OPERATING AGREEMENT for BLOCKCHAIN FUND 1 LLC a Michigan Limited Liability Company ARTICLE 1 DEFINITIONS

Transcription

1 OPERATING AGREEMENT for BLOCKCHAIN FUND 1 LLC a Michigan Limited Liability Company This Operating Agreement ( Operating Agreement ) is made and entered into effective on, 2018, by and among BLOCKCHAIN FUND 1, LLC, a Michigan limited liability company ( Company ), ENSOURCE CAPITAL, LLC, a Michigan limited liability company as Manager of the Company and each of those Persons executing this Operating Agreement as a Member, all of whom agree as follows: ARTICLE 1 DEFINITIONS 1.1 Act means the Michigan Limited Liability Company Act, MCL et seq., 1993 PA 23, as amended. 1.2 Affiliate shall mean, with respect to any specified Person, a Person that directly or through one or more intermediaries controls or is controlled by or is under common control with the specified Person. As used in this definition, the term control means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. 1.3 Articles mean the Articles of Organization for the Company filed with the Bureau, as they may be amended from time to time. 1.4 Asset Value means, with respect to any asset, the asset s adjusted basis for federal income tax purposes, adjusted as follows: a. The initial Asset Value of any property contributed to the Company shall be the asset s fair market value at the time of contribution by the contributing Member. b. The Asset Value of Company assets shall be adjusted to equal their respective fair market values, as determined by the Manager, at the following times: (i) the acquisition of Shares by a new Member or the acquisition of additional Shares by an existing Member in exchange for more than a de minimis capital contribution; (ii) the distribution by the Company of more than a de minimis amount of cash or other property to a retiring or continuing Member as consideration for the retirement of all or part of the Member s Shares; or (iii) in connection with the liquidation of the Company within the meaning of Treas Reg (b)(2)(ii)(g). c. The Asset Value of any asset distributed to a Member shall be adjusted to equal the fair market value of the asset on the date of distribution as determined by the Manager. d. The Asset Value of Company assets shall be increased or decreased, as appropriate, to reflect any adjustments to the adjusted basis of the assets pursuant to IRC 734(b) or IRC 743(b), but only to the extent that the adjustments are taken into account in determining Capital Accounts pursuant to Treas Reg (b)(2)(iv)(m) or section However, no adjustment shall be made pursuant to this subsection (d) if the adjustment has been made under any other subsection under this section Bureau means the Michigan Department of Licensing and Regulatory Affairs Corporations, Securities, and Commercial Licensing Bureau or its successor. 1

2 1.6 Capital Account means the capital account maintained for a Member pursuant to section Capital Contribution means, with respect to any Member, the amount of any cash and any initial Asset Value of any property contributed to the Company by a Member. Capital Contribution includes each Member s initial Capital Contribution, as set forth in section 3.2, and any additional Capital Contributions. 1.8 Capital Contribution Date means the date on which a Member makes a Capital Contribution. 1.9 Company means this limited liability company named on the first page of this Operating Agreement Company Minimum Gain shall have the meaning ascribed to the term partnership minimum gain in Treas Reg (b)(2) Company Nonrecourse Deductions shall have the meaning ascribed to the term in Treas Reg (c) Cryptocurrency shall any established digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank. The mining of Cryptocurrency is the process by which transactions are verified and added to the public ledger, known as the block chain, and also the means through which new Cryptocurrency is released. The Company will mine Cryptocurrency under the direction of the Manager. It is anticipated that the Company will begin its operations by mining Ether ( ETH ), but may mine other Cyptocurrency(ies) in the discretion of the Manager Dollar Value of Cryptocurrency Distribution(s) shall have the meaning set forth in section Eligible Early Subscription(s) shall mean a Subscription for Subscriber Shares that is received by the Company no later than 5:00 PM ET on January 19, 2018 (which date and time may be extended in the sole discretion of the Manager.) In no case will subscriptions for Subscriber Shares purchased by Legacy Investors with the proceeds of the sale to the Company of Legacy Rigs be considered Eligible Early Subscriptions ETH shall mean the Cryptocurrency known as Ether For Cause shall mean the Member or Manager, as applicable, (a) willfully breaches or habitually neglects the duties which he or it is required to perform under the terms of this Agreement; (b) commits fraud, theft or other form of dishonesty related to the Company, Members or Manager; or (c) is convicted of, is indicted for, or enters a guilty plea or plea of no contest with respect to, a felony that is directly related to duties and obligations to the Company and that would prevent the effective performance of those duties Founder Member shall mean Ensource Capital, LLC Founder Shares shall mean the Shares issued to the Founder Member as described in section IRC means the Internal Revenue Code of 1986, as amended Legacy Rig(s) shall mean the equipped, installed and operating cryptocurrency mining rig(s) which has/have been developed, built and operated by Dave Warner and Mark Niskanen (principals of the Manager) the latter part of 2017 and continuing to present for certain individual investors ( Legacy Investor(s) ). The Legacy Investors have agreed to sell such Legacy Rig(s) to the Company at original 2

3 construction cost less an allowance for depreciation (assuming a 36-month useful life) on the condition that all the proceeds from the sale of such Legacy Rig(s) to the Company will be invested by the Legacy Investors in Subscriber Shares in the Offering Majority in Interest shall mean: the affirmative vote or written consent of those Members owning over 50% of all outstanding Shares Manager shall have the meaning ascribed to the term in section 8.1. The initial Manager will be Ensource Capital, LLC Member(s) means any Person executing this Operating Agreement as a Member or who is subsequently admitted as a Member of the Company as an admitted Member pursuant to and in accordance with this Operating Agreement. Members shall include the Founding Member, which is the Manager, the Subscriber Members and any future admitted Members Member Nonrecourse Debt Minimum Gain means an amount determined in accordance with Treas Reg (i)(3) with respect to each Member Nonrecourse Debt that would be Company Minimum Gain if the Member Nonrecourse Debt were a nonrecourse liability as that term is defined in Treas Reg (b)(3) Member Nonrecourse Debt shall have the meaning ascribed to the term partner nonrecourse debt in Treas Reg (b)(4) Member Nonrecourse Deductions shall have the meaning ascribed to the term partner nonrecourse deductions in Treas Reg (i)(2) Membership Interest means a Member s rights in the Company, including, without limitation, the right to receive distributions and tax allocations and the right to vote on or approve certain Company actions or matters to the extent such rights are granted to the Members under the Act or this Operating Agreement. Membership Interests shall be evidenced by Shares of the Company and shall be entitled to the Membership Interest Sharing Ratios set forth in section Membership Interest Sharing Ratio(s) shall have the meaning set forth in section Monetary Subscription Amount shall mean the cash amount paid for a Subscriber s subscription for Subscriber Shares. 130 Offering means the offering to qualified Subscribers pursuant to the Offering Documents of up to 5,000 Subscriber Shares of Membership Interest in the Company at $800 per Share, for a fully subscribed Maximum Subscription Amount of $4,000,000. The Minimum Offering Amount is $2,000,000 (2,500 Subscriber Shares) Offering Documents means the Private Placement Memorandum dated December 22, 2017 ( Memorandum ), the Confidential Information Memorandum dated December 19, 2017 ( CIM ), the Subscription Documents and the Organizational Documents relating to the Offering Organizational Documents shall mean the Company Articles, Operating Agreement and the Subscription Documents relating to the Company and the Offering Payout shall have the meaning set forth in section

4 1.34 Person means an individual, partnership, limited liability company, trust, custodian, estate, association, corporation, governmental entity, or any other legal entity Profits and Losses means an amount equal to the Company s taxable income or loss for the fiscal year determined under IRC 703(a) and Treas Reg , adjusted as follows: a. All items of income, gain, loss, or deduction required to be separately stated pursuant to IRC 703(a)(1) shall be included. b. Tax-exempt income as described in IRC 705(a)(1)(B) realized by the Company during the fiscal year shall be included. c. Expenditures of the Company described in IRC 705(a)(2)(B) for the fiscal year, including items treated under Treas Reg (b)(2)(iv)(j) as items described in IRC 705(a)(2)(B), shall be taken into account as if they were deductible items. d. Items that are specially allocated to the Members under sections 5.2 and 5.3 shall be excluded. e. For property (other than money) that has been contributed to the capital of the Company, Profit and Loss shall be computed in accordance with the provisions of Treas Reg (b)(2)(iv)(g) by computing depreciation, amortization, gain, or loss on the Asset Value of the property on the books of the Company. f. For any property of the Company that has been revalued as required or permitted by regulations under IRC 704(b), Profit or Loss shall be determined based on the Asset Value of the property as determined in the revaluation. g. The difference between the adjusted basis for federal income tax purposes and the fair market value of any Company asset shall be treated as gain or loss from the disposition of the asset if (i) any new or existing Member acquires an additional interest in the Company in exchange for a contribution to the capital of the Company or (ii) the Company asset is distributed to a Member as consideration for a partial redemption of the Member s Shares (and corresponding Membership Interest percentage) in the Company or in liquidation (as defined in Treas Reg (b)(2)(ii)(g)) of the Company s Shares Purchase Price means the price at which Shares are sold and transferred pursuant to and on the happening of the events specified in article IX of this Operating Agreement Share(s) is the term used to represent a Member s evidence of ownership of Membership Interest in the Company. Shares include both Subscriber Shares which will be offered and sold to Subscribers in the Offering and Founder Shares which are issued to the Manager, as the Founder Member of the Company, which has founded and organized the Company Subscriber(s) or Subscriber Member(s) means those Persons who subscribe to Subscriber Shares in the Offering and are accepted by the Manager as Subscriber Members in the Company Subscriber Share(s) shall mean the Shares of the Company issued to Subscribers in the Offering and having the characteristics described in section Subscriber Incentive Discount(s) shall mean the applicable discount on a Subscriber s Monetary Subscription Amount computed as follows: For any Eligible Early Subscription, 5.0% of any excess Monetary Subscription Amount of an Eligible Early Subscription in excess of the initial $25,000 amount 4

5 thereof; Provided, however, that in the case of an Eligible Early Subscription of a Subscriber for $100,000 or greater, the 5.0% discount shall apply to the entire Monetary Subscription Amount, including the initial $25, Subscription Documents means the documents, including the Subscription Agreement and Questionnaire and the Subscription Application Page contained therein, to be executed and delivered by each Subscriber in connection with a subscription for Subscriber Shares of the Company in the Offering Tax Matters Member shall the have meaning ascribed to the term Tax Matters Partner under IRC 6231(a)(7) Transfer shall have the meaning ascribed to the term in section 9.1 of this Operating Agreement Treas Reg or Treas Regs means the Treasury Regulations promulgated under the Internal Revenue Code. Additional terms are defined elsewhere in this Operating Agreement. ARTICLE II ORGANIZATION 2.1 Formation. The Company has been organized as a manager-managed Michigan limited liability company by the filing of the Articles as required by the Act. 2.2 Name. The name of the Company is stated on the first page of this Operating Agreement. 2.3 Purpose. The Company has been formed for the purpose or purposes enumerated in the Articles. The Company shall have all the powers necessary or convenient to undertake and pursue any purpose for which it is formed, including all powers granted by the Act. The Company intends to undertake the business plan and activities described in the Offering Documents. 2.4 Duration. The Company shall commence on the date of filing of the Articles with the Bureau and shall continue in existence for the period fixed in the Articles or until the Company dissolves and its affairs are wound up in accordance with the Act or this Operating Agreement. 2.5 Registered Office and Resident Agent. The Registered Office and Resident Agent of the Company shall be as designated in the initial or amended Articles. The Registered Office or Resident Agent may be changed from time to time. Any change shall be made in accordance with the requirements of the Act. If the Resident Agent resigns, the Company shall promptly appoint a successor. 2.6 No Liability of Manager and Members. Unless otherwise provided by law or in this Operating Agreement, a Person who is a Member, a Manager, or both, of the Company is not liable for the acts, debts, or obligations of the Company. 2.7 No Management Authority of Members. Except as otherwise provided for in this Operating Agreement or the Act, no Member, acting in the capacity of a Member, shall have the right, power, or authority to manage the business and affairs of the Company, bind the Company under any contract or agreement, or otherwise perform any act on behalf of the Company. 5

6 ARTICLE III MEMBERSHIP 3.1 Shares of Membership Interest and Sharing Ratios. Each Member s ownership of a Membership Interest and corresponding Membership Interest Sharing Ratio in the Company shall be represented by certificated or uncertificated Shares in the Company as recorded in the official books and records of the Company. Subscriber Members will be issued Subscriber Shares and the Founder Member will be issued Founder Shares. The number of Shares and Membership Interest Sharing Ratios owned by Subscriber Members and the Founder Member, respectively, shall be as follows: MEMBERS Subscriber(s) to the Offering ( Subscriber Member(s) ) NUMBER/TYPE OF SHARES For all Subscribers in the aggregate - 50,000 (the Subscriber Shares ) (1) MEMBERSHIP INTEREST SHARING RATIOS For all Subscriber Shares in the aggregate - 80% before Payout / 50% after Payout (2) (3) Ensource Capital, LLC ( Founder Member and the Manager ) 50,000 (the Founder Shares ) 20% prior to Payout / 50% after Payout (3) Notes: (1) For any individual Subscriber Member, the number of Subscriber Shares will be equal to: (a) the Monetary Subscription Amount of the Subscriber Shares subscribed (before consideration of any Subscriber Incentive Discount), divided by (b) the aggregate Monetary Subscription Amount of all Subscriber Share subscriptions (before consideration of any Subscriber Incentive Discounts), times (c) 50,000. (2) For any individual Subscriber Member, the Membership Interest Sharing Ratio will be equal to: (a) the aggregate Membership Interest Sharing Ratio of for all Subscriber Shares, times (b) the percentage of Subscriber Shares owned by the individual Subscriber Member. (3) The term Payout means the event and time wherein the aggregate of all distributions from the Company to Subscriber Members (inclusive of: (a) the Dollar Value of Cryptocurrency Distributions; (b) the amount of any cash distributions, and (c) the fair market value of any other property distributed in kind), equals the aggregate Monetary Subscription Amount of all Subscriber Share subscriptions in the Offering (before consideration any Subscriber Discount Incentives.) The term Dollar Value of Cryptocurrency Distribution(s) means, as of the date and time of any in kind distribution of Cryptocurrency to Members, the U.S. Dollar exchange value for such Cryptocurrency as published on CoinMarketCap.com, a recognized cryptocurrency market cap and price checking website. 3.2 Initial Capital Contributions. In consideration for issuance of Member Shares and Membership Interest, each Subscriber Member will make an initial Capital Contribution to the Company in the amount of such Subscriber Member s Monetary Subscription Amount less any applicable Subscriber Incentive 6

7 Discount. Such initial Capital Contributions shall be recorded in the official books and records of the Company. The Founder Member will receive its Founder Shares and Membership Interest associated therewith in consideration for founding and organizing the Company, but not in consideration for any monetary Capital Contribution. The Manager(s), or an Affiliate of the Manager, may at their option make initial cash Capital Contributions to the Company as Subscribers to Subscriber Shares in the Offering. 3.3 Additional Capital Contributions No Member shall be required to make any additional Capital Contributions to the Company If the Manager determines that additional funds are needed by the Company, the Manager may formulate a plan of additional capitalization or financing and present such plan to the Members in writing. No plan of capitalization or financing which involves an actual or potential material dilution to the Membership Interest of any Member will be binding on such Member unless such plan is affirmatively approved by such Member. Further, any such plan of capitalization must be approved by a Majority in Interest of Members of the Company. 3.4 Member Capital Accounts The Company shall maintain a separate Capital Account for each Member. Each Member s Capital Account shall be a. increased for (i) the amount of cash and the Asset Value of any property contributed by the Member, (ii) the amount of any Company liabilities assumed by the Member or secured by any property distributed to the Member, and (iii) the Member s distributive share of any of the Company s Profits and any items of income or gain that are specially allocated to the Member pursuant to sections 5.2 and 5.3 of this Operating Agreement; b. decreased for (i) the amount of any cash and the Asset Value of any property distributed to the Member, (ii) the amount of any liabilities of the Member assumed by the Company or secured by any property contributed by the Member to the Company, and (iii) the Member s distributive share of any Losses of the Company and any items of expense, loss, or deduction that are specifically allocated to the Member pursuant to sections 5.2 and 5.3 of this Operating Agreement; and c. credited, in the case of an increase, or debited, in the case of a decrease, for the Member s share of any adjustment to the adjusted basis of Company assets pursuant to IRC 734(b) or IRC 743(b) to the extent provided under Treas Reg (b)(2)(iv)(m) All of the provisions stated above regarding the establishment and maintenance of Capital Accounts are intended to comply with Treas Reg (b)(2)(iv) and shall be interpreted and applied to comply with the Treasury Regulation. The Members agree that the Managers may make any adjustments to the Capital Accounts that may be necessary or appropriate to comply with the Treasury Regulation. 3.5 No Rights to Company Assets. Except as may otherwise be expressly provided in this Operating Agreement or under the Act, no Member is entitled to receive any interest or return on any contributions to the Company or on the Member s Capital Account; nor does any Member have any interest, right, or claim in or to any of the Company s assets. 3.6 Borrowings. The Company may borrow money from any source, including a Member or the Manager, on any terms and conditions determined by the Manager to be fair and commercially reasonable. 7

8 3.6.1 One or more Member(s), or Affiliate(s) of Member(s) (the Guarantor(s) ), although not required, may from time to time provide a personal guaranty (the Guaranty(ies) ) of one of more loans made to the Company (the Company Loan(s) ). In connection with the closing of each such Company Loan for which Guaranty(ies) are provided, the Company and any Guarantor(s) agree as follows: (a) the Company agrees to indemnify and hold each Guarantor harmless from any cost, expense, liability or claim (including reasonable attorneys fees and costs) arising from or related to a claim made by the lender under a Company Loan against the Guarantor s Guaranty of the loan; and (b) each Guarantor (the Indemnifying Guarantor ) agrees to indemnify and hold each other Guarantor (the Indemnified Guarantor ) harmless to the extent the Indemnifying Guarantor has been required under its Guaranty to pay an amount with respect to the Company Loan which is less than the Indemnifying Guarantor s pro rata share (based on the Shares of the Guarantor or the Guarantor s affiliated Member) of the total amount paid by all Guarantors under their Guaranties with respect to the Loan (after consideration of any amounts collected from the Company or any other Guarantor under the indemnity provisions described above). Notwithstanding any provision of this Operating Agreement to the contrary, any amount to be distributed under this Operating Agreement to a Member who has unpaid obligations (or whose affiliate has unpaid obligations) under the indemnity provisions above, shall first be distributed and paid in discharge of those unpaid obligations and the balance, if any, distributed to the Member. 3.7 Admission of New Members. The Manager may admit as an admitted Member any Person determined by the Manager to satisfy the criteria established by the Manager, in its sole and absolute discretion, for membership in the Company. The Person shall, before being admitted as a Member of the Company and as a condition to admission, execute any document or documents required by the Company, agreeing to be and become a Member of the Company, subject to all the terms and conditions of this Operating Agreement. 3.8 No Right of Withdrawal. The Members shall not have any right of withdrawal or any right to receive any payment or distribution from the Company on any actual or purported withdrawal. The Members agree not to withdraw, and they waive any right of withdrawal and any right to receive any payment or distribution on withdrawal provided for or under the Act. ARTICLE IV ADMINISTRATIVE PROVISIONS 4.1 Books of Account. At all times during the continuance of the Company, the Company shall keep or cause to be kept full and true books of account reflecting each of the Company s transactions. These books of account, together with a list of the name and address of each Member; a copy of the Articles; copies of the Company s financial statements and federal, state, and local tax returns; reports for any prior fiscal year(s); a copy of this Operating Agreement; and copies of records that would enable a Member to determine the Member s Shares, shall be maintained at all times at the Company s registered office. These books shall be open to reasonable inspection and examination by the Members at the Company s registered office, during reasonable business hours, on reasonable notice to the Company. The Company may engage certified public accountants, or other experts, to assist in the preparation of the Company s books and financial statements and to render any other services the Company requests. 4.2 Reports. The Company shall furnish to each Member within 90 days after the end of each fiscal year, or as soon as practical, an annual report of the Company s business and operations during the year, together with any information necessary for the preparation of each Member s federal and state income or other tax returns. The annual report shall contain a copy of the Company s annual financial statement showing the Company s gross receipts and expenses and profit or loss and the allocations to each Member for the year. In addition to the foregoing, the Company intends to furnish Members more frequently with various reports 8

9 of operations and/or industry information that may be informative to Members in connection with operation of the Company and ownership of their Shares. 4.3 Fiscal Year and Accounting Method. The fiscal year of the Company shall be determined in accordance with IRC 706(b) and the regulations promulgated under it. The Company s books and records shall be kept on the cash or accrual method as determined by the Manager. 4.4 Checks. All checks, drafts, orders for the payment of money, notes, or evidences of indebtedness issued in the name of the Company shall be signed by a Manager or by an authorized agent of the Company and in a manner determined by the Manager. 4.5 Tax Matters Member; Member Tax Returns As used in this Operating Agreement, the Tax Matters Member shall be that Person who is designated as the Company s Tax Matters Member by the Manager. The initial Tax Matters Member of the Company shall be the Manager Each Member shall reflect on his or her individual income tax returns all items of income, gain, loss, deduction, or credit relating to the Company, its property, or its business in a manner that is consistent with the treatment of those items on the Company returns. ARTICLE V PROFIT AND LOSS ALLOCATIONS 5.1 Allocation of Profits and Losses. After the application of sections 5.2 and 5.3, Profits and Losses for each fiscal year (or any portion of it) shall be allocated among the Members on a pro-rata basis, in accordance with the number of Shares and the type of Shares (i.e. Subscriber Shares or Founder Shares) held by each Member. See section 3.1 hereof for information on the Membership Interest Sharing Ratios associated with Subscriber Shares and Founder Shares respectively. 5.2 Regulatory Allocations. The following regulatory allocations shall be made in the following order of priority: Minimum-Gain Chargeback. To the extent and in the manner required by Treas Reg (f)(1), if there is a net decrease in Company Minimum Gain for any fiscal year, each Member shall be specially allocated items of Company income or gain for the fiscal year (and, if necessary, succeeding fiscal years) in an amount equal to that Member s share of the net decrease in Company Minimum Gain determined under Treas Reg (g). This section shall be interpreted and applied in a manner consistent with the minimum-gain chargeback requirements of Treas Reg (f) Member Minimum-Gain Chargeback. To the extent and in the manner required by Treas Reg (i)(4), if there is a net decrease in Member Nonrecourse Debt Minimum Gain during any fiscal year, each Member who has a share of that Member Nonrecourse Debt Minimum Gain, determined in accordance with Treas Reg (i)(5), shall be specially allocated items of Company income and gain for the fiscal year (and, if necessary, succeeding fiscal years) in an amount equal to the Member s share of the net decrease in Member Nonrecourse Debt Minimum Gain, determined in accordance with Treas Reg (i)(4). The items to be allocated shall be determined in accordance with Treas Reg (f)(6). This section shall be interpreted and applied in a manner consistent with the minimum-gain chargeback requirements of Treas Reg (i)(4). 9

10 5.2.3 Qualified Income Offset. If any Member unexpectedly receives any adjustments, allocations, or distributions described in Treas Reg (b)(2)(ii)(d)(4), (5), or (6), items of Company income and gain shall be specially allocated to the Member in an amount and manner sufficient to eliminate, as quickly as possible, to the extent required by the Treasury Regulations, the deficit capital account of the Member after the Member s Capital Account is (a) credited for any amounts the Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treas Reg (g)(1) and (i)(5) and (b) debited for those items described in Treas Reg (b)(2)(ii)(d)(4), (5), and (6). However, an allocation under this section shall be made only if and to the extent that the Member would have a deficit capital account (as adjusted in the manner provided for here) after all other allocations provided for in this article V have been tentatively made as if this section were not in this Agreement Gross Income Allocation. If any Member has a deficit Capital Account at the end of any fiscal year that is in excess of the sum of (i) the amount the member is obligated to restore pursuant to any provision of this Operating Agreement and (ii) the amount the Member is deemed to be obligated to restore pursuant to the penultimate sentences of Treas Reg (g)(1) and (i)(5), the Member shall be specially allocated items of Company income and gain in the amount of the excess as quickly as possible, provided that an allocation pursuant to this section shall be made only if and to the extent that the Member would have a deficit Capital Account in excess of this sum after all other allocations provided for in this article V have been made as if section and this section were not in the Operating Agreement Company Nonrecourse Deductions. Any Company Nonrecourse Deductions shall be allocated among the Members on a pro-rata basis in accordance with the number of Shares held by each Member Member Nonrecourse Deductions. Any Member Nonrecourse Deductions shall be specially allocated to the Members who bear the economic risk of loss with respect to the Member Nonrecourse Debt to which Member Nonrecourse Deductions are attributable. This section shall be interpreted and applied in a manner consistent with Treas Reg (i)(1) IRC 754 Adjustments. To the extent an adjustment to adjusted tax basis of any Company Asset pursuant to IRC 734(b) or IRC 743(b) is required, pursuant to Treas Reg (b)(2)(iv)(m)(2) or (4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of the Member s Shares in the Company, the amount of the adjustment to Capital Accounts shall be treated as an item of gain or loss, as applicable, and the gain or loss shall be specially allocated to the Members in accordance with their Membership Interest in the Company if Treas Reg (b)(2)(iv)(m)(2) applies or to the Member to whom the distribution was made if Treas Reg (b)(2)(iv)(m)(4) applies. 5.3 Curative Allocations. The allocations in section 5.2 are necessary to comply with the requirements of the Treasury Regulations. To the maximum extent possible, the regulatory allocations made pursuant to section 5.2 shall be offset by other items of the Company income, gain, loss, or deduction so that, after the offsetting allocations are made, the Members Capital Account balances are, to the extent possible, equal to the Capital Account balances the Members would have if the regulatory allocations were not made and all items of income, gain, loss, deduction, or credit were allocated in accordance with each Member s respective Shares. 5.4 Allocations Regarding Contributed Property. In accordance with IRC 704(c) and the Treasury Regulations under it, items of income, gain, loss, and deduction with respect to any property contributed to the capital of the Company by any Member 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 Asset Value for Capital Account purposes. Whenever the Capital Accounts of Members are required to be adjusted pursuant to Treas Reg (b)(2)(iv)(f) or (g) with respect to a 10

11 revaluation of any asset of the Company, subsequent allocations of income, gain, loss, and deduction, including, without limitation, depreciation with respect to the asset, shall take into account any variation between the then-existing adjusted tax basis of the asset and the Asset Value as adjusted of the asset, as such computations may be required under IRC 704(b) and (c) and the regulations promulgated under them. 5.5 Interpretation. The Members intend that the allocations of the Company s Profits and Losses shall be applied in a manner consistent with IRC 704 and the Treasury Regulations promulgated under it. The provisions of this article V shall be interpreted in a manner consistent with IRC 704 and the Treasury Regulations promulgated under it. 6.1 Non-liquidating Distributions. ARTICLE VI DISTRIBUTIONS Subject to section 6.3, the Company and Members agree that for each fiscal year, the Manager shall use best efforts to distribute sufficient cash or in kind Cryptocurrency to the Members (pro rata, in accordance with each Members respective Membership Interest Sharing Ratios) to satisfy estimated federal, state, and local income taxes for the relevant period resulting from the taxable income of the Company being taxed to the Members as a result of the partnership tax status of the Company ( Tax Distributions. ) The Company s obligation to make the Tax Distributions shall be deemed to be an obligation of the Company and shall be properly reserved for by the Manager before making any other nonliquidating distributions. For this purpose, the Members will be deemed to pay tax at the highest marginal individual income tax rate Subject also to section 6.3, additional distributions Cryptocurrency, cash or other property to the Members may be made to the Members (pro rata, in accordance with each Member s respective Shares and Membership Interest Sharing Ratios) in amounts and forms and at times determined by the Manager. It is anticipated that distributions of Cryptocurrency or cash will be made to Members at least quarterly) 6.2 Liquidating Distributions. If the Company is dissolved under article XI or is liquidated within the meaning of Treas Reg (b)(2)(ii)(g), in compliance with Treas Reg (b)(2)(ii)(b)(2), all liquidating distributions in the form of Cryptocurrency, cash or other property shall be made to the Members who have positive Capital Accounts, in accordance with the positive Capital Account balances, but only after the Capital Accounts have been adjusted for all prior contributions and distributions and all allocations under article V for all fiscal years (including the fiscal year during which the liquidation occurs). 6.3 Restrictions on Distributions. Except as otherwise permitted under the Act, the Manager shall not make a distribution (non-liquidating or liquidating) if, after giving the distribution effect, the Company would not be able to pay its debts as they become due in the usual course of business or the Company s total assets would be less than the sum of its total liabilities. The effect of the distribution shall be measured at the times set forth in the Act. ARTICLE VII MEMBER MEETINGS AND VOTING 7.1 Member Voting Rights. Subject to the terms and provisions of this Operating Agreement, each Share (whether a Founder Share or a Subscriber Share) is entitled to one vote on each matter submitted to a vote of the Members. A vote may be cast orally or in writing as determined by the representative of the Manager presiding over of the meeting or written consent process. Except as otherwise provided by the Articles or 11

12 this Operating Agreement, any action of the Members shall require the affirmative vote or written consent of a Majority in Interest of the outstanding Shares. The following specific actions shall be authorized by the vote or written consent of the Members: a. a merger, share exchange, reorganization, or similar transaction involving the Company, or a sale of all or substantially all of the Company s assets; b. the dissolution of the Company; c. material amendments to the Articles or, material amendments to the Operating Agreement which may adversely affect the economic or other rights or the responsibilities of the Members; or d. such other actions that specifically require a vote or consent of the Members, or any class thereof, as set forth in the Act, Articles or elsewhere in this Operating Agreement. Where specifically provided herein, certain actions may require authorization by the affirmative vote consent of a certain class of Shares (i.e Member Shares or Founder Shares). 7.2 Meetings. Regular meetings of the Members shall be held within 90 days of the end of each fiscal year, or as soon as practical, for the purpose of reviewing the results of the Company s business and operations during the prior period and any other matters the Members may wish to consider. A special meeting of the Members may be called by the Manager or one or more Members holding at least 25% of the total outstanding Shares. The Manager or Members calling the special meeting shall provide each of the Members with written notice of the time, place, and purposes of the special meeting. The notice shall be given to each of the Members not less than 5 or more than 30 days before the scheduled date of the special meeting. A Member may participate in any meeting (either regular or special) of the Members by internet, a conference telephone or by other similar communications equipment through which all Persons participating in the meeting may communicate with the other participants. Participation in a meeting by internet, a conference telephone or by other similar communications equipment constitutes presence in person at the meeting. A Member entitled to vote at any meeting of the Members or to express consent or dissent without a meeting may authorize another Member a representative of the Manager to act for the Member by proxy. A Member may waive notice of time, place, and purpose of any meeting either before or after any meeting is held. 7.3 Adjournment of Meetings. Any meeting of the Members may be adjourned to another time or place by a Majority in Interest of the Shares present, regardless of whether the Shares constitute a Majority in Interest of the outstanding Shares at the time of the adjournment. If a meeting is adjourned, notice of the adjourned meeting is not required to be given if the time and place of the adjourned meeting is announced at the meeting at which the adjournment occurs. The Members may transact any business at the adjourned meeting that might have been transacted at the original meeting. 7.4 Actions by Written Consent. Any action required or permitted by the Act, the Articles, or this Operating Agreement to be taken at any meeting of the Members may be taken without a meeting, without prior notice, and without a vote if written consents setting forth the action taken are signed by Members who collectively own the requisite number of Shares that would otherwise be entitled or required to vote on the indicated action at a duly convened meeting of Members. 12

13 ARTICLE VIII MANAGEMENT 8.1 Number, Term, and Election. Except as otherwise provided in this Operating Agreement or required under the Act, the business and affairs of the Company shall be managed by or under the authority of one or more Manager(s). A Manager may or may not be a Member and may be a natural person or an entity. If there is more than one Manager of the Company, the Managers shall be constituted and function collectively as a board of Managers (Board of Managers) operating upon majority vote and assigning such specific powers, authorities or limitations to individual Managers as the Board of Managers shall from time to time determine. A Manager who is a natural person shall continue to serve in such capacity until he or she dies, becomes Permanently Disabled, is adjudicated bankrupt or insolvent, or until he or she resigns or is removed as provided in section 8.5. A Manager which is an entity shall continue to serve in such capacity until it is acquired, merged, dissolves or is adjudicated bankrupt or insolvent, or until it resigns or is removed as provided in section Initial Manager. The initial Manager of the Company shall be Ensource Capital, LLC, a Michigan limited liability company and the Founding Member. 8.3 Power and Authority. The Manager(s) shall have all power and authority to manage, direct, legally bind and take action to undertake and execute the business and affairs of the Company as may be permitted by the Act and this Operating Agreement. 8.4 Resignation. A Manager may resign at any time by giving at least 30 days prior written notice to other Manager(s), if any, and the Members. 8.5 Removal. A Manager may be removed only For Cause upon a Super-Majority Interest vote of at least 75% in interest of the Members owning Subscriber Shares (exclusive of any Member who is also a Manager, or an Affiliate of a Manager, which is the Manager sought to be removed.) 8.6 Vacancy. If any Manager resigns, is removed, or due to death, Permanent Disability, sale, merger, dissolution, or adjudication of bankruptcy or insolvency, or otherwise is unwilling or unable to serve as a Manager, the remaining Manager(s), if any, shall appoint his or her successor. If there are no remaining Manager(s), the Members by Majority in Interest vote or written consent shall appoint a successor Manager. 8.7 Meetings of the Manager(s). If there is more than one Manager, the Board of Managers may have meetings. Meetings of the Board of Managers may be held at any time on the request of one Manager. Unless waived, written notice of the time and date of the meeting, together with a written agenda specifying the matters to be addressed at the meeting, shall be delivered or mailed to each Manager not less than 5 or more than 30 days before the date of the meeting, or within a shorter period and by another form of notice if, because of urgency, 5 days prior written notice is not practical. A Manager may participate in a meeting by means of a conference telephone or similar communications equipment through which all Managers participating in the meeting can communicate with the other Managers. Participation in a meeting in this manner constitutes presence in person at the meeting. 8.8 Quorum; Required Vote. A quorum of the Managers at any meeting of the Board of Managers shall consist of a majority of the Managers then in office. The affirmative vote or written consent of a majority of the Managers shall constitute the action of the Managers. 13

14 8.9 Action by Written Consent. Any action required or permitted to be taken at any meeting of the Managers may be taken without a meeting, without notice, and without a vote, if a majority of the Managers then in office consent in writing to the action No Authority of Members. No Member acting in the capacity of a Member shall have the power or authority to act on behalf of or bind the Company, to authorize any action to be taken by or the Company, to act as agent for the Company, or to incur any liability or expense on behalf of the Company Officers. The Manager(s) may appoint one or more officers of the Company with the titles, powers, authority, and duties that the Manager(s) may determine except, however, the officers shall not have any power or authority, either alone or with any other officer, to take any action that is in excess of the power and authority granted the Manager(s) by this Operating Agreement. An officer may be removed by the Manager(s) at any time, without prior notice, for any or no reason or cause whatsoever Advisors. The Manager(s) may seek or retain the advice and counsel of one or more Person(s) (including Member(s)) with respect to matters relating the Company and its business. Such Person(s) shall have no power or authority to make decisions, vote or take action on behalf of the Manager or the Company, and shall serve in the capacity of advisor(s) at the pleasure of the Manager. ARTICLE IX TRANSFERS OF SHARES 9.1 Prohibition on Transfers of Shares. The Members each agree that they will not voluntarily, and cannot involuntarily, or by operation of law sell, transfer, assign, encumber, pledge, convey, or otherwise dispose of ( Transfer ) part or all of the Shares they now own or may acquire at a later time except pursuant to the terms and conditions of this article IX. Any Transfer or attempted Transfer in violation of this article IX shall be null and void and of no effect whatsoever. Any certificate representing Shares owned by a Member shall conspicuously bear the following legend: THE OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT, SALE, TRANSFER, OR OTHER DISPOSITION OF THE MEMBERSHIP INTEREST EVIDENCED BY THIS CERTIFICATE IS SUBJECT TO THE RESTRICTIONS IN AN OPERATING AGREEMENT BETWEEN THE MEMBER, THE COMPANY, AND THE OTHER MEMBERS. THAT AGREEMENT CONTAINS CERTAIN RIGHTS AND OPTIONS OF THE COMPANY AND THE OTHER MEMBERS TO PURCHASE THE SHARES EVIDENCING THIS MEMBERSHIP INTEREST. A COPY OF THE OPERATING AGREEMENT IS ON FILE AT THE OFFICE OF THE COMPANY. ANY ENCUMBRANCE, PLEDGE, ASSIGNMENT, SALE, TRANSFER, OR OTHER DISPOSITION OF THIS MEMBERSHIP INTEREST CONTRARY TO THE OPERATING AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. In the event of the dissolution of a Member that is a corporation, limited liability company, partnership, limited partnership, or any other entity, the successors in interest of the dissolved or terminated Member shall, for the purposes of winding up the affairs of the dissolved Member, have the rights of a mere assignee of the Member s Membership Interest in the Company, as provided in the Act, and shall not, unless otherwise permitted by the Act and authorized under provisions of this Operating Agreement, become an additional or substitute Member. 14

15 Any transfer or assignment of any direct or indirect ownership or other interest in a Member that is a corporation, limited liability company, partnership, limited partnership, or any other entity that (taking into account any prior transfers or assignments) results in the Member being controlled by a Person or Persons other than the Person or Persons that controlled the Member when the Member first became a Member shall be deemed a Transfer of the Shares of the Member and therefore subject to all of the restrictions and provisions of this article IX. In addition, any encumbrance, pledge, or other collateral assignment of a direct or indirect ownership or other interest in a Member that is a corporation, limited liability company, partnership, limited partnership, or any other entity that, if the pledgee or other assignee were to exercise its right to acquire the interest, would (taking into account any prior transfers or assignments described above and any prior pledges, encumbrances, or collateral assignments) result in the Member being controlled by a Person or Persons other than the Person or Persons that control the Member on the date of this Agreement, shall be deemed a Transfer of the Shares of the Member and therefore shall also be subject to all of the restrictions and provisions of this article IX. 9.2 Transferee s Rights. No transferee shall have any right to vote on or participate in the management, affairs, or decisions of the Company or to receive any Company information or an accounting of Company funds or affairs unless and until the person is admitted as a Member upon vote or written consent of thenexisting Manager(s). A transferee shall be entitled only to the allocations of Profit and Losses and distributions provided to such Shares under this Operating Agreement as provided by the Act. 9.3 Transferor s Rights. A Member who or which Transfers all or part of the Shares owned by the Member shall no longer have any rights with respect to the Shares transferred (even if the transferee is not admitted as an additional or substitute Member) but shall continue to have all of the liabilities and obligations with respect to the Shares, if any, even if the liabilities and obligations are assumed by the transferee. A Member shall cease to be a Member in the Company on the Transfer of all of the Shares owned by the Member. 9.4 Involuntary Transfers. Each Member agrees that if a Member suffers any involuntary Transfer or purported involuntary Transfer of part or all of the Member s Shares, including but not limited to any Transfer or purported Transfer resulting from foreclosure, asset seizure, bankruptcy, insolvency, divorce, or otherwise, the Member shall immediately provide the Company and all other Members with written notice and the Member shall be deemed to have made on the date of the event an offer to sell all of the Member s Shares pursuant to section 9.6. The Company and other Members shall have the option, but not the obligation, to acquire the Shares in the manner set forth in section 9.6. For the purpose of this section 9.4, an involuntary Transfer shall be deemed to have occurred at the moment a notice of foreclosure or seizure is received, a petition in bankruptcy is filed by or against a Member, a petition seeking the appointment of a receiver over a Member s property is filed by or against the Member, or a complaint of divorce is filed by or against a Member. 9.5 Mandatory Offer to Sell in Case of a Bona Fide Offer. If any Member desires for any reason to Transfer any of the Shares then owned by the Member pursuant to a bona fide offer to purchase the Shares received from another Person (Bona Fide Offer), the selling Member shall immediately provide the Company and all other Members with written notice together with a copy of the Bona Fide Offer and all related agreements and documents. For 90 days following the receipt of the written notice and documents or for 60 days following the determination of the Purchase Price (as defined in section 9.11) under the terms and provisions of this article IX, whichever is longer, the Company shall have the exclusive right and option ( First Option ), but not the obligation, to elect to purchase all (but not merely part) of the Shares subject to the Bona Fide Offer at the same price and terms as in the Bona Fide Offer. If the Company fails to exercise the First Option, for an additional 60 days, the other Members of the Company shall have the exclusive right and option ( Second Option ), but not the obligation, to purchase all (but not merely part) of the Shares subject to the Bona Fide Offer on the same terms available to the Company under the First 15