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HomeMy WebLinkAboutPZ - SCSH Properties LLC_Operating Agreement_Effective 06.25.2021 OPERATING AGREEMENT OF SCSH PROPERTIES LLC This Operating Agreement of SCSH Properties LLC("Agreement")is effective as of June 25,2021. 1. FORMATION 1.1 Name. The name of the limited liability company shall be SCSH Properties LLC. 1.2 Certificate of Organization. A Certificate of Organization in the above name has been filed with the Idaho Secretary of State. 1.3 Tenn. Unless sooner dissolved as provided in this Agreement, the term for which the Company is to exist commences on the date the Certificate of Organization is filed,and continues perpetually except as otherwise provided herein. 1.4 Names and Addresses of Members. The names and addresses of the initial Members of the Company are: SCS Holdings LLC 855 West Broad Street,Ste. 300 Boise,ID 83702 1.5 Principal Office. The principal office of the Company shall be located at 855 W. Broad Street,Ste.300,Boise,ID 83702 or such other location as the Members may designate. The Members may relocate the principal office or establish additional offices from time to time. 1.6 Registered Office and Registered Agent. The Company's registered office shall be located at 855 W. Broad Street, Ste. 300, Boise, ID 83702 and the name of its initial registered agent at such address shall be April Bull. The Members may relocate the registered office and rename its registered agent from time to time. 1.7 Business Purpose. The purpose of the Company shall be to engage in any lawful business. 2. DEFINITIONS Whenever used in this Agreement, the following terms shall have the definitions set forth in this Section. Unless the context clearly indicates otherwise,where appropriate the singular shall include the plural and the masculine shall include the feminine or neuter, and vice versa,to the extent necessary to give the terns defined in this Section or the terms otherwise used in this Agreement their proper meanings. 2.1 "Act": The Idaho Uniform Limited Liability Company Act as set forth in Chapter 6,Title 30,Idaho Code. 2.2 "Adjusted Deficit": With respect to any Member, the deficit balance, if any, in such Member's capital account as of the end of the relevant Fiscal Year,after giving effect to the following adjustments: (a) The capital account shall be increased by any amounts which such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the next to the last sentences of Reg. §§ 1.704-2(g)(1)and 1.704-2(i)(5);and OPERATING AGREEMENT-Page 1 SCSH Properties LLC (b) The capital account shall be decreased by items described in Reg. § 1.704- I(b)(2)(ii)(d)and shall be interpreted consistently therewith. 2.3 "Affiliate": With respect to any person or entity, a corporation, company or other entity controlled by, controlling or under common control with such person or entity. For purposes of this Section, the term"control"means the ownership of more than 50%of the voting interests or beneficial interests by any person. 2.4 "Capital Contribution": The amount of cash and the agreed value of property contributed to the capital of the Company by the Members, as set forth in Section 7.1, and any additional contributions made subsequently to the initial Capital Contributions. 2.5 "Capital Transaction Proceeds": (a) The net proceeds from the sale or other disposition of any Company property, other than such proceeds from a sale or other disposition occurring in connection with (i) the liquidation and termination of the Company,(ii)the transfer of all or substantially all of the Company's assets,(iii)the transfer of any stock in trade of the Company, or (iv) the transfer of any other Company assets in the ordinary course of the Company's trade or business. (b) The net proceeds from refinancing any Company property after repayment of the refinanced obligation and payment of all other Company obligations. (c) The net proceeds from the(i)condemnation of any Company property,(ii)grant of an easement, license, right-of-way or other property right relating to Company property, and (iii) an insurance settlement or other settlement attributable to fire or other casualty relating to Company property (after provision for repairs and improvements to the Company property, if any as determined by the Members). 2.6 "Code": The Internal Revenue Code of 1986,as amended. 2.7 "Company": SCSH Properties LLC,an Idaho limited liability company. 2.8 "Transferable Interest": The interest possessed by a transferee of a Member's Membership Interest,which transferee has not been admitted as a Member,such interest to consist of the transferee's capital account, and its share of the Company's Capital Transaction Proceeds, Net Liquidation Proceeds, Net Operating Cash Flow and net profits and losses pursuant to this Agreement and the Regulations,but which interest shall not include any right to participate in the management or affairs of the Company, nor the right to vote on, consent to or otherwise participate in,any decision by the Members. 2.9 "Fiscal Year": The accounting year of the Company,ending December 31 of each year. 2.10 "Majority Vote": A consensus of those Members that hold Membership Interests representing a percentage share in the allocation of the taxable income of the company, as set forth in Section 8, greater than 50%. Unless otherwise specified in this Agreement or under applicable law,action,consent or approval of the Members shall require only a Majority Vote of the Members. 2.11 "Members": SCS Holdings LLC and any successors in interest to their respective Membership Interests,who or which has been admitted as a Member of the Company pursuant to Section 11. 2.12 "Membership Interest": The interest possessed by a Member, consisting of a Member's capital account,and the Member's share of the Company's Capital Transaction Proceeds,Net Liquidation Proceeds, Net Operating Cash Flow and net profits and losses pursuant to this Agreement and the Regulations, the right to participate in the management or affairs of the Company,and the right to vote on,consent to or otherwise participate in, any decision by the Members. When expressed in conjunction with a general or specific reference to a OPERATING AGREEMENT-Page 2 SCSH Properties LLC percentage share,Membership Interest refers to a Member's percentage share in the allocation of the taxable income of the Company as set forth in Section 8.1. 2.13 "Net Liquidation Proceeds": The net proceeds from the dissolution, liquidation and winding up of the Company. 2.14 "Net Operating Cash Flow": That amount of cash from Company operations available for distribution to the Members. 2.15 "Regulation" or "Reg.": A regulation of the United States Treasury Department, promulgated under Title 26 of the Federal Code of Regulations,as amended. 3. MANAGERS 3.1 Management and Control. Management of the business and affairs of the Company shall be vested in managers("Manager(s)")who shall have the power and authority to manage the affairs of the Company and to make all decisions with respect to such management,except with respect to decisions requiring the approval of the Members under this Agreement or non-waivable provisions of applicable law. At any time when there is more than one Manager, any one Manager may take any action permitted to be taken by the Managers, unless the approval of more than one of the Managers is expressly required pursuant to this Agreement or the Act. 3.2 Powers. Without limiting the foregoing, a Manager is authorized on the Company's behalf to make all decisions as to: (a) the development,sale,lease or other disposition of(less than all,or substantially all)the Company's assets; (b) the purchase or other acquisition of the assets of all kinds; (c) the management of all or any part of the Company's assets; (d) the borrowing of money and the granting of security interests in the Company's assets(including loans from Members); (e) the prepayment, refinancing, or extension of any mortgage affecting the Company's assets; (f) the compromise or release of any of the Company's claims or debts;and (g) the employment of persons, firms, or corporations for the operation and management of the Company's business. In the exercise of its management powers,and in the ordinary course of the Company's business,a Manager is authorized to execute and deliver (a) all contracts,conveyances,assignments, leases, subleases,franchise agreements, licensing agreements, management contracts and maintenance contracts covering or affecting the Company's assets; (b) all checks,drafts,and other orders for the payment of the Company's funds; (c) all promissory notes, mortgages, deeds of trust, security agreements, and other similar documents;and (d) all other instruments of any kind or character relating to the Company's affairs whether like or unlike the foregoing. 3.3 Number,Tenure and Qualifications. The Company shall initially have one(1)Manager. The number of Managers of the Company shall be fixed from time to time by the Majority Vote of the Members. A Manager need not be a Member or a resident of the State of Idaho. Each Manager shall hold that position until his successor is elected and qualified. Except as provided below, Managers shall be elected by Majority Vote of the Members. Any Manager may resign at any time by giving written notice to the Members of the Company. The resignation of a Manager who is also a Member shall not affect the Manager's rights as a Member. The initial OPERATING AGREEMENT-Page 3 SCSH Properties LLC Manager shall be SCS Management LLC. If any manager dies, becomes incapacitate or is otherwise unable to serve as Manager,the remaining managers shall continue on as Manager(s)of the Company. 3.4 Removal. At any meeting of the Members called as provided herein, all or any lesser number of Managers may be removed,with or without cause,by Majority Vote of the Members. The removal of a Manager who is also a Member shall not affect the removed Manager's rights as a Member and shall not constitute the withdrawal of the removed Manager as a Member. 3.5 Vacancies. Any vacancy occurring, for any reason, in the number of Managers of the Company may be filled by Majority Vote of the Members. Any Manager's position to be filled by reason of an increase in the number of Managers shall be filled by Majority Vote of the Members. A Manager elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office and shall hold office until the expiration of such term and until his successor shall be elected and shall qualify or until his earlier death, resignation, or removal. A Manager chosen to fill a position resulting from an increase in the number of Managers shall hold office until the next meeting of Members and until his successor shall be elected and shall qualify,or until his earlier death, resignation,or removal. 3.6 Tax Matters. Except as otherwise specifically provided herein or prohibited by law,the Managers shall make any and all elections for federal and state income tax purposes, including,without limitation, any election,if permitted by applicable law to: (i)adjust the basis of Company property pursuant to Code§754,§ 734(b), and §743(b), or comparable provisions of state or local law, in connection with transfers of Transferable Interests, Membership Interests and Company distributions; (ii) extend the statute of limitations for assessment of tax deficiencies against Members with respect to adjustments to the Company's federal, state or local tax returns; and(iii)represent the Company before taxing authorities or courts of competent jurisdiction in tax matters affecting the Company. The Members may appoint a"tax matters partner"under the Code(or the equivalent representative of a limited liability company before the Internal Revenue Service)and in any similar capacity under state or local law. 3.7 Attorney in Fact. Any Manager may make, constitute and appoint one or more individuals to serve as its true and lawful attomey(s)in fact as Manager of the Company in name,place and stead,and such attomey(s) in fact shall have full power and authority to manage the affairs of the Company and to make all decisions with respect to such management as provided herein and as provided within the instrument making such appointment. 4. MEMBERS 4.1 Limitation of Liability. Each Member's liability to third parties shall be limited to the maximum extent permitted by applicable law. 4.2 Company Debt Liability. A Member shall not be personally liable for any debts or losses of the Company beyond his respective Capital Contributions and any obligation of the Member under Section 7.2 to make Capital Contributions,except as otherwise required by law. 4.3 Approval by All Members. The sale, exchange, or other disposition of all, or substantially all,of the Company's assets(other than in the ordinary course of the Company's business),which is to occur as part of a single transaction or plan, and/or merger, conversion or domestication of the Company, and/or undertaking of any act which is outside the ordinary course of the Company's business, and/or amendment to the Agreement,must first be approved by a unanimous vote of all Members. 4.4 Company Books. In accordance with Section 10 herein, the Manager(s) shall maintain and preserve, during the term of the Company, and for eight (8) years thereafter, all accounts, books, and other relevant Company documents; provided however, the Company shall retain copies of its tax returns indefinitely. Upon reasonable request,each Member shall have the unrestricted right,during ordinary business hours,to inspect and copy such Company documents at the requesting Member's expense. OPERATING AGREEMENT-Page 4 SCSH Properties LLC 4.5 Priority and Return of Capital. Except as may be expressly provided in Section 9, no Member or Transferable Interest holder shall have priority over any other Member or Transferable Interest holder, either as to the return of Capital Contributions or as to profits, losses, or distributions; provided that this Section shall not apply to loans (as distinguished from Capital Contributions) which a Member or Transferable Interest holder has made to the Company. 4.6 Member Authority. No Member shall have any power or authority to bind the Company unless the Member has been given written authorization from the Manager(s)to act as an agent of the Company. 5. INDEPENDENT ACTIVITIES Notwithstanding the existence of this Agreement, each Member and Manager, and its Affiliates, may engage in whatever activities they choose,whether the same be competitive with the Company or otherwise, without having or incurring any obligation to offer any interest in such activities to the Company or any Member. Neither this Agreement nor any activity undertaken pursuant hereto shall prevent a Member, Manager or its Affiliates from engaging in such activities,or require a Member,Manager or its Affiliates to permit the Company or any other Member to participate in any such activities,and as a material part of the consideration for the Members' execution hereof, each Member hereby irrevocably waives, relinquishes and renounces any such right or claim of participation. 6. ACTIONS WITHOUT NOTICE,WITHOUT MEETING,OR BY TELEPHONE 6.1 Meeting of all Members. Notwithstanding any other provision of this Agreement, if all Members are present at a meeting,such meeting shall be valid without call or notice,and any lawful action taken at such meeting shall be the action of the Members. 6.2 Action Without Meeting. Any action requiring the Majority Vote of the Members may be taken without a meeting of all of the Members. 6.3 Meetings by Telephone. Meetings of the Members may be held by telephone conference or by any other means of communication by which all participants can hear each other simultaneously during the meeting,and such participation shall constitute presence in person at the meeting. 7. CAPITAL 7.1 Capital Contributions, Each Member has made the following initial Capital Contribution to the Company: SCS Holdings LLC $ 500.00 $ 500.00 7.2 Additional Capital. (a) Except as set forth in this Section 7.2(a), no Member shall be required or permitted to make any Capital Contributions. In the event that at any time,pursuant to a unanimous vote of the Members, the Members determine that additional funds in excess of the Capital Contributions and Capital Transaction Proceeds are required by the Company for its business or any of its obligations, expenses, costs, liabilities or expenditures, or for improvements with respect to any Company property, which cannot otherwise be financed on commercially reasonable terms by an outside lending institution,as determined upon the Majority Vote of the Members,the Members may contribute such additional funds. (b) In the event that a Member("non-contributing Member")elects not to contribute additional funds pursuant to subparagraph(a),the other Members("contributing Members")may contribute such additional funds, in which case the advance shall be deemed a loan by the contributing Member(s)to OPERATING AGREEMENT-Page 5 SCSH Properties LLC the non-contributing Member(s), bearing interest at the greater rate of 10 percent or the prime rate published in the Wall Street Journal, from time to time,plus 4 percentage points,per annum from the date the advance is made, and, to the extent of such advance,plus interest, any distributions of Net Operating Cash Flow or Capital Transaction Proceeds otherwise due to the non-contributing Member shall instead be paid to the contributing Member(s)who made such contribution. 7.3 Interest on Capital Contributions. No interest shall be paid on Capital Contributions, except as provided in Section 7.2(b)herein. 7.4 Loans. The Company may borrow money from any Member upon such commercially reasonable terms and conditions as may be approved by unanimous vote of the Members. 8. INCOME AND LOSS ALLOCATIONS 8.1 Basic Allocations. The taxable income and loss (and every item of income, deduction, gain or loss entering into the computation thereof) and credits of the Company, for each Fiscal Year of the Company,shall be initially allocated as follows: SCS Holdings LLC 100% 8.2 Section 704(c) Allocations. Notwithstanding the provisions of Section 8.1, and in accordance with Code Section 704(c)and the regulations thereunder, income,gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and the fair market value of such property on the date it was contributed to the Company. 8.3 Oualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations or distributions described in Reg. §§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or 1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially allocated to each such Member in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Deficit of such Member as quickly as possible,provided that an allocation pursuant to this Section 8.3 shall be made only if and to the extent that such Member would have an Adjusted Deficit after all other allocations provided for in this Section 8 have been tentatively made as if this Section 8.3 were not in the Agreement. 8.4 Allocations to Reflect Economic Arrangement of Members. Notwithstanding the provisions of Section 8.1 requiring Company income and losses to be allocated in accordance with the Members' Membership Interest, the Members understand that special allocations of Company tax items, including but not limited to income,gain,loss,credits and deductions,may be necessary to accurately reflect the underlying economic arrangement of the Members. In the event one or more Members believe that such an allocation is necessary, the Manager(s)shall present the allocation for approval by a Majority Vote of the Members. 9. DISTRIBUTIONS 9.1 Operating Distributions. Net Operating Cash Flow shall be distributed to the Members in proportion to their percentage shares in the Membership Interests at such times as the Members shall determine. Notwithstanding anything herein to the contrary,no Distribution shall be declared and paid if such Distribution shall violate the limitations on Distributions set forth in the Act. 9.2 Distributions of Capital Transaction Proceeds. Capital Transaction Proceeds shall be distributed to the Members in proportion to their percentage shares in the Membership Interests at such times as the Members shall determine. OPERATING AGREEMENT-Page 6 SCSH Properties LLC 9.3 Liquidating Distributions. Upon the dissolution and winding up of the Company pursuant to Section 14, after providing for the satisfaction of any of the remaining debts of the Company and all other expenses of liquidation, the Members shall distribute the Net Liquidation Proceeds in accordance with their positive capital account balances,after giving effect to all contributions,distributions and allocations for all periods prior to dissolution. Such distributions shall satisfy the requirements of Reg. § 1.704-1(b)(2)(ii)(b)(2),as the same may be amended. 10. BANK ACCOUNTS,BOOKS AND RECORDS,ACCOUNTING,AND TAX ELECTIONS 10.1 Bank Accounts. The Members shall open and maintain in the name of the Company a bank account or accounts in which shall be deposited all funds of the Company. Withdrawals from such account or accounts shall be made upon the signature or signatures of such person or persons as the Members shall designate. 10.2 Method of Accounting. The Members shall keep, or cause to be kept, full and accurate records of all transactions of the Company in accordance with sound accounting principals,using the accrual method of accounting. The Members may change the Company method of accounting to a different method of accounting if they determine that such a change is in the best interests of the Company. The maintenance of capital accounts shall satisfy the requirements of Reg. § 1.704-1(b)(2)(iv),as the same may be amended. 10.3 Books and Records. All books and records of the Company shall, at all times, be maintained in the principal office of the Company, and shall be open during reasonable business hours for the reasonable inspection and examination by the Members or their authorized representatives. The Manager(s) shall maintain books and records of the Company separate from the books and financial records of the Members and any Affiliate of the Members, and shall take all actions which are necessary or appropriate for the continuation of the Company's valid existence as a limited liability company under the Act,or under the laws of any other jurisdiction in which the Company is doing business, in order to protect the limited liability of the Members and to enable the Company to continue to conduct the business in which it is engaged. 10.4 Federal Income Tax Returns. The Members shall prepare, or cause to be prepared, federal and state income tax returns for the Company. 10.5 Other Report and Statements. Monthly,and at other times desired by a Majority Vote of the Members, detailed statements shall be prepared by the Manager(s), or by the certified public accountant then servicing the Company,which statements shall show all income,receipts,expenses and costs in connection with the Company. 11. ADMISSION OF NEW MEMBER 11.1 Requirements. A new Member may be admitted to the Company only by unanimous vote of the Members,and thereafter shall possess a Membership Interest. Each new Member shall be admitted only upon execution,and written acceptance of all of the terms and provisions of this Agreement,as amended through the time of admission. A duly admitted Member's Capital Contribution and percentage Membership Interest shall be set forth in an executed amendment to this Agreement. The spouse of a Member shall not be deemed a Member, regardless of whether such spouse has executed this Agreement and regardless of any community property interest such spouse may have in a Member's Membership Interest, unless the requirements of this Section are hereafter satisfied. 11.2 Absence of Consent. In the event that such a consent is not granted, the transferee shall not possess a Membership Interest,but only a Transferable Interest. 12. DISSOCIATION AND DISPOSITIONS OF INTERESTS 12.1 Lifetime Dispositions. Except as expressly provided in this Section 12.1,no owner of a Membership Interest or Transferable Interest("Interest") shall transfer, sell, assign,pledge, encumber or otherwise OPERATING AGREEMENT-Page 7 SCSH Properties LLC dispose of his or her Interest now owned or hereafter acquired without the unanimous written consent of the Members,which may be withheld in their sole discretion. Transfers for estate planning purposes to family members of a Member,entities owned in whole or in part by family members of a Member,or trusts created for the benefit of the Member's family are hereby consented to by the Members in advance, but such transferees shall only hold a Transferable Interest unless further consent is given pursuant to Section 11.1. (a) Right of First Refusal. In the absence of the unanimous written consent of the other Members, if a holder of an Interest desires to transfer or sell its Interest to a third party, it shall first offer,in writing,to sell its Interest to the parties set forth below for the same price and terms offered by the third party. The written offer submitted to such parties shall contain the name or names of the prospective purchaser and the offered price and terms of purchase. (i) Option to Company. The Interest shall first be subject to an option on the part of the Company to purchase all or part of such Interest,which option shall be exercised if at all,within a period of 30 days following the receipt of the selling Interest holder's offer. The Company's election to purchase all or part of such Interest shall be made, if at all, upon the unanimous vote of the non-selling Interest holders. (ii) Option to Remaining Members. If the Company fails to exercise its option with respect to all or any part of the Interest, then the same shall be offered for sale and shall be subject to an option on the part of the other Members to purchase,which option shall be exercised,if at all,within 15 days after the expiration of the 30-day period granted the Company. The other Members may divide the interest of the selling Interest holder in such manner as they shall mutually agree,and any of them may elect not to participate in the purchase. If they do not otherwise agree, the interest of the selling Interest holder shall be divided among the Members participating in the purchase in proportion to their respective Membership Interests at the time the offer is made. To exercise the right to purchase,written notice shall be given to the selling Interest holder by the individual purchasing Members. (iii) Terms. The Company or the purchasing Members,as the case may be, shall make payment for the Interest either(a)according to the payment terms and condition of the proposed transfer to the third party or (b) by the execution and delivery of a promissory note payable to the selling Interest holder,whichever option the purchasing Member may choose. The promissory note shall bear interest at the prime rate on the date of the transfer and shall be secured by the Interest purchased. The principal of the note shall be payable, together with interest accrued as of the date of each installment payment in ten (10) equal annual installments, commencing on the first anniversary of the transfer. (iv) Failure to Exercise Option. In the event the Interest offered is not purchased by the above parties, then all restrictions imposed under Section 12.1 shall terminate with respect to the then proposed disposition;provided, however, that, if such disposition is not made within 30 days following the expiration of the 15-day option period granted the other Members under subparagraph (ii) above, then the restrictions imposed under Section 12.1 shall once again become applicable. (v) Transferee's Status. In the event the Interest offered is purchased by a party other than a Member, the transferee shall become a Member with a Membership Interest only by admission in accordance with the provisions of Section 11. Otherwise, such transferee shall possess only a Transferable Interest. (vi) Failure to Comply. Any disposition or attempted disposition of an Interest, or any part thereof, not in compliance with this Section 12, shall be null and void ab initio,and need not be recognized by the Company. OPERATING AGREEMENT-Page 8 SCSH Properties LLC 12.2 Dissociation. (a) Events of Dissociation. A Person shall cease to be a Member upon the happening of any of the following events: W the voluntary withdrawal of a Member (which shall not constitute a violation or breach of this Agreement); (ii) a disposition of a Member's Membership Interest in contravention of Section 12.1. (iii) the Member (A) has become the subject of an Order for Relief under the United States Bankruptcy Code, or (B) has initiated as to such Member, in any state insolvency or receivership proceeding,either in an original proceeding or by way of an answer,an action for liquidation arrangement,composition,readjustment,dissolution,or similar relief, (iv) in the case of a Member who is a natural person, the death of the Member or the entry of an order by a court of competent jurisdiction adjudicating the Member incompetent to manage the Member's estate; (v) in the case of a Member who is acting as a Member by virtue of being a trustee of a trust,the termination of the trust(but not merely the substitution of a new trustee); (vi) in the case of a Member that is a separate organization other than a corporation,the dissolution and commencement of winding up of the separate organization; (vii) in the case of a Member that is a corporation,the filing of a certificate of dissolution,or its equivalent,for the corporation or the revocation of its charter;or (viii) in the case of an estate, the distribution by the fiduciary of the estate's entire interest in the limited liability company. (b) Purchase of Dissociated Member's Membership Interest. Upon the dissociation of a Member, when the remaining Members by Majority Vote elect to continue the business of the Company,the remaining Members by Majority Vote shall elect between one of the following alternatives: W the disassociated Member's Membership Interest shall be purchased by the Company for a purchase price equal to the aggregate fair market value of the Member's Interest determined according to the provisions of subsection (c) below. The purchase price of such interest shall be paid by the Company to the Member in cash within sixty (60) days of determination of the aggregate fair market value or, at the Company's option, said debt may be evidenced by a promissory note bearing interest at the prevailing prime rate at the time of the dissociation,payable in ten(10) equal annual installments commencing on the first anniversary of the event of dissociation and consisting of principal and interest accrued as of the date of each installment. The promissory note shall be secured by the Membership Interest purchased;or, (ii) the transferee of the dissociated Member's interest shall be treated as a Member holding a Membership Interest rather than the holder of merely a Transferable Interest. The election to treat the transferee as a Member shall be made by Majority Vote of the remaining Members,any contrary provisions in Section 11 notwithstanding. Such election shall be made within ninety (90) days after the remaining Members learn of the event of dissociation,otherwise the remaining Members shall be deemed to have selected the alternative set forth in subsection (ii) above. If the event of dissociation does not involve a transfer of the dissociated Member's OPERATING AGREEMENT-Page 9 SCSH Properties LLC interest, however, the remaining Members shall be deemed to have selected the alternative set forth in subsection(i)above. (c) Purchase Price of Dissociated Member's Membership Interest. The fair market value of a Member's Interest to be purchased by the Company pursuant to this section shall be determined by agreement between the dissociated Member (or the dissociated Member's legal representative or the transferee of the dissociated Member's Membership Interest, as the case may be)and the Company,which agreement is subject to approval by the remaining members. If the dissociated Member(or the transferee of the dissociated Member's Membership Interest,as the case may be)and the Company cannot agree upon the fair market value of such Membership Interest within thirty (30) days, the fair market value thereof shall be determined by appraisal, the Company and the dissociated Member each to choose one appraiser and the two appraisers so chosen to choose a third appraiser. For this purpose,the fair market value of the dissociated Member's Membership Interest shall be computed as the amount which could reasonably be expected to be realized by such Member upon the sale of the Company's assets in the ordinary course of business at the time of dissociation. The decision of a majority of the appraisers as to the fair market value of such Membership Interest shall be final and binding and may be enforced by legal proceedings. The dissociated Member and the Company shall each compensate the appraiser appointed by it and the compensation of the third appraiser shall be borne equally by such parties. (d) Damages. The provision set forth herein shall not effect any claim for damages the Company may have against the dissociated Member if such dissociation is in violation of this Company Agreement. The Company shall have the right to offset any payments due under this Article by any damages that the Company may incur as a result of a dissociation of a Member in contravention of this Agreement. 12.3 Dispositions to Other Members. Transfers of interests between Members shall not require the consent of the other Members, and the entire interest held by the transferee Member shall be deemed to be a Membership Interest. If, upon the death of a Member, the Membership Interest of that Member is to be transferred completely to other Members of the Company, then the death of that Member shall not operate as an event of dissociation, and each transferee shall thereafter be treated as a Member holding a Membership Interest equal to the combination of the Membership Interest previously held by that transferee and the Membership Interest transferred to that transferee. Following the incompetency of a Member,so long as another Member is appointed as a guardian of the estate of the incompetent Member,the incompetency shall not operate as an event of dissociation. 13. INDEMNIFICATION AND LIMITATION OF LIABILITY 13.1 Indemnity of the Members,Employees and Other Agents. The Company may indemnify, defend and hold harmless its Members,employees and other agents to the fullest extent permitted by law provided that such action in any given situation is approved by unanimous vote of Members. 13.2 Limitation of Liability of Members. The Members of the Company shall not be liable for losses or damages for conduct as Members except to the extent that the Act, as it now exists or may hereafter be amended,prohibits elimination or limitation of Member liability. No repeal or amendment of this Section or of the Act shall adversely affect any right or protection of a Member for actions or omissions that occurred prior to the repeal or amendment of this Section. 13.3 Standard of Conduct for Managers. No Manager shall be liable to the Company or to any Member for any loss or damage sustained by the Company or any Member, unless the loss or damage shall have been the result of gross negligence or willful misconduct of the Manager. The Manager(s)of the Company shall not be liable to third parties for losses or damages for conduct as a manager except to the extent that the Act,as it now exists or may hereafter be amended,prohibits elimination or limitation of manager liability. The Company shall indemnify the Manager as provided by Idaho Code Section 30-6-408(1)and any subsequent amendment thereto. OPERATING AGREEMENT-Page 10 SCSH Properties LLC 14. DISSOLUTION 14.1 Events of Dissolution. The Company shall be dissolved and,its business wound up,upon the earliest to occur of the following events: (a) The written consent of all the Members;or (b) Upon an event of dissociation as set forth in Section 12.2 unless the business of the Company is continued by the Majority Vote of the remaining Members within ninety(90)days of the event of dissociation. If the remaining Members do not by Majority Vote elect to dissolve the Company, the continuation of the business of the Company shall be deemed to have been approved by Majority Vote of the remaining Members. 14.2 Liquidation Upon Dissolution and Winding Up. Upon the dissolution of the Company, the Members shall proceed to wind up the business of the Company in an orderly manner,liquidating its assets,and satisfying the claims of its creditors,and the Members shall take no action that is inconsistent with,or not necessary to or appropriate for,the winding up of the Company's business and affairs. The Members shall be responsible for overseeing the winding up and liquidation of the Company, shall take full account of the Company's liabilities and assets, shall cause the assets to be liquidated as promptly as is consistent with obtaining the fair value thereof,and shall cause the Net Liquidation Proceeds to be distributed in accordance with Section 9.3. 15. MISCELLANEOUS 15.1 Notices. Any notice, consent, election or other communication required or permitted under this Agreement shall be deemed given when personally delivered, sent by telefacsimile transmission, deposited with an established overnight courier service (such as Fed Ex), or when deposited in the United States Mail as first class certified or registered mail,postage prepaid;provided,however,any notice sent by United States Mail to a person at a location outside the state from which the notice is mailed shall not be deemed given until 72 hours after the date deposited in the United States Mail,postage prepaid. Any party may change its notice address by notifying the other party in writing prior to giving any notice hereunder. 15.2 Integration. This Agreement sets forth all(and is intended by all parties hereto to be an integration of all)of the promises,agreements,conditions,understandings,warranties and representations among the parties hereto with respect to the Company, the Company business and the Company assets, and there are no promises,agreements,conditions,understandings,warranties or representations,oral or written, express or implied, relating to the Company or its assets,except as set forth herein. 15.3 Severability. This Agreement is intended to be performed in accordance with,and only to the extent permitted by,all applicable laws,ordinances,rules and regulations. If any provision of this Agreement or the application thereof to any person or circumstance shall, for any reason and to any extent, be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances shall not be affected thereby,but rather shall be enforced to the greatest extent permitted by law. 15.4 Application of Idaho Law. This Operating Agreement, and the application or interpretation hereof,shall be governed exclusively by its terms and by the laws of the State of Idaho,the Code and the Regulations. 15.5 Classification for Federal Income Tax Purposes. It is the intent of the Members that the limited liability company hereby formed is to be taxed as a partnership for federal income tax purposes. To this end, the Members have executed this Agreement with the understanding that the provisions hereof will cause the Company to be classified as a partnership for federal income tax purposes. Thus, any other provision hereof, notwithstanding all provisions hereof shall be interpreted consistent with this intent and, if any provision, or provisions, hereof would cause the Company to be taxed as an association taxable as a corporation for federal income tax purposes, said provision or provisions shall be void and this Agreement shall be construed to contain OPERATING AGREEMENT-Page 11 SCSH Properties LLC provisions similar to said void provision or provisions to the extent that said inclusion does not cause the Company to be taxed other than as a partnership for federal income tax purposes. 15.6 Waivers. The failure of any party to seek redress for violation of or to insist upon the strict performance of any covenant or condition of this Agreement shall not prevent a subsequent act,which would have originally constituted a violation,from having the effect of an original violation. 15.7 Heirs. Successors and Assigns. Each and all of the covenants, terms, provisions, and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto and, to the extent permitted by this Agreement,their respective heirs,legal representatives,successors,and assigns. 15.8 Creditors. None of the provisions of the Operating Agreement shall be for the benefit of or enforceable by any creditors of the Company. 15.9 Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed an original, and the counterparts shall together constitute one and the same agreement, notwithstanding the fact that all of the parties did not sign the same counterpart. 15.10 Captions. The headings and captions herein are inserted solely for the purpose of convenience of reference and are not a part of and are not intended to govern,limit or aid in the construction of any term or provision hereof. 15.11 Amendment. Neither this Agreement nor the Certificate of Organization for the Company shall be altered or amended except by unanimous vote of the Members. Any such amendment shall be in writing and executed by all Members. OPERATING AGREEMENT-Page 12 SCSH Properties LLC SCSH Properties LLC, an Idaho limited liability company By: SCS Management LLC Its: Manager Al Michael A.Hall,President OPERATING AGREEMENT-Page 13 SCSH Properties LLC