LIMITED LIABILITY COMPANY OPERATING AGREEMENT
FOR
LITTLE HOGBACK COMMUNITY FOREST, LLC
A MANAGER-MANAGED LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made by and among those persons listed on
Schedule A attached hereto, all of whom have executed a copy of this Agreement.
WITNESSETH:
WHEREAS, certain Articles of Organization have been filed with the Vermont
Secretary of State in order to form a limited liability company in accordance with the
Vermont Limited Liability Company Act, and
WHEREAS, the undersigned wish to establish this Agreement, as it may from
time to time be amended as provided herein, as the sole operating agreement of the
Company;
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1. Company Formation
1.1. FORMATION. The Company was formed as a limited liability company under
the Vermont Limited Liability Company Act by filing the Articles of
Organization with the Vermont Secretary of State on the date the Articles of
Organization were accepted for filing by the Secretary of State.
1.2. NAME. The name of the Company shall be: Little Hogback Community Forest,
L.L.C.
1.3. REGISTERED OFFICE. The location of the registered office of the Company
shall be: PO Box 254, Bristol, VT 05443
1.4. PRINCIPAL PLACE OF BUSINESS. The location of the principal place of
business of the Company shall be at 14 School Street, Bristol, Vermont or at such
other place or places as the Members shall from time to time determine.
1.5. TERM. The Company shall continue until the date upon which the Company is
to dissolve as specified in the Articles of Organization unless dissolved by:

(a) Members holding a majority of Membership Units vote for dissolution; or
(b) Any event which makes it unlawful for the business of the Company to be
carried on by the Members; or
(c) Any other event causing a dissolution of a Limited Liability Company
under the laws of the State of Vermont.
1.6. CONTINUANCE OF COMPANY. Notwithstanding the provisions of Section
1.5, in the event of an occurrence described in Section 1.5(c), if there are at least
two remaining Members, said remaining Members shall have the right to
continue the business of the Company. Such right can be exercised only by the
unanimous vote of the remaining Members within ninety (90) days after the
occurrence of an event described in Section 1.5(c). If not so exercised, the right
of the Members to continue the business of the Company shall expire.
1.7. BUSINESS PURPOSE. The purpose of the Company is to engage in any lawful
act or activity for which a Limited Liability Company may be formed under the
Limited Liability statutes of the State of Vermont.
1.8. MEMBERSHIP UNITS. There shall be sixteen equal Membership Units. No
Member may own more than two Membership Units.
1.9. THE MEMBERS. The name, place of residence, and number of Membership
Units of each initial member are contained in Exhibit 2 attached to this
Agreement.
1.10. ADMISSION OF ADDITIONAL MEMBERS. Except as otherwise
expressly provided in the Agreement, no additional members may be admitted to
the Company through issuance by the company of a new Membership Interest in
the Company without the prior unanimous written consent of the Members. New
Members may be admitted to the Company through acquisition of one or more of
the existing Membership.
ARTICLE 2. Capital
2.1. INITIAL CONTRIBUTIONS. The Members initially shall contribute to the
Company capital as described in Schedule A attached to this Agreement. The
agreed value of each Membership Unit is $ 2850.
2.2. ADDITIONAL CONTRIBUTIONS. No Member shall make any additional
contribution to the Company’s capital except in the following situations:
(a) Purchase of an additional Membership Unit providing the Member will
not own more than two Membership Units.

(b) Payment of any assessment made on each Membership Unit to cover
operating costs as approved by Members holding a majority of the
Membership Units according to the provisions of Section 4.6.
ARTICLE 3. Profits, Losses and Distributions
3.1. PROFITS/LOSSES. For financial accounting and tax purposes the Company’s
net profits or net losses shall be determined on an annual basis and shall be
allocated to the Members in proportion to each Member’s number of
Membership Units in the Company as set forth in Schedule A as amended from
time to time in accordance with Treasury Regulation 1.704-1.
3.2. DISTRIBUTIONS. Provided that the management reserve fund described in
Section 4.5 shall be fully funded, the Members shall determine and distribute
available funds annually or as they see fit based on the recommendations of the
Manager provided that the distribution is approved by Members holding at least
50% of the Membership Units. Available funds, as referred to herein, shall mean
the net cash of the Company available after appropriate provision for expenses
and liabilities, as determined by the Manager. Distributions in liquidation of the
Company or in liquidation of a Member’s interest shall be made in accordance
with the positive capital account balances pursuant to Treasury Regulation 1.704-
l(b)(2)(ii)(b)(2). To the extent a Member shall have a negative capital account
balance, there shall be a qualified income offset, as set forth in Treasury
Regulation 1.704-l(b)(2)(ii)(d).
ARTICLE 4. Management.
4.1. SELECTION OF MANAGER. Members, by a vote of the Members holding a
majority of the Membership Units in the Company, as set forth in Schedule A as
amended from time to time, shall elect one Manager. The initial Manager is
Vermont Family Forests, PO Box 254, 14 School Street, Bristol, Vermont 05443.
4.2. RIGHT TO MANAGE. The Manager shall have the right to control and manage
the Company consistent with any written policy established by the Membership.
4.3. POWERS OF MANAGER. Without limiting the generality of Section 4.2 above,
the Manager shall have the power and authority, on behalf of the Company, to
take the following action on behalf of the company.
(a) Purchase liability and other insurance to protect the company’s property
and business.
(b) Hold and own any company real and/or personal properties in the name of
the Company.
(c) Oversee the management to ensure compliance with the easement and
terms of other management agreements.

 
 

  




 
 

  




 
 

  




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(d) Invest any Company funds temporarily (by way of example but not
limitation) in time deposits, short-term governmental obligations,
commercial paper, or other investments;
(e) Purchase a Membership Unit on behalf of the Company pursuant to
Section 7.2.
(f) Employ on behalf of the company such persons, firms or corporations
(including, without limitation, any Member or entities or persons related to,
affiliated with or controlled by any Members) as the Manager, in its
discretion, shall deem advisable, for or in connection with the operation and
management of the business of the Company and for the performance of
forestry, land management, accounting and legal services.
(g) Recommend when and in what amounts distributions shall be made in
accordance with and subject to Section 3.1 of this Agreement.
(h) Estimate the amount needed for the Management Reserve Fund and
recommend when an assessment or loan is needed pursuant to Section 4.6 of
this Agreement.
(i) File on behalf of the Company all required local, state and federal tax
returns relating to the Company and make or fail to make, in its discretion,
any and all elections required or permitted to be made by the IRC, or the
regulations thereunder, or by the laws governing any state or local tax.
(j) File on behalf of the Company any management or stewardship reports
including the conformance report.
(k) Execute on behalf of the Company all instruments and documents,
including, without limitation: checks, drafts, loans, notes and other
negotiable instruments, financing statements, documents providing for the
acquisition, mortgage or disposition of the Company’s property; bills of sale;
leases; and any other instruments or documents necessary, in the opinion of
the Manager, to the business of the Company.
4.4. REMOVAL OF MANAGER. A manager may be removed as Manager with or
without cause, but only upon the affirmative vote or written consent of Members
holding a majority of the Membership Units.
4.5. MANAGEMENT RESERVE FUND. The Manager shall be required to have a
Management Reserve Fund in place at all times, and the management of the
company shall be in compliance and consistent with the management reserve
fund. Management Reserve Fund shall mean an amount of money to include 110
percent (110%) of the estimated budget expenses for the company between the
major income stream events (such as sale of timber).
4.6. ASSESSMENT. In the event the fund is not adequate to cover the estimated
budget expenses for the Company the Manager, upon approval by Members
holding a majority of Membership Units, may either assess Members an equal
amount per Membership Unit to cover the expected shortfall or take out a loan to
cover the expected shortfall.

 
 

  




 
 

  




 
 

  




 
 

  



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4.7. COMPANY INFORMATION. Upon request, the Manager shall supply to any
member reasonably available information regarding the Company or its
activities. Each Member or authorized representative shall have reasonable
access to, including inspection and copying of, all books, records and materials
in the Manager’s possession regarding the Company or its activities. The
exercise of the rights contained in this section shall be at the requesting
Member’s expense.
4.8. RECORDS. The Manager shall cause the Company to keep at its principal place
of business the following:
(a) a current list in alphabetical order of the full name and the last known
street address and the number of Membership Units of each Member;
(b) a copy of the Certificate of Association and the Company Operating
Agreement and all amendments;
(c) copies of the Company’s federal, state and local income tax returns and
reports, if any, for the three most recent years;
(d) copies of any financial statements of the limited liability company for the
three most recent years.
ARTICLE 5. Members
5.1. LIMITATIONS. No act shall be taken, sum expended, decision made or
obligation incurred by the Company except by the unanimous consent of all
Members with respect to a matter that would make it impossible for the
Company to carry on its ordinary business or which would contravene this
agreement.
5.2. LIABILITY OF MEMBERS. The liability of the Members shall be limited as
provided under the laws of the Vermont Limited Liability statutes.
5.3. NO POWER TO BIND. Members that are not Managers have no power
individually to bind the Company.
5.4. DECISIONS OF MEMBERS. With the exception of those decisions otherwise
specified in this agreement, action on a matter is approved if it received approval
by Members holding a majority of the Membership Units. Approval may be
given through a vote at a meeting of Members, written consent or electronic
consent. . The Manager may seek direction from the Members, which shall be
determined by a vote or written approval of Members holding a majority of the
Membership Units.
5.5. MEETINGS. Meetings of Members may be called by the Members holding at
least 33 percent (33%) of the Membership Units. The company shall send notice
of the date, time place, and business to be transacted to the address as appears in
the records of the Company at least thirty, but not more than sixty, days before

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the date of the meeting. A member may appoint a proxy to vote or otherwise act
for the Members.
5.6. TELEPHONIC OR ELECTRONIC DECISIONS. Any or all Members may
participate in any Members’ meeting by, or through the use of, any means of
communication by which all Members participating may receive each others
comments.
5.7. REMOVAL OF MEMBERS. A Member may be removed for a breach of the
obligations set forth by law, including Chapter 21 of Title 11 of the Vermont
Statutes Annotated, or conduct evidencing a failure to abide by the rules for use
of the Little Hogback Community Forest as set forth in Section 10.3 of this
Agreement or in the easement or a rule otherwise established by the Company, or
failure to pay an assessment as provided in Section 4.6 but only upon the
affirmative vote or written consent of Members holding at least sixty (60) percent
of the Membership Units. The removal of a Member shall not affect the
Member’s rights to transfer or sell the Membership Unit(s).
5.8. WRITTEN CONSENT. Any action permitted or required by the Act, the Articles
or this Agreement to be taken by the Members may be taken without a meeting if
a consent describing the action to be taken in writing (which may be executed in
multiple counterparts), setting forth the action to be taken, is signed by the
members and delivered to the Company for inclusion in the minutes. The record
date for determining Members entitled to take action without a meeting is the
first date a Member signs the consent to such action. Such consent shall have the
same force and effect as the vote of the Members at a meeting and may be stated
as such in any document or instrument filed with the Secretary of State of
Vermont or delivered to any person or entity.
ARTICLE 6. Bookkeeping
6.1.BOOKS. The Manager shall maintain complete and accurate books of account of
the Company’s affairs at the Company’s principal place of business. The
company’s accounting period shall be the calendar year.
6.2.MEMBER’S ACCOUNTS. The Manager shall maintain separate capital and
distribution accounts for each member. Each member’s capital account shall be
determined and maintained in the manner set forth in Treasury Regulation 1.704-
l(b)(2)(iv) and shall consist of his initial capital contribution increased by: any
additional capital contribution made by him/her; credit balances transferred from
his distribution account to his capital account; and decreased by: distributions to
him/her in reduction of Company capital; the Member’s share of Company losses
if charged to his/her capital account.
6.3.REPORTS. The Manager shall close the books of account after the close of each
calendar year, and shall prepare and send to each member a statement of such

 




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Member’s distributive share of income and expense for income tax reporting
purposes.
ARTICLE 7. Transfers
7.1. TRANSFER DURING LIFETIME. Subject to Section 7.3 below, if at any time a
Member has a bona fide agreement to sell, assign or otherwise dispose of all or
any of his Membership Units in the Company, such Member shall provide a
written notice of the agreement to Vermont Community Forests (VCF). VCF has
the option to purchase Member’s unit(s) as provided in this ARTICLE 7. The
notice shall set forth the identity of any proposed transferee and the amount and
type of consideration, if any, which the Transferring Member is to receive
pursuant to the agreement.
Upon receipt of such notice, VCF shall within thirty (30) days from the date of
receipt of the notice notify the transferring Member in writing of its decision
whether it will exercise its option and the Purchase Option Price as determined
pursuant to Section 7.5, and the purchase shall be made within thirty days after
written notice of exercise of option is received by the transferring Member. If
VCF shall not exercise its option or if no response is made within 30 days, the
member shall have the right to sell in accord with the offer proposed.
7.2. WITHDRAWAL. A Member who elects to withdraw as provided under Vermont
law shall do so by providing written notice to the Company by certified mail. The
withdrawing Member shall have comparable rights to payment for such
Membership Units. The company or its assign shall within thirty (30) days
provide an offer to purchase the withdrawing Member’s Membership Unit,
subject to any right of first refusal in Vermont Community Forests, including all
information required under Section 3091 (b) of the Vermont Limited Liability
Act, at a value determined according to the valuation method set out in Section
7.5 of this Agreement.
7.3. TRANSFERS TO PERMITTED PERSONS. Anything in this Article 7 to the
contrary notwithstanding, a Member shall have the right to Transfer his or her
Membership Unit(s) by sale, gift, inheritance or devise to any (i) family member
of the Member, or (ii) another Member, provided that such Member does not
hold more than two Membership Units, without first offering his or her
Membership Unit(s) to VCF.
7.4. RIGHTS OF PURCHASER OR ASSIGNEE. The purchaser or assignee shall
become a Member entitled to all rights of a Member upon acquisition of a
Membership Unit.
7.5. PURCHASE OPTION PRICE. To further the goals and purposes set forth herein
by helping to preserve the affordability of the Membership Units to succeeding
Members while taking fair account of the investment of labor and capital by

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   7.5

   7.6

   7.5

   7.6
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current Members, subject to the provisions of Section 7.1 VCF shall have the
right to purchase any share offered for sale at Purchase Option Price.
Purchase Option Price of a Membership Unit shall be defined as the value of the
Productive Use of the land, plus the value of the Management Reserve Fund,
divided by the number of Membership Units.
“Productive Use” of the land shall mean 45% of the current value of the inventory
of merchantable wood products. The estimate of the inventory shall be based on
the latest field sample data plus an estimate of growth since the field sample was
taken. The value of the inventory shall be based on the most recent prices for
products and for harvesting and management services. VCF shall provide the data
used in its good faith effort to arrive at this value of the productive use.
ARTICLE 8. Liquidation
8.1. CONTINUATION FOR INCOME TAX PURPOSES. Notwithstanding the
dissolution of the Company, until termination, the business of the Company and
the affairs of the Members shall continue to be governed by this Agreement and
the Company shall be deemed to continue for Federal income tax purposes until
its affairs have been wound up and the Company is liquidated.
8.2. LIQUIDATOR. Upon dissolution, a Liquidator designated by the Remaining
Members shall liquidate the assets of the Company, apply and distribute the
proceeds thereof as provided in Section 8.4 of this Agreement and cause the
filing of the articles of dissolution as required by the Act.
8.3. ACCOUNTING. Upon dissolution of the Company, a full accounting of the
assets and liabilities of the Company shall be promptly undertaken in accordance
with generally accepted accounting principles by the independent public
accountant regularly employed by the Company, and the Member(s) or the
Liquidator or shall wind up the Company’s affairs by completing any business
then in progress, and subject to any rights of first refusal to Vermont Community
Forests, liquidating its assets to the extent practicable and applying its funds and
remaining assets as set forth in Section 8.4 of this Agreement.
8.4. DISTRIBUTIONS. Upon dissolution of the company and the winding up of its
affairs the funds and assets of the Company remaining after the completion of
Company Business, the liquidation of Company assets, shall be applied and
distributed by the later of the close of the taxable year of liquidation or ninety
(90) days after the liquidation as follows:
(a) the Company shall pay it creditors, including Members who are
creditors, to the extent permitted by law, and in the order of priority
provided by law, in satisfaction of liabilities of the Company other
than liabilities for distributions to Members;
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(b) the Company shall establish reserves, which are deemed by the
Manager or Liquidator, as the case may be, as reasonably necessary
for any contingent or unforeseen liabilities or obligations of the
Company arising out of or in connection with the Company or its
liquidations. These reserves shall be held by the Members or
Liquidator for such period as they shall deem advisable and the
balance thereafter remaining shall be distributed in the manner
proved below;
(c) the Company shall make any distribution necessary to satisfy
liabilities to Members or former Members for any unpaid interim or
withdrawal distributions;
(d) the Company shall distribute to the Members, the balance, if any,
in their Capital Accounts, in proportion to their respective balances;
and
(e) the Company shall divide the balance by the number of
Membership Units and distribute it to Members according to their
Membership Units.
8.5. LIQUIDATING TRUST. Distributions pursuant to this Section may be
distributed to a trust established for the benefit of the Members for the purposes
of liquidating Company assets, collecting amounts owned the Company, and
paying any contingent or unforeseen liabilities or obligations of the Company or
of the Members arising out of or in connection with the Company. The assets of
any such trust shall be distributed to the Members by the later of the close of the
taxable year or liquidation or within ninety (90) days after liquidation in the same
proportions as the amount distributed to such trust by the Company would
otherwise have been distributed to the Members pursuant to this Agreement.
ARTICLE 9. Loans to the Company
9.1. LOANS FROM MEMBERS. Nothing contained herein shall prevent any
Member from making a loan or loans to the Company, and any amount so loaned
shall be considered a debt of the Company payable in accordance with its terms
and not a capital contribution to the Company. Unless otherwise expressly
provided in the documentation evidencing the loan, the loan and the interest
thereon shall be payable only out of the assets of the company and, unless
expressly agreed in writing by such Member, no Member shall have any personal
liability for the loan. Any loan by a Member to the Company shall bear interest at
the prime rate quoted in the Wall Street Journal as the prevailing prime rate or at
a mutually agreed upon lower rate.

 




 







 
 
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ARTICLE 10. General
10.1. SOLE OPERATING AGREEMENT. This written Agreement embodies
the only operation agreement of the Company and the entire understanding and
agreement of the parties relating to the subject matter of the Agreement and no
promise, condition, representation or warranty, expressed or implied, not herein
set forth shall bind any party with respect thereto.
10.2. AMENDMENT. None of the terms and conditions of this Agreement may
be amended, changed, modified, waived or cancelled, except by an agreement of
the Members holding a majority interest of the Membership Units. A waiver at
any time of compliance with any of the terms and conditions of this Agreement
shall not be considered a modification, cancellation or waiver of such terms and
conditions or of any preceding or succeeding breach hereof unless expressly so
stated.
10.3. MANAGEMENT OF FOREST. The uses of the forest land held by Little
Hogback Community Forest, LLC, are limited by the terms of a conservation
easement held by the Vermont Land Trust, or its designee. The property shall be
managed according to a properly approved management plan. Any tree cutting,
crop tree release, road and trail building or other management and extraction
activities shall be in accordance with the plan and approved by the Manager. The
rights in the land are also subject to a covenant running in favor of Vermont
Community Forests providing them with the option to repurchase the rights. The
Company may establish rules to restrict and direct use of the property.

 




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Schedule A
Pursuant to ARTICLE 2, the Members’ initial contribution to the Company capital is
stated to be $2850 per Membership Unit. The initial Members, Membership Units and
contributions are as follows:
Name Membership
Units
Capital
Contribution
Mischul Brownstone 1 $2850
Donald Joseph Dewees and Martha Potter Dewees 1 $2850
Laura Farrell and Joe Roman 1 $2850
Patricia A. Hannaford Regional Technical Center 1 $2850
Richard E. Hotchkin and Toni D. Hotchkin 1 $2850
Lee Kauppila 1 $2850
Cory Malzac and Cindy Growney 1 $2850
Nancy Marcus and George Marcus 1 $2850
Kathryn McEachen 1 $2850
Bill McKibben and Sus Halpern 1 $2850
John P. McNerny and Kimberly A. Clark 1 $2850
Joshua Sky and Natasha Sky 1 $2850
Roger Wallace and Susan M. DeSimone 1 $2850
William Whitney and Carla Klop 1 $2850
Martha Heidi Willis 1 $2850
Matthew Witten 1