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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 1 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. 2 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. 3 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 4 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 5 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 6 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. 7 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. 8 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. 9 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 10 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. 11 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 12 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