OPERATING AGREEMENT FOR DANCING RIVER COMMUNITY, LLC (A Nevada Limited Liability Company) THIS OPERATING AGREEMENT is made and entered into as of June 10, 2017, by and between DANCING RIVER COMMUNITY, LLC, a Nevada Limited Liability Company (the "Company") and the persons executing this Operating Agreement as members and managers of the Company and all of those who shall hereafter be admitted as members (individually, a "Member" and collectively, the "Members") who agree as follows: ARTICLE I ORGANIZATION 1.1 Formation. The Company has been organized as a Nevada Limited Liability Company under and pursuant to the Nevada Limited Liability Company Act (Chapter 86 of the Nevada Revised Statutes) (the "Act") by the filing of Articles of Organization ("Articles") with the Secretary of State of the state of Nevada as required by the Act. 1.2 Name. The name of the Company shall be DANCING RIVER COMMUNITY LLC. The Company may also conduct its business under one or more assumed names. 1.3 Purposes. The purposes of the Company are to engage in any activity for which Limited Liability Companies may be formed under the Act, specifically including, but not limited to, the following: (a) The Company owns real property located at 7777 White Fir Street, Reno, Nevada ( Property ). The Company shall own the Property and develop residential units on the Property in which the Members may reside in accordance with the terms and conditions as set forth herein, and thereafter the Company shall maintain, own, and operate the residential units on a cooperative basis. (b) Any lawful activity and any and all things and carry on all other activities necessary or incidental to the accomplishment of the foregoing purpose or for the protection of the Company's interests. (c) To raise capital, borrow funds, and to take all necessary and reasonable steps to insure that the Company has adequate working capital to carry out the purpose of the Company set forth above. 1
The Company shall have all the powers necessary or convenient to effect any purpose for which it is formed, including all powers granted by the Act. the Articles. 1.4 Duration. The Company shall continue in existence for the period fixed in 1.5 Registered Office and Registered Agent. The Registered Office and Registered Agent of the Company shall be as designated in the initial Articles or any amendment thereof. The Registered Office and/or Registered Agent may be changed from time to time. Any such change shall be made in accordance with the Act. If the Registered Agent shall ever resign, the Company shall promptly appoint a successor. 1.6 Intention for Company. The Members have formed the Company as a Limited Liability Company under and pursuant to the Act. The Members specifically intend and agree that the Company not be a partnership (including, a limited partnership) or any other venture, but a Limited Liability Company under and pursuant to the Act. No Member or Manager, if any, shall be construed to be a partner in the Company or a partner of any other Member, Manager or person and the Articles, this Operating Agreement and the relationships created thereby and arising therefrom shall not be construed to suggest otherwise. ARTICLE II MEMBERSHIP 2.1 Authorized membership. The authorized membership of the Company shall consist of memberships with subscription prices listed in Exhibit A attached hereto and incorporated herein. Each person signing this Operating Agreement is a Member and any person who becomes a Member after acquiring a membership interest in the Company as described herein. 2.2 Eligibility. Any natural person approved by the Board shall be eligible for membership. Membership may be assigned to a revocable living trust without Board approval. 2.3 Application for membership. Application for membership shall be presented in person on a form of Subscription Agreement prescribed by the Board, and all such applications shall be acted upon promptly by the Board. 2.4 Subscription funds. All subscription funds shall be deposited promptly without deduction in a special account to be designated Escrow Account of Subscribers to Membership in DANCING RIVER COMMUNITY, LLC. Upon depositing the subscription funds, the Board of Managers will issue and deliver a membership certificate to the subscribing member. (a) By the execution of this Operating Agreement, the initial Members hereby agree to make the subscription funds contributions set forth in the attached Exhibit A. The initial subscription funds as set out herein shall be made simultaneous with the signing of 2
this agreement, or if not simultaneous with the execution of this Agreement, by way of a Subscription Agreement. The interests of the respective Members in the total capital of the Company (their respective "Sharing Ratios") and Voting Rights are also set forth in Exhibit A. No interest shall accrue on any subscription funds contribution and no Member shall have any right to withdraw or to be repaid any subscription funds contribution except as provided in the Operating Agreement. Except as otherwise provided herein, a Member's sharing ratio may not be diluted without the unanimous consent of all the Members. 2.5 Members. The members shall consist of the organizers and such subscribers as have been approved for membership by the Board and who have paid for their membership and received membership certificates. The status of the organizers as members shall terminate at the first annual meeting of members unless they have executed Subscription Agreements and Occupancy Agreements. 2.6 Occupancy Agreements. Each member is required to enter an Occupancy Agreement, substantially in the form set forth in Exhibit B attached hereto and incorporated herein, with the Company for the property described and set forth in Exhibit A. The descriptions of the properties are set forth in the map in Exhibit C. The Occupancy Agreement may be amended by the majority vote of the Board of Managers. 2.7 Transfer of membership. Except as provided herein, membership shall not be transferable. (a) Death of member. If upon the death of a member the member s interest in the Company passes by will, trust, or intestate succession to a member s immediate family, such legatee or distributee, by assuming in writing the terms of the Subscription Agreement and Occupancy Agreement within 60 days after such member s death, and by paying all amounts due thereunder, may become a member of the Company. If a member dies and an obligation is not assumed in accordance with the foregoing, then the Company shall have an option to purchase the membership from the deceased member s estate or trust in the manner provided in paragraph (b) of this Section, written notice of the death being equivalent to notice of intention to withdraw. If the Company does not exercise such option, the provisions of paragraph (c) of this Section shall be applicable, the references to member therein to be construed as references to the legal representatives of the deceased member. (b) Option of Company to Purchase. If a member desires to leave the Company, he shall notify the Company in writing of such intention and the Company shall have an option for a period of 30 days thereafter, but not the obligation, to purchase the membership, together with all of the member s rights with respect to the dwelling unit, at an amount to be determined by the Company as representing the book value thereof, less any amounts due from the member to the Company pursuant to the Occupancy Agreement. The purchase by the Company of the membership will immediately terminate all such member s rights, including any Occupancy Agreement, and such member shall forthwith vacate the premises. (c) Procedure where Company does not exercise option. If the Company waives in writing its right to purchase the membership under the foregoing option, or if the 3
Company fails to exercise such option within the 30-day period, the member may sell his or her membership to any person who has been duly approved by the Company as a member and occupant, except the Members who are entitled to occupy Building Area 3 and Building Area 2 as set forth in Exhibit C are limited to selling their interest to no more than four (4) members each. If the Company agrees, at the request of the member, to assist the member in finding a purchaser at a price designated in writing by the member, the Company shall be entitled to charge the member a fee it deems reasonable for this service. When the transferee has been approved for membership and has executed the prescribed Occupancy Agreement, the retiring member shall be released of his or her obligations under his or her Occupancy Agreement, provided the retiring member has paid all amounts due the Company to date. 2.8 Termination of membership. In the event the Company has, pursuant to the provisions of any Occupancy Agreement, terminated the rights of a member under such Occupancy Agreement and repossessed the dwelling unit, the member shall be required to deliver promptly to the Company his or her membership certificate and his or her Occupancy Agreement, both endorsed in such manner as may be required by the Company. The Company shall thereupon at its election either: (1) repurchase such membership at its book value as determined by the Company, or (2) proceed with reasonable diligence to effect a sale of the member s rights under such membership to a purchaser and at a sales price acceptable to the Company. The retiring member shall be entitled to receive the book value (if the Company has exercised election (1) above) or the sales price (if the Company has exercised (2) above), but in either case less the following amounts (the determination of such amounts by the Company to be conclusive): (a) Occupancy Agreement. Any amounts due to the Company from the member under the (b) The cost or estimated cost of all deferred maintenance, including painting, redecoration, floor finishing, and such repairs and replacements as are deemed necessary by the Company to place the dwelling unit in suitable condition for another occupant; and (c) Legal and other expenses incurred by the Company in connection with the default of such member and the resale of his or her membership. 2.9 Book value. Whenever the Company elects to purchase a membership as set forth in Paragraph 2.7 of this Article, the term book value shall be understood to mean the proportionate amount of the net worth of the Company attributable to its holdings as of a given date. For the purpose of this computation, net worth consists of the amount paid in by the members (as original consideration for membership) as increased or diminished by the reserve or surplus accounts listed under the capital account classification on the most recent balance sheet prepared by the Company s CPA. 4
2.10 Lien. The Company shall have a lien on each outstanding membership in order to secure payment of any sum which shall be due or become due from the holder thereof for any reason whatsoever, including any sums due under an Occupancy Agreement. 2.11 Transfer of membership on books. No transfer of membership shall be made on the books of the Company within ten days next preceding the annual meeting of the members. ARTICLE III CAPITAL ACCOUNTS 3.1 Capital Contributions. The Members have made initial capital contributions of the amounts set forth in Exhibit A ( Capital Contributions ) in exchange for the Voting Rights and Sharing Ratios set forth opposite their names in that exhibit. The aggregate capital contributions are attributable to the Members on a pro rata basis as set forth therein. (a) Adjusted Capital Contributions. The Capital Contributions attributable to the membership interest held by a member shall be adjusted as follows: (b) Increase. The Capital Contributions shall be increased by the amount of the Company s Debt that, in connection with Distributions, is assumed by the Member or is secured by any property of the Company distributed to the Member under an Occupancy Agreement. Company Debt secured by the real property owned by the Company shall be shared on a pro-rata basis based on each member s Capital Account as determined below. (c) Reduction. The Capital Contributions shall be reduced by the amount of cash and the value of any property of the Company distributed to the Member and the amount of any Debt of the Member that is assumed by the Company or secured by any property contributed by the Member to the Company. (d) Transfers. If any Member transfers all or any number of his or her membership interest in accordance with the terms of this Operating Agreement, the Transferee shall succeed to the Transferor s Adjusted Capital Contribution to the extent that it relates to the transferred membership interest. 3.2 Capital Accounts: There shall be established and maintained with respect to the membership interest held by each Member a Capital Account in accordance with the following: (a) Credits. To each Member s Capital Account there shall be credited (1) the Member s Capital Contributions, (2) the Member s allocable share of Profits pursuant to Article 4.3 below and any items in the nature of income or gain that are specially allocated pursuant to Article 4.4 and 4.5 below, and (3) the amount of any Company Debt that is assumed by the Member or that is secured by any property allocated to the Member under the Occupancy Agreement on a pro-rata basis. 5
(b) Debits. To each Member s Capital Account there shall be debited (1) the amount of cash and the value of any property distributed to the Member, (2) the Member s allocable share of losses pursuant to Article 4.3 below and any items in the nature of deductions or losses specially allocated pursuant to Sections 4.4 and 4.5 below, and (3) the amount of any debt of the Member that is assumed by the Company or secured by any property contributed by the Member to the Company (c) Transfers. If any Member transfers all or any number of his or her membership interest in accordance with the terms of this Operating Agreement, the transferee shall succeed to the transferor s Capital Account to the extent that it relates to the transferred membership interest. (d) Interpretation. The provisions of this section and the other provisions of this Operating Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b) and shall be interpreted and applied in a manner consistent with that Treasury Regulation. The Board also shall (1) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts and the amount of capital reflected on the Company s balance sheet, as computed for book purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g), and (2) make any appropriate modifications in the event that unanticipated events might otherwise cause this Operating Agreement not to comply with Treasury Regulations Section 1.704-1(b). ARTICLE IV ALLOCATIONS AND DISTRIBUTIONS 4.1 Current Distributions. Upon the majority consent of the Board, the Board may make distributions after the Board determines in their reasonable judgment, that the Company has sufficient cash on hand which exceeds the current and the anticipated needs of the Company to fulfill its business purposes (including, needs for operating expenses, debt service, acquisitions, reserves and mandatory distributions, if any). 4.2. Liquidating Distribution. If the Company is liquidated pursuant to Article X below, the assets to be distributed pursuant to Section 10.3 below shall be distributed to the Members pro-rata in accordance with their Capital Account balances, after making the adjustments for allocations under Article III above. 4.3 Profits and Losses. Except as provided below in this Article IV, the Company s profits and losses shall be allocated among the Members in proportion to Capital Account balances of each Member. 4.4 Other Allocation Rules. 6
(a) Tax Credits. The basis (or cost) of any Tax Credit Property shall be allocated among the Members in accordance with section 1.46-3(f)(2)(i) of the Treasury Regulations. All other tax credits shall be allocated among the Members in accordance with applicable law. (b) Transfer of Membership Units. If membership interest is transferred pursuant to this Agreement during any Fiscal Period, the Profits (or Losses) allocated to the Members for each such Fiscal Period shall be allocated among the Members in proportion to the Capital Account of each Member from time to time during the Fiscal Period in accordance with I.R.C. Section 706, using any convention permitted by law and selected by the Board. (c) Determination of Allocable Amounts. The Profits, Losses, or any other items allocable to any Fiscal Period shall be determined on a daily, monthly, or other basis, as determined by the Board using any permissible method under I.R.C. Section 706 and the Treasury Regulations under that section. (d) Rental income. Rental income, net of depreciation specific to a member s property as defined in the Occupancy Agreement ( Member s Property ) will be allocated to that Member s capital account and, at the sole discretion of the Board of Managers, distributed to that member at least quarterly. The Company shall record depreciation specific to the Member s Property on the Company s tax return and allocate the rental income net of the Member s Property depreciation solely to that respective Member without affecting the remaining Member s reportable net income from operations. 4.5 Tax Allocations. (a) Capital Contributions. In accordance with I.R.C. Section 704(c) and the Treasury Regulations under that section, income, gain, loss, and deduction with respect to any Capital Contribution shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the property s adjusted basis to the Company for federal income tax purposes and its initial value. (b) Adjustment of Value. If the value of any Company asset is adjusted, subsequent allocations of income, gain, loss, and deduction with respect to the asset shall take account of any variation between the asset s adjusted basis for federal income tax purposes and its value as so adjusted in the same manner as under I.R.C. Section 704(c) and the Treasury Regulations under that section. (c) Elections. Any elections or other decisions relating to the allocations shall be made by the Board in any manner that reasonably reflects the purpose and intent of this Operating Agreement. Allocations pursuant to this Section 4.5 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of this Operating Agreement. /// /// 7
ARTICLE V MEETINGS OF MEMBERS 5.1 Place of meetings. Meetings of the membership shall be held at the principal office or place of business of the Company or at such other suitable place convenient to the membership as may be designated by the Board. 5.2 Annual meetings. The first annual meeting of the Company shall be held on July 15, 2017. Thereafter, the annual meetings of the Company shall be held on the 15th day of July of each succeeding year. At such meeting there shall be elected by ballot of the members the Board in accordance with the requirements of Paragraph 4.3 of Article IV of this Agreement. The members may also transact such other business of the Company as may properly come before them. 5.3 Special meetings. It shall be the duty of the Board to call a special meeting of the members as directed by resolution of the Board, or upon a petition signed by 20 percent of the members and presented to the Board. The notice of any special meeting shall state the time and place of such meeting and the purpose thereof. No business shall be transacted at a special meeting except as stated in the notice unless by consent of four fifths of the members present, either in person or by proxy. 5.4 Notice of meetings. It shall be the duty of the Board to mail a notice of each annual or special meeting, stating the purpose thereof as well as the time and place where it is to be held, to each member of record, at the member s address as it appears on the membership book of the Company, or if no such address appears, at the member s last-known place of address, at least 15 but not more than 45 days prior to such meeting. The mailing of a notice in the manner provided in this section shall be considered due service of notice. 5.5 Quorum. The presence, either in person or by proxy, of at least 25 percent of the members of record of the Company shall be requisite for, and shall constitute a quorum for, the transaction of business of all meetings of members. 5.6 Adjourned meetings. If any meeting of members cannot be organized because a quorum has not attended, the members who are present, either in person or by proxy, may, except as otherwise provided by law, adjourn the meeting to a time not less than 48 hours from the time the original meeting was called. 5.7 Voting. All Members shall be entitled to vote on any matter submitted to a vote of the Members at the meetings. Notwithstanding the foregoing, the Members shall have the right to vote on all of the following: (a) the dissolution of the Company; (b) the merger of the Company; (c) an amendment to the Articles; or (d) the sale, exchange, lease or other transfer of all or substantially all of the assets of the Company other than in the ordinary course of business; (e) any mortgage, grant of security interest, pledge or encumbrance upon all or substantially all of the assets and property of the Company. 8
5.8 Required Vote. Unless a greater vote is required by the Act or the Articles, the affirmative vote or consent of a majority of all the Members entitled to vote or consent on such matter shall be required. The number of votes each member is entitled to on any given matter is set forth in Exhibit A, attached hereto. For purposes of determining voting rights, Exhibit A shall be controlling. 5.9 Proxies. A member may appoint only his or her spouse as a proxy. Any proxy must be filed with the Board before the appointed time of each meeting. 5.10 Order of business. The order of business of all meetings of the Members shall be as follows: (a) Roll call. (b) Proof of notice of meeting or waiver of notice. (c) Reading of minutes of preceding meeting. (d) Reports of the Board. (e) Report of committees. (f) Election of the Board of Managers. (g) Unfinished business. (h) New business. ARTICLE VI BOARD OF MANAGERS 6.1 Number and qualification. The affairs of the Company shall be governed by a Board of Managers ( Board ) composed of two (2) persons, all of whom shall be members of the Company. The initial managers shall be Iris Stille and Thomas Stille. Decisions of the Board of Managers shall be made by a majority vote of the Managers. 6.2 Powers and duties. The Board shall have the powers and duties necessary for the administration of the affairs of the Company and may do all such acts and things as are not by law or by this Agreement directed to be exercised and done by the members. The powers of the Board shall include but not be limited to the following: 9
(a) To prepare an annual operating budget; (b) To accept or reject all applications for membership and admission to occupancy of a dwelling unit in the cooperative housing project, either directly or through an authorized representative; (c) To establish monthly carrying charges prescribed in the Occupancy Agreement, based on an annual operating budget formally adopted by the Board; (d) To authorize in their discretion distributions to the members as a result of any revenue generated by the Company s lease of its common areas; and (e) To amend the Occupancy Agreement; (f) To hold hearings to determine good cause for termination of a member under the Occupancy Agreement. (g) To promulgate and amend from time to time such rules and regulations pertaining to use and occupancy of the premises as may be deemed proper and which are consistent with the Operating Agreement, Nevada statutes and the Articles of Organization. Said rules and regulations shall be referred to as House Rules and Procedures. 6.3 Election and term of office. The term of the Managers named in the Articles of Organization shall expire when their successors have been elected at the first annual meeting or any special meeting called for that purpose. At the first annual meeting of the members, the term of office of the first two managers shall be fixed for three years and an additional manager shall be elected to serve a two year term. At the expiration of the initial term of office of each respective managers, that manager s successor shall be elected to serve a term of three years. The managers shall hold office until their successors have been elected and hold their first meeting. 6.4 Vacancies. Vacancies in the Board of Managers caused by any reason other than the removal of a Manager by a vote of the membership shall be filled by vote of the majority of the remaining managers, even though they may constitute less than a quorum; and each person so elected shall be a manager until a successor is elected by the members at the next annual meeting. 6.5 Removal of Managers. At any regular or special meeting duly called, any one or more of the managers elected by the members may be removed with or without cause by a vote of the majority of the entire membership of record and a successor may then and there be elected to fill the vacancy thus created. Any manager whose removal has been proposed by the members shall be given an opportunity to be heard at the meeting. 6.6 Compensation. No compensation shall be paid to managers for their services as managers. No remuneration shall be paid to a manager for services performed by him 10
for the Company in any other capacity, unless a resolution authorizing such remuneration shall have been unanimously adopted by the Board of Managers before the services are undertaken. A manager may not be an employee of the Company. 6.7 Organization meeting. The first meeting of a newly elected Board of Managers shall be held within ten days of election at such place as shall be fixed by the managers at the meeting at which such managers were elected, and no notice shall be necessary to the newly elected managers in order legally to constitute such meeting, provided a majority of the whole Board shall be present. 6.8 Regular meetings. Regular meetings of the Board may be held at such time and place as shall be determined, from time to time, by a majority of the managers, but at least four such meetings shall be held during each fiscal year. Notice of regular meetings of the Board of Managers shall be given to each manager, personally, or by mail, telephone, or email, at least three days prior to the day named for such meeting. 6.9 Special meetings. Special meetings of the Board may be called by any manager on three days notice to each other manager, given personally, or by mail, telephone, or email which notice shall state the time, place (as hereinabove provided), and purpose of the meeting. 6.10 Waiver of notice. Before or at any meeting of the Board, any manager may, in writing, waive notice of such meeting and such waiver shall be deemed equivalent to the giving of such notice. Attendance by a manager at any meeting of the Board shall be a waiver of notice by him of the time and place thereof. If all the managers are present at any meeting of the Board, no notice shall be required and any business may be transacted at such meeting. 6.11 Quorum. At all meetings of the Board, a majority of the managers shall constitute a quorum for the transaction of business, and the acts of the majority of the managers present at a meeting at which a quorum is present shall be the acts of the Board. If, at any meeting of the Board, there be less than a quorum present, the majority of those present may adjourn the meeting from time to time. At any such adjourned meeting, any business which might have been transacted at the meeting as originally called may be transacted without further notice. ARTICLE VII FISCAL MANAGEMENT 7.1 Fiscal year. The fiscal year of the Company shall begin on the 1st day of January every year, except that the first fiscal year of the Company shall begin at the date of organization. The commencement date of the fiscal year herein established shall be subject to change by the Board of Managers should company practice subsequently dictate. 7.2 Books and accounts. The Company shall maintain complete and accurate books and records of the Company's business and affairs as required by the Act and such books and records as shall be kept at the Company's Registered Office. Books and accounts of the 11
Company shall be kept under the direction of the mangers in coordination with Company s CPA, who shall be chosen by the majority vote of the Board. 7.3 Reports. The Board shall provide quarterly reports concerning the financial condition and results of operation of the Company and the Capital Accounts of the Members to the Members in the time, manner and form as the Board determines. Financial reports shall be provided at least annually as soon as practicable after the end of each fiscal year and shall include a statement of each Member's share of profits and other items of income, gain, loss, deduction and credit. In addition to annual reports, the Board shall provide the Members, on a monthly basis, if deemed necessary, progress reports on any projects undertaken since the previous report. 7.4 Inspection of books. Financial reports and the membership records of the Company shall be available at the principal office of the Company for inspection at reasonable times by any member. 7.5 Execution of company documents. With the prior authorization of the Board, all notes and contracts, including Occupancy Agreements, shall be executed on behalf of the Company by either two of the three managers on the Board, and all checks shall be executed on behalf of the Company by two of the three managers on the Board. ARTICLE VIII AMENDMENTS The Operating Agreement may be amended by two-thirds vote of the members present and voting at any regular or special meeting, provided that a quorum as prescribed in Article V, Paragraph 5.5, herein, is present at any such meeting. Amendments may be proposed by the Board or by petition signed by at least 20 percent of the members. A statement of any proposed amendment shall accompany the notice of any regular or special meeting at which such proposed amendment shall be voted upon. ARTICLE IX EXCULPATION OF LIABILITY; INDEMNIFICATION 9.1 Exculpation of Liability. Unless otherwise provided by law or expressly assumed, a person who is a Member or Manager, or both, shall not be liable for the acts, debts or liabilities of the Company. 9.2 Indemnification. Except as otherwise provided in this Article, the Company shall indemnify the Managers and may indemnify any employee or agent of the 12
Company who was or is a party or is threatened to be made a party to a threatened, pending or complete action, suit or proceeding, whether civil, criminal, administrative, or investigative, and whether formal or informal, other than an action by or in the right of the Company, by reason of the fact that such person is or was a Manager, employee or agent of the Company against expenses, including attorneys' fees, judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with the action, suit or proceeding, if the person acted in good faith, with the care an ordinary prudent person in a like position would exercise under similar circumstances, and in a manner that such person reasonably believed to be in the best interests of the Company and with respect to a criminal action or proceeding, if such person had no reasonable cause to believe such person's conduct was unlawful. To the extent that a Member, employee or agent of the Company has been successful on the merits or otherwise in defense of an action, suit or proceeding or in defense of any claim, issue or other matter in the action, suit or proceeding, such person shall be indemnified against actual and reasonable expenses, including attorneys' fees, incurred by such person in connection with the action, suit or proceeding and any action, suit or proceeding brought to enforce the mandatory indemnification provided herein. Any indemnification permitted under this Article, unless ordered by a court, shall be made by the Company only as authorized in the specific case upon a determination that the indemnification is proper under the circumstances because the person to be indemnified has met the applicable standard of conduct and upon an evaluation of the reasonableness of expenses and amounts paid in settlement. Under no circumstances shall the Manager be indemnified as to any act or omission constituting gross negligence. This determination and evaluation shall be made by majority vote of the Members who are not parties or threatened to be made parties of the action, suit or proceeding. Notwithstanding the foregoing to the contrary, no indemnification shall be provided to the Manager, employee or agent of the Company for or in connection with the receipt of a financial benefit to which such person is not entitled, voting for or assenting to a distribution of Members in violation of the Operating Agreement or the Act, or a knowing violation of law. ARTICLE X DISSOLUTION AND WINDING UP 10.1 Dissolution. The Company shall dissolve and its affairs shall be wound up on the first to occur of the following events: (a) at any time specified in the Articles or this Operating Agreement; (b) upon the decision by two-third majority of the members to sell all the real property owned by the Company; (c) by the unanimous consent of all of the Members; (d) an event of dissolution under the Act. 10.2 Winding Up. Upon dissolution, except as provided below, the Company shall cease carrying on its business and affairs and shall commence the winding up of the Company's business and affairs and complete the winding up as soon as practicable. Upon the winding up of the Company, the assets of the Company shall be distributed first to creditors to the extent permitted by law, in satisfaction of Company debts, liabilities and obligations and then to Members first, in satisfaction of liabilities for distributions and then, in accordance with their 13
Sharing Ratios. Such proceeds shall be paid to such Members within ninety (90) days after the date of winding up. 10.3 Assets on Dissolution. Except as may otherwise be expressly agreed by all the Members, the Company property includes not only the assets, tangible and intangible, carried on the Company's books, but also without limitation the name of the Company; its goodwill; its books, records and files; its interests under leases, licenses or franchises; the right to bill and collect for services rendered by persons who are Members or employees of the Company and its interests in and expectations from engagements for clients. ARTICLE XI SECURITIES LAW PROVISIONS 11.1 Claim of Exemption. The Company Interests have not been registered under the Securities Act of 1933, as amended (the "Federal Act"), or any other state securities act, and are being offered pursuant to applicable exemptions from registration. The provisions contained in this Article 10 have been included in this Agreement with respect to certain conditions which must be satisfied in order for such exemptions to be available. 11.2 General Provisions. (a) Each Member hereby represents that (i) the Interest he is acquiring hereunder is being acquired solely for his or her own account and not for or on behalf of other Persons, (ii) such Interest is being acquired for investment purposes only, and not for resale or distribution, and (iii) he has no intention to enter into any contract, agreement, undertaking or arrangement to sell, transfer or pledge such Interest or any part thereof. (b) If the Company shall ever have a transfer agent, the Company shall issue stop transfer instructions to the Company's transfer agent with respect to the Interests acquired hereunder, and the Company shall make a notation in the appropriate records of the Company that will prevent the sale, transfer or assignment of such Interest until such time as the Manager is satisfied that any such sale, transfer or assignment is not in violation of the applicable provisions of the Federal Act or state Act, and is not in violation of the restrictions against the sale, transfer or assignment of such Interest contained in this Agreement. (c) Each Member hereby agrees that he will not sell, transfer or assign his or her Interest, or any portion thereof, without registration under the Federal Act or state Act or exemption therefrom. /// /// /// /// /// 14
ARTICLE XII MISCELLANEOUS PROVISIONS (a) Terms. Nouns and pronouns will be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the person or persons, firm or corporation may in the context require. (b) Article Headings. The Article headings contained in this Operating Agreement have been inserted only as a matter of convenience and for reference, and in no way shall be construed to define, limit or describe the scope or intent of any provision of this Operating Agreement. (c) Counterparts. This Operating Agreement may be executed in several counterparts, each of which will be deemed as original but all of which will constitute one and the same. (d) Entire Agreement. This Operating Agreement constitutes the entire agreement among the parties hereto and contains all of the agreements among said parties with respect to the subject matter hereof. This Operating Agreement supersedes any and all other agreements, either oral or written, between said parties with respect to the subject matter hereof. (e) Severability. The invalidity or enforceability of any particular provision of this Operating Agreement shall not affect the other provisions hereof, and this Operating Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. (f) Binding Effect. Subject to the provisions of this Operating Agreement relating to transferability, this Operating Agreement will be binding upon and shall inure to the benefit of the parties, and their respective distributees, heirs, successors and assigns. (g) Governing Law. This Operating Agreement is being executed and delivered in the state of Nevada and shall be governed by, construed and enforced in accordance with the laws of the state of Nevada. (h) Arbitration. Any dispute which arises hereunder with respect to the terms of this Agreement and that cannot be resolved must first be mediated by a third party neutral mediator. Each party to the dispute shall anonymously submit two choices for mediator to the Company s CPA, and the Company s CPA shall choose a mediator among the submissions. If mediation fails, the parties shall submit the dispute to binding arbitration, and a judgment on the award may be entered in any court of competent jurisdiction. /// 15
IN WITNESS WHEREOF, the parties hereto make and execute this Operating Agreement on the dates set below their names, to be effective on the date first above written. THE COMPANY MEMBERS DANCING RIVER COMMUNITY, LLC, a Nevada limited liability company By: THOMAS STILLE, Manager By: IRIS STILLE, Manager By: By: 16
EXHIBIT "A" MEMBER Initial Contribution Building Areas Votes Initial Contribution SHARING RATIO % to Common Areas Iris and Thomas Stille (Member 1-6) $450,000 Building Area 1, Units 1-6 6 $150,000 6/15 Member 7 $25,000 Building Area 2, Unit 2A 1 $25,000 1/15 Member 8 $25,000 Building Area 2, Unit 2A2 1 $25,000 1/15 Member 9 $25,000 Building Area 2, Unit 2B1 1 $25,000 1/15 Member 10 $25,000 Building Area 2, Unit 2B2 1 $25,000 1/15 Member 11 $10,000 Building Area 3, Unit 3A 1 $25,000 1/15 Member 12 $10,000 Building Area 3, Unit 3B 1 $25,000 1/15 Member 13 $10,000 Building Area 3, Unit 3C 1 $25,000 1/15 Member 14 $10,000 Building Area 3, Unit 3D 1 $25,000 1/15 Member 15 $10,000 Building Area 3, Unit 3E 1 $25,000 1/15 17
EXHIBIT B Occupancy Agreement 18
Exhibit C Map 19