Affidavit of Legal Interest_A&R Operating AgreementAMENDED AND RESTATED OPERATING AGREEMENT
OF
AHLQUIST DEVELOPMENT, L.L.C.
Effective: June 1, 2019
TABLE OF CONTENTS - i
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS ................................................................................................... 1
1.1 Definitions ........................................................................................................... 1
ARTICLE 2. FORMATION; COMPANY OFFICES; OTHER MATTERS ........................ 6
2.1 Name ................................................................................................................... 6
2.2 Certificate of Organization .................................................................................. 6
2.3 Principal Office of the Company.......................................................................... 6
2.4 Registered Office and Registered Agent .............................................................. 6
2.5 Company Purpose ................................................................................................ 6
2.6 Adoption of Operating Agreement, Effect of Inconsistencies with Act................. 7
2.7 Rights of Creditors and Third Parties ................................................................... 7
ARTICLE 3. INTEREST HOLDERS; ADDITIONAL MEMBERS AND
AFFILIATE; WITHDRAWAL; EXPULSION ............................................... 7
3.1 Names and Addresses of Current Interest Holders ............................................... 7
3.2 Rights of Interest Holder ...................................................................................... 8
3.3 Additional Members or Affiliate Members .......................................................... 8
3.4 Withdrawal .......................................................................................................... 8
3.5 Expulsion ............................................................................................................ 8
ARTICLE 4. MEMBERS ......................................................................................................... 9
4.1 Management; Authority to Act ............................................................................ 9
4.2 Actions Requiring Approval of Members ............................................................ 9
4.3 Actions of Members .......................................................................................... 11
4.4 Duties of Members ............................................................................................ 12
4.5 Indemnification ................................................................................................. 12
4.6 Payments of Individual Obligations ................................................................... 12
ARTICLE 5. MANAGEMENT OF COMPANY .................................................................. 13
5.1 Manager Managed ............................................................................................. 13
5.2 Manager Powers ................................................................................................ 13
5.3 Duties and Obligations of Managers .................................................................. 15
5.4 Number of Managers and Qualifications, Election, Resignation, and Removal of
Managers ........................................................................................................... 15
5.5 Action by Two or More Managers ..................................................................... 16
5.6 Reliance by Other Persons ................................................................................. 16
5.7 Managers’ Standard of Care .............................................................................. 17
5.8 Other Business of Managers .............................................................................. 17
5.9 Appointment of Officers or Assistant Managers................................................. 18
5.10 Indemnification ................................................................................................. 18
ARTICLE 6. CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS, LOANS,
AND DISTRIBUTIONS .................................................................................. 18
6.1 Capital Contributions ......................................................................................... 18
6.2 Additional Capital Contributions ....................................................................... 18
6.3 Interest and Return of Capital Contribution ........................................................ 19
6.4 Capital Accounts ............................................................................................... 19
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6.5 Loans to the Company ....................................................................................... 19
6.6 Distributions ...................................................................................................... 19
6.7 Allocations ........................................................................................................ 20
ARTICLE 7. RECORDS, REPORTS, ETC. ......................................................................... 20
7.1 Books and Records ............................................................................................ 20
7.2 Tax Return Information ..................................................................................... 21
7.3 Financial and Operating Statements ................................................................... 21
7.4 Banking ............................................................................................................. 21
ARTICLE 8. TRANSFER OF COMPANY INTERESTS .................................................... 21
8.1 Restrictions on Transfer; Effect of Prohibited Transfer ...................................... 21
8.2 Permitted Transfers ........................................................................................... 21
8.3 Rights and Obligations Arising Out Of A Permitted Transfer............................. 22
8.4 Conditions to Permitted Transfer ....................................................................... 23
8.5 Prohibited Transfers .......................................................................................... 24
8.6 Rights and Obligations Arising Out of Transfers ................................................ 24
8.7 Option to Purchase Affiliate Member’s or Disassociated Member’s Company
Interest .............................................................................................................. 25
ARTICLE 9. DISASSOCIATION OF A MEMBER ............................................................. 27
9.1 Disassociation ................................................................................................... 27
9.2 Consequences of Disassociation ........................................................................ 28
9.3 Rights of Disassociated Member ........................................................................ 28
ARTICLE 10. DISSOLUTION AND TERMINATION ....................................................... 28
10.1 Dissolution and Events of Dissolution ............................................................... 28
10.2 Winding Up and Liquidation ............................................................................. 29
10.3 Liquidating Distributions ................................................................................... 29
10.4 Distribution in Kind ........................................................................................... 29
10.5 No Recourse Against Interest Holders ............................................................... 29
10.6 Notice of Dissolution ......................................................................................... 29
ARTICLE 11. CONFLICTS OF INTEREST, COMPETITION AND
CONFIDENTIAL INFORMATION .............................................................. 30
11.1 Self-Interest ....................................................................................................... 30
11.2 Other Business of Members ............................................................................... 30
11.3 Confidential Information ................................................................................... 30
11.4 Independent Covenants ...................................................................................... 31
ARTICLE 12. MISCELLANEOUS PROVISIONS .............................................................. 31
12.1 Attorneys’ Fees ................................................................................................. 31
12.2 Notices .............................................................................................................. 31
12.3 Application of Idaho Law .................................................................................. 32
12.4 Amendments ..................................................................................................... 32
12.5 Construction ...................................................................................................... 32
12.6 Headings ........................................................................................................... 32
12.7 Waivers ............................................................................................................. 32
12.8 Rights and Remedies Cumulative ...................................................................... 32
12.9 Severability ....................................................................................................... 32
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12.10 Heirs, Successors and Assigns ........................................................................... 32
12.11 Creditors ............................................................................................................ 32
12.12 Counterparts ...................................................................................................... 32
12.13 Entire Agreement .............................................................................................. 33
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AMENDED AND RESTATED OPERATING AGREEMENT
OF
AHLQUIST DEVELOPMENT, L.L.C.
THIS AMENDED AND RESTATED OPERATING AGREEMENT dated effective as of
June 1, 2019 (“Operating Agreement”), by and among the undersigned parties, who by their
execution of this Operating Agreement as the Managers and the Member of Ahlquist
Development, L.L.C., an Idaho limited liability company (the “Company”). By amending and
restating this Operating Agreement, the Member and the Managers intend to supersede and replace
all prior Operating Agreements executed by the Company, its Member, or its Manager.
As of the Effective Date, the Company is a single member limited liability company that
is managed by managers as set forth herein. This Operating Agreement contemplates the
possibility of multiple members in the future. However, it is the intention of the Member and
Managers that in the event of the addition of multiple members, this operating agreement will be
further amended and modified to reflect the then existing membership structure and to evidencde
the consent of such members.
The Member and Managers w agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Definitions. The following terms used in this Operating Agreement shall have the
following meanings (unless otherwise expressly provided herein):
(a) “Acquiring Interest Holder” shall mean a Person who acquires a Company
Interest from an Assigning Interest Holder or any other Person.
(b) “Act” shall mean the Idaho Uniform Limited Liability Company Act as set
forth in Idahdo Code Sections 30-6-1, et. seq., as amended from time to time.
(c) “Affiliate Member” shall mean (i) an Acquiring Interest Holder who
received a Company Interest pursuant to a Permitted Affiliate Member Transfer under
Section 8.2(b) and has not been admitted as a Member pursuant to Section 3.3, and (ii) a
Disassociated Member or any other Person who is admitted as an Affiliate Member under Section
3.3.
(d) “Appointed Representative” shall mean the duly appointed personal
representative, guardian, conservator, attorney-in-fact, trustee, manager, officer, or other legal
representative vested with the power to act on behalf of a Member, Affiliate Member, Deceased
Interest Holder, or Disabled Interest Holder, or administer such Person’s estate.
(e) “Assigning Interest Holder” shall mean any Interest Holder who Transfers
a Company Interest.
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(f) “Bankruptcy” shall mean: (i) the inability of a Person to pay his debts
generally as they become due, (ii) any assignment by a Person for the benefit of his creditors, (iii)
the filing by a Person of a voluntary petition in bankruptcy or similar insolvency proceedings, or
(iv) the filing against a Person of an involuntary petition in bankruptcy or similar insolvency
proceeding that is not dismissed within ninety (90) days thereafter.
(g) “Book Value” shall have the meaning ascribed to such term as in Section
1.1(c) of Exhibit B.
(h) “Built-In-Gain Allocation” shall have the meaning ascribed to such term in
Section 1.1(d) of Exhibit B.
(i) “Business Day” shall mean any day other than Saturday, Sunday, or any
legal holiday observed in Idaho.
(j) “Capital Account” shall mean as of any given date the amount calculated
and maintained by the Company for each Interest Holder as provided in Section 6.4 and Section
2.1 of Exhibit B.
(k) “Certificate” shall mean the Certificate of Organization of the Company as
filed with the Idaho Secretary of State on April 20, 2006, as the same may be amended or restated
from time to time.
(l) “Code” shall mean the Internal Revenue Code of 1986 or corresponding
provisions of subsequent superseding federal tax laws.
(m) “Company” shall refer to Ahlquist Development, L.L.C., an Idaho limited
liability company.
(n) “Company Interest” shall mean each Interest Holder’s ownership interest in
the Company, and includes each Interest Holder’s “limited liability company interest” or “interest
in the limited liability company” under the Act and any rights and benefits to which the owner of
such ownership interest may be entitled as provided in this Operating Agreement, together with
the obligation of such Person to be subject to, and comply with, the terms and conditions of this
Operating Agreement.
(o) “Competitive Opportunities” shall mean any business opportunities or
activities that competes directly with the business of the Company in Idaho or in any other place
where the Company has ongoing operations.
(p) “Confidential Information” means information or material proprietary to the
Company or proprietary to others and entrusted to the Company, whether written or oral, tangible
or intangible, which an Interest Holder obtains knowledge of through or as a result of the Interest
Holder’s relationship with the Company. In addition to the foregoing, Confidential Information
shall include, without limitation, all Tax Information, Financial Information, as well as data, know-
how, trade secrets, designs, plans, drawings, specifications, reports, customer and supplier lists,
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pricing information, marketing techniques and materials, and manufacturing techniques and
processes, whether related to the Company’s past, present, or future business activities, research,
development, or products.
(q) “Curative Allocations” shall have the meaning ascribed to such term in
Section 1.1(g) of Exhibit B.
(r) “Deceased Interest Holder” shall mean a Member or Affiliate Member who
dies. The term “Deceased Interest Holder” shall also include a deceased Assigning Interest Holder
who Transferred a Company Interest pursuant to a Permitted Member Transfer under Section
8.2(a)(i) or 8.2(a)(ii) or a deceased Disabled Interest Holder who Transferred a Company Interest
pursuant to a Permitted Affiliate Member Transfer under Section 8.2(b)(i); provided, that the
Acquiring Interest Holder is still a Member or Affiliate Member when such Assigning Interest
Holder or Disabled Interest Holder dies.
(s) “Disabled Interest Holder” shall mean a Member or Affiliate Member who
is Legally Disabled. The term “Disabled Interest Holder” shall also include a Legally Disabled
Assigning Interest Holder who Transferred a Company Interest pursuant to a Permitted Member
Transfer under Section 8.2(a)(i) or 8.2(a)(ii), provided that the Acquiring Interest Holder is a
Member when such Assigning Interest Holder becomes Legally Disabled.
(t) “Disassociated Member” shall mean: (i) any Member or Affiliate Member
to whom a Disassociation Event applies as set forth in Section 9.1, and (ii) any Acquiring Interest
Holder that acquires a Company Interest from such Person other than a Member that acquires such
Company Interest through a Permitted Transfer.
(u) “Disassociation Event” shall mean the events identified in Section 9.1.
(v) “Dissolution Event” shall mean the events identified in Section 10.1.
(w) “Economic Percentage Interest” shall mean for each Interest Holder, the
Capital Account of such Person, as applicable, divided by the total Capital Accounts of all Interest
Holders, which Economic Percentage Interest shall be used to determine an Interest Holder’s share
of Operating Distributions, Tax Distributions, Liquidating Distributions and allocation of Profits
and Losses under this Operating Agreement. As of the Effective Date, the Economic Percentage
Interest of each Interest holder is set forth on Exhibits A-1, A-2 and A-3.
(x) “Economic Rights” shall mean an Interest Holder’s allocable share of the
Profits and Losses under Section 6.7, Tax Distributions and Operating Distributions, under Section
6.6, Liquidating Distributions, under Section 10.3, and the limited right to receive Tax Return
Information pursuant to Section 7.2 but shall not include any Voting Rights or Information Rights.
(y) “Effective Date” shall mean the date this Operating Agreement is effective
as noted in the introductory paragraph on page 1.
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(z) “Entity” shall mean any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust, cooperative, or other association.
(aa) “Financial Information” shall mean all books and records maintained by the
Company pursuant to Section 7.1.
(bb) “Information Rights” shall mean the right of a Member or Affiliate to obtain
information with respect to the Company hereunder, including without limitation the right to
review and inspect Financial Information and the right to receive financial and operating
statements pursuant to Section 7.3. Information Rights do not include Voting Rights. Only
Members and Affiliate Members have Information Rights.
(cc) “Interest Holder” shall mean any Member, Affiliate Member, or
Disassociated Member who owns a Company Interest.
(dd) “Issue” shall mean all persons who are descended from the natural Person
referred to for purposes of intestate succession as determined under the laws of Idaho. For the
purposes of the foregoing, an adopted person shall be considered as descended from the person
referred; provided, that such person was adopted while under the age of eighteen (18) years.
(ee) “Legally Disabled” shall mean the adjudication and entry of an order of a
court of competent jurisdiction that a natural Person is incompetent to manage their person or
estate.
(ff) “Liquidating Distributions” shall have the meaning ascribed to such term in
Section 10.3(b).
(gg) “Losses” shall have the meaning ascribed to such term in the definition of
“Profits and Losses” set forth in Section 1.1(n) of Exhibit B.
(hh) “Majority of Members” shall mean greater than fifty percent (50%) of the
Voting Percentage Interests of the Members if there are more than one member, or the action of
the Member if there is just one member.
(ii) “Manager” shall mean a person appointed to manage the business and
affairs of the Company pursuant to Article 5.
(jj) “Member” shall mean each Person that is identified as a current Member in
Section 3.1 hereof, or is admitted as a Member as provided in Section 3.3(a). A Person shall cease
to be a Member at such time as he becomes a Disassociated Member or no longer owns a Company
Interest.
(kk) “Operating Agreement” shall mean only this Operating Agreement, as
originally executed and as amended from time to time pursuant to Section 12.4 herein.
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(ll) “Operating Distributions” shall have the meaning ascribed to such term in
Section 6.6(a).
(mm) “Option Notice” shall have the meaning ascribed to such term in Section
8.7(b).
(nn) “Option to Purchase” shall have the meaning ascribed to such term in
Section 8.7.
(oo) “Option Term” shall have the meaning ascribed to such term in Section
8.7(a).
(pp) “Permitted Affiliate Member Transfer” shall mean a Transfer set forth in
Section 8.2(b).
(qq) “Permitted Member Transfer” shall mean a Transfer set forth in Section
8.2(a).
(rr) “Permitted Transfer” shall mean a Permitted Member Transfer or a
Permitted Affiliate Member Transfer.
(ss) “Person” shall mean any natural person or Entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such Person where the context so
admits.
(tt) “Profits” shall have the meaning ascribed to such term in the definition of
“Profits and Losses” set forth in Section 1.1(n) of Exhibit B.
(uu) “Regulations” shall mean the permanent, temporary or proposed regulations
of the United States Department of the Treasury under the Code.
(vv) “Selling Interest Holder” shall have the meaning ascribed to such term in
Section 2.1 of Exhibit C.
(ww) “Special Allocations” shall have the meaning ascribed to such term in
Section 3.1 of Exhibit B.
(xx) “Successor Manager” shall mean any person appointed to act as a Manager
after the date hereof.
(yy) “Super Majority of Members” shall mean greater than sixty-six percent
(66%) of the Voting Percentage Interests of the Members.
(zz) “Tax Distributions” shall have the meaning ascribed to such term in Section
6.6(b).
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(aaa) “Tax Return Information” shall mean the information required to be
prepared and distributed to the Interest Holders pursuant to Section 7.2.
(bbb) “Transfer” shall mean any sale, pledging, encumbering, giving,
bequeathing, or other transferring or disposing of, or permitting to be sold, encumbered, attached,
or otherwise disposed of or have ownership changed in any manner, whether voluntarily,
involuntarily, by operation of law, upon or as a result of death, or incident to divorce.
Notwithstanding the above, the term Transfer shall not include a pledge or encumbrance of a
Member’s Company Interest as security for the payment of a debt provided that: (i) the pledgee or
the secured party agrees to be bound by all of the terms and conditions of this Operating
Agreement, and (ii) such pledge or encumbrance is approved by a Super Majority of Members.
(ccc) “Voting Percentage Interests” shall mean for each Member, the Capital
Account of such Person, as applicable, divided by the total Capital Accounts of all Members, which
Voting Percentage Interest shall be used to determine the proportionate Voting Rights of the
Members. As of the Effective Date, the Voting Percentage Interest of each Member is set forth on
Exhibit A-1.
(ddd) “Voting Rights” shall mean the right of a Member to consent or approve
actions of the Company and the right to attend meetings of the Members. Only Members have
Voting Rights.
(eee) “Wholly Owned Entity” means an Entity of which one hundred percent
(100%) of the voting stock or beneficial ownership is owned directly or individually by one Person.
ARTICLE 2.
FORMATION; COMPANY OFFICES; OTHER MATTERS
2.1 Name. The name of the limited liability company is Ahlquist Development, L.L.C.
2.2 Certificate of Organization. The Certificate was filed with the Idaho Secretary of
State on April 20, 2006. The Certificate may be amended from time to time upon the approval of
a Super Majority of Members.
2.3 Principal Office of the Company. The principal office of the Company shall initially
be located at 2775 W Navigator Drive, Suite 200, Meridian, Idaho 83642-7554. The Managers
may relocate the principal office or establish additional offices from time to time as appropriate.
2.4 Registered Office and Registered Agent. The Company’s registered office shall be
at 2775 W Navigator Drive, Suite 200, Meridian, Idaho 83642-7554, and the name of its registered
agent at such address shall be Ryan Cleverley. The Managers may change the registered office and
registered agent from time to time in its discretion.
2.5 Company Purpose. The purpose of the Company shall be to engage in any lawful
business permitted by the Act or the laws of the State of Idaho.
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2.6 Adoption of Operating Agreement, Effect of Inconsistencies with Act. Interest
Holders shall be subject to the terms and conditions of this Operating Agreement. Notwithstanding
any other agreement between the Interest Holders with respect to the Company, whether in writing,
oral, in a record, implied, or any combination thereof, the Interest Holders agree that this Operating
Agreement shall be the sole source of agreement between and among the Company and the Interest
Holders with respect to all matters relating to the Company. Except to the extent a provision of
this Operating Agreement expressly incorporates federal income tax rules by reference to the Code
or Regulations, this Operating Agreement shall govern all matters between the Company and the
Interest Holders (in the capacity as such) relating to the Company notwithstanding any provision
of the Act or any other law or rule to the contrary. To the extent any provision of this Operating
Agreement is prohibited or ineffective under the Act, this Operating Agreement shall be
considered amended to the smallest degree possible in order to make this Operating Agreement
effective under the Act. In the event the Act is subsequently amended or interpreted in such a way
to make any provision of this Operating Agreement that was formerly invalid valid, such provision
shall be considered to be valid from the effective date of such amendment or interpretation. The
Interest Holders agree that each Interest Holder shall be entitled to rely on the provisions of this
Operating Agreement, and no Interest Holder shall be liable to the Company or to any other Interest
Holder for any action, or refusal to act, taken in good faith reliance on the terms of this Operating
Agreement. Furthermore, the Interest Holders agree and acknowledge that any provisions of this
Operating Agreement that are inconsistent with the Act are not manifestly unreasonable as that
term is defined under the Act or any Idaho law interpreting the same.
2.7 Rights of Creditors and Third Parties. This Operating Agreement is entered into for
the exclusive benefit of the Interest Holders. This Operating Agreement is expressly not intended
for the benefit of any creditor of the Company or any other Person who is not an Interest Holder.
No such creditor or Person shall have any rights under this Operating Agreement or any agreement
between the Company and any Interest Holder with respect to any rights related to this Operating
Agreement.
ARTICLE 3.
INTEREST HOLDERS; ADDITIONAL MEMBERS AND AFFILIATE;
WITHDRAWAL; EXPULSION
3.1 Names and Addresses of Current Interest Holders.
(a) Members. The names and addresses of the current Members as of the date
hereof are set forth in Exhibit A-1. Upon the admittance of an additional Member or if any Person
ceases to be a Member, the Managers shall amend and/or restate Exhibit A-1 accordingly.
(b) Affiliate Members. The names and addresses of Affiliate Members shall be
set forth on Exhibit A-2. As of the date hereof there are no Affiliate Members. In the event an
Interest Holder, or any other Person, becomes an Affiliate Member and upon any subsequent
admission of an additional Affiliate Member or an Interest Holder ceases to be an Affiliate
Member, the Managers shall amend and/or restate Exhibit A-2 accordingly.
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(c) Disassociated Members. The names and addresses of Disassociated
Members shall be set forth on Exhibit A-3. As of the date hereof there are no Disassociated
Members. In the event an Interest Holder, or any other Person, becomes a Disassociated Member
or an Interest Holder ceases to be a Disassociated Member, the Managers shall amend and/or
restate Exhibit A-3 accordingly.
3.2 Rights of Interest Holder.
(a) Rights of Members. A Member’s Company Interest and the rights related
thereto shall include Economic Rights, Information Rights, and Voting Rights.
(b) Rights of Affiliate Members. An Affiliate Member’s Company Interest and
the rights related thereto shall include Economic Rights and Information Rights. An Affiliate
Member shall not have any Voting Rights.
(c) Rights of Disassociated Members. A Disassociated Member’s Company
Interest and the rights related thereto shall be limited solely to Economic Rights. A Disassociated
Member shall not have any Information Rights or Voting Rights.
3.3 Additional Members or Affiliate Members.
(a) Members. Except as provided in Section 8.3(a) with respect to a Permitted
Member Transfer, in the event an Option to Purchase the Company Interests held by certain
Affiliate Members is not exercised during the Option Term, Acquiring Interest Holders, Affiliate
Members may only be admitted as Members with the consent and upon the terms and conditions
approved by a Super Majority of Members. Disassociated Members, and other Persons may only
be admitted as Members with the consent and upon the terms and conditions approved by a Super
Majority of Members. In addition, prior to admission as a Member, such Person shall be required
to satisfy the relevant conditions to Permitted Transfers set forth in Section 8.4 of this Operating
Agreement.
(b) Affiliate Members. Except as provided in Section 8.3(b) with respect to a
Permitted Affiliate Member Transfer, Acquiring Interest Holders and other Persons may only be
admitted as an Affiliate Member with the consent and upon the terms and conditions approved by
a Majority of Members. In addition, prior to admission as an Affiliate Member, such Person shall
be required to satisfy the relevant conditions to Permitted Transfers set forth in Section 8.4 of this
Operating Agreement.
3.4 Withdrawal. No Interest Holder may voluntarily withdraw from the Company or
otherwise forfeit its Company Interests without the consent of a Super Majority of Members. A
voluntary withdrawal in violation of this Section constitutes a breach of this Operating Agreement
for which the Company and the other Members shall have the remedies provided under this
Operating Agreement and applicable law.
3.5 Expulsion. A Member or Affiliate Member may be expelled from the Company
upon the written determination of a Super Majority of Members that the Member or Affiliate
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Member has been guilty of wrongful conduct that adversely and materially affects the business or
affairs of the Company, or has willfully and persistently committed a material breach of the
Certificate or this Operating Agreement, or otherwise breached a duty owed to the Company or
the other Members, and that it is not reasonably practical to carry on the business or affairs of the
Company with the Member or Affiliate Member. An expelled Member or Affiliate Member shall
become a Disassociated Member as of the date of the written expulsion determination.
ARTICLE 4.
MEMBERS
4.1 Management; Authority to Act. The Members shall not be entitled to participate in
the day-to-day affairs and management of the Company, but instead, the Members’ right to
exercise Voting Rights, or otherwise participate with respect to matters relating to the Company,
shall be limited to those matters for which the express terms of this Operating Agreement vest in
the Members the right to so vote or otherwise participate. No Member shall have the power or
authority to bind the Company unless the Member has been authorized by the Managers in
accordance with Section 5.9.
4.2 Actions Requiring Approval of Members.
(a) Approval of Majority of Members. Notwithstanding any other provision of
this Operating Agreement, the approval of a Majority of Members shall be required in order for
any of the following actions to be taken by or on behalf of the Company:
(i) Appointing or removing a Successor Manager as set forth Section
5.4(d) and Section 5.4(f).
(ii) Establishing and revising the salary or other compensation of any
Manager or any officers and assistant managers appointed by the Managers under
Section 5.9.
(iii) Approving any additional Capital Contributions under Section 6.2.
(iv) Determining whether the Company will exercise an Option to
Purchase pursuant to Section 8.7.
(v) Incurring any indebtedness or making any single expenditure or any
group of related expenditures during any calendar year in excess of $ 50,000.00.
(vi) Entering into any single transaction or series of related transactions
on behalf of the Company for which the stated value of the consideration given for such
transaction or series of related transactions exceeds $ 50,000.00.
(vii) Approval of the admission of an Affiliate Member as a Member of
the Company as set forth in Section 3.3(a).
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(viii) Approval of a Transfer as a Permitted Affiliate Member Transfer
that would not otherwise qualify as a Permitted Affiliate Member Transfer without such
approval.
(b) Approval of Super Majority of Members. Notwithstanding any other
provision of this Operating Agreement, the approval of a Super Majority of Members shall be
required in order for any of the following actions to be taken by or on behalf of the Company:
(i) Approving any transaction involving an actual or known potential
conflict of interest between a Member or a Manager and the Company.
(ii) Amending and/or restating this Operating Agreement.
Notwithstanding the foregoing, the Managers shall have the power to amend and/or restate
Exhibits A-1, A-2 and A-3 as provided in Section 3.1.
(iii) Ratifying the election of a Manager that is not a Member as set forth
in Section 5.4(b).
(iv) Selling, leasing, exchanging, mortgaging, pledging, or otherwise
transferring or disposing of all or substantially all of the assets of the Company, including,
without limitation, a sale or disposition by merger, conversion, consolidation, or
reorganization with or into another Entity.
(v) Effecting a merger or reorganization of the Company with or into
any other Entity.
(vi) Amending the Certificate.
(vii) Confessing a judgment against the Company.
(viii) Filing or consenting to the filing of Bankruptcy.
(ix) Consenting to the withdrawal of an Interest Holder as set forth in
Section 3.4.
(x) Expelling a Member or Affiliate Member under Section 3.5.
(xi) Approving the pledge or encumbrance of a Member’s Company
Interest as provided in Section 1.1(bbb).
(xii) Removing a Manager as set forth in Section 5.4(f).
(xiii) Determining the number of Managers as set forth under Section
5.4(a).
(xiv) Satisfaction of an Interest Holder’s individual obligations with
Company assets as set forth under Section 4.6.
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(xv) Dissolving the Company pursuant to Section 10.1(a).
(xvi) Determination that making the adjustments under Section 1.1(a)(ii)
of Exhibit B are not necessary to preserve the Interest Holder’s Interests in the Company.
(xvii) Approval of the admission of any Person that is not an Affiliate
Member as a Member of the Company as set forth in Section 3.3(b).
(c) Unless the express terms of this Operating Agreement specifically provide
otherwise, the affirmative vote or approval of a Majority of Members shall be necessary and
sufficient to approve or consent to any of the matters that require the approval or consent of the
Members.
4.3 Actions of Members.
(a) Member Meetings.
(i) The Members shall hold an annual meeting on a date and at a time
established by the Managers of which the Members shall be notified pursuant to the
notification requirements set forth in Section 4.3(a)(ii).
(ii) A Manager or any Member with a Voting Percentage Interest greater
than twenty percent (20%) may call a special meeting of the members to consider approval
of an action or decision under any provision of this Operating Agreement by delivering to
each Member written notice of the time and purpose of such meeting not less than ten (10)
nor more than sixty (60) days before the date of such meeting. A Member may waive the
requirement of notice of a meeting either by attending such meeting or executing a written
waiver before or after such meeting. Any such meeting shall be held during the Company’s
normal business hours at its principal place of business unless all of the other Members
consent in writing or by their attendance at such meeting to its being held at another
location or time.
(iii) Only Members have the right to attend Member meetings. Affiliate
Members and Disassociated Members do not have the right to participate in or attend
Member meetings and are not entitled to notice of such meetings.
(b) Participation by Telephone or Similar Communications. Members may
participate and hold a meeting by means of telephone conference or similar communications
equipment by means of which all Members participating can hear and be heard, and such
participation shall constitute attendance and presence in person at such meeting.
(c) Waiver of Notice; Meeting of All Members. When any notice of a meeting
of the Members is required to be given, a waiver thereof in writing signed by a Member entitled
to such notice, whether given before, at, or after the time of the meeting as stated in such notice,
shall be equivalent to the proper giving of such notice. If all of the Members shall meet at any time
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and place, and consent to the holding of a meeting at such time and place, such meeting shall be
valid without call or notice, and at such meeting lawful action may be taken.
(d) Proxies. At all meetings of the Members a Member may vote in person or
by a proxy executed in writing by the Member or by a duly authorized attorney-in-fact. Such proxy
shall be filed with the Managers before or at the time of the meeting and may be of any duration,
except that a Member who shall appear in person at a meeting shall void any outstanding proxy
for so long as such Member is in attendance.
(e) Action by Written Consent. Any action required to be approved by the
Members may be approved without a meeting if one or more written consents to such action are
signed by the number of Members who hold the requisite Voting Percentage Interests required for
approval of such matter. Such consent or consents shall be filed with the minutes of the meetings
of the Members. Action taken under this Section shall be effective when requisite Members have
signed the consent or consents, unless the consent or consents specify a different effective date.
(f) Books, Records, Reports and Information. Each Member shall have the
right to receive the reports and information required to be provided by this Operating Agreement.
Upon reasonable request, each Member, and/or the Member’s agent and attorney, shall have the
right, during ordinary business hours, to inspect and copy, at the requesting Member’s expense,
the books and records which the Managers are required, by the Act and this Operating Agreement,
to keep.
4.4 Duties of Members. Pursuant to Section 30-6-409(7)(e) of the Act, the Members do
not have any fiduciary duties to the Company or to each other solely by reason of being a Member,
except as set forth in Section 11.2 and the requirement that each Member notify the Managers and
all other Members if the Company is involved in a transaction in which such Member has an actual
or potential conflict of interest as provided in Section 11.1.
4.5 Indemnification. The Company shall indemnify each Member for all costs, losses,
liabilities, and damages paid or accrued by such Member, and business expenses incurred by the
Member with the approval of the Managers, in connection with the business of the Company,
except that this provision shall not eliminate or limit a Member's liability for:
(a) Acts or omissions not in good faith which involve intentional misconduct
or a knowing violation of law;
(b) Any act that violates the terms of this Operating Agreement; or
(c) Any action taken by a Member on behalf of the Company without authority.
4.6 Payments of Individual Obligations. The Company's credit and assets shall be used
solely for the benefit of the Company, and no asset of the Company shall be Transferred for or in
payment of any individual obligation of any Interest Holder unless approved by a Super Majority
of Members.
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ARTICLE 5.
MANAGEMENT OF COMPANY
5.1 Manager Managed. Except as expressly provided otherwise in this Operating
Agreement, the powers of the Company shall be exercised by or under the authority of, and the
business and affairs of the Company shall be managed by one (1) or more Managers designated
by the Members as provided in Section 5.4. If at any time there is only one (1) Manager, such
Manager shall be entitled to exercise all powers of the Managers set forth in this Article 5 and all
references to “Managers” in this Operating Agreement shall be deemed to refer to such single
Manager.
5.2 Manager Powers. Except as expressly provided otherwise in this Operating
Agreement, the Managers shall have the sole and exclusive right to manage the business of the
Company and shall have all of the rights and powers which may be possessed by a manager under
the Act. The powers so exercised shall include but not be limited to the following:
(a) Entering into, making, and performing contracts, agreements, and other
undertakings binding the Company that may be necessary, appropriate, or advisable in furtherance
of the purposes of the Company.
(b) Opening and maintaining bank accounts, investment accounts, and other
arrangements, drawing checks and other orders for the payment of money, and designating
individuals with authority to sign or give instructions with respect to those accounts and
arrangements.
(c) Collecting funds owed to the Company.
(d) To the extent that funds of the Company are available, paying debts and
obligations of the Company.
(e) Borrowing money or otherwise committing the credit of the Company for
Company activities, and voluntarily prepaying or extending any such borrowings.
(f) Employing from time to time persons, firms, or corporations for the
operation and management of various aspects of the Company’s business, including, without
limitation, managing agents, contractors, subcontractors, architects, engineers, laborers, suppliers,
accountants, and attorneys on such terms and for such compensation as the Managers shall
determine, notwithstanding the fact that the Managers or any Member may have a financial interest
in such firms or corporations.
(g) Making elections available to the Company under the Code.
(h) Obtaining general liability, property, and other insurance for the Company,
as the Managers deem proper.
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(i) Taking such actions as may be directed by the Members in furtherance of
their approval of any matter set forth in Section 4.2 hereof.
(j) Instituting, prosecuting, and defending actions in all courts in the
Company’s name.
(k) Purchasing, taking, receiving, leasing, or otherwise acquiring, owning,
holding, improving, using, and otherwise dealing in or with, real or personal property or any
interest in real or personal property, wherever situated.
(l) Selling, conveying, mortgaging, pledging, creating a security interest in,
leasing, exchanging, transferring, and otherwise disposing of less than all or substantially all of
the assets of the Company.
(m) Purchasing, taking, receiving, subscribing for or otherwise acquiring,
owning, holding, voting, using, employing, selling, mortgaging, lending, pledging, otherwise
disposing of, and otherwise using or dealing in or with other interests in or obligations of any other
Entity.
(n) Entering into contracts or guarantees, incurring liabilities, or issuing
Company notes.
(o) Investing or reinvesting Company funds or receiving and holding real or
personal property as security for repayment of funds so loaned, invested, or reinvested, including,
without limitation, loans to any Manager, Members, employees, and agents.
(p) Being a promoter, incorporator, general partner, limited partner, member,
associate, or manager of any partnership, joint venture, trust, or other Entity.
(q) Conducting the Company’s business, locating its offices and exercising the
powers granted by the Act and the Certificate within or without the State of Idaho.
(r) Establishing pension plans, profit sharing plans, and other benefit or
incentive plans for any and all of the Company’s current or former Managers, Members,
employees, and agents.
(s) Indemnifying a Member or any other person as and to the extent not
inconsistent with the provisions of the Act, the Certificate, or this Operating Agreement.
(t) Doing and performing all such things and executing, acknowledging, and
delivering any and all such instruments as may be in furtherance of the Company’s purposes and
necessary and appropriate to the conduct of its business.
(u) Exercising any other power or undertaking any action that the Managers are
authorized to exercise or undertake under this Operating Agreement.
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5.3 Duties and Obligations of Managers. In addition to any other duties and obligations
the Managers may have, the Managers shall also be responsible for the following:
(a) The Managers shall cause the Company to conduct its business and
operations separate and apart from that of the Managers by:
(i) Segregating assets of the Company and not allowing assets of the
Company to be commingled with the funds or other assets of, held by, or registered in the
name of any Manager or any Person other than the Company;
(ii) Maintaining books and financial records of the Company separate
from the books and financial records of the Managers or any Person other than the
Company, and observing all Company procedures and formalities, including, without
limitation, maintaining minutes of Company meetings;
(iii) Causing the Company to pay its liabilities from the assets of the
Company; and
(iv) Causing the Company to conduct its dealings with any Person in its
own name and as a separate and independent entity.
(b) The Managers shall take all actions which may be necessary or appropriate
to:
(i) Continue the Company’s valid existence as a limited liability
company under the laws of Idaho and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Members or to enable the Company to
conduct the business in which it is engaged; and
(ii) Accomplish the Company’s purposes, including the acquisition,
development, maintenance, preservation, and operation of assets of the Company in
accordance with the provisions of this Operating Agreement and applicable laws and
regulations.
5.4 Number of Managers and Qualifications, Election, Resignation, and Removal of
Managers.
(a) Number of Managers. The number of Managers shall be determined and
may be changed from time to time upon approval of a Super Majority of Members; provided,
however, there shall always be at least one (1) Manager. Notwithstanding anything in this
Operating Agreement to the contrary, no decrease in the number of Managers shall shorten the
term of any incumbent Manager.
(b) Qualification. A Manager is not required to be a Member of the Company;
notwithstanding, the election of a Manager who is not a Member must be ratified by a Super
Majority of Members; provided, however, the Appointed Representative of a Member whose
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Voting Percentage Interest is ten percent (10%) or more shall be considered a Member solely for
purposes of qualifying to serve as a Manager and no such ratification is required. Notwithstanding
anything herein to the contrary, a Disassociated Member or its Appointed Representative may not
serve as a Manager.
(c) Appointment of Managers. The Members do hereby appoint J. Thomas
Ahlquist and Ryan Cleverley as the Managers of the Company(“Managers”).
(d) Election of Successor Managers. Any Successor Manager shall be elected
by a Majority of Members.
(e) Term. The Managers shall serve until they either resign or are removed by
the Members. Successor Managers shall be elected to hold office for a term of two (2) years. Each
Manager shall continue to serve, despite the expiration of his or her term, until a successor is duly
elected and qualified, or until there is a decrease in the number of Managers, or until his or her
earlier death, resignation, or removal.
(f) Removal. If a Manager is no longer qualified under Section 5.4(b) above,
such Manager shall be automatically removed upon the date of disqualification. In all other cases,
a Manager may be removed, with or without cause, by the vote of a Majority of Members.
Notwithstanding the foregoing, a Manager may only be removed upon the determination of a Super
Majority of Members that such Manager has been guilty of wrongful conduct that adversely and
materially affects his or her ability to serve as a Manager or has willfully and persistently failed to
carryout and observe the duties of a Manager.
(g) The salary or other compensation of any Manager and any officers or
assistant managers appointed by the Manager pursuant to Section 5.9 shall be established and set
by a Majority of Members.
5.5 Action by Managers. If the Members have appointed more than one (1) Manager,
unless otherwise expressly provided by the terms of this Operating Agreement, the vote, approval,
or consent of a majority of the Managers shall be necessary for the Managers to take any action on
behalf of the Company that the Managers are authorized to take pursuant to the Act, the Certificate,
or this Operating Agreement, including, without limitation, the authority to execute any documents
or take any other actions deemed necessary or desirable in furtherance of any action that they are
authorized to take on behalf of the Company. Notwithstanding the foregoing, the Managers may
delegate in writing to one (1) or more of their number the authority to unilaterally take any such
action on behalf of the Company and from and after the Effective Date, the Managers do hereby
authorize either Manager to take action on behalf of the Company, and the Member by executing
below does hereby evidence their consent. If either J. Thomas Ahlquist or Ryan Cleverley cease
to be Managers of the Company, then the foregoing authorization shall automatically terminate,
unless and until this Operating Agreement is amended and the Member and the Successor
Managers do take such affirmative action thereafter.
5.6 Execution of Documents; Reliance by Third Persons. Notwithstanding any other
provision of this Agreement, any Manager may execute any instruments, documents, agreements,
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certificates, affidavits, guaranties or other writings on behalf of the Company, without the consent
or signature of any other Member, any other Manager or other Person being required, including,
without limitation, the following (the "Documents"):
(a) All deeds, assignments, leases, subleases, management and maintenance contracts;
(b) All checks, drafts and other orders for the payment of Company funds;
(c) All promissory notes, mortgages, deeds of trust, security agreements, financing
statements and other similar documents;
(d) All guarantees of any indebtedness authorized herein; and
(e) All other instruments, documents, agreements, certificates, affidavits or other writings
of any kind or nature relating to the affairs of the Company whether like or unlike the
foregoing.
Any Manager, in writing, may authorize any other or additional agent or agents to enter into any
Document or to execute and to deliver any of the foregoing Documents in the name of and in
behalf of the Company and such authority may be general or confined to specific instances. No
third Person dealing with the Company shall be required to ascertain whether any Manager
executing any such Document is acting in accordance with the provisions of this Agreement. A
third Persons may rely in all events on Documents executed by any Manager as binding the
Company. The foregoing provisions of this Section extend to Documents executed by the
Company in its capacity as a general or limited partner of a general or limited partnership, or as a
member or manager of a joint venture or another limited liability company. or in any capacity in
any other Person which is not an individual and in which the Company owns an interest.
5.7 Managers’ Standard of Care. Subject to the business judgment rule, all Managers
shall discharge its duties set forth herein in good faith and shall act with the care that a Person in
a like position would reasonably exercise under similar circumstances and in a manner such Person
reasonably believes to be in the best interests of the Company. In discharging this duty, a Manager
may rely in good faith upon opinions, reports, statements, or other information provided by another
Person that they reasonably believe is a competent and reliable source for the information.
Notwithstanding anything in this Section 5.7 or any other section of this Operating Agreement to
the contrary, if a Manager is also a Member, the duties and standard of care imposed upon the
Managers under this Operating Agreement or the Act shall not apply to such Member in its
capacity as a Member solely because such Member is also a Manager.
5.8 Other Business of Managers. Managers shall not be required to manage the
Company as their sole and exclusive function. Such Person may have other business interests and
may engage in other activities in addition to those relating to the Company, even if such other
activities are competitive with any activity or business conducted by the Company. As permitted
by Section 30-6-110(4) of the Act, the Members hereby eliminate the duties set forth in Sections
30-6-409(2)(a)(iii), (b) and (c) of the Act that would be otherwise imposed upon the Managers
pursuant to Section 30-6-409(7) of the Act, and the Members hereby agree that the elimination of
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such duties is not manifestly unreasonable as that term is defined under the Act or any Idaho law
interpreting the same. In addition, the pursuit of any such activity or business by a Manager shall
not be considered a breach of Section 5.7 of this Operating Agreement.
5.9 Appointment of Officers or Assistant Managers. The Managers may appoint such
officers or assistant Managers as they deem necessary or desirable and may delegate some or all
of their duties and/or responsibilities hereunder to such Persons that the Managers reasonably
believe competent to perform such duties and/or responsibilities. Notwithstanding the above or
any other provision of this Operating Agreement, the following actions cannot be so delegated:
(a) Determining the amount of cash and/or kind of property available for, and
the timing of, Operating Distributions under Section 6.6.
(b) Loaning Company funds.
(c) Obtaining loans from Members pursuant to Section 6.5.
(d) Any decisions or powers vested in the Managers under Exhibit B of this
Operating Agreement.
(e) Indemnifying a Member or Manager or any other Person as and to the extent
not inconsistent with the provisions of the Act, the Certificate, or this Operating Agreement.
5.10 Indemnification. Subject to substantial compliance with the standard of care set
forth in Section 5.7, the Company shall indemnify each Manager, to the full extent permitted by
the Act, except that this provision shall not eliminate or limit a Manager’s liability for:
(a) Acts or omissions not in good faith which involve intentional misconduct
or a knowing violation of law;
(b) Any act that violates the terms of this Operating Agreement; or
(c) Any action taken by a Manager on behalf of the Company without authority.
ARTICLE 6.
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS,
LOANS, AND DISTRIBUTIONS
6.1 Capital Contributions. The Interest Holders have made Capital Contributions to the
Company as set forth on the books and records of the Company.
6.2 Additional Capital Contributions. The Interest Holders may make additional
Capital Contributions to the Company only if a Majority of Members determines that such are
necessary or desired to the continued operation and/or expansion of the Company. Any such
additional Capital Contribution shall be made in cash or other readily available funds unless the
Managers agree to accept property other than cash. If any such additional Capital Contribution is
property other than cash, the amount of the Capital Contribution shall be the fair market value of
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such property as determined by the Managers pursuant to Section 3 of Exhibit B. Upon the
approval of additional Capital Contributions by a Majority of Members, the Company shall give
written notice to all Interest Holders at least five (5) Business Days prior to the date on which such
Capital Contribution is due. The notice shall set forth the amount of Capital Contribution needed,
the purpose of the Capital Contribution, and the date by which the Interest Holders should
contribute. Each Interest Holder is entitled to contribute a proportionate share of such Capital
Contribution in accordance with such Interest Holder’s Economic Percentage Interest. No Interest
Holder is obligated to make any additional Capital Contributions. In the event any one (1) or more
Interest Holders do not make an additional Capital Contribution, the other Interest Holders shall
be given the opportunity to make such Capital Contribution not otherwise made, in which case the
Interest Holders hereby acknowledge that if they do not make a Capital Contribution or their
Capital Contribution is less than the proportionate share they are entitled to make, such Person’s
Voting Percentage Interest and Economic Percentage Interest will be reduced as a result of the
definition of Percentage Interest and Economic Percentage Interest.
6.3 Interest and Return of Capital Contribution. Except as set forth under Section 6.5,
no Interest Holder shall receive any interest on any Capital Contribution or positive Capital
Account balance. Except as otherwise specifically provided for herein, the Interest Holders shall
not be allowed to withdraw or have refunded any Capital Contribution or positive Capital Account
balance.
6.4 Capital Accounts. Separate Capital Accounts shall be maintained for each Interest
Holder in accordance with Section 2.1 of Exhibit B. The Capital Accounts of the Interest Holders
will be as set forth in Exhibit A-1, A-2 and A-3, ass applicable.
6.5 Loans to the Company. If the Company has insufficient funds to meet its additional
obligations as they come due and to carry out its routine, day-to-day affairs, then, in lieu of
obtaining required funds from third parties or selling its assets to provide required funds, the
Company may, but shall not be required to, borrow necessary funds from one or more of the
Members as designated by and on the terms and conditions approved by the Managers; provided
that all Members are given the opportunity to participate in making such loans and the terms of
such loans are commercially reasonable. Affiliate Members and Disassociated Members are not
entitled to participate in such loans unless otherwise permitted by the Managers.
6.6 Distributions.
(a) Operating Distributions. All distributions of cash or other property (except
Liquidating Distributions, which shall be governed by Article 10 hereof) (“Operating
Distributions”) shall be made at such time and in such amounts as determined by the Managers or
as determined by the vote of a Majority of Members. Any such Operating Distributions shall be
made in the following order. to the Interest Holders in proportion to their respective Economic
Percentage Interests.
(b) Tax Distributions. Notwithstanding Section 6.6(a), or any other provision
of this Operating Agreement to the contrary, if the Operating Distributions in any taxable year of
the Company are less than fifty percent (50%) of the net Profits and Losses of the Company for
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such taxable year then, within a reasonable time after the end of the Company’s taxable year but
in no event later than April 15, unless a Majority of Members determine otherwise, the Company
shall make a cash distribution to the Members (“Tax Distribution”) in an amount equal to the lesser
of (i) the difference between the Operating Distributions for such taxable year and fifty percent
(50%) of the net Profits and Losses allocated to the Members for such taxable year, or (ii) the cash
on-hand on the date of distribution.
(c) Allocation of Distributions. All Operating Distributions and Tax
Distributions shall be made to the Interest Holders in proportion to their respective Economic
Percentage Interests. Liquidating Distributions shall be allocated pursuant to Section 10.3. The
Company is authorized to withhold from Operating Distributions, and to pay over to any federal,
state, or local government, any amounts required to be so withheld pursuant to the Code or any
provisions of any other federal, state, or local law. All such amounts withheld shall be treated as
amounts distributed to the relevant Interest Holders pursuant to this Section 6.6.
6.7 Allocations. After making any Special Allocations, Curative Allocations or Built-
In-Gain Allocations, Profits and Losses, whether resulting from the Company’s operations or in
connection with its dissolution, shall be allocated to the Interest Holders’ Capital Accounts in
proportion to their respective Economic Percentage Interests. Notwithstanding anything in this
Operating Agreement, the Certificate, or the Act to the contrary, the allocation of Profits and
Losses to an Interest Holder’s Capital Account hereunder, including any Special Allocation,
Curative Allocation, and Built-In-Gain Allocation, do not entitle the Interest Holder to a
corresponding Operating Distribution or, if applicable, a Liquidating Distribution. The amount and
timing of Operating Distributions are set forth in Section 6.6(a) and shall be governed exclusively
thereunder. The amount and timing of Liquidating Distributions shall be governed exclusively by
Section 10.3.
ARTICLE 7.
RECORDS, REPORTS, ETC.
7.1 Books and Records. The Company shall maintain records and accounts of all
operations and expenditures of the Company. At a minimum the Company shall keep at its
principal place of business the following records:
(a) A current list of the full name and last known business, residence, or mailing
address of each Interest Holder, and Managers, both past and present;
(b) A copy of the Certificate and all amendments thereto, together with
executed copies of any powers of attorney pursuant to which any amendment has been executed;
(c) Copies of the Company’s federal, state, and local income tax returns and
reports, if any, for the three (3) most recent years;
(d) Copies of this Operating Agreement and all amendments thereto, copies of
any writings permitted or required under the Act, and copies of any financial statements of the
Company for the three (3) most recent years; and
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(e) Minutes of every meeting of the Members or Managers and any written
consents obtained from Members or the Managers for actions taken without a meeting.
7.2 Tax Return Information. On or before the due date for filing the Company’s federal
and state tax returns, taking into account any extensions, a statement setting forth an Interest
Holder’s allocable share of the Company’s taxable income or loss for such year determined in
accordance with Code Section 703(a), including all items of income, gain, loss, or deduction
required to be separately stated pursuant to Code Section 703(a)(1), and all such other information
as may be required to enable each such Person to prepare his or her federal, state, and local income
tax returns in accordance with the Code, Regulations, and any other applicable laws, rules, and
regulations shall be delivered to such Interest Holder. The Company shall also prepare and file all
federal, state, and local income tax returns required of the Company for each fiscal year.
7.3 Financial and Operating Statements. The Managers shall provide financial
statements at least annually to the Members and Affiliate Members at such time and in such manner
as the Managers may determine reasonable.
7.4 Banking. The funds of the Company shall be kept in one or more separate bank
accounts in the name of the Company in such banks or other federally insured depositories as may
be designated by the Managers, or shall otherwise be invested in the name of the Company in such
manner and upon such terms and conditions as may be designated by the Managers. All
withdrawals from any such bank accounts or investments established by the Company hereunder
shall be made on such signature or signatures as may be authorized from time to time by the
Managers. Any account opened by the Managers for the Company shall not be commingled with
other funds of the Managers or any other Person.
ARTICLE 8.
TRANSFER OF COMPANY INTERESTS
8.1 Restrictions on Transfer; Effect of Prohibited Transfer. Except for a Permitted
Transfer, no Interest Holder shall Transfer all or any portion of such Interest Holder’s Company
Interests.
8.2 Permitted Transfers. Subject to the provisions of Sections 8.3 and 8.4, the
restrictions on Transfer in Section 8.1 shall not apply to Permitted Member Transfers as described
in Section 8.2(a) or Permitted Affiliate Member Transfers described in Section 8.2(b) (each a
“Permitted Transfer”):
(a) Permitted Member Transfers. Permitted Member Transfers shall include the
following (each a “Permitted Member Transfer”):
(i) A Transfer by a Member to a Wholly Owned Entity of such
Member;
(ii) A Transfer by a Member that is a natural Person to an Entity created
by such Member for estate planning purposes for the benefit of the Member or any
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combination between or among the Member, the Member’s spouse, and the Member’s
Issue; provided, that the Member retains a beneficial interest in such Entity and, if
applicable, all of the rights to control or otherwise manage the Company Interest
Transferred;
(iii) A Transfer by a Member who received its Company Interest from
an Assigning Interest Holder who was a Member at the time of the Transfer pursuant to
Section 8.2(a)(i) or 8.2(a)(ii) back to the Assigning Interest Holder;
(iv) A Transfer by a Member or Affiliate Member to a Member; and
(b) Permitted Affiliate Member Transfers. Permitted Affiliate Member
Transfers shall include the following (each a “Permitted Affiliate Member Transfer”):
(i) A Transfer as a result of a Member or an Affiliate Member
becoming a Disabled Interest Holder to an Entity created for the benefit of such Disabled
Interest Holder or any combination between or among the Disabled Interest Holder, the
Disabled Interest Holder’s spouse, and the Disabled Interest Holder’s Issue; provided that
the Disabled Interest Holder retains a beneficial interest in such Entity;
(ii) A Transfer as a result of the death of a Deceased Interest Holder to
any Person other than a Disassociated Member;
(iii) A Transfer by a Member or Affiliate Member to any person other
than a Disassociated Member or former Disassociated Member approved by a Majority of
Members; and
(iv) A Transfer of a Company Interest to a Disassociated Member or
former Disassociated Member approved by a Super Majority of Members.
Notwithstanding anything in this Operating Agreement to the contrary, only Members and
Affiliate Members have the right to make a Permitted Transfer that does not require the approval
of the Members; provided, however, an Affiliate Member’s right to make a Permitted Transfer is
limited to Permitted Transfers set forth in Section 8.2(a)(iv) or 8.2(b). The provisions of this
Section 8.2 shall not apply to any Transfer made by a Disassociated Member unless such Transfer
is approved by a Super Majority of Members.
8.3 Rights and Obligations Arising Out Of A Permitted Transfer. As soon as reasonably
practical after a Permitted Transfer, the Assigning Interest Holder shall notify the Company of
such Transfer, which notice shall identify the Acquiring Interest Holder and shall include sufficient
evidence that the Transfer is a Permitted Transfer. After receipt of such notice and upon
satisfaction of the conditions to Permitted Transfers set forth in Section 8.4 below, the rights of
the Acquiring Interest Holder shall be as follows:
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(a) For Permitted Member Transfers, if the Acquiring Interest Holder is not
already a Member, such Person shall become a Member effective as of the date of the Permitted
Transfer.
(b) For Permitted Affiliate Member Transfers, unless admitted as a Member
pursuant to Section 3.3(a), the Acquiring Interest Holder shall be an Affiliate Member and, with
respect to Permitted Affiliate Member Transfers under Sections 8.2(b)(i) and 8.2(b)(ii), the
Company Interest Transferred shall be subject to the Option to Purchase as provided in Section
8.7; provided, however, if the Option to Purchase is not exercised on or before the expiration of
the Option Term and the Affiliate Member’s Economic Percentage Interest is ten percent (10%)
or more, such Affiliate Member shall become a Member effective as of the date the Option Term
expired. If an Option to Purchase the Company Interest of an Affiliate Member who has a
Economic Percentage Interest less than ten percent (10%) is not exercised before the expiration of
the Option Term such Person shall continue to be an Affiliate Member; however, their Company
Interest shall no longer be subject to the Option to Purchase.
8.4 Conditions to Permitted Transfer. A Transfer shall not be treated as a Permitted
Transfer under Section 8.2 unless and until the following conditions are satisfied within a
reasonable time after such Transfer or are waived by the Managers:
(a) The Assigning Interest Holder and/or Acquiring Interest Holder shall
execute and deliver to the Company such documents and instruments of conveyance as may be
necessary or appropriate in the opinion of counsel to the Company to affect such Transfer and to
confirm that the Acquiring Interest Holder has agreed in writing to be bound by the provisions of
this Operating Agreement. In the case of a Transfer of a Deceased Interest Holder’s or Disabled
Interest Holder’s Company Interests, the Transfer shall be confirmed by presentation to the
Company of legal evidence of such Transfer, in form and substance satisfactory to counsel to the
Company. In all cases, the Company shall be reimbursed by the Assigning Interest Holder or
Acquiring Interest Holder for all costs and expenses that it reasonably incurs in connection with
such Transfer.
(b) The Assigning Interest Holder and/or Acquiring Interest Holder shall
furnish to the Company an opinion of counsel, which counsel and opinion shall be satisfactory to
the Company, to that effect (i) the Transfer will not cause the Company to terminate for federal
income tax purposes or under the Act, (ii) such Transfer is exempt from all applicable registration
requirements and that such Transfer will not violate any applicable laws regulating the transfer of
securities, and (iii) such Transfer will not cause the Company to be deemed an “investment
company” under the Investment Company Act of 1940.
(c) The Assigning Interest Holder and/or Acquiring Interest Holder shall
furnish the Company with the Acquiring Interest Holder’s taxpayer identification number,
sufficient information to determine the Acquiring Interest Holder’s initial tax basis in the
Assigning Interest Holder’s Company Interest that was Transferred, and any other information
reasonably necessary to permit the Company to file all required federal and state tax returns and
other legally required information statements or returns. Without limiting the generality of the
foregoing, the Company shall not be required to make any Operating Distribution otherwise
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provided for in this Operating Agreement with respect to any Transfer until it has received such
information.
8.5 Prohibited Transfers.
(a) Transfer Void. Any purported Transfer of a Person’s Company Interest that
is not a Permitted Transfer shall be null and void and of no force or effect whatever; provided,
however, that if the Company is required by law to recognize a Transfer that is not a Permitted
Transfer (or if the Company, in its sole discretion, elects upon the approval of a Super Majority of
Members to recognize a Transfer that is not a Permitted Transfer), the Acquiring Interest Holder
shall be a Disassociated Member and the Company Interest Transferred shall be strictly limited to
the Economic Rights, and Operating Distributions or Liquidation Distributions to which the
Disassociated Member is entitled to under this Operating Agreement first applied (without limiting
any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities
for damages that such Disassociated Member, or Assigning Interest Holder if such Transfer is
recognized for any reason, may owe to the Company as provided in Sections 8.5(b) and/or 8.6(c).
(b) Liability and Indemnification. In the case of a Transfer or attempted
Transfer of a Person’s Company Interest that is not a Permitted Transfer, the parties engaging or
attempting to engage in such Transfer shall be liable to indemnify and hold harmless the Company
and the other Members from all costs, liability, and damage that any of such indemnified Persons
may incur (including, without limitation, incremental tax liability and attorneys’ fees and
expenses) as a result of such Transfer or attempted Transfer and efforts to enforce the term of this
Operating Agreement, including without limitation this Article 8. Provided, however, in lieu of
actual damages, which the Interest Holders acknowledge may be difficult to determine at the time
of such Transfer or attempted Transfer, the Company may elect to reduce Disassociated Member’s
share of Operating Distributions and/or Liquidating Distributions, or any payment due to such
Disassociated Member, including, without limitation, any payment under Section 8.7, as liquidated
damages for engaging in such Transfer or attempted Transfer.
8.6 Rights and Obligations Arising Out of Transfers.
(a) A Transfer of a Company Interest to a Person who is not a Member does
not itself dissolve the Company.
(b) A Transfer of a Company Interest by an Assigning Interest Holder who was
a Member or Affiliate Member does not alone entitle the Acquiring Interest Holder to become a
Member or Affiliate Member or exercise any Voting Rights and/or Information Rights previously
held by such Assigning Interest Holder. Except as otherwise provided in Section 8.3 with respect
to Permitted Transfers or any other express provision of this Operating Agreement, all Acquiring
Interest Holders shall be Disassociated Members unless the Acquiring Interest Holder is admitted
as a Member or Affiliate Member pursuant to Section 3.3 of this Operating Agreement.
(c) An Assigning Interest Holder shall not be released from liabilities to the
Company attributable to the Company Interest Transferred that arose before the date of the
Transfer, including, without limitation, obligations to make Capital Contributions. In addition, the
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Acquiring Interest Holders shall be liable for any obligation to make Capital Contributions with
respect to the Company Interest Transferred even if such Capital Contribution obligation arose
prior to the Transfer.
(d) In the event a court of competent jurisdiction charges a Company Interest
with the payment of an unsatisfied amount of a judgment with interest, to the extent so charged,
the judgment creditor shall be treated as an Interest Holder; however, such Interest Holder shall be
a Disassociated Member and the Company Interest shall be subject to the provision of Section 8.7.
8.7 Option to Purchase Affiliate Member’s or Disassociated Member’s Company
Interest. Except for a Company Interest acquired by an Affiliate Member pursuant to a Permitted
Affiliate Member Transfer under Sections 8.2(b)(iii) and 8.2(b)(iv), the Company, upon approval
of a Majority of Members, shall have the option, but not the obligation, to purchase all or any
portion of the Company Interests held by a Disassociated Member or Affiliate Member pursuant
to the terms and conditions of this Section 8.7 (“Option to Purchase”).
(a) Term of Option to Purchase. The term of any Option to Purchase (“Option
Term”) shall be as follows:
(i) Affiliate Members. With respect to a Company Interest held by an
Affiliate Member, the Option Term shall be for a period of two (2) years from the date such
Person is admitted as an Affiliate Member under Section 3.3(b) if applicable, and/or has
satisfied all of the conditions to become an Affiliate Member under Section 8.4.
(ii) Disassociated Member. With respect to a Company Interest held by
a Disassociated Member, the Option Term shall commence on the date the Company has
actual knowledge of the event triggering the Option to Purchase and shall continue so long
as such Person remains a Disassociated Member.
(b) Option Notice. In the event the Company elects to exercise any Option to
Purchase, the notice of exercise (“Option Notice”) shall be delivered before the end of the Option
Term.
(c) Purchase Price of Affiliate Member’s Company Interest. In the event of the
exercise of the Option to Purchase an Affiliate Member’s Company Interest, the parties shall
attempt to negotiate in good faith a purchase price for the Company Interest being purchased. If
the parties have failed to reach an agreement within thirty (30) days after the date of the Option
Notice, the purchase price shall be the fair market value of such Company Interest, taking into
account both the value of the tangible assets of the Company as well as the value of the good will
or going concern value of the Company, without regard to any applicable lack of marketability
discounts and/or minority interest discounts, as determined by a disinterested appraiser mutually
agreed upon by the parties. If the parties are unable to agree on a disinterested appraiser, then each
party shall select a disinterested appraiser. If the fair market values of the Company Interest
determined by such appraisers differ by an amount that is less than five percent (5%) of the lower
appraised value, the purchaser price shall be the average of the two appraised values. If the parties
are unable to agree on a disinterested appraiser, then each party shall select a disinterested
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appraiser. If the fair market values of the Company Interest determined by such appraisers differ
by an amount that is greater than five percent (5%) of the lower appraised value, then the two
disinterested appraisers shall select a third disinterested appraiser who shall determine the fair
market value of such Company Interest. The determination of the fair market value of the Company
Interest by the appraiser or appraisers shall be conclusive and binding on all parties. Any appraiser
retained hereunder shall: (i) have earned a business valuation designation from a nationally
recognized professional business valuation organization, awarded on the basis of demonstrated
competency; (ii) have at least five (5) years experience in appraising and valuing businesses; and
(iii) have experience in valuing businesses substantially similar to the Company’s business. In
addition, any fees and costs relating to any appraisers retained hereunder shall be shared equally
by the Affiliate Member and the Company.
(d) Purchase Price of a Dissociated Member’s Company Interest. The purchase
price of a Dissociated Member’s Company Interest shall be equal to such Dissociated Members
Capital Account balance on the date of the Option Notice.
(e) Purchase Price Reduction. The purchase price shall be reduced by all
obligations of the Interest Holder under Section 8.6(c) and, with respect to a Disassociated
Member, Section 8.5(b).
(f) Closing. Once the purchase price has been established, the purchaser shall
close the transaction for the acquisition of the subject Company Interests within sixty (60) days of
the determination of value; provided, however, with respect to an Affiliate Member, if such closing
is more than six (6) months after the date of the Option Notice, interest on the purchase price shall
accrue at a rate equal to the rate set forth in Section 8.7(g) and shall be payable upon closing.
(g) Payment Terms. The purchase price shall be paid in cash at closing;
provided, however, with respect to a purchase from a Disassociated Interest Holder or when the
Company has elected to purchase all, but not less than all, of an Affiliate Member’s Company
Interest, the Company can elect to make a down payment of the purchase price of twenty-five
percent (25%) of the purchase price (or such Member’s share of the purchase price, if applicable)
at closing with the balance to be evidenced by a promissory note requiring ten (10) equal annual
payments of principal and simple interest at the rate equal to either (i) with respect to an Affiliate
Member, the prime rate published in The Wall Street Journal on the date of closing), or (ii) with
respect to a Disassociated Interest Holder, the lesser of four percent (4%) or the Federal Mid-Term
Rate in effect under § 1274(d) of the Code in effect on the date of closing.
(i) Additional Terms Applicable to Affiliate Members. With respect to
an Affiliate Member, the following additional or alternative payment terms shall apply: (A)
the promissory note shall be secured by the Company Interest being acquired by the
Company, and (B) in no event shall the payment under the promissory note be less than
the operating distributions and tax distributions that would have been made to such Person
if he or she continued to be an Interest Holder.
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ARTICLE 9.
DISASSOCIATION OF A MEMBER
9.1 Disassociation. A Member and/or Affiliate Member shall become a Disassociated
Member and shall cease to be a Member upon the happening of any of the following events (each
a “Disassociation Event”):
(a) The withdrawal of a Member or Affiliate Member pursuant to Section 3.4;
(b) The Expulsion of a Member or Affiliate Member pursuant to Section 3.5;
(c) In the case of a Member or Affiliate Member who is a natural Person, the
death or Legal Disability of such Member or Affiliate Member;
(d) In the case of a Member or Affiliate Member that is an Entity, the
termination or dissolution thereof or such Entity otherwise ceases to exist;
(e) The Bankruptcy of a Member or Affiliate Member;
(f) In the case of a Member or Affiliate Member who received its Company
Interest pursuant to a Permitted Member Transfer, the Bankruptcy of the Assigning Interest
Holder;
(g) In the case of a Member or Affiliate Member who received its Company
Interest from a Disabled Interest Holder pursuant to Section 8.2(b)(i), the Bankruptcy of such
Disabled Interest Holder;
(h) In the case of a Member who received its Company Interest pursuant to a
Permitted Member Transfer as defined under Section 8.2(a)(i) or 8.2(a)(ii), the occurrence of any
of the events set forth in Section 9.1(c) or 9.1(d), to the Assigning Interest Holder;
(i) A Member who received its interest pursuant to a Permitted Member
Transfer under Section 8.2(a)(i) ceases to be a Wholly Owned Entity of the Assigning Interest
Holder;
(j) In the case of a Member who received its interest pursuant to a Permitted
Member Transfer under Section 8.2(a)(ii) herein, the Assigning Interest Holder ceases to own a
beneficial interest in such Entity or, if applicable, no longer has the right to control and/or manage
such Entity and the Company Interest Transferred;
(k) In the case of a Member or Affiliate Member who received its Company
Interest from a Disabled Interest Holder pursuant to a Permitted Affiliate Member Transfer under
Section 8.2(b)(i), the Disabled Interest Holder ceases to own a beneficial interest in such Entity or
the death of such Disabled Interest Holder; and
(l) A Transfer or attempted Transfer in violation of the terms of this Operating
Agreement.
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9.2 Consequences of Disassociation. Upon the occurrence of a Disassociation Event,
the Member or Affiliate Member to whom a Disassociation Event applies or, except as provided
in Section 9.3(b), such Member or Affiliate Member’s Appointed Representative, shall be a
Disassociated Member from the date of the Disassociation Event, unless such Person is admitted
as a Member or Affiliate Member pursuant to Section 3.1(a) or 3.1(b).
9.3 Rights of Disassociated Member.
(a) A Disassociated Member’s Company Interest shall be limited solely to
Economic Rights, and a Disassociated Member shall not have any Information Rights or Voting
Rights. A Disassociated Member shall be subject to, and must comply with, the terms and
conditions of this Operating Agreement. Furthermore, a Disassociated Member’s Company
Interest shall be subject to the Company’s and/or Member’s Option to Purchase such Company
Interest as specifically provided in Section 8.7.
(b) Notwithstanding the above, in the case of a Disassociation Event under
Section 9.1(c), 9.1(d), 9.1(h), 9.1(j), 9.1(k) or 9.1(k) if sufficient evidence is presented to the
Managers within thirty (30) days after the occurrence of the Disassociation Event that the
Appointed Representative of the Interest Holder to whom such Disassociation Event applies that
the Appointed Representative is legally obligated (either by contract or operation of law) to
Transfer the Company Interest held by such Interest Holder pursuant to a Permitted Transfer or
the Appointed Representative otherwise makes a Permitted Transfer within such thirty (30) day
period, the Appointed Representative shall be vested with the rights the Person had as a Member
or Affiliate Member to make Permitted Transfers and Information Rights. The Appointed
Representative shall not, however, be entitled to exercise any Voting Rights. Furthermore, in the
case of a Disassociation Event under Section 9.1, if the termination of employment or Management
Agreement is not for “Cause” (as the term is defined in the Management Agreement) than the
Interest Holder to whom such Disassociation Event applies shall become an Affiliate Member. In
the event such termination is for “Cause” then such Interest Holder shall become a Dissociated
Member.
ARTICLE 10.
DISSOLUTION AND TERMINATION
10.1 Dissolution and Events of Dissolution. The Company shall not dissolve prior to the
occurrence of a Dissolution Event. The Company shall be dissolved only upon the occurrence of
the first of the following events (each a “Dissolution Event”):
(a) The determination by and consent of a Super Majority of Members to
dissolve the Company;
(b) At such time as the Company has no Members; and
(c) The entry of a decree of judicial dissolution of the Company under Sections
30-6-701(d) or 30-6-701(e)(i) of the Act.
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10.2 Winding Up and Liquidation. Upon the occurrence of a Dissolution Event, an
accounting shall be made of the accounts of the Company and of the Company’s assets, liabilities,
and operations, from the date of the last previous accounting until the date of dissolution. The
Managers shall then immediately begin to wind up the affairs of the Company and shall sell or
otherwise liquidate all of the Company’s assets (except to the extent the Managers may determine
to distribute any assets to Interest Holders in kind) as promptly as is consistent with obtaining fair
market value thereof. Any Profits or Losses resulting from such sales shall be allocated in
accordance with Section 6.7 above.
10.3 Liquidating Distributions. Upon liquidation, the Company’s assets (including any
cash on hand) shall be distributed in the following order and in accordance with the following
priorities:
(a) Discharge all liabilities of the Company, including to Members who are
creditors to the extent permitted by the Act, and establish any reserves that may be reasonably
necessary to provide for contingent or actual liabilities of the Company.
(b) The remaining assets shall be distributed to the Interest Holders
(“Liquidating Distributions”), either in cash or in kind, in accordance with and in proportion to the
positive balance (if any) in each Interest Holder’s Capital Account (as determined after taking into
account all Capital Account adjustments for the Company’s taxable year during which the
liquidation occurs including adjustments pursuant to Section 1.1(c) of Exhibit B) up to the amount
of such positive Capital Account balances with the excess, if any, being distributed to such Interest
Holders in proportion to their respective Economic Percentage Interests. Any Liquidating
Distributions with respect to an Interest Holder’s Capital Account shall be made in accordance
with the time requirements set forth in Section 1.704-1(b)(2)(ii)(b)(2) of the Regulations.
10.4 Distribution in Kind. If any assets of the Company are to be distributed in kind, the
fair market value of such assets as of the date of dissolution shall be determined by the Managers.
Such assets shall be deemed to have been sold as of the date of dissolution for their fair market
value, and the Capital Accounts of the Interest Holders shall be adjusted pursuant to Section
1.1(c)(ii) of Exhibit B.
10.5 No Recourse Against Interest Holders. Each Interest Holder, shall look solely to
the assets of the Company for the return of such Interest Holder’s Capital Contribution. If the
Company property remaining after the payment or discharge of the debts and liabilities of the
Company is insufficient to return the Capital Contribution of each Interest Holder, such Interest
Holder shall have no recourse against the Manager or any other Interest Holder.
10.6 Notice of Dissolution. Upon the occurrence of a Dissolution Event, the Company
shall, within thirty (30) days thereafter, provide written notice thereof to each of the Interest
Holders and to all other parties with whom the Company regularly conducts business (as
determined in the discretion of the Managers) and shall publish notice thereof in a newspaper of
general circulation in each place in which the Company regularly conducts business (as determined
in the discretion of the Managers).
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ARTICLE 11.
CONFLICTS OF INTEREST, COMPETITION
AND CONFIDENTIAL INFORMATION
11.1 Self-Interest. Neither an Interest Holder nor any Manager violates a duty or
obligation to the Company with respect to such Person’s dealings with the Company merely
because the conduct furthers the interest of the Interest Holder or Manager. Subject to the
notification obligations set forth in Sections 4.4 and 5.8, an Interest Holder and/or any Manager
may lend money to and transact other business with the Company, and the rights and obligations
of an Interest Holder or Manager who lends money to or transacts business with the Company are
the same as those of a person who is not an Interest Holder or Manager. No transaction with the
Company shall be voidable solely because an Interest Holder or Manager has a direct or indirect
interest in the transaction if the transaction is approved or ratified by the Interest Holders as
provided for herein. Each Interest Holder and any Manager shall be entitled to enter into
transactions that may be considered to be competitive with, or a business opportunity that may be
beneficial to, the Company, it being expressly understood that some of the Interest Holders and
Managers may enter into transactions that are similar to the transactions into which the Company
may enter, and the Company and each Interest Holder waive the right or claim to participate
therein.
11.2 Other Business of Members. Except with respect to Competitive Opportunities, a
Member may engage, or acquire and retain an interest, in any other business ventures (including
future ventures), transactions, or other opportunities of any kind, nature, or description
(independently or with others) that are not Competitive Opportunities without having any fiduciary
duty or other obligation: (a) to notify the Company or the Members of any aspect of those
opportunities, (b) to pursue or undertake those opportunities on behalf of the Company or the
Members, (c) to offer (or otherwise make available to) the Company or the Members any interest
in those opportunities, or (d) to share with the Company or the Members any of the income, profits,
or rewards derived by that Member from those opportunities. The fact that a Member takes
advantage of any opportunity described in the preceding sentence, either alone or with other
Persons, and does not offer that opportunity to the Company or the other Members, will not cause
that Member to become liable to the Company or to the other Members for any lost opportunity of
the Company or other Members. With respect to Competitive Opportunities, it is the Members’
intent that any such Competitive Opportunities shall be undertaken by the Company or a Wholly-
Owned Entity of the Company and each Member, on behalf of themselves and their Affiliates,
hereby agree and covenant that all Competitive Opportunities shall be presented to the Company
and the Members, or their Affiliates, and during such time that a Member is an Interest Holder,
and for a period of three (3) years thereafter, shall not engage in any Competitive Opportunities,
even if the Company does not undertake such Competitive Opportunities, unless the Company
gives its written consent, which consent must be approved by a Majority of Members.
11.3 Confidential Information. The Interest Holders recognize and acknowledge that as
Interest Holders they will have access to, be provided with and, in some cases, prepare and create
Confidential Information. An Interest Holder shall not use or disclose any Confidential
Information, either personally or for the use of others, other than in connection with such Person’s
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activities on behalf of the Company, nor shall an Interest Holder disclose any Confidential
Information to any Person who is not an Interest Holder, not employed by the Company or not
authorized by the Company to receive such Confidential Information, without the prior written
consent of the Company. Each Interest Holder shall use reasonable and prudent care to safeguard
and protect and prevent the unauthorized use and disclosure of Confidential Information. The
obligations contained in this Section shall survive for as long as the Company, in its sole judgment,
considers the subject information to be Confidential Information. Each Interest Holder shall, at the
request of the Company after the occurrence of a Cessation Event, deliver to the Company all
Confidential Information in the possession of such Person together with such Person’s written
certification of compliance with this Section. If an Interest Holder is served with any subpoena or
other compulsory, judicial, or administrative process calling for production of any Confidential
Information of the Company, such Person shall immediately notify the Company in writing of
such subpoena or process, and shall cooperate with the Company in an effort to protect and retain
the confidential status of such Confidential Information. If such Person is compelled to make a
disclosure pursuant to such subpoena or other compulsory, judicial, or administrative process, and
the Person has cooperated with the Company in all reasonable respects as required under this
Section, such disclosure shall not be a violation of this Section.
11.4 Independent Covenants. It is understood and agreed between the Company and
each Interest Holder that the covenants set forth in this Article 11 shall be construed as independent
agreements, separate from the other provisions of this Operating Agreement. The existence of any
claim or cause of action of an Interest Holder against the Company, whether predicated upon the
provisions of this Operating Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of this Article. The provisions of this Article shall survive
notwithstanding termination of this Operating Agreement.
ARTICLE 12.
MISCELLANEOUS PROVISIONS
12.1 Attorneys’ Fees. If any Interest Holder or the Company brings any action to enforce
or relating to any provisions of this Operating Agreement, the Act, or any other action relating to
the Company, whether at law, in equity or otherwise, the party who substantially prevails in such
action shall be entitled, in addition to any other rights or remedies available to him or it, to collect
from the other party or parties the reasonable costs and expenses incurred in the investigation
preceding such action and the prosecution and appeal of such action, including but not limited to
reasonable attorneys’ fees.
12.2 Notices. Whenever, under the provisions of the Act or other law, the Certificate or
this Operating Agreement, notice is required to be given to any Person, such notice may be by
mail, addressed to the Company at its principal office from time to time and to any other Person
at his or her address as it appears on the records of the Company from time to time, with postage
thereon prepaid. Any such notice shall be deemed to have been given at the time it is deposited in
the United States mail. Notice to a Person may also be given personally or by electronic mail or
facsimile sent to his or her address as it appears on the records of the Company. The addresses of
the Members as shown on the records of the Company shall originally be those set forth in Article
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C.- 32
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C., V.2 (6-22-2019).DOCX
3 hereof. Any Person may change his or her address as shown on the records of the Company by
delivering written notice to the Company in accordance with this Section.
12.3 Application of Idaho Law. This Operating Agreement, and the interpretation
hereof, shall be governed exclusively by its terms and by the laws of the State of Idaho, without
reference to its choice of law provisions, and specifically the Act.
12.4 Amendments. No amendment or modification of this Operating Agreement shall
be effective except upon the consent of a Super Majority of Members.
12.5 Construction. Whenever the singular number is used in this Operating Agreement
and when required by the context, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and vice versa.
12.6 Headings and Exhibits. The headings in this Operating Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define, or limit the scope,
extent, or intent of this Operating Agreement or any provision hereof. The exhibits and schedules
of this Operating Agreement are hereby incorporated as part of this Operating Agreement with the
same force and effect as if the provisions set forth therein when contained in the body of this
Operating Agreement
12.7 Waivers. The failure of any party to seek redress for violation of or to insist upon
the strict performance of any covenant or condition of this Operating Agreement shall not prevent
a subsequent act, which would have originally constituted a violation, from having the effect of an
original violation.
12.8 Rights and Remedies Cumulative. The rights and remedies provided by this
Operating Agreement are cumulative and the use of any one right or remedy by any party shall not
preclude or waive the right to use any or all other remedies. Such rights and remedies are given in
addition to any other rights the parties may have by law, statute, ordinance or otherwise.
12.9 Severability. If any provision of this Operating Agreement or the application
thereof to any Person or circumstance shall be invalid, illegal or unenforceable to any extent, the
remainder of this Operating Agreement and the application thereof shall not be affected and shall
be enforceable to the fullest extent permitted by law.
12.10 Heirs, Successors and Assigns. Each and all of the covenants, terms, provisions,
and agreements herein contained shall be binding upon and inure to the benefit of the parties hereto
and, to the extent permitted by this Operating Agreement, their respective heirs, legal
representatives, successors, and assigns.
12.11 Creditors. None of the provisions of this Operating Agreement shall be for the
benefit of or enforceable by any creditor of the Company.
12.12 Counterparts. This Operating Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same instrument.
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C.- 33
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Delivery of an executed counterpart of a signature page to this Operating Agreement via facsimile
transmission or electronic mail shall be as effective as delivery of an executed original.
12.13 Entire Agreement. This Operating Agreement sets forth all of the promises,
agreements, conditions, and understandings between the parties respecting the subject matter
hereof and supersedes all prior negotiations, conversations, discussions, correspondence,
memoranda, agreements, whether oral, in a record, implied, or any combination thereof, between
the parties concerning such subject matter.
[Signature Page to Follow]
EXHIBIT A-1
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C., V.2 (6-22-2019).DOCX
EXHIBIT A-1
Current Members
Initial Capital
Contribution
Capital
Accounts
Percentage
Interests
J. Thomas Ahlquist $1,000 $1,000 100%
2775 W Navigator Drive, Suite
200, Meridian, Idaho 83642-
7554
Totals 100%
[end of Exhibit A-1]
EXHIBIT A-2
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C., V.2 (6-22-2019).DOCX
EXHIBIT A-2
NONE
[To be amended and restated by the Managers,
if necessary, pursuant to Section 3.1(b)]
EXHIBIT A-3
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C., V.2 (6-22-2019).DOCX
EXHIBIT A-3
NONE
[To be amended and restated by the Managers,
if necessary, pursuant to Section 3.1(c)]
EXHIBIT B - 1
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C., V.2 (6-22-2019).DOCX
EXHIBIT B
TAX PROVISIONS
ARTICLE 1.
DEFINITIONS
1.1 The following terms used in this Exhibit B shall have the following meanings
(unless otherwise expressly provided herein). Any capitalized term used in this Exhibit B which is
not otherwise defined herein shall have the meaning ascribed to them in Article 1 of this Exhibit
B:
(a) “Adjusted Capital Account Deficit” shall mean, with respect to any Interest
Holder, the deficit balance, if any, in such Person’s Capital Account as of the end of the relevant
fiscal year, after giving effect to the following adjustments:
(i) The Capital Account shall be increased by any amounts which such
Interest Holder is obligated to restore pursuant to any provision of this Exhibit B or is deemed to
be obligated to restore pursuant to the next to the last sentences of Regulations Sections 1.704-
2(g)(1) and 1.704-2(i)(5);
(ii) The Capital Account shall be decreased by the items described in
Sections 1.704-l(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), and 1.704-l(b)(2)(ii)(d)(6) of the
Regulations; and
(iii) The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Section 1.704-l(b)(2)(ii)(d) of the Regulations and shall be
interpreted consistently therewith.
(b) “Book Depreciation” means, for each taxable year of the Company with
respect to a particular asset of the Company, an amount equal to the depreciation, amortization, or
other cost recovery deduction allowable for federal income tax purposes with respect to that asset
for the taxable year, except that if, as of the beginning of the taxable year, the Book Value of the
asset differs from its adjusted basis for federal income tax purposes, Book Depreciation for that
asset will be an amount that bears the same ratio to its Book Value at the beginning of the year as
the federal income tax depreciation, amortization, or other cost recovery deduction with respect to
that asset for the taxable year bears to its adjusted tax basis at the beginning of the year; except
that if the asset’s adjusted basis for federal income tax purposes at the beginning of a taxable year
is zero, the Book Depreciation for that asset will be determined with reference to its Book Value
using any reasonable method selected by the Managers.
(c) “Book Value” means, for each of the Company assets, the adjusted basis for
federal income tax purposes of the Company in that asset, except as follows:
(i) Fair Market Value of Contributed Property. Each asset contributed
by an Interest Holder to the capital of the Company will have an initial Book Value equal to the
fair market value (determined without regard to Code Section 7701(g) as provided by Section
EXHIBIT B - 2
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1.704-1(b)(2)(iv)(d)(1) of the Regulations) of that asset on the date of its contribution determined
by the Managers.
(ii) Book Ups and Book Downs. Unless a Super Majority of Members
determine that making the adjustments under this Section 1.1(c)(ii) are not necessary to preserve
the Interest Holder’s Interests in the Company, the Managers shall cause the Book Values of all of
the assets of the Company to be adjusted to equal their fair market values (taking Code Section
7701(g) into account as provided in Section 1.704-1(b)(2)(iv)(f)(1) of the Regulations) as of the
following times: (i) the acquisition of any additional Company Interests by any new or existing
Interest Holder in exchange for more than a de minimis Capital Contribution, (ii) the Distribution
by the Company to an Interest Holder of more than a de minimis amount of property (including
money, but excluding any promissory note of which the Company is the maker or payor) as
consideration for all or part of that Interest Holder’s Company Interest; (iii) the grant of more than
a de minimis Company Interest in consideration for services rendered to or for the benefit of the
Company by an Interest Holder acting in a “partner capacity” within the meaning of Section 1.704-
1(b)(2)(iv)(f)(5)(iii) of the Regulations or by a new Interest Holder acting in a partner capacity or
in anticipation of becoming an Interest Holder, and (iv) the liquidation of the Company within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Regulations.
(iii) Distributions of Property. The Book Value of a Company Asset
(excluding money, but including any promissory note of the Company) Transferred to any Interest
Holder as a result of a Distribution is to be adjusted to equal the fair market value of that asset on
the date of the Distribution as reasonably determined by the Managers (determined without regard
to Code Section 7701(g), except Code Section 7701(g) will be taken into account for purposes of
determining the effect that the Distribution will have on the allocation of Profits and Losses, as
provided in Section 1.704-1(b)(2)(iv)(e)(1) of the Regulations).
(iv) Adjustments Related to Section 754 Election. The Book Values of
certain Company Assets will be increased (or decreased, as the case may be) to reflect any
adjustments to the adjusted federal income tax basis of those assets pursuant to Code Section
734(b) or Code Section 743(b), but only to the extent that those adjustments are taken into account
in determining Capital Accounts pursuant to: (A) Section 1.704-1(b)(2)(iv)(m) and (B)
subparagraph (vi) of the definition of “Profits” and “Losses” or Section 3.1(a) of this Exhibit B;
provided, however, that Book Values shall not be adjusted pursuant to this subparagraph (iv) to
the extent that an adjustment pursuant to Section 1.1(c)(i) of this Exhibit B is required in
connection with a transaction that would otherwise result in an adjustment pursuant to this
subparagraph iv.
(v) Book Depreciation Adjustments. If the Book Value of an asset has
been determined or adjusted pursuant to subparagraph (i), (ii) or (iv), such Book Value shall
thereafter be adjusted by the Book Depreciation taken into account with respect to such asset, for
purposes of computing Profits and Losses.
(d) “Built-in-Gain Allocations” shall mean the allocation of Profits and Losses
set forth under Section 3.3 of this Exhibit B.
EXHIBIT B - 3
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(e) “Capital Accounts” shall have the meaning set forth in Section 2.1 of this
Exhibit B.
(f) “Company Minimum Gain” shall mean the same as “partnership minimum
gain” as set forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
(g) “Curative Allocations” shall mean the allocation of Profits and Losses as
set forth under Section 3.2 of this Exhibit B.
(h) “Distribution” shall mean any Liquidating Distribution or Operating
Distribution.
(i) “Interest Holder Nonrecourse Debt” shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations for “partner nonrecourse debt.”
(j) “Interest Holder Nonrecourse Debt Minimum Gain” shall mean an amount,
with respect to Interest Holder Nonrecourse Debt, equal to the Company Minimum Gain that
would result if such Interest Holder Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the Regulations.
(k) “Interest Holder Nonrecourse Deductions” shall have the meaning set forth
in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations for “partner nonrecourse
deductions.”
(l) “Nonrecourse Deductions” shall have the meaning set forth in Section
1.704-2(b)(1) of the Regulations.
(m) “Nonrecourse Liability” shall have the meaning set forth in Section 1.704-
2(b)(3) of the Regulations.
(n) “Profits” and “Losses” shall mean, for each tax year, an amount equal to the
Company’s taxable income or loss for such tax year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with
the following adjustments (without duplication):
(i) Tax Exempt Income. Any income of the Company that is exempt
from federal income tax and not otherwise taken into account in computing Profits or Losses
pursuant to this definition of “Profits” and “Losses” shall be added to such taxable income or loss;
(ii) Section 705(a)(2)(B) Expenditures. Any expenditures of the
Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations, and not otherwise taken
into account in computing Profits or Losses pursuant to this Section 1.1(n)(ii), shall be subtracted
from such taxable income or loss;
(iii) Book-Ups and Book Downs. If the Book Value of any Company
asset is adjusted pursuant to subparagraphs (ii) or (iii) of the definition of “Book Value,” the
EXHIBIT B - 4
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amount of such adjustment shall be treated as an item of gain (if the adjustment increases the Book
Value of the asset) or an item of loss (if the adjustment decreases the Book Value of the asset)
from the disposition of such asset and shall be taken into account for purposes of computing Profits
or Losses;
(iv) Use of Book Value for Determining Gain or Loss. Gain or loss
resulting from any disposition of property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the Book Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property differs from its Book
Value;
(v) Use of Book Depreciation. Book Depreciation will be in lieu of the
depreciation, amortization, and other cost recovery deductions taken into account in computing
the Company’s taxable income or loss;
(vi) Section 754 Election Adjustments. To the extent an adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) is required, pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as a result of an Operating Distribution, the amount of such adjustment shall be treated
as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) from the disposition of such asset and shall be taken into account for purposes
of computing Profits or Losses; and
(vii) Special Allocations and Curative Allocations. Notwithstanding any
other provision of this definition, any items that are allocated pursuant to Section 3.1 or Section
3.2 of this Exhibit shall not be taken into account in computing Profits or Losses. The amounts of
the items of Company income, gain, loss, or deduction available to be specially allocated pursuant
to Sections 3.1 and 3.2 hereof shall be determined by applying rules analogous to those set forth
in subparagraphs (i) through (vi) above.
(o) “Special Allocations” shall mean the allocation of Company income, gain,
loss, deduction or credit as set forth under Section 3.1 of this Exhibit B.
ARTICLE 2.
CAPITAL ACCOUNT MAINTENANCE
2.1 Capital Accounts. Each Interest Holder is to have a “Capital Account” that is
maintained as provided in this Section 2.1:
(a) Credits. Each Interest Holder’s Capital Account balance will be increased
by: (i) the Capital Contributions made by that Interest Holder, including the Book Value of any
property contributed to the Company by the Interest Holder (determined for this purpose without
reducing the amount of those Capital Contributions by the amount of liabilities associated with
those Capital Contributions, which amount is to be taken into account for that purpose under
Section 2.1(b)(iii) of this Exhibit B), (ii) the Interest Holder’s allocation of Profits under Section
6.7 of this Operating Agreement (and any items of income and gain allocated to the Interest Holder
pursuant to Sections 3.2, 3.3, and 3.4 of this Exhibit B that are not included in the computation of
Profits), and (iii) the amount of any Company liabilities that the Interest Holder is deemed to
EXHIBIT B - 5
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assume under the last sentence of Section 1.704-1(b)(2)(iv)(c) of the Regulations or that are
secured by any property of the Company Transferred to that Interest Holder as a result of a
Distribution and which the Interest Holder is deemed to take the property subject to under Code
Section 752.
(b) Debits. Each Interest Holder’s Capital Account balance will be reduced by
the amount of: (i) Distributions made to that Interest Holder, determined for this purpose without
reducing the amount of those Distributions by either (A) the amount of liabilities associated with
those Distributions, which amount is to be taken into account for purposes of this Section 2.1 under
Section 2.1(a)(iii) of this Exhibit B or (B) the amount that the Interest Holder’s Capital Account
would otherwise be reduced under this Section 2.1(b) with respect to any Distribution of a
promissory note of the Company to the Interest Holder (instead, that Interest Holder’s Capital
Account will be reduced with respect to the promissory note only as, and to the extent, provided
in Section 1.704-1(b)(2)(iv)(e)(2) of the Regulations), (ii) that Interest Holder’s allocation of
Losses under Section 6.7 of this Operating Agreement (and any items of expenses and losses
allocated to such Interest Holder under Sections 3.2, 3.3, and 3.4 of this Exhibit B that are not
included in the computation of Losses), and (iii) the amount of any liabilities of that Interest Holder
that the Company is deemed to assume under the last sentence of Section 1.704-1(b)(2)(iv)(c) of
the Regulations or that are secured by any property contributed by the Interest Holder to the
Company and which the Company is deemed to take the property subject to under Code Section
752.
2.2 Transfer of Capital Accounts. In the event all or any portion of an Interest Holder’s
Company Interest is Transferred in accordance with this Operating Agreement, the Acquiring
Interest Holder will succeed to the Capital Account of the Assigning Interest Holder to the extent
it relates to the Transferred Company Interest.
2.3 Section 752(c). In determining the amount of any liability for purposes of this
Section 2.3, there will be taken into account Code Section 752(c) and any other applicable
provisions of the Code and Regulations.
2.4 Intent to Comply with Regulations. The foregoing provisions and the other
provisions of this Operating Agreement concerning the maintenance of Capital Accounts are
intended to comply with Section 1.704-1(b) of the Regulations and are to be interpreted and applied
in a manner that is consistent with that intent. The Managers may make appropriate modifications
to this Section 2.4 to the extent necessary for the Company to comply with the capital account
maintenance requirements of Section 1.704-1(b)(2)(iv) of the Regulations.
ARTICLE 3.
SPECIAL ALLOCATIONS, CURATIVE ALLOCATIONS
AND BUILT-IN-GAIN ALLOCATIONS
3.1 Special Allocations. The following special allocations (“Special Allocations”) shall
be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, if there is a net decrease in Company Minimum Gain during any
EXHIBIT B - 6
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fiscal year, each Interest Holder shall be allocated items of Company income and gain for such
fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to such Person’s share
of the net decrease in Company Minimum Gain, determined in accordance Section 1.704-2(g) of
the Regulations. Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Interest Holder pursuant thereto. The items to
be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of
the Regulations. This Section 3.1(a) is intended to comply with the minimum gain chargeback
requirement in Section 1.704-2(f) of the Regulations and shall be interpreted consistently
therewith.
(b) Interest Holder Minimum Gain Chargeback. Except as otherwise provided
in Section 1.704-2(i)(4) of the Regulations, notwithstanding any other provision of this Exhibit B
if there is a net decrease in Interest Holder Nonrecourse Debt Minimum Gain attributable to a
Interest Holder Nonrecourse Debt during any fiscal year, each Interest Holder who has a share of
the Interest Holder Nonrecourse Debt Minimum Gain attributable to such Interest Holder
Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Regulations, shall
be allocated items of Company income and gain for such fiscal year (and, if necessary, subsequent
fiscal years) in an amount equal to such Person’s share of the net decrease in Interest Holder
Nonrecourse Debt Minimum Gain attributable to such Interest Holder Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(4) of the Regulations. Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts required to be
allocated to each Interest Holder pursuant thereto. The items to be so allocated shall be determined
in accordance with Sections 1.704 2(i)(4) and 1.704-2(j)(2) of the Regulations. This Section 3.1(b)
is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of
the Regulations and shall be interpreted consistently therewith.
(c) Qualified Income Offset. In the event any Interest Holder unexpectedly
receives any adjustments, allocations, or distributions described in Section 1.704-l(b)(2)(ii)(d)(4),
Section 1.704-l(b)(2)(ii)(d)(5), or Section 1.704-l(b)(2)(ii)(d)(6) of the Regulations, items of
Company income and gain shall be allocated to each such Person in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account
Deficit of such Interest Holder as quickly as possible, provided that an allocation pursuant to this
Section 3.1(c) shall be made only if and to the extent that such Person would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Exhibit B have been
tentatively made as if this Section 3.1(c) were not in this Exhibit B.
(d) Gross Income Allocation. In the event any Interest Holder has an Adjusted
Capital Account Deficit at the end of any tax year, items of Company income and gain shall be
allocated to each such Person in the amount of such excess as quickly as possible, provided that
an allocation pursuant to this Section 3.1(d) shall be made only if and to the extent that such Interest
Holder would have a deficit Capital Account in excess of such sum after all other allocations
provided for in this Article 3 have been made as if Section 3.1(c) and this Section 3.1(d) were not
in this Operating Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year shall
be allocated to the Interest Holder’s in proportion to their Economic Percentage Interests.
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(f) Interest Nonrecourse Deductions. Any Interest Nonrecourse Deductions for
any fiscal year shall be allocated to the Interest Holder who bears the economic risk of loss with
respect to the Interest Nonrecourse Debt to which such Interest Nonrecourse Deductions are
attributable in accordance with Section 1.704-2(i)(1) of the Regulations.
(g) Section 754 Adjustments. To the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required,
pursuant to Section 1.704-l(b)(2)(iv)(m)(2) or Section 1.704 l(b)(2)(iv)(m)(4) of the Regulations,
to be taken into account in determining Capital Accounts as the result of a Distribution to a Interest
Holder in complete liquidation of such Interest Holder’s Company Interest, the amount of such
adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be
allocated to such Interest Holder in accordance with their Economic Percentage Interest in the
event that Section 1.704 l(b)(2)(iv)(m)(2) of the Regulations applies, or to the Interest Holder to
whom such Distribution was made in the event that Section 1.704-1(b)(2)(iv)(m)(4) of the
Regulations applies.
(h) Member Approved Special Allocations. In addition to the Special
Allocations set forth in (a) - (g) above, the Company shall make such other allocations of other
items of Company income, gain, loss, or deduction disproportionate to the Economic Percentage
Interests of the Interest Holders that are unanimously agreed upon by the Members in writing and
which have “substantial economic effect” or are otherwise permitted under Code Section 704 and
the Regulations promulgated thereunder.
3.2 Curative Allocations. The Special Allocations set forth in Sections 3.1(a) through
3.1(g) of this Exhibit B are intended to comply with certain requirements of the Regulations. It is
the intent of the Members that, to the extent possible, all Special Allocations shall be offset either
with other Special Allocations or with allocations of other items of Company income, gain, loss,
or deduction pursuant to this Section 3.2. Therefore, notwithstanding any other provision of this
Exhibit B (other than the Special Allocations), the Company, upon the approval of the Managers,
shall make such offsetting allocations of Company income, gain, loss, or deduction whatever
manner they determine appropriate so that, after such offsetting allocations are made, each Interest
Holder’s Capital Account is, to the extent possible, equal to the Capital Account such Interest
Holder would have had if the Special Allocations were not part of this Exhibit B and all items of
income, gain, loss, deduction, and credit were allocated in accordance with each Interest Holder’s
Economic Percentage Interest. In exercising discretion under this Section 3.2, the Managers shall
take into account future Special Allocations under Section 3.1(a) and 3.1(b) that, although not yet
made, are likely to offset other Special Allocations previously made under Sections 3.1(f) and
3.1(g) shall be considered.
3.3 Built-In-Gain Allocations.
(a) Section 704(c) Allocations. Each item of income, gain, loss, or deduction
attributable to property contributed to the Company by an Interest Holder are to be allocated, for
income tax purposes only, among the Interest Holders so as to account, in accordance with Code
Section 704(c) and the Regulations promulgated thereunder, for any variation at the time of
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contribution between the adjusted federal income tax basis of that property to the Company and
its initial Book Value (computed in accordance with Section 1.1(n)(iv) of this Exhibit B).
(b) Reverse Section 704(c) Allocations. If the Book Value of any property of
the Company is adjusted on the Company’s books under Section 1.1(c) of this Exhibit B,
subsequent allocations of items of income, gain, expense, deduction, and loss that are attributable
to that property must, solely for income tax purposes, account, in accordance with Code Section
704(c) and the Regulations promulgated thereunder, for any variation at the time of that adjustment
between the adjusted federal income tax basis of that asset and its Book Value.
(c) Elections. All decisions and elections pertaining to Built-In-Gain
Allocations, including the selection of the method, or of different methods (to the extent permitted
under the Regulations), of allocation, whether the “traditional method” described in Section 1.704-
3(b) of the Regulations, the “traditional method with curative allocations” described in Section
1.704-3(c) of the Regulations, the “remedial allocation method” described in Treas. Reg. § 1.704-
3(d), or any other reasonable method contemplated by Section 1.704-3(a)(1) of the Regulations
and the preamble to the Regulations promulgated under Code Section 704(c) in Treasury Decision
8500 (Dec. 22, 1993) for making those allocations which need not be specifically identified in the
Regulations are to be made by the Managers.
3.4 Other Allocation Rules.
(a) Tax Consequences of Allocations. The Interest Holders are aware of the
income tax consequences of the allocations made by this Exhibit B and hereby agree to be bound
by the provisions of this Operating Agreement and of this Exhibit B in reporting their shares of
Profits or Losses, Company income, gain, loss, deductions, or credit for income tax purposes.
(b) Determination of “Excess Nonrecourse Liabilities”. Solely for purposes of
determining a Interest Holder’s proportionate share of the “excess nonrecourse liabilities” of the
Company within the meaning of Regulations Section 1.752-3(a)(3), the Interest Holders interests
in Company income, or gain, loss, or deduction shall be in proportion to their Economic Percentage
Interests.
(c) Treatment of Distributions. To the extent permitted by Section 1.704-
2(h)(3) of the Regulations, the Interest Holders shall endeavor to treat Distributions as having been
made from the proceeds of a Nonrecourse Liability or a Interest Holder Nonrecourse Debt only to
the extent that such Distributions would cause or increase an Adjusted Capital Account Deficit for
any Interest Holder. Unless this Operating Agreement provides otherwise, all decisions concerning
the Book Value of the Company assets, including the determination of their fair market values,
will be made by the Managers.
(d) Varying Interests. If the relative Economic Percentage Interests of the
Interest Holders change during a Taxable Year, the Managers shall select any method permitted
under Code Section 706(d) (or any other applicable law) that they determine to be appropriate for
determining the varying Economic Percentage Interests of the Equity Owners during that Taxable
Year and to the Interest Holders’ allocable shares of Profits and Losses (or items, if any, of income,
EXHIBIT B - 9
AMENDED AND RESTATED OPERATING AGREEMENT FOR AHLQUIST DEVELOPMENT, L.L.C., V.2 (6-22-2019).DOCX
gain, expense, deduction, or loss to be allocated hereunder that are not included in the computation
of Profits and Losses) for that taxable year.
(e) Managers’ Discretionary Powers; Allocation Savings Provision. The
allocations under this Operating Agreement (including this Exhibit B) are intended to allocate
Profits and Losses (and items of income, gain, expense, deduction, or loss that are not included in
the computation of Profits and Losses) to the Interest Holders in accordance with their economic
interests in the Company while complying with the requirements of Subchapter K of Chapter 1 of
Subtitle A of the Code (particularly section 704 thereof) and the Regulations promulgated
thereunder. If, in the opinion of the Managers, the allocation of Profits and Losses (or any items
of income, gain, expense, deduction, or loss allocated hereunder that are not included in the
computation of Profits and Losses) under this Operating Agreement (exclusive of this Section
3.4(e)) does not (a) satisfy the requirements of Code Section 704 or the Regulations promulgated
thereunder, (b) properly take into account any: (i) expenditure made by the Company, (ii) Transfer
of all or part of an Interest Holder’s Company Interest, or (iii) admission of a new Interest Holder;
(c) properly reflect the economic arrangement of the Interest Holders, (d) preserve the equality
between the Capital Accounts of the Interest Holders and the amount of the Company’s capital
reflected on the Company’s balance sheet, as computed for book purposes, in accordance with
Section 1.704-1(b)(2)(iv)(g) of the Regulations, or (e) provide for a given situation or set of
circumstances—then, notwithstanding anything to the contrary contained in this Operating
Agreement (including this Exhibit B), the Managers shall cause Profits and Losses (and items of
income, gain, expense, deduction, and loss allocated hereunder that are not included in the
computation of Profits and Losses) to be allocated in that manner (and this Operating Agreement
is to be deemed amended to that extent) as the Managers determine is required to comply with the
foregoing premises and conditions of this Section 3.4(e) without materially altering the economic
arrangement of the Interest Holders or otherwise unreasonably impairing the value of the Company
Interest of one or more Interest Holders to the benefit or one or more other Interest Holders.
[end of Exhibit B]