20091112Application.pdf

..
Troy Hoffman Water Corp.
710 W Dalton Ave, Suite J
Coeur d'Alene, ID 83815
Tel: [phone]
Fax: [phone]
RECEIVED
2809 NOV' 2 AM 8: 08
iDAHO !'¡¡ i,,') ;~,
UT/il'ri'.S f l'D,:~nJt COMMISSION
November 10, 2009
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Idaho Public Utilities Commission
PO Box 83720
Boise, ID 83720-0074
RE: Application to sell Troy Hoffman Water Corporation (PWS1280096)
Certificate of Convenience and Necessity #280
Dear Idaho Public Utilities Commission:
Enclosed are the original and seven copies of this Application requesting the Idaho Public
Utilties Commission's (IPUC) approval for Bentwood Park, LLC to sell the Troy
Hoffman Water Corporation (THWC) to Dalton Square, LLC. Dalton Square, LLC will
operate the THWC as a corporation and continue to operate under the THWC name. This
Application is solely for approval of the change of ownership. We request the
Application be processed under Modified Procedure as to expedite it.
Dalton Square, LLC is familiar with the Commission's regulatory authority and rules and
is prepared to abide by existing directives. They are aware ofthe Commission's web site
and have made themselves familar with the Utility Customer Relations Rules (IDAPA
31.21.01) and Customer Information Rules (lDAPA 21.21.02). Dalton Square, LLC is
familiar with the water system testing requirements of the Idaho Deparment of
Environmental Quality and is prepared to fulfill those ongoing requirements.
Dalton Square, LLC has the business experience, financial abilty and water system
expertise to operate and maintain the system. Dalton Square, LLC (which is an LLC) is
owned by Ron Stadley and Ken Muren and was formed in 2006. Dalton Square, LLC
owns light industrial buildings for rent in Coeur d Alene as well as aparments for rent in
Plumer. Mr. Stadley has been the Water Master for THWC since 1995 and is qualified
to operate a pressurized potable water system, both through his hands on experience of
handling the day to day operations, maintenance and emergencies as well as through
being licensed as a Drinking Water Operator which requires ongoing continuing
education classes. He holds a curent Idaho Drinking Water Operator License. Mr.
Stadley has also been an electrician since 1988 and owns his own electrical company. He
holds a Master Electrician license in four states. Mr. Muren has 25 years of experience
in commercial and residential constrction. He owns a general contracting and
landscaping business and specializes in custom homes. He is curently in the process of
preparing to take his tests to receive both his Drinking Water Operator License and
Backflow Assembly Tester License.
Nov 10 09 12:26p
...
208-665-2003 p.3
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There is no deed transferring title to the water system because THW C as the corporation
owns the real estate and Dalton Square, LLC is purchasing the corporation.
Attachment "A" is a copy of the Purchase and Sale Agreement between Bentwood Park,
LLC C'Sellet') and Dalton Squae, LLC ("Buyer"). This transfer of ownership took
place April i, 2009.
Attachment '"B" is copy of the Drnking \Vater Operator License held by Ron Stadley.
Attachment "c" is a copy of Dalton Squae, LLC's Certifcate of Existence from the
Idaho Secretary of State.
Attachment "D" is a copy of the Idaho Tax Commission's 2009 valuation of THWC for
$16,081.00. Please refer to the Purchase and Sale Agreement, Attchment "A", showing
the purchase price of $65,000.00 as the value the Seller and Buyer agreed upon for the
sale/purchase ofTHWC. Dalton Square, LLC acknowledges they are aware that the
valuation of the system by the IPUC will be the basis established by the Commission at
the time the present rates were established adjustd for additional depreciation and
improvements. Dalton Square, LLC understands it is their responsibi1ty to justify any
additions to the valuation.
Attchment "E" is a brief Business Plan which explains how Dalton Square, LLC intends
to incorporate the THWC into their other business interests.
Attachment 'OF" is a copy of the notice sent to customers November 10th, 2009 informing
them of the sale.
Dalton Square, LLC acknowledges they understand that accounting for the water system
must be in accordance with the Commission's Uniform System of Accounts and must be
maintained on a stand-alone basis separate and apar from any other business activities of
the Buyer. It is the intent of the Buyer to continue to use the services of All Servce
Electric to do the biling for the water system and to complete and meet the
Commission's accounting requirements. All Service Electric has been doing the billng
for THWC for the last three years.
We request this Application be processed as quickly as possible and we are prepared to
answer any questions the Commission may have.
Jim Magnuson
Bentwood Park, LLC
Manager
on Stadley
Dalton Squar, LLC
Managig Member
Bureau of Oeeupatlonal License.
Department of Self Governing Agenele.
The peso name hai mlllhe reulmenll fot 1k:.llur. and fa enitl
under the ~~ and rul.. of IN SlIle of klaho 10 operal. .. a(n)
DRINKING WATER OPERATOR
DISTRIBUTION. VERY SMAt SYSTEM
RONAlD J STADLEY
13815
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Tans Cory DWOVSWS.12189-GP 02181010Chi.f, B.O.L. Number Explrn
RONALD J STAnLEY
710 W DALTON AVE, SUITE B
COEUR D ALENE ID 83815
Your license must
be shown on
demand.+=
. carry this copy
display this copy~
01/16/
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IDSOS CERTIFICATE OF EXISTENCE Page 1 of 1
State of Idaho
¡¡Offce of the Secretary of statell
CERTIFICATE OF EXISTENCE
OF
DALTON SQUARE, LLC
File Number W-57645
I, BEN YSURSA, Secretar of State of the State of Idaho, hereby certify that I am the custodian of
the limited liabilty company records of this State.
I FURTHER CERTIFY That the records of this office show that the above-named limited liabilty
company fied aricles of organization in Idaho on 12/2912006.
I FURTHER CERTIFY That the limited liabilty company's aricles of organization have not been
dissolved.
Dated: 10/13/2009 9:49 AM ~~
SECRETARY OF STATE
Authentic Access Idaho Doument ( htt://www,accessidaho.orglpub)ic/portl/authenticate,html )
Tag: b5ae5f5ffd74087f9aa27Se776dfgeOe23524 1 e 1 823d8b9559068f8e07ac6 12fOa2797d775525ec
https://ww.accessidaho.org/secure/sos/corp/cert.html
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10/13/2009
GHOOIO
233
IDAHO
. Tax Commission
PO Box 36. Boise 10 63722-010
800 Park Blvd., Plaza IV · Boise 10 83712~7742
August 13, 2009 Lettr ID: L1278261888
Referece: 04021821
JAMES MAGNUSON
TROY HOFFMAN WATER CORP
POBOX 2288
COEUR D ALENE ID 83816~2288
Dear TROY HOFFMAN WATER CORP:
The 2009 final order of valuation for TROY HOFFMA WATER CORP is $16,081.00.
After the four Monday in November you will receive a ta notice showing the amount of taxes due.
The tax may be paid in two instalments: the first on or before December 20,2009, and the second on
or before June 20, 2010 (Idaho Code section 63~903). Idaho C~de section 63~906 also allows for a
periodic tax payment schedule.
If you have any questions, please call Krsty Torres at (208) 334~7722.
Sincerely,/~-i(~
Tom Katsilometes
Commissioner
Idaho State Tax Commission
Ätld1mei \\ bi I'
Equal Opportnity Employer. tax.idaho.goy . Hearing Impaired TOO (80) 377.3529 ytL09
BUSINESS PLAN
The daily operation and management of the system along with any maintenance and
emergencies wil be handled by the owners of Dalton Square, LLC, Ron Stadley and Ken
Muren. Mr. Stadley and Mr. Muren wil provide the day to day maintenance for the
system and test the water monthly as required by the Deparment of Environmental
Quality along with all other anual testing requirements. They have a backflow
prevention plan in place and will both be on call 24 hours a day.
Mailng address for Dalton Square, LLC (Buyer) is:
710 W Dalton Ave, Suite B
Coeur d' Alene, ID 83815
208-664-9858
The Managing Members are:
Ron Stadley, 4350 N Alderbrook Drive, Coeur d Alene, ID 83815, Phone: [phone]
Ken Murren, 5233 E Hooker Hil Road, Hayden, ID 83835, Phone: 208("661-9146
Street address at which the company's books and records wil be maintained:
4350 N Alderbrook Drive
Coeur d Alene, ID 83815
208-664-9858
Following are the list of individuals that will be responsible for:
a) Operation, Maintenance and Emergency Response:
Ron Stadley and Ken Muren
710 W Dalton Ave, Suite B
Coeur d Alene, ID 83815
208-664-9858
b) Customer Biling, Collection and Complaints:
Ane Weadick with All Service Electric
710 W Dalton Ave, Suite B
Coeur d Alene, ID 83815
208-664-9858
c) Accounting:
Kelly Dickson with Dougherty & Associates Certified Public Accountats
802 N. Lincoln Street
Post Falls, ID 83854
208-773-7551
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RECEIVED
2009 NOV 12 AM 8: 08
This Agreement is made effective as of April 1,2009, by and between Ben~õit~(~~~~~ff~j(¿:ç fe)
LLC, clo H. James Magnuson, P. O. Box 2288, Coeur d'Alene, Idaho 83816 ("Seller '), and '-)'010",
Daltop Squae, LLC, of71O West Dalton Avenue, Suite B, Coeur d'Alene, Idaho 83815
("Purchaser") .
PURCHASE AND SALE AGREEMENT
" In consideration of the mutual promises and covenants, the pares agree as follows:
1. Purchase Price. Seller hereby sells and Purchaser hereby purchaes 100% of the
common stock of Troy Hoffman Water Corp. ("THWC") for the purchase price of Sixty-Five
Thousand Dollars ($65,000).
2. Payment of Purchase Price. The purchase price shall be pad by delivery of a
Promissory Note (the "Note") to Bentwood Park, LLC, in the amount of Sixty-Five Thousand
Dollars ($65,000) caring interest at the rate of five percent (5%) with the monthly payment dueApril 1, 2009, and each month for the next sixty (60) months in the amount of One Thousand
Two Hundred Twenty-Six and 63/100 DOllars ($1,226.63) with any remaining amount due at the
end of the sixtieth (60th) month. The form of the Note is attached hereto as Exhibit A.
3. Stock Assignent. Seller shall assign or cause to be assigned all shares of
corporate stock ofTHWC to Purchaser. Seller shall hold said assignment as security for
payment of the Note until paid in full. Upon payment of the Note, Seller shall deliver saidassignment and all shares of the corporate stock, all corporate records and all water company
records of any nature to Purchaser. The fonn of the assignments is attached hereto as Exhibit B.
4. Management Fees. The paries acknowledge that final management fees of
$3,000 each were paid to H. James Magnuson and Rick Gunther on March 31, 2009, by THWC,
check numbers 126 i and 1262. This left a balance in the checking account which is the property
ofTHWC as of the effective date hereof, April 1,2009, in the amount of$539.46.
5. THWC Ban Account. Seller shall make arangements to transfer authorized
signatues to Purchaser regarding the checking account ofTHWC. The checking account of
THWC shall remain in place.
6. Corporate Officers. H. James Magnuson and Rick Gunther shall deliver to the
Purchaser resignations for offces held in THWC. Simultaeously, THWC shall elect directors
as chosen by the Purchaser and said directors shall elect officers for THWC.
7. Real Estate ang Water Rights and Rights-of-Way. Seller hereby assigns anyinterest of Seller to Purchaser in any water rights, real estate or rights-of-way associated with
THWC. The paries recognize that water rights, real estate and rights-of-way are held of recordas owned by THWC in the name ofTHWC.
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.. 8. Idah Regulatory AQproval. THWC is regulated by the Idaho Public Utilties
Commission. Purchaser hereby acknowledges that THWC's water system is subject to all the
rules and regulations of the Idaho Public Utilties Commission. In addition, the system is
regulated under the authority of the Idaho Deparent of Environmenta Quality. Purchaseracknowledges that the Idaho Deparent of Environmental Quality has jursdiction over water
quaity and testing requirements and, as such, water produced by THWC is subject to the rules
and regulations of the Idaho Deparent of Environmental Quaity.
9. Miscellaneous Provisions.
A. Notices. All notices and other communications to any pary hereunder
shall be in writing and shall be deemed to have been duly given only if delivered (personally or
by facsimile transmission) or mailed (by certified mail, retu receipt requested. first-class
postage prepaid) to such par at the address or the facsimile number set fort below:
To Seller:Bentwood Park, LLC
c/o H. James Magnuson
P. O. Box 2288
Coeur d'Alene, Idaho 83816
To Purchaser:Dalton Square, LLC
Att: Ron Staley
710 West Dalton Avenue, Suite B
Coeur d' Alene, Idaho 83815
All such notices and other communications that are given as provided above wil (i) if delivered
personally, be deemed given upon delivery, (ii) if delivered by facsimile transmission, be
deemed given when sent and confirmation receipt is received by the sender and (ii) if delivered
by mail, be deemed given two (2) business days following mailng. Any pary from time to time
may change its address for the puroses of notices to that par by giving notice to the other
paries hereto specifying a new address in the maner specified in this Section 9 A.
B. Entire Agreement. This Agrement sets fort the entire agreement
between the paries hereto with respect to the transactions contemplated hereby and supersedes
all prior agreements and understadings relating to the subject matter hereof.
C. Successors and Assigns: No Thrd-Par Seneficiares. This Agreement
shall be binding upon and shall inure to the benefit of and be enforceable by the paries and their
respective successors and assigns; provided that neither the rights nor obligations of any pary may
be assigned or delegated without the prior wrtten consent of the other paries. This Agreement is
entered into solely for the benefit of the paries hereto and no person other th those referred to in
the preceding sentence shall be entitled to exercise any right or enforce any obligation hereunder.
D. Amendments. This Agreement may be amended, and any provision may
be waived, only by the written agreement of the pares.
2
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E. Governing Law. This Agreement, including all matters of construction,
validity and performance, shall be governed by, constred and enforced in accordance with the
laws of the State of Idaho, as applied to contracts made and to be fully performed in such state,
without regard to its confict of law rules.
F. Attorny's Fees. The prevailng pa in any dispute under this
Agreément shall be entitled to recover its reasonable attorneys' fees and other out-of-pocket
costs at all levels of judicial and nonjudicial proceedings. Except as awarded pursuant to the
preceØing sentence, each par shall pay its own costs.
G. Severabilty. If any provision of this Agreement is held by a cour of
competent jursdiction to be invalid, ilegal or unenforceable, the validity, legality and
enforceabilty of the remaining provisions shall not in any way be affected, impaired or
invalidated thereby.
H. Counteipars. This Agreement may be executed in two or more
counterpar, each of which shall be deemed an original, and all of which together shall
constitute one and the same instrent.
1. Headings. The headings in the Agreement are intended for convenience of
reference and shall not affect in any way the meaning or interpretation of this Agreement.
SELLER:
BENTWOOD PARK, LLC
PURCHASER:
~
BrD\gM~~~~urer~~:Jr
3
EXHIBIT A
PROMISSORY NOTE
$65,000.00 April 1, 2009
For value received, the undersigned, Dalton Square, LLC, of7l0 West Dalton Avenue,
SuiteB, Coeur d'Alene, Idaho 83815 (UBorrower"), hereby promises to pay to the order
of Bentwood Park, LLC, clo H. James Magnuson, P. O. Box 2288, Coeur dtAlene, Idaho 83816
("Bentwood"), the principal sum of Sixty-Five Thousand Dollar ($65,000), and to pay interest
as provided in ths Promissory Note, together with all costs and fees, including reasonable
attorney's fees, incured by Bentwood in enforcing the obligations of this Promissory Note.
Principal hereof and any interest due under the terms of this Promissory Note are payable toBentwood Park, LLC, or such other place as Bentwood may direct, in such coin or curency of
the United States of America as at the time of payment shall be legal tender for the payment of
public and private debts. Principal and interest shall be payable as provided herein:
i. Payment shall be made in the amount of One Thousand Two Hundred Twenty-Six
and 63/100 Dollar ($ i ,226.63) or more per month, with the first payment due and payable on
April 1, 2009, with a like payment due and payable on the first day of each month thereafter until
this Promissory Note is paid in full.
2. Interest shall accrue on the balance owing commencing as of April i, 2009, at the
rate of five percent (5%) .
3. All payments made hereunder shall first be applied to any charges owing
hereunder, then secondly to any accrued interest and any balance to reduction of the principalowing.
4. Interest shall accrue on any and all untimely payments due hereunder (timeliness
being paid and received no more than ten (10) days after any due date set fort herein) at the rate
of twelve percent (12%) per anum until paid in full.
Any delay on the par of Bentwood in exercising any rights hereunder shall not operate as
a waiver of said rights, nor shall any waiver of a default be considered to be a waiver of any
subsequent default, nor shall acceptace of any payment afer Bentwood has declared the entire
indebtedness due and payable cure any default or operate as a waver of Bentwood's rights.
In case suit or action is instituted to collect this Promissory Note, or any portion thereof,
the undersigned promises to pay, besides the costs and disburements allowed by law, reasonable
attorney's fees incured by Bentwood or the holder hereof. Presentment, demand of
payment,protest and notice of nonpayment and protest are hereby waived.
Time is of the essence. All reimburements and payments other than payments of
principal or interest required by this Promissory Note shall be immediately due and payable on
demand. Each and every maker hereof agres that they have received valuable consideration
hereunder, that they signed ths Promissory Note as makers and not as sureties, and that any andall suretyship defenses are hereby waived.
This Promissory Note is governed by the laws of
the State of Idaho, and venue for the
enforcement of the same shall lie in the First Judicial Distct Cour for the State of Idaho in andfor the County of Kootenai.
Borrower acknowledges that this loan is primarly for business or commercial puroses,
and not primarly for personal, family, household or agrcultul purses.
BORROWER:
:~
EXHIBITB
STOCK ASSIGNMENT
.' H. JAMS MAGNUSON hereby assign all right, title and interest to stock certificates,
shares or any interest in common stock of Troy Hoffan Water Corp. to Dalton Square, LLC, as
of April 1,2009.
/
EXHBITB
STOCK ASSIGNMENT
RICK GUNHER hereby assign all right, title and inte to stock certificates, shares or
any interest in common stock of Troy Hoffan Water Corp. to Dalton Squae, LLC, as of
April i, 2009.
EXHIBITB
STOCK ASSIGNMENT
_ BENTWOOD PARK, LLC, hereby assigns all right, title and interst to stock certificates,
shares or any interest in common stock of Troy Hoffan Water Corp. to Dalton Squae, LLC, as
of April i, 2009.
BENTWOOD PARK, LLC
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OPERATING AGREEMENT
Df\1\/£:0
iuog rJOV 12 M1 8: I 0
OF
DALTON SQUAR, LLC
Ths Óperating Agreement of Dalton Squa, LLC, an Idao limited liabilty company organzed
pursuant to the Idaho Limited Liabilty Company Act is entered into and shall be effective as of theEffective Date, by and among the Company (Dalton Squae, LLC) and the persons executing ths
Agreement as Members (Ronald W. Stadleyan Kenneth 1. Muren).
ARTICLE I
DEFINITIONS
For puroses of this Operating Agreement (as defied below), unless the context clearly
indicates otherwse, the following terms shall have the following meanings:
1.1 Act - The Idaho Limited Liabilty Company Act and all amendments to the
Act.
1.2 Additional Member - A Member other than an Initial Member or a
Substitute Member who has acquired a Membership Interest from the Company.
1.3 Artcles - The Aricles of Organzation of the Company as properly adopted
and amended from time to time by the Members and filed with the Secretar of State.
1.4 Assignee - A transferee of a Membership Interest who ha not been admitted
as a Substituted Member.
1.5 Bankrupt Member - A member who: (1) ha become the subject ofan Order
for Relief under the United States Banptcy Code, 2) has initiated, either in an
original Proceeding or by way of answer in any state insolvency or receivership
proceeding, an action for liquidation arangement, composition, readjustment,
dissolution, or similar relief.
1.6 Business Day - Any day other than Satuday, Sunday or any legal holiday
observed in the State.
1.7 Capital Account - The account maitained for a Member or Assignee
determined in accordance with Aricle VII.
1.8 Capital Contribution - Any contrbution of Propert, services or the
obligation to contribute Propert or services made by or on behalf of a Member or
OPERTING AGREEMENT: Page i
.J C,
Assignee.
1.9 Code - The Internal Revenue Code of 1986 as amended from time to time.
1. 10 Commitment - The Capita Contrbutions that a Member or Assignee is
obligated to make under ths Operating Agreement.
1.1 I Company - Dalton Square, LLC, a limited liabilty company formed under
the laws ofIdaho, and any successor limited liabilty company.
1.12 Company Liabilty - Any enforceable debt or obligation for which the
Company is liable or which is secured by any Company Propert.
1.13 Company Minimum Gain - An amount determined by first computing for
each Company Nonrecourse Liabilty any gain the Company would realize if it
disposed of the Company Propert subject to that liabilty for no consideration other
than ful satisfaction of the liabilty, and then aggrgating the separtely computed
gains. The amount of Company Minimum Gain includes such minum gain arsing
from a conversion, refinancing, or other change to a debt instrent, only to the
extent a Member is allocated a share of that minimum gain. For any Taxable Year,the net increase or decrease in Company Minimum Gai is determined by comparg
the Company Minimum Gain on the last day of
the imediately preceding TaxableYear with the Minimum Gain on the last day of the curent Taxable Year.
Notwthstading any provision to the contrar contaed herein, Company Minimum
Gain and increases and decreases in Company Minimum Gain are intended to be
computed in accordance with § 704 of the Code and the Regulations issued
thereunder, as the same may be issued and inteipreted from time to time. A
Member's share of Company Minimum Gai at the end of any Taxable Year equas:
the sum of Nonrecourse Deductions allocated to that Member (and to that Member's
predecessors in interest) up to that time and the distrbutions made to that Member
(and to tht Member's predecessors in interest) up to that time of proceeds of a
nonrecourse liabilty allocable to an increase in Company Minimum Gain minus the
sum of that Member's (and that Member's predecessors' in interest) aggregate share
of the net decreases in Company Minimum Gain plus their aggregate share of
decreases resulting from revaluations of Company Propert subject to one or more
Company Nonrecourse Liabilties.
1. 14 Company Nonrecourse Liabilty - A Company Liabilty to the extent that no
Member or related Person bears the economic risk ofloss (as defined in § 1.752-2 of
the Reguations) with respect to the liabilty.
1.15 Company Propert - Any Propert owned by the Company.
1.16 Contributig Members - Those Membe makg contrbutions as a result of
OPERATIG AGREEMENT: Page 2
) .
the failure of a Delinquent Member to make the contrbutions reuired by the
Commitment as described in Aricle VIII.
1.17 Default Interest Rate - The higher of the legal rate or the then-curnt prime
rate quoted by the largest commercial ban in the jursdiction of the Pricipal Offce
. plus thee percent.
1.18 Delinquent Member - A Member or Assignee who has failed to meet the
. Commitment of that Member or Assignee.
1.19 Distnbution - A tranfer of Propert to a member on account of a
Membership Interest as described in Aricle IX.
1.20 Disposition (Dispose) - Any sale, assignent, transfer, exchange, mortgage,
pledge, grant, hypothecation, or other tranfer, absolute or as securty or encumbrace
(including dispositions by operation of law).
1.21 Dissociation - Any action which causes a Person to ceae to be a Member as
described in Aricle XII hereof.
1.22 Dissolution Event - An event, the occurence of which will result in the
dissolution of the Company under Arcle XI uness the Members agree to the
contrar.
1.23 Effective Date - December 29, 2006.
1.24 Immediate Family - A Member's Iiediate Family includes the Member's
spouse, children (including natu, adopted, and stepchildren), grandchildren, and
parents.
1.25 Initial Capital Contnbution - The Capita Contribution agreed to be made
by the Initial Members as described in Aricle VIII.
1.26 Initial Members - Those persons identified on Exhbit A atthed hereto and
made a par hereof by this reference who have executed the Operating Agreement.
1.27 Majonty - The afirative vote or consent of more than one-half(~) of the
membership interest of all Members described as a "'Majority" in Aricle VI hereof.
1.28 Management Right - The right of a Member to paricipate in the
management of the Company, including the rights of information and to consent or
approve actions of the Company.
1.29 Managing Member or Manager- A Member selected to manage the afairs
OPERATING AGREEMENT: Page 3
l ,
of the Company under Aricle VII hereof.
1.30 Member - Intial Member, Substituted Member or Additional Member, and,
uness the context expressly indicates to the contrar, includes Managing Members
and Assignees.
1.31 Member Minimum Gain - An amount determined by fist computing for
each Member Nonrecourse Liabilty any gain the Company would realize if it
. disposed of the Company Propert subject to that liabilty for no consideration other
than full satisfaction of the liabilty, and then aggrgating the separtely computed
gains. The amount of Member Minum Gai includes such minimum gain arsing
from a conversion, refinancing, or other change to a debt instrent, only to the
extent a Member is allocated a share of that minum gain. For any taxable Year,
the net increase or decrease in Member Minum Gain is determined by comparng
the Member Minmum Gai on the last day of the imediately preceding Taxable
Year with the Minimum Gain on the last day of the curent Taxable Year.
Notwthstading any provision to the contrar contaned herein, Member Minimum
Gain and increases and decreass in Member Minimum Gain are intended to be
computed in accordance with § 704 of the Code and the Regulations issued
thereunder, as the same may be issued and interpreted from time to time.
1.32 Member Nonrecourse Liabilty - Any Company Liabilty to the extent the
liabilty is nonrecourse under state law, and on which a Member or Related Person
bears the economic risk ofloss under § 1.752-2 of the Code because, for example, the
Member or Related Person is the creditor or a guarantor.
1.33 Membership Interest - The rights of a Member or, in the case of an
Assignee, the rights of the assignng Member in Distrbutions (liquidating or
otherwse) and allocations of the profits, losses, gains, deductions, and credits of the
Company.
1.34 Money - Cash or other legal tender of the United States, or any obligations
that is immediately reducible to legal tender without delay or discount. Money shall
be considered to have a fair market value equa to its face amount.
1.35 Net Losses - The losses and deductions of the Compay determined in
accordance with accounting principles consistently applied from year to year
employed under the method of accounting adopted by the Company and as reported
separately or in the aggegate, as appropriate, on the ta retu of the Company filed
for federal income tax puroses.
1.36 Net Profits - The income and gai of the Company determned in
accordance with accounting principles consistently applied from year to year
employed under the method of accounting adopted by the Company and as reported
OPERTIG AGREEMENT: Page 4
'.
separately or in the aggregate, as appropriate, on the ta retu of the Company filed
for federa income ta purses.
1.37 Nonrecourse Liabilties - Nonrecoure liabilties include Company
Nonrecourse Liabilty and Member Nonrecoure Liabilties.
1.38 Notice - Notice shall be in wrtig. Notice to the Company shall be
considered given when mailed by first class mail postage prepaid addressed to any
Manging Member in care of the Company at the address of the Principal Offce.
Notice to a Member shall be considered given when mailed by first class mail
postage prepaid addressed to the Member at the address reflected in the Operating
Agreement uness the Member has given the Company a Notice of a different
address.
1.39 Offset table Decrease - Any allocation that unexpetedly causes or increass
a deficit in the Member's Capita Account as of the end of the taable year to which
the allocation relates attibutable to depletion allowances under § 1. 704(b )(2)(iv)(k)
of the Reguations, allocations of loss and deductions under §§ 704(e)(2) or 706 of
the Code or under § 1.751-1 of the Reguations, or distrbutions that, as of the end of
the year are reasonably expected to be made to the extent they exceed the offsetting
increases to such Member's Capital Account that reasonably ar expected to occur
durng or (prior to) the taxable years in which such distrbutions are expected to be
made (other than increases pursuat to a Minimum Gain Chargeback).
1.40 Operating Agreement - This Operating Agreement including all
Subscription Agreements, if any, and amendments adopted in accordance with the
Operating Agreement and the Act.
1.41 Organiztion - A Person other th a natual person. Organon includes,
without limitation, corprations (bth non-profit and other corprations),
parerships (both limited and genera), joint ventues, limited liabilty companies,
trusts and unncorprated associations, but the term does not include joint tenancies
and tenancies by the entirety.
1.42 Organization Expenses - Those expenses incured in the organzation of the
Company including the costs of prepartion of the Operatig Agrement and Aricles.
1.43 Proceeding - Any judicial or adinstrative tral, hearng or other activity,
civil, criminal or investigative, the result of which may be that a cour, arbitrtor, or
governenta agency may enter a judgment, order, decree, or other determination
which if not appealed and reversed, would be binding on the Company, a Member or
other person subject to the jursdiction of such cour, arbitrtor, or governenta
agency.
OPERTIG AGREEMENT: Page 5
1 ..
i.44 Propert - Any propert real or persona, tagible or intagible, including
money and any legal or equitable interest in such prpe, but excludg serces and
promises to perform services in the futu.
1.45 Permitted Transferee - Any member of the Membe's Imedate Family, oran Organization controlled by such Member or by members of the Member's
Imediate Family.
1.46 Person - An individual, trt, estate, or any incorprated or unncorprated
organzation permitted to be a member of a limited liabilty company under the laws
of the State.
1.4 7 Proceeding - Any adinstrtive, judicial, or other advers proceeding,
including, without limitation, litigation, arbitrtion, adstrive adjudication,
mediation, and appea or review of any of the foregoing.
i .48 Regulations - Except where the context indicates otherwse, the permanent,
temporar, or proposed regulations of the Depaent of the Treasur under the Codeas such regulations may be lawflly changed from time to time.
1.49 Related Person - A person having a relationship to a Member that is
described in § 1.75l-4(b) of the Reguations.
1.50 Resignation - The act by which a Manging Member ceases to be a
Managing Member.
1.51 Sharing Ratio - With respect to any Member, the pecentage of ownership in
the Company as specified on Exhbit A to ths Oprating Agrement.
1.52 Subscription Agreement - Agreement between a Member and the Company
to fufill the Commitment defined in 1.10 of the Aricle.
1.53 Substitute Member - An Assignee who ha been admitted to all of the rightsof membership pursuat to the Operatig Agreement.
1.54 Taxable Year - The taable year of the Company as determined pursuant to§ 706 of the Code.
i .55 Taxing Jurisdiction - Any state, loca, or foreign governent that collects
ta, interest or penalties, however designted, on any Member's share of the incomeor gain attbutable to the Company.
ARTICLE II
OPERATIG AGREEMENT: Pae 6
) ..
FORMATION
2.1 Organization - The Membe hereby organze the Company as an Idaho limited
liabilty company pursuat to the provisions of the Act.
2,2 Agreement - For and in consideration of the mutu covenants herein contaned andfor other good and valuable consideration, the receipt and sufciency of which is hereby
acknowledged, the Members executing the Operatig Agreement hereby agree to the terms and
conditions of the Operating Agreement, as it may from time to time be amended according to its
terms. . It is the express intention of the Members that the Operating Agreement shall be the sole
source of agreement of the paries, and, except to the extent a provision of the Operating Agreement
expressly incorprates federal income ta rues by refernce to sections of the Code or Regulationsor is expressly prohibited or ineffective under the Act, the Operating Agrement shall govern, even
when inconsistent with, or different than, the provisions of the Act or any other law or rule. To theextent any provision of the Operating Agreement is prohibited or ineffective under the Act, the
Operating Agreement shall be considered amended to the smallest degree possible in order to make
the agreement effective under the Act. In the event the Act is subseuently amended or intereed in
such a way to make any provision of the Operatig Agreement that was formerly invalid valid, such
provision shall be considered to be valid from the effective date of such interpretation or amendment.
2.3 Name. The nae of the Company is Dalton Squae, LLC and all business of theCompany shall be conducted under that name or under any other name, but in any case, only to the
extent permtted by applicable law.
2.4 Effectie Date - The Operating Agreement shall beme effective upon the ealier of
the filing and acceptace of the same with the Secreta of State ofIdaho or the date of execution of
the Operating Agreement.
2.5 Term - The term of the Company shal be perptu and shal continue until dissolved
in accordance with the Act and ths Operating Agreement.
2.6 Registered Agent and Offce - Th registere agent for the serce of process and the
registered offce shall be that Person and location reflected in the Aricles as filed in the offce of
the
Secreta of State. The Managing Members, may, from time to time, change the registered agent or
offce though appropriate fiings with the Secreta of
State. If the Managing Members shall fail todesignate a replacement registered agent or change of address of the registered offce, any Member
may designate a replacement registered agent or file a notice of change of address through
appropriate filings with the Secretar of State.
2.7 Principal Offce - The Principal Offce of the Company shall be located at P.O. Box
1507., Hayden, Idaho 83835.
ARTICLE III
OPERATIG AGREEMENT: Page 7
i ..
NATUR OF BUSINSS
3.1 The Company may engage in any lawfl búsiness permitted by the Act or the laws of
any jursdiction in which the Company may do business. The Company shall have the authority to
do all thngs necessar or convenient to accomplish its purse and operate its business as describe
in ths Aricle III.
ARTICLE IV
ACCOUNTffG AND RECORDS
4.1 Records to be Maintained - The Company shall maintan the following records and
information, at the Principal Offce, which shall be available for inpection and copying by the
Members at reasonable times:
A. A curent and pat list, setting fort the ful name and last known mailing
address of each member and manager in alphabetical order;
B. A copy of the aricles of organzation and all amendments thereto, together
with executed copies of any powers of attorney pursuant to which the aricles of
amendment have been executed;
C. Copies of the Company's federa, foreign, state and local income ta retus,
and report, if any, for the thee most recent year;
D. Copies of the Operating Agrement includig all amendments thereto and
copies of any wrtten operating agreement no longer in effect;
E. Any financial statements of the Company for the thee most recent years.
F. A wrting or other data compilation from which information can be obtaned
though retreval devices into reasonably usable form setting fort the following:
(i) the amount of cash and a description and statement of the
agreed value of the other propert or services contrbuted by each
Member and which each Member ha agreed to contrbute;
(ii) the times at which or events on the happening of which any
additional Commitments agreed to be made by each Member ar to be
made;
(ii) any right of a Member to receive, or of the Company to make,
distributions to a Member which include a retu of all or any par of
the Member's Capita Contrbutions; and
OPERATIG AGREEMENT: Page 8
) -
(iv) any events upon the happening of which the Company is to be
dissolved and its afairs wound up.
4,2 Report to Members:
A. The Managing Members shall provide reprts at least anualy to the Members other
than Assignees at such time and in such maner as the Managing Members may determine
reasonable.
B. The Managing Members shall provide all Members with those information retus
required by the Code and the laws of any state in which the Company operates.
4.3 Accounts - The Managing Members shall maintan a record of Capital Account for
each Member in accordance with the Aricle VIII.
ARTICLE V
NAMES AND ADDRESSES OF MEMBERS
5.1 The names and addresses of the Intial Members are as follows:
Ronald W. Stadley, P.O. Box 1507, Hayden, Idaho 83835
Kenneth 1. Muren, 5233 Hooker Hil Road, Hayden, Idao 83835
ARTICLE VI
RIGHTS AND DUTIES OF MEMBERS
6.1 Management Rights - All Members (other than Assignees) who have not
Dissociated shall be entitled to vote on any matter submitted to a vote of the Members.
The following actions require the consent of all of the Members:
A. any amendment to this Operating Agreement;
B. the admission of Assignees to Management Rights;
C. the continuation of the Company afer a Dissolution Event;
D. the authorization of a Managing Member or Member to do any act on behalf
of the Company that contravenes the Operating Agreement.
E. the sale, exchange, or other disposition of all, or substantially all, of the Company's
assets.
OPERATIG AGREEMENT: Page 9
) ..
6.2 Maority - Whenever any matter is required or allowed to be approved by a
Majority of the Members or a Majority of the Remaining Members under the Act or the Oprating
Agreement, such matter shall be considered approved or consented to upon the receipt of the
affrmative approval or consent, either in writing or at a meeting of the Members, of Members
having Sharing Ratios in excess of one haf of the Shaing Ratios of all the Members entitled to
vote on a particular matter. Assignees and, in the cae of approvals to withdrawal where consent
of the'remaig Members is required, dissociating Members shall not be considered Members
entitled to vote for the purpose of determg a Majority. In the case of a Member who has
Disposed of that Member's entire Membership Interest to an Assignee, but has not been removed
as pròvided below, the Sharing Ratio of such Assignee shall be considered in determining a
Majority and such Member's vote or consent shal be determined by such Sharing Ratio.
6.3 Liabilty of Members - No person solely by vire of his/her/its Member status
shall be liable as such for the liabilties of the Company. The failure of this limited liabilty
company to observe any formities or requirements relating to the exercise of its powers or
mangement of its business or affairs under this agreement of the Act shal not be grounds for
imposing personal liabilty on the members or mangers for liabilties of the limited liabilty
company.
6.4 Indemncation - The Company shall indemify and hold haress the Members,
Managing Members, employees and agents for all costs, losses, liabilties and damages paid or
accrued by such Member, Manager, employee or agent in connection with the business of the
Company, to the fullest extent provided or allowed by the laws of the State.
6.S Conflcts of Interest
A. A Member, including a Manging Member, sha be entitled to enter
into tranactions that may be considered to be competitive with, or a business opportity
that may be beneficial. to, the Company, it being expressly understood that some of the
Members may enter into transactions that are simlar to the tranactions into which the
Company may enter. Notwithstading the foregoing, Members shal account to the
Company and hold as trstee for it any propert, profit, or benefit derived by the Member,
without the consent of the other Members, in the conduct and winding up of the Company
business or from a use or appropriation by the Member of Company property including
information developed exclusively for the Company and opportnities expressly offered to
the Company.
B. A Member, including a Manging Member does not violate a duty
or obligation to the Company merely because the Member's conduct fuers the Member's
own interest. A Member may lend money to and tranact other business with the
Company. The rights and obligations of a Member who lends money to or transacts
business with the Company are the same as those of a person who is not a Member, subject
OPERTING AGREEMENT: Page 10
) ..
to other applicable law. No tranaction with the Company shall be voidable solely beause
a Member has a direct or indirect interest in the tranaction if either the transaction is fair
to the Company or the disintereste Manging Members or disinterested Members, in
either case knowing the material facts of the tranaction and the Member's interest,
authorize, approve, or ratify the tranaction.
ARTICLE VII
MANAGING MEER
7.1 Origi Mang Members - The ordin an usual decisions concerng the
business affairs of the Company shall be made by the Manging Members. If at any time there is
only one person serving as a Manging Member, such Manging Member shal be entitled to
exercise all powers of the Managing Members set fort in this Article, and all references in this
Article and otherwise in the Operating Agreeent to "Manging Members" shall be deemed to
refer to such single Manging Member. The initial Managing Members shall be:
Ronad W. Stadley
Kenneth J. Murren
7.2 Term of Offce as Managig Member - No Manging Member shall have any
contractual right to such position. Each Managing Member shall serve until the earliest of:
.
A. the Dissociation of such Manging Member;
B. removal of the Manging Member;
C. the volunta withdrawal as a Managing Member by a Member.
7.3 Authority of Members to Bind the Compay - The Members hereby agree that
only the Manging Members, and authorized agents of the Company shal have the authority to
bind the Company. No Member other than a Manging Member shall tae any action as a
Member to bind the Company, and each Member shal indemnfy the Company for any costs or
daages incured by the Company as a result of the unuthorized action of such Member. Each
Manging Member has the power, on behalf of the Company, to do all things necessar or
convenient to car out the business and affairs of the Company, including, without limitation:
A. the intitution, prosecution and defense of any Proceding in the
Company's nae;
B. the purchase, recipt, lea or other acquisition, ownership, holding,
improvement, use and other dealing with, Propert, wherever located;
OPERATIG AGREEMENT: Page 11
)#
. C. the sae, conveyance, mortgage, pledge, lease, exchange, and other
disposition of Propert;
D. the entering into contracts and guarantees; incurring of liabilties;
borrowing money, issuace of notes, bonds, and other obligations; an the securing
of any of its obligations by mortgage or pledge of any of its Propert or income;
E. the lending of money, investment and reinvestment of the
Company's fuds, and receipt and holding of Propert as security for repayment,
including, without limtation, the loaning of money to, and otherwise helping
Members, offcers, employees, and agents;
F. the conduct of the Company's business, the establishment of
Company offices, and the exercise of the powers of the Company with or without
the State;
G. the appointment of employees and agents of the Company, the
defining of their duties, the establishment of their compensation;
H. the payment of
pensions and establishment of peion plan, pension
trusts, profit shaing plan, and benefit and incentive plans for all or any of the
current or former Members, employees, and agents of the Company.
i. the mag of donations to the public welfare or for religious,
chaitable, scientific, literar or educationa purses;
J. the payment or donation, or any other act that fuers the business
and affairs of the Company;
K. the payment of compensation, or additional compnsation to any or
all Members, and employees on accunt of service previously rendered to the
limted liabilty company, whether or not an agreement to pay such compnsation
was made before such services were rendered;
L. the purchase of inurance on the life of any of its Members, or
employees for the benefit of the Company; the purchase of general liabilty,
propert and other insurance for the Company, as the Manging Members deem
proper;
M. the paricipation in parership agreements, joint ventures, or other
associations of any kind with any person or persons;
N. the indemnfication and hold haress of Members, Member
OPERATIG AGREEMENT: Page 12
) .,
Mangers or any other Person.
7.4 Actions of the Magig Members~ Each Manging Member has the power to
bind the Company as provided in this Artcle vn. Any difference arising as to any matter within
the Authority of the Manging Members shall be decided by a majority in number of the
Manging Members. No act of a Member in contravention of such determnation shall bind the
Company to Persons having knowledge of such determtion. Notwithstading such
determtion, the act of a Managing Member for the purse of apparently caying on the usua
way of business or affairs of the Company, including the exercise of authority indicated in this
Article VII, no Person dealing with the Company shall have any obligation to inquire into the
power or authority of the Manging Member acting on behaf of the Company.
7.5 Compenstion of Mangi Member~ Each Manging Member shall be
reimbursed all reasonable expenses incurred in maging the Company and shall be entitled to
compensation, in an amount to be determed from time to time by the affrmative vote of a
Majority of the Members.
7.6 Managig Members' Stadard of Care- A Manging Member's duty of care in
the discharge of the Manging Member's duties to the Company and the other Members is limited
to refraing from engaging in grossly negligent or reckless conduct, intentional misconduct, or a
knowing violation of law. In dischaging its duties, a Manging Member shall be fully protected
in relying in good faith upon the records required to be maitained under Artcle N and upon such
informtion, opinons, report or statements by any of its other Manging Members, Members, or
agents, or by any other person, as to matters the Manging Member reaonaly believes are with
such other person's professional or expert competence and who has been selected with reasonable
care by or on behalf of the Company, including information, opinions, report or statements as to
the value and amount of the assets, liabilties, profits or losses of the Company or any other facts
pertinent to the existence and amount of assets from which distributions to members might
properly be paid.
7.7 Removal of Managing Member - Any Manging Member may be removed by the
affative vote of a Majority of the Members.
ARTICLE VIII
CONTRIBUTONS AN CAPITAL ACCOUNS
8.1 Initial Contributions - Each Initial Member shall mae the Capita Contribution
describe for that Member on Exhibit A at the time and on the terms speified on Exhibit A and
shall perform that Member's Commtment. If no time for contribution is speified, the Capita
Contributions shall be made upon the fiing of the Artcles of Organtion with the Secreta of
State. The value of the Capita Contributions shall be as set fort on Exhibit A. No interest shall
accrue on any Capita Contribution and no Member shall have the right to withdraw or be repaid
OPERATIG AGREEMENT: Page 13
I..
anY,Capita Contribution except as provided in this Operating Agreement. Each Additional
Member shall mae the Initial Capita Contribution described in the Admission Agreement. The
value of the Additional Member's Initial Capita Contribution and the time for maing such
contribution shall be set fort in Exhibit A to this Operating Agreement.
8.2 Additional Contributions - In addition to the Initia Capita Contributions and
ComÍtments, the Managing Members may determine from time to time that additional
contributions are needed to enable the Company to conduct its business. Upon mang such a
determination, the Managing Members shall give Notice to all Members in writing at least ten
Business Days prior to the date on which such contribution is due. Such Notice shall set fort the
amount of additional contribution needed, the purpose for which the contribution is needed, and
the date by which the Members should contribute. Each Member shall be entitled to contribute a
proportionate share of such additional contribution. Except to the extent of a Member's unpaid
Commitment, no Member shall be obligated to mae any such additiona contributions. In the
event anyone or more Members do not make their additiona contribution, the other members
shall be given the opportunity to make the contribution. Each Additiona Member shall mae the
Capital Contribution to which such Member has agreed, at the time or times and upon the term to
which the Manging Members and the Additiona Member agree.
8.3 Enforcement of Commtments - In the event any Member (a Delinquent Member)
fails to perform the Delinquent Member's Commitment, the Managing Members shall give the
Delinquent Member a Notice of the failure to meet the Commitment. if the Delinquent Memberfails to perform the Commtment (including any costs associated with the failure to demand
compliance with the Commtment and interest on such obligation at the Default Interest Rate)
within ten Business days of the giving of Notice, the Manging Members may tae such action,
including but not limted to enforcing the Commtment in the court of appropriate jurisdiction in
the state in which the Principal Offce is located or the state of the Delinquent Member's addressas reflected in the Operating Agreement. Each Member expressly agrees to the jurisdiction of
such courts but only for the enforcement of Commtments. The Manging Members may elect to
allow the other Members to contribute the amount of the Commitment in proportion to such
Members' Sharing Ratios, with those Members who contribute (Contributing Members) to
contribute additional amounts equal to any amount of the Commitment not contributed. The
Contributing Members shall be entitled to treat the amounts contributed pursuant to this section as
a loan from the Contributing Members bearing interest at the Default Interest Rate secured by the
Delinquent Member's interest in the Company. Until they are fully repaid, the Contributing
Members shall be entitled to all Distributions to which the Delinquent Member would have been
entitled. Notwithstading the foregoing, no Commtment or other obligation to mae an additiona
contribution may be enforced by a creditor of the company unless the Member expressly consents
to such enforcement or to the assignment of the obligation to such creditor.
8.4 Maintenance of Capita Accounts - The Company shall establish and maintain
Capital Accounts for each Member and Assignee. Each Member's Capital Account shall be
increased by (1) the amount of any Money actually contributed by the Member to the capita of the
OPERATIG AGREEMENT: Page 14
) -
Company, (2) the fair maket value of any Propert contributed, as determed by the Company
and the contributing Member at arm's lengt at the time of contribution (net of liabilties assumed
by the Company or net of liabilties which the Company taes such Propert subject to, within the
meaning of § 752 of the Code), and (3) the Member's share of Net Profits and of any separately
allocated items of income or gain except adjustments of the Code (including any gain and income
from. unreaized income with respet to accounts recivable allocted to the Member to reflect the
difference between the book value and ta basis of assets contributed by the Member). Each
Member's Capital Account shall be decreased by (1) the amount of any Money actuly distrbuted
to the Member, (2) the fair market value of any Propert distributed to the Member, as determed
by the Company and the contributing Members at ar's length value at the time of distribution
(net of liabilties of the Company assumed by the Member or net of liabilties which the Member
taes such Propert subject to with the meang of §752 of the Code), and (3) the Member's
share of Net Losses and of any separately allocted items of deduction or loss (including any loss
or deduction allocated to the Member to reflect the difference between the bok value and ta basis
of assets contributed by the Member).
8.S Distribution of Assets - If the Company at any time distributes any of its asset in-
kind to any Member, the Capital account of each Member shall be adjusted to account for that
Member's allocable share (as determed under Article IX below) of the Net Profits or Net Losses
that would have been realized by the Company had it sold the assets that were distributed at their
respective fair maket values imediately prior to their distribution.
8.6 Sale or Exchange of Interest - In the event of a sale or exchage of some or all of
a Member's Interest in the Company, the Capita Account of the Transferring Member shall
become the capita account of the Assignee, to the extent it relates to the portion of the Interest
Transferred.
8.7 Compliance with Setion 704(b) of the Code - The provisions of this Article VIII
as they relate to the maintenance of Capital Accounts are intended, and shall be constred, and, if
necessar, modified to cause the allocations of profits, losses, income, gain, and credit pursuant to
Article IX to have substatial economic effect under the Regulations promulgated under § 704(b)
of the Code, in light of the distributions mae pursuant to Articles IX and XIV and the Capital
Contributions made pursuant to this Article vm. Notwithtading anytg herein to the contrar,
this Operating Agreement shall not be çonstred as creating a deficit restoration obligation or
otherwise personally obligate any Member to make a Capital Contribution in excess of the Initial
Contribution.
ARTICLE IX
ALLOCATIONS AN DISTRIBUTIONS
9.1 Aloctions of Net Profits and Net Losses from Operations - Except as may be
required by § 704(c) of the Code, and §§ 2,3, and 4 of this Article XI, net profits, net losses, and
OPERTIG AGREEMENT: Page is
, gl
other itern of income, gain, loss, deduction and credit sha be apportoned among the Members in
proportion to their Sharing Ratios.
9.2 Compay Mium Gai Chargeback - If there is a net decrease in Company
Minimum Gain for a Taxable Yea, each Membe must be allocted itern of income and gain for
that Taxable Year equal to that Member's shae of the net decreae in Company Minum Gain. A
Member's share of the net decrease in Company Minimum Gain is the amount of the total net
decrease multiplied by the Member's percentage shae of the Company Minimum Gain at the end
of the imediately preceding Taxable Yea. A Member's share of any decrease in Company
Minum Gain resulting from a revaluation of Company Propert equas the increase in the
Member's Capita Account attibutable to the revaluation to the extent the reduction in minium
gain is caused by the revaluation. A Member is not subject to the Company Minimum Gain
Chageback Requirement to the extent the Member's share of the net decrease in Company
Minum Gain is caused by a guarantee, refiancing, or other change in the debt instrment
causing it to become partially or wholly a Recourse Liabilty or a Member Nonrecourse Liabilty ,
and the Member bears the economic risk of loss (within the meag of § 1.752-2 of the
Regulations) for the newly guaranteed, reficed, or otherwise changed liabilty.
9.3 Member Minum Gai Chaeback -If during a Taxable Year there is a net
decrease in Member Minimum Gain, any Member with a share of tht Member Minum Gain (as
determed under § 1.704- 2(i)(5) of the Regulations) as of the beging of tht Taxable Yea must
be allocated items of income and gain for that Taxable Yea (and, if necessar, for succeeding
Taxable Years) equal to tht Member's share of the net decrease in the Company Minum Gain.
A Member's share of the net decrease in Member Minum Gain is determed in a maner
consistent with the provisions of paragraph 9.2 of this section. A Member is not subject to this
Member Minimum Gain Chargeback, however, to the extent the net decrease in Member
Minium Gain arises because the liabilty ceases to be Member Nonrecourse Liabilty due to a
conversion, refincing, or other change in the debt intrent that causes it to become partially
or wholly a Company Nonrecourse Liabilty. The amount that would otherwise be subject to the
Member Minum Gain Chargeback is added to the Member's shae of Company Minum Gai.
In addition, rules consistent with those applicable to Company Minum Gain shal be applied to
determne the shares of Member Minimum Gain and Member Minum Gain Chargeback to the
extent provided under the Regulations issued pursuat to § 704(b) of the Code.
9.4 Qualified Income Offset - In the event any Member, in such capacity,
unexpetedly receives an Offsettble Decrease, such Member wil be allocted ite of income and
gain (consisting of a pro rata portion of each item of the Company's income and gain for such
year) in an amount and maner suffcient to offset such Offsettable Decrease as quickly as
possible.
9.5 Interim Disributions - From time to tie, the Manging Members shal determe
in their reaonable judgment to what extent, if any, the Company's cash on hand exceeds the
current and anticipated needs, including, without limtation, needs for operating expenses, debt
OPERTING AGREEMENT: Page 16
, '
service, acquisitions, reserves, and mandatory distributions, if any. To the extent such excess
exists, the Manging Members may mae distributions to the Members in accordan with their
Sharing Ratios. Such distributions shall be in cah or Propert (which need not be distributed
proportionately) or parly in both, as determined by the Manging Members.
ARTICLE XTAX
10.1 Elections - The Manging Membes may mae any ta elections for the Company
allowed under the Code or the ta laws of any state or other jurisdiction having taing jurisdiction
over the Company.
10.2 Taxes of Taxg Jurisdictions - To the extent that the laws of any Taxing
Jurisdiction requires, each Member requested to do so by the Manging Members wil submit anagreement indicating that the Member wil make timely income ta payments to the Taxing
Jurisdiction and that the Member accepts persona jurisdiction of the Taxing Jurisdiction with
regard to the collection of income taxes attibutable to the Member's income, and interest, and
penaties assessed on such income. If the Member fails to provide such agreement, the Company
may withold arid pay over to such Taxing Jurisdiction the amount of ta, penalty and interest
determned under the laws of the Taxing Jurisdiction with respect to such income. Any such
payments with respect to the income of a Member shall be treated as a distribution for purposes of
Article ix. The Managing Members may, where permtted by the rules of any Taxing
Jurisdiction, fie a composite, combined or aggregate ta return reflecting the income of the
Company and pay the tax, interest and penalties of some or all of the Msembers on such income to
the Taxing Jurisdiction, in which case the Company shall inform the Members of the amount of
such ta interest and penalties so paid.
10.3 Tax Matters Partner - The Manging Members shall designate one of their
number, or if there are no Manging Members eligible to act as tax maters partner any other
Member, as the tax matters parer of the Company pursuat to § 6231(a)(7) of the Code. Any
Member designated as tax matters partner shall tae such action as may be necessar to cause each
other Member to become a notice partner withn the meang of § 6223 of the Code. Any
Member who is designated ta matter parer may not tae any action contemplated by §§ 6222
though 6232 of the Code without the consent of the Manging Members.
10,4 Cash Method of Accounting - The records of the Company shall be mataed on
a cah receipt and disbursements method of accounting.
ARTICLE XI
DISPOSITION OF MEMBERSIß INRETS
OPERATIG AGREEMENT: Page 17
- 11.1 Disposition - Any Member or Assignee may dispose of all or a portion of the
Member's or Assignee's Membership Interest upon compliance with this Article XI. No
Membership Interest shall be Disposed of:
A. if such disposition, alone or when combined with other tranactons, would result in
a tennination of the Company within the meaning of § 708 of the Code;
B. if the Managing Members request an opinon of counsel, such opinion of counsel
must -be satisfactory to the Managing Membes and opine that such assignent is subject to an
effective registration under the applicable state and federal securities laws, or exempt from such
registration requirements;
c. unless and until the Company receives from the Assigne the information and
agreements that the Managing Members may reasonably require, including but not limited to any
tapayer identification number and any agreement tht may be required by any Taxing
Jurisdiction.
11.2 Dispositions not in Compliance with th Arcle Void - Any attempted
Disposition of a Membership Interest, or any par thereof, not in compliance with this Articlê is
null and void.
ARTICLE XI
DISSOCIATION OF A MEMBER
12,1 Dissociation - A Person shall cease to be a Member upon the happening of any of
the following events:
A. The Member withdraws by volunta act from the Company by giving thir (30)
days Notice to the Managing Members.
B. The Member ceases to be a Member of the Company due to the assignent of all of
such Member's interest in the Company a,d the Assignee has become a Substitute Member.
C. The Member is removed as a Member by an afftive vote of a Majority of the
Members who have not assigned their interests when the Member assign all of his interest in the
Company.
D. Except where the Member obta the written consent of all Members at the time,
the Member (i) makes an assignment for the benefit of creditors; (ii) fies a volunta petition in
banptcy; (iii) is adjudicated a bankpt or inolvent; (iv) fies a petition or anwer seeking for
the member any reorganization, arrangement, composition, readjustment, liquidation, dissolution,
OPERATIG AGREEMENT: Page 18
or similar relief under any statute, law or regulation; (v) fies an anwer or other pleading
adittng or failing to contest the material allegations of a petition filed againt the Member in any
proceeding of this nature; or (vi) seeks, consents to, or acquiesces to the appointment of a trstee,
reciver or liquidator ofthe Member or of all or any substatial par of the Member's properties.
E. Except where the Member obtai the written consent of all Members at the tie, if
withfu one hundred twenty (120) days after the commencement of any proceding againt the
Member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any statute, law or regulation, the proceeing has not been dismissed, or if
within one hundred twenty (120) days after the appointment without his consnt or acquiescence of
a trtee, receiver or liquidator of the member or of all or any substatia par of his properties,
the appointment is not vacated or stayed or if within one hundred twenty (120) days after the
expiration of any stay, the appointment is not vacated.
F. Except where the written consent of all Members at the time is obtaed, in the case
of a Member who is an individual;
(1) The Member's death; or
(2) The entry of an order by a cour of competent jurisdiction
adjudicating the Member incompetent to mage his person or
estate.
G. Except where the written consent of all Members at the time is obtaed, in the cae
of a Member who is a trst or is acting as a Member by vire of being a trstee of a trst, the
termation of the trust, but not merely the substitution of a new trustee.
H. Except where the written consent of all Members at the time is obtaed, in the case
of a Member that is a separate limited liabilty company, the dissolution and commencement of
winding up of the separate limited liability company.
i. Except where the written consent of all Members at the time is obtained, in the cae
of a Member that is a corporation, the filing of aricles of dissolution or forfeiture of its corporate
powers or right to do business.
J. Except where the written copsent of all Members at the time is obtained, in the case
of an estate, the distribution by the fiduciary of the estate's entire interest in the Company.
12.2 Rights of Dissociating Member - In the event any Member dissociates prior to the
expiration of the Term:
A. if the dissociation causes a dissolution and winding up of the
Company under Article XiV, the Member shal be entitled to paricipate in the
winding up of the Company to the same extent as any other Member except that
any Distributions to which the Member would have been entitled shall be reduced
OPERTIG AGREEMENT: Page 19
I "'
by the damges sustained by the Company as a result of the Dissolution caused by
the dissociation and winding up;
B. if the dissociation does not caus a dissolution and win up of theCompany under Article XIV and the event of dissociation is either 12.I.C. or
12.I.F., the Member shall be entitled to an amount equal to the value of the
' Member's Membership Interest in the Company, to be paid within six months of
the date of dissociation. As to all other events of dissociation defined in Article
, XII, Section 12.1 which do not cause a dissolution, the dissociated Membe shall be
entitled to receive an amount equal to the Member's Membership Interest in the
Company, to be paid when the Company is dissolved and wound up in accordace
with Article XIV. The value of the Member's Membership Interest shall include
the amount of any Distributions to which the Member is entitled under the
Operating Agreement and the fair value of the Membr's Membership Interest as of
the date of dissociation based upon the Member's right to shae in distributions
from the Company reduced by any damages sustained by the Company as a result
of the Member's dissociation.
ARTICLE XIII
ADMISSION OF ASSIGNEES AN ADDITIONAL MEERS
13.1 Rights of Assignees - The Assignee of a Membership Interest has no right to
paricipate in the maagement of the business and affais of the Company or to beme or exercise
any rights of a Member. The Assignee is only entitled to receive the Distributions and return of
capita, and to be allocated the Net Profits and Net Losses attibutable the Membership Interest.
13.2 Admission of Substitute Members - An Assignee of a Membership Interest shall
be admtted as a Substitute Member and admitted to all the rights of the Member who initially
assigned the Membership Interest only with the approval of all the Members. If so admtted, the
Substitute Member has all the rights and powers and is subject to all the restrictions and liabilties
of the Member originally assigning the Membership Interest. The admission of a Substitute
Member, without more, shall not release the Member originly asignig the Membership Interest
from any liabilty to the Company that may have existed prior to the approval.
13.3 Admsion of Additional Members - The Manging Members may permit the
admssion of Additional Members and determine the Capital Contributions of such Members only
upon the approval of a Majority of the Members.
ARTICLE XI
DISSOLUTION AN WIING UP
OPERTIG AGREEMENT: Page 20
, ¡
14.1 Dissolution - The Company shall be dissolved and its affairs wound up, upon the
fist to occur of the following events (which, unless the Members agree to continue the business,
shall constitute Dissolution Events):
A. the unanimous written consent of all of the Members;
B. the Dissociation of any Manging Member, unless the business of
the Company is continued with the consent of all of the remaining
Members within 90 days after such Dissociation;
C. the entry of a decree of judicial dissolution.
D. Administrative dissolution by the secretar of state.
14.2 Effect of Dissolution - Upon dissolution, the Company shall cease caring on as
distinguished from the winding up of the Company business, but the Company is not terminated,
but continues until the winding up of the affairs of the Company is completed and the Certificate of
Dissolution has been issued by the Secretary of State.
14,3 Distribution of Assets on Dissolution - Upon the winding up of the Company, the
Company Property shall be distributed:
A. to creditors, including Members who are creditors, to the extent
permittd by law, in satisfaction of Company Liabilties;
B. to Members in accordance with positive Capita Account balances
taing into account all Capital Account adjustments for the Company's taable yea
in which the liquidation occurs. Liquidation procs shall be paid with 60 days
of the end of the Company's taxable yea OI, iflater, with 90 days aftr the date
of liquidation. Such distributions shall be in cash or Propert (which need not be
distributed proportionately) or partly in both, as determined by the Manging
Members.
14.4 Winding Up and Certifcate of Disolution - The winding up of a limted liabilty
company shall be completed when all debts, liabilties, and obligations of the limted liabilty
company have been paid and discharged or reasonably adequate provision therefor has ben mae,
and all of the remaining property and assets of the limited liabilty company have been distributed
to the Members. Upon the completion of winding up of the Company, a certificate of dissolution
shall be delivered to the Secretary of State for fiing. The certificate of dissolution shall set fort
the information required by the Act.
ARTICLE XV
AMENDMENT
15.1 Operating Agreement May Be Modied - The Operating Agreement may be
OPERTING AGREEMENT: Page 21
, ¡
modified as provided in this Article XV (as the same may, from time to time be amended).
15.2 Amendment or Modification of Operatig Agreement - The Operating
Agreement may be amended or modified from time to time only by a written instrent adopted
and executed by all of the Members.
ARTICLE XV
MISCELLANEOUS PROVISIONS
16.1 Entire Agreement - The Operating Agreement represents the entire agreement
among all the Members and between the Members and the Company.
16.2 No Partnership Intended for Nonta Purposes - The Members have formed the
Company under the Act, and expressly do not intend hereby to form a parership under either the
State Uniform Partnership Act nor the State Uniform Limited Parership Act. The Members do
not intend to be partners one to another, or parers as to any third party. To the extent any
Member, by word or action, represents to another person tht any other Member is a parner or
that the Company is a partnership, the Member makg such wrongful representation shall be
liable to any other Member who incurs personal liabilty by reason of such wrongful
representation.
16.3 Rights of Creditors and Third Partes under Operatig Agreement - The
Operating Agreement is entered into among the Company and the Members for the exclusive
benefit of the Company, its Members, and their successors and assignees. The Operating
Agreement is expressly not intended for the benefit of any creditor of the Company or any other
Person. Except and only to the extent provided by applicable statute, no such creditor or third
par shall have any rights under the Operating Agreement or any agreement between the
Company and any Member with respect to any Capita Contribution or otherwise.
IN WITNESS WHEREOF, we have hereunto set our hands on the date set fort beside our
our naes,
COMPAN
Date ~h.i&?(7
d W. Stadley, managing member
OPERTIG AGREEMENT: Page 22
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By
Date ~~1Io!J
STATE OF IDAHO )
) ss.
COUNTY OF KOOTENAI )
On this ~ ~ day of May, 2007, before me, the undersigned Nota Public for
the State of Idaho, personally appeared Ronald W. Stadley, known to me or identified to me to be
a Managing Member of Dalton Square, LLC, the limited liabilty company that executed this
instrument, or the person who executed this instrment on behalf of the limted liabilty company,
and acknowledged to me that such limited liabilty company executed the same.
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STATE OF IDAHO )
) ss.COUNTY OF KOOTENAI )
On this 23w day of May, 2007, before me, the undersigned Nota Public for
the State of Idaho, personally appeared Kenneth J. Murren, known to me or identified to me to be
a Managing Member of Dalton Square, LLC, the limted liabilty company tht executed this
instrment, or the person who executed this instruent on behalf of the limited liabilty company,
and acknowledged to me that such limited liabilty company executed the same.
OPERATING AGREEMENT: Page 23
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OPERATING AGREEMENT: Page 24
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My Commssion Expires:
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EXHIBIT A
Member Initial Capita Contribution
Ronald W. Stadley
Kenneth J. Murren
Fair Market Value of Capital Contributions
$
Ownership Interest in Company
Ronald W. Stadley 50 %
Kenneth J. Murren 50 %
OPERATING AGREEMENT: Page 25