Operating Agreement Arizona Real Estate Legal Forms and Contracts

The following free LLC operating agreement is a thorough document outlining the internal operations of a Limited Liability Company. This operating agreement is specifically for an Arizona Real Estate Company looking to develop property. This agreement and contract is being provided as a sample and example for information and research purposes only, however it is a valid legal contract and agreement. Always consult an Attorney or Lawyer. This Agreement can apply in most states including California, New York, Florida, Nevada and others with modifications. Help improve this agreement by leaving a comment.

OPERATING AGREEMENT

For
__________________

THIS OPERATING AGREEMENT (the “Agreement”) is made and entered into effective as of ____________________ by and among each of the persons who has signed this Operating Agreement as members (“Member”) of ____________________, LLC, an Arizona limited liability company (the “Company”).

Section I
Formation; Name and Office; Purpose; Partnership Treatment

1.1 Formation. Pursuant to the Arizona Limited Liability Company Act, A.R.S. Sections 29 601 through 29 857 (the “Act”), the parties have formed an Arizona limited liability company ____________________. The parties have executed this Agreement to serve as the “Operating Agreement” of the Company, as that term is defined in A.R.S. Section 29 601(11), and, subject to any applicable restrictions set forth in the Act, the business and affairs of the Company, and the relationships of the parties to one another, shall be operated in accordance with and governed by the terms and conditions set forth in this Agreement. By executing this Agreement, the Members hereby consent to the admission to the Company of all the Persons listed in the Articles and executing this Agreement. The parties agree to execute all amendments of the Articles, and do all filing, publication, and other acts as may be appropriate from time to time hereafter to comply with the requirements of the Act.

1.2 Name and Registered Office. The Company's name shall be ____________________, LLC, and the Company’s registered office in Arizona shall be: ________________________________________, or such other place as the Members may from time to time determine.

1.3 Purpose. The purpose and business of this Company shall be to acquire and develop the residential real property located in ____________________, Arizona and described as +/- ____________________ sf, located in f____________________ separate parcels in Phoenix, Arizona and known by the following Maricopa County Tax Assessor Parcel Numbers: ____________________, ____________________, ____________________ and ____________________ (the “Property”) and to engage in any lawful act or activity under Arizona law. The Company shall have the power to do any and all acts and things necessary, appropriate, or incidental to the furtherance of such purpose. The Company may engage in other business or acquire other assets only upon the vote of all of the Members.

1.4 Treatment as a Partnership. It is the intent of the Members that the Company shall always be operated in a manner consistent with its treatment as a partnership for federal and state income tax purposes, but that the Company shall not be operated or treated as a partnership for purposes of the federal Bankruptcy Code. No Member shall take any action inconsistent with this Section 1.4.

Section II
Definitions

The following terms shall have the meanings set forth in this Section II:

“Act” means the Arizona Limited Liability Company Act, A.R.S. Sections 29 601 through 29 857, as amended from time to time (or any corresponding provisions of succeeding law).

“Adjusted Book Value” means with respect to Company Property, the Property's Initial Book Value with the adjustments required under this Agreement.

“Adjusted Capital Account Deficit” means, with respect to any Interest Holder, the deficit balance, if any, in the Interest Holder's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments:

(i) the Capital Account shall be increased by the amounts which the Interest Holder is obligated to restore under this Agreement or is deemed obligated to restore pursuant to Regulation Sections 1.704 2(g)(1) and (i)(5) (i.e., the Interest Holder's share of Minimum Gain and Member Minimum Gain); and

(ii) the Capital Account shall be decreased by the items described in Regulation Sections 1.704 1(b)(2)(ii)(d)(4), (5) and (6).

This definition of Adjusted Capital Account Deficit is intended to comply with Section 1.704 1(b)(2)(ii)(d) of the Treasury Regulations and shall be interpreted and applied in a manner consistent with that Regulation.

“Affiliate” means, with respect to any Interest Holder, any Person: (i) who is a member of the Interest Holder's Family; (ii) which owns more than ten percent (10%) of the voting or economic interests in the Interest Holder; (iii) in which the Interest Holder owns more than ten percent (10%) of the voting or economic interests; or (iv) in which more than ten percent (10%) of the voting or economic interests are owned by a Person who has a relationship with the Interest Holder described in clause (i), (ii), or (iii) above.

“Capital Account” means the account maintained by the Company for each Interest Holder in accordance with the provisions of Section III.

“Cash Flow” means all cash funds derived from operations of the Company (including interest received on reserves), without reduction for any noncash charges, but less cash funds used to pay current operating expenses and to pay or establish reasonable reserves for future expenses, debt payments, capital improvements, and replacements as determined by the Members. Cash Flow shall be increased by the reduction of any reserve previously established.

“Code” means the Internal Revenue Code of 1986, as amended, or any corresponding provision of any succeeding law.

“Event of Withdrawal” means those events and circumstances listed in Section 29 733 of the Act other than subparagraphs 4 or 5 thereof.

“Family” means a Person's spouse, lineal ancestors or descendants by birth or adoption, siblings, and trusts for the benefit of such Person or any of the foregoing individuals.

“Fiscal Year” or “Annual Period” means the fiscal year of the Company, as determined under Section V.

“Initial Book Value” means, with respect to Property contributed to the Company by an Interest Holder, the Property's fair market value at the time of contribution and, with respect to all other Property, the Property's adjusted basis for federal income tax purposes at the time of acquisition.

“Interest” means a Person's share of the profits and losses of, and the right to receive distributions from, the Company.

“Interest Holder” means any Person who holds an Interest, whether as a Member or as an unadmitted assignee of a Member.

“Majority in Interest” means one or more Members who own, collectively, a simple majority of the Percentage Interests held by Members.

“Member” means each Person signing this Agreement and any Person who subsequently is admitted as a member of the Company until such time as an Event of Withdrawal has occurred with respect to such Member.

“Membership Rights” means all of the rights of a Member in the Company, including a Member's: (i) Interest, (ii) right to inspect the Company's books and records, and (iii) right to participate in the management of and vote on matters coming before the Company.

“Percentage Interest” means, as to a Member, the percentage set forth after the Member's name in conjunction with his signature to this Agreement, as amended from time to time, and, as to an Interest Holder who is not a Member, the Percentage of the Member whose Interest has been acquired by such Interest Holder, to the extent the Interest Holder has succeeded to that Member's Interest.

“Person” means and includes an individual, corporation, partnership, association, limited liability company, trust, estate, or other entity.

“Profit” and “Loss” means, for each Fiscal Year of the Company (or other period for which Profit or Loss must be computed), the Company's taxable income or loss determined in accordance with Code Section 703(a), with the following adjustments:

(i) all items of income, gain, loss, deduction, or credit required to be stated separately pursuant to Code Section 703(a)(1) shall be included in computing taxable income or loss;

(ii) any tax exempt income of the Company, not otherwise taken into account in computing Profit or Loss, shall be included in computing Profit or Loss;

(iii) any expenditures of the Company described in Code Section 705(a)(2)(B) (or treated as such pursuant to Regulation Section 1.704 1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit or Loss, shall be included in computing Profit or Loss;

(iv) if the Adjusted Book Value of Company Property differs from its adjusted basis for federal income tax purposes, then gain or loss resulting from any taxable disposition of Company property shall be computed by reference to the Adjusted Book Value of the Property disposed of rather than the adjusted basis of the property for federal income tax purposes;

(v) if the Adjusted Book Value of Company Property differs from its adjusted basis for federal income tax purposes, then in lieu of the depreciation, amortization, or cost recovery deductions allowable in computing taxable income or loss, the depreciation, amortization (or other cost recovery deduction) shall be an amount that bears the same ratio to the Adjusted Book Value of such Property as depreciation, amortization (or other cost recovery deduction) computed for federal income tax purposes for such period bears to the adjusted tax basis of such Property. If the Property has a zero adjusted tax basis, the depreciation, amortization (or other cost recovery deduction) of such Property shall be determined under any reasonable method selected by the Members; and

(vi) any items which are specially allocated pursuant to Section 4.3 hereof shall not be taken into account in computing Profit or Loss.

“Property” means all real and personal property (including cash) acquired by the Company, and any improvements thereto.

“Transfer” means, when used as a noun, any voluntary or involuntary sale, hypothecation, pledge, assignment, attachment, or other transfer, and, when used as a verb, means voluntarily or involuntarily to sell, hypothecate, pledge, assign, or otherwise transfer.

“Treasury Regulations” or “Regulations” means the income tax regulations, including any temporary regulations, promulgated under the Code as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

Section III
Capital Contributions

3.1 Capital Accounts. A Capital Account shall be maintained for each Interest Holder in accordance with the following provisions:

3.1.1 An Interest Holder's Capital Account shall be credited with the amount of money contributed by the Interest Holder to the Company; the fair market value of the Property contributed by the Interest Holder to the Company (net of liabilities secured by such contributed Property that the Company is considered to assume or take subject to under Section 752 of the Code); the Interest Holder's allocable share of Profit; and the amount of Company liabilities that are assumed by the Interest Holder under Regulation Section 1.704 1(b)(2)(iv)(c);

3.1.2 An Interest Holder's Capital Account shall be debited with the amount of money distributed to the Interest Holder; the fair market value of any Company property distributed to the Interest Holder (net of liabilities secured by such distributed Property that the Interest Holder is considered to assume or take subject to under Section 752 of the Code); the Interest Holder's allocable share of Loss; and the amount of the Interest Holder's liabilities that are assumed by the Company under Regulation Section 1.704 1(b)(2)(iv)(c);

3.1.3 If Company Property is distributed to an Interest Holder, the Capital Accounts of all Interest Holders shall be adjusted as if the distributed Property had been sold in a taxable disposition for the gross fair market value of such Property on the date of distribution (taking into account Section 7701 of the Code) and the Profit or Loss from such disposition allocated to the Interest Holders as provided in Section IV.

3.1.4 If money or other Property (other than a de minimis amount) is (i) contributed to the Company by a new or existing Interest Holder in exchange for an interest in the Company; or (ii) distributed by the Company to a retiring or continuing Interest Holder as consideration for an interest in the Company; then, if the Members deem such an adjustment to be necessary to reflect the economic interests of the Interest Holders, the Book Value of the Company's Property shall be adjusted to equal its gross fair market value on such date (taking into account Section 7701(g) of the Code) and the Capital Accounts of all Interest Holders shall be adjusted in the same manner as if all the Company Property had been sold in a taxable disposition for such amount on such date and the Profit or Loss allocated to the Interest Holders as provided in Section IV.

3.1.5 To the extent an adjustment to the tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Regulation Section 1.704 1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the Book Value of the Company's Property and the Capital Account of the Interest Holders shall be adjusted in a manner consistent with the manner in which the Capital Accounts are required to be adjusted pursuant to that Section of the Regulations.

3.1.6 If any Interest is transferred pursuant to the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent the Capital Account is attributable to the transferred Interest. It is intended that the Capital Accounts of all Interest Holders shall be maintained in compliance with the provisions of Regulation Section 1.704 1(b), and all provisions of this Agreement relating to the maintenance of Capital Accounts or the Adjusted Book Value of Company Property shall be interpreted and applied in a manner consistent with that Section of the Regulations.

3.2 Capital Contributions.

3.2.1 Initial Capital Contributions. Upon the execution of the original Operating Agreement, the Members made initial contributions to the capital of the Company in the amounts set forth below their respective signatures below. Since execution of the original Operating Agreement, the Members have contributed to the capital of the Company by paying their pro rata portions of payments on the loan made to acquire the Property and appropriate adjustments will be made to each Member’s Capital Account to reflect the payments.

3.2.2 Additional Capital Contributions. Each Member shall be required to contribute additional capital, pro rata in accordance with its Percentage Interest, to the Company when it is required to make any loan payment on the loan made to acquire the Property or to perform preliminary engineering relating to the development of the Property. Except as provided above, no Member shall be required to contribute any additional capital to the Company, and no Member shall have any personal liability for any obligation of the Company. If a Member fails to make a required pro rata capital contribution for two loan payments, the Member shall be in default of its obligation under this Section 3.2.2., and the non-defaulting Members may remove the defaulting Member as a Member of the Company by paying to such defaulting Member an amount equal to its capital contributions less the amount of pro rata capital contributions that the defaulting Member failed to make.

3.3 Withdrawal or Return of Capital Contributions. Except as specifically provided in this Agreement, no Interest Holder shall have the right to withdraw or reduce the Capital Contributions he or she makes to the Company. Upon dissolution of the Company or liquidation of his or her interest in the Company, each Interest Holder shall look solely to the assets of the Company for return of his or her Capital Contributions and, if the Company's property remaining after the payment or discharge of the debts, obligations, and liabilities of the Company is insufficient to return the Capital contributions of each Interest Holder, no Interest Holder shall have any recourse against the Company or any Interest Holder.

3.4 Form of Return of Capital. Under circumstances requiring a return of any Capital Contributions, no Interest Holder shall have the right to receive property other than cash except as may be specifically provided herein.

3.5 Salary or Interest. Except as otherwise expressly provided in Section V of this Agreement and unless all of the Members consent, no Interest Holder shall receive any interest, salary, or drawing with respect to his or her Capital Contributions or his or her Capital Account, or for services rendered on behalf of the Company.

3.6 Member Loans. If Members owning a Majority in Interest determine that the Company requires additional capital to carry out the purposes of the Company, the Members shall have the right, but not the obligation, to make loans to the Company (a “Member Loan”). Such Member Loans shall be made by the Members willing to make such Member Loans pro rata based on their Percentage Interests unless the Members willing to make such Member Loans agree otherwise.

3.7 Terms of Member Loans. All Member Loans made pursuant to Section 3.6 shall bear interest at the prime rate of interest charged by Bank One Arizona (or its successor) at the date of the loan plus two (2%) percentage points, shall be unsecured, and shall be repaid in full out of available funds of the Company before any distribution may be made to any Member under Section IV unless the Members owning a Majority in Interest agree to partial payment of the loan and a distribution. If more than one Member has made a Member Loan, repayment shall be made to each Member in proportion to the amount of principal each has advanced.

Section IV
Allocations and Distributions

4.1 Allocations. Except as provided in Section 4.2, Profits shall be allocated based on Exhibit B, Members Distributions and Losses shall be allocated to the Interest Holders in accordance with their Exhibit B’s, Ownership Percentage Interests for any Fiscal Year.

4.2 Loss Limitations.

4.2.1 Adjusted Capital Account Deficit. No Losses shall be allocated to any Interest Holder pursuant to Section 4.1 if the allocation causes the Interest Holder to have an Adjusted Capital Account Deficit or increases the Interest Holder's Capital Account Deficit. All Losses in excess of the limitations set forth in this Subsection shall be allocated to the other Interest Holders in accordance with the other Interest Holders' Percentage Interests until all Interest Holders are subject to the limitation of this Subsection, and thereafter, in accordance with the Interest Holders' interest in the Company as determined by the Members. If any Losses are allocated to an Interest Holder because of this Subsection, then notwithstanding any other provision of this Agreement, all subsequent Profits shall be allocated to the Interest Holders pro rata based on Losses allocated to them pursuant to this Subsection until each Interest Holder has been allocated an amount of Profits pursuant to this Subsection equal to the Losses previously allocated to that Interest Holder under this Subsection.

4.2.2 Cash Method Limitation. If the Company is on the cash method of accounting and more than 35% of the Company's Losses in any year would be allocable to Interest Holders who are limited entrepreneurs (within the meaning of §464(e)(2) of the Code), then except as otherwise provided in Section 4.2.1, the Losses in excess of 35% otherwise allocable to those Interest Holders shall be specially allocated among the other Interest Holders in the ratio that each shares in Losses. If any Losses are allocated to an Interest Holder under this Subsection, then notwithstanding any other provision of this Agreement, all subsequent Profits shall be allocated to the Interest Holders pro rata based on Losses allocated to them pursuant to this Subsection until each Interest Holder has been allocated an amount of Profits pursuant to this Subsection in the current and previous Fiscal Years equal to the Losses allocated to that Interest Holder pursuant to this Subsection in previous Fiscal Years.

4.2.3 Qualified Income Offset. If an Interest Holder unexpectedly receives an adjustment, allocation, or distribution described in Regulation Section 1.704 1(b)(2)(ii)(d)(4), (5), or (6), then to the extent required under Regulations Section 1.704 1(b)(2)(d), such Interest Holder shall be allocated items of income and gain of the Company (consisting of a pro rata portion of each item of Company income, including gross income and gain for that Fiscal Year) before any other allocation is made of Company items for that Fiscal Year, in the amount and in proportions required to eliminate the Interest Holder's Adjusted Capital Account Deficit as quickly as possible. This Subsection is intended to comply with, and shall be interpreted consistently with, the “qualified income offset” provisions of the Regulations promulgated under Code Section 704(b).

4.3 Section 704(c) Allocations.

4.3.1 Contributed Property. In accordance with Code Section 704(c) and the Regulations thereunder, as well as Regulation Section 1.704 1(b)(2)(iv)(d)(3), income, gain, loss, and deduction with respect to any property contributed (or deemed contributed) to the Company shall, solely for tax purposes, be allocated among the Interest Holders 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 fair market value at the date of contribution (or deemed contribution).

4.4 Distributions. Except as otherwise provided in this Agreement, distributions shall be made to the Interest Holders at such times pro rata in proportion to their Percentage Interests and in such amounts as determined by the Members owning a Majority in Interest. No

4.5 General.

4.5.1 Form of Distribution. In connection with any distribution, no Interest Holder shall have the right to receive Property other than cash except as may be specifically provided herein. If any assets of the Company are distributed in kind to the Interest Holders, those assets shall be valued on the basis of their fair market value, and any Interest Holder entitled to any interest in those assets shall receive that interest as a tenant in common with all other Interest Holders so entitled. Unless the Interest Holders otherwise agree, the fair market value of the assets shall be determined by an independent appraiser who shall be selected by the Members.

4.5.2 Withholding. All amounts required to be withheld pursuant to Code Section 1446 or any other provision of federal, state, or local tax law shall be treated as amounts actually distributed to the affected Interest Holders for all purposes under this Agreement.

4.5.3 Varying Interests; Distributions and Allocations in Respect to Transferred Interests. Profits, losses, and other items shall be calculated on a monthly, daily, or other basis permitted under Code Section 706 and the Regulations. If any Interest is sold, assigned, or transferred during any accounting period in compliance with the provisions of this Agreement, profits, losses, each item thereof, and all other items attributable to such Interest for such period shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during the period in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Members. All distributions on or before the date of such transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee. Solely for purposes of making such allocations and distributions, the Company shall recognize such transfer not later than the end of the calendar month during which it is given notice of such transfer, provided that if the Company does not receive a notice stating the date such Interest was transferred and such other information as it may reasonably require within thirty (30) days after the end of the Fiscal Year during which the transfer occurs, then all of such items shall be allocated, and all distributions shall be made, to the person who, according to the books and records of the Company, on the last day of the Fiscal Year during which the transfer occurs, was the owner of the Interest. Neither the Company nor any Interest Holder shall incur any liability for making allocations and distributions in accordance with the provisions of this Section, whether or not any Interest Holder or the Company has knowledge of any transfer of ownership of any Interest.

4.5.4 Knowledge. The Interest Holders acknowledge that they understand the economic and income tax consequences of the allocations and distributions under this Agreement and agree to be bound by the provisions of this Section IV in reporting their taxable income and loss from the Company.

Section V
Management

5.1 Management. The Members agree that the management of the Company shall be vested in a Manager. The initial Manager shall be ____________________one of the Members of the Company.

5.2 Member Authority. Except with respect to the duties delegated to a Member in this Section 5.2 or in a written instrument signed by all Members, no single Member is authorized or empowered to execute, deliver, or perform any agreements, acts, transactions, or matters contemplated in this Agreement on behalf of the Company as agent for the Company, notwithstanding any applicable law, rule, or regulation.

5.3 Fiduciary Duties. Notwithstanding anything in this Agreement to the contrary, each Member acknowledges and agrees that each Member shall be accountable to the Company and the other Members as a fiduciary, and shall be bound by a fiduciary duty to the Company and the other Members, to the same extent that applicable law generally imposes such status and duty upon a general partner in a partnership.

5.4 Actions Requiring Unanimous Consent of the Members. The Company shall not take any of the following actions without first obtaining the approval of all of the Members:

5.4.1 Amend the Articles, except that any amendments required under the Act to correct an inaccuracy in the Articles may be filed at any time by any Member;

5.4.2 Sell or otherwise dispose of all or substantially all of the assets of the Company in a single transaction or a series of related transactions;

5.4.3 Authorize the Company to make an assignment for the benefit of creditors of the Company, file a voluntary petition in bankruptcy or consent to the appointment of a receiver for the Company or its assets;

5.4.4 Approve a plan of merger or consolidation of the Company with or into one or more business entities; or

5.4.5 Enter into any contract or agreement between the Company and any Interest Holder or Affiliate of any Interest Holder.

5.5 Compensation and Expenses. The Company may enter into management agreements or employment agreements, with one or more Interest Holders or Persons Affiliated with the Interest Holders, under such terms and conditions and providing for such compensation as shall be approved by the Members as provided in Section 5.4.5 herein.

5.6 Books and Records. At the expense of the Company, the Manager shall keep or cause to be kept complete and accurate books and records of the Company and supporting documentation of transactions with respect to the conduct of the Company's business. The books and records shall be maintained in accordance with sound accounting practices and kept at the Company's registered office and such other location or locations as the Members shall from time to time determine. At a minimum the Company shall keep at its registered office the following records:

5.6.1 A current list of the full name and last known business, residence, or mailing address of each Member;

5.6.2 A copy of the initial Articles and all amendments thereto and restatements thereof;

5.6.3 Copies of the Company's federal, state, and local income tax returns and reports, if any, for the three most recent fiscal years;

5.6.4 Copies of this Agreement and all amendments hereto or restatements hereof, including any prior operating agreements no longer in effect;

5.6.5 Copies of any documents relating to a Member's obligation to contribute cash, property, or services to the Company;

5.6.6 Copies of any financial statements of the Company for the three most recent fiscal years; and

5.6.7 Copies of minutes of all meetings of the Members and all written consents obtained from Members for actions taken by Members without a meeting.

5.7 Access to Books and Records. Each Member shall have the right, during normal business hours, to inspect and copy, at the Member's expense, the Company's books and records.

5.8 Returns and Other Elections. The Manager shall cause the preparation and timely filing of all tax returns required to be filed by the Company pursuant to the Code and all other tax returns deemed necessary and required in each jurisdiction in which the Company does business.

5.9 Annual Accounting Period. The annual accounting period of the Company shall be its Fiscal Year. The Company's Fiscal Year shall be the calendar year.

5.10 Reports. Within sixty (60) days after the end of each Fiscal Year of the Company, the Manager shall cause to be sent to each Person who was a Member at any time during the Fiscal Year then ended a complete accounting of the affairs of the Company for the Fiscal Year then ended. In addition, within sixty (60) days after the end of each Fiscal Year of the Company, the Manager shall cause to be sent to each Person who was an Interest Holder at any time during the Fiscal Year then ended, that tax information concerning the Company which is necessary for preparing the Interest Holder's income tax returns for that year. At the request of any Member, and at the Member's expense, the Manager shall cause an audit of the Company's books and records to be prepared by independent accountants for the period requested by the Member. Within ninety (90) days after the end of each Fiscal Year, the Manager shall cause to be sent to each Member a business plan (including cash flow projections) for the next Fiscal Year.

5.11 Tax Matters Partner. ____________________ shall act as the Company's tax matters partner (“Tax Matters Partner”) unless the Members holding a Majority in Interest designate another person to serve in this capacity. The Tax Matters Partner shall have all powers and responsibilities provided in Code Section 6221, et seq.

5.12 Title to Company Property.

5.12.1 Except as provided in Section 5.12.2, all real and personal property acquired by the Company shall be acquired and held by the Company in its name.

5.12.2 The Manager may direct that legal title to all or any portion of the Company's property be acquired or held in a name other than the Company's name. Without limiting the foregoing, the Members may cause title to be acquired and held in their name or in the names of trustees, nominees, or straw parties for the Company. It is expressly understood and agreed that the manner of holding title to the Company's property (or any part thereof) is solely for the convenience of the Company and all of that property shall be treated as Company property.

Section VI
Members

6.1 Meetings. Unless otherwise prescribed by the Act, meetings of the Members may be called, for any purpose or purposes, by the Manager or a Member or Members owning at least 10% in Interest.

6.2 Place of Meetings. Meetings of the Members shall be held at the Company’s registered office in Arizona, unless Members owning at least a Majority in Interest designate another location.

6.3 Notice of Meetings. Except as provided in this Agreement, written notice stating the date, time, and place of the meeting, and the purpose or purposes for which the meeting is called, shall be delivered not less than fifteen (15) nor more than fifty (50) days before the date of the meeting, either personally or by facsimile or overnight or next-day delivery services by or at the direction of the person or persons calling the meeting, to each Member entitled to vote at such meeting. A notice transmitted by way of facsimile shall be deemed to be delivered on the date of such facsimile transmission to the fax number for the respective Member, next to his name in Section 11.1, or which has been supplied by such Member to the Company and identified as such Member's facsimile number. If transmitted by overnight or next day delivery, such notice shall be deemed to be delivered on the next business day after deposit with the delivery service addressed to the Member at his or her address as it appears in conjunction with his signature hereto or as it may be supplied by such Member as his address on the books of the Company. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken, unless the adjournment is for more than thirty (30) days. At the adjourned meeting the Company may transact any business which might have been transacted at the original meeting.

6.4 Meeting of All Members. If all of the Members shall meet at any time and place, including by conference telephone call, either within or outside of the State of Arizona, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice.

6.5 Record Date. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, the date on which notice of the meeting is mailed shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this Section, such determination shall apply to any adjournment thereof, unless notice of the adjourned meeting is required to be given pursuant to Section 6.3.

6.6 Quorum. A Majority in Interest of the Members, represented in person or by proxy, shall constitute a quorum at any meeting of Members. Business may be conducted once a quorum is present.

6.7 Voting Rights of Members. Each Member shall be entitled to vote based on his Percentage Interest. If all or a portion of an Interest is transferred to an assignee who does not become a Member, the Member from whom the Interest is transferred shall no longer be entitled to vote the Interest transferred nor shall the transferred Interest be considered outstanding for any purpose pertaining to meetings or voting. No withdrawn Member shall be entitled to vote nor shall such Member's Interest be considered outstanding for any purpose pertaining to meetings or voting.

6.8 Manner of Acting. Unless otherwise provided in the Act, the Articles of Organization, or this Agreement, the affirmative vote of a Majority in Interest of the Members at a meeting at which a quorum is present shall be the act of the Members.

6.9 Proxies. At all meetings of Members a Member may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney in fact. Such proxy shall be filed with the Company before or at the time of its exercise. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy.

6.10 Action by Members without a Meeting. Any action required or permitted to be taken at a meeting of Members may be taken without a meeting if the action is evidenced by one or more written consents describing the action taken, circulated to all the Members with an explanation of the background and reasons for the proposed action, signed by that percentage or number of the Members required to take or approve the action. Any such written consent shall be delivered to the Company for inclusion in the minutes or for filing with the Company records. Action taken by written consent under this Section shall be effective on the date the required percentage or number of the Members have signed and delivered the consent to the Company, unless the consent specifies a different effective date. The record date for determining Members entitled to take action without a meeting shall be the date the written consent is circulated to the Members.

6.11 Telephonic Communication. Members may participate in and hold a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in such meeting shall constitute attendance and presence in person, except where the Member participates in the meeting for the express purpose of objecting to the transaction of any business on the ground the meeting is not lawfully called or convened.

6.12 Waiver of Notice. When any notice is required to be given to any Member, a waiver thereof in writing signed by the Person entitled to such notice, whether before, at, or after the time stated therein, shall be equivalent to the giving of such notice.

Section VII
Transfers and Withdrawals

7.1 Transfers. Except as otherwise provided elsewhere in this Section VII, no Member may Transfer all, or any portion of, or any interest or rights in, the Membership Rights owned by the Member, and no Interest Holder may Transfer all, or any portion of, or any interest or rights in, any Interest without the prior written consent of the Members which consent may be withheld in the Members' sole and absolute discretion. Any sale or foreclosure of a security interest will itself constitute a Transfer independent of the grant of security. Each Member hereby acknowledges the reasonableness of this prohibition in view of the purposes of the Company and the relationship of the Members. The Company may treat any transfer of any Membership Rights or Interests in violation of the prohibition contained in this Section 7.1 as invalid, null, and void and of no force or effect. In such case any Person to whom Membership Rights or an Interest are attempted to be transferred in violation of this Section 7.1 shall not be entitled to vote on matters coming before the Members, participate in the management of the Company, act as an agent of the Company, receive allocations or distributions from the Company, or have any other rights in or with respect to the Membership Rights or Interest.

7.2 Withdrawal. Except as otherwise provided in this Agreement, no Member shall have the right or power to withdraw from the Company. Any such withdrawal shall constitute a material breach of this Agreement and the Company shall have the right to recover damages from the withdrawn member and to offset the damages against any amounts otherwise distributable to such Member under this Agreement.

7.3 Options to Purchase . On the bankruptcy or similar event described in Section 29 733(4) or (5) of the Act (whether voluntary or involuntary) of a Member or Interest Holder or upon the death of a Member or Interest Holder, if the Member or Interest Holder is a natural person, such Member or Interest Holder (or such Person's estate) shall offer, or shall automatically be deemed to have offered, to sell the Member's or Interest Holder's Interest to the other Members. Upon the approval of a Majority in Interest of the Members other than the offering Member, the other Members shall have the right and option pro rata based upon their relative Percentage Interests within seventy-five (75) days after the other Members’ actual knowledge of the death, bankruptcy, or similar event, to accept the offer to acquire the Interest, for the purchase price and on the terms set forth in Exhibit A attached hereto and made a part hereof. If the Interest is not purchased by the other Members, the Interest remain in such Member or shall be transferred to the assignee of the Interest but shall remain fully subject to and bound by the terms of this Agreement.

7.4 No Transfer of Membership Rights. The Transfer of an Interest shall not result in the Transfer of any of the Transferring Member's other Membership Rights, if any, and unless the transferee is admitted as a Member pursuant to Section VII of this Agreement, the transferee shall only be entitled to receive, to the extent transferred, the share of distributions, including distributions representing the return of contributions, and the allocation of Profits and Losses (and other items of income, gain, or deduction), to which the Transferring Member would have otherwise been entitled with respect to the Transferring Member's Interest. The transferee shall have no right to participate in the management of the business and affairs of the Company or to become or to exercise any rights of a Member.

7.5 Additional and Substitute Members. No person shall be admitted as a Member of the Company after the date of formation of the Company without the written consent or approval of a Majority in Interest of the Members at the time of such admission, which consent may be withheld in the Members' sole and absolute discretion. Notwithstanding the foregoing, an assignee of a Member may only be admitted as a substitute Member upon the written consent of a Majority in Interest of the non transferring Members, which consent may be withheld in the Members' sole and absolute discretion.

7.6 Expenses. Expenses of the Company or of any Interest Holder occasioned by transfers of Interests shall be reimbursed to the Company or Interest Holder, as the case may be, by the transferee.

7.7 Distributions on Withdrawal.

7.7.1 Upon the occurrence of an Event of Withdrawal under Section 29 733(1) or (3) of the Act, if the Company is not dissolved pursuant to Section VIII, the withdrawn Member shall cease to have any right to participate in any allocations of profits or losses or to receive any distributions from the Company, other than the right to receive a withdrawal distribution equal to the balance of his or her capital account determined as if the Company had liquidated at the time of withdrawal reduced by any damages suffered by the Company if such Event of Withdrawal constituted a breach of this Agreement. The withdrawal distribution shall be payable by the Company at the time and in the manner provided in Section VIII.

7.7.2 Upon the occurrence of an Event of Withdrawal under Section 29 733(2) or (6) through (11), if the Company is not dissolved pursuant to Section VIII, the withdrawn Member shall not be entitled to receive a withdrawal distribution; rather, the Interest of the withdrawn Member shall be held by the withdrawn Member's successors or assigns as an assignee subject to rights of the Company and the Members under this Agreement.

7.7.3 If the Company is dissolved pursuant to Section VIII following an Event of Withdrawal, the Member (or the Member's assignee) shall continue to participate in Company profits, losses, and distributions as an assignee of the Member's interest in the Company, until the Company is wound up and terminated in accordance with this Agreement, reduced by any damages suffered by the Company if the Event of Withdrawal constituted a breach of this Agreement.

7.7.4 For purposes of this Agreement, neither the bankruptcy, reorganization, insolvency, nor the making of an assignment for the benefit of creditors under A.R.S. Section 29 733(4) or (5) shall constitute an Event of Withdrawal.

7.8 Dilution of Membership Interest

7.8.1 The Members collectively agree that if the Members decide to build a structure, unit or building other than one in the Proforma and the Members ownership and / or distribution interest gets diluted, then the Members interests will be proportionately diluted.

7.9 Distribution Percentage

7.9.1 LLC distribution percentages shall be explicitly governed by Exhibit B of this Agreement.
Section VII
Dissolution and Termination

8.1 Dissolution.

8.1.1 Events of Dissolution. The Company will be dissolved upon the occurrence of any of the following events:
8.1.1.1 Upon the written consent of all of the Members;

8.1.1.2 Upon the entry of a decree of dissolution under Section 29 785 of the Act;

8.1.1.3 Upon the acquisition by one person of all of the outstanding interests in the Company;

8.1.1.4 Upon the occurrence of any Event of Withdrawal unless within ninety (90) days after the occurrence of the Event of Withdrawal the business of the Company is continued by the specific consent of the remaining Members owning a Majority in Interest of the remaining Members. Except as provided in this Section 8.1.1.4, an Event of Withdrawal with respect to a Member shall not cause a dissolution and the Company shall automatically continue following such an Event of Withdrawal;

8.1.1.5 Upon the sale or other disposition of all or substantially all of the Company's assets and receipt by the Company of the proceeds therefrom.

8.2 Distributions and Other Matters. The Company shall not terminate until its affairs have been wound up and its assets distributed as provided herein. Promptly upon the dissolution of the Company, the Members shall cause to be executed and filed a Notice of Winding Up with the Arizona Corporation Commission in accordance with Section 29 781 of the Act, and will liquidate the assets of the Company and apply and distribute the proceeds of such liquidation, or distribute the Company's assets in kind, as follows and in the following order:

8.2.1 Ordinary Debts. To payment of the debts and liabilities of the Company, including debts owed to Interest Holders, in the order of priority provided by law; provided that the Company shall first pay to the extent permitted by law, liabilities with respect to which any Interest Holder is or may be personally liable;

8.2.2 Reserves and Distributions. To the setting up of such reserves as the Members may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company arising out of or in connection with the Company business; and

8.2.3 Remainder. The balance of the proceeds shall be distributed to the Interest Holders, and to any withdrawn Members as required under Section VII, in accordance with the positive balance in their Capital Accounts, determined as though all of the Company assets were sold for cash at their fair market value as of the date of distribution. Any such distributions shall be made in accordance with the timing requirements of Treasury Regulation Section 1.704 1(b)(2)(ii)(b)(2). Notwithstanding anything in this Agreement to the contrary, distributions to any withdrawn Members pursuant to Section VII shall not exceed the amount provided in Section VII and shall be reduced to the extent necessary to make distributions to Interest Holders equal to the positive capital account balances of the Interest Holders;

8.3 Deficit Capital Accounts. Notwithstanding anything to the contrary in this Agreement, if any Interest Holder's Capital Account has a deficit balance (taking into account all contributions, distributions, and allocations for the year in which a liquidation occurs), the Interest Holder shall not be obligated to make any contribution to the capital of the Company and the negative balance of such Interest Holder's Capital Account shall not be considered a debt owed by the Interest Holder to the Company or to any other person for any purpose whatsoever.

8.4 Rights of Interest Holders Distributions of Property. Except as otherwise provided in this Agreement, each Interest Holder shall look solely to the assets of the Company for the return of his or her Capital Contribution and shall have no right or power to demand or receive property other than cash from the Company. No Interest Holder shall have priority over any other Interest Holder for the return of his or her Capital Contributions, distributions, or allocations.

8.5 Articles of Termination. When all the assets of the Company have been distributed as provided herein, the Members shall cause to be executed and filed Articles of Termination as required by the Act.

Section IX
Other Interests of an Interest Holder

9.1 Interests in Other Ventures. Any Interest Holder may engage in or possess interests in other business ventures of every nature and description, independently or with others.

9.2 Company Interest in Other Ventures. The Company nor any Interest Holder shall have any right to any independent ventures of any other Interest Holder or to the income or profits derived therefrom.

Section X
Indemnity

10.1 Indemnity Rights. The Company shall indemnify each Member or Interest Holder who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, by reason of his or her actions as a Member or Interest Holder or by reason of his or her acts while serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses, including attorneys' fees, and against judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with such action, suit, or proceeding, provided that the acts of such Member or Interest Holder were not committed with gross negligence or willful misconduct, and, with respect to any criminal action or proceeding, such Member or Interest Holder had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or conviction, or upon a plea of no contest or its equivalent, shall not, in and of itself, create a presumption that the Member or Interest Holder acted with gross negligence or willful misconduct, or with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

10.2 Notice and Defense. Any Member or Interest Holder who is or may be entitled to indemnification shall give timely written notice to the Company, the Members and Interest Holders that a claim has been or is about to be made against him or her, shall permit the Company to defend him or her through legal counsel of its own choosing, and shall cooperate with the Company in defending against the claim. A Majority in Interest of the Members other than the Member or Interest Holder seeking indemnification shall have the sole power and authority to determine the terms and conditions of any settlement of the claim.

10.3. Other Sources. The indemnification provided for herein shall apply only in the event, and to the extent that, the person is not entitled to indemnification, or other payment, from any other source (including insurance), and the Company's indemnity obligations hereunder shall be in excess of any indemnification or other payment provided by such other source.

10.4 Survival. The indemnification provided for herein shall continue as to a person who has ceased to be a Member or Interest Holder and shall inure to the benefit of the heirs, executors, and administrators of such person.

Section XI
Miscellaneous

11.1 Notices. Any notice, demand, offer, or other communication which any person is required or may desire to give to any other person shall be delivered in person or by email or overnight or next day delivery service. A notice transmitted by way of facsimile shall be deemed to be delivered on the date of such email or facsimile transmission to the email address or fax number for the person or such other number as set forth in conjunction with that person’s signature hereto. If transmitted by overnight or next day delivery, such notice shall be deemed to be delivered on the next business day after deposit with the delivery service addressed to the person at his or her address as it appears next to his name in conjunction with that person’s signature hereto or as it may be supplied by such Member as his address on the books of the Company.

11.2 Bank Accounts. All funds of the Company shall be deposited in a bank account or accounts opened in the Company's name. The Members shall determine the institution or institutions at which the accounts will be opened and maintained, the types of accounts, and the Persons who will have authority with respect to the accounts and the funds therein.

11.3 Partial Invalidity. The invalidity of any portion of this Agreement will not affect the validity of the remainder hereof.

11.4 Governing Law; Parties in Interest. This Agreement will be governed by and construed according to the laws of the State of Arizona without regard to conflicts of law principles and will bind and inure to the benefit of the heirs, successors, assigns, and personal representatives of the parties.

11.5 Amendment. This Agreement may only be amended, restated, or revoked by the written consent of a Majority in Interest of the Members.

11.6 Execution in Counterparts. This Agreement may be executed in counterparts, all of which taken together shall be deemed one original.

11.7 Titles and Captions. All article, section, or paragraph titles or captions contained in this Agreement are for convenience only and are not deemed part of the context thereof.

11.8 Pronouns and Plurals. All pronouns and any variations thereof are deemed to refer to the masculine, feminine, neuter, singular, or plural as the identity of the person or persons may require.

11.9 Waiver of Action for Partition. Each of the Interest Holders irrevocably waives any right that he or she may have to maintain any action for partition with respect to any of the Company Property.

11.10 Entire Agreement. This Agreement contains the entire understanding between the parties, and supersedes any prior understandings and agreements between or among them with respect to the subject matter hereof.

11.11 Acknowledgment and Waiver of Conflict of Interest. By execution of this Agreement, each Member recognizes and acknowledges that ____________________ (“____________________”) has represented ____________________ and ____________________ personally, ____________________ has not represented ____________________, ____________________ or their Affiliates, and ____________________, ____________________ and their Affiliates waive any and all potential conflicts of interest resulting from Jones’ representation of ____________________ and ____________________ and participation in ____________________ LLC and its Affiliates on any, other and all transactions and of and with the LLC. ____________________ has additionally advised all Members to have outside counsel review this document.

11.12 Estoppel Certificate. Each Member shall, within ten (10) days after written request by any Member, deliver to the requesting Person a certificate stating, to the Member's knowledge, that: (a) this Agreement is in full force and effect; (b) this Agreement has not been modified except by any instrument or instruments identified in the certificate; and (c) there is no default hereunder by the requesting Person, or if there is a default, the nature and extent thereof.

Section XII
Arbitration

If the parties are unable to resolve any dispute arising out of this Agreement either during or after its term informally, including the question as to whether any particular matter is arbitrable, the parties agree to submit the matter to binding arbitration. In the event the parties have not agreed upon an arbitrator within twenty (20) days after either party has demanded arbitration, either party may file a demand for arbitration with the Phoenix regional office of the American Arbitration Association (“AAA”) and a single arbitrator shall be appointed in accordance with the then existing Commercial Arbitration Rules of the AAA. Discovery may be conducted either upon mutual consent of the parties, or by order of the arbitrator upon good cause being shown. In ruling on motions pertaining to discovery, the arbitrator shall consider that the purpose of arbitration is to provide for the efficient and inexpensive resolution of disputes, and the arbitrator shall limit discovery whenever appropriate to insure that this purpose is preserved. The dispute between the parties shall be submitted for determination within sixty (60) days after the arbitrator has been selected. The decision of the arbitrator shall be rendered within thirty (30) days after the conclusion of the arbitration hearing. The decision of the arbitrator shall be in writing and shall specify the factual and legal basis for the decision. Upon stipulation of the parties, or upon a showing of good cause by either party, the arbitrator may lengthen or shorten the time periods set forth herein for conducting the hearing or for rendering a decision. The decision of the arbitrator shall be final and binding upon the parties. Judgment to enforce the decision of the arbitrator, whether for legal or equitable relief, may be entered in any court having jurisdiction thereof, and the parties hereto expressly and irrevocably consent to the jurisdiction of the Arizona Courts for such purpose. The arbitrator shall conduct all proceedings pursuant to the then existing Commercial Arbitration Rules of the AAA, to the extent such rules are not inconsistent with the provisions of this Section XII. The Uniform Rules of Procedure for Arbitration shall not apply to any arbitration proceeding relating to the subject matter or terms of the documents. In the event a dispute is submitted to arbitration pursuant to this Section, the prevailing party shall be entitled to the payment of its reasonable attorneys' fees and costs, as determined by the arbitrator. Each of the parties shall keep all disputes and arbitration proceedings strictly confidential, except for disclosures of information required by applicable law or regulation.

SIGNATURES APPEAR ON FOLLOWING PAGE:

IN WITNESS WHEREOF, the Members have executed this Operating Agreement, effective as of the date first set forth above.

MEMBERS:
____________________ ____________________

____________________ Managing Member

Address: ____________________
____________________

Email: ____________________

Percentage Ownership Interest:
Thirty ____________________ (___%)

____________________
Managing Member

Address: ____________________
____________________

Email: ____________________

Percentage Ownership Interest:
____________________ (___%)

Exhibit A

FORMULA FOR DETERMINING
THE PURCHASE PRICE OF A MEMBER'S INTEREST AND
PAYMENT TERMS PURSUANT TO SECTION 7.3

When required pursuant to Section 7.3 of this Agreement, the value of a Member's or Interest Holder's Interest will be determined as follows:

The value of the Interest shall be determined by an appraiser experienced in valuing businesses similar to that of the Company, jointly selected by the offering Member, Interest Holder, or such Person's estate (the “Offering Member”) and the other Members within fifteen (15) days after the other Member's actual knowledge of the Offering Member's death (if such the Offering Member is a natural person) or bankruptcy. The cost of the appraiser shall be borne equally by the Offering Member and the other Members. If a mutually satisfactory appraiser cannot be selected, then the Offering Member and the other Members each shall select and pay for its own appraiser and the two appraisers shall attempt to reconcile their valuations to arrive at a single valuation. If they are unable to do so, they shall jointly select a third appraiser to value the Offering Member's Interest. The cost of the third appraiser shall be borne equally by the Offering Member and the Other Members. The three appraisers shall thereafter attempt to reconcile their valuations to arrive at a single valuation. If they are unable to do so, then the middle of the three appraisals shall be used as the valuation. If applicable, each party shall appoint its appraiser within seven (7) days after the parties determine they cannot agree on a single appraiser. The two appraisers appointed shall select a third appraiser within seven (7) days after they determine they cannot agree on a single valuation. The appraisers shall be instructed to provide their valuations within thirty (30) days after their appointment.

Payment of the Offering Member's Interest shall be due and payable by the purchasing Members as follows: ten percent (10%) in cash within sixty (60) days after acceptance by the purchasing Members of the offer to purchase the Offering Member's Interest and the balance in one hundred and twenty (120) equal monthly installments commencing on the first month after the initial down payment, together with interest on the unpaid balance from time to time outstanding until paid at the rate of 10% per annum, simple interest, payable at the same time as and in addition to the installments of principal.

Exhibit B
MEMBER OWNERSHIP INTEREST / VOTING RIGHTS OF LLC

The Members have elected to divide the ownership interest and voting rights as follows:

Member Contribution Due date for contribution Percentage

____________________ LLC

____________________ LLC

DISTRIBUTIONS OF LLC

The Members have elected to distribute all up front payments and profits of the LLC as follows:

Member Percentage

____________________ LLC

___________________________
____________________

____________________ LLC

__________________________
____________________

____________________ LLC

_________________________
____________________

____________________ LLC

________________________
____________________