March 19, 2011 - Operating Agreement (Class Example)

Operating Agreement (Class Example)

Class Example


OPERATING AGREEMENT

of

_____________________ LLC

Dated Effective: _____________ __, 2010



TABLE OF CONTENTS
(The Table of Contents for this operating agreement is for convenience of reference only and is not intended to define, limit or describe the scope or intent of any provisions of this operating agreement.)

ARTICLE 1. FORMATION 1
1.1. Name. 1
1.2. Articles of Organization. 1
1.3. Principal Place of Business. 1
1.4. Registered Office and Registered Agent. 1
1.5. Business Purpose. 1
1.6. Agreement. 1
ARTICLE 2. MEMBERS, CONTRIBUTIONS, AND INTERESTS 2
2.1. Names; Addresses; Capital Contributions; Membership Interests. 2
2.2. Limitation of Liability. 2
2.3. No Liability for Company Debts. 2
2.4. No Member Authority. 2
2.5. Other Business of Members. 2
2.6. Additional Members. 2
2.7. Additional Contributions. 3
2.8. No Interest on Capital Contributions. 3
2.9. Loans; Guaranties. 3
ARTICLE 3. MEMBER MEETINGS 3
3.1. Meetings. 3
3.2. Notice of Meeting. 4
3.3. Record Date. 4
3.4. Quorum. 4
3.5. Proxies. 4
3.6. Voting. 4
ARTICLE 4. MANAGEMENT 4
4.1. Number and Qualifications of Managers. 4
4.2. Election of Managers. 4
4.3. General Authority. 4
4.4. Other Activities. 4
4.5. Meetings; Notices: Quorum; Voting. 5
4.6. Resignation. 5
4.7. Removal of Manager by Members. 5
4.8. Salaries. 5
4.9. Other Agents. 5
4.10. Employment of Members or Affiliates. 5
4.11. Tax Matters. 5
ARTICLE 5. ACTIONS WITHOUT NOTICE, WITHOUT MEETING OR BY TELEPHONE 6
5.1. Meeting of all Members or Managers. 6
5.2. Action Without Meeting. 6
5.3. Meetings by Telephone. 6
ARTICLE 6. ACCOUNTING AND RECORDS 6
6.1. Books of Account. 6
6.2. Fiscal Year. 6
6.3. Accounting Reports. 6
6.4. Tax Returns. 6
6.5. Taxes of Taxing Jurisdictions. 7
6.6. Tax Matters Partner. 7
ARTICLE 7. ALLOCATIONS AND DISTRIBUTIONS 7
7.1. Allocations Generally. 7
7.2. Allocations of Income from Sales. 7
7.3. Distributions. 7
7.4. Distribution of Cash from Operations. 7
7.5. Distributions Upon Sale of Assets. 7
7.6. Shared Priorities. 8
7.7. Capital Accounts. 8
7.8. Compliance with Section 704. 8
7.9. Priority and Return of Capital. 8
ARTICLE 8. TRANSFERS OF MEMBERSHIP INTERESTS 8
8.1. Restriction on Disposition. 8
8.2. Prohibited Transfers. 9
8.3. Option to Purchase on Bankruptcy or Withdrawal. 9
8.4. Admission of Assignees as Members. 10
8.5. Rights of Unadmitted Assignees. 10
ARTICLE 9. WITHDRAWAL AND DISSOLUTION 10
9.1. No Withdrawal. 11
9.2. Events of Dissolution. 11
9.3. Effect of Death of a Member. 11
9.4. Liquidation Upon Dissolution and Winding Up. 11
9.5. Valuation of Member's Interest. 11
9.6. Effect of Purchase of Member's Interest. 11
ARTICLE 10. INDEMNIFICATION 11
10.1. Indemnification. 12
10.2. Limitation of Liability. 12
ARTICLE 11. AMENDMENTS 12
11.1. By Members. 12
11.2. By Managers. 12
ARTICLE 12. MISCELLANEOUS 12
12.1. Additional Documents. 12
12.2. Headings. 12
12.3. Severability. 12
12.4. No Third Party Beneficiaries. 12
12.5. No Partnership Intended for Nontax Purposes. 13
12.6. Partnership Intended for Tax Purposes. 13
12.7. Binding Effect. 13
12.8. Construction. 13
12.9. Time. 13
12.10. Governing Law. 13
12.11. Waiver of Action for Partition; No Bill for Partnership Accounting. 13
12.12. Counterpart Execution. 13
12.13. Specific Performance. 13
12.14. Notice. 14
12.15. Rights and Remedies Cumulative. 14
12.16. Waivers. 14
12.17. Attorney Fees. 14


OPERATING AGREEMENT OF ___________________ LLC
an Idaho Limited Liability Company

The undersigned members, desiring to form a limited liability company under the Idaho Limited Liability Company Act (the "Act"), hereby agree as follows:

ARTICLE 1. FORMATION

1.1. Name. The name of the limited liability company is __________________ LLC (the “LLC”).
1.2. Articles of Organization. Articles of organization were filed with the Idaho Secretary of State on __________ __, 2004.
1.3. Principal Place of Business. The principal office of the LLC shall initially be at . The managers may relocate the principal office or establish additional offices from time to time.

1.4. Registered Office and Registered Agent. The LLC's initial registered office shall be at , Idaho 83714, and the name of its initial registered agent at such address shall be . The members may change the registered office and registered agent from time to time.

1.5. Business Purpose. The purpose of the LLC shall be to purchase, own, develop, build and construct commercial real estate, own, manage, lease and operate commercial, retail, and other real estate and other business establishments on that certain real property more particularly described in Exhibit A, attached hereto and incorporated herein (the “Property”), and to engage in any other lawful business.

1.6. Agreement. The members executing the operating agreement hereby agree to the terms and conditions of the operating agreement, as it may from time to time be amended according to its terms. To the extent any provision of the operating agreement is prohibited or ineffective under the Act, the operating agreement shall be considered amended to the smallest degree possible in order to make the agreement effective under the Act. In the event the Act is subsequently amended or interpreted in such a way to make any provision of the operating agreement that was formerly invalid valid, such provision shall be considered to be valid from the effective date of such interpretation or amendment.

ARTICLE 2. MEMBERS, CONTRIBUTIONS, AND INTERESTS

2.1. Names; Addresses; Capital Contributions; Membership Interests. The names and addresses of the members of the LLC and their initial capital contribution and membership interests are as set forth below:

Name and address Agreed Value Membership Interest
Capital Contribution

Land valued at
$___/square foot




2.2. Limitation of Liability. Each member's liability shall be limited to the maximum extent permitted by applicable law. The failure of the LLC to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs shall not be grounds for imposing personal liability on the members or managers for liabilities of the LLC.

2.3. No Liability for Company Debts. Except as otherwise expressly required by Idaho law, the debts, obligations and liabilities of the LLC, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the LLC, and no member shall be obligated personally for any such debt, obligation or liability of the LLC solely by reason of being a member. Except as otherwise expressly required by this operating agreement or by Idaho law, the liability of each member shall be limited to the amount of capital contributions, if any, required to be made by such member in accordance with this operating agreement, but only when and to the extent the same shall become due pursuant to the provisions of this operating agreement.

2.4. No Member Authority. No member shall have any power or authority to contract on behalf of the LLC or otherwise bind the LLC unless the member has been given written authorization from the managers to act as an agent of the LLC.
2.5. Other Business of Members. Any member may engage independently or with others in other business and investment ventures of every nature and description, even if such business is competitive with the business of the LLC, and shall have no obligation to account to the LLC for such business or investments or for business or investment opportunities.

2.6. Additional Members. No additional members shall be admitted without the unanimous consent of the managers, except that such consent is not required to admit a deceased member's spouse, estate or other beneficiary as a member in place of the deceased member.

2.7. Additional Contributions. Except as set forth in this Section 2.7, no member shall be required or permitted to make any additional capital contributions. In the event that at any time, pursuant to the vote of the managers, the managers determine that additional funds in excess of the capital contributions are required by the LLC for its business or any of its obligations, expenses, costs, liabilities or expenditures, or for improvements with respect to any LLC property, the members shall be required to contribute such additional funds in proportion to their percentage interests.

In the event, after being notified to do so, a member ("defaulting member") fails to contribute additional funds as required herein, the other members who have made their required contributions ("non-defaulting members") may contribute the additional funds needed pro rata based upon their percentage interests, in which case the advance shall be deemed a demand loan by the non-defaulting member or members to the defaulting member bearing interest at the rate of twelve (12) percent per annum from the date the advance is made. The non-defaulting members and the LLC shall have any and all other remedies available at law or in equity against the defaulting members, in addition to the opportunity to advance funds to the LLC as a demand loan to the defaulting member as described above. To the extent of such advance plus interest, any distributions otherwise due to the defaulting member shall instead be paid to the non-defaulting member or members (pro rata with the amounts advanced by each non defaulting member) who made such contribution. The defaulting member may again receive distributions after all defaults are cured, and any loans to non-defaulting members are repaid in full.

2.8. No Interest on Capital Contributions. Except as otherwise provided herein, no interest shall be paid on capital contributions.

2.9. Loans; Guaranties. The LLC may borrow money from any member or third parties upon such commercially reasonable terms and conditions as may be approved by the managers. The members acknowledge that in order to obtain third-party financing for the operation of the LLC, the members, or principals of the members, may be required by third-party lenders to execute guarantees for such financing (each a “Guarantor”). With regard to any and all obligations arising from or related to any guarantee of any loan to the LLC (a “Guarantee Obligation”), the members hereby agree that if any Guarantor is obligated to satisfy any Guarantee Obligation, such Guarantor shall have a right of contribution against the other members to the extent of each member’s respective Membership Interest. In addition, each member hereby agrees to indemnify and hold the other members harmless from any claim, costs, damages or expenses, including attorneys fees, incurred with regard to any Guarantee Obligation in excess of each indemnified member’s Membership Interest. The rights of indemnification and contribution provided herein are in addition to any additional rights or remedies provided by law, or by any other agreement among the members, and shall include all costs and expenses, including attorneys fees and interest, incurred by a member in enforcing the terms hereof and/or with regard to any such claim.

ARTICLE 3. MEMBER MEETINGS

3.1. Meetings. A meeting of members shall be held (a) if it is called by the managers; or (b) if members holding at least twenty-five percent (25%) of the membership interests sign, date, and deliver to the LLC's principal office a written request for the meeting, describing the purpose or purposes for which it is to be held. Meetings of members shall be held at the principal office of the LLC or any other place specified in the notice of meeting.

3.2. Notice of Meeting. Notice of the date, time, and place of each members' meeting shall be given to each member not more than sixty (60) days nor less than ten (10) days before the meeting date. The notice must include a description of the purpose or purposes for which the meeting is called.

3.3. Record Date. The persons entitled to notice of and to vote at a members' meeting, and their respective membership interests, shall be determined as of the record date for the meeting. The record date shall be a date, not more than seventy (70) days nor less than ten (10) days before the meeting, selected by the managers. If the managers do not specify a record date, the record date shall be the date on which notice of the meeting was first mailed or otherwise delivered.

3.4. Quorum. The presence, in person or by proxy, of members holding at least sixty six percent (66%) of the membership interests shall constitute a quorum.

3.5. Proxies. A member may be represented at a meeting in person or by written proxy.

3.6. Voting. Each member shall be entitled to a vote based on the member's membership interest in the LLC on each matter requiring action by the members. Except as otherwise stated in the articles of organization, this operating agreement, or applicable law, a matter submitted to a vote of the members shall be deemed approved if the membership interests voted in favor exceed those voted against the matter.

ARTICLE 4. MANAGEMENT

4.1. Number and Qualifications of Managers. As provided in the articles of organization, the LLC shall be managed by managers. The number of managers shall be the number elected by the members and acting as such from time to time, but shall not be less than one (1). Managers may be individuals or entities, and need not be members of the LLC. The initial manager shall be .

4.2. Election of Managers. If an initial manager resigns, the office of manager shall be filled by election at a meeting of members called for the purpose of electing managers; the meeting notice must state that the purpose, or one of the purposes, of the meeting is election of managers. A manager other than the initial manager shall serve for a term ending when the members next hold a meeting at which managers are elected, or until the manager's earlier death, resignation, or removal.

4.3. General Authority. Subject to restrictions that may be imposed from time to time by the managers or members, any manager shall be an agent of the LLC with authority to contract on behalf of the LLC or to otherwise bind the LLC in the ordinary course of its business. Except as otherwise provided in this operating agreement, if there is more than one (1) manager, all actions shall require the vote and consent of a majority of the managers, and upon such consent, all documents shall require the signature of one (1) manager before such signature shall be effective.

4.4. Other Activities. Managers may have other business interests and may engage in other activities in addition to those relating to the LLC even if those activities are competitive with the business of the LLC. This Section does not change a manager's duty to act in a manner that such manager reasonably believes to be in the best interests of the LLC.

4.5. Meetings; Notices: Quorum; Voting. In the event there is more than one (1) manager, meetings of the managers may be called by any manager. Meetings shall be held at the place fixed by the managers or, if no such place has been fixed, at the principal office of the LLC. Oral or written notice of the date, time, and place of any meeting shall be given at least twenty-four (24) hours in advance. Written notice may be delivered personally, given by facsimile or other form of wire communication, or by mail or private carrier, to each manager's business or home address. Written notice shall be effective at the earliest of the following: (a) when received, (b) when sent by facsimile or other form of wire communication, or (c) two business days after being mailed. A majority of the managers shall be required to constitute a quorum. Each manager shall be entitled to one vote. The matter submitted to a vote of the managers shall be deemed approved if a majority of the votes are cast in favor of the matter.

4.6. Resignation. A manager may resign at any time by delivering written notice to the members. The resignation is effective upon notice, unless the notice specifies a later effective date. Once delivered, a notice of resignation is irrevocable unless revocation is permitted by the members. The resignation of a manager who is also a member shall not affect the manager's rights as a member and shall not constitute a withdrawal of the member.

4.7. Removal of Manager by Members. The members may remove one or more managers with cause. A manager may be removed by the members only at a meeting called for the purpose of removing the manager and the meeting notice must state that the purpose, or one of the purposes, of the meeting is the removal of the manager.

4.8. Salaries. Managers may receive a salary or other compensation for services rendered to or on behalf of the LLC if approved by the members. A manager shall not be precluded from receiving a salary because the manager is also a member. Managers shall be reimbursed for out-of-pocket expenses incurred in performing their duties as managers of the LLC. Notwithstanding the foregoing, no compensation shall be paid at the time of execution hereof unless otherwise agreed by the members.

4.9. Other Agents. The managers may authorize any agent to enter into any lawful contract or to otherwise act on behalf of the LLC. Such authority may be general or be confined to specific instances.

4.10. Employment of Members or Affiliates. The manager may retain, employ, sell or lease any services of the members or affiliates of the members to the LLC, provided that such transaction is made on terms and conditions which are no less favorable to the LLC than if such transaction had been entered into with an independent third party, and such transaction is approved by the LLC. The members acknowledge and agree that shall provide construction services to the LLC on the terms and conditions set forth in that certain Development and Construction Agreement by and between the LLC and .

4.11. Tax Matters. Except as otherwise specifically provided herein or prohibited by law, the managers shall make any and all elections for federal and state income tax purposes, including, without limitation, any election, if permitted by applicable law to: i) adjust the basis of LLC property pursuant to Code '754, '734(b), and '743(b), or comparable provisions of state or local law, in connection with transfers of membership interests and LLC distributions; ii) extend the statute of limitations for assessment of tax deficiencies against members with respect to adjustments to the LLC's federal, state or local tax returns; and iii) represent the LLC before taxing authorities or courts of competent jurisdiction in tax matters affecting the LLC.

ARTICLE 5. ACTIONS WITHOUT NOTICE, WITHOUT MEETING OR BY TELEPHONE

5.1. Meeting of all Members or Managers. Notwithstanding any other provision of this operating agreement, if all of the members or all of the managers shall hold a meeting at any time and place, such meeting shall be valid without call or notice, and any lawful action taken at such meeting shall be the action of the members or managers, as the case may be.

5.2. Action Without Meeting. Any action required or permitted to be taken by the members or managers at a meeting may be taken without a meeting if a consent in writing, describing the action taken, is signed by all of the members or managers and is included in the minutes or filed with the LLC's records of meetings.

5.3. Meetings by Telephone. Meetings of the members or managers may be held by conference telephone or by any other means of communication by which all participants can hear each other simultaneously during the meeting, and such participation shall constitute presence in person at the meeting.

ARTICLE 6. ACCOUNTING AND RECORDS

6.1. Books of Account. The LLC's books and records, a register showing the names, addresses, and membership interests of the members, and this operating agreement shall be maintained by. Each manager and each member shall have access thereto at all reasonable times. shall keep books and records of the operation of the LLC which are appropriate and adequate for the LLC's business and for the carrying out of this agreement. A separate checking account will be opened for the LLC, and all records will be made available for all members as requested.

6.2. Fiscal Year. The fiscal year of the LLC shall be the calendar year.

6.3. Accounting Reports. At the end of each quarter, shall provide the members with quarterly financial reports of the activities of the LLC for the preceding quarter. Within 90 days after the close of each fiscal year, the manager shall cause each member to receive an unaudited report of the activities of the LLC for the preceding fiscal year, including a copy of a balance sheet of the LLC as of the end of such year and a statement of income or loss for such year.

6.4. Tax Returns. The manager shall cause all required federal and state income tax returns for the LLC to be prepared and timely filed with the appropriate authorities. Within 90 days after the end of each fiscal year, each member shall be furnished a statement suitable for use in the preparation of the member's income tax return, showing the amounts of any distributions, contributions, gains, losses, profits, or credits allocated to the member during such fiscal year.

6.5. Taxes of Taxing Jurisdictions. Each non-resident member of Idaho acknowledges that Idaho claims taxing jurisdiction over such member through such member's membership interest in the LLC. Such non-resident members shall make timely income tax payments to Idaho for income taxes attributable to the member's income, and interest, and penalties assessed by Idaho on such income. If the member fails to make such timely payments, or if the member so elects, the LLC shall withhold and pay over to Idaho the amount of tax, penalty and interest determined under the laws of Idaho with respect to such income. Any such payments made to Idaho with respect to the income of a member shall be treated as a distribution for purposes of Article 7. In addition, the LLC may, where permitted by the rules of any taxing jurisdiction, file a composite, combined or aggregate tax return reflecting the income of the LLC and pay the tax, interest and penalties of some or all of the members on such income to the taxing jurisdiction, in which case the LLC shall inform the members of the amount of such tax, interest and penalties so paid.
6.6. Tax Matters Partner. The manager shall be designated to act as the tax matters partner of the LLC pursuant to '6231(a)(7) of the Internal Revenue Code. Any member designated as tax matters partner shall take such action as may be necessary to cause each other member to become a notice partner within the meaning of '6223 of the Code. Any member who is designated tax matter partner may not take any action contemplated by ''6222 through 6232 of the Internal Revenue Code without the consent of the members.

ARTICLE 7. ALLOCATIONS AND DISTRIBUTIONS

7.1. Allocations Generally. Except as otherwise provided in this operating agreement, all items of income, gain, loss, deduction, and credit of the LLC shall be allocated among all members in proportion to their membership interests.
7.2. Allocations of Income from Sales. All gain attributable to a sale of all or a portion of the Property shall be allocated to the members in accordance with the distribution percentages set forth in Section 7.5.

7.3. Distributions. The LLC shall make distributions in such amounts and at such times as the manager shall determine in such manager’s discretion; provided, however, distributions of the LLC’s cash available for distribution shall occur at least annually at the end of the fiscal year.

7.4. Distribution of Cash from Operations. Distributions of the LLC’s cash available for distribution shall be made in the following order of priority:

7.4.1. Any cash available for distribution shall be distributed to the members until the members have received cash distributions which are returns of capital for the full value of the members= cash or agreed value contribution; and

7.4.2. Any cash available for distribution remaining after satisfaction of the return of capital shall be distributed to the members in proportion to their respective Membership Interests.

7.5. Distributions Upon Sale of Assets.

Upon the sale of all or any portion of the Property, the LLC’s proceeds from the sale shall be made in the following order of priority:

7.5.1. First, to pay off the balance of any construction financing for construction of any improvements on that portion of the Property sold;

7.5.2. Second, to the members until the members have received cash distributions which are returns of capital for the full value of the members’ cash or agreed value contributions; and

7.5.3. Third, to the members in accordance with their respective Membership Interests.

7.6. Shared Priorities. If there is more than one member who is entitled to the same priority of distribution and there is not enough cash available for distribution to cover all distributions in that priority category, the cash available for distribution shall be allocated and distributed to the members entitled to distribution within that priority category in the relationship which each of the member's respective claims in that priority category bear to the total claims of all members in that priority category.

7.7. Capital Accounts. An individual capital account shall be maintained for each member. Each member's capital account shall be (i) credited with all capital contributions by such member and the member's distributive share of all income and gain (including any income exempt from federal income tax); and (ii) charged with the amount of all distributions to such member and the member's distributive share of losses and deductions. Capital accounts shall be maintained in accordance with federal income tax accounting principles as set forth in Treas. Reg. 1.704 l(b)(2)(iv) or any successor provision.

7.8. Compliance with Section 704. The provisions of this Article 7 as they relate to the maintenance of capital accounts are intended, and shall be construed, and, if necessary, modified to cause the allocations of profits, losses, income, gain and credit pursuant to Article 7 to have substantial economic effect under the Regulations promulgated under '' 704(b) and 704(c) of the Code, in light of the distributions made pursuant to Articles 7 and 9 and the capital contributions made pursuant to Article 2.

7.9. Priority and Return of Capital. Except as may be expressly provided in Article 7, no member shall have priority over any other member, either as to the return of capital contributions or as to profits, losses, or distributions; provided that this Section shall not apply to loans (as distinguished from capital contributions) which a member has made to the LLC.

ARTICLE 8. TRANSFERS OF MEMBERSHIP INTERESTS

8.1. Restriction on Disposition. No member or assignee shall transfer, sell, gift, encumber, hypothecate, exchange or otherwise dispose of all or any portion of his membership interest without the express written consent of the remaining members, except as provided in this Section 8.1 or Section 8.3. The written consent of the members is not required to admit a deceased member's spouse, estate, devisee, heir or other beneficiary as a member. Each member hereby acknowledges the reasonableness of the restrictions on disposition imposed by this operating agreement in view of the LLC purposes and the relationship of the members. Accordingly, the restrictions on disposition contained herein shall be specifically enforceable.

8.2. Prohibited Transfers. Any purported transfer of all or any portion of a membership interest that does not satisfy the requirements of Section 8.1 or Section 8.3 shall be null and void and of no force or effect whatever; provided that, if the LLC is required to recognize a transfer that does not meet such requirements (or if the LLC, in its sole discretion, elects to recognize a transfer that does not satisfy such requirements), the membership interest transferred shall be strictly limited to the transferor's economic rights with respect to the transferred membership interests, which economic rights may be applied (without limiting any other legal or equitable rights of the LLC) to satisfy any debts, obligations, or liabilities for damages that the transferor or assignee of such membership interests may have to the LLC. In the case of a transfer or attempted transfer of membership interests that does not satisfy such requirements, the parties engaging or attempting to engage in such transfer shall indemnify, defend and hold harmless the LLC and the other members from all cost, liability, and damage that any of such indemnified persons may incur (including, without limitation, incremental tax liability and lawyers' fees and expenses) as a result of such transfer or attempted transfer and efforts to enforce the indemnity granted hereby.

8.3. Option to Purchase on Bankruptcy or Withdrawal. Upon the bankruptcy or withdrawal of a member (a "Triggering Event"), the LLC shall have the first option to purchase the membership interest subject to the Triggering Event. If the LLC exercises such option with respect to less than all of the membership interest, then the remaining members shall have the second option to purchase the remaining portion of such membership interest based upon the relative percentage interest owned by such member and the remaining members electing to purchase the membership interest. If the remaining members exercise their option with respect to less than all of the membership interest, then the remaining members who have elected to purchase a portion of such membership interest shall have the third option to purchase the remaining portion of such membership interest. The LLC shall give notice to the members within a reasonable time after learning of the occurrence of a Triggering Event. The option shall be exercised as follows:

8.3.1. The LLC shall give notice to the members of its decision to purchase all or a portion of the membership interest by giving notice to the remaining members within thirty (30) days of receiving notice of the Triggering Event.

8.3.2. If the LLC exercises its option with respect to less than all of the membership interest, then each remaining member shall have the second option to purchase a portion of the remaining portion of the membership interest by giving notice to the members of his or her decision to exercise his or her option as to all or a portion of the membership interest he or she may purchase within sixty (60) days of receiving notice of the occurrence of a Triggering Event. Each member electing to purchase all or a portion of the membership interest shall purchase in proportion to the membership interests of the members electing to purchase, unless such members agree on another allocation of such purchased membership interest.
8.3.3. If the remaining members exercise their option with respect to less than all of the membership interest, then the members who have elected to purchase a portion of such membership interest shall have the third option to purchase the remaining portion of the membership interest, pro rata based on membership interests, by giving notice to the LLC and the remaining members within ninety (90) days of the Triggering Notice. If some members purchase portions of the membership interest and others do not, the purchasing members may purchase the unpurchased portion pro rata based upon the membership interests of the purchasing members.

8.3.4. The price to be paid for the membership interest shall be sixty five percent (65%) of the fair market value of the membership interest as determined under Section 9.5.

8.3.5. The closing of the sale of the membership interest shall occur on a date and time mutually convenient to the parties; provided that the closing date shall occur no later than the sixtieth (60th) day following the day that the last notice given in subsections 8.3.1, 8.3.2 or 8.3.3 above. On the closing date, the parties shall execute such documents and instruments of conveyance as may be necessary or appropriate to confirm the sale of the membership interest, the withdrawal of the selling member as a member as of the date of the retiring event, and the assumption by the LLC of all liabilities with respect to the LLC.

8.3.6. The payment for the membership interest shall be made in installments ("Installment Payments") as follows: ten percent (10%) of the price shall be paid on the closing date. The remainder of the price shall be paid in equal annual installments on the next five (5) consecutive anniversaries of the closing date. The unpaid portion of the price shall bear interest at the prime rate of U.S. Bank on the closing date. The remaining amount of the purchase price may be prepaid at any time.

8.3.7. In the event the options to purchase are exercised with respect to less than all of the membership interest, so that less than all of the membership interest is purchased in accordance with the terms of this Section 8.3, the option shall lapse and the remaining members shall be deemed to have given consent to the transfer to the representative of the bankrupt member, subject to the application of Article 9. The membership interest shall remain subject to all of the terms, covenants, conditions and restrictions of this operating agreement, including this option. During the period in which payments are being made, the former member shall have no rights as a member in the LLC.

8.4. Admission of Assignees as Members. Subject to the other provisions of this Article 8, an assignee of membership interests may be admitted to the LLC as a member only upon the vote of the remaining members and the satisfaction of such other terms and conditions as the manager shall require.

8.5. Rights of Unadmitted Assignees. A person who acquires one or more membership interests but who is not admitted as a member pursuant to this Article 8 shall be entitled only to the economic rights with respect to such transferred membership interests in accordance with this operating agreement, and shall have no right to vote on any matters as a member, shall have no right to any information or accounting of the affairs of the LLC, shall not be entitled to inspect the books or records of the LLC, and shall not have any of the rights of a member under the Act or this operating agreement.

ARTICLE 9. WITHDRAWAL AND DISSOLUTION

9.1. No Withdrawal. Each member agrees not to withdraw from the LLC without the consent of two-thirds of the other members. A voluntary withdrawal in violation of this Section shall be effective after ninety (90) days written notice delivered to the manager, but such withdrawal shall constitute a breach of this operating agreement for which the LLC and other members shall have the remedies provided under applicable law or in equity. Upon such withdrawal, the member shall be required to offer its membership interest to the LLC and the other members pursuant to Section 8.3.
9.2. Events of Dissolution. Except as otherwise provided in this operating agreement, the LLC shall dissolve upon the earlier of: (a) the time for dissolution specified in the articles of organization; or (b) the approval of dissolution by a vote of the members.
9.3. Effect of Death of a Member. In the event of the death of a member, then the deceased member’s spouse, estate, devisee, heir or other beneficiary shall be admitted as a member.
9.4. Liquidation Upon Dissolution and Winding Up. Upon the dissolution of the LLC, the manager shall wind up the affairs of the LLC. A full account of the assets and liabilities of the LLC shall be taken. The assets shall be promptly liquidated and the proceeds distributed as follows:
9.4.1. First, to the payment and discharge of all of the LLC's debts and liabilities to creditors other than members;
9.4.2. Second, to the payment and discharge of all of the LLC's debts and liabilities to members;
9.4.3. Third, to the members to repay their cash or agreed value capital contributions;
9.4.4. The balance, if any, to the members in accordance with their capital accounts after giving effect to all contributions, distributions, and allocations for all periods.
With approval by vote of the members, the LLC may, in the process of winding up the LLC, elect to distribute certain property in kind.
9.5. Valuation of Member's Interest. Upon an election by the LLC to purchase the interest of a member pursuant to Section 8.3, within a reasonable time of the Triggering Event and the requirement for an appraisal, the LLC shall pay for an appraisal of the membership interest being purchased. Such appraisal shall be made by an MAI certified appraiser. The appraisal shall be completed within a reasonable time and shall constitute the basis for the price of the membership interest under Section 8.3.

9.6. Effect of Purchase of Member's Interest. A member shall cease to be a member upon the LLC's election to purchase the member's interest pursuant to Section 9.3 or 9.4. During the period in which the LLC is making payments, the former member shall have no rights as a member in the LLC.

ARTICLE 10. INDEMNIFICATION

10.1. Indemnification. The LLC shall indemnify each of its managers to the fullest extent permissible under Idaho law, as the same exists or may hereafter be amended, against all liability, loss and costs (including, without limitation, attorney fees) incurred or suffered by such person by reason of or arising from the fact that such person is or was a manager of the LLC, or is or was serving at the request of the LLC as a manager, director, officer, partner, trustee, employee, or agent of another foreign or domestic limited liability company, corporation, partnership, joint venture, trust, benefit plan, or other enterprise. The LLC may, by action of the members or managers, provide indemnification to employees and agents of the LLC who are not managers. The indemnification provided in this Section shall not be exclusive of any other rights to which any person may be entitled under any statute, bylaw, agreement, resolution of members or managers, contract, or otherwise.

10.2. Limitation of Liability. Managers of the LLC shall not be liable to the LLC or its members for monetary damages for conduct as managers except to the extent that the Act, as it now exists or may hereafter be amended, prohibits elimination or limitation of manager liability. No repeal or amendment of this Section or of the Act shall adversely affect any right or protection of a manager for actions or omissions prior to the repeal or amendment.

ARTICLE 11. AMENDMENTS

11.1. By Members. The members may amend or repeal the provisions of this operating agreement by majority vote set forth in writing or by action taken at a meeting of members called for that purpose, except that this operating agreement may not be amended adversely as to any member without the consent of such member. This operating agreement may not be amended or repealed by oral agreement of the members.
11.2. By Managers. The managers may amend or repeal the provisions of this operating agreement by majority vote set forth in writing or by action taken at a meeting of managers called for that purpose, except that this operating agreement may not be amended adversely as to any member without the consent of such member. This operating agreement may not be amended or repealed by oral agreement of the managers.
ARTICLE 12.
MISCELLANEOUS

12.1. Additional Documents. Each member shall execute such additional documents and take such actions as are reasonably requested by the managers in order to complete or confirm the transactions contemplated by this operating agreement.
12.2. Headings. Headings in this operating agreement are for convenience only and shall not affect its meaning.
12.3. Severability. The invalidity or unenforceability of any provision of this operating agreement shall not affect the validity or enforceability of the remaining provisions.
12.4. No Third Party Beneficiaries. The provisions of this operating agreement are intended solely for the benefit of the members and shall create no rights or obligations enforceable by any third party, including creditors of the LLC, except as otherwise provided by applicable law.
12.5. No Partnership Intended for Nontax Purposes. The members have formed the limited liability company under the Act, and expressly do not intend hereby to form a partnership under any Idaho statute. The members do not intend to be partners one to another, or partners as to any third party. To the extent any member, by word or action, represents to another person that any other member is a partner or that the limited liability company is a partnership, the member making such wrongful representation shall be liable to any other member who incurs personal liability by reason of such wrongful representation.
12.6. Partnership Intended for Tax Purposes. It is the express intention of the members that the LLC be treated as a partnership for purposes of federal and state taxation. The members agree to take such actions and make such elections as may be necessary or convenient to all the LLC to be treated as a partnership. If it is determined that the LLC is or will not be classified as a partnership under the Internal Revenue Code, then the operating agreement shall be considered amended to the smallest degree possible in whatever manner necessary to ensure that the LLC is or shall be treated as a partnership under the Code for purposes federal and state taxation.
12.7. Binding
Effect. Except as otherwise provided in this operating agreement, every covenant, term, and provision of this operating agreement shall be binding upon and inure to the benefit of the members and their respective heirs, legatees, legal representatives, successors, transferees, and assigns.
12.8. Construction. Every covenant, term, and provisions of this operating agreement shall be construed simply according to its fair meaning and not strictly for or against any member. The terms of this operating agreement are intended to embody the economic relationship among the members and shall not be subject to modification by, or be conformed with, any actions by the Internal Revenue Service except as this operating agreement may be explicitly so amended and except as may relate specifically to the filing of tax returns.

12.9. Time. Time is of the essence with respect to this operating agreement.
12.10. Governing Law. The laws of the State of Idaho shall govern the validity of this operating agreement, the construction of its terms, and the interpretation of the rights and duties of the members.
12.11. Waiver of Action for Partition; No Bill for Partnership Accounting. Each of the members irrevocably waives any right that he may have to maintain any action for partition with respect to any of the company property. To the fullest extent permitted by law, each member covenants (except with the consent of the managers) not to file a bill for limited liability company accounting.
12.12. Counterpart Execution. This operating agreement may be executed in any number of counterparts with the same effect as if all of the members had signed the same document. All counterparts shall be construed together and shall constitute one agreement.

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

12.14. Notice. All notices, demands, requests and other communications required or permitted hereunder shall be in writ¬ing and shall be deemed delivered on the earlier of (i) three (3) days after the date of posting of registered or certified mail, addressed to the addressee at its address set forth herein or at such other address as such party may have specified theretofore by notice delivered in accordance with this Section, (ii) attempted delivery or refusal to accept delivery if sent by courier or other personal delivery service, or (iii) actual receipt by the addressee regardless of the method of giving notice. The addresses in this operating agreement, as amended from time to time, shall be used for purposes of giving notice to members.

12.15. 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. Said rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.

12.16. 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.
12.17. Attorney Fees. In the event any action is instituted to enforce or determine the parties' rights or duties arising out of the terms of this operating agreement, the prevailing party shall recover reasonable attorney fees and costs through all levels of any action incurred in such proceeding.
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ADOPTED as of the ____ day of ____________, 2007, by the undersigned, constituting all of the members






____________________________


By:__________________________________________

Name:________________________________________

Its:___________________________________________

EXHIBIT A

Legal Description of Property