HomeMy WebLinkAboutThe Big Ugly LLC Operating Agreement OPERATING AGREEMENT
OF
THE BIG UGLY,LLC
THIS OPERATING AGREEMENT("Agreement")is made by and among THE BIG
UGLY,LLC,a Montana limited liability company,of P.O. Box 1088,Missoula, Montana
59806(the "Company"), IYAR N.JONES,of 148 Southview Ridge Lane, Bozeman, Montana
59715,MAXWELL M. BUSKEY,of 825 Forest Glen Drive, Bozeman, Montana 59718, and
such other Persons as are hereafter properly admitted as Members of the Company.
SECTION 1 -DEFINITIONS
1.1 Definitions. The following terms used in this Agreement shall have the following
meanings:
(a) "Act"means the Montana Limited Liability Company Act,as amended from time
to time,and any reference to a specific provision of the Act shall be deemed to
include any future corresponding provision of the Act.
(b) "Capital Account" means for each Member the account established pursuant to
Section 4.1 and maintained in accordance with the provisions of this Agreement.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any reference to a specific provision of the Code shall be deemed to include
any future corresponding provision of the Code.
(d) "Dissociated Member" means any Member with respect to whom an Event of
Dissociation has occurred.
(e) "Event of Dissociation" means the voluntary withdrawal,death, expulsion,total
and permanent disability,termination of employment with the Company,
bankruptcy,or dissolution of any Member or occurrence of any event which
terminates the continued membership of a Member in the Company, including but
not limited to the circumstance where a Member is ordered by a court of
competent jurisdiction to transfer his or her Membership Interest(or any portion
thereof)to his or her spouse pursuant to a marital dissolution and the other spouse
is not a Member of the Company at that point in time.
(f) "Fiscal Year"means the Company's fiscal year, which shall be the calendar year.
(9) "Majority in Interest" means,a combination of any Members who, in the
aggregate, own more than fifty percent(50%)of the Membership Interests owned
by all Members from time to time(but not of transferees of Members who have
not been admitted as Members).
(h) "Member" means each Person who has been admitted to membership in the
Company in accordance with Section 8 and with respect to whom an Event of
Dissociation has not occurred. "Members" refer to such Persons as a group. The
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names and addresses of the initial Members are set forth on the first page of this
Agreement.
(i) "Membership Interest" means all of a Member's rights in the Company,
including without limitation,the Member's right to vote and participate in the
management of the Company,to share in the Net Profits and Net Losses of the
Company and to receive distributions of the Company's assets.
(j) "Permitted Transferee" means(i) a Member; (ii)the spouse of a Member; (iii)
the lineal descendant of a Member; (iv) a Member's own revocable living trust; or
(v) a trust created for the exclusive benefit of a Person described in Section
1.10)(i), (ii)or(iii). Any trust(revocable or irrevocable) created for the exclusive
benefit of any Person described in the preceding sentence shall be treated as a
Person for purposes of this Agreement,and the Trustee of such trust may, if
permitted by the terms and provisions of such trust,distribute the Membership
Interests of the trust to the beneficiary of such trust. The Transfer of Membership
Interests,bankruptcy,marital dissolution or death of the sole beneficiary of a trust
described above which is a Member shall be treated as though such event occurs
with respect to an individual Member for purposes of this Agreement. All
Members described in this Section 1.10) shall hold such Membership Interests
subject to all of the provisions of this Agreement.
(k) "Person" means an individual,a general partnership, a limited partnership, a
domestic or foreign limited liability company, a trust, an estate, an association, a
corporation,or any other legal entity.
(1) "Regulations" mean the Income Tax Regulations promulgated under the Code,as
amended from time to time,and any reference to a specific provision of the
Regulations shall be deemed to include any future corresponding provision of the
Regulations.
(m) "Transfer" means any sale,assignment,gift, exchange, devise or any other
transfer of a Membership Interest whatsoever, whether voluntary or involuntary,
direct or indirect;provided,however, that such term shall not include a mortgage,
pledge or other encumbrance of a Membership Interest(but such term shall
include a foreclosure sale pursuant to any such mortgage,pledge or
encumbrance).
SECTION 2 -FORMATION OF THE COMPANY
2.1 Formation. The Company was formed on June 4,2022,upon the filing with the
Montana Secretary of State of the Articles of Organization of the Company. The Members
hereby admit each other and associate themselves together as Members of the Company upon the
terms and conditions set forth in this Agreement. In the event of a conflict between the terms
and conditions of this Agreement and of the Act,the terms and conditions of this Agreement
shall control to the extent permitted under the Act.
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2.2 Effective Date. This Agreement shall become effective when it has been
executed by all of the parties and,once effective,it shall relate back to the time of filing of the
Articles of Organization.
2.3 Purposes and Powers.
(a) The Company is initially being formed to own real property for development in
Bozeman,Montana. The Company may engage in any lawful business for which
limited liability companies may be organized under the Act, unless a more limited
purpose is stated in the Articles of Organization.
(b) The Company shall have any and all powers which are necessary or desirable to
carry out the purposes and business of the Company,to the extent that such
powers may be legally exercised by limited liability companies under the Act.
The Company shall carry out the foregoing activities pursuant to the arrangements
set forth in the Articles of Organization and this Agreement.
(c) The Members desire to ensure the centralization of the management of the
Company's property, to formalize communication regarding business matters and
usage of the Company's property; to simplify the Transfer of undivided
Membership Interests,to limit the Members' liability to third parties for the acts
and omissions of the Members,and to limit creditor's remedies against the
Members.
2.4 Nature of Members' Interests. The interests of the Members in the Company
shall be personal property for all purposes. Legal title to all Company property shall be held in
the name of the Company. No Member shall have any right,title or interest in or to any
Company property or the right to partition any real property owned by the Company.
Membership Interests may, but need not,be evidenced by a certificate of Membership Interest
issued by the Company, in such form as the Members may determine.
2.5 Extent of Members' Interests. A Member's Membership Interest shall be
expressed as a percentage of all outstanding Membership Interests. The initial Membership
Interests of the Members are stated in Exhibit"A." The Membership Interests are subject to
adjustment upon the:
(a) admission of new Members;
(b) purchase and cancellation of a Member's Membership Interest by the Company
and/or another Member;
(c) unanimous agreement of the Members; and/or
(d) receipt of capital contributions which are not made by the Members on a pro rata
basis in accordance with their respective Membership Interests.
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SECTION 3 - MANAGEMENT
3.1 Management. The business and affairs of the Company shall be managed by its
Members. Each Member shall be entitled to vote not in accordance with the Member's
Membership Interest,but instead each Member shall have one equally weighted vote regardless
of his or her Membership Interest;provided,however, that a transferee who is not admitted.as a
Member in accordance with Section 8.3 shall have no right to vote or otherwise participate in the
management of the Company.
3.2 Manner of Acting; Deadlock of Members. Except as otherwise specifically
provided in this Agreement,all Company decisions and actions shall be made or taken upon the
unanimous vote of the Members. The Members expressly contemplate delegating one or more
decisions described in this Agreement to the individual Members to simplify the management of
the Company. In connection therewith, the Members shall execute resolutions from time to time
clarifying the nature and scope of such duties to a Member as an"Authorized Member."
Company action may be taken without a meeting if all of the Members consent in writing to the
proposed action or to ratification of any action previously taken. If the Members are unable to
make any decision required by them pursuant to this Agreement,then prior to the filing of a
lawsuit or similar action, said dispute shall be submitted to non-binding mediation with a
mediator mutually agreed upon by the parties pursuant to Section 11.2.
3.3 Member's Authority. Without obtaining the prior written consent of all
Members,no Member shall:
(a) borrow or lend money in an amount in excess of nnn nn on behalf of the
Company or utilize collateral owned by the Company as security for loans;
(b) assign,transfer,pledge,compromise or release any of the claims of or debts due
the Company except upon payment in full or arbitrate or consent to the arbitration
of any dispute or controversy involving the Company;
(c) make,execute or deliver any assignment for the benefit of creditors or any bond,
confession of judgment,chattel mortgage,deed,guarantee,indemnity bond,
surety bond, or other obligation of the Company;
(d) purchase or contract to purchase, sell,contract to sell, lease, assign or otherwise
transfer any Company property except in the usual and regular course of business;
(e) mortgage or otherwise encumber any Company property or any interest therein or
enter into any contract for any such purpose; or
(f) take any other action which requires the prior written consent of all Members
under this Agreement.
3.4 Meetings. A meeting of the Members may be called at any time by any Member
upon ten(10) days'prior written notice to the other Members or upon a waiver of notice by all of
the Members. Meetings of the Members shall be held at the principal office of the Company or
at any other location agreed to by all of the Members. Members may participate in a meeting by
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means of conference telephone or similar communications equipment(including but not limited
to"Go To Meeting","Zoom" or any other similar videoconferencing device)by which all
persons participating in the meeting can hear each other at the same time, and participation by
such means shall constitute presence in person at the meeting. The waiver of notice provisions
contained in Montana Code Annotated § 35-14-706,which apply to shareholders of for-profit
corporations, shall apply to this Section 3.4. Any action required or permitted to be taken at a
meeting of Members may be taken without a meeting if a consent in writing, setting forth the
action so taken, shall be signed by all of the Members entitled to vote with respect to the subject
matter thereof. Such consent shall have the same effect as a unanimous vote.
3.5 Records and Information. The Company shall keep or cause to be kept
complete and accurate books of account and records of the Company's affairs. The books of
account and records, together with a copy of this Agreement and any amendments thereto, shall
at all times be maintained at the principal office of the Company. Any Member or any Member's
authorized representative (and to the extent permitted by the Act, former Members and their
authorized representatives) shall have the right at any time to inspect and copy from the books,
records and other documents regarding the Company or its affairs during normal business hours
upon reasonable notice to the Company.
3.6 Annual Reports. Within a reasonable time after the end of each Fiscal Year,the
Company shall furnish each Member with an annual report containing a balance sheet as of the
end of the Fiscal Year,an income statement for the Fiscal Year, a summary of changes to the
Capital Accounts during the Fiscal Year and all other information necessary or advisable for
each Member to properly file the Member's income tax returns.
3.7 Bank Accounts. All receipts by the Company shall be deposited to and all
disbursements and expenditures by the Company shall be made from bank accounts maintained
by the Company in the Company's name. Withdrawals from the Company's bank accounts for
Company purposes shall only be made by such parties as may be approved from time to time by
the Members. Until otherwise directed by the Members,the individuals authorized to make
withdrawals from the Company's bank accounts shall be Aaron McPherson and Mark Kenney.
3.8 Compensation. The salaries and other compensation of the employees of the
Company shall be fixed from time to time by the Members,and no employee shall be prevented
from receiving a salary by reason of the fact that the employee is also a Member.
3.9 Members Have No Exclusive Duty- to Company. The Members shall not be
required to manage the Company as their sole and exclusive function and they (or any Member)
may have other business interests and may engage in other activities in addition to those relating
to the Company. Neither the Company nor any Member shall have any right,by virtue of this
Agreement, to share or participate in such other investments or activities of the Members or to
the income or proceeds derived therefrom.
SECTION 4 -CONTRIBUTIONS TO CAPITAL
4.1 Capital Accounts. A capital account ("Capital Account") shall be established
and maintained for each Member(and for each assignee of a Membership Interest who is not a
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Member). Loans by any Member to the Company shall not be considered contributions to the
capital of the Company.
4.2 Initial Capital Contributions. Ivar N. Jones and Maxwell M. Buskey made
initial capital contributions to the Company subsequent to its formation on June 3,2022. Their
initial capital contributions and Membership Interests are set forth in Exhibit"A."
4.3 Additional Capital Contributions. Except as set forth in Section 4.2,no
Member shall be obligated to make any capital contributions. The Members may be permitted to
make additional capital contributions from time to time if the Members unanimously determine
that additional capital contributions are necessary or appropriate for Company purposes. If an
additional capital contribution is approved by the Members,then each Member shall have the
opportunity,but not the obligation,to participate in such additional capital contribution on a pro
rata basis in accordance with the Member's Membership Interest. If a Member elects not to
make the Member's proportionate share of any additional capital contribution(the "Delinquent
Capital Contribution"), then the other Members may by agreement among themselves determine
the proportions in which they will make the Delinquent Capital Contribution. The Membership
Interests of all of the Members shall be adjusted as necessary to reflect any additional capital
contributions which are not made on a pro rata basis.
4.4 Right to Enforce. No creditor of or claimant against the Company shall have any
right to compel the Members to require any additional capital contributions to the Company
pursuant to Section 4.3 or otherwise.
4.5 Interest. No Member shall receive interest with respect to the Member's
contributions to capital or the Member's Capital Account.
SECTION 5 -ALLOCATION OF PROFITS AND LOSSES
5.1 Determination of Profits and Losses. The Net Profits and Net Losses of the
Company shall be computed and allocated at the end of each Fiscal Year, upon the date of
complete liquidation and termination of the Company, and at such other times as may be deemed
to be necessary. "Net Profits" and"Net Losses" shall mean,for each Fiscal Year or other period,
an amount equal to the Company's income or loss for such year or period, as determined upon
the advice of the independent public accountant who prepares the Company's federal income tax
return(hereinafter sometimes referred to as the "Accountants"),in accordance with the
accounting principles used for federal income tax purposes,with the following adjustments:
(a) Any income for the Company that is exempt from federal income tax and not
otherwise taken into account in computing income or losses pursuant to this
Section 5.1 shall be added to such taxable income or loss;
(b) Any expenditures of the Company not deducted in computing income or losses
pursuant to this Section 5.1 and not otherwise chargeable to Capital Accounts
shall be subtracted from such taxable income or loss; and
(c) Gain or loss resulting from any disposition of Company property,and
depreciation,amortization,or other cost recovery deductions allowable with
respect to any Company property,shall be computed(1)by reference to the
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adjusted tax basis of such property,or(2) if such property was contributed to the
Company in exchange for an interest in the Company,by reference to the agreed
upon fair market value of such property at the time of contribution,or(3) if such
property has been revalued and the Capital Accounts of the Members adjusted
pursuant to Section 4.1,by reference to the value of such property after such
revaluation.
5.2 Allocation of Net Profits and Net Losses. The Net Profits and Net Losses of the
Company shall be allocated among the Members in proportion to their respective Membership
Interests.
SECTION 6-INCOME TAX MATTERS
6.1 Allocation of Other Items. Every item of income, gain, loss, deduction or credit
entering into the computation of Net Profits or Net Losses, or applicable to the period during
which the Net Profits and Net Losses were realized,with the exception of any items allocated
pursuant to Section 6.2, shall be allocated to each Member in the same proportion as Net Profits
and Net Losses are allocated to the Member.
6.2 Tax Allocations: &704(c) of the Code.
(a) Allocations pursuant to this Section 6.2 are solely for the purposes of federal,
state and local taxes and shall not affect,or in any way be taken into account in
computing,any Member's Capital Account or share of Net Profits,Net Losses,
other items or distributions pursuant to any other provision of this Agreement.
(b) In accordance with §704(c) of the Code and the Regulations promulgated
thereunder, income, gains, losses, and deductions with respect to any property
contributed to the capital of the Company shall, solely for tax purposes,be
allocated among the Members so as to take account of any variation between the
adjusted basis of the property to the Company for federal income tax purposes
and its initial agreed upon fair market value.
(c) If the value of any Company asset is adjusted pursuant to Section 4.1,then
subsequent allocations of income, gain,loss,and deduction with respect to the
asset shall take account of any variation between the adjusted basis of the asset for
federal income tax purposes and its adjusted value in the same manner as under
§704(c)of the Code and the Regulations promulgated thereunder.
(d) Any elections or other decisions relating to the allocations shall be made by the
Members in any manner that reasonably reflects the purpose and intention of this
Agreement.
6.3 Qualified Income Offset. Any Member who unexpectedly receives an
adjustment, allocation or distribution as described in §1.704-1(b)(2)(ii)(d)(4)-(6)of the
Regulations shall be allocated items of Company income and gain in an amount and manner to
eliminate any deficit in the Member's Capital Account as quickly as possible. This provision is
intended to be a "qualified income offset" as defined in §1.704-1(b)(2)(ii)(d)of the Regulations,
the Regulation being hereby incorporated by reference.
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6.4 Minimum Gain Chargeback. If there is a net decrease in the Company's
minimum gain(as the term is defined in §1.704-2(g)(2)of the Regulations)during any taxable
year,then each Member shall be allocated,before any other allocation is made of Company
items for the taxable year,an amount equal to the greater of(a)the Member's share of the net
decrease in Company minimum gain allocable to the disposition of Company property subject to
nonrecourse liability, or(b)the negative balance in the Member's Capital Account. This
provision is intended to be a"minimum gain chargeback" as defined in §1.704-2(f) of the
Regulations,the Regulation being hereby incorporated by reference. Nonrecourse Deductions
(as defined in Treasury Regulations Section 1.704-2(b)) shall be allocated to the Members in
accordance with their Membership Interests. Member Nonrecourse Deductions (as defined in
Treasury Regulations Section 1.704-2(i) shall be allocated in the manner required by Treasury
Regulations Section 1.704-2(i).
6.5 Regulatory Allocations. The allocations set forth in Sections 6.3 and 6.4 above
(the "Regulatory Allocations") are intended to comply with certain requirements of the Treasury
Regulations under Code Section 704. Notwithstanding any other provisions of this Section 6.5
(other than the Regulatory Allocations),the Regulatory Allocations shall be taken into account in
allocating Net Profits and Net Losses among Members so that,to the extent possible, the net
amount of such allocations of Net Profits and Net Losses and other items and the Regulatory
Allocations to each Member shall be equal to the net amount that would have been allocated to
such Member if the Regulatory Allocations had not occurred.
6.6 Compliance with the Code. It is the intention of the Members that the
maintenance of each Member's Capital Account and the determination and allocation of Net
Profits and Net Losses in accordance with the provisions of this Agreement shall comply with
§§704(b), 704(c) and other applicable sections of the Code and Regulations. If at any time the
Members are advised by counsel to the Company or the Accountants that the applicable
provisions of this Agreement are more than likely not to be respected for federal income tax
purposes,then the Members shall amend this Agreement to the minimum extent necessary to
satisfy the applicable requirements of the Code and.Regulations;provided,however, that no
Member shall be required to consent to any amendment which could under any circumstances
increase the amount of capital contributions otherwise required to be made by the Member, or
alter the timing or the amount of any distributions to which the Member otherwise would be
entitled under the provisions of this Agreement.
6.7 No Reimbursement of Expenses Paid on Behalf of the Company. The
Members acknowledge and agree that ordinary and necessary expenses paid by a Member on
behalf of the Company will not be reimbursed by the Company. Such expenses shall be treated
as unreimbursed expenses for such member's income tax purposes.
6.8 Partnership Representative. Pursuant to §6231(a) of the Code, Ivar N. Jones is
hereby designated as the "partnership representative" for the Company and is hereby authorized
to perform,on behalf of the Company or any Member,any act that may be necessary to make
this designation effective. If Aaron McPherson should be or become unwilling to serve as the
"partnership representative" for the Company,then a successor"partnership representative" shall
be elected by the unanimous written consent of the Members.
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SECTION 7 -DISTRIBUTIONS
7.1 Non-Liquidating Distributions. Except as prohibited by the Act, distributions
of available cash of the Company (other than distributions specified in Section 7.3), including
distributions to satisfy each Member's combined federal and state tax liability arising out of the
Members' Membership Interests, shall be made to the Members in amounts and at times as the
Members shall determine. Distributions under this Section 7.1 shall be made in the following
order of priority:
(a) Between or among the Members in accordance with the respective balances in
their Capital Accounts until all of their Capital Accounts have been reduced to
zero under this Section 7.1(a); and
(b) Any remaining cash,between or among the Members in accordance with their
respective Membership Interests.
7.2 Distribution to Pay Taxes. Subject to the Act,and unless otherwise agreed by
the Members,the Company shall,no later than seventy-five (75)days after the close of the
Company's Fiscal Year, distribute sufficient cash to each Member to satisfy each Member's
combined federal and state tax liability arising out of the Members' Membership Interests, and
the Members shall be deemed to be in the highest federal and state marginal income tax bracket.
7.3 Liquidating Distributions. All liquidating distributions shall be made in the
following order of priority:
(a) To Company creditors,including Members who are creditors,to the extent
otherwise permitted by law,in satisfaction of liabilities of the Company,whether
by payment or by the making of reasonable provision for payment;
(b) To Members and former members of the Company in satisfaction of liabilities for
distributions under §35-8-605 of the Act;
(c) Between or among the Members in accordance with the respective balances of
their Capital Accounts until all of their Capital Accounts have been reduced to
zero under this Section 7.3(c); and
(d) Any remaining distributions between or among the Members in accordance with
their respective Membership Interests.
Nothing in this Section 7.3 shall be construed to undermine or limit any of the provisions
of Section 4.2. Notwithstanding the provisions of this Section 7.3, liquidating distributions shall
be in accordance with §1.704-1(b)(2)(ii)(b)(2)of the Regulations. For purposes of this Section
7.3,the Capital Accounts shall be determined after allocating all Net Profits and Net Losses
through the date of the distribution. Upon liquidation and dissolution of the Company, no
Member shall be required to contribute to the Company the amount of any deficit in such
Member's Capital Account.
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SECTION 8-TRANSFER OF MEMBERSHIP INTERESTS;
ADMISSION AND WITHDRAWAL OF MEMBERS; NO ENCUMBRANCES OF
MEMBERSHIP INTERESTS
8.1 Transfer of Membership Interests. A transferee of a Membership Interest by
any means of Transfer shall have only the rights,powers and privileges set forth in Section 8.3 or
otherwise provided by law. No Transfer shall be effective for any purpose prior to the time that
notice of the Transfer,including the name and address of the proposed transferee,the date of the
Transfer and any other relevant transaction terms, is provided by the relevant Member(or his or
her legal or similar representative)to the Company and the non-transferring Members.
8.2 Permitted Transferee. Notwithstanding any other provision of this Agreement,
a Permitted Transferee shall become a Member,to the extent of the Membership Interest which
is the subject of any Transfer, immediately upon each of the following:
(a) The acceptance, in a form satisfactory to the remaining Members, of all of the
terms and conditions of this Agreement; and
(b) The payment of such reasonable expenses as the Company may incur in
connection with the Permitted Transferee's admission as a Member.
8.3 Rights of Transferee and Transferor. Unless and until admitted as a Member
of the Company in accordance with Section 8.4,a transferee of a Membership Interest shall not
be entitled to any of the rights,powers,or privileges of a Member,except that the transferee shall
be entitled to receive the distributions to which the transferor Member would have been entitled
but for the Transfer of the transferor Member's Membership Interest. The rights of a transferee
described in this Section 8.3 are subject to the provisions of Section 9.2 and the options granted
to the Company and the Members under Section 10. The transferor Member shall cease to have
any of the rights and interests of a Member including,without limitation,the right to vote and
participate in the management of the Company,to the extent that such rights and interests were
associated with the transferred Membership Interest immediately prior to the Transfer.
8.4 Admission of Transferees as Substitute Members. A transferee of a
Membership Interest shall be admitted as a Member only upon furnishing to the Company all of
the following:
(a) The written consent of all Members;
(b) The acceptance, in a form satisfactory to the Members, of all the terms and
conditions of this Agreement; and
(c) Payment of such reasonable expenses as the Company may incur in connection
with the transferee's admission as a Member.
8.5 Admission of New Members. A Person shall be admitted as a new Member only
upon furnishing to the Company the written consent of all Members.
8.6 Withdrawal of Members. No Member may withdraw from the Company
without obtaining the remaining Members' prior written consent. Any Member withdrawing in
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contravention of this Section 8.6 shall indemnify,defend and hold harmless the Company and all
other Members (other than a Member who is, at the time of the withdrawal,in default under this
Agreement) from and against any losses, expenses,judgments, fines, settlements or damages
suffered or incurred by the Company or any other Member arising out of or resulting from the
withdrawal.
8.7 No Encumbrances of Membership Interests Permitted. At all times, a
Member's Membership Interest shall be kept free and clear of all encumbrances, including, but
not limited to taxes, debts, claims,judgments, liens or otherwise.
SECTION 9 -DISSOLUTION
9.1 Dissolution. The Company shall be dissolved and its affairs must be wound up in
accordance with the Act when one of the following occurs:
(a) Upon the written consent of all Members to dissolve the Company;
(b) Upon the occurrence of an event which is more particularly described in
§35-8-901(1)(c) of the Act;
(c) Upon the occurrence of an Event of Dissociation unless the business of the
Company is continued in accordance with Section 9.2; or
(d) Upon the entry of a decree of judicial dissolution under §35-8-902 of the Act.
9.2 Continuation of Company After Event of Dissociation. The Company shall
not be dissolved upon the occurrence of an Event of Dissociation if there is at least one (1)
remaining Member and the business of the Company is continued by the consent of all of the
remaining Members within ninety (90) days after the occurrence of the Event of Dissociation.
The remaining Members shall be deemed to have consented to continue the business of the
Company after the occurrence of an Event of Dissociation unless one or more of the remaining
Members notify the Company and each other remaining Member within ninety (90) days of the
occurrence of the Event of Dissociation that they do not consent to continue the business of the
Company. If the business of the Company is continued in the manner provided in this Section
9.2 after the occurrence of the Event of Dissociation,then the options described in Section 10 in
favor of the Company and the remaining Members,respectively, shall apply. Notwithstanding
any other provision of this Agreement, in the event of the death of a Member who does not
transfer his or her Membership Interest to a Permitted Transferee, or in the event of the
withdrawal of a Member, if the business of the Company is continued pursuant to this Section
9.2,the Company and/or the remaining Members shall (as opposed to having the option to)
purchase the Membership Interest of the deceased Member or the withdrawing Member pursuant
to Section 10. If the business of the Company is not continued in the manner provided in this
Section 9.2 after the occurrence of the Event of Dissociation,then the Company shall be
dissolved and its affairs wound up in accordance with the Act.
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SECTION 10 - PURCHASE OF DISSOCIATED
MEMBER'S MEMBERSHIP INTEREST
10.1 Option of Company to Purchase. If the business of the Company is continued
in accordance with Section 9.2 after the occurrence of an Event of Dissociation,then except as
otherwise provided in the second to last sentence of Section 9.2, then the Company shall have the
option,but not the obligation,to purchase the Dissociated Member's entire Membership Interest
for the price and upon the other terms set forth in this Section 10 within one hundred twenty
(120) days of the receipt of the notice described in Section 8.1, or,if later,within sixty (60) days
after the Company has received notice of the appointment of a personal representative or similar
representative of the estate of the Dissociated Member(i.e. pursuant to Section 8.1). The
Company shall exercise the option by delivering its notice of exercise,within the time provided
in this Section 10.1, to the Dissociated Member or the Dissociated Members legal or personal
representative and to each remaining Member.
10.2 Option to Purchase by Remaining Members. If the Company does not exercise
the option to purchase the Dissociated Member's entire Membership Interest as provided in
Section 10.1,then except as otherwise provided in the second to last sentence of Section 9.2,
then the remaining Members shall have the option,but not the obligation,to purchase the
Dissociated Member's entire Membership Interest for the price and upon the other terms set forth
in this Section 10 within thirty (30) days after the expiration of the option period described in
Section 10.1. If this option is exercised by the remaining Members,unless otherwise agreed by
the remaining Members,each remaining Member shall purchase that proportion of the
Dissociated Members Membership Interest which equals the proportion which the Membership
Interest owned by such remaining Member is of the total Membership Interests owned by all of
the remaining Members. If the Company and the remaining Members do not exercise the
options described in this Section 10 as set forth above, then the Dissociated Member may
transfer his or her Membership Interest to the proposed transferee upon the terms and conditions
described in the notice described in Section 8.1.
10.3 The Purchase Price. The purchase price of the Dissociated Member's
Membership Interest shall be determined in accordance with the provisions of Exhibit "B."
10.4 Payment Terms. Unless otherwise agreed by the selling and purchasing parties,
the purchase price of the Dissociated Member's Membership Interest shall be paid as follows:
(a) Unless otherwise provided in this Section 10.4,ten percent (10%) of the purchase
price shall be paid in cash at the closing.
(b) The balance of the purchase price in one hundred twenty (120) equal consecutive
monthly amortized installments, including interest at an annual rate equal to the
Federal Long-Term Rate, as that term is used in §1274(d)(1)(C)(ii) of the Code in
effect for the month during which the closing occurs,the first installment to be
paid one (1)month after the closing,and the remaining installments each month
thereafter.
(c) Notwithstanding any other provision of this Section 10.4,in the event of the death
of a Member,if the purchaser of the deceased Member's Membership Interest
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owns one or more life insurance policies upon the life of such deceased Member
at the time of his or her death,the proceeds from such policy or policies shall be
applied as a down payment at the closing. The remaining balance, if any, shall be
paid pursuant to the provisions set forth above. If said life insurance proceeds
exceed the amount required to purchase the deceased Member's Membership
Interest,then the owner of such policy or policies shall be entitled to retain the
difference between the life insurance proceeds and the amount required to
purchase the deceased Member's Membership Interest.
10.5 Promissory Note for Deferred Portion. The deferred portion of the purchase
price shall be evidenced by the individual promissory note of the purchasing party made payable
to the order of the selling party, which promissory note shall be substantially in the form of that
attached as Exhibit "C." If the maker of the promissory note is the Company,then the
promissory note shall be unsecured but the promissory note shall be personally guaranteed by
each remaining Member and all Membership Interests owned by each remaining Member shall
be assigned or pledged by the remaining Members to the payee of the promissory note to secure
payment of the guarantee. If the maker of the promissory note is a remaining Member,then the
promissory note shall be personally guaranteed by the Member and secured by the Member's
assignment or pledge to the payee of the Membership Interest the Member is purchasing plus any
other Membership Interest owned by the Member. The guarantee and the assignment or pledge
shall be in a form which is reasonably satisfactory to both the selling party and the purchasing
party for purposes of securing payment of the promissory note of the purchasing party and/or the
guarantee. The pledge of Membership Interests which are certificated may, at the option of the
purchasing party,be made through an escrow agent.
10.6 Closing Time and Place. Unless otherwise agreed by the parties, the closing
shall be within ten(10) days after the expiration of the Section 10.1 option period. Unless
otherwise agreed by the parties,the closing shall take place at the principal office of the
Company.
10.7 Documents. At the closing of the sale and purchase,the selling and purchasing
parties shall execute and immediately deliver to each other the various documents which shall be
required to carry out their undertakings hereunder, including but not limited to the payment of
cash,the execution and delivery of notes and assignment and delivery of the Dissociated
Member's Membership Interest free and clear of all taxes, debts, claims,judgments, liens or
encumbrances whatsoever.
SECTION 1.1 - MISCELLANEOUS PROVISIONS
11.1 Governing Law, Venue. This Agreement shall be governed by and construed in
accordance with the laws of the State of Montana. Gallatin County, Montana, shall be the venue
of any proceeding in law or equity to determine or interpret the rights or liabilities of the parties
hereto or to recover damages under this Agreement.
11.2 Non-Binding Mediation Prior to Litigation. If the parties are unable to resolve
any dispute described in this Agreement, then prior to the filing of arbitration, said dispute shall
be submitted to a non-binding mediation in Bozeman,Montana with a mediator who is a
Montana licensed attorney who is mutually agreed upon by the parties. Any agreements reached
in mediation shall be enforceable as settlement agreements by any court having jurisdiction. If
13
such mediation is unsuccessful,then the parties may seek the waiver of any court-imposed
mediation resulting from any subsequent litigation.
11.3 Indemnification. The Company shall indemnify and hold harmless each
Member from and against any loss or expense incurred by reason of the fact that the Member is
or was a Member of the Company, including without limitation any judgment, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of
any actual or threatened action or proceeding,provided the loss or expense resulted from Good
Faith Errors (as defined below)or from action or inaction taken in good faith for a purpose
which the Member reasonably believed to be in,or not opposed to,the best interests of the
Company. For purposes of this Section 11.3, "Good Faith Errors"shall mean mistakes of
judgment or for losses due to the mistakes or to the negligence or bad faith of any employee,
broker, adviser or other agent or representative of the Company,provided that the agent or
representative was selected with reasonable care.
11.4 Notice. All notices required or permitted to be given under this Agreement shall
be in writing and shall either be delivered personally or sent by certified mail, return receipt
requested,to the Company or a Member, as the case may be, at the address set forth on the first
page of this Agreement,except that the Company or any Member may change such address by
giving the other parties to this Agreement written notice of the change of address and the
changed address shall be used for mailed notices from and after that date or dates so changed.
All notices shall be effective on the date of personal delivery,or in the case of mailing,when
deposited in the United States mail,postage prepaid.
11.5 Amendments. Amendments or modifications to this Agreement or the Articles
of Organization shall require the written consent of all Members.
11.6 Waiver. No consent or waiver, express or implied,by any Member to or for any
breach or default by any other Member in the performance by such other Member of the
Member's obligations under this Agreement shall be deemed or construed to be a consent or
waiver to or of any other breach or default in the performance by such other Member of the same
or any other obligations of such other Member under this Agreement. Failure on the part of any
Member to complain of any act or failure to act of any of the other Members or to declare any of
the other Members in default,regardless of how long such failure continues, shall not constitute
a waiver by such Member of the Member's rights hereunder.
11.7 Severability. If any provision of this Agreement or the application thereof to any
Person or circumstance shall be invalid or unenforceable to any extent,then the remainder of this
Agreement and the application of such provisions to other Persons or circumstances shall not be
affected thereby,and the intent of this Agreement shall be enforced to the greatest extent
permitted by law.
11.8 Binding Agreement. Subject to the restrictions on transferability of Membership
Interests set forth in this Agreement,this Agreement shall inure to the benefit of and be binding
upon the Members and their respective legal representatives,successors and assigns.
11.9 Estate Planning Documents. Each Member shall include a provision in his or
her Will or similar estate planning documents directing and authorizing his or her personal or
legal representative to comply with this Agreement,however the failure of a Member to include
14
such a provision in his or her estate planning documents will not affect the validity or
enforceability of this Agreement.
11.10 Headings. The headings of the particular Sections or paragraphs of this
Agreement are intended for guidance only,and shall not be relied upon in the construction or
interpretation of this Agreement,nor shall they restrict the scope of the particular Sections or
paragraphs to which they refer.
11.11 Further Assurances. After execution of this Agreement,the Company and the
Members shall execute,acknowledge and deliver such further documents and do such further
acts as may be required to carry out the intent and purposes of this Agreement,including such
documents and actions as may be necessary or advisable to comply with the requirements of law
for the formation and operation of limited liability companies wherever the Company carries on
its business.
11.12 Attorneys' Fees. In the event of a default by the Company or a Member under
this Agreement,the non-defaulting parties under this Agreement shall be entitled to recover from
the defaulting party all costs and expenses incurred by the non-defaulting parties by reason of
such default,including,without limitation,reasonable attorneys'fees and costs and court costs,
whether such amounts are incurred with or without legal action.
11.13 Benefits of Agreement. Nothing in this Agreement expressed or implied, is
intended or shall be construed to give to any creditor of the Company or any creditor of any
Member or any other person or entity whatsoever,other than the Members and the Company,
any legal or equitable right,remedy or claim under or in respect of this Agreement or any
covenant, condition or provisions herein contained, and such provisions are and shall be held to
be for the sole and exclusive benefit of the Members and the Company.
11.14 Counterparts. This Agreement may be executed simultaneously in one or more
counterparts, each of which when executed and delivered shall be deemed an original,but all of
which together such counterparts shall constitute one and the same instrument. As used herein,
"counterparts"shall include full copies of this Agreement signed and delivered by facsimile
transmission or by electronic mail ("e-mail")attachment,as well as photocopies of such
facsimile transmission or e-mail attachment("e-mail") correspondence,as well as photocopies of
such facsimile transmissions or e-mail correspondence.
11.15 Entire Agreement. This Agreement, including all Exhibits attached to this
Agreement, as amended from time to time in accordance with the terms of this Agreement,
contains the entire agreement among the parties respective to the subject matter hereof.
The parties to this Agreement have executed it on the date appearing opposite their
respective names.
15
THE BIG UGLY,LLC,a Montana limited liability
company
Date: July 22,2022 By:
Ivar 1. J'ones,
V
Date: July 22,2022 B •
Maxwell M. Buskey,Member
"Company"
Date: July 22, 2022 By:
Iv N. Jones
Date: July,22 2022 By: _
Maxwell M. Buskey
"Members"
Date:July 22,2022 By:
Gretta M. Stack
Date: July,22 2022 By:
Nancy W. Shea
"Members"
16
EXHIBIT "A"
MEMBERSHIP INTERESTS
Names and Addresses Initial Capital Membership
of Members Contribution Interest
Ivar N. Jones $147,250.00 Cash* 95%
148 Southview Ridge Lane
Bozeman, MT 59715
Maxwell M. Buskey $7,750.00 Cash* 5%
825 Forest Glen Drive
Bozeman,MT 59718
TOTALS $155,000.00 Cash 100%
*Ivar N. Jones and Maxwell M. Buskey purchased real property for$310,000.00, with 50%cash
and a bank loan for the remaining 50%of the purchase price. The Members intend to transfer
their respective ownership interests in the real property to the Company as their initial Capital
Contributions.
EXHIBIT "B"
DETERMINATION OF THE PURCHASE PRICE
The purchase price shall be determined between the parries or their representatives. If an
agreement on the purchase price cannot be reached within ninety (90)days of the Event of
Dissociation giving rise to the purchase of a Membership Interest,then the purchase price shall
be determined by the Accountants, or,if for any reason such firm does not make such
determination,then such determination shall be made by any reputable firm of certified public
accountants employed for the above-described purpose by the Company. Provided,however,
there shall be discounts for lack of control and marketability. Such certified public accountants
may hire appraisers and other professionals to assist in the determination of the purchase price.
The expense of determining the purchase price shall be borne by the Company.
EXHIBIT "C"
$ , 20
Montana
PROMISSORY NOTE
FOR VALUE RECEIVED,the undersigned promises to pay to the order of
, at , or
such other place as is designated from time to time by the holder of this note,in lawful money of
the United States,the sum of DOLLARS
($ ) in the following manner:
$ on , 20 , and a like sum on the same
day of each succeeding month thereafter until the full amount due hereunder has
been paid. Each payment shall be applied first to accrued interest on the entire
outstanding principal balance from time to time at the rate of %per annum
from the date hereof and then to principal.
Any installment of principal or interest payable hereunder, or any part thereof, which is
not paid when due, shall thereafter bear interest at the maximum legal rate in effect at the date of
this note, or at the time of such nonpayment,whichever is greater.
If any payment due hereunder remains unpaid for more than thirty (30) days after it is
due, then the holder hereof may, at its option, declare the entire unpaid balance of principal and
interest hereunder to be immediately due and payable.
The undersigned may make advance payments of the principal at any time and in such
amounts as the undersigned may elect without penalty as to interest.
Waiver by the holder hereof of any default by the undersigned shall not constitute a
waiver by the holder of a subsequent default. Failure by the holder to exercise any right,power
or privileges which it may have by reason of a default by the undersigned shall not preclude the
exercise of such right,power or privilege so long as such default remains uncured or if a
subsequent default occurs.
The undersigned agrees to pay all costs of collection, including a reasonable attorney's
fee, if this note is placed in the hands of an attorney for collection after default, and hereby
waives demand,presentment for payment,protest, notice of protest, and notice of dishonor.
Words used in the singular herein shall include the plural, and the obligations and
liabilities hereunder of the undersigned shall be joint and several.
*ADD LANGUAGE REGARDING PERSONAL GUARANTEES AND ASSIGNMENTS
OR PLEDGES OF MEMBERSHIP INTERESTS BEFORE FINALIZING ANY
PROMISSORY NOTES. THIS PROMISSORY NOTE WILL NOT BE SIGNED UNTIL
THE CLOSING OF A TRANSACTION SUBJECT TO THIS AGREEMENT