the existing class of Units will be reclassified as the new classes of Units. Specifically, the amendments regarding the Unit reclassification consist of the following amendments to the Company’s existing Operating Agreement:

DESCRIPTION OF UNITS

Terms of the Existing Units

Units represent an ownership interest in the Company. The holders of our Units are each a party to the Company’s Operating Agreement, which establishes the rights and privileges associated with the Units. Under the Current Operating Agreement, there is only one class of Units, and all members have identical rights and privileges.

Our Current Operating Agreement provides that members have the following rights:

On the other hand, our Current Operating Agreement imposes certain restrictions on the rights of the members of the Company, which restrictions include the following:

These restrictions include a requirement that any transfer of Units including a Permitted Transfer be approved in advance by the Board of Governors in its sole discretion. Certificates issued to evidence Units include a restrictive legend that notes these limitations on the ability of a member to transfer the Units.

Terms of the Class A Units

If the Company’s members vote to approve and adopt the Seventh Amended and Restated Operating Agreement, the existing Units held by members owning 21 or more Units on the effective date of the Seventh Amended and Restated Operating Agreement will be reclassified as “Class A Units.” Members holding Class A Units will be referred to as “Class A Members.” The rights and privileges of the Class A Members will be largely the same as those associated with the existing Units and will be set forth in the Seventh Amended and Restated Operating Agreement, the form of which is attached as Exhibit 99.4 to this proxy statement. The following is a summary of the material rights and privileges of the Class A Members. However, this is a summary only and does not purport to be a complete description of the terms of the Seventh Amended and Restated Operating Agreement. We urge you to review the entire Seventh Amended and Restated Operating Agreement prior to returning your proxy.

Cash Distributions. Class A Members will be entitled to receive distributions of Company cash and other property as and when declared by the Board of Governors. A Class A Member will share in such distribution on a pro rata basis with all other members of the Company based on the number of Units such Class A Member holds.

Profits and Losses. Class A Members will be entitled to share in the profits and losses of the Company on a pro rata basis, subject to certain technical adjustments described in the Seventh Amended and Restated Operating Agreement designed to ensure the Company complies with U.S. Treasury regulations applicable to entities treated as partnerships for federal income tax purposes.

Rights upon Liquidation. Upon liquidation of the Company, a Class A Member will be entitled to participate in the distribution of Company assets remaining after the satisfaction of all Company debts and the establishment of any reserves for contingencies to the extent of the positive balance, if any, of the Class A Member’s capital account.

Voting Rights. Class A Members will be entitled to vote on all matters for which member approval is required under the Seventh Amended and Restated Operating Agreement. This includes a right to vote: (1) for the election of governors; (2) on the issue of Units at a purchase price of less than $1,000 per Unit, (3) on the Company’s voluntarily taking any action that would cause a bankruptcy of the Company, (4) on acquiring equity or debt securities of any governor or affiliate of a governor or making a loan to any such person; (5) on any future amendments to the Seventh Amended and Restated Operating Agreement; (6) on the merger, dissolution or sale of all or substantially all the assets of the Company; or (7) on any other matters that require a vote of at least a majority of the outstanding Units under the Act to the extent that requirement cannot be varied in the operating agreement. Any amendment to the Seventh Amended and Restated Operating Agreement must be approved by Class A members holding a majority of the Class A Units. Class A Members are entitled to one vote per Class A Unit held on each matter submitted to a vote of the Class A Members. There is no right to cumulate votes with respect to any matter, including the election of governors.

Proposal of Amendments. Any Class A Member will be entitled to propose amendments to the Company’s Seventh Amended and Restated Operating Agreement.

Nomination of Governors. Any Class A Member will be entitled to nominate persons to serve on the Board of Governors. In order to nominate a person to be a governor, a Class A Member must provide written notice of such nomination to the Company’s Secretary not less than 60 days nor more than 90 days prior to the Company’s next annual meeting of members and include in such notice certain specified information regarding the nominating Class A Member and the person being nominated to serve on the Board of Governors, including information relating to all arrangements or understandings between the nominating Class A Member and the person being nominated and any other person or persons pursuant to which the nomination was made.

Call Members’ Meetings. Class A Members holding in the aggregate at least 20% of the total outstanding Units will be entitled to require the Board of Governors to call a special meeting of the members by making a written demand to the Board of Governors.

Transferability. Class A Members will be subject to restrictions on their ability to sell, assign, pledge or otherwise convey Class A Units. Except for Permitted Transfers, Class A Units may not be transferred without the prior approval of the Board of Governors, which may be withheld in the Board’s sole discretion. A Member must submit a written application for the transfer of any Class A Units, other than Permitted Transfers, to the Board of Governors in such form as the Board determines to be appropriate from time to time. Unless otherwise provided in its action to approve a transfer, the Board’s approval of a transfer will also operate as the Board’s approval of the admission of the transferee as a Class A Member of the Company. The Board may withhold approval for any reason.

Permitted Transfers of Class A Units will consist of transfers to a member’s administrator, executor or guardian, transfers involuntarily by operation of law or judicial decree, and transfers to any other member holding Class A Units. In order to transfer Class A Units in a Permitted Transfer, a Class A Member must provide a written notice of the transfer to the Company at least five business days prior to the transfer. The admission as a Class A Member of a person acquiring Class A Units in a Permitted Transfer requires the approval of the Board.

Any transfer of Class A Units must satisfy the conditions precedent to transfer described in Section 10.3 prior to the transfer and must not result in the number of record holders of Class A Units exceeding 299 or result in the transferee owning more than 20% of the Units of the Company.

Inspection Rights. Any Class A Member will have the right to all the information provided by the Act.

Maximum Ownership Limitations. A Class A Member may not own or control more than 20% of the issued and outstanding Units at any time, unless such Class A Member’s ownership percentage exceeds 20% due solely to an involuntary transfer of units by operation of law or inadvertent company action, e.g., the redemption of Units. If a Class A Member and its related parties and affiliates own more than 20% of the issued and outstanding Units, they will not be able to vote more than 20%, in the aggregate, of the outstanding Class A Units, Class B Units, or Class C Units.

Tax Representative. Any person is eligible to serve as the Company’s tax representative which is the “partnership representative” described in Section 6223(a) of the Internal Revenue Code. A partnership representative is designated by a partnership to represent it before the Internal Revenue Service in income tax matters. The Company is treated as a partnership for federal income tax purposes and the Board of Governors designates the partnership representative.

Terms of the Class B Units

If the Company’s members vote to approve and adopt the Seventh Amended and Restated Operating Agreement, a new class of Units will be created and designated as “Class B Units.” The existing Units will be reclassified as Class B Units with respect to each member who is the record holder of at least 10 but no more than 20 Units on the effective date of the Seventh Amended and Restated Operating Agreement. Such members will be referred to as “Class B Members.” The rights and privileges of the Class B Members will be set forth in the Seventh Amended and Restated Operating Agreement. These rights and privileges will be materially different from the rights and privileges of the existing Units. The following is a summary of the material rights and privileges of the Class B Members. However, this is a summary only and does not purport to be a complete description of the terms of the Seventh Amended and Restated Operating Agreement. We urge you to review the entire Seventh Amended and Restated Operating Agreement prior to returning your proxy.

Cash Distributions. Class B Members will be entitled to receive distributions of Company cash and other property as and when declared by the Board of Governors. A Class B Member will share in such distribution on a pro rata basis with all other members of the Company based on the number of Units such Class B Member holds.

Profits and Losses. Class B Members will be entitled to share in the profits and losses of the Company on a pro rata basis, subject to certain technical adjustments described in the Seventh Amended and Restated Operating Agreement designed to ensure the Company complies with U.S. Treasury regulations applicable to entities treated as partnerships for federal income tax purposes.

Rights upon Liquidation. Upon liquidation of the Company, a Class B Member will be entitled to participate in the distribution of Company assets remaining after the satisfaction of all Company debts and the establishment of any reserves for contingencies to the extent of the positive balance, if any, of the Class B Member’s capital account.

Voting Rights. Class B Members will be entitled to vote only with respect to (i) the election of governors, (ii) amendments to the Seventh Amended and Restated Operating Agreement that modify the rights of the Class B Members and (iii) the merger or consolidation of the Company with or into another entity, dissolution, or sale, exchange, or other disposition of all or substantially all the assets of the Company or (iv) any other matters that require a vote of at least a majority of the outstanding Units under the Act to the extent the requirement cannot be modified in an operating agreement. Any amendment to the Seventh Amended and Restated Operating Agreement that would modify the rights of Class B Members must be approved by members holding a majority of the Class A Units and by members holding a majority of the Class B Units. Class B Members will not be authorized to vote on any other amendments to the Seventh Amended and Restated Operating Agreement that may be proposed in the future or any other matter brought to a vote of the members. Class B Members are entitled to one vote per Class B Unit held on each matter submitted to a vote of the Class B Members. There is no right to cumulate votes with respect to any matter, including the election of governors.

Proposal of Amendments. Class B Members holding in the aggregate at least 10% of the outstanding Class B Units will be entitled to propose amendments to the Company’s Seventh Amended and Restated Operating Agreement.

Nomination of Governors. Class B Members holding in the aggregate at least 10% of the outstanding Class B Units will be entitled to nominate persons to serve on the Board of Governors. In order to nominate a person to be a governor, the Class B Members must provide written notice of such nomination to the Company’s Secretary not less than 60 days nor more than 90 days prior to the Company’s next annual meeting of members and include in such notice certain specified information regarding the nominating Class B Members and the person being nominated to serve on the Board of Governors, including information relating to all arrangements or understandings between the nominating Class B Members and the person being nominated and any other person or persons pursuant to which the nomination was made.

Call Members’ Meetings. Class B Members holding in the aggregate at least 25% of the total outstanding Units will be entitled to require the Board of Governors to call a special meeting of the members by making a written demand to the Board of Governors.

Transferability. Except for Permitted Transfers, Class B Units may not be transferred without the prior approval of the Board of Governors, which may be withheld in the Board’s sole discretion. A Member must submit a written application for the transfer of any Class B Units, other than Permitted Transfers, to the Board of Governors in such form as the Board determines to be appropriate from time to time. Unless otherwise provided in its action to approve a transfer, the Board’s approval of a transfer will also operate as the Board’s approval of the admission of the transferee as a Class B Member of the Company. The Board may withhold approval for any reason.

Permitted Transfers of Class B Units will consist of transfers:

In order to transfer Class B Units in a Permitted Transfer, a Class B Member must provide a written notice of the transfer to the Company at least five business days prior to the transfer. The admission as a Class B Member of a person acquiring Class B Units in a Permitted Transfer does not require the approval of the Board.

Any transfer of Class B Units must satisfy the conditions precedent to transfer described in Section 10.3 prior to the transfer and must not result in the number of record holders of Class B Units exceeding 499 or in any Class A Member owning more than 20% of the Units of the Company.

Inspection Rights. Any Class B Member will have the right to all the information provided by the Act.

Maximum Ownership. Class B Members will not be subject to any limitation on their maximum ownership of Units.

Tax Representative. Any person is eligible to serve as the Company’s tax representative which is the “partnership representative” described in Section 6223(a) of the Internal Revenue Code. A partnership representative is designated by a partnership to represent it before the Internal Revenue Service in income tax matters. The Company is treated as a partnership for federal income tax purposes and the Board of Governors designates the partnership representative.

Terms of the Class C Units

If the Company’s members vote to approve and adopt the Seventh Amended and Restated Operating Agreement, a new class of Units will be created and designated as “Class C Units.” The existing Units will be reclassified as Class C Units with respect to each member who is the record holder of 9 or fewer Units on the effective date of the Seventh Amended and Restated Operating Agreement. Such members will be referred to as “Class C Members.” The rights and privileges of the Class C Members will be set forth in the Seventh Amended and Restated Operating Agreement. These rights and privileges will be materially different from the rights and privileges of the existing Units. The following is a summary of the material rights and privileges of the Class C Members. However, this is a summary only and does not purport to be a complete description of the terms of Seventh Amended and Restated Operating Agreement. We urge you to review the entire Seventh Amended and Restated Operating Agreement prior to returning your proxy.

Cash Distributions. Class C Members will be entitled to receive distributions of Company cash and other property as and when declared by the Board of Governors. A Class C Member will share in such distribution on a pro rata basis with all other members of the Company based on the number of Units such Class C Member holds.

Profits and Losses. Class C Members will be entitled to share in the profits and losses of the Company on a pro rata basis, subject to certain technical adjustments described in the Seventh Amended and Restated Operating Agreement designed to ensure the Company complies with U.S. Treasury regulations applicable to entities treated as partnerships for federal income tax purposes.

Rights upon Liquidation. Upon liquidation of the Company, a Class C Member will be entitled to participate in the distribution of Company assets remaining after the satisfaction of all Company debts and the establishment of any reserves for contingencies first to the extent of the positive balance, if any, of the Class C Member’s capital account and then pro rata with all other members of the Company based on the number of Units such Class C Member holds.

Voting Rights. Class C Members will be entitled to vote only with respect to (i) amendments to the Seventh Amended and Restated Operating Agreement that modify the rights of the Class C Members and (ii) the merger or consolidation of the Company with or into another entity, dissolution, or sale, exchange, or other disposition of all or substantially all the assets of the Company or (iii) or any other matters that require a vote of at least a majority of the outstanding Units under the Act to the extent the requirement cannot be modified in an operating agreement. Any amendment to the Seventh Amended and Restated Operating Agreement that would modify the rights of Class C Members must be approved by members holding a majority of the Class A Units and by members holding a majority of the Class C Units. Class C Members will not be authorized to vote with respect to the election of governors, on any other amendments to the Seventh Amended and Restated Operating Agreement that may be proposed in the future, or any other matter brought to a vote of the members. Class C Members are entitled to one vote per Class C Unit held on each matter submitted to a vote of the Class C Members. There is no right to cumulate votes with respect to any matter. Even though Class C Members do not have the right to vote for governors, they will be entitled to receive notice of, and to attend, any meetings of the members.

Proposal of Amendments. Class C Members will not be entitled to propose amendments to the Company’s Seventh Amended and Restated Operating Agreement.

Nomination of Governors. Class C Members will not be entitled to nominate persons to serve on the Board of Governors.

Call Members’ Meetings. Class C Members holding in the aggregate at least 30% of the total outstanding Units will be entitled to require the Board of Governors to call a special meeting of the members by making a written demand to the Board of Governors.

Transferability. Except for Permitted Transfers, Class C Units may not be transferred without the prior approval of the Board of Governors, which may be withheld in the Board’s sole discretion. A Member must submit a written application for the transfer of any Class C Units, other than Permitted Transfers, to the Board of Governors in such form as the Board determines to be appropriate from time to time. Unless otherwise provided in its action to approve a transfer, the Board’s approval of a transfer will also operate as the Board’s approval of the admission of the transferee as a Class C Member of the Company. The Board may withhold approval for any reason.

Permitted Transfers of Class C Units will consist of transfers:

In order to transfer Class C Units in a Permitted Transfer, a Class C Member must provide a written notice of the transfer to the Company at least five business days prior to the transfer. The admission as a Class C Member of a person acquiring Class C Units in a Permitted Transfer does not require the approval of the Board.

Any transfer of Class C Units must satisfy the conditions precedent to transfer described in Section 10.3 prior to the transfer and must not result in the number of record holders of Class C Units exceeding 499 or in any Class A Member owning more than 20% of the Units of the Company.

Inspection Rights. Any Class C Member will have the right to all the information provided by the Act.

Maximum Ownership. Class C Members will not be subject to any limitation on their maximum ownership of Units.

Tax Representative. Any person is eligible to serve as the Company’s tax representative which is the “partnership representative” described in Section 6223(a) of the Internal Revenue Code. A partnership representative is designated by a partnership to represent it before the Internal Revenue Service in income tax matters. The Company is treated as a partnership for federal income tax purposes and the Board of Governors designates the partnership representative.

No Provision For Access to Company Files

The Company has not made any provision to grant any unaffiliated members access to Company files or to obtain counsel or appraisal services at the Company’s expense.

No Listing or Trading

The Class A Units, Class B Units and Class C Units will not be eligible for listing on any securities exchange or traded on any automatic quotation system.

Timing of Adoption

If our members approve and adopt the Seventh Amended and Restated Operating Agreement at the Special Meeting, the Board of Governors currently intends to implement the Unit reclassification as of the date of the Special Meeting. If the Seventh Amended and Restated Operating Agreement is not approved and adopted by the members at the Special Meeting, the members will continue to hold their existing Units and their rights as members of the Company will not be affected. In that case, the Company will remain subject to the SEC-reporting and other public company requirements.

Deregistration of Units

If our members approve and adopt the Seventh Amended and Restated Operating Agreement at the Special Meeting and the reclassification results in there being fewer than 300 holders of record of the Class A Units, we intend to deregister the Units under the Securities Exchange Act of 1934 as soon as practicable. As a result, the Company will no longer file periodic reports with the SEC. The Board of Governors may elect to defer the deregistration of Units to such time as it determines to be appropriate.

Surrender of Unit Certificates

If our members approve and adopt the Seventh Amended and Restated Operating Agreement at the Special Meeting, the Company will promptly mail a letter of transmittal to each member of record as of the date of the Special Meeting along with instructions for its use in delivering certificates for existing Units to the Company in exchange for new certificates representing the Class A Units, Class B Units or Class C Units, as the case may be, to be issued in exchange for the certificates for existing Units held by such members. Upon receipt of a member’s Unit certificates, together with a properly completed and executed letter of transmittal and any other documents specified in the instructions that the Company may reasonably require, we will deliver a certificate for an equal number of Class A Units, Class B Units or Class C Units, as the case may be, to the member surrendering such Unit certificate. Our membership register will be amended as of the Effective Date of the Seventh Amended and Restated Operating Agreement to reflect the reclassification of Units and is determinative of Unit ownership regardless of the status of Unit Certificates.

If you do not hold the physical certificate for your Units, but instead hold your Units in “street name” with a broker or a bank, your broker or bank will be able to assist you in arranging to receive your new certificates.

Prior to its surrender and exchange, your existing Unit certificate will be deemed to represent the class of Units issued to you as of the effective date of the Unit reclassification based on the membership register.

YOU SHOULD NOT RETURN UNIT CERTIFICATES WITH THE PROXY.

Lost, Stolen or Destroyed Certificates

If any certificate representing Units is lost, stolen or destroyed, the Company will deliver the certificates for Class A Units, Class B Units or Class C Units, as the case may be, without delivery of a certificate representing existing Units if:

Restrictive Legend

The following legend will appear on each certificate issued to evidence a Class A Unit, Class B Unit or Class C Unit:

THE TRANSFERABILITY OF THE MEMBERSHIP UNITS REPRESENTED BY THIS CERTIFICATE IS RESTRICTED. SUCH UNITS MAY NOT BE SOLD, ASSIGNED, OR TRANSFERRED, NOR WILL ANY ASSIGNEE, VENDEE, TRANSFEREE OR ENDORSEE THEREOF BE RECOGNIZED AS HAVING ACQUIRED ANY SUCH UNITS FOR ANY PURPOSES, UNLESS AND TO THE EXTENT SUCH SALE, TRANSFER, HYPOTHECATION, OR ASSIGNMENT IS PERMITTED BY, AND IS COMPLETED IN STRICT ACCORDANCE WITH, THE TERMS AND CONDITIONS SET FORTH IN THE OPERATING AGREEMENT OF THE COMPANY AND AGREED TO BY EACH MEMBER.

THE UNITS REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, OFFERED FOR SALE, OR TRANSFERRED IN ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS.