PZ - Operating Agreement.Executed OPERATING AGREEMENT
OF
SCS BRIGHTON II LLC
THIS OPERATING AGREEMENT OF SCS BRIGHTON II LLC ("Agreement") is made
effective as of the 16'' day of May, 2017 ("Effective Date'), by and between SCS
INVESTMENTS LLC, an Idaho limited liability company ("SCS"), and DWT INVESTMENTS,
LLC, an Idaho limited liability company ("Brighton"), and each person who shall hereafter be
admitted to SCS BRIGHTON II LLC, an Idaho limited liability company, as a member
(collectively the "Members" and individually a "Member");
WITNESSETH:
The Members desire to form a Limited Liability Company pursuant to, and in accordance
with, the laws of the State of Idaho, specifically the Idaho Uniform Limited Liability Company
Act, I.C. § 30-25-101, et seq. (hereafter "Act"). Accordingly, in consideration of the mutual
agreements and covenants contained in this Agreement, the undersigned Members agree and
certify as follows:
ARTICLE 1. THE LIMITED LIABILITY COMPANY
Section 1.1 Formation. The Members hereby agree to form a Limited Liability
Company (hereafter "Company") pursuant to, and in accordance with, the Act, and the
provisions of this Agreement.
Section 1.2 Certificate of Organization. Concurrently with the execution of this
Agreement, the members or a designated authorized person shall execute the Certificate of
Organization for the Company (hereafter"Certificate") and, promptly thereafter, shall cause the
Certificate to be filed with the Idaho Secretary of State, and shall execute such further
instruments and documents (including amendments to the Certificate) and take such further
actions as shall be necessary, required or appropriate to comply with the requirements of law in
all states and counties where the Company may conduct its business.
Section 1.3 Name. The name of the Company shall be: "SCS Brighton II LLC."
Section 1.4 Designated Office— Registered Agent. The location of the Company's
initial designated office in this State is 12601 W. Explorer Drive, Suite 200, Boise, Idaho 83713,
or at such other place in Idaho as may be determined from time to time by the Members. The
name of the initial registered agent of the Company at such address is Amanda McCurry.
Section 1.5 Events of Dissolution. The Company shall continue from the date of
filing the Certificate until 99 years thereafter, unless sooner dissolved by:
(a) The written consent of all Members;
(b) The sale of all or substantially all of the assets of the Company;
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(c) Any event which makes it unlawful for the business of the Company to be
carried on by the Members; or
(d) Any other event causing dissolution of a limited liability company under
the Act.
Section 1.6 Continuance of the Company. Management of the business and affairs
of the Company shall be vested in the Manager, in its capacity as Manager, who shall have the
right and authority to manage the affairs of the Company and to make all decisions with respect
to such management, unless otherwise expressly provided herein.
Section 1.7 Character of Business. The ordinary business of the Company's
activities shall mean to undertake one or more "Projects" (as hereafter defined) and all other
lawful business enterprises related thereto as permitted under the laws of the State of Idaho.
Section 1.8 Principal Place of Business. The location of the principal place of
business of the Company shall be at 12601 W. Explorer Drive, Suite 200, Boise, Idaho, 83713
or at such other place in Boise, Idaho, as may be determined from time-to-time by the Members.
Section 1.9 Members. The name and place of residence or principal place of
business of each Member are listed on Exhibit A.
ARTICLE 2. DEFINITIONS
As used in this Agreement, the following terms shall have the definitions provided below.
Section 2.1 Adjusted Book Value. The term "Adjusted Book Value" shall mean the
value of the Company, and/or the value of a Sharing Percentage, as applicable, determined by
the accountant regularly employed by the Company or, if there is none, an independent certified
public accounting firm selected by the Manager. If a real property appraisal is required, it shall
be obtained as provided in Section 9.8. The determination made by said accountant (and
appraiser) shall be binding and conclusive upon the Manager, Members and the Company.
Determination of the value described herein shall be made in accordance with GAAP,
consistently applied, and the following shall be observed:
(a) The determination shall be made as of the last day of the preceding
calendar month;
(b) No allowance of any kind shall be made for goodwill or any similar
intangible asset of the Company;
(c) Inventory of merchandise, supplies and other non-depreciable personal
property shall be valued at cost or replacement cost, whichever is lower;
(d) Machinery, fixtures and equipment shall be valued at the depreciated
value appearing on the books of the Company;
(e) Buildings and land whether held directly or indirectly through other entities
in which this company participates shall be valued at fair market value;
and company interest valued at amount the Company would receive in a
deemed sale at distribution;
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(f) Stocks, bonds, partnership interests and other similar investments shall
be valued at the most recently quoted sales or trading price, if a market
exists therefore, or if not, then the value shall be equal to the most recent
past sale not later than one (1)year prior to valuation. In the absence of a
market or sale, stock shall be valued at its recorded book value, a bond
shall be valued at its face value plus accrued interest and a partnership
interest shall be valued at an amount determined by a majority of the
general partners of said partnership;
(g) Trademarks, trade names, patents and other intangibles having
commercial value shall be considered in arriving at a valuation figure;
(h) Past, present and prospective earnings, including the existing and
prospective economic condition of the industry shall be considered in
arriving at the valuation figure;
(i) All debts of the Company shall be deducted at their face value, including
any interest accrued but unpaid;
(j) All unpaid but accrued federal, state and local taxes, including but not
limited to sales, payroll, unemployment insurance, excise, franchise and
income shall be deducted as liabilities; and
(k) Contingent liability items shall be specifically deducted from the valuation
figure but only if such item may, in the accountant's or appraiser's
opinion, become an actual obligation of the Company and then only in the
amount the accountant or appraiser determines to be reasonable.
Section 2.2 Agreement. The term "Agreement" shall mean this Operating Agreement
of SCS Brighton II LLC, as it now exists or may hereafter be amended, modified or
supplemented.
Section 2.3 Book. The term "Book" or "book" basis, value and/or purposes shall
mean as determined based on GAAP consistently applied.
Section 2.4 Capital Account. The term "Capital Account" shall mean collectively an
account with a subaccount for contributions and a subaccount for distributions.
Section 2.5 Capital Contribution. The term "Capital Contribution" shall mean the
amount paid to the capital of the Company in cash, property and/or services contributed to the
Company by each Member, or sums paid by a Member for the conduct of the Company
business,from time to time.
Section 2.6 Company, The term "Company" shall mean SCS Brighton 2 LLC, an
Idaho limited liability company, created and existing by and under the provisions of this
Agreement and the Certificate.
Section 2.7 GAAP. The term "GAAP" shall mean as described, used and/or defined
by generally accepted accounting practices consistently applied.
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Section 2.8 I.R.C. The term "I.R.C." shall mean the Internal Revenue Code of 1986,
as amended from time to time, and any successor provisions.
Section 2.9 Maiority of Members. The term "Majority of Members" shall mean the
Members holding more than fifty percent (50%) of the Sharing Percentages of the Company,
exclusive of those Sharing Percentages not entitled to vote.
Section 2.10 Members. The term "Members" shall mean the Persons listed in Exhibit
A, and any Person that is admitted as a new or additional Member after the date of this
Agreement.
Section 2.11 Net Cash From Operations. The term "Net Cash From Operations"
shall mean the gross cash proceeds from Company operations less the portion thereof used to
pay, or establish reserves for the payment of, all Company expenses and liabilities, debt
payments, capital improvements, replacements, and contingencies all as reasonably approved
by a Majority of Members. "Net Cash From Operations" shall not be reduced by depreciation,
cost recovery deductions, or similar allowances, but shall be increased by any reductions of
reserves previously established.
Section 2.12 Net Cash From Sales or Refinancings. The term "Net Cash From
Sales or Refinancings" shall mean the net cash proceeds from all sales and other dispositions
(other than in the ordinary course of business) and all refinancings of real estate owned by the
Company, less any portion thereof used to pay, or establish reserves for the payment of,
Company expenses and liabilities, debt payments, capital improvements, replacements, and
contingencies, all as determined by a Majority of Members. "Net Cash From Sales and
Refinancings" shall include all principal and interest payments with respect to any note or other
obligation received by the Company in connection with a sale and other disposition of real
estate owned by the Company.
Section 2.13 Project. The term "Project' shall mean the acquisition, purchase, sale,
ownership, development, lease, management, finance, subdivision, and other dealing in and
with one or more real properties and improvements collectively designed by the Members as a
single plan or venture,whether held for short or long term investment.
Section 2.14 Sharing Percentage. The term "Sharing Percentage" shall mean the
ratio at which each Member will share in the profits and losses, contributions, distributions and
allocations within the Company, as described in Exhibit A, unless otherwise specifically provided
in this Agreement.
ARTICLE 3. CONTRIBUTIONS
Section 3.1 Capital Contributions. The initial Capital Contributions of the Company
shall be contributed by the Members as described on Exhibit A.
(a) A Member shall not have the right to demand the return of any Capital
Contribution(s) made to the Company.
(b) The liability of any Member to make a contribution to the capital of the
Company shall be limited to the amount of the total contribution of the
initial Capital Contribution and any required in Section 3.2 below. No
Member shall have any further liability to contribute money or property to
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the capital of the Company for, or in connection with, the liabilities of the
Company, and the Members shall not be personally liable for any liability
or obligation of the Company.
(c) No Member shall receive any interest, salary or drawing with respect to a
Capital Contribution or a Capital Account, or for services rendered on
behalf of the Company, except as otherwise specifically provided in this
Agreement, and, in particular, except as provided in Section 5.3 (Regular
Distributions).
(d) Notwithstanding any other provision of this Agreement to the contrary, if
at any time the Company shall have more than one Member, the
Members shall cause depreciation and/or cost recovery deductions by a
Member to be allocated among the Members for income tax purposes in
accordance with I.R.C. § 704(c) and the regulations promulgated
thereunder, to take into account the variation, if any between the adjusted
basis of such property in the hands of the contributing Member on the
date immediately preceding the date of such contribution and its agreed
value at the time of such contribution.
Section 3.2 Additional Capital Contributions. No Member shall be permitted or
required to make any additional Capital Contribution. may require the contribution of such
additional funds to the Company in proportion to the Members' Sharing Percentages, or the
Majority of Members may elect to have the Company borrow from the Members in proportion to
the Members' Sharing Percentages, the amount of such additional funds needed. The prior
written approval shall set forth the amount of the additional capital required, the purpose for
which the additional capital is required and the date upon which the Members should contribute.
Any loans to the Company under this Subsection 3.2 shall be as provided in Section 3.4.
Section 3.3 Failure to Make Additional Contributions. If any Member fails to pay
its respective portion of any additional capital contribution on the date specified in the prior
written consent (hereafter, a "Non-Contributing Member"), the other Members may, in addition
to any other legal remedies available, elect to contribute additional funds in the amount unpaid
by the Non-Contributing Member (an "Over-Contribution") in proportion to the respective
Sharing Percentages of the Members making an Over-Contribution (the "Contributing
Members"), or as otherwise agreed in writing by such Contributing Members. The Contributing
Members shall, by the vote of the Contributing Members holding a majority of the Sharing
Percentages of the Contributing Members, elect one of the following options for treatment of the
Over-Contributions:
(a) Purchase Sharing Percentage of Non-Contributing Member. Those
Contributing Member(s) making an Over-Contribution on behalf of a Non-Contributing
Member may elect to purchase the Sharing Percentage of the Non-Contributing Member
for the Adjusted Book Value of the Sharing Percentage as determined in Section 9.21.
Section 3.4 Member Loan and Security Interest. The Contributing Member(s) may
elect to treat their Over-Contribution as a loan to the Non-Contributing Member. Such loan shall
be charged to the Non-Contributing Member and shall bear interest at an annual rate equal to
the published prime rate of Wells Fargo Bank of Idaho, Boise, Idaho, as it exists from time-to-
time, or a successor bank approved by a Majority of Members if such bank no longer exists,
plus three percent (3%), and shall be payable from the next distributions payable by the
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Company to the Non-Contributing Member, which distributions shall be paid by the Company
directly to the Contributing Member making the loan, provided that the full amount of such loan
and interest accrued thereon shall be due and payable one (1) year after the date of the loan.
The Contributing Member(s) making such a loan on behalf of a Non-Contributing Member shall
have and is hereby granted a security interest in and to the interest of the Non-Contributing
Member in the Company to secure all sums advanced and interest accrued thereon, all in
accordance with and subject to the provisions of the Uniform Commercial Code of the State of
Idaho; and the Contributing Member(s) shall be entitled to all of the rights and remedies of a
secured party in the event of a default by the Non-Contributing Member including, but not limited
to, the right and power to sell or offer for sale the interest of the Non-Contributing Member in the
Company as provided in the Uniform Commercial Code, subject to the restrictions on transfer as
set forth in Article 9, below. The Non-Contributing Member shall execute all instruments and
documents necessary to evidence said loan and the agreement to repay the same and to
acknowledge and perfect the security interest herein created.
(a) Adjustments to Sharing Percentages for Over-Contributions. The
Contributing Member(s) making an Over-Contribution may elect to adjust Sharing
Percentages by increasing the Sharing Percentage of such Contributing Member and
decreasing the respective Sharing Percentage of the Non-Contributing Member to reflect
the Over-Contribution as follows:
(i) The Sharing Percentage of each Contributing Member shall be
increased by Adjustment Percentage X, which shall be calculated
for each Contributing Member according to the following formula.
For purposes of this formula, "Total Capital Contributions of all
Members to Date" shall include the agreed value of the initial
capital contributions in addition to all other capital contributions
made to date.
Adjustment = Amount of Contributing Member's Over-Contribution
Percentage X Total Capital Contributions+ Sum of all Contributing Members'
of all Members to Date Additional Capital Contributions
(ii) The respective Sharing Percentage of the Non-Contributing
Members shall be decreased (but not below zero) by each such
Members pro rata share (based on the total Sharing Percentages
of the Non-Contributing Members) of Adjustment Percentage X
calculated for each Contributing Member.
Section 3.5 Member Loans to Company. In lieu of or in addition to additional capital
contributions, and if unanimously agreed by the Members in a writing signed by all Members,
The Company may borrow all or a portion of its additional capital requirements from one (1) or
more of the Members. In the event a Member loans money to the Company, each such loan
shall be evidenced by a promissory note (hereafter "Promissory Note") executed by the
Company in the Company name and delivered to the Member making the loan. The interest rate
shall be the published prime rate of Wells Fargo Bank of Idaho, Boise, Idaho, as it exists from
time-to-time, or a successor bank approved by a Majority of Members if such bank no longer
exists, plus one percent (1%), unless otherwise unanimously agreed between the applicable
parties, and the Member making the Loan. The other terms of each loan, including, but not
limited to, the annual interest to be paid, the time and manner of repayment and the maturity
date of the loan, shall be agreed by all Members. If approved by a Majority of Members, the
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repayment of the loan made by a Member to the Company and represented by a Promissory
Note, as required herein, may be established, as a payment that is required to be made prior to
the distribution of any Company funds to the Members as described in Section 5.2 (Priority
Distributions), and, if so approved, such shall be set forth in the Promissory Note.
Section 3.6 Capital Accounts. Capital Accounts shall include the amount of the
Capital Contributions contributed by each Member to the Company, and, if at any time the
Company will have had more than one member, Capital Accounts shall be maintained for each
Member on the books of the Company determined from the inception of the Company strictly in
accordance with the rules set forth in Treasury Regulation § 1.704-1(b)(2)(iv). In such
circumstance, unless otherwise specifically described herein, Capital Accounts shall be
maintained on a Book basis based on GAAP rather than a "tax" basis as described by the I.R.C.
(a) Capital Accounts shall be increased by the following:
(i) The fair market value of property (additional to any
property included in the Capital Contribution of such
Member) contributed by the Member to the Company (net
of liabilities secured by the property or to which the
property is subject); and
(ii) The Net Income (hereafter defined) allocated to the
Member.
(b) Capital Accounts shall be decreased by the following:
(i) The amount of money distributed to the Member;
(ii) The fair market value of property distributed to the Member
by the Company (net of liabilities secured by the property
or to which the property is subject);
(iii) The Member's share of amounts paid or incurred by the
Company to organize the Company or to promote the sale
of (or to sell) an interest in the Company (except to the
extent properly amortized for tax purposes); and
(iv) The Net Losses (hereafter defined) allocated to the
Member.
(c) "Net Income" and "Net Loss" shall mean the taxable income or taxable
loss (exclusive of Built-In Gain or Built-in Loss as defined in the I.R.C.) of
the Company for each taxable year, as determined for federal income tax
purposes in accordance with I.R.C. § 703(a), including all items of
income, gain, loss or deduction required to be separately stated pursuant
to I.R.C. § 703(a)(1), other than any specific item of income, gain
(exclusive of Built-In-Gain), loss (exclusive of Built-In Loss), deduction or
credit subject to special allocation under this Agreement, with the
following modifications adjusting it to book basis:
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0) Net Loss shall not include Nonrecourse Deductions
(hereafter defined);
(ii) Net Income shall be increased by any income exempt from
federal income tax;
(iii) Net Income shall be reduced by an I.R.C. § 705(a)(2)(b)
expenditures or expenditures treated as such pursuant to
Treasury Regulation § 1.704-1(b)(2)(iv)(h)(i); and
(iv) Depreciation, amortization and other cost recovery
transactions shall be determined based on book value
instead of the amount determined in calculating taxable
income or loss. Any item of deduction, amortization or cost
recovery specially allocated to a Member and not included
in Net Income or Net Loss shall be determined for Capital
Account purposes in a manner similar to this subsection.
(v) As used in this Section, "Nonrecourse Deductions" shall
mean the amount of loss, deduction or I.R.C. §
705(a)(2)(b) expenditure (or item thereof) attributable to
Nonrecourse Liabilities (hereafter defined), determined in
accordance with Treasury Regulation § 1.701-1(b)(4)(iv).
"Nonrecourse Liabilities" shall mean the liabilities of the
Company which are treated as "nonrecourse liabilities"
under Treasury Regulation § 1.704-1(b)(4)(iv). Any liability
of the Company guaranteed by a Member, or with respect
to which a Member has pledged personal assets, shall not
be classified as Nonrecourse Liability; provided, that such
liabilities for basis purposes shall be allocated to the
Members who have directly or through their affiliates
provided such guarantee.
(d) In the event of the liquidation of a Member's interest in the Company or of
the Company, the Capital Account of each Member shall be adjusted for
the hypothetical book gain or loss that would have been realized by the
Company if all Company assets had been sold for their fair market values
in a cash sale (in order to reflect unrealized gain or loss).
(e) The Capital Account of each Member shall also be adjusted upon the
constructive termination of the Company as provided under I.R.C. § 708
in accordance with the method set forth in the immediately preceding
paragraph (as required by Treasury Regulation § 1.074-1(b)(2)(iv)(1)).
(f) Notwithstanding anything to the contrary in this Agreement, the Capital
Accounts of the Members shall be maintained in accordance with I.R.C. §
704 and Treasury Regulation § 1.704-1(b).
Section 3.7 Contributed Property. Notwithstanding any other provision of this
Agreement to the contrary, the Members shall cause depreciation and/or cost recovery
deductions by a Member to be allocated among the Members for income tax purposes in
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accordance with I.R.C. § 744(c) and the regulations promulgated thereunder, to take into
account the variation, if any between the adjusted basis of such property in the hands of the
contributing Member on the date immediately preceding the date of such contribution and its
agreed value at the time of such contribution.
Section 3.8 Return of Capital Contribution. A Member shall not have the right to
demand the return of any capital contribution(s) made to the Company.
Section 3.9 Interest on Capital Account. No Member shall receive any interest,
salary or drawing with respect to a capital contribution or a Capital Account, or for services
rendered on behalf of the Company, except as otherwise specifically provided in this
Agreement, and, in particular, except as provided in Section 5.3, below.
ARTICLE 4. PROFITS AND LOSSES
As used herein, the "net profits" and "net losses" of the Company shall be determined
annually on a Book basis by the application of GAAP as customarily and consistently applied to
businesses of the nature conducted by the Company. In determining the net profits and net
losses of the Company, no effect shall be given to withdrawal of funds by the Members. The
Company's Net Income or Net Losses shall be allocated to the Members on a Project-by-Project
basis, upon such terms and conditions as are otherwise agreed upon by the Members in writing.
Notwithstanding the foregoing, in the event the Members are unable to agree upon the
applicable allocation(s), all allocations shall be made in accordance with the Sharing
Percentages stated in Exhibit A.
Provided, that if pursuant to Section 5.3 below, the regular distributions to the Members
during a taxable year are disproportionate to the foregoing Sharing Percentages, the
Company's Net Income or Net Losses for that taxable year shall be allocated to the Members in
accordance with the actual percentage of the regular distributions made to each Member.
ARTICLE 5. DISTRIBUTIONS
Section 5.1 Distributions to Members. All distributions, from whatever source, shall
be distributed to and among the Members on a Project-by-Project Basis and in strict accordance
with this Agreement. Except as otherwise required herein, distribution to the Members from Net
Cash From Operations or from Net Cash From Sales or Refinancings, shall be made in cash, at
such times as approved by the Manager. The Manager shall make, on not less than on a
quarterly basis, payments distributions from Net Cash From Operations in such amounts as are
necessary to make the payments and distributions set forth in Section 5.2(a)(i) and (ii). To the
extent Net Cash From Operations is insufficient to make the distributions required by the
immediately preceding sentence, the Manager shall make payments and distributions from Net
Cash from Sales or Refinancing, subject to applicable lender requirements, which are set forth
in Section 5.2(b)(i) and (ii).
Section 5.2 Priority Distributions. All distributions for any Project shall be made in
the following order of priorities:
(a) The Net Cash From Operations shall be paid or distributed in the
following priority, unless such priority is otherwise waived or modified by
unanimous agreement of the Members:
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(i) First, in reimbursement of any expenses of the Company
that have not yet been reimbursed; and
(ii) Second, to the Members in accordance with each
Member's Sharing Percentage, in an amount equal to (1)
the Company's Net Income during the fiscal year multiplied
by (11) the lesser of (A) forty percent (40%) or (B) the sum
of the maximum federal and state individual income tax
rates of any member in effect for the fiscal year(taking into
account the deductibility of state taxes for federal income
tax purposes).
(iii) Third, to a Member or Manager who has made a loan to
the Company, as provided in Section 3.4(a) above,
provided that the Promissory Note for such loan provides
that the repayment of the loan is a priority distribution to be
paid by the Company.
(b) Subject to any applicable lender requirements, the Net Cash From Sales
and Refinancings shall be paid or distributed in the following priority,
unless such priority is otherwise waived or modified by unanimous written
agreement of the Members:
(i) First, to a Member for reimbursement of any expenses not
otherwise reimbursed under Section 5.2(a)(i);
(ii) Second, to the Members in accordance with each
Member's Sharing Percentage to the extent of distributions
required, but not made under Section 5.2(a)(ii) (relating to
distributions to cover income taxes);
(iii) Third, to a Member or Manager for loans not otherwise
reimbursed under Section 5.2(a)(ii); and
(iv) Fourth, to the Members in proportion to their respective
positive Capital Account balances up to and until the
complete return of all Capital Contributions made by such
Members.
The payments and/or distributions specified in subsections (a) and (b) of this Section
shall be priority distributions of Company cash and payment thereof shall be made, to the extent
of Company cash available in the order specified and shall have an absolute priority over other
distributions to any of the Members unless expressly provided to the contrary in this Agreement.
Section 5.3 Regular Distributions. After satisfaction by the Company of the priority
distributions described in Section 5.2(a)(iii) with respect to Net Cash From Operations and
Section 5.2(b)(iv)with respect to Net Cash From Sales and Refinancings, all distributions of Net
Cash From Operations and Net Cash From Sales and Refinancings thereafter (collectively,
"Regular Distributions) shall be distributed to the Members on a Project-by-Project basis in the
manner previously agreed by the Members in writing. In the event the Members are unable to
agree upon the proportions of the respective Regular Distributions to be made, such Regular
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Distributions shall be made to the Members in proportion to their Sharing Percentages. Except
as otherwise agreed upon by all the Members in writing, in no case shall any Regular
Distribution be made to one (1) Member without a Regular Distribution being made to the other
Members.
ARTICLE 6. MANAGEMENT
Section 6.1 Management by Manager. Except as otherwise set forth in Section 6.5
the business, property, management and affairs of the Company shall be vested in the Manager
appointed or elected pursuant to this Article. The Manager shall have and exercise full,
complete and exclusive authority, power and discretion to manage and control all aspects of the
business, property and affairs of the Company, to establish the policies, budgets and operating
procedures regarding those matters, to make all decisions regarding those matters and to
perform any and all other acts or activities customary or incident to the management of the
Company's business, property and affairs, consistent with this Agreement and any Company
resolutions. The Manager may delegate specific Manager responsibilities described herein to a
Member, Person or other agent on behalf of the Company by written resolution signed by the
Manager. All decisions made by the Manager and/or authorized agent with respect to the
management and control of the Company as permitted in this Agreement shall be binding on the
Company and all Members.
Section 6.2 Number and Qualifications of Manager. There shall be one (1)
Manager of the Company. A Manager can be an individual or an entity and need not be a
Member of the Company. The initial Manager shall be: Brighton Corporation, an Idaho
corporation.
Section 6.3 Manager Procedures.
(a) Election. The Members, by a vote of the Majority of Members, at a
meeting called for that purpose, shall elect the Manager.
(b) Term. Each Manager shall serve until replaced by the Members, or until
the earlier of such Manager's death, dissolution, resignation, or removal.
(c) Resignation. A Manager may resign at any time by delivering written
notice to the Members. The resignation is effective upon notice, unless
the notice specifies a later effective date. Once delivered, a notice of
resignation is irrevocable unless revocation is permitted by the Members.
The resignation of a Manager who is also a Member shall not affect the
Manager's rights as a Member and shall not constitute a withdrawal of the
Member.
(d) Removal. A Manager may be removed by vote of the Majority of
Members, with cause (meaning the actions or omissions of Manager have
caused economic harm to the Company).
(e) Vacancy. Any vacancy of a Manager occurring for any reason may be
filled only through the election of a new Manager pursuant to this Section.
(f) Compensation. The Manager may be entitled to receive compensation
for the provision of management services as may be approved by a vote
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of the Majority of Members. The Manager shall be reimbursed by the
Company for reasonable out of pocket expenses directly associated with
the performance of services to the Company in that capacity.
Section 6.4 Management of Company and Property. It is understood that the
Manager hereunder is not required to be engaged in the day to day management of the affairs
of the Company. The Manager may contract with third parties for tax, accounting and/or legal
services required in managing the day to day affairs of the Company and with an outside
property management company for the customary property management and accounting
functions. With respect to such services, the Manager may authorize any third party agent to
enter into any lawful contract or to otherwise act on behalf of the Company as an authorized
agent by resolution signed by the Manager. Such authority may be confined to specific
instances or may be for general services.The fees and costs of outside third parties shall be on
terms customary in the city where the Company is located and shall be considered an operating
expense of the Company, as shall out-of-pocket costs and expenses of the Manager in
managing the Company.
Section 6.5 Acts Requiring Approval of Members. Except as may be otherwise
specifically stated in this Agreement, only the following matters shall require approval of the
Members (which approval may be documented by a specific or general Company resolution
regarding authority) in the form as stated below:
(a) Approval of a Majority of Members. The Manager shall have no
authority to bind the Company for any matters requiring the approval of a Majority of
Members as described herein, including the matters set forth below, without first
obtaining the approval of a Majority of Members (which approval may be documented by
a general Company resolution regarding authority). In all cases where approval of the
Members is required, the Manager must notify all Members and all Members must be
given an opportunity to either approve or disapprove of such matter:
(b) Sale, lease, exchange, mortgage, pledge, hypothecation or other transfer
or disposition of all or substantially all of the Company's assets;
(c) Merger of the Company with another entity;
(d) Incurring or refinancing of indebtedness by the Company;
(e) Execution, consent, approval, ratification or performance of a contract,
instrument or agreement which requires the payment or performance of services with a
value in excess of Twenty Thousand Dollars ($20,000); or
(f) The making and terms of any Member loans to the Company, as
described in Section 3.4.
Section 6.6 Acts Requiring Unanimous Consent of Members. Notwithstanding
Sections 6.1 and 6.2, The Manager shall have no authority to bind the
Company as to the following matters without first obtaining the unanimous
approval of all of the Members:
(i) Sale, lease, exchange, or otherwise dispose of all, or
substantially, all, of the Company's assets, with or without
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-12
the good will, outside the ordinary course of business of
the Company's activities;
(ii) Approve a merger, conversion or domestication under
Chapter 22, Title 30, of the Idaho Code;
(iii) Undertake any act outside the ordinary course of the
Company's activities; and
(iv) Matters described in this Article 6 requiring a unanimous
vote of the Members (only with respect to disinterested
Members entitled to vote).
Section 6.7 Manager's Fiduciary Duties. Manager owes to the Company and the
Members the fiduciary duties only as set forth in this Section 6.7, unless otherwise required by
Idaho law, as follows:
(a) Duty of Loyalty. A Manager's duty of loyalty to the Company and the
Members is limited to the following:
(i) to account to the Company and hold as trustee for it any
property, profit, or benefit derived by the Manager in the
conduct and winding up of the Company business, or
derived from a use by the Manager of Company property;
and
(ii) to refrain from dealing with the Company in the conduct or
winding up of the Company's activities as or on behalf of
an interest adverse to the Company.
(b) Duty of Care. A Manager's duty of care to the Company and/or the
Members in the conduct and winding up of the Company's activities shall
be met so long as the Manager refrains from engaging in grossly
negligent or reckless conduct, willful misconduct, and/or a knowing
violation of law. In discharging its duties, a Manager shall be fully
protected in relying in good faith upon the records required to be
maintained under the Act, and upon such opinions, reports, statements or
other information provided by another person that the Manager
reasonably believes is a competent and reliable source for such
information, including, but not limited to employees and/or consultants of
a Member or Manager or an affiliate or related company of the same.
(c) Good Faith and Fair Dealing. The Manager shall be deemed to have met
any obligation of good faith and fair dealing imposed by the Act or
otherwise by Idaho law, if Manager reasonably believes its actions are
consistent with typical business practices for the Company's activities
within the County in which the designated office of the Company is
located.
(d) Member Approval. After full disclosure by the Manager of all material
facts, the Members may unanimously approve (excluding any vote of the
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Manager or any Member directly and singly benefitting therefrom in a
manner distinct from other similarly situated Members) a specific act or
transaction that would otherwise violate the duty of loyalty described
herein, or any other duties as may be permitted by Idaho law, and upon
such approval, the Members shall be deemed to have waived the duty of
loyalty and/or such other duties in such matter, and the Manager shall not
be in breach of the same. A Member's signature on a document
describing and/or contractually entering into such transaction shall be
considered its approval of such transaction.
(e) Fairness; Elimination of Duties. Notwithstanding anything to the contrary
in this Agreement, if any transaction or conduct is fair to the Company,
the Manager shall be deemed in compliance with this Section 6.7, the
Agreement and the Act. Further, as permitted by Section 30-25-105(d) of
the Act, the Members hereby eliminate the duties set forth in Sections 30-
25-409(b) and (i) of the Act that would be otherwise imposed upon the
Manager pursuant to Section 30-25-409(i) of the Act, and the Members
hereby agree that the elimination of such duties is not "manifestly
unreasonable" as defined under the Act or any Idaho law interpreting the
same.
Section 6.8 Transactions with the Company. Provided that the Manager complies
with this Article 6, a Manager does not violate any duty or obligation to the Company merely
because (i) the Manager's conduct furthers the Manager's own interest or the interest of any
particular Member; or (ii) the Manager or the Member with whom such Manager may be
affiliated engages in any transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with the Company; and/or (iii) a
Manager has a direct or indirect interest, or benefit, in a transaction with the Company.
Permitted transactions with the Company, include, but are not limited to, the following:
(a) Services. The Manager, affiliates of the Manager, the Members or
affiliates of the Members may also act independently to provide non-
management professional services to the Company, including, without
limitation, development, construction real estate brokerage services or
property management services; provided, however, that the provision of
such services by the Manager, the Members or affiliates of the Manager
or members is approved in writing by all Members. In the event the
Manager, the Members or affiliates of the Manager or Members provide
such non-management services to the Company, the Manager, the
members or affiliates of the Manager or Members shall be reimbursed at
the normal and customary charges for the provision of such services, or
may provide such services as a part of ownership in the Company as
described herein.
(b) Employment of Affiliates. The Manager may retain, employ, sell or lease
to the Company, affiliates of the Manager, Members and/or the Company,
provided that such transaction be made on terms and conditions which
are no less favorable to the Company than if such transaction had been
entered into with an independent third party, and provided such
employment is disclosed to the Members.
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Section 6.9 Non-Company Activities. The Manager may engage independently or
with others in other business and investment opportunities of every nature and description even
if it conflicts or competes with the business of the Company and Company activities, and shall
have no obligation to account to the Company for such business or investment opportunities
(collectively, "Non-Company Activities"). Manager's performance of any Non-Company
Activities shall not constitute a corporate opportunity under the laws of the State of Idaho or any
other applicable law, and shall not constitute a breach of fiduciary duty under Section 6.7.
Notwithstanding the foregoing, this Section 6.9 does not change the Manager's duty to act in a
manner that the Manager reasonably believes to be in the best interest of the Company, but
solely with respect to the business of the Company itself.
Section 6.10 Tax Matters. To the extent the Company is subject to the provisions of
Section 6231 of the Code before its amendment by the Bipartisan Budget Act of 2015, the
Members hereby designate the Manager, with full power of substitution, as the "Tax Matters
Partner" of the Company in accordance with Section 6231(a)(7) of the Code and in connection
therewith and in addition to all the powers given thereunder, shall have all other powers needed
to fully perform hereunder, including, without limitation, the power to retain all attorneys and
accountants of its choice and the right to settle any audits without the consent of the Members.
With respect to the Company's taxable years beginning after December 31, 2017, the Manager
shall be the Company's "partnership representative" (as such term is defined in Code Section
6223(a)) (and in any other similar capacity under applicable state or local tax law) (the
"Partnership Representative"). The Partnership Representative shall not cause or permit the
Company to elect, under Code Section 6241(g)(4), to have any provision of the "Bipartisan
Budget Act of 2015" apply to the Company for the Company's taxable years beginning before
January 1, 2018 (such provisions, the "2015 Audit Rules"). The Partnership Representative may
cause the Company to make an election out of the 2015 Audit Rules pursuant to Code Sections
6221(b) and/or 6226(a)(i), provided that the Company is eligible to make such election. Each
Member shall provide to the Partnership Representative such information (or, if applicable,
certify as to filing of initial or amended tax returns) as is reasonably requested by the
Partnership Representative to enable the Partnership Representative to: (i) elect out of the 2015
Audit Rules, if such election is available; (ii) reduce under Code Section 6226 any Company-
level assessment under the 2015 Audit Rules; and (iii) to determine apportionment of
responsibility of such a Company-level assessment among the Members ("Apportionment").
Each Member to whom liability for a Company-level assessment is so apportioned shall be
obligated to pay the amount so apportioned to the Company so that such amount can be
provided to the auditing tax authority, to the end that the Company and the other Members shall
be indemnified and saved harmless from the same. The benefit of such indemnity shall extend
to Members admitted following the period which is the subject of the audit, and each Member
shall continue to be obligated for any liability so apportioned to it following its withdrawal as a
Member or the termination of the Company. Notwithstanding anything to the contrary in this
Agreement, the Manager may propose, and the Members shall, by virtue of this Agreement,
agree to, any amendment to the provisions of this Agreement required to appropriately reflect
the promulgation of Treasury Regulations implementing Sections 6221 through 6241 of the
Code, as amended by Section 1101 of the Bipartisan Budget Act of 2015, or any amendment
thereof, or regulations, notices or other guidance issued thereunder. The designations made in
this Section is hereby expressly consented to by each Member as an express condition to
becoming a Member.
Section 6.11 Manager Indemnification and Limitation of Liability. The Company
shall indemnify the Manager to the fullest extent permissible under Idaho law, as the same
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-15
exists or may hereafter be amended, against all liability, loss and costs (including, without
limitation, attorney fees through all levels of action) incurred or suffered by such person by
reason of or arising from the fact that such person is or was a Manager of the Company, or is or
was serving at the request of the Company as a Manager, director, officer, partner, trustee,
employee, or agent of another foreign or domestic limited liability company, corporation,
partnership, joint venture, trust, benefit plan, or other enterprise. The Company may, by action
of the Members, provide indemnification to employees and agents of the Company who are not
Managers. However, the Manager shall not be indemnified from any liability for fraud, bad faith,
willful misconduct or gross negligence. The indemnification provided in this Section 6.11 shall
not be exclusive of any other rights to which any person may be entitled under any statute,
bylaw, agreement, resolution of members, contract, or otherwise. The Manager of the
Company shall not be liable to the Company or its members for monetary damages for conduct
as the Manager except to the extent that the Act, as it now exists or may hereafter be amended,
prohibits elimination or limitation of Manager liability. No repeal or amendment of this Section
6.11 or of the Act shall adversely affect any right or protection of a Manager for actions or
omissions prior to the repeal or amendment.
Section 6.12 Manager Time Devoted to Business. The Manager shall devote such
time to the business of the Company, as it deems in its sole discretion, as is necessary for the
efficient operation of the business and investments of the Company.
Section 6.13 Member Provisions.
(a) Time Devoted to Business. Each Member shall devote such time to the
business of the Company, as it deems in its sole discretion, necessary for
the efficient operation of the business and investments of the Company.
The Members shall, at all times, be free to engage for their own account
in all aspects of any business or investment in which the Company is
involved.
(b) Indemnification. The Company shall indemnify, defend, save and hold
each Member, and the partners of each Member, and the separate
property of each, free and harmless from any loss, claim, damage or
liability arising from or related to the obligations of the Company, provided
that the acts and conduct of the Member giving rise to the loss claim,
damage or liability for which indemnity is claimed is in accordance with,
and not beyond the authority of the Member, as provided in this
Agreement.
(c) Deadlock. In the event the Sharing Percentages of Members entitled to
approve, consent, and/or vote on a matter described in this Agreement is
deadlocked, the Members agree to submit to mediation with a mutually
agreed mediator located in Boise, Idaho, to resolve such matter, with
each Member paying its own attorneys'fees and costs.
Section 6.14 Appointment of Company Officers. The Manager, in its sole and
absolute discretion, shall have the authority to appoint one or more Company officers to act on
behalf of the Company from time to time, to perform such duties and upon such terms and
conditions as may be determined by the Manager, including, without limitation, matters
concerning employment status and payment of compensation, if any.
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-16
ARTICLE 7. COMPENSATION
Section 7.1 Services. If approved by the Manager, any Member or Manager
rendering services to or on behalf of the Company, in addition to the services to be provided as
described in this Agreement, may be paid compensation commensurate with the value of such
services, which compensation shall be considered an expense of the Company and not a
distribution of available funds pursuant to Article 5, above.
Section 7.2 Expenses. The Company shall reimburse the Manager for the actual
direct out-of-pocket expenses incurred by the Manager in the management of the business,
investments, property and assets of the Company.
ARTICLE 8.ACCOUNTS
Section 8.1 Books. The Manager shall maintain complete and accurate books of
account and records of the business and investment affairs of the Company at the principal
place of business of the Company. The books and records shall be kept on such method of
accounting, as the Manager shall select and will be kept and maintained by the Company. The
fiscal and accounting year of the Company shall be the calendar year.
Section 8.2 Members' Capital Accounts. The Manager may, at any time, transfer
within the Members' Capital Accounts all or any portion of the credit balances in the Members'
distribution account. Any amounts transferred shall be in proportion to the Members' Sharing
Percentages. A credit balance in a Member's distribution account shall constitute a liability of
the Company to that Member, but shall not constitute a part of that Member's interest in the
capital of the Company. A debit balance in a Member's distribution account, whether
occasioned by distributions to that Member in excess of such Members share of the Net
Income of the Company or by charging the Member for such Member's share of the Company's
Net Losses, shall constitute an obligation of that Member to the Company, but shall not reduce
that Member's interest in the capital of the Company. The payment of any amount owed to the
Company shall be made at such time and in such manner as the Members may determine.
Section 8.3 Transfers During the Year. To avoid an interim closing of the books of
the Company, the share of income and/or loss of a Member who transferred all or part of such
Member's interest in the Company during the calendar year, may, at the discretion of the
Manager, be determined by taking (a) such Members interest in the Company during the
calendar year; (b) such Member's proportionate share of the amount year, and (c) such
Member's proportionate share of the amount of the Net Income and/or Net Loss for the year.
The Member's proportionate share shall be a proration based on the portion of the calendar
year that has elapsed prior to the transfer by such Member. The Members shall allocate the
balance of the Net Income and/or Net Loss attributable to the transferred interest to the
transferee of such interest.
Section 8.4 Liability for Income Tax. If the Company may be liable for the payment
of any tax as a result of a Member's failure to file a tax return or to pay a tax liability (hereafter
"Non-filing Member"), the Non-filing Member shall be personally liable to the Company for any
such tax, plus all penalties and interest levied, assessed or charged the Company by the taxing
entity. The Company may pay such liability out of funds in the Non-filing Member's Capital or
distribution accounts.
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-17
Section 8.5 Reports. The Company shall close the books promptly after the close of
each calendar year, and shall prepare and send to each Member a full tax return of such
Member's distributive share of the Company's income and/or loss for federal income tax
reporting purposes.
Section 8.6 Information Relating to Company. Each Member or an authorized
representative of such Member shall have access to and may inspect and copy all books,
records and materials regarding the Company and/or the Company activities, unless otherwise
provided in this Agreement or required by Idaho law. The exercise of the Member's rights
contained in this Section shall be at the requesting Member's expenses, and further, shall be
performed at such time(s) and interval(s) as shall minimize the disruption of, the inconvenience
to,the business of the Company.
Section 8.7 Records at Principal Place of Business. The Manager shall cause the
Company to keep at its principal place of business the following, which shall be available for
review by the Members at any reasonable time:
(a) A current and past list, in alphabetical order, of the full name and last
known mailing address of each Member;
(b) A copy of the filed Certificate and all amendments to the Certificate,
together with copies of any executed powers of attorney pursuant to
which any amendments to the Certificate have been executed;
(c) Copies of the Company's federal, state and local income tax returns and
financial statements, if any, for the three (3) most recent years, or, if those
returns and statements were not prepared for any reason, copies of the
information and statements provided to, or which should have been
provided to, the Members to enable them to prepare their federal, state
and local income tax returns for the period;
(d) Copies of any effective written operating agreements, and all
amendments thereto, and copies of any written operating agreements no
longer in effect; and
(e) Other writings prepared pursuant to a requirement, if any, in this
Agreement, as amended from time to time.
ARTICLE 9. TRANSFERS
Section 9.1 General Restriction on Transfers. A Member shall not have the right to
dispose of, transfer, encumber, pledge, hypothecate, convey, and/or assign all or any portion of
such Member's interest in the Company, including, but not limited to, as security for a loan
("Transfer"), except in strict compliance with the provisions of this Article 9. Any purported
Transfer in breach or violation of the terms of this Agreement shall be void, and the Company
shall not recognize or give any effect to such transaction whatsoever. As used in this Article 9,
"transferee" shall mean any person or legal entity receiving any interest in the Company
whatsoever from a Transfer. Unless admitted as a Member pursuant to Section 6.5(b), all
transferees, whether or not such transferee's Transfer is a Permitted Transfer, shall have only
the right of an assignee to receive, to the extent transferred, the following: the share of
distributions of available cash and liquidation proceeds and the return of contribution to which
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-18
the transferring Member would otherwise be entitled, and shall receive the allocation of the
Company's Net Income or Net Loss that would otherwise by allocated to the transferring
Member. Consistent with Idaho Code § 30-25-502(a)(3) and (b), such transferee as assignee
shall have no right to participate in the management of the business and affairs of the Company,
or any other rights of a Member in this Agreement whatsoever, including, but not limited to, any
right to a review of any of the Company's books and/or records.
Section 9.2 Permitted Transfers. It is agreed that the following Transfers are
expressly exempt from the transfer restrictions contained in this Article 9, and do not require
approval of the Members unless otherwise provided herein ("Permitted Transfers"):
(a) Any Transfer of interests between the Members;
(b) Any Transfer by a Member of a Member interest for bona fide estate
planning purposes to any entity or trust controlled by the same principal
as the Member making such transfer; and/or members of the Member's
immediate family. As used in this Section, "immediate family" shall mean
spouses, children and grandchildren of a Member (or the spouses,
children and/or grandchildren of a principal in a Member);
(c) Any Transfer by a Member of a Member interest in the Company owned
by a corporation, partnership or other legal entity (hereafter "Corporate
Member") by the Corporate Member to its shareholders, partners or other
owners of the Corporate Member; and/or
Any Transfer by a Member of a Member interest in the Company owned
by a Member may be transferred, in whole or in part, to a corporation or
other entity, including a trust, of which the transferring Member owns or
controls.
(d) All interest in the Company transferred pursuant to a Permitted Transfer
shall be and remain subject to all of the terms and conditions of this
Agreement.
(e) Any transferee from Permitted Transfers shall have only the rights of an
assignee of such Member's interest as described in Section 9.1 unless
admitted as a Member to the Company pursuant to Section 6.5(b). In the
event any transferee is a trust, the trust shall have a designated
representative for matters with the Company, which designated
representative must be approved by a Majority of Members.
Section 9.3 Member Transfer to Third Party. If a Member which desires a Transfer
to a third party ("Offering Member") either of its own volition or as a result of a receipt of a "bona
fide offer" from a third party all or a portion of its interest (including an encumbrance) in the
Company shall provide the terms of the proposed offer to Transfer to the remaining Members
(and a copy of any bona fide offer and/or signed loan commitment), to which shall be attached a
statement of intention to Transfer, as the case may be, the name and address of the
prospective transferee, the percentage of the Offering Member's interest involved in the
proposed transfer (for purposes of this Section only, "Target Interest"), the price, and the other
terms of said Transfer ("Transfer Notice"). As used herein "bona fide offer" shall mean a bona
fide written offer from a third party which the Offering Member desires to accept. Upon receipt
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-19
of the Transfer Notice, the remaining Members shall have the option to take the following
actions with respect to all of the Target Interest,within forty five (45)days after the receipt of the
Transfer Notice by all remaining Members:
(a) approve or conditionally approve the Transfer as more specifically
described in Exhibit B;
(b) exercise their rights of first refusal to purchase the Target Interest or to
nominate a third party to purchase the Target Interest as more specifically
described in Exhibit B,
(c) exercise their tag-along rights to sell their interest to the Offering Member
or the third party as more specifically described in Exhibit B;
(d) disapprove such Transfer as more specifically described in Exhibit B.
Section 9.4 Transfer — Death of Individual Member. Upon the death of an
individual Member (each hereafter referred to as a "Decedent"), the remaining Members shall
have the option to purchase all of the interest in the Company owned by the Decedent and the
interest in the Company previously transferred by the Decedent pursuant to Section 9.2(b),(c)
and/or d (whether to a person or within an entity comprising a Member) and/or any transferee
has not been made a Member (which owned and previously transferred interests are hereafter
collectively called "Decedent's Interest"). The option to purchase herein described shall not
arise in the event of the death of the first spouse of a husband and wife who is a Decedent,
provided that the surviving spouse becomes the owner of the whole of the interest in the
Company owned by said Decedent. If, upon the death of the first spouse of a husband or wife
of a Decedent, all or any portion of the deceased spouse's interest in the Company is
bequeathed to a person other than such deceased spouse's surviving spouse, then the option
to purchase herein described shall arise as to the whole of the interest in the Company owned
by the husband or wife of Decedent. Upon the death of a Decedent, the remaining Members
shall have the option to purchase all of the Decedent's Interest in the Company. The option to
purchase herein described shall not arise in the event of the death of the first spouse of a
husband and wife who is a Decedent, provided that the surviving spouse becomes the owner of
the whole of the interest in the Company owned by said Decedent.
(a) Exercise of Option to Purchase. The option of the remaining Members to
purchase the Decedent's Interest shall be exercised within ninety (90)
days after the date of the Decedent's death. The exercise of the option
by the remaining Members shall be evidenced by the delivery to the
Decedent's personal representative of a written notice of election within
the time herein provided. If the remaining Member(s) shall exercise the
option to purchase the Decedent's Interest, the remaining Members shall
purchase from the Decedent's personal representative or transferee, as
the case may be, and the Decedent's personal representative or
transferee shall sell and transfer to the remaining Member(s), all of the
Decedent's Interest at the price set forth below.
(b) Purchase Price. The purchase price for the Decedent's Interest shall be
equal to its Adjusted Book Value. In lieu thereof, the Members may, but
are not required to, agree in writing on the price to be paid for the interest
of the Company upon the death of a Member, which agreement if made
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-20
prior to the death of a Member, shall be the purchase price to be paid
therefore, provided that not more than one (1) year has elapsed since the
date of such agreement or other written memorandum signed by the
Members agreeing to extend the period such price shall be binding. The
closing shall occur based on the terms and conditions stated in Section
9.8.
(c) Insurance. If the Company shall receive any proceeds of any policy of
insurance on the life of the Decedent such proceeds shall be paid by the
Company to the Decedent's personal representative (or transferee) to the
extent of the purchase price of the Decedent's Interest, such payment to
be deemed made on account of such purchase price. Payment thereof
may be deferred until the closing of the purchase and sale.
Section 9.5 Transfer - Incompetence of Member. If an individual Member shall be
adjudicated to be incompetent in an appropriate judicial proceeding, such occurrence shall be
regarded, for the purposes of this Agreement, the same as the death of said incompetent
Member, and the remaining Members shall have the option to purchase the interest in the
Company owned by the incompetent Member. In such event, the amount of the purchase price,
the method of payment and the other rights and obligations of the parties to this Agreement and
the guardian, conservator, committee or personal representative of the incompetent Member
shall be as stated in this Article 9 with respect to the sale and purchase of a Decedent's Interest
except that wherever appearing in this Article 9, the word "Decedent" shall be replaced by
"Incompetent Member;" the words "Decedent's personal representative" shall be replaced by
"Incompetent Member's legal representative;" the words "date of death of Decedent" shall be
replaced by"date of adjudication of incompetence of the Incompetent Member."
Section 9.6 Transfer - Bankruptcy of a Member. If a Member files a voluntary
petition in bankruptcy, is adjudicated a bankrupt, becomes insolvent, makes an assignment for
the benefit of creditors, or applies for or consents to the appointment of a receiver or trustee
with respect to any substantial part of such Member's assets, or if a receiver of trustee is
appointed or an attachment or execution levied with respect to any substantial part of a
Member's assets and the appointment is not vacated or the attachment or execution is not
released within thirty (30) days, or if a charging order is issued against a Member's interest in
the Company and is not released or satisfied within thirty (30) days, such occurrence shall be
regarded, for the purposes of this Agreement, as an event of dissociation of a Member
(hereafter"Bankrupt Member") under the Act, provided, that such shall not, if so elected by the
Majority of the Members, excluding the vote of the Bankrupt Member, constitute an event of
dissolution, but, instead, the remaining Members shall have the option to purchase the interest
in the Company owned by the Bankrupt Member, which option may be exercised by the
remaining Members within ninety (90) days after the date of the occurrence which gives rise to
such option. The exercise of the option by the remaining Members shall be evidenced by the
delivery to the Bankrupt Member a written notice of election within the time herein provided, and
the closing of the purchase shall be conducted within thirty (30) days after the written notice
exercising the option is so delivered. If the remaining Members elect to purchase the interest of
the Bankrupt Member, the purchase price for a Bankrupt Member's interest in the Company
shall be an amount, which is equal to eighty percent (80%) of the Adjusted Book Value of the
Bankrupt Member's interest in the Company. The purchase price for the Bankrupt Member's
interest in the Company, if purchased by the remaining Members, shall be paid as described in
Section 9.8. Any proportional purchase of a Member's interest in this Section shall be
calculated as provided in Section 9.3 for"proportionate percentage".
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-21
Section 9.7 Transfer - Charging Order. Interest in the Company is non-transferable
for the purposes of charging orders and the issuance of a charging order against any interest
does not constitute an approved Transfer. In the event of a foreclosure of a lien of a charging
order on a Member's interest, any transferee shall have only the rights of an assignee as
described in Section 9.1. Issuance of a charging order against a Member's interest which is not
removed within thirty (30) days (such Member, for purposes of this Section 9.7 only, being a
"Defaulting Member") is an automatic and unanimously approved disassociation of such
Defaulting Member. Upon a Member's interest becoming subject to a charging order, the
remaining Members may, but shall not be required to, agree to (i) elect to treat the Defaulting
Member as a "Bankrupt Member" described above, and elect to purchase such Member's
interest as described; or (ii) satisfy any such charging order (such satisfaction being an "Over-
Contribution" and such satisfying Members each being a "Contributing Member") and elect one
(1) of the following remedies:
(a) Purchase the Member Interest of Defaulting Member. The Contributing
Members may elect to purchase the Defaulting Member's interest for the
Adjusted Book Value of such Member interest.
(b) Make a Loan and Obtain a Security Interest. The Contributing Members
may elect to treat the Over-Contribution(s) as a loan to the Defaulting
Member. Such loan shall be charged to the Defaulting Member and shall
bear interest at the prime rate of The Bank of America minus 100 per
annum, unless otherwise agreed by the Manager and shall be payable
from the next distributions payable by the Company to the Defaulting
Member, which distributions shall be paid by the Company directly to the
Contributing Members making the loan, provided that the full amount of
such loan and interest accrued thereon shall be due and payable one (1)
year after the date of the loan. The Contributing Members making such a
loan on behalf of a Defaulting Member shall have and is hereby granted a
security interest in and to the interest of the Defaulting Member in the
Company to secure all sums advanced and interest accrued thereon, all
in accordance with and subject to the provisions of the Uniform
Commercial Code of the State of Idaho; and the Contributing Members
shall be entitled to all of the rights and remedies of a secured party in the
event of a default by the Defaulting Member including, but not limited to,
the right and power to sell or offer for sale the interest of the Defaulting
Member in the Company as provided in the Uniform Commercial Code,
subject to the restrictions on Transfer as set forth in Article 9, below. The
Defaulting Member shall execute all instruments and documents
necessary to evidence said loan and the agreement to repay the same
and to acknowledge and perfect the security interest herein created.
Section 9.8 Transfer - Purchase Price and Closing Terms. Unless otherwise
provided in this Article 9, the financial and closing terms for a Transfer from a Member to a
Member shall be as follows, as applicable to such Transfer:
(a) Transfer Notice. Unless the Transfer is a loan as described below, the
purchase price shall be as stated in the Transfer Notice, except the
purchase price may be payable in installments, as may be elected by the
remaining Member(s) as described in subsection (e) below.
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-22
(b) Transfer is an Encumbrance/Security Interest.
(i). If the Transfer is based upon an Offering Member to
encumber all or any portion of the Target Interest
connected to a loan, if the remaining Members elect to
purchase the Target Interest as provided in this Article 9,
the purchase price to be paid by the remaining Member(s)
or its (their) nominee, as the case may be, shall be the
lesser of (i) the amount of the loan for which the Target
Interest is to be given as security, or (ii) the Adjusted Book
Value of the Target Interest, as determined in accordance
with subsection (iii) below. The full purchase price for the
Target Interest shall be paid at the date of the closing. As
used herein, "loan" shall mean a bona fide loan by an
institutional lender as evidenced by a written loan
commitment signed by such lender.
(ii). If, after full compliance with the provisions of this
Agreement, the Transfer is approved and the Offering
Member is granted an encumbrance against the Target
Interest to secure a portion of the purchase price, said
encumbrance shall be exempt from the restrictions on
encumbrance provided above; PROVIDED, HOWEVER,
the promissory note given by the purchaser and secured
by an encumbrance against the Target Interest shall
expressly provide on its face that neither the promissory
note, or any portion thereof, nor the security for the
promissory note may be in a Transfer to a third party
unless the third party agrees in a writing delivered to the
remaining Members that the Company and the other
Members shall have the right to redeem the interest from
the encumbrance upon the default of the purchaser upon
the terms set forth in Exhibit B and that the remaining
Members shall be entitled to a notice of default and an
opportunity to exercise their right of redemption prior to the
time the interest is transferred to the third party holding the
Note.
(c) Involuntary Transfer. Unless otherwise specified herein, the purchase
price for purchases for death, incompetence, bankruptcy, and/or charging
order shall be the Adjusted Book Value.
(d) Appraisal. If an appraisal of any of the Company property is desired or
required under this Agreement for a Transfer or otherwise, the following
procedure shall be followed:
(i). Within thirty (30) days after the event requiring an
appraisal, the remaining Members and the Offering
Member, or the Company and the Decedent's personal
representative, as the case may be, shall either (i) jointly
appoint an appraiser for this purpose, or (ii)failing this joint
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC•23
action, each shall separately designate an appraiser and
within ten (10) days after their appointment the two (2)
designated appraisers shall jointly designate a third
appraiser. The failure of a party to appoint an appraiser
within the time allowed shall be deemed equivalent to
appointing the appraiser appointed by the other party. No
person shall be appointed or designated an appraiser
unless such person is a member in good standing of the
American Institute of Real Estate Appraisers and has the
designation "M.A.I." or is a member of another recognized
organization of appraisers and has a designation
substantially equivalent to"M.A.I."
(ii). Within thirty (30) days after the appointment of all
appraisers a majority of the appraisers concur on the value
of the property being appraised, the appraisal shall be
binding and conclusive. If a majority of the appraisers do
not concur within that period, the determination of the
appraiser whose appraisal is neither highest nor lowest
shall be binding and conclusive. The parties shall share
the appraisal expenses equally.
(e) Payment of Purchase Price. Unless otherwise provided herein or agreed
by the remaining Members, for any Transfer involving remaining
Members, each remaining Member may elect to pay its purchase price
(after credit for insurance proceeds, if applicable), together with interest
as hereafter provided,for each remaining Member as follows:
(i) If the balance of the total purchase price to be paid is
$100,000.00 or less, it shall be paid in full at the closing;
(ii) If the balance of the total purchase price to be paid is
greater than $100,000.00, the remaining Member may
elect to pay in full; or the remaining Member may elect to
pay twenty percent(20%)at closing,with the balance to be
paid in annual principal payments of twenty percent (20%)
of the purchase price for the following four (4) years, plus
accrued interest on the unpaid principal balance at the
prime rate of the Bank of America minus 100 per annum,
with such annual payments to commence one (1) year
after the date of the closing of the purchase, and to be paid
in full after such five (5) years. The balance of the
purchase price which is deferred after the closing of the
purchase and sale shall be represented by an unsecured
promissory note (hereafter "Promissory Note(s)") of by
such remaining Member of its respective amount. Such
Promissory Note shall also provide that the purchasing
Member(s) shall have the privilege of prepaying all or any
part of the Promissory Note at any time with interest to
date of prepayment without penalty and that a default in
the payment of the Promissory Note shall entitle the holder
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-24
thereof, at the holder's option, to accelerate the payment of
the remaining principal balance. The Promissory Note
from a remaining Member shall be personally guaranteed
by the purchasing Member, unless such Member is an
individual.
(f) Closing. The closing of a Transfer for any interest described herein shall
occur on a date and time mutually convenient to the parties; provided that
the closing date shall occur no later than thirty (30) days after the final
written notice required by this Agreement for such Transfer (or
qualification of the personal representative in the case of a Decedent's
Interest) unless otherwise agreed by the remaining Members. At the
closing of the purchase, the transferring Member shall deliver to the
purchaser, in exchange for payment, an assignment of the interest being
sold, properly and duly executed and acknowledged by the transferring
Member, and if the interest represents all of the interest in the Company
owned by the transferring Member and such Member is then an
employee or agent of the Company, such transferring Member shall, at
the closing, deliver, or cause to be delivered, to the Company such
Member's resignation from such positions and/or contract. On the closing
date, the parties shall execute such other documents and instruments of
conveyance as may be necessary or appropriate to confirm the Transfer.
(g) Conflict with Notice or Exercise. In the event of a Transfer, this Section
9.8 shall automatically be the terms and conditions specified for the
Members unless otherwise unanimously agreed (as shall be indicated in
writing by the remaining Members). In the event this Section 9.8 conflicts
with the closing terms and conditions of a Transfer Notice or other
exercise of a right herein, unless agreed in writing by all Members, the
terms and conditions of this Section shall control with respect to Member
closings.
Section 9.9 Admission of Transferee as Member. Approval of a Transfer does not
constitute admission of a transferee as a Member of the Company. The Members may, in their
discretion, admit a transferee as a Member of the Company pursuant to Section 6.5(b)
(excluding the Offering Member if selling all of its interest). If the Members desire to admit a
transferee as Member of the Company, the following conditions shall apply to the admission of
such transferee as a Member of the Company, along with any other conditions as determined
by the Members (excluding the Offering Member) in their sole discretion:
(a) The transferee shall agree in writing to be bound by all of the terms of this
Agreement;
(b) The transferee shall execute and deliver such documents and
instruments, in such from and substance satisfactory to the Manager, as
the Manager deems necessary, required or convenient to cause the
transferee to become a substitute Member;
(c) The transferee shall personally guarantee in writing any unpaid debt or
other outstanding obligation of the Company that had been guaranteed by
the Offering Member, or its principals; and
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-25
(d) The transferee shall pay all reasonable expenses in connection with the
transferee's admission as a Member of the Company, including, but not
limited to, the cost of preparation and filing of any amendment of this
Agreement or the Certificate, which amendment is necessary, required or
convenient in connection with such substitution.
Section 9.10 Transfer-Effect on Sharing Percentages.
(a) Partial Transfer; Not Admitted as Member. In the event of a Transfer of
some of a Member's interest permitted herein and the transferee is not
admitted as a Member, the transferring Member's Sharing Percentage
shall remain the same, the Company shall still distribute Net Profits and
Net Losses to the Member as described in this Agreement, and it shall be
the Member's responsibility to transfer to the transferee its share as
assignee.
(b) Partial Transfer; Admitted as a Member. In the event of a Transfer of
some of a Member's interest permitted herein and the transferee is
admitted as a Member, the transferring Member's proportional Sharing
Percentage transferred to such new Member shall be the new Member's
Sharing Percentage. The transferring Member's Sharing Percentage shall
be reduced accordingly, and this Agreement shall be amended to reflect
the same. The Company shall distribute Net Profits and Net Losses to the
Member according to the adjusted Sharing Percentages described herein.
(c) Transfer of All Interest. Upon a Transfer of all of its interest pursuant to
this Article 9, unless such Transfer is an encumbrance for security
approved by the Manager, a Member shall cease to be a Member of the
Company, and such Member shall be considered automatically expelled
and disassociated as a Member, regardless of whether any new
transferee is admitted as a Member pursuant to Section 9.9. The former
Member shall have no rights as a Member in the Company after such
Transfer, regardless of whether as a part of such Transfer includes
Members making payments to the former Member after such Transfer. If
the Member's transferee is not admitted as a Member, the Sharing
Percentage of the remaining Members shall proportionally adjust to
exclude and allocate the management and voting with respect to such
Member's Sharing Percentage to the remaining Members (but the
transferee's rights as assignee of such Member's interest shall not be
affected). If the Member's transferee is admitted as a Member, the
transferee shall have the Sharing Percentage of the transferring Member,
and this Agreement shall be amended to reflect the same.
ARTICLE 10. DISSOLUTION AND LIQUIDATION
Section 10.1 Dissolution. The Company may be dissolved at any time upon written
approval of a majority of the Members or the Manager.
Section 10.2 Liquidation of Assets. Promptly following the effective date of
dissolution of the Company, the Manager or a committee of the Members designated by the
Manager for that purposed, shall be empowered to liquidate and wind up the affairs and all
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-26
business transaction of the Company. For that purpose, the Members shall serve without
compensation but may employ such agents or assistants, as they deem desirable to effect the
liquidation and winding up of the Company.
Section 10.3 Distribution of Proceeds. Following liquidation of the property and
assets of the Company and after payment of expenses incurred in connection with such
liquidation, the proceeds remaining shall be applied on a Project-by-Project basis in the
following order:
(a) To the payment of the debts and liabilities of the Company owing to the
creditors other than Members. If any Member lends money to the
Company for payment of its operational costs and expenses, which
loan(s) is represented by a promissory note executed by the Company,
for the purposes of liquidation, such note(s) shall be deemed debts and
liabilities of the Company payable under this subsection (a).
(b) To the payment of unmatured installments yet to be paid on a promissory
note given to a Member whose interest in the Company was purchased
by the Company pursuant to this Agreement.
(c) To the payment of debts and liabilities owing to Members other than (i)for
Capital Contributions by Members and (ii) each Member's share of net
profits.
(d) To the extent of each Member's unreturned Capital Contributions as if the
then remaining funds, proceeds or assets are Net Cash From Sales and
Refinancings (but only to the extent required under Section 5.2(b)(iv)).
(e) To the extent of each Member's positive Capital Account balances;
(f) Any funds, proceeds or assets thereafter remaining shall be distributed to
the Members based upon each Member's Sharing Percentage.
Section 10.4 Cancellation of Certificate. Upon the completion of the liquidation and
distribution of the property and assets of the Company, the Company shall be terminated and
the Members shall cause the Company to execute Articles of Dissolution and take such other
actions as may be necessary to terminate the Company.
ARTICLE 11. DISPUTE RESOLUTION
Section 11.1 Dispute Resolution Procedure. It is intended that all disputes or other
matters in question arising out of or relating to the interpretation, application, performance or
breach of any term, covenant or condition of this Agreement (hereafter "Dispute") shall be
resolved and settled through reasonable, business-like dispute resolution procedures, without
resort to litigation. Accordingly, any Dispute, which arises between the Members or the
Manager, shall be resolved in accordance with this Article 11.
Section 11.2 Special Meeting. As a first step, a Member or Manager may call a
special meeting for the resolution of a Dispute. The meeting shall be held within five (5)
business days after delivery of a written request for a meeting from the Member calling the
meeting to all Members and Manager specifying the nature of the Dispute to be resolved. The
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-27
meeting shall be attended by at least one (1) representative of each of the Members, the
Manager, and such other participants as the Manager deems required for a full discussion and
resolution of the Dispute. Such representative must have the requisite authority to resolve the
Dispute on terms binding upon the party represented.
Section 11.3 Mediation. If the Dispute has not been resolved within five (5) business
days after the conclusion of the special meeting held pursuant to Section 11.2 above, a Member
or Manager may, at such Member's or the Manager's election, initiate mediation by delivering a
written notice to all other Members and the Manager. All Members and the Manager shall attend
and participate in the mediation, which shall be non-binding and without prejudice to any other
rights or remedies, which any party may have. Unless all Members and the Manager agree
otherwise, the mediation proceeding shall be conducted by an independent mediator having
offices in the County in which the designated office of the Company is located, agreed upon by
all parties, in accordance with the Arbitration Rules of the American Arbitration Association then
in effect, as modified by this Section 11.3. Such mediation proceedings shall commence within
thirty (30) days after the written notice of the initiation of mediation is delivered to the Members
and Manager. All Members shall share the costs for the services and expenses of the mediator
equally.
Any voluntary settlement reached as a result of the mediation proceeding shall be
reduced to writing and signed by all Members and the Manager. The Manager and each
Member and agrees not to commence legal action against the other Member(s), the Manager,
or the Company in connection with the Dispute until it becomes reasonably certain that the
attempt to resolve the Dispute by mediation will not be successful.
Section 11.4 Confidentiality and Privilege. All proceedings under Section 11.2 and
Section 11.3 above shall be subject to the Idaho Rules of Civil Procedure and the Idaho Rules
of Evidence regarding confidentiality and privilege.
Section 11.5 Other Remedies. All applicable statutes of limitation, repose and similar
rules of law regarding the time for giving notice, filing and appealing claims, and commencing
legal proceedings shall be tolled during the period that the dispute resolution procedures
described in this Article 11 are in progress. Except as provided in the immediately preceding
sentence, this dispute resolution procedure shall not in any way affect any statutes of limitation
relating to any claim, dispute or other matter or questions arising out of or relating to this
Declaration of the breach hereof.
ARTICLE 12. MISCELLANEOUS
Section 12.1 Bank Accounts. The Company shall maintain one (1) or more bank
accounts for Company purposes. Funds may be withdrawn from a Company account through
bank check or draft executed by any person or persons, including Members, designated by the
Manager.
Section 12.2 Restriction. No Member shall become a surety, guarantor or
accommodation party as a Member or in any manner as would impose an obligation thereunder
upon the Company or the remaining Members.
Section 12.3 Right of Contribution. If any obligation of the Company is personally
guaranteed by all or any of the Manager, the Members, or a principal of any Member or
Manager, the terms of said guaranty notwithstanding, the Members agree that their separate or
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-28
individual liability therefore shall be in proportion to their respective Sharing Percentages. In the
event that a Member is required to perform more than such Member's proportionate share of
said guaranteed obligation, each other Member shall be obligated to contribute such other
Member's proportionate share either in payment or performance of the obligation, debt or
reimbursement of the Member to the end that each Member shall be obligated for and shall pay
or perform his/her/its proportionate share of the Company obligation.
Section 12.4 Assignment of Interest to a Corporation or Other Entity. If after
complying with the terms of this Agreement, any Member assigns his/her/its interest in the
Company to a corporation or other legal entity for which the owners are not personally liable for
the debts and obligations, such assignment shall not be effective, and need not be recognized
by the Company or the other Members unless each shareholder of the corporate transferee, or
each owner of such other legal entity transferee, of the interest in the Company personally
guarantees in writing the obligations of that corporate or other legal entity Member under this
Agreement.
Section 12.5 Succession. The obligations of the Members contained in this
Agreement shall inure to and shall be binding upon the Members and their respective heirs,
personal representatives, successors and assigns.
Section 12.6 Entire Agreement. The recitals and exhibits to this Agreement are
incorporated herein and made a part hereof. This Agreement contains the entire agreement
between the parties with respect to the matters contained herein and no other agreement,
statement or promise made by any party thereto which is not contained herein shall be binding
or enforceable. The recitals and exhibits to this Agreement are incorporated herein and made a
part hereof.
Section 12.7 Modification. Except as provided in Section 6.5, the Members may
amend or repeal the provisions of this Agreement with the unanimous approval of the Members,
which amendment shall be set forth in writing. This Agreement may not be amended or
repealed by oral or implied agreement or course of conduct of the Members. Notwithstanding
the foregoing, the Manager may: (i) execute, on behalf of the Members, ministerial or routine
amendments to this Agreement to comply with lender requirements in connection with any loan,
so long as any such amendment does not adversely affect the economic interests of the
Members; and (ii) amend the Agreement to reflect adjustments to the Members' Sharing
Percentages or the admission of new Members.
Section 12.8 Severability. If any provision of this Agreement is held to be invalid,
illegal, unconscionable or unenforceable in any respect, such shall not affect any other
provisions hereof and this Agreement shall be construed as if such invalid, illegal,
unconscionable or unenforceable provision had never been included herein, all other terms and
provisions remaining effective and in force to the fullest extent permitted by law.
Section 12.9 Notice. Any notice required to be given under this Agreement shall be
deemed given if personally delivered or when deposited with the United States postal service,
registered or certified mail, postage prepaid, return receipt requested and addressed as follows:
Company: SCS Brighton II LLC
12601 W. Explorer Drive, Suite 200
Boise, Idaho 83713
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-29
A copy of any notice given to the Company by a Member shall be given to each other
Member(s) in the manner required by this Section.
A party may change its address by delivery of a notice thereof to the Company and the
other Member(s) in the manner required by this Section.
Section 12.10 Construction. All parties hereto have either (i) been represented by
separate legal counsel, or(ii) have had the opportunity to be so represented. Thus, in all cases,
the language herein shall be construed simply and in accordance with its fair meaning and not
strictly for or against a party, regardless of which party prepared or caused the preparation of
this Agreement.
Section 12.11 Performance. The parties hereto declare, acknowledge and agree that it
will be impossible to measure in money the damages, which will accrue to the Company and the
Members by reason of a failure to perform all of the obligations contained in this Agreement.
Therefore, if any party shall institute any action or proceeding to enforce the provisions hereof,
any person shall institute any action or proceeding to enforce the provisions hereof, any person
(including the Company or the personal representative of a Decedent) against whom such
action or proceeding is brought, hereby waives the claim or defense that such party has an
adequate remedy at law and such person(s) shall not urge in any such action or proceeding the
claim or demand that such remedy at law exists, it being agreed that the obligations contained
in this Agreement may be specifically enforced.
Section 12.12 Further Instruments. Whenever an interest in the Company is sold and
purchased pursuant to the terms of this Agreement, the Company and each Member, including
the personal representative of any Decedent and all other parties involved, shall do all things
and deliver all instruments and document as may be necessary to consummate said sale and
purchase.
Section 12.13Attornevs' Fees. In the event that any action, including arbitration, is
brought by a party to interpret or enforce this Agreement, the prevailing party in such action
shall be awarded all costs and expenses, including reasonable attorneys', accountants' and
appraisers' fees, incurred by the prevailing party, including the same with respect to an appeal,
and such may be included in any judgment entered.
Section 12.14Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Idaho.
Section 12.1 S Headings. Titles and headings of the Articles and Sections of this
Agreement are for the convenience of reference only and do not form or comprise a part of this
Agreement and shall not, in any way, affect the interpretation of this Agreement.
Section 12.1 S Waiver The waiver of any breach of any term or covenant contained in
this Agreement shall not be deemed a waiver of any other or subsequent breach whether of like
or different nature.
Section 12.17 Number and Gender. The use of the singular herein shall include the
plural and the use of the plural shall include the singular, and the masculine pronoun shall
include the feminine or shall be construed to refer to a corporation, partnership or other entity,
all as the context shall require under the circumstances.
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-30
Section 12.18 Person. As used herein, "person", regardless of capitalization, means
any individual or entity, and the heirs, personal representatives, administrators, legal
representatives, successors, and assigns of such "person"where the context so admits.
Section 12.19 Time is of the Essence. Time is of the essence of all matters and
agreements set forth in this Agreement.
Section 12.20 Counterparts. This Agreement may be executed in several
counterparts, each of which so executed shall be deemed to be an original and each such
counterpart shall, together constitute and be one (1) and the same instrument.
Section 12.21 Representation by Counsel / Waiver of Conflict of Interest. The
Manager and each Member and their successors, assigns, and transferees, hereby represent
that they have consulted with their own legal and tax counsel, accountants, or advisors
concerning the tax and legal consequences of the transactions contemplated by this
Agreement. The Manager and each Member represents that they have relied solely upon the
advice of their own advisors and not on any representations or warranties of the drafter of this
Agreement in connection with such consequences. The parties further represent that the
attorney(s) drafting this Agreement have disclosed the inherent conflict of interest that exists
when one individual or law firm acts as the draftsman of an agreement affecting more than one
party, and have further disclosed that they may have represented in a legal capacity or
otherwise, or have been associated with, some or all of the Members or the Manager or the
principals of said Members or Manager at other times, whether on related or unrelated matters
and hereby consent to such future representation. All parties have been advised to seek
independent counsel, and by their signature below hereby so affirm the receipt of such advice. If
separate counsel is not obtained, each party, together with all officers, principals, shareholders,
partners, members, managers, assigns, transferees, and successors in any manner, hereby
knowingly waive any right or claim against the attomey(s) preparing this Agreement based on a
conflict of interest or similar claim. The election by the Members or the Manager to share the
cost of the attorneys' fees in connection with drafting this Agreement shall in no event be
construed as creating an attorney-client or other fiduciary relationship between the attorney(s)
drafting this Agreement and any other party.
ARTICLE 13. MEMBER MEETINGS
Section 13.1 Meetings. A meeting of members shall be held if called by the Manager
or by Members holding at least twenty-five percent (25%) of the Sharing Percentages who sign,
date and deliver to the Company's designated office a written request for the meeting which
describes the purpose or purposes for which said meeting is to be held; provided, however, no
single Member may call more than one (1) meeting every three (3) months.
Section 13.2 Notice of Meeting. Notice of the date, time, and place of any meeting of
Members shall be given to each Member not more than thirty (30) days nor less than ten (10)
days before the meeting date. The notice must also include a description of the purpose or
purposes for which the meeting is called.
Section 13.3 Record Date. The Members entitled to notice of and to vote at a meeting
of the Members, and their respective Sharing Percentages, shall be determined as of the record
date for the meeting. The record date shall be the date on which notice of the meeting was first
mailed or otherwise delivered.
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-31
Section 13.4 Quorum. At all meetings of Members, the presence, in person or by
proxy, of Members holding a majority of the Sharing Percentages shall constitute a quorum.
Section 13.5 Proxies. A Member may vote (or execute a written consent) by proxy
given to any other Member. Any such proxy must be in writing and must identify the specific
meeting or matter to which the proxy applies or state that it applies to all matters (subject to
specified reservations, if any) coming before the Company for approval under any provision of
this Agreement prior to a specified date (which shall not be later than the first anniversary of the
date on which such proxy is given). Any such proxy shall be revocable at any time and shall not
be effective at any meeting at which the member giving such proxy is in attendance.
ARTICLE 14. ACTIONS WITHOUT NOTICE,WITHOUT MEETING, OR BY
TELEPHONE
Section 14.1 Meeting of all Members. Notwithstanding any other provision of this
Agreement, if the Members hold a meeting at any time and place, such meeting shall be valid
without call or notice and any lawful action taken at such meeting shall be the action of the
Members.
Section 14.2 Action Without Meeting. Any action required or permitted to be taken
by the Members at a meeting may be taken without a meeting if all the Members entitled to vote
on a matter sign a written consent describing the action taken. Such consent shall be included
in the minutes or filed with the Company's records.
Section 14.3 Meetings by Telephone. Meetings of the Members may be held by
conference telephone 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.
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-32
IN WITNESS WHEREOF the parties have hereunto executed this Agreement as
of the Effective Date.
MEMBERS:
SCS:
SCS INVESTMENTS, LLC,
an Idaho limited liability company
By:
BRIGHTON:
DWT INVESTMENTS, LLC,
an Idaho limited liability company
By: BRIGHTON CORPORATION, an Idaho corporation,
Its: Manager
By:
Bake R. Alder, President
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-33
EXHIBIT A
Member Contributions and Sharing Percentages
Name and Address Contribution Sharing
Percentage
SCS Investments, LLC
855 Broad Street, Suite 300 50.00%
Boise, Idaho 83702
DWT Investments LLC
12601 W. Explorer Dr., Ste. 200 50.00%
Boise, Idaho 83713
Total: 100%
' Total initial Capital Contribution for each Member shall be as such contributions are set forth on the
records of the Company, as the same may be amended from time to time and subject to the priority
distribution provisions set forth in this Operating Agreement.
EXHIBIT A to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-34
EXHIBIT B
Member Options -Transfer to Third Party
1. Approval or Conditional Approval of Transfer. Within forty-five (45) days after receipt
of a Transfer Notice under Section 9.3 (and subject to the limitations contained therein), the
Manager may approve or conditionally approve the Transfer. Conditional approval may include
such conditions as the Manager determines in its discretion. In the event of a proposed
Transfer which is a loan with an encumbrance on the Offering Member's interest, such
conditions may include, but are not limited to, requiring that the lender making the loan to the
Offering Member expressly agree in writing to all or any of the following terms:
a. The remaining Member(s) shall have the right to redeem the Target Interest in the
Company from the encumbrance upon the default of the Member for a purchase price which is
the lesser of: (i) the then unpaid principal balance of the promissory note, plus interest accrued
but unpaid, or (ii) the Adjusted Book Value of the Target Interest, and such redemption may be
in payments as provided as set forth in Section 9.8;
b. The Company and the other Member(s) shall be given a notice of default by the lender
and an opportunity to exercise its right of redemption prior to the time the interest is transferred
to the lender holding the promissory note; and
c. Neither the promissory note for such loan, nor the interest in the Company given as
security for said promissory note, may be in a Transfer to a third party unless the third party
agrees in a writing delivered to the Company and the other Member(s) to the terms set forth
above.
2. Right of First Refusal. Within forty-five (45) days after receipt of the Transfer Notice,
the remaining Members may, as its (their) option, elect to purchase all, but not less than all, of
the Target Interest at the purchase price stated in the Transfer Notice. If there is more than one
(1) remaining Member, each of the remaining Members shall have the right to purchase such
remaining Member's proportionate percentage of the Target Interest. The term "proportionate
percentage" shall mean that percentage of the Target Interest determined by dividing the
Sharing Percentage of the remaining Member by the cumulative Sharing Percentage of all of
the remaining Members. If any of the Target Interest is not purchased by the remaining
Member first entitled thereto, the term "proportionate percentage" shall include that percentage
of the Target Interest not purchased by the remaining Member first entitled thereto determined
by dividing the Sharing Percentage of the remaining Member by the cumulative Sharing
Percentages of all remaining Members other than the remaining Member first entitled to
purchase. If the offer is not accepted by any of the remaining Member(s)within the time frames
above specified, the remaining Member(s) may, by a Majority of the Member(s), designate a
nominee to purchase all, but not less than all, of the Target Interest. Such nominee shall have
an additional ten (10) day period after the last period has expired herein (including time to elect
to purchase a proportionate percentage) to exercise its right to purchase the Target Interest.
The remaining Member(s) shall exercise its (their) option(s) to purchase the Target Interest by
giving written notice thereof to the Offering Member within the required time period. The
approved nominee shall exercise his/herlits option to purchase by giving written notice thereof
to the Offering Member, and to the remaining Member(s). The written notice given pursuant
hereto shall specify a date and terms for the closing of the purchase which comply with Section
9.8.
3. Disapproval. Upon disapproval by the Manager, the Offering member shall not be
permitted to Transfer the Target Interest pursuant to the Transfer Notice. The Transfer Notice,
EXHIBIT B to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-35
shall be deemed automatically null and void and of no force or effect, and the Target Interest
shall remain subject to all of the Transfer restrictions of this Agreement. The following actions
or failure to act shall constitute disapproval of the proposed Transfer:
a. Within forty-five (45) days after receipt of the Transfer Notice, express disapproval of the
Transfer by the Manager;
b. Failure of the Manager to respond to the Transfer Notice;
c. Failure within thirty (30) days by the Offering Member to accept in writing the terms and
conditions of any notice or action by the Manager in a conditional approval, exercise of rights of
first refusal, or tag-along rights, after receipt of the same;
d. Failure to complete any approved Transfer to a third party within the time frame specified
in the Transfer Notice;
e. Failure to complete the sale of the Target Interest to the remaining Members exercising
their rights of first refusal pursuant to the terms and conditions of Section 9.8; and/or
f. Refusal to complete the purchase the remaining Members' interests upon their election
of tag along rights pursuant to the terms and conditions of Section 9.8.
4. Failure to Complete Transaction/Default. If the remaining Member fails to close the
purchase of the Target Interest in accordance herewith after electing to purchase the interest, or
if the Offering Member fails to close the purchase of the entire offered interest in accordance
herewith following an election by the remaining Member to sell such interest (such Member
failing to consummate the transaction shall be referred to as the "Defaulting Member"), then the
Defaulting Member shall be obligated to sell the applicable interest to the non-defaulting
Members under the same terms and conditions as provided in the applicable notice, except that
the non-defaulting Members shall be given a discount of ten percent (10%) off the price the
Defaulting Member would have paid had such Member consummated the purchase.
Notwithstanding the foregoing, the non-defaulting Members shall have no obligation to purchase
the offered interest and alternatively, the non-defaulting Members may elect to pursue any legal
or equitable remedies available, including, without limitation, an action for specific performance.
EXHIBIT B to OPERATING AGREEMENT FOR DWT INVESTMENTS LLC-36