# OPERATING AGREEMENT

SnS Hospitality Group LLC
Entity: SnS Hospitality Group LLC
EIN: 42-4288652
Type: Multi-Member LLC (Indiana)
Parent: SnS Network Solutions Holdings LLC (EIN 42-4099038)
State filed: Indiana (INBiz, 08/06/2026)
Effective date: ________________________________________ (to be filled in at signing)

## 1. Formation and Purpose

This Operating Agreement (the "Agreement") is entered into by the undersigned Members to govern the operations of SnS Hospitality Group LLC (the "Company"), a limited liability company organized under the Indiana Business Flexibility Act (Indiana Code § 23-18).

The Company is formed to own, operate, and manage mobile and trailer-based food and beverage ventures across Northwest Indiana and Southern Michigan. The first venture is "The Daily Pour" — a fleet of drive-through coffee trailers deployed to high-traffic locations.

The Members acknowledge that the Company's success depends on both capital investment (provided by Holdings) and operational excellence, systems development, compliance management, and growth leadership (provided by Kiowa). This Agreement is designed to fairly recognize and protect both forms of contribution.

## 2. Members and Ownership

Member | Interest | Type
--- | --- | ---
SnS Network Solutions Holdings LLC ("Holdings") | 75% minimum | Capital + control
Kiowa Scott ("Kiowa") — service | Up to 15% (guaranteed, earned over time) | Vested through operational work
Kiowa Scott ("Kiowa") — investment | Up to 10% (proportional to startup capital contributed) | Must invest at startup per venture. Formula: (contribution ÷ startup cost) × 100, capped at 10%.

Holdings never drops below 75%. Kiowa's guaranteed path is 15% through service. An additional up to 10% is earned proportionally by investing working capital at startup — the more she contributes toward a venture's startup cost, the more investment equity she earns (capped at 10%). If she doesn't invest, the tranche may be offered to another investor at Holdings' discretion.

## 3. Management

The Company shall be Member-managed. Holdings (represented by Samuel S. James) retains sole authority over all day-to-day operational decisions and capital deployment.

### 3.1 Holdings' Authority (Samuel S. James)

- Capital expenditures and investment decisions
- Forming, acquiring, or dissolving ventures
- Opening and controlling bank accounts
- Approving new locations and expansion timing
- Hiring and removing the General Manager

### 3.2 Kiowa's Role — Operations Director

Kiowa serves as Operations Director — a strategic and administrative leadership role. Her responsibilities:

- Compliance — permits, licenses, health department filings, renewals
- Site selection — finding and securing high-traffic lot locations
- SOPs — building standard operating procedures and systems for scale
- Grant sourcing — identifying, applying for, and securing grants/funding
- Growth planning — expansion strategy, new market evaluation
- Legal/admin — formation paperwork, regulatory filings, insurance coordination
- Recruiting Location Managers — finding the right people to run each trailer

### 3.3 Location Manager (Per Trailer)

Each trailer is run by a Location Manager — the lead barista/operator who is empowered to handle day-to-day operations independently:

- Opening/closing the trailer
- Scheduling and managing their own support staff
- Vendor relationships and supply ordering
- Customer service and quality control
- Hiring part-time support for their location

The Location Manager runs their trailer. They are NOT managed by a General Manager — they report directly to Sam and Kiowa as co-founders.

### 3.4 Shared Founder Responsibility — Escalations

Sam and Kiowa share responsibility for issues the Location Manager cannot resolve on their own, including:

- Equipment failure (generator, espresso machine, refrigeration)
- Infrastructure issues (power outage, leaks, internet/network down)
- Lease/landlord disputes
- Major staffing issues (Location Manager quits, needs to be replaced)
- Any situation requiring capital expenditure or legal action

Either founder may handle an escalation. Neither founder is solely responsible for day-to-day store operations — that is the Location Manager's job.

### 3.5 Major Decisions Requiring Mutual Consent

The following decisions require the written consent of both Members (Holdings AND Kiowa), regardless of ownership percentage:

- Selling or merging the Company (or any material portion of its assets)
- Dissolving the Company
- Issuing new equity that would dilute any Member's vested interest
- Amending this Operating Agreement

All other business decisions remain under Holdings' authority per §3.1.

## 4. Equity Vesting — Service Grant (15%)

Each venture Kiowa participates in earns her equity in the Hospitality Group:

Grant | Amount | When
--- | --- | ---
Formation grant | 5% | Vests immediately upon venture formation (Articles filed)
Service grant (Q1) | 2.5% | 3 months from Opening Date
Service grant (Q2) | 2.5% | 6 months from Opening Date
Service grant (Q3) | 2.5% | 9 months from Opening Date
Service grant (Q4) | 2.5% | 12 months from Opening Date
Total | 15% | Fully vested after 12 months of active service

- Opening Date = first day of revenue-generating operations
- Each venture has its own independent vesting schedule
- Total cumulative service equity is capped at 15%

## 5. Investment Equity (Up to 10%, Proportional)

Separate from and in addition to her 15% service grant (§4, time-vested), Kiowa may earn investment equity in a venture by contributing working capital at startup. Each venture has a 10% investment-equity pool (the maximum interest Holdings will give up above its 75% floor). Investment equity is a financial contribution and is proportional to the amount contributed relative to the venture's total startup cost:

Formula: Investment Equity % = (Kiowa's capital contribution ÷ total venture startup cost) × 100, capped at 10%. This is a separate mechanism from the service grant — service equity time-vests (§4); investment equity vests immediately on contribution.

Venture Startup Cost | Kiowa Invests | % of Startup | Investment Equity | + Service (12 mo) | Her Total
--- | --- | --- | --- | --- | ---
$50,000 | $5,000 | 10% | 10% | 15% | 25%
$50,000 | $2,500 | 5% | 5% | 15% | 20%
$50,000 | $1,000 | 2% | 2% | 15% | 17%
$50,000 | $0 | 0% | 0% | 15% | 15%

Availability — shared with outside investors (per venture): The 10% pool is shared. Kiowa's investment-equity option is limited to whatever remains in the 10% pool after any outside investors Holdings brings into that specific venture. If an outside investor takes the full 10%, there is nothing left for Kiowa to invest in for that venture (she keeps her 15% service grant only). If an outside investor takes 5%, Kiowa may invest for up to the remaining 5%. If there are no outside investors, the full 10% is available to her. This is determined per venture.

- Timing: Investment must be made at startup (before or at the Opening Date). No retroactive buy-in after operations begin.
- Per venture: Each trailer/venture has its own startup cost and its own investment opportunity (and its own outside-investor situation). Investing in T-00 does not carry over to T-01.
- Cap: Investment equity is capped at 10% per venture — and further limited to whatever remains in that venture's 10% pool after outside investors.
- Vests immediately: Investment equity vests on the date funds (or installed equipment, per §5.1) are received by the Company. No time-based vesting. (This is distinct from the service grant, which time-vests under §4.)
- Holdings minimum preserved: Holdings never drops below 75% — the combined outside-investor + Kiowa investment equity for any venture cannot exceed the 10% pool.

### 5.1 In-Kind Contribution via Financed Equipment

Kiowa's working-capital contribution under this Section 5 may be made in-kind by purchasing equipment for the venture — including equipment she finances personally (e.g., Affirm, Karat, a credit card, or any personal financing) — rather than only by cash. The following terms apply:

- Counts as working capital: The purchase price of the equipment (per the receipt) counts as Kiowa's capital contribution toward that venture's startup cost, and earns investment equity under the same proportional formula above.
- Proof required: Kiowa must provide the receipt / proof of purchase documenting the amount paid for the equipment.
- Must be installed before Opening Day: The equipment must be delivered and installed in the trailer before the venture's Opening Date. Equipment added after operations begin does not count as a startup contribution (consistent with the timing rule above).
- Ownership transfers to the Company: Once the equipment is installed in the trailer, it belongs to the Company — it is no longer Kiowa's personal property. In exchange, she receives investment equity equal to its purchase price under the formula above.
- Financing is Kiowa's own responsibility: Kiowa is solely responsible for repaying any personal financing she used (principal and interest). The Company does not assume her debt and does not reimburse her financing costs. Her contribution is valued at the equipment's purchase price only — interest she pays is her own.

Worked example (Trailer 2): Trailer 2's total startup cost is $30,000. Kiowa uses her personal financing to buy $3,000 of equipment and installs it in the trailer before Opening Day, bringing the receipt. That $3,000 is a working-capital contribution: $3,000 ÷ $30,000 = 10% of startup cost → she earns the full 10% investment equity (vested immediately once the equipment is in the trailer). Combined with her 15% service grant (5% at formation + 10% vesting over 12 months), her total interest in Trailer 2 reaches 25% — while Holdings stays at its 75% minimum. The equipment now belongs to the Company; Kiowa keeps paying her own Affirm/financing balance.

## 6. Grant Finder's Fee

If Kiowa identifies, applies for, and secures a grant (non-repayable funding — government, foundation, or private grant money) for any venture under the Hospitality Group:

- Kiowa receives 7.5% of the total grant amount as a one-time lump sum
- Payment is due within 14 days of the grant funds hitting the Company's bank account
- This fee is in addition to (not instead of) her equity and distributions
- "Grant" means money the Company does not have to repay — loans, lines of credit, and investor capital do not qualify

## 7. Departure Buyback (Before 10 Trailers)

If Kiowa departs before all 10 Daily Pour trailers are operational — she is required to sell her vested interest back to Holdings. The buyback price depends on how she leaves.

### 7.1 Tiered Buyback Pricing

Departure Type | Buyback Price
--- | ---
Good standing + 90-day transition (helps onboard replacement, documents systems, hands off cleanly) | 100% of FMV
Good standing, immediate departure (no transition, but no misconduct) | 75% of FMV
Abandonment (no notice, 30+ days unresponsive, no communication) | 50% of FMV
For Cause (fraud, theft, intentional misconduct — see §8) | $0 — full forfeiture

FMV definition: Net asset value (total assets − total liabilities) × Kiowa's vested ownership percentage, as determined by the Company's most recent quarterly books. If disputed, an independent third-party valuation at shared cost.

Payment terms: Lump sum within 90 days of the departure date, or a 12-month installment plan at Holdings' election.

Unvested portion: Any unvested equity at the time of departure is forfeited automatically — reverts to Holdings at no cost, regardless of departure type.

### 7.2 Trigger Events

- Voluntary resignation from operational role
- Failure to fulfill responsibilities (per §7.3) after notice and cure period
- Removal for cause (see §8 — Forfeiture for Cause)
- Mutual written agreement to part ways

### 7.3 Performance Standards (Outcome-Based)

Instead of hourly commitments, Kiowa's performance is measured by outcomes:

- All permits and licenses are current (no lapses)
- All operational locations are staffed and open per schedule
- Quarterly financial reports delivered within 30 days of quarter-end
- Expansion milestones progressing per the agreed growth plan
- SOPs documented and maintained for each venture

If Kiowa is not meeting these outcomes, the following process applies:

1. Written notice from Holdings specifying the deficiency
2. 30-day cure period for Kiowa to resolve the issue (where the issue is curable)
3. If not resolved → 30-day mediation (both parties select a neutral mediator)
4. If mediation fails → binding arbitration in St. Joseph County, Indiana

Only after this process is exhausted may Holdings invoke the buyback. No buyback may be triggered on the basis of a performance issue without completing the notice + cure + mediation steps above.

## 8. Forfeiture for Cause

If Kiowa violates any law or is found to have misappropriated any terms of this Agreement, she forfeits ALL rights — including all vested and unvested equity — in the Company.

### 8.1 Triggering Violations (Serious Misconduct Only)

Forfeiture for Cause is triggered only by intentional, serious misconduct:

- Fraud or theft — any act of fraud, embezzlement, or theft against the Company, its Members, employees, customers, or vendors
- Misuse of company funds — unauthorized withdrawals, personal use of business accounts, falsified expenses, or deliberate diversion of revenue
- Misuse of company assets — unauthorized sale or encumbrance of company property, equipment, or intellectual property
- Intentional disclosure of private data — deliberate unauthorized sharing of Social Security Numbers, EIN information, financial account details, trade secrets, or any information protected under the NDA
- Criminal conduct — conviction of or plea to any felony, or any misdemeanor involving dishonesty or fraud, in connection with her role
- Intentional material breach of this Agreement or the NDA

What does NOT trigger forfeiture: Performance issues, honest mistakes, negligence, circumstances outside Kiowa's control, or disagreements between Members. These are handled through the notice/cure/mediation process in §7.3, potentially leading to a buyback — not forfeiture.

### 8.2 Consequences of Forfeiture for Cause

- All equity forfeited — both vested and unvested Membership Interest reverts to Holdings immediately, at no cost to Holdings
- Distributions cease — Kiowa receives only distributions already earned and unpaid through the current quarter at the time of forfeiture. No future distributions.
- Permanent removal — Kiowa is permanently removed from the Company and all ventures under the Hospitality Group. No reinstatement.
- No buyback payment — unlike the §7 departure buyback, forfeiture for cause results in zero compensation for the forfeited equity
- Additional remedies preserved — forfeiture does not limit Holdings' right to pursue legal action for damages, injunctive relief, or criminal referral as applicable

### 8.3 Determination Process

Holdings shall provide Kiowa written notice of the alleged violation, specifying the conduct at issue and the evidence supporting the claim. Kiowa has 15 calendar days to respond in writing. If the parties cannot resolve the matter within 15 days of Kiowa's response, either party may submit the dispute to binding arbitration in St. Joseph County, Indiana, under Indiana law. Forfeiture does not take effect until either (a) Kiowa acknowledges the violation in writing, or (b) an arbitrator rules in Holdings' favor.

## 9. After 10 Trailers Are Complete

The mandatory buyback (§7) expires. The fleet is built. The deal is honored.

### 9.1 If She Keeps Working

Full equity, full distributions, full management authority. Business as usual.

### 9.2 If She Stops Working

- Retains all vested equity as a passive member (economic rights only)
- Loses management authority — no decisions, no signing power, no operational role
- Dilution: Holdings will hire a W-2 operations manager to replace her role. That salary is a company expense reducing distributable profit. Holdings may also issue new equity from its 75%+ position to incentivize the replacement, diluting Kiowa's percentage over time. She accepts this dilution as a consequence of stepping back.
- No forced buyback — she keeps what she earned

### 9.3 Right of First Refusal — Post-Completion Sale

If Kiowa decides to sell her vested interest after the 10 trailers are complete:

Term | Detail
--- | ---
Who buys first? | Holdings gets first right to purchase
Price (good standing, all ventures excelling) | 100% of FMV — Holdings matches fair market value when all businesses are performing and the departure is amicable
Price (if any venture is declining) | 85% of FMV — reduced to reflect transition risk when performance is mixed
Decision window | 60 days from written notice
If Holdings passes | Kiowa may sell to a third party — but the buyer must be approved by Holdings. No sale to any party Holdings does not consent to.
Third-party price floor | Kiowa cannot sell to a third party at a price lower than what Holdings was offered
Partial sales | Same terms apply — Holdings' ROFR covers partial sales too

## 10. Distributions

- Distributions of available profit are made to Members pro rata in proportion to their vested Membership Interest
- The formation grant (5%) earns distributions from the Formation Date forward
- Service tranches earn distributions only once vested — unvested tranches do not participate
- Timing and amounts are determined by Holdings, subject to the Company's financial obligations and applicable law
- The Company may not make a distribution that would render it unable to pay its debts as they come due

### 10.1 Tax Distributions

Because the Company is taxed as a partnership (see §13), each Member is taxed on their allocated share of the Company's profit whether or not that profit is actually distributed. To ensure no Member owes tax on undistributed ("phantom") income, the following applies notwithstanding the discretionary nature of distributions above:

- For each fiscal year, the Company shall — to the extent of available cash and subject to the solvency limitation above — distribute to each Member an amount at least equal to that Member's allocated share of the Company's taxable income multiplied by an assumed tax rate of [35%].
- Tax distributions are made pro rata in proportion to each Member's vested Membership Interest, on or before [April 1] following the close of each fiscal year, with quarterly advances permitted (at Holdings' discretion) to align with estimated-tax deadlines.
- Tax distributions are treated as advances against, and are offset against, future distributions otherwise payable to that Member under this Section 10 — they are not additional compensation.
- This obligation is subject to the same solvency limitation above: the Company will not make a tax distribution that would render it unable to pay its debts as they come due.

Why this matters (plain language): the fleet model reinvests profit into the next trailer, so cash may stay in the business. Without this clause, a Member could owe tax on profit they never received. This clause guarantees each Member first gets enough cash to cover the tax on their share, protecting both Holdings (the majority owner) and Kiowa.
Draft — confirm with CPA/attorney before signing. The [35%] assumed rate and [April 1] timing are placeholders; your CPA sets the final rate (based on the highest combined federal + Indiana rate applicable) and the payment schedule.

## 11. Capital Contributions

- Holdings: Provides all capital required for trailer acquisition, buildout, equipment, and initial operating expenses (~$35,000 per unit). Capital calls are at Holdings' sole discretion.
- Kiowa (service equity): No capital contribution required. Her 15% is earned through operational work.
- Kiowa (investment equity): Up to 10% of the venture's total startup cost, contributed at startup. Earns proportional investment equity per §5.

## 12. Bank Accounts, Books, and Records

- The Company shall maintain its own bank account(s), separate from Holdings' accounts, any Member's personal accounts, and any individual venture's accounts
- Accurate books and records shall be maintained and made available to all Members
- Quarterly financial reports (revenue, expenses, net profit, distributions) shall be provided to all Members within 30 days of quarter-end

## 13. Tax Treatment

As a multi-member LLC, the Company is treated as a partnership for U.S. federal income tax purposes. Each Member reports their proportionate share of income/expense on their individual return via Schedule K-1. The Company will file Form 1065 annually.

- Kiowa's service equity is intended to qualify as a profits interest under Rev. Proc. 93-27 / 2001-43 (no taxable income on grant)
- Section 83(b) election: Kiowa should file within 30 days of each grant date. This is a hard IRS deadline with no extensions.
- Fiscal year: Calendar year (January 1 – December 31)

## 14. Confidentiality

Kiowa's access to personal information, business data, trade secrets, and proprietary information is governed by a separate Non-Disclosure Agreement. The NDA applies regardless of Kiowa's membership status and survives termination of this Agreement. Violation of the NDA constitutes grounds for Forfeiture for Cause under §8.

## 15. Amendments

This Agreement may be amended only by a written instrument signed by all Members. Amendments are effective on the date stated in the amendment.

## 16. Dissolution

The Company shall continue in perpetuity unless dissolved by:

- The written consent of both Members (per §3.3); or
- Operation of Indiana law.

Notice: Holdings shall provide Kiowa a minimum of 90 days written notice before any dissolution. Kiowa continues earning distributions through the notice period.

Upon dissolution, the Company's assets shall be applied first to creditors (including any Member, if owed), then distributed to the Members pro rata in proportion to their vested Membership Interests, after which Articles of Dissolution shall be filed with the Indiana Secretary of State.

## 17. Governing Law and Disputes

This Agreement is governed by the laws of the State of Indiana. Any dispute arising under this Agreement that cannot be resolved by the Members within 30 days shall be submitted to binding arbitration in St. Joseph County, Indiana, under Indiana law.

## 18. Exit Scenarios — Summary

Scenario | Outcome
--- | ---
Leaves before 10 trailers — good standing + 90-day transition | Buyback at 100% of FMV. Unvested forfeited.
Leaves before 10 trailers — good standing, no transition | Buyback at 75% of FMV. Unvested forfeited.
Leaves before 10 trailers — abandonment | Buyback at 50% of FMV. Unvested forfeited.
Forfeiture for Cause (fraud/theft/intentional misconduct) | ALL equity forfeited. $0. Permanent removal.
Stays through 10 trailers, keeps working | Full equity, full distributions, full authority.
Stays through 10 trailers, stops working | Keeps equity (passive), loses authority, accepts dilution.
Stays through 10 trailers, wants to sell (all ventures excelling) | Holdings buys at 100% FMV. Must approve any third-party buyer.
Stays through 10 trailers, wants to sell (any venture declining) | Holdings buys at 85% FMV. Must approve any third-party buyer.

## 19. Definitions

Term | Meaning
--- | ---
"Company" | SnS Hospitality Group LLC
"Holdings" | SnS Network Solutions Holdings LLC (sole member represented by Samuel S. James)
"Kiowa" | Kiowa Scott
"Formation Date" | Date Articles of Organization filed with Indiana Secretary of State
"Opening Date" | Date the venture begins revenue-generating operations
"FMV" (Fair Market Value) | Net asset value (total assets − total liabilities) × Member's ownership percentage
"Grant" | Non-repayable funding (government, foundation, or private grant). Loans and investor capital do not qualify.
"For Cause" | Any triggering violation listed in §8.1

## Execution

The undersigned, being all of the Members of SnS Hospitality Group LLC, adopt and agree to this Operating Agreement as of the Effective Date first written above.

MEMBER — SnS Network Solutions Holdings LLC (75%+)

Signature

Printed name: Samuel S. James

Title: Sole Member, SnS Network Solutions Holdings LLC

Date

MEMBER — Kiowa Scott (up to 25%)

Signature

Printed name: Kiowa Scott

Date