SECOND AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
EXHIBIT
10.4
SECOND
AMENDED AND RESTATED
OF
FRONT
RANGE ENERGY, LLC
THIS
SECOND AMENDED AND RESTATED OPERATING AGREEMENT (“Agreement”)
which
amends and restates the First Amended and Restated Operating Agreement of Front
Range Energy, LLC, a Colorado limited liability company (the “Company”),
is
hereby amended and restated in its entirety effective as of the 20th day of
October, 2005 (the “Effective
Date”),
by the
undersigned being all the members of the Company.
SECTION
1.
Definitions
SECTION
1.1 Definitions.
For
purposes of this Agreement, capitalized terms shall have the meaning ascribed
to
them in Appendix I attached hereto.
SECTION
1.2 References
and Construction.
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(a)
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Words
of the masculine gender shall be deemed to include the feminine and
neuter
genders, and vice versa, where applicable. Words of the singular
number
shall be deemed to include the plural number, and vice versa, where
applicable.
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(b)
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Unless
otherwise indicated, any reference herein to a “Section”, “Exhibit”,
“Appendix”, “Subsection”, “Paragraph”, or to a subpart of any of them,
shall be to the applicable section, exhibit, appendix, subsection
or
paragraph of or to this Agreement or subpart
thereof.
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(c)
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The
words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder”, and
words of similar import refer to this Agreement as a whole and not
to any
particular subdivision unless expressly so
limited.
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(d)
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The
word “includes” and its derivatives means “includes, but is not limited
to” and corresponding derivative
expressions.
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(e)
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Unless
the context otherwise requires or unless otherwise provided herein,
the
terms defined in this Agreement which refer to a particular agreement,
instrument, or document also refer to and include all renewals, extension,
modifications, amendments, or restatements of such agreement, instrument,
or document.
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SECTION
2.
Organization
SECTION
2.1 Formation.
The
Company was formed on July 29, 2004 under and pursuant to the provisions of
the
Act. Except as otherwise required by the nonwaivable provisions of the Act
or
the Articles, the rights, duties and obligations of the Members and Managers,
and the operation of the Company shall be governed by the provisions of this
Agreement.
SECTION
2.2 Name
and Principal Office.
The
Company shall conduct its business under the name of “Front Range Energy, LLC”,
or such other name or names as the Managers may determine. The Company’s
principal office shall be located at such place as the Managers may, from time
to time, determine.
SECTION
2.3 Term.
The
Company’s existence commenced on July 29, 2004 and shall continue until
dissolved as provided herein.
SECTION
2.4 Business
Purpose.
The
Company is organized for profit and it may engage in any and all lawful business
for which limited liability companies may be organized under the Act, and engage
in any or all activities related or incidental thereto.
SECTION
2.5 Ratification
of Prior Acts.
All
contracts, agreements, letters of intent, and all other actions heretofore
undertaken and performed on behalf of the Company by its Managers, officers,
or
by any Member are hereby ratified, approved and confirmed,
SECTION
3.
Capital
Contributions
SECTION
3.1 Initial
Units.
Until
such time as additional classes or series of Units of the Company are created
and issued pursuant to Section 10.1 hereof, the Company shall have two classes
of Units (Class A Units and Class B Units). Each outstanding Unit shall be
entitled to one (1) vote on matters submitted to a vote of all members or
submitted to a vote of a particular class of Members.
SECTION
3.2 Initial
Capital Contributions.
Each of
the Initial Members shall make the capital contribution set forth for such
Member on Exhibit
A
attached
hereto. In consideration of such capital contributions, each such Member shall
receive the number and classes of Units indicated on Exhibit
A
attached
hereto.
SECTION
3.3 Additional
Capital Contributions.
The
Members recognize that the Company may require additional capital from time
to
time in order to accomplish the business purpose for which it is formed. The
Company may, by written notice, call for additional contributions to the capital
of the Company (each, an “Additional
Capital Contribution”)
to be
made by all Members if a Two-Thirds Interest determines that such an Additional
Capital Contribution is appropriate or necessary for the operation of the
Company. Within thirty (30) days following the giving of such a notice, each
Member shall contribute, in cash, to the capital of the Company a proportion
of
an Additional Capital Contribution equal to the proportion that the number
of
Class B Units held by such Member bears to the total issued and outstanding
Class B Units (the “Required
Contribution”).
Each
Member making a Required Contribution under this Section 3.3 or Section 3.4
shall be credited with one (1) Class B Unit (or appropriate portion thereof)
for
each $1,000 (or portion thereof) of Required Contribution made by that
Member.
SECTION
3.4 Failure
to Contribute.
If any
Member fails or refuses for any reason to make in a timely manner any part
or
all of a Required Contribution, such Member shall be in default hereunder and
shall be deemed to be a “Defaulting
Member”
to the
extent of the unpaid part of the Required Contribution (the “Unpaid
Required Contribution”).
For a
period often (10) days after the earlier of the expiration of the thirty (30)
day period described in Section 3.3 or notice to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ from the
Defaulting Member that the Defaulting Member shall not make all or any portion
of the Additional Capital Contribution, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as Class A Member,
shall have the right — but not the obligation — to make all or such part of the
Unpaid Required Contribution as he so determines. In the event or to the extent
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ does not make all of the Unpaid Required Contribution, for
a
period of ten (10) days after the earlier of the expiration of the ten (10)
day
period described in the preceding sentence or ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇’ giving notice
to the other Members holding Class B Units of his intention not to make the
entire Unpaid Required Contribution, Members holding Class B Units other than
the Defaulting Member shall have the right — but not the obligation — to make a
proportion of the remaining Unpaid Required Contribution equal to the proportion
that the number of Class B Units held by such Member bears to the total issued
and outstanding Class B Units (excluding those held by the Defaulting Member).
In the event any portion of the Unpaid Required Contribution remains unmade
at
the end of the ten (10) day period described in the immediately preceding
sentence, the following shall apply:
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(a)
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The
Unpaid Required Contribution shall constitute an obligation of such
Defaulting Member to the Company and shall bear interest from the
from the
[sic?]
expiration of the thirty (30) day period described in Section 3.3
at a
floating annual rate of interest equal to the lesser of (i) eight
percent
(8%), or (ii) the maximum rate permitted by law. Interest shall be
compounded monthly. The Company may upon the decision of a Majority
in
Interest (determined by excluding all of the Units of the Defaulting
Member), institute suit in any court of competent jurisdiction to
enforce
such obligation of the Defaulting Member. In addition, the Company
shall
be entitled to recover in such suit all costs and expenses, including,
but
not limited to, court costs and reasonable attorneys’ fees, thereby
incurred by the Company and any damages (except incidental or
consequential damages) sustained by the Company as a result of the
default
by the Defaulting Member.
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(b)
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By
executing this Agreement, each Member shall be deemed to have granted
to
the Company a first and prior lien and security interest upon such
Member’s Units as security for the payment of all Required Contributions
of such Member. This Agreement shall be deemed to be a security agreement
with respect to such security interest and collateral and each Member
shall promptly execute and deliver to the Company any financing statements
or other instruments that the Company, or any other Member, may request
for purposes of perfecting or continuing such security interest.
Upon the
failure of a Member to execute and deliver such financing statements
or
other instruments, the other Members, and each of them, as
attorney-in-fact for such Member, may execute and deliver such financing
statements or other instruments for, in the name and on behalf of
such
Member.
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With
respect to a Defaulting Member, the Company, acting upon the decisions of a
Majority in Interest (determined by excluding all of the Units of the Defaulting
Member), shall have all of the rights and remedies of a secured party under
the
Colorado Uniform Commercial Code, including, without limitation, and in addition
to the rights under such law, the right to sell, effective as of the first
day
of the fiscal quarter in which the default occurs or such subsequent date as
the
Company may determine, by public or private sale upon five (5) days advance
notice to the Defaulting Member, the Defaulting Member’s Units or any part
thereof, and the Company and the other Members shall be permitted purchasers
at
any such sale. In addition, the Company shall have the right to retain and
set-off against the Unpaid Required Contribution of a Defaulting Member and
any
accrued interest thereon all amounts becoming otherwise distributable (including
all distributions, mandatory or otherwise to which the Defaulting Member would
otherwise have been entitled under Section 4.1 hereof) or payable to such
Defaulting Member by the Company. Any amount so retained and set-off by the
Company shall be deemed to be a constructive cash distribution to the Defaulting
Member and a constructive repayment by such Member to the Company. Any
repayment, whether constructive or actual, shall be applied first against any
unpaid accrued interest on the Defaulting Member’s Unpaid Required Contribution
and the remainder shall be applied against such Member’s Unpaid Required
Contribution.
SECTION
3.5 Capital
Accounts.
A
separate capital account (“Capital
Account”)
shall
be maintained for each Member. Each Member’s Capital Account shall be maintained
as follows:
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(a)
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To
each Member’s Capital Account there shall be credited such Member’s
Capital Contributions, such Member’s distributive share of Profits and any
items in the nature of income or gain which are specially allocated
pursuant to Section 4.4 or Section 4.5, and the amount of any Company
liabilities assumed by such Member or which are secured by any asset
distributed by the Company to such
Member;
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(b)
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To
each Member’s Capital Account there shall be debited the amount of cash
and the Gross Asset Value of any asset distributed to such Member
pursuant
to any provision of this Agreement, such Member’s distributive share of
Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 4.4 or Section 4.5, and the
amount
of any liabilities of such Member assumed by the Company or which
are
secured by any property contributed by such Member to the
Company;
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(c)
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In
the event all or a portion of an interest in the Company is Transferred
in
accordance with the provisions of this Agreement, the Transferee
shall
succeed to the Capital Account of the Transferor to the extent it
relates
to the Transferred interest; and
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(d)
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In
determining the amount of any liability for purposes of clauses (a)
and
(b) above, there shall be taken into account Code § 752(c) and any
other applicable provisions of the Code and
Regulations,
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This
Section and the other provisions of this Agreement relating to the maintenance
of Capital Accounts are intended to comply with Regulations § 1.704-1(b),
and shall be interpreted and applied in a manner consistent therewith. In the
event the Managers shall determine that it is prudent to modify the manner
in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Company or
the
Members), are computed in order to comply with such Regulations, the Managers
may make such modification, provided that it is not likely to have a material
effect on the amounts distributable to any Member upon the dissolution of the
Company. The Managers also shall (1) make any adjustments that are necessary
or
appropriate to maintain equality between the Capital Accounts of the Members
and
the amount of Company capital reflected on the Company’s balance sheet, as
computed for book purposes, in accordance with Regulations
§ 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate modifications in the
event unanticipated events (for example, the acquisition by the Company of
oil
and gas properties) might otherwise cause this Agreement not to comply with
Regulations § 1.704-1(b).
SECTION
3.6 Capital
Withdrawal Rights, Interest and Priority.
Except
as otherwise provided herein, no Member shall be entitled to (i) a return of
any
part of such Member’s Capital Contributions or Capital Account, (ii) be paid any
interest on such Member’s Capital Contributions or Capital Account, or (iii)
priority over any other Member as to the return of such Member’s Capital
Contributions or Capital Account.
SECTION
3.7 Loans.
No
Member shall be required to make any loan to the Company. A Member may make
a
loan to the Company in such amounts, at such times and on such terms and
conditions as may be determined by the Manager. A loan by a Member to the
Company shall not be considered a contribution to the capital of the
Company.
SECTION
3.8 Securities
Law Representations and Warranties of Members.
Each
Member hereby represents and warrants to the Company and acknowledges that:
(i) such Member has knowledge and experience in financial and business
matters and is capable of evaluating the merits and risks of an investment
in
the Company and making an informed investment decision with respect thereto;
(ii) such Member has reviewed and evaluated all information necessary to assess
the merits and risks of his, her or its investment in the Company and has had
answered to its satisfaction any and all questions regarding such information;
(iii) such Member is able to bear the economic and financial risk of an
investment in the Company for an indefinite period of time; (iv) such Member
is
acquiring Units in the Company for investment only and not with a view to,
or
for resale in connection with, any distribution to the public or public offering
thereof; (v) the Units in the Company have not been registered under the
securities laws of any jurisdiction, and can be disposed of only in accordance
with applicable securities laws and the provisions of this Agreement; (vi)
the
execution, delivery and performance of this Agreement have been duly authorized
by such Member and do not require such Member to obtain any consent or approval
that has not been obtained and do not contravene or result in a default under
any provision of any law or regulation applicable to such Member or other
governing documents or any agreement or instrument to which such Member is
a
party or by which such Member is bound, (vii)
the
determination of such Member to purchase Units in the Company has been made
by
such Member independent of any other Member and independent of any statements
or
opinions as to the advisability of such purchase or as to the properties,
business, prospects or condition (financial or otherwise) of the Company and
its
subsidiaries which may have been made or given by any other Member or by any
agent or employee of any other Member and (viii) this Agreement is valid,
binding and enforceable against such Member in accordance with its
terms.
SECTION
4.
Allocations
and Distributions
SECTION
4.1 Distributions.
The
amount, if any, of Available Cash shall be distributed to the Members in the
following order of priority:
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(a)
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First,
to all Members in an amount equal to the estimated federal and state
income tax liability attributable to such Member’s proportionate share of
the Company’s net taxable income. This estimated tax liability, which
shall be computed by the accountant who regularly prepares the Company’s
tax returns, shall be computed on the basis of the highest marginal
rate
applicable to individuals on capital gains and other taxable income
for
the Fiscal Year in question. Unless the Company does not have sufficient
Available Cash or is otherwise prevented from making any distributions
under applicable state law, or determined not to be in the best interest
of the Company as determined in good faith by the Manager, the minimum
mandatory distribution shall be paid on or before the date on which
such
tax liability is due. The Manager’s determination of the amount of minimum
mandatory distribution shall be binding and conclusive on all
Members.
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(b)
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Second,
to Members holding all Units in proportion to the percentage of
outstanding Units held by each Member but reduced by any amount
distributed to that Member pursuant to Section 4.1(a). Thus, all
Class A
Units and Class B Units shall be treated equally with regard to any
and
all distributions under this Section 4.1(b) and if distributions
made
under Section 41(a) were treated as if they were made under Section
4.1(b).
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SECTION
4.2 Allocations
of Profit and Losses.
After
giving effect to the special allocations set forth in Sections 4.3 and 4.4,
Profits or Losses for any Fiscal Year shall be allocated among the Members
in
proportion to their Units.
SECTION
4.3 Special
Allocations.
The
following special allocations shall be made in the following order:
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(a)
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Minimum
Gain Chargeback.
Except as otherwise provided in Regulations § 1.704-2(f),
notwithstanding any other provision of this Section 4, if there is
a net
decrease in Company Minimum Gain during any Fiscal Year, each Member
shall
be specially allocated items of Company income and gain for such
Fiscal
Year (and, if necessary, subsequent Fiscal Years) in an amount equal
to
such Member’s share of the net decrease in Company Minimum Gain,
determined in accordance with Regulations § 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to
the
respective amounts required to be allocated to each Member pursuant
thereto. The items to be so allocated shall be determined in accordance
with Regulations §§ 1.704-2(f)(6) and 1704-2(j)(2). This Subsection
is intended to comply with the minimum gain chargeback requirement
in
Regulation § 1.704-2(f) and shall be interpreted consistently
therewith.
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(b)
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Member
Minimum Gain Chargeback.
Except as otherwise provided in Regulations § 1.704-2(i)(4),
notwithstanding any other provision of this Section 4, if there is a
net decrease in Member Nonrecourse Debt Minimum Gain attributable
to a
Member Nonrecourse Debt during any Fiscal Year, each Member who has
a
share of the Member Nonrecourse Debt Minimum Gain attributable to
such
Member Nonrecourse Debt, determined in accordance with Regulation
§ 1.704-2(i)(5), shall be specially allocated items of Company income
and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
Years)
in an amount equal to such Member’s share of the net decrease in Member
Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
Debt, determined in accordance with Regulations § 1.704-2(i)(4).
Allocations pursuant to the previous sentence shall be made in proportion
to the respective amounts required to be allocated to each Member
pursuant
thereto. The items to be so allocated shall be determined in accordance
with Regulations § 1.704-2(i)(4) and 1.704-2(j)(2). This Subsection
is intended to comply with the minimum gain chargeback requirement
in
Regulations § 1.704-2(i)(4) and shall be interpreted consistently
therewith.
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(c)
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Qualified
Income Offset.
In the event any Member unexpectedly receives any adjustments,
allocations, or distributions described in Regulations
§ 1.704-1(b)(2)(ii)(d)(4), Regulations § 1.704-1
(b)(2)(ii)(d)(5) or Regulations § 1.704-1(b)(2)(ii)(d)(6), items of
Company income and gain shall be specially allocated to each such
Member
in an amount and manner sufficient to eliminate, to the extent required
by
the Regulations, the Adjusted Capital Account Deficit of such Member
as
quickly as possible, provided that an allocation pursuant to this
Section
4.4(c) shall be made only if and to the extent that such Member would
have
an Adjusted Capital Account Deficit after all other allocations provided
for in this Section 4 have been tentatively made as if this Section
4.4(c)
were not in the Agreement. This Subsection is intended to comply
with the
qualified income offset requirement in Regulations
§ 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
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(d)
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Nonrecourse
Deductions.
Nonrecourse Deductions for any Fiscal Year shall be specialty allocated
among the Members in proportion to their
Units.
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(e)
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Member
Nonrecourse Deductions.
Any Member Nonrecourse Deductions for any Fiscal Year shall be specially
allocated to the Member who bears the economic risk of loss with
respect
to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions
are attributable in accordance with Regulations § 1704-
2(i)(l).
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(f)
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Code
§ 754 Adjustment.
To the extent an adjustment to the adjusted tax basis of any Company
asset
pursuant to Code § 734(b) or Code § 743(b) is required, pursuant
to Regulations § 1.704-1(b)(2)(iv)(m)(2) or Regulations
§ 1.704-1 (b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a Member in complete
liquidation of such Member’s interest in the Company, the amount of such
adjustment to the Capital Accounts shall be treated as an item of
gain (if
the adjustment increases the basis of the asset) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in accordance with their interests in the
Company
in the event Regulations § 1.704-1(b)(2)(iv)(m)(2) applies, or to the
Member to whom such distribution was made in the event Regulations
§ 1.704-1 (b)(2)(iv)(m)(4)
applies.
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SECTION
4.4 Curative
Allocations.
The
allocations set forth in Section 4.3 (the “Regulatory
Allocations”)
are
intended to comply with certain requirements of the Regulations.
It
is the
intent of the Members that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Company income, gain, loss, and deduction pursuant
to this Section 4.4. Therefore, notwithstanding any other provision of this
Section 4 (other than the Regulatory Allocations), the Company shall make such
offsetting special allocations in whatever manner the Managers determine
appropriate so that, after such offsetting allocations are made, each Member’s
Capital Account balance is, to the extent possible, equal to the Capital Account
balance such Member would have had if the Regulatory Allocations were not part
of this Agreement and all Company items were allocated pursuant to Sections
4.2.
In exercising the discretion under this Section 4.4, the Managers shall take
into account future Regulatory Allocations under Sections 4.3(a) and 4.3(b)
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Sections 4.3(d) and 4.3(e).
SECTION
4.5 Other
Allocation Rules.
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(a)
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For
purposes of determining the Profits, Losses, or any other items allocable
to any period, Profits, Losses, and any such other items shall be
determined on a daily, monthly, or other basis, as determined by
the
Managers using any permissible method under Code § 706 and the
Regulations thereunder.
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(b)
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Solely
for purposes of determining a Member’s proportionate share of the “excess
nonrecourse liabilities” of the Company, within the meaning of Regulations
§ 1.752-3(a)(3), the Members’ interests in Company profits are in
proportion to their Units.
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(c)
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To
the extent permitted by Regulations § 1.704-2(h)(3), the Members
shall endeavor to treat distributions of Available Cash as having
been
made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse
Debt only to the extent that such distributions would cause or increase
an
Adjusted Capital Account Deficit for any
Member.
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SECTION
4.6 Tax
Allocations: Code § 704(c).
In
accordance with Code § 704(c) and the Regulations thereunder, income, gain,
loss, and deduction with respect to any property contributed to the capital
of
the Company shall, solely for tax purposes, be allocated among the Members
so as
to take account of any variation between the adjusted basis of such property
to
the Company for federal income tax purposes and its initial Gross Asset Value
(computed in accordance with Paragraph (r)(i) of Appendix
I).
In
the
event the Gross Asset Value of any Company asset is adjusted pursuant to
Paragraph (r)(ii) of Appendix I, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of any variation
between the adjusted basis of such asset for federal income tax purposes and
its
Gross Asset Value in the same manner as under Code § 704(c) and the
Regulations thereunder.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-8-
Any
elections or other decisions relating to such allocations shall be made by
the
Managers in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to this Section are solely for purposes
of
federal, state, and local taxes and shall not affect, or in any way be taken
into account in computing, any Member’s Capital Account or share of Profits,
Losses, other items, or distributions pursuant to any provision of this
Agreement.
SECTION
5.
Books
and Returns
SECTION
5.1 Books
and Records.
The
Company shall maintain at its principal office, or at such other place as the
Managers may designate, full and accurate books and records. A Member shall
have
the right at such Member’s expense to examine and make copies of such books and
records at reasonable times. The Company shall use the accrual method for tax
and accounting purposes unless otherwise decided by the Managers. As soon as
practicable after the end of each Fiscal Year, each Member shall be furnished
with an income statement and balance sheet for or as of the end of such Fiscal
Year. The Company shall provide monthly financial statements to the Members
for
the first two Fiscal Years of operation and provide quarterly financial
statements to Members beginning with the third Fiscal Year.
SECTION
5.2 Tax
Returns and Annual Report.
The
Company shall prepare and timely file all federal, state and local income tax
returns required by applicable law. As soon as practicable after the end of
each
Fiscal Year, each Member shall be furnished with all necessary tax information
for such Fiscal Year. The Company shall prepare and timely file the annual
report required by the Act.
SECTION
5.3 Section
754 Election.
In the
event a distribution of Company assets occurs which satisfies the provisions
of
Code § 734 or in the event a Transfer of an interest in the Company occurs
which satisfies the provisions of Code § 743, the Company shall, if
requested to do so by the distributee or Transferee, elect, pursuant to Code
§ 754, to adjust the basis of the Company’s assets to the extent allowed by
Code § 734 or Code § 743. Any expenses incurred by the Company in
connection with making or maintaining such basis adjustment shall be reimbursed
to the Company by the distributee of such assets or the Transferee of such
interest who benefits from the making and maintenance of such basis
adjustment.
SECTION
5.4 Bank
Accounts.
The
Company’s funds shall be deposited in the name of the Company in one or more
bank or similar accounts designated by the Managers. Withdrawals there from
shall be made by Persons authorized to do so by the Managers.
SECTION
6.
Management
SECTION
6.1 Designation
of Managers.
In
accordance with Section 6.3 below, the Members shall designate one or more
Persons to manage the business and affairs of the Company (individually a
“Manager”
and
collectively the “Managers”).
The
Members hereby designate ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ as the initial manager of the
Company. A Manager shall serve until such Manager resigns, ceases to serve
because of death or disability, or is removed, with or without cause, by the
Members in accordance with Section 6.3. In the event a Manager hereafter ceases
to act as a Manager, the Members of the applicable Class of Units shall appoint
a new Manager to replace such Manager in accordance with Section 6.3. A Manager
need not be a Member of the Company.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-9-
SECTION
6.2 Powers,
Duties and Compensation of the Managers.
Except
as otherwise provided herein, the Managers, by the vote of a majority of them,
shall have the right and power to manage, direct, control and conduct the
business and affairs of, and enter into contracts, incur liabilities, borrow
money and give collateral therefor, and buy, sell and lease assets on behalf
of
the Company, all without joinder of the Members. The Managers shall supervise
and direct the business and operations of the Company efficiently and with
proper economy. The Managers’ duties hereunder shall include: (a) maintaining
the Company’s books and records, (b) preparing and filing the Company’s tax
returns and annual report, (c) approving the annual Budget, (d) hiring and
firing all personnel necessary to perform and carry out the Company’s business
or affairs, including paying and withholding all necessary taxes and filing
all
necessary forms in relation to such employees, and (e) performing such other
activities and tasks as are necessary or appropriate for the business or affairs
of the Company. A Manager’s compensation for services to the Company, if any,
shall be determined by the Members.
The
Managers may, from time to time, designate such committees and officers of
the
Company as they may deem advisable, with titles for such officers including
but
not limited to “chief executive officer”, “chairman”, “chief operating officer”,
“chief financial officer”, “president”, “vice president”, “secretary”,
“treasurer” and “controller”. Any committee or officer so designated shall have
such authority and perform such duties as the Managers may, from time to time,
delegate to such committee or officer. Any Person designated to a committee
or
office may be removed from such committee or office, with or without cause,
by
the Managers and/or any other officer of the Company who is delegated such
authority by the Managers. A Person may serve on any number of committees and
offices, and need not be Members or Managers of the Company. The compensation,
if any, of any Person designated to a committee or office shall be determined
by
the Managers or such officer who is delegated such authority by the Managers.
The Managers and Persons designated to a committee or office shall be reimbursed
by the Company for all reasonable and necessary expenses incurred in carrying
out and discharging their duties hereunder.
SECTION
6.3 Election
of Managers.
The
Company shall have one (1) Manager. A Majority in Interest of the Class A Units
shall have the right to appoint the Manager. A Manager may be removed, with
or
without cause, by the Member(s) responsible for electing such Manager. The
Managers shall meet at least quarterly, whether in person, telephone or video
conferencing if all of the Managers participating in such meeting can hear
one
another for the entire discussion of such meeting; provided, however, that
special meetings of the Managers may be called by any Manager. The affirmative
vote of a majority of the Managers shall be required to approve any action
or
matter coming before them. In the event a Manager is absent from any meeting
or
abstains from voting on any matter at a meeting, the Manager(s) who were
appointed by the same class of Units as such absent or abstaining Manager (if
any) shall have the right to cast all votes for the absent Manager at such
meeting or cast the vote for the abstaining Manager on such matter, as the
case
may be.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-10-
SECTION
6.4 Limitation
of Powers.
Notwithstanding anything herein to the contrary, any Manager and/or Member
or
officer of the Company shall not take any action for, in the name or on behalf
of the Company that requires the consent of a Majority in Interest or some
other
consent under the provisions of this Agreement unless such action has been
approved or authorized by such consent.
SECTION
6.5 Certain
Powers of the Manager.
Without
limiting the generality of Section 6.2 but subject to the limitations of Section
6.6, the Manager shall have power and authority, on behalf of the Company,
to:
|
(a)
|
Acquire
property not to exceed a cumulative total in any Fiscal Year of $300,000
from any Person as the Managers may determine (the fact that a Manager
or
an Equity Owner is directly or indirectly affiliated or connected
with any
such Person shall not prohibit the Managers from dealing with that
Person);
|
|
(b)
|
Borrow
money not to exceed a cumulative total in any Fiscal Year of $300,000
for
the Company from banks, other lending institutions, the Managers,
Equity
Owners, or Affiliates of the Managers or Equity Owners on such terms
as
the Managers deem appropriate and, in connection therewith, to Hypothecate
Company Property to secure repayment of the borrowed
sums;
|
|
(c)
|
Purchase
liability and other insurance to protect the Company’s property and
business;
|
|
(d)
|
Hold
and own any Company real or personal properties in the name of the
Company;
|
|
(e)
|
Invest
any Company funds not to exceed a cumulative total in any Fiscal
Year of
$300,000 (by way of example but not limitation) in time deposits,
short-term governmental obligations, commercial paper, or other
investments;
|
|
(f)
|
Execute
on behalf of the Company all instruments and documents, including
checks,
drafts, notes and other negotiable instruments; mortgages or deeds
of
trust; security agreements; financing statements; documents providing
for
the acquisition, mortgage, or disposition of Company Property;
assignments; bills of sale; leases; partnership agreements; operating
(or
limited liability company) agreements of other limited liability
companies; and any other instruments or documents necessary, in the
opinion of the Managers, to the conduct of the business of the
Company;
|
|
(g)
|
Enter
into any and all other agreements on behalf of the Company, with
any other
Person for any purpose and in such forms as the Managers may
approve;
|
|
(h)
|
Execute
and file such other instruments, documents, and certificates which
may
from time to time be required by the laws of Colorado or any other
jurisdiction in which the Company shall determine to do business,
or any
political subdivision or agency thereof; to effectuate, implement,
continue, and defend the valid existence of the
Company;
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-11-
|
(i)
|
Open
bank accounts in the name of the Company and to be the sole signatory
thereon unless the Managers determine
otherwise;
|
|
(j)
|
Do
and perform all other acts as may be necessary or appropriate to
the
conduct of the Company’s business.
|
|
(k)
|
Employ
accountants, legal counsel, managing agents, or other experts to
perform
services for the Company and to compensate them from Company
funds;
|
|
(l)
|
Purchase
liability and other insurance to protect the Company’s property and
business;
|
|
(m)
|
Hold
and own any Company real or personal properties in the name of the
Company;
|
|
(n)
|
Invest
any Company funds in excess of a cumulative total in any Fiscal Year
of
$300,000 (by way of example but not limitation) in line deposits,
short-term governmental obligations, commercial paper, or other
investments;
|
|
(o)
|
Compromise
or settle any claim against or inuring to the benefit of the Company
involving an amount in controversy not to exceed a cumulative total
in any
Fiscal Year of $300,000.
|
SECTION
6.6 Limitations
on Authority (Actions Requiting Board Approval).
Notwithstanding any other provision of this Agreement, the Managers shall not
cause or commit the Company to do any of the following without the consent
of a
Two-Thirds Vote:
|
(a)
|
Sell
or otherwise dispose all or substantially all of the Company Property
or
any Company Property other than in the ordinary course of
business;
|
|
(b)
|
Acquire
property from any Person or Persons in excess of a cumulative total
in any
Fiscal Year of $300,000;
|
|
(c)
|
Enter
into a joint venture or partnership with any other business
organization[;]
|
|
(d)
|
Enter
into a merger, conversion or participate in any other form of
reorganization;
|
|
(e)
|
Borrow
money in excess of a cumulative total in any Fiscal Year of $300,000
from
any Person and to hypothecate property of the Company to secure repayment
of the borrowed sums;
|
|
(f)
|
Lend
money in excess of a cumulative total in any Fiscal Year of $300,000
to,
or guaranty or become surety for the obligations of any Person or
Persons
in excess of a cumulative total in any Fiscal Year of $300,000;
or
|
|
(g)
|
Sell
or otherwise dispose all or substantially all of the Company Property
or
any Company Property other than in the ordinary course of business;
or
|
|
(h)
|
Cause
the Company to commence a voluntary case as debtor under the United
States
Bankruptcy Code.
|
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-12-
Any
unauthorized action taken by such Person(s) may be subsequently ratified by
the
applicable consent. Notwithstanding anything herein to the contrary, such Person
shall not be liable to the Company or its Members for any inadvertent
unauthorized action which is not subsequently ratified by the applicable consent
if (i) such inadvertent action was undertaken in good faith and in a manner
such
Person reasonably believed to be in, or not opposed to, the interests of the
Company and (ii) did not constitute fraud, gross negligence, or willful or
wanton misconduct.
SECTION
6.7 Board
Members and Action.
Each
Member shall have the authority to appoint, remove and replace one “Board
Member,”
with
each Board Member being designated by reference to the Member appointing him
or
her. A Member may also appoint, remove and replace an alternate Board Member
who
may act in the absence of the Member’s appointed Board Member (collectively, the
Board Members are referred to herein as the “Board”).
The
Board may, but shall not be required to, hold any periodic, or other formal
meetings. Consent or ratification of the Board may be evidenced by one or more
written consents describing the action taken by the Board and signed by Board
Members sufficient to approve the consented to transaction. Board Action taken
under this Section 6.7 is effective when Board Members sufficient to approve
the
action have signed the consent, unless the consent specifies a different
effective date. The Board Members appointed by Members shall jointly have a
vote
or consent in actions brought before the Board equal to the percentage of
outstanding Units held at the time of the appointment by the Member appointing
those Board Members. Thus, for example, based on Exhibit
A,
the
Board Members appointed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ would be entitled to a vote equal
to 52%. All parties understand that each Board Member is acting in a
representative capacity, owes his or her primary duties to the Member appointing
him or her, and will not be liable to the Company or any other Member for acting
on behalf of the Member appointing him or her. Notwithstanding the foregoing,
each of the Members and the Board Members representing them shall have an
obligation to act in good faith considering the best interests of the Company
in
performing their duties as Board Members.
SECTION
6.8 Powers
of Members.
No
Member shall have the right or authority to enter into agreements, execute
contracts or other instruments, incur obligations or otherwise bind or act
for,
in the name or on behalf of the Company in any manner solely by virtue of being
a Member. Any Member who takes any action in violation of this Section shall
be
solely responsible for all losses and expenses incurred by the Company as a
result of such unauthorized action and shall indemnify and hold the Company
harmless with respect thereto.
SECTION
6.9 Liability
of Managers, Members, and Board Members.
Except
in the case where a Manager is guilty of fraud, gross negligence, or willful
or
wanton misconduct, a Manager shall not be liable to the Company or any Member
for any loss, damage, liability or expense suffered by the Company or any Member
on account of any action taken or omitted to be taken by such Manager. No Member
shall be liable under any judgment, decree or order of a court, or in any other
manner, for a debt, obligation or liability of the Company, except as otherwise
provided herein.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-13-
SECTION
6.10 Annual
Operating Plan.
The
Manager has prepared and the Board has Approved (a “Annual
Operating Plan”)
for the
Fiscal Year including the Effective Date. The Manager shall prepare for the
Approval of the Board each Fiscal Year (no later than thirty (30) days before
the Fiscal Year to which the Animal Operating Plan applies) an Annual Operating
Plan for the next Fiscal Year, setting forth at a minimum the estimated receipts
(including capital calls) and expenditures (capital, operating and other) of
the
Company in sufficient detail to provide an estimate of cash flow, capital
proceeds, and other financial requirements of the Company for such year. Any
such Annual Operating Plan shall also include such other information or other
matters thought appropriate by the Manager or reasonably required by the Board.
The Board shall review the proposed Annual Operating Plan and shall offer any
revisions thereto within 10 days after receipt. After the final Annual Operating
Plan has been Approved by Two Thirds Vote of the Board, the Manager shall
implement the Annual Operating Plan and shall be authorized to make only the
expenditures and incur only the obligations provided for therein.
Notwithstanding the foregoing, the Manager may make any expenditure or incur
any
obligation, whether or not such expenditure or obligation is provided for in
an
Annual Operating Plan, which is the legal obligation of the Company and not
within the reasonable control of the Managers (e.g.,
real or
personal property taxes). If the Board, acting reasonably and in good faith,
is
not able to agree on an Annual Operating Plan for any year, each line item
in
the Annual Operating Plan for the prior year shall be increased by the
percentage increase in the CPI Index from the first day for which the previous
Annual Operating Plan was in effect to the first day for which the new Annual
Operating Plan is to be in effect. If the CPI Index is no longer published,
published less frequently, or altered in some other manner, then the Manager
shall, from time to time, adopt a substitute index or substitute procedure
which
reasonably reflects and monitors consumer prices, and the resulting plan shall
be the Annual Operating Plan for the current year.
SECTION
6.11 Indemnification.
|
(a)
|
The
Company, to the fullest extent permitted by law, shall indemnify
and hold
harmless each Manager, Member, and all officers, directors, trustees,
partners, members, principals, employees, and agents of a Manager
and
Member (individually, an “Indemnitee”)
from and against any and all losses, claims, demands, costs, damages,
liabilities, expenses of any nature (including attorneys’ fees and
disbursements), judgments, fines, settlements, and other amounts
arising
from any and all claims, demands, or proceedings in which an Indemnitee
may be involved, or threatened to be involved, as a party or otherwise,
arising out of or incidental to the business of the Company, including
liabilities under the federal and state securities laws, regardless
of
whether an Indemnitee continues to be a Manager, Member, or an officer,
director, trustee, partner, member, principal, employee, or agent
of a
Manager or Member at the time any such liability or expense is paid
or
incurred, if (i) the Indemnitee acted in good faith and in a manner
he,
she or it reasonably believed to be in, or not opposed to, the interests
of the Company, and, with respect to any criminal proceeding, had
no
reason to believe its, his, or her conduct was unlawful, and (ii)
the
Indemnitee’s conduct did not constitute fraud, gross negligence, or
willful or wanton misconduct.
|
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-14-
|
(b)
|
The
indemnification provided by this Section shall be in addition to
any other
rights to which each Indemnitee may be entitled under the Act or
under any
agreement as a matter of law or otherwise, both as to action in the
Indemnitee’s capacity as a Manager, Member, or as an officer, director,
trustee, partner, member, principal, employee, or agent of a Manager
or
Member, and to action in another capacity, and shall continue as
to an
Indemnitee who has ceased to serve in such capacity and shall inure
to the
benefit of the heirs, successors, assigns, administrators, and personal
representatives of such Indemnitee.
|
|
(c)
|
The
Company may purchase and maintain insurance on behalf of any one
or more
Indemnitees, and other such Persons as the Managers shall determine,
against any liability which may be asserted against or expense which
may
be incurred by such Person in connection with the Company’s activities,
whether or not the Company would have the power to indemnify such
Person
against such liability under the provisions of this
Agreement.
|
|
(d)
|
Any
indemnification hereunder shall be satisfied solely out of the property
of
the Company, and the Managers and Members shall not be subject to
personal
liability by reason of these indemnification
provisions.
|
|
(e)
|
An
Indemnitee shall not be denied indemnification in whole or in part
under
this Section because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction
was
otherwise permitted by the terms of this
Agreement.
|
|
(f)
|
The
provisions of this Section are for the benefit of the Indemnitees
and the
heirs, successors, assigns, administrators, and personal representatives
of the Indemnitees and shall not be deemed to create any rights for
the
benefit of any other Persons.
|
|
(g)
|
The
right to indemnification conferred in this Section shall include
the right
to be paid or reimbursed by the Company the reasonable expenses (including
attorney fees, disbursements and expenses) incurred by a Person entitled
to be indemnified who was, is or is threatened to be made a named
defendant or respondent in a proceeding in advance of the final
disposition of the proceeding and without any determination as to
the
Person’s ultimate entitlement to indemnification; provided,
however,
that the payment of such expenses incurred by any such Person in
advance
of the final disposition of a proceeding shall be made only upon
delivery
to the Company of a written affirmation by such Person of his, her
or its
good faith belief that such Person has met the standard of conduct
necessary for indemnification and a written undertaking, by or on
behalf
of such Person, to repay all amounts so advanced if it shall ultimately
be
determined that such indemnified Person is not entitled to be indemnified
under this Section or otherwise.
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-15-
SECTION
6.12 Other
Business Ventures.
The
Managers and Members may engage in or possess an interest in other business
ventures of every nature and description, independently or with others, whether
or not similar to or in competition with the business of the Company and neither
the Company nor the Members shall have any right by virtue of this Agreement
in
or to such other business ventures or to the income or profits derived
therefrom. The Managers shall not be required to devote all of their time nor
business efforts to the affairs of the Company, but the Managers shall devote
so
much of their time and attention to the Company as is reasonably necessary
and
advisable to manage the business and affairs of the Company to the best
advantage of the Company and to perform their duties hereunder.
SECTION
6.13 Conflicts.
The
Company may enter into or modify various agreements or transactions with one
or
more of the Managers and/or Members on terms approved by the
Managers.
SECTION
6.14 Confidential
Information.
Without
limiting the applicability of any other agreement to which any Member may be
subject, a Manager and/or Member shall not, directly or indirectly disclose,
either during his, her or its association or employment with the Company or
thereafter, any Confidential Information of which such Manager or Member is
or
becomes aware. A Manager or Member in possession of Confidential Information
shall take all appropriate steps to safeguard such information and to protect
it
against disclosure, misuse, espionage, loss and theft. Notwithstanding the
above, a Manager and/or Member may disclose Confidential Information to the
extent (i) the disclosure is necessary for the Manager, Member and/or the
Company’s agents, representatives, and advisors to fulfill their duties to the
Company pursuant to this Agreement and/or other written agreements, (ii) the
disclosure is required by law or a court order, (iii) to the extent necessary
to
enforce rights hereunder and (iv) the disclosure is of a general nature
regarding general financial information, return on investment and similar
information, including without limitation, in connection with communications
to
direct and indirect beneficial owners of Units and controlling Persons and
general marketing efforts.
SECTION
6.15 Other
Matters Concerning the Managers.
|
(a)
|
The
Managers and officers shall have no fiduciary duty (including, but
not
limited to, any duty of loyalty or duty of care) to the Company or
to any
Member, except (i) a duty to act in good faith, (ii) a general obligation
of fair dealing with respect to the Company and its property, (iii)
any
duty expressly set forth in this Agreement, and (iv) any duty expressly
set forth in other written
agreements.
|
|
(b)
|
The
Managers and officers may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report notice, request, consent, order, bond,
debenture, or other paper or document believed in good faith by the
Manager or officer to be genuine and to have been signed or presented
by
the proper party or parties.
|
|
(c)
|
The
Managers and officers may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, and other
consultants and advisers selected by the Managers or officers, and
any
opinion of such Person as to matters which the Managers or officers
believe in good faith to be within such Person’s professional or expert
competence shall be full and complete authorization in respect of
any
action taken or suffered or omitted by the Managers or officers hereunder
in good faith and in accordance with such
opinion.
|
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-16-
SECTION
7.
Meetings
of Members
SECTION
7.1 No
Required Meetings.
The
Members may, but shall not be required to, hold any annual, periodic, or other
formal meetings. Consent or ratification of the Members may be evidenced by
one
or more written consents describing the action taken and signed by Members
holding sufficient Units to approve the transaction consented to. Action taken
under this Section 7.1 is effective when Members holding the requisite Units
have signed the consent, unless the consent specifies a different effective
date.
SECTION
7.2 Annual
Meeting.
An
annual meeting of the Members may be held at the time and place determined
by
the Managers, at which the Members shall transact such business as may be
brought before the annual meeting.
SECTION
7.3 Special
Meetings.
Special
meetings of the Members, for any purpose or purposes, may be called upon the
written request of the Managers, or any Member or group of Members holding
at
least twenty percent (20%) of the Units then entitled to vote. Such request
shall state the purpose or purposes of the special meeting. Business transacted
at any special meeting of the Members shall be limited to the purpose or
purposes stated in the notice.
SECTION
7.4 Notice
of Meetings.
Written
or printed notice stating the time and place of any annual or special meeting
of
the Members and, in the case of a special meeting, the purpose or purposes
for
which the meeting is called, shall be delivered to each Member entitled to
vote
at such meeting not less than three (3) days before the date of such meeting.
Attendance of a Member at a meeting shall constitute a waiver of notice of
such
meeting, except when the Member attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Written waiver by a
Member of notice of a meeting, signed by such Member, whether before or after
the time for notice to be given, shall be deemed equivalent to
notice.
SECTION
7.5 Voting
at Meetings.
At all
meetings of the Members every Member entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such Member and bearing
a
date not more than three (3) years prior to said meeting, unless said instrument
provides for a longer period, shall be entitled to a vote equal to the number
of
Units then entitled to vote that registered in such Member’s name on the books
of the Company. All questions to be decided by the Members shall be decided
by a
Majority in Interest unless otherwise required by this Agreement.
SECTION
7.6 Members
Shall Register Address.
It
shall be a condition on the right of each Member to receive any notice from
the
Company that such Member shall have furnished to the Company, from time to
time,
over such Member’s signature, the address to which notices to such Member shall
be mailed.
SECTION
7.7 Consent
of Members in Lieu of Meeting.
Any
action required or permitted to be taken at any meeting of the Members may
be
taken without a meeting, prior notice or a vote, if a written consent, setting
forth the action so taken, shall be signed by a Majority in Interest, or if
such
act requires some other consent, by such other consent.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-17-
SECTION
7.8 Telephonic
or Video Meeting.
Members
of the Company may participate in any meeting of the Members by means of
conference telephone, video conference or similar communication if all Members
participating in such meeting can hear one another for the entire discussion
of
the matters to be voted upon. Participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
SECTION
7.9 Designation
of Representative.
Each
Member that is a corporation, partnership, limited liability company, trust
or
other legal entity shall designate in writing one individual to represent that
Member at all meetings of the Members or to sign consents on behalf of that
Member. Such individual may be removed or replaced at any time by the Member
appointing such Person upon written notice to the Company.
SECTION
8.
Transfer
of Units
SECTION
8.1 General
Restrictions.
No
Person shall Transfer all or any part of such Person’s Units, except as provided
in this Agreement. Any purported Transfer of all or any part of a Unit in
violation of the terms of this Agreement shall be null and void and of no
effect. In addition, to the extent that any Member has attempted or purported
to
Transfer all or any portion of that Person’s Units in violation of this
Agreement that Person shall be deemed to have withdrawn or resigned with respect
to all or such portion of the Person’s Units within the meaning of the
Act.
SECTION
8.2 Permitted
Transfers.
A
Person shall have the right to Transfer, by written instrument, all or part
of
such Person’s Units provided that (a) the Transferee is admitted as a Substitute
Member in accordance with Section 8.3, (b) such Transfer would not be in
violation of any applicable law, rule or regulation (for example, federal or
state securities laws), and (c) in the event of a Transfer of Units, such
Transfer has been approved in writing by a Majority in Interest of the Members
(determined by excluding all of the Transferor’s Units); provided, however, that
no such approval shall be required with respect to a Transfer by a Member to
(i) one or more members of such Member’s Immediate Family, or (ii) a
revocable living trust of which such Member is the sole grantor and trustee,
and
which has no beneficiary during such Member’s lifetime other than such Member
and/or one or more members of his or her Immediate Family. If an event occurs
which would cause Units owned by a trust described in clause (ii) above to
be
subject to purchase pursuant to Section 8 of this Agreement if it were then
owned by the grantor of such trust, then such Units shall be deemed to be owned
by the grantor of such trust and shall be subject to purchase to the same extent
and on the same terms and conditions that would apply if the grantor actually
owned such Units. All Transfers of Units by the trustee of a trust described
in
clause (ii) above shall be subject to the terms and conditions of this Agreement
and shall be deemed to be made by the trust’s grantor.
SECTION
8.3 Substitute
Members.
The
Company shall not recognize any Transfer of a Unit in accordance with the terms
of this Agreement unless and until the Transferee of such Unit shall become
a
Substitute Member by:
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-18-
|
(a)
|
executing
an instrument reasonably satisfactory to the Managers accepting and
adopting the terms and provisions of this Agreement;
and
|
|
(b)
|
paying
all reasonable expenses of the Company in connection with the admission
of
the Transferee as a Substitute
Member.
|
Until
such time as the Transferee shall become a Substitute Member in accordance
with
the foregoing, such Transfer shall be null and void and of no
effect.
SECTION
8.4 Transfer
of All Rights Associated with Units.
Any
Transfer of a Unit in accordance with the terms of this Agreement shall require
a Transfer by the Transferor to the Transferee of all ownership rights
associated with such Unit. Notwithstanding any provision of the Act to the
contrary, a Transferor shall not have the right to Transfer some but not all
of
the ownership rights associated with any Unit (including, without limitation,
the right to vote such Unit).
SECTION
8.5 Redemption
of Units.
The
Company may purchase one or more Units from any Person on such terms and
conditions mutually acceptable to such Person and a Majority in Interest
(determined by excluding all Units held by such Person). Any Units acquired
by
the Company pursuant to this Section 8.5 or the option granted under
Section 8.9 shall be canceled.
SECTION
8.6 Grant
of Options to Members.
Each
Member hereby grants to the other Member(s) who hold Units an irrevocable option
to purchase, at the price, in the manner and on the terms and conditions set
forth herein, that part of such Member’s Units that is actually involved in or
affected by the occurrence of any of the following events (the “Subject
Units”):
|
(a)
|
such
Member shall desire to voluntarily Transfer any of such Member’s Units,
other than in a Transfer permitted by Section 8.2, in which event
such
Member shall obtain a bona fide written offer from a third party
(the
“Bona
Fide Offer”)
stating an aggregate purchase price payable in the form of cash and/or
a
promissory note (with the terms and conditions of such promissory
note
being stated) and conditioned only upon assignment of good title
to the
Subject Units, free and clear of liens and
encumbrances;
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|
(b)
|
any
of such Member’s Units shall become subject to involuntary Transfer,
whether by judicial decree, divorce, sale upon execution or in foreclosure
of any lien or charge or by acquisition of an interest therein by
a
trustee in bankruptcy or similar officer or otherwise, to a Person
other
than permitted under Section 8.2;
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|
(c)
|
any
of such Member’s Units are subject to a Transfer to a Person other than
permitted under Section 8.2 due to the death, termination, liquidation
or
dissolution of such Member; or
|
|
(d)
|
any
time after two (2) years and before the expiration of four (4) years
from
the Effective Date, the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as a Member holding Class
A
Units may elect to purchase the Units owned at any time by ICM, Inc.
by
giving notice to the person or persons holding those Units at the
time of
exercise.
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-19-
For
purposes of this Section only that part of a Member’s Units that is to be
disposed of or affected by any event specified in clauses (a) through (d) shall
be deemed to be actually involved in or affected by the occurrence of an event
described therein. A Member whose Units are subject to an option granted herein
which becomes exercisable is referred to as the “Disposing
Member.”
SECTION
8.7 Notice
of Events.
Upon
the occurrence of an event described in clauses (a), (b), or (c) of Section
8.6,
the Disposing Member (or the Disposing Member’s legal representative, as the
case may be) shall give notice thereof to the Members and the Company,
including, if applicable, the portion of the Member’s Units to be Transferred,
the terms and conditions of any proposed Transfer, the names of the Person
or
Persons to whom Transfers are proposed to be made, if known, or who have
allegedly acquired the Subject Units, a copy of any Bona Fide Offer made by
any
proposed purchaser, and an affidavit of such Disposing Member stating that
such
bona fide is subject to no terms or conditions other than those set forth
therein. In the event the Disposing Member (or the Disposing Member’s legal
representative) fails to give such notice, any other Member may give such notice
on behalf of the Disposing Member (or the Disposing Members legal
representative). All notices given under this Section shall be in writing and
signed by the party giving such notice.
SECTION
8.8 Exercise
of Option by Member(s).
The
options under Section 8.6 shall become exercisable upon the occurrence of any
event described therein and such option shall remain exercisable until the
expiration of the later of (i) sixty (60) days after notice of such event is
given under Section 8.7 or 8.6(d) as the case may be, or (ii) fifteen (15)
days
after delivery of the written notice of the purchase price under Section
8.11(c). ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, as holder of the Class A Units shall have the right
at any time before the expiration of ten (10) days after receipt of notice
to
designate all or a lesser number of the Subject Units with respect to an option
under Section 8.6 (a), (b), or (c) he desires to purchase. Thereafter, all
Members (including ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) shall be entitled [to]
purchase
the remaining Units with respect to an option under Section 8.6 (a), (b), or
(c)
as provided in the next sentence. If there shall be more than one Member who
shall desire to purchase part of the Subject Units with respect to an option
under Section 8.6 (a), (b), or (c), each of such Member shall be entitled to
purchase (i) such proportionate part of the Subject Units available for purchase
as the Units then owned by such Member bears to the total Units then owned
by
all of the Members who desire to purchase part of the Subject Units, or (ii)
such part of the Subject Units available for purchase as shall be agreed upon
by
all of the Members who shall desire to purchase part of the Subject Units.
Each
Member may exercise such option by giving notice of exercise to the Disposing
Member (or the Disposing Member’s legal representative) and the Company in the
manner required by Section 8.10.
SECTION
8.9 Option
Granted to Company.
In the
event that the Member(s) shall waive or fail to timely exercise their Right
to
purchase all or any part of the Subject Units under the options granted to
them
under Section 8.6 (a), (b), or (c), then the Company shall have an irrevocable
option to purchase all, but not less than all, of the Subject Units not
purchased by the Member(s) at the price, in the manner and on the terms and
conditions set forth herein. The option granted to the Company shall become
exercisable upon the earlier of (i) the giving of notice by the Member(s) that
they are not exercising their option as to all of the Subject Units, or (ii)
the
expiration of the option of such Member(s); and such option of the Company
shall
remain exercisable for a period of fifteen (15) days thereafter. The Company
may
exercise such option by giving notice of exercise to the Disposing Member (or
the Disposing Members legal representative) in the manner required by Section
8.10.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-20-
SECTION
8.10 Contents
of Notices; Expiration of Options.
Notices
given under Section 8.6(d), 8.8 or Section 8.9 shall be in writing and
signed by the party giving such notice and shall set forth (i) such party’s
intention to purchase or not purchase part of the Subject Units and (ii) the
part of the Subject Units to be purchased (a Member may simply state such
Member’s desire to purchase the maximum part of the Subject Units to which such
Member is entitled). If any option is not exercised within the applicable period
herein provided, such option shall expire on the last day of such
period.
SECTION
8.11 Purchase
Price and Terms.
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(a)
|
If
the event causing an option wanted herein to become exercisable shall
be a
proposed sale pursuant to a Bona Fide Offer, as described in Section
8.6,
the aggregate purchase price for the Subject Units shall be the purchase
price set forth in the Bona Fide
Offer.
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(b)
|
If
the event causing an option granted herein to become exercisable
shall be
other than a proposed sale pursuant to a Bona Fide Offer, as described
in
Section 8.6 (b), (c), or (d), the aggregate purchase price for the
Subject
Unit shall be the purchase price determined under Section 8.11(c)
below.
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(c)
|
The
value of the Subject Units shall be their fair market value as determined
by the Disposing Member and a Majority in Interest (determined by
excluding all of the Units of the Disposing Member). If they are
unable to
agree upon the fair market value, the fair market value of the Subject
Units shall be determined by an appraiser selected by them. If they
are
unable to agree upon a single appraiser, the fair market value of
the
Subject Units shall be determined by a panel of three (3) appraisers
consisting of one appraiser selected by the Disposing Member, one
selected
by a Majority in Interest (determined by excluding all of the Units
of the
Disposing Member), and the third selected by the two appraisers.
They
shall each select their respective appraiser and notify the other
in
writing of such selection within fifteen (15) days following delivery
of
the notice under Section 8.7. If the two appraisers are unable to
agree
upon a third appraiser, such third appraiser shall be appointed by
the
Administrative Judge of the Nineteenth Judicial District, District
Court,
Weld County, Colorado. In the event the three appraisers are unable
to
agree upon the fair market value of the Subject Units, an average
of the
appraisals made individually by them shall be computed. The individual
appraisal that deviates the most from such average shall be disregarded
and an average of the remaining two individual appraisals shall constitute
the fair market value of the Subject Units. The appraisers shall
take into
account minority interest and lack of marketability discounts to
the
extent they are deemed appropriate. All fees and expense reimbursement
payable to the appraisers shall be borne equally between the Disposing
Member and the purchaser or purchasers. The appraisers shall give
written
notice of the fair market value of the Subject Units to the Company
and
all Members (and, if applicable, the Disposing Member’s legal
representative) promptly following determination
thereof.
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-21-
|
(d)
|
The
aggregate purchase price shall be allocated proportionately among
the
purchasers, if more than one. If the event causing an option granted
herein to become exercisable shall be a proposed sale pursuant to
a Bona
Fide Offer, the price and terms specified in such Bona Fide Offer
shall be
controlling. Otherwise, each purchaser’s purchase price shall be
paid[.]
At
the closing the purchaser or purchasers shall deliver to the seller
or
sellers (i) the releases from liability for debts of the Company,
as
contemplated by subparagraphs (a) and (b) above, and (ii) payment
shall be
made in the form a promissory note payable in six (6) equal annual
installments of principal and interests a floating annual rate of
interest
equal to the lesser of (i) eight percent (8%), or (ii) the maximum
rate
permitted by law compounded monthly with the first such payment due
at
closing. Notwithstanding the foregoing, if the Company is a purchaser,
and
if the Disposing Member is then indebted to the Company, the Company
may
set-off all or any portion of such indebtedness against the purchase
price
payable by the Company, even if such indebtedness is not then due
and
payable.
|
SECTION
8.12 Closing.
The
closing of all of the purchases and sales of the Subject Units shall be held
concurrently at the principal office of the Company within fifteen (15) days
after the expiration of the options granted herein, or at such other time and
place as may be agreed upon by the purchasers and seller. At the closing, each
purchaser shall deliver to the Seller, in the manner set forth in Section 8.11,
the consideration payable by such purchaser and each purchaser (other than
the
Company) shall deliver to the Company the executed instrument and payment
required under Section 8.3 for such purchaser to be admitted as a Substitute
Member with respect to the purchased Units. At the closing, the seller shall
deliver to each purchaser an assignment and ▇▇▇▇ of sale duly Transferring
such
part of the Subject Units purchased by such purchaser free and clear
[of]
all
liens, encumbrances, security interests, charges and claims of others of every
kind or character (other than the options granted in this Section
8).
SECTION
8.13 All
of
Subject Units Need Not Be Purchased.
Notwithstanding any other provision herein, a Disposing Member shall be required
to sell any part of the Subject Units pursuant to the options granted herein
and, in the event less than all of the Subject Units are purchased at the
closing by the Company and/or the other Members, shall be entitled to consummate
the sale of the unsold Units pursuant to the Bona Fide Offer described
above.
SECTION
8.14 Automatic
Transfer of Subject Units.
If an
option granted herein becomes exercisable and is exercised and the Disposing
Member fails or refuses to deliver to the purchaser an assignment and ▇▇▇▇
of
sale for that part of the Subject Units purchased by such purchaser, then
payment for the Subject Units shall be made by the purchaser to the Company,
which shall thereupon, by vote of a Majority in Interest (determined by
excluding all of the Units of the Disposing Member) and as attorney-in-fact
for
the Disposing Member, take all action necessary to effect the Transfer to the
purchaser of the Subject Units, including the execution and delivery of an
assignment and ▇▇▇▇ of sale. The Disposing Member shall not thereafter own
any
interest in such part of the Subject Units or have any rights with respect
thereto except to receive from the Company the purchase price therefor once
such
Transfer is effected. Each Member hereby appoints the Company as its
attorney-in-fact for the purposes specified in this Section 8.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-22-
SECTION
8.15 Warranties
of Disposing Member.
Each
Member hereby warrants that the Subject Units to be sold by such Member pursuant
to the options granted herein shall be free and clear of all liens,
encumbrances, security interests, charges and claims of others of every kind
or
character (other than the options granted in this Section 8). In the event
any
part of the Subject Units are subject to any lien, encumbrance, security
interest, charge or claim, the purchaser of such part of the Subject Units
may
elect to:
|
(a)
|
Postpone
payment of the purchase price of such part of the Subject Units until
such
time as the lien, encumbrance, security interest, charge or claim
has been
discharged;
|
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(b)
|
Deduct
from the purchase price of such part of the Subject Units and disburse
directly to such lienholder, encumbrance or claimant, if the amount
of
such claim has been determined, such part of the purchase price as
may be
adequate to discharge such lien, encumbrance, security interest,
charge or
claim;
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(c)
|
In
the event any such lien, encumbrance, security interest, charge or
claim
is not liquidated, postpone the payment of the purchase price of
such part
of the Subject Units until final determination of such claim and
make
payment at that time to the lienholder, encumbrancer or claimant
and to
the Disposing Member, as their respective interests may appear;
or
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(d)
|
In
the event that any such lien, encumbrance, security interest, charge
or
claim is in excess of the amount of the purchase price of such part
of the
Subject Units, then such purchaser may, but shall not be obligated
to,
disburse (if liquidated, or if not liquidated, when finally determined)
the purchase price for such part of the Subject Units to such lienholder,
encumbrancer or claimant and thereupon the lien, encumbrance, security
interest, charge or claim against such part of the Subject Units
shall be
fully released and discharged and such part of the Subject Units
shall be
Transferred to such purchaser free and clear of all liens, encumbrances,
security interests, charges and
claims.
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SECTION
8.16 Non-Exercise
of Options Upon Voluntary Transfer.
If or
to the extent the options granted herein to the Members and the Company with
respect to an event described in Section 8.6(a) shall be waived or shall not
be
exercised before the expiration thereof or shall be exercised as to less than
all of the Subject Units, then the Disposing Member shall have the right, for
a
period of ninety (90) days following the expiration of all of the options,
to
Transfer all, but not less than all, of the Subject Units, provided that such
Transfer shall be upon the same terms and conditions and to the same Persons
as
specified in the notice given pursuant to Section 8.7 and such Persons are
admitted as Substitute Members in accordance with Section 8.3.
SECTION
8.17 Non-Exercise
of Options Upon Involuntary Transfer.
If the
options granted herein to the Members and the Company with respect to an event
described in Section 8.6(b) shall be waived or shall not be exercised
before the expiration thereof or shall be exercised as to less than all of
the
Subject Units, then the involuntary Transfer causing such options to become
exercisable with respect to the Subject Units shall be recognized by the
Company, provided that such Transfer shall be upon the same terms and conditions
and to the same Persons as specified in the notice given pursuant to Section
8.7
and such Persons are admitted as Substitute Members in accordance with Section
8.3.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-23-
SECTION
8.18 Non-Exercise
of Options After Death, Termination, Liquidation or Dissolution.
If the
options granted herein to the Members and the Company with respect to an event
described in Section 8.6(c) shall be waived or shall not be exercised before
the
expiration thereof or shall be exercised as to less than all of the Subject
Units, then the Transfer causing such options to become exercisable with respect
to the Subject Units shall be recognized by the Company, provided that such
Transfer shall be upon the same terms and conditions and to the same Persons
as
specified in the notice given pursuant to Section 8.7 and such Persons are
admitted as Substitute Members in accordance with Section 8.3.
SECTION
8.19 Subsequent
Transfers,
The
Transfer of all or any part of a Member’s Units shall not affect the status of
such Units as being subject to this Section 8 and the options granted herein
on
any subsequent Transfer of such Units (or Change of Ownership, as the ease
may
be), and such Units shall in all respects remain subject to this Section 8
and
the options granted herein upon the occurrence of any event specified in Section
8.6 to any Member or Substitute Member of such Units.
SECTION
8.20 Membership
Certificates.
The
Company may issue to each Member or Transferee one or more certificates
evidencing the Units owned by such Person. All certificates issued by the
Company shall contain the following statement which shall be conspicuously
printed or typed on the front of back of the certificate:
“THE
MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES
LAWS, IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION
REQUIREMENTS.
THE
MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER
RESTRICTIONS AND CERTAIN BUYOUT RIGHTS IN ACCORDANCE WITH THE TERMS OF THE
COMPANY’S AMENDED AND RESTATED OPERATING AGREEMENT, AS AMENDED FROM TIME TO
TIME.”
If
issued, the Company shall develop procedures for the issuance of new
certificates upon (i) the Transfer of Units or (ii) the loss or destruction
of
previously issued certificates.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-24-
SECTION
8.21 Buy-Sell
Agreement.
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(a)
|
The
owners of the Class A Units or the owners of the Class B Units acting
collectively as a group (the “Offeror”)
may at any time make a buy-sell offer (the “Offer”)
to the other group, excluding owners or affiliates owning only Non-Units
(the “Offeree”)
by notifying the Offeree in writing of the exercise of this right
and
stating in such notice the price at which the Offeror is willing
either to
buy all of the Units of the Company owned by the Offeree, or to sell
the
Offeree all of the Units of the Company owned by the Offeror, with
the
price per Unit and Non-Unit being the same for both the purchase
and the
sale. The Offer shall be deemed to include as an additional term
and
condition a promise by the Offeror to cause the release of the Offeree
from all liabilities of the Company for which the Offeree or any
asset of
the Offeree is liable or subject to attachment as a result of being
a
guarantor or co-maker of such liabilities or a pledgor or mortgagor
of
assets securing such liabilities; provided, however, that any Person
who
will continue to be a Member of the Company after the closing shall
not be
entitled to such a release. The Offer shall not be revocable once
the
aforesaid notice has been delivered to the
Offeree,
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(b)
|
Within
thirty (30) days after receipt by the Offeree of the Offeror’s written
notice of the Offer, the Offeree shall send to the Offeror a written
notice stating whether the Offeree elects (i) to purchase from the
Offeror
all of the Units of the Company owned by the Offeror at the price
stated
in the Offer and in accordance with the other terms and conditions
thereof
(including a release of the Offeror from personal liability for debts
of
the Company), or (ii) to sell to the Offeror all of the Units of
the
Company owned by the Offeree at the price stated in the Offer and
in
accordance with the other terms and conditions thereof (including
a
release of the Offeree from personal liability for debts of the
Company).
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(c)
|
Any
Offer, notice or election which may be given by a group hereunder
shall
not be effective unless it is signed by all Persons included in such
group. If the Offeree shall fail to notify the Offeror whether the
Offeree
elects to buy or sell within the time period specified in subparagraph
(b)
above, or if the notice delivered by the Offeree pursuant to such
subparagraph is not signed by all of the Persons included in the
Offeree
group, the Offeree and each Person included in the Offeree group
shall be
deemed to have elected to sell all of their Units of the Company
to the
Offeror.
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-25-
|
(d)
|
The
closing of the sale shall be held at the Company’s principal office (or at
such other place as the Offeror and the Offeree may in writing agree)
no
later than fifteen (15) days after the expiration of the notice period
specified in clause (b) above. At the closing the purchaser or purchasers
shall deliver to the seller or sellers (i) the releases from liability
for
debts of the Company, as contemplated by subparagraphs (a) and (b)
above,
and (ii) payment shall be made in the form a promissory note payable
in
six (6) equal annual installments of principal and interests a floating
annual rate of interest equal to the lesser of (i) eight percent
(8%), or
(ii) the maximum rate permitted by law compounded monthly with the
first
such payment due at closing, except if the seller is then indebted
to the
purchaser, such purchaser may set-off the purchase price against
and to
the extent of such indebtedness, even if such indebtedness is not
then due
and payable. Further, at the closing each seller shall deliver to
the
purchaser or purchasers an assignment and ▇▇▇▇ of sale duly Transferring
all of such seller’s Units of the Company. Each Member hereby covenants
and warrants that any Unit of the Company which is sold by such Member
pursuant to this Section will be free and clear of all liens,
encumbrances, security interests, charges and claims of others of
every
kind or character as of the
closing.
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(e)
|
Notwithstanding
the foregoing, no Offer may be made pursuant to this Section (i)
within
four (4) years from the date of this Agreement, or (ii) after an
occurrence of an event causing an option under Section 8.6 to become
exercisable with respect to all or part of the Units of the Offeror
or
Offeree until such time as such option has expired or, if exercised,
such
Units have been purchased pursuant
thereto.
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SECTION
8.22 Preemptive
Rights
|
(a)
|
Offer
to Sell.
If the Company authorizes the issuance or sale of any Units, then
the
Company shall first offer to sell to each Member a portion of such
Units
(or such Rights thereto) equal to (i) the number of Units held by
such
Member divided by (ii) the sum of the number of Units
outstanding.
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(b)
|
Right
to Purchase.
In order to accept an offer under Section 8.22(a), each Member of
the
class of Units so authorized to be issued or sold must, within fifteen
(15) days after receipt of written notice from the Company describing
in
reasonable detail the Units (or Rights) being offered, the purchase
price
thereof, the payment terms and such Member’s percentage allotment, deliver
a written notice to the Company accepting such
offer.
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(c)
|
Sale
of Unsubscribed Units.
During the Ninety (90) days following the expiration of such fifteen
(15)
day offering period, the Company shall be entitled to sell any such
Units
(or any such Rights) so authorized to be issued or sold, which the
holders
of such Units have not elected to purchase, on terms and conditions
no
more favorable to the purchasers thereof than those offered to such
holders. Any Units or securities offered or sold by the Company after
such
ninety (90) day period must be re-offered to the holders of the Units
(or
any such Rights) so authorized to be issued or sold pursuant to the
terms
of this Section 8.22.
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-26-
|
(d)
|
Exclusion
from Preemptive Rights.
The provisions of this Section 8.22 shall not apply to any issuance
of
Units (or Rights to acquire any Units) (i) in connection with the
acquisition of another business (whether by purchase of stock, purchase
of
assets, merger or otherwise), (ii) pursuant to any obligation of
the
Members to purchase additional securities as a result of a capital
call by
the Company, (iii) in connection with a debt financing, (iv) as a
distribution with respect to the outstanding Units, (v) issued in
exchange
for consideration other than cash such as property or services, (vi)
as
part of an Additional Capital Contribution pursuant to Sections 3.3
and
3.4, or (vii) pursuant to any agreement in effect on the date of
this
Agreement.
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SECTION
8.23 Acknowledgment
and Authorization of a Transfer of Units.
The
Members understand, and agree that Exhibit
A
attached
to this Agreement has been modified, amended and restated to reflect, that
all
of the Units (as stated in Exhibit
A
of the
First Amended and Restated Operating Agreement of Front Range Energy, LLC,
dated
August 31, 2005) previously held by the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Living Trust and all rights, duties and obligations attached thereto
have been Transferred to and assumed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ such that the ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Revocable Living Trust is no longer a Member
of
the Company. The Members and the ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable Living Trust hereby consent to, and waive any rights in respect of,
such Transfer.
SECTION
9.
Dissolution
SECTION
9.1 Dissolution.
The
Company shall be dissolved upon the occurrence of any of the following events:
|
(a)
|
Upon
the Approval of a Two Thirds Vote of the Units;
or
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(b)
|
The
entry of a decree of judicial dissolution under the
Act.
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SECTION
9.2 Winding
Up.
The
Company shall cease to carry on its business, except insofar as may be necessary
for the winding up of its business and affairs, but its separate existence
shall
continue until it is dissolved in accordance with the laws of Colorado. The
Managers (or, in the event there is no Manager, a Person authorized by a
Majority in Interest) shall proceed to collect the Company’s assets; convey and
dispose of such assets as are not to be distributed in kind to the Members;
pay,
satisfy, or discharge the Company’s liabilities and obligations or make adequate
provisions for the payment or discharge thereof; and do all other acts required
to liquidate its business and affairs.
SECTION
9.3 Resignation
or Withdrawal.
Each
Member agrees not to resign or otherwise voluntarily withdraw from the Company
except (i) with the written consent of the Managers, or (ii) in connection
with
a Transfer of all of his, her or its Units in a manner permitted under Section
8.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-27-
SECTION
9.4 Distribution
of Assets Upon Dissolution.
In
settling accounts after dissolution, the assets of the Company shall be applied
and distributed in the following order of priority:
|
(a)
|
First,
to the payment of debts and liabilities of the Company, in the order
of
priority as provided by law, except those liabilities to Members
on
account of their Capital Contributions;
and
|
|
(b)
|
The
balance, if any, to the Members in accordance with their respective
Capital Account balances after giving effect to all contributions,
distributions and allocations for all Fiscal
Years.
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This
Section is intended to comply with the Act and Regulations
§ 1.704-1(b)(2)(ii)(b)(2) and shall be interpreted consistently
therewith.
SECTION
9.5 Deficit
Capital Accounts.
In the
event the Company is “liquidated” within the meaning of Regulations
§ 1.704-1(b)(2)(ii)(g), if any Member’s Capital Account has a deficit
balance (after giving effect to all contributions, distributions, and
allocations for all Fiscal Years, including the Fiscal Year during which such
liquidation occurs), such Member shall have no obligation to make any
contribution to the capital of the Company with respect to such deficit balance,
and such deficit shall not be considered a debt owed the Company or any other
Person for any purpose whatsoever.
SECTION
10.
Miscellaneous
SECTION
10.1 Issuance
of Additional Units.
Subject
to Section 8.22 and the terms and conditions stated herein, the Company, by
the
written consent of a Majority in Interest, may issue additional Units (including
new classes or series thereof having rights that are different than the rights
of any then-existing class or series) upon such terms and conditions as such
consent may specify.
SECTION
10.2 Liquidation
Safe Harbor Valuation.
This
Section 10.2 shall apply after the effective date of any final Regulations
or of
final guidance by the Internal Revenue Service with respect to the Transfer
of
Units to a new or existing Member of the Company in connection with the
performance of services for the Company or otherwise under which the Company
may
make an election (a “Safe
Harbor Election”)
to
treat the liquidation value of Units so Transferred as being the fair market
value of those Units for purposes of Section 83 of the Code. From and after
the
effective date of any final Regulations or of final guidance by the Internal
Revenue Service, each Member and each Person (including any Person to whom
any
Units are Transferred in connection with the performance of services for the
Company or otherwise) and each assignee and Transferee of a Member who acquires
Units agrees that that (a) the Company is authorized and directed to make the
Safe Harbor Election, and (b) each such Person agrees to comply with all
requirements of such Regulations or guidance with respect to all Units so
Transferred while the Safe Harbor Election remains effective. The Safe Harbor
Election may be revoked by the vote of a Majority in Interest of the
Members.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-28-
SECTION
10.3 Mediation
and Arbitration.
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(a)
|
To
the maximum extent permitted by law, the parties mutually consent
to the
resolution by arbitration, and not litigation, of all claims, causes
of
action and disputes which may arise out of or in connection with
this
Agreement. In the event of any such dispute, the parties agree they
shall
attempt to resolve such dispute by good faith negotiations prior
to the
institution of mediation or arbitration proceedings. If the dispute
cannot
be resolved by such negotiations, then any party, by written notice
to the
other party, may call for private mediation of the issue before a
mediator
to be agreed upon by the parties. The parties agree to conclude such
private mediation within thirty (30) days of the filing by a party
of a
request for such mediation. In the event the dispute cannot be resolved
by
such mediation, either party may, by written notice to the other
party,
may [sic?]
commence arbitration proceedings as provided
below.
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|
(b)
|
Disputes
to be resolved by arbitration shall be submitted to binding arbitration
to
be held in a neutral location to be mutually agreed upon by and between
the parties, by either one or three independent arbitrators in accordance
with the Federal Arbitration Act, Title 9 of the U.S. Code, and the
Commercial Arbitration Rules of the American Arbitration Association
pursuant to the procedure set forth
below.
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|
(c)
|
Any
aggrieved party may demand such arbitration in writing by notice,
which
demand shall include the name of the arbitrator appointed by the
party
demanding arbitration and a statement of the matter in
controversy.
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(d)
|
If
there are two parties to the dispute, then unless the parties have
agreed
on a single arbitrator within ten (10) days after such demand, the
other
party shall name its arbitrator, and the two arbitrators so selected
shall
select a third arbitrator within ten (10) days or, in lieu of an
agreement
on the third arbitrator by the two arbitrators so appointed, a third
arbitrator shall be appointed by the American Arbitration Association.
If
a second arbitrator is not selected within the time provided, the
first
arbitrator shall serve as sole arbitrator. If there are more than
two
parties to the dispute, then an independent single arbitrator shall
be
appointed by the American Arbitration Association to resolve the
dispute.
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(e)
|
The
arbitrators shall have the power to determine the procedure to be
followed, whether discovery is to be allowed and to what extent,
and to
establish a schedule for resolving the controversy and allocating
costs of
arbitration among the parties as they shall solely determine in their
discretion, including the power to award costs and attorney fees
of the
prevailing party against the losing party. The arbitrators shall
have the
power to award punitive or exemplary damages, but only when, in their
sole
discretion, they determine that a dispute brought or claim pursued
by a
party was not brought in good faith. The decision of a majority of
the
arbitrators shall be the decision of the arbitrators. All decisions
shall
be in writing. The decision of the arbitrators shall be final and
binding
upon the parties and shall not be appealable. The parties understand
and
agree that they are waiving all right to have all claims, causes
of action
or disputes adjudicated by a court or
jury.
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-29-
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(f)
|
The
parties agree that the provisions of this Section 10.2 shall be a
complete
defense to any suit, action, or other proceeding instituted in any
federal, state, or local court or before any administrative tribunal
with
respect to any controversy or dispute arising out of this Agreement,
that
judgment may be rendered in any court of competent jurisdiction on
any
award made by the arbitrators pursuant to this Agreement, and that
the
arbitration provisions hereof shall survive the termination of this
Agreement for any reason.
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SECTION
10.4 Title
to Assets.
Title
to all assets acquired by the Company shall be held in the name of the Company.
No Member shall individually have any ownership interest or rights in the assets
of the Company, except indirectly by virtue of such Member’s ownership of one or
more Units. No Member shall have any right to seek or obtain a partition of
the
assets of the Company, nor shall any Member have the right to any specific
assets of the Company upon the liquidation of or any distribution from the
Company.
SECTION
10.5 Grant
of Power of Attorney.
Each
Member constitutes and appoints the Managers as the Member’s true and lawful
attorney-in-fact, and in the Member’s name, place and stead, to make, execute,
sign, acknowledge, and file:
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(a)
|
All
documents (including amendments to the Articles) which the
attorney-in-fact deems appropriate to reflect any written amendment,
change or modification of this Agreement approved in accordance with
this
Agreement;
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|
(b)
|
Upon
the requisite approval, if any, required elsewhere in this Agreement,
any
and all other certificates or other instruments required to be filed
by
the Company under the laws of any state or jurisdiction, including,
without limitation, any certificate or other instruments necessary
in
order for the Company to continue to qualify as a limited liability
company under the applicable laws;
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(c)
|
One
or more applications to use an assumed name;
and
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(d)
|
All
documents which may be required to dissolve and terminate the Company
and
to cancel its Articles upon the requisite approval required elsewhere
in
this Agreement.
|
The
foregoing power of attorney is irrevocable and is coupled with an interest,
and,
to the extent permitted by applicable law, shall survive the death or disability
of a Member. It also shall survive the Transfer of a Unit, except that if the
Transferee is approved for admission as a Substitute Member, this power of
attorney shall survive the delivery of the assignment for the sole purpose
of
enabling the attorney-in-fact to execute, acknowledge and file any documents
needed to effectuate the substitution. Each Member shall be bound by any
representations made by the attorney-in-fact acting in good faith pursuant
to
this power of attorney, and each Member hereby waives any and all defenses
which
may be available to contest, negate or disaffirm the action of the
attorney-in-fact taken in good faith under this power of attorney.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-30-
SECTION
10.6 Tax
Classification.
The
Members intend that the Company not be a partnership (including, without
limitation, a limited partnership or a joint venture) for any purpose other
than
for federal and state tax purposes, that no Member shall be a partner or joint
venturer of any other Member by virtue of this Agreement, and that neither
this
Agreement nor any other document entered into by the Company or any Member
shall
be construed to suggest otherwise. The Members intend that the Company shall
be
treated as a partnership for federal and state income tax purposes, and each
Member and the Company shall file all tax returns and shall otherwise take
all
tax and financial reporting positions in a manner consistent with such
treatment.
SECTION
10.7 Tax
Controversies.
In the
event the Company is or becomes required to designate a “tax matters partner”
pursuant to Code § 6231, the Company, by the consent of a Majority in
Interest, shall designate a Member to act as the tax matters partner for the
Company (the “Tax
Matters Partner”).
The
Tax Matters Partner is authorized and required to represent the Company (at
the
Company’s expense) in connection with all examinations of the Company’s affairs
by tax authorities, including resulting administrative and judicial proceedings.
The Tax Matters Partner agrees to notify each Manager and Member as to the
initiation of any such examination or administrative or judicial proceeding,
and
to keep each Manager and Member reasonably informed of the status thereof.
The
Tax Matters Partner shall obtain the consent of a vote of a Majority in Interest
prior to entering into any settlement of any such examination. Each Manager
and
Member agrees to cooperate with the Tax Matters Partner and to do or refrain
from doing any or all things reasonably required by the Tax Matters Partner
in
connection with the conduct of such proceedings.
SECTION
10.8 Headings.
Section
and other headings contained in this Agreement are for reference purposes only
and are not intended to describe, interpret, define, or limit the scope, extent,
or intent of this Agreement or any provision herein.
SECTION
10.9 Survival.
All
rights of contribution and indemnity contained in this Agreement shall survive
and remain in full force and effect notwithstanding any dissolution of the
Company or this Agreement.
SECTION
10.10 Notices.
Except
as otherwise provided by this Agreement or by law, any notice required or
permitted to be given by this Agreement shall be sufficient if in writing and
shall be deemed effective only if transmitted by personal delivery or mailed
by
certified mail, return receipt requested, postage prepaid, to the address of
the
Member as it appears on the records of the Company; provided that a waiver
in
writing signed by any person entitled to notice, whether made before or after
the time for notice to be given, is equivalent to the giving of notice. Any
such
notice shall be deemed to be delivered and received as of the date so delivered,
if delivered personally, or as of the second business day following the day
sent, if sent by certified mail.
SECTION
10.11 Entire
Agreement.
This
Agreement contains the entire agreement between the Members relative to the
operation of the Company, and it shall not be amended, altered, modified or
changed except by a written document duly executed by a Majority in Interest
at
the time of such alteration, modification or change. Notwithstanding the
foregoing, the provisions of Section 3, Section 4, Section 6.6, Section 6.7
and
Section 8 may not be altered, modified or changed with respect to any Member
without the written consent of such Member.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-31-
SECTION
10.12 Severability.
In the
event any provision of this Agreement is held to be illegal, invalid or
unenforceable to any extent, the legality, validity and enforceability of the
remainder of this Agreement shall not be affected thereby and shall remain
in
full force and effect and shall be enforced to the greatest extent permitted
by
law.
SECTION
10.13 Binding
Agreement.
The
provisions of this Agreement shall be binding upon, and inure to the benefit
of,
the parties hereto and their respective heirs, personal representatives,
successors and assigns.
SECTION
10.14 Jointly
Negotiated.
The
parties hereto have participated jointly in the negotiation and drafting of
this
Agreement. In the event an ambiguity or question of intent or interpretation
arises, no presumption or burden of proof shall arise favoring or disfavoring
any party by virtue of the authorship of any of the provisions of this
Agreement.
SECTION
10.15 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which shall
be
deemed to be an original and all of which shall constitute one agreement that
is
binding upon all of the parties hereto, notwithstanding that all parties are
not
signatories to the same counterpart.
SECTION
10.16 Governing
Law.
The
laws of the State of Colorado shall govern the validity of this Agreement,
the
construction of its terms, and the interpretation of the rights and duties
of
the parties hereto.
IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed effective as of the Effective Date.
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
/s/
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
Signature
Eagle
Energy LLC
By
/s/
▇▇▇▇▇ ▇.
▇▇▇▇▇
Its
President
ICM,
Inc.
By
/s/
▇▇▇▇▇
▇▇▇▇▇
Its
CFO
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Revocable
Living Trust
By
/s/
▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇, As Trustee
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-32-
Appendix
I
Definitions
Terms
Defined Herein.
Unless
the context otherwise requires, the following terms shall have the following
meanings:
(a) “Act”
means
the Colorado Limited Liability Company Act, as amended from time to time (or
any
corresponding provision of succeeding law).
(b) “Additional
Capital Contribution”
has the
meaning given it in Section 3.3.
(c) “Adjusted
Capital Account Deficit”
means,
with respect to any Member, the deficit balance, if any, in such Member’s
Capital Account as of the end of the relevant Fiscal Year, after giving effect
to the following adjustments:
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i.
|
Credit
to such Capital Account any amounts which such Member is obligated
to
restore pursuant to any provision of this Agreement or is deemed
to be
obligated to restore pursuant to the penultimate sentences of Regulations
§§ 1.704-2(g)(1) and 1.704-2(0(5);
and
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|
ii.
|
Debit
to such Capital Account the items described in Regulations
§§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
|
The
foregoing definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of Regulations § 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
(d)
“Agreement”
means
this Operating Agreement, as amended from time to time.
(e) “Annual
Operating Plan”
means
the Annual Operating Plan adopted as provided in Section 6.10.
(f) “Articles”
means
the Articles of Organization of the Company or such other document filed in
accordance with the Act in order to form the Company under the laws of Colorado,
as amended or restated from time to time.
(g) “Available
Cash”
means
the aggregate amount of cash on hand or in bank, money market or similar
accounts of the Company derived from any source which the Managers determine
is
available for distribution after taking into account any amount required or
appropriate to maintain a reasonable amount of working capital and reserves
for
outstanding obligations and anticipated future expenditures of the Company,
and
any limitations on distribution imposed by any agreement to which the Company
is
a party.
(h) “Board”
means a
board consisting of the Board Members, as described in Section 6.7.
(i) “Board
Member”
has the
meaning given it in Section 6.7.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-33-
(j) “Bona
Fide Offer”
means a
bona fide offer as described in Section 8.6(a).
(k) “Capital
Account”
means
the capital account maintained for each Member in accordance with Section
3.5.
(l) “Capital
Contributions”
means,
with respect to any Member, the amount of cash and the initial Gross Asset
Value
of any property (other than cash) contributed to the capital of the Company.
The
principal amount of a promissory note which is not readily traded on an
established securities market and which is contributed to the Company by the
maker of the note (or a person related to the maker of the note within the
meaning of Regulations § 1.704-1 (b)(2)(ii)(c)) shall not be included in
the Capital Account of any Member until the Company makes a taxable disposition
of the note or until (and to the extent) principal payments are made on the
note, all in accordance with Regulations
§ 1.704-1(b)(2)(iv)(d)(2).
(m) “Class
A Units”
and
“Class
B Units”
refer to
the classes of Units created pursuant to Section 3.1.
(n) “Code”
means
the Internal Revenue Code of 1986, as amended from time to time (or any
corresponding provisions of succeeding law).
(o) “Company”
means
Front Range Energy, LLC, a Colorado limited liability company.
(p) “Company
Minimum Gain”
means
“partnership minimum gain” as that term is defined in Regulations
§§ 1.704-2(b)(2) and 1.704-2(d).
(q) “Confidential
Information”
means
the terms of this Operating Agreement, the name of any Member, together with
any
other information that is not generally known to the public and that is used,
developed or obtained by the Company in connection with its business, including
but not limited to (i) financial information and projections, (ii) business
strategies, (iii) products or services, (iv) fees, costs and pricing structures,
(v) designs, (vi) analysis, (vii) drawings, photographs and reports, (viii)
computer software, including operating systems, applications and program
listings, (ix) flow charts, manuals and documentation, (x) data bases, (xi)
accounting and business methods, (xii) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xiii) customers and clients and customer or client lists,
(xiv) copyrightable works, (xv) all technology and trade secrets, and (xvi)
all
similar and related information in whatever form.
(r)
“Defaulting
Member”
means a
defaulting member as described in Section 3.4.
(s) “Depreciation”
means,
for each Fiscal Year, an amount equal to the depreciation, amortization, or
other cost recovery deduction allowable with respect to an asset for such Fiscal
Year, except that if the Gross Asset Value of an asset differs from its adjusted
basis for federal income tax purposes at the beginning of such Fiscal Year,
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or
other
cost recovery deductions for such Fiscal Year or other period bears to such
beginning adjusted tax basis; provided, however, that if the adjusted basis
for
federal income tax purposes of an asset at the beginning of such Fiscal Year
is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the
Managers.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-34-
(t) “Disposing
Member”
means a
disposing Member as described in Section 8.6.
(u) “Effective
Date”
means
the date first set forth and defined as the Effective Date in the first
paragraph of this Agreement.
(v) “Fiscal
Year”
means on
or after the Effective Date (i) the period commencing on the Effective Date,
and
ending on the next December 31st,
(ii)
any subsequent twelve (12) month period commencing on January 1st
and
ending on December 31st,
or
(iii) any portion of the period described in clause (ii) for which the Company
is required to allocate Profits, Losses, and other items of Company income,
gain, loss, or deduction pursuant to Section 4.
(w) “Gross
Asset Value”
means,
with respect to any asset, the asset’s adjusted basis for federal income tax
purposes, except as follows:
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i.
|
The
initial Gross Asset Value of any asset contributed by a Member
to the
Company shall be the gross fair market value of such asset, as
determined
by the Managers;
|
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ii.
|
The
Gross Asset Values of all Company assets shall be adjusted to equal
their
respective gross fair market values as of the following times:
(a) the
acquisition of an additional interest in the Company by any new
or
existing Member in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Company to a Member of
more than
a de minimis amount of Company assets as consideration for an interest
in
the Company; and (c) the liquidation of the Company within the
meaning of
Regulations § 1.704-1 (b)(2)(ii)(g); provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made
only if
the Managers reasonably determine that such adjustments are necessary
or
appropriate to reflect the relative economic interests of the Members
in
the Company;
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iii.
|
The
Gross Asset Value of any Company asset distributed to any Member
shall be
adjusted to equal the gross fair market value of such asset on
the date of
distribution as determined by the Managers; and
|
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iv.
|
The
Gross Asset Values of Company assets shall be increased (or decreased)
to
reflect any adjustments to the adjusted basis of such assets pursuant
to
Code § 734(b) or Code § 743(b), but only to the extent that such
adjustments are taken into account in determining Capital Accounts
pursuant to Regulations § 1.704-1(b)(2)(iv)(m) and Paragraph (bb)(vi)
of this Appendix and 4.4(f); provided, however, that Gross Asset
Values
shall not be adjusted pursuant to this clause (iv) to the extent
the
Managers determine that an adjustment pursuant to clause (ii) above
is
necessary or appropriate in connection with a transaction that
would
otherwise result in an adjustment pursuant to this clause
(iv).
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SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-35-
If
the
Gross Asset Value of an asset has been determined or adjusted pursuant to
clauses (i), (ii) or (iv) above, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset
for
purposes of computing Profits and Losses.
(x) “Immediate
Family”
means,
with respect to a Member, such Member’s spouse and lineal descendants (excluding
adopted descendants).
(y) “Indemnitee”
means a
Person entitled to be indemnified by the Company pursuant to Section
6.11.
(z) “Majority
in Interest”
means
any Member or group of Members holding an aggregate of more than fifty percent
(50%) of the applicable Units then entitled to vote. Unless otherwise expressly
limited in this Agreement to the vote of a specific class of Unit, Class A
Units, and Class B Units shall be entitled to vote for purposes of determining
a
“Majority in Interest.”
(aa) “Manager”
means
the Person designated as a manager of the Company in accordance with Section
6.1. “Managers”
means
all such Persons.
(bb) “Member”
means
any Person who is a party hereto or who is hereafter admitted as a new Member
or
Substitute Member of the Company pursuant to the provisions of this Agreement.
“Members”
mean
all such Persons.
(cc) “Member
Nonrecourse Debt”
means
“partner nonrecourse debt” as that term is defined in Regulations
§ 1.704-2(7b)(4).
(dd) “Member
Nonrecourse Debt Minimum Gain”
means an
amount, with respect to each Member Nonrecourse Debt, equal to the Company
Minimum Gain that would result if such Member Nonrecourse Debt were treated
as a
Nonrecourse Liability, determined in accordance with Regulations
§ 1.704-2(i)(3).
(ee) “Member
Nonrecourse Deductions”
means
“partner nonrecourse deductions” as that term is defined in Regulations
§§ 1.704-2(i)(1) and 1.704-2(I)(2) [1.704-2(i)(2)?].
(ff) “Nonrecourse
Deductions”
has the
meaning set forth in Regulations § 1.704-2(b)(1).
(gg) “Nonrecourse
Liability”
has the
meaning set forth in Regulations § 1.704-2(b)(3).
(hh) “Offer,”
“Offeror”
and
“Offeror”
has the
meaning set forth in Section 8.21.
(ii) “Person”
means
any individual, corporation, partnership, limited liability company, trust
or
other legal entity.
(jj) “Profits”
and
“Losses”
means,
for each Fiscal Year, an amount equal to the Company’s taxable income or loss
for such Fiscal Year, determined in accordance with Code § 703(a) (for this
purpose, all items of income, gain, loss, or deduction required to be stated
separately pursuant to Code § 703(a)(1) shall be included in taxable income
or loss), with the following adjustments:
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-36-
|
i.
|
Any
income of the Company that is exempt from federal income tax and
not
otherwise taken into account in computing Profits or Losses pursuant
to
this Subsection shall be added to such taxable income or
loss;
|
|
ii.
|
Any
expenditures of the Company described in Code § 705(a)(2)(B) or
treated as Code § 705(a)(2)(B) expenditures pursuant to Regulations
§ 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this Subsection shall be
subtracted from such taxable income or
loss;
|
|
iii.
|
In
the event the Gross Asset Value of any Company asset is adjusted
pursuant
to Paragraph (o)(ii) or (o)(iii) of this Appendix, the amount of
such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or
Losses;
|
|
iv.
|
Gain
or loss resulting from any disposition of a Company asset with respect
to
which gain or loss is recognized for federal income tax purposes
shall be
computed by reference to the Gross Asset Value of the asset disposed
of,
notwithstanding that the adjusted tax basis of such asset differs
from its
Gross Asset Value;
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|
v.
|
In
lieu of the depreciation, amortization, and other cost recovery deductions
taken into account in computing such taxable income or loss, there
shall
be taken into account Depreciation for such Fiscal Year or other
period,
computed in accordance with Paragraph (m) of this
Appendix;
|
|
vi.
|
To
the extent an adjustment to the adjusted tax basis of any Company
asset
pursuant to Code § 734(b) or Code § 743(b) is required pursuant
to Regulations § 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
determining Capital Accounts as a result of a distribution other
than in
liquidation of a Member’s interest in the Company, the amount of such
adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases
the
basis of the asset) from the disposition of the asset and shall be
taken
into account for purposes of computing Profits or Losses;
and
|
|
vii.
|
Notwithstanding
any other provision of this Subsection, any items which are specifically
allocated pursuant to Section 4.4 or Section 4.5 shall not be taken
into
account in computing Profits or
Losses.
|
The
amounts of the items of Company income, gain, loss, or deduction available
to be
specially allocated pursuant to Sections 4.4 and 4.5 shall be determined by
applying rules analogous to those set forth in clauses (i) through (vi)
above.
(kk) “Regulations”
means
the Income Tax Regulations, including Temporary Regulations, promulgated under
the Code, as amended from time to time (including corresponding provisions
of
succeeding Regulations).
(ll) “Regulatory
Allocations”
mean the
allocations pursuant to Section 4.4.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-37-
(mm) “Required
Contribution”
means a
required contribution as described in Section 3.3.
(nn) “Right”
means a
warrant, right, call or option or security exercisable for or convertible into
a
Unit.
(oo) “Safe
Harbor Election”
means
the Safe Harbor Election as described in Section 10.2.
(pp) “Substitute
Member”
means a
Person admitted to the Company as a Member and entitled to all the rights and
bound by all the obligations of the Member for which such Person is
substituted.
(qq) “Subject
Units”
means
subject units as described in Section 8.6.
(rr) “Tax
Matters Partner”
means
the tax matters partner as described in Section 10.7.
(ss) “Transfer”,
“Transferred”,
etc.
means, with respect to a Unit, to sell, Transfer, assign, give, bequeath,
mortgage, alienate, pledge, hypothecate or otherwise encumber or dispose of
such
Unit. “Transfer”, “Transferred”, etc. includes with respect to a Unit owned by a
Member that is not a natural person, the cumulative transfer (voluntarily,
involuntarily or by operation of law, including by merger or other
reorganization) of more than 50% of the equity ownership of the
Member.
(tt) “Two-Thirds
Interest”
means
any on or more Board Members appointed by Members holding an aggregate of more
than sixty-six and two thirds percent (66 2/3%) of the Units then outstanding.
Unless otherwise expressly limited in this Agreement to the vote of a specific
class of Unit, Class A Units and Class B Units shall be entitled to vote for
purposes of determining a “Two Thirds Interest”.
(uu) “Unit”
means a
Unit issued by and representing an ownership interest in the Company including
a
Class A Unit, a Class B Unit, and any other class or series of Units created
and
issued pursuant to Section 10.1. “Units” mean all such Units.
(vv) “Unpaid
Required Contribution”
means an
unpaid required contribution as described in Section 3.4.
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
-38-
Exhibit
A
As
of
October 20, 2005.
NOTE:
Exhibit
A
may be amended from time to time to reflect adjustments to Members’
Accounts.
|
Member
|
Units
|
Cash
Capital
Contribution
|
%
|
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
50.000
Class A Units
|
$-0-
|
.1%
|
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
12,880.405
Class B Units
|
$12,880,405
|
53.72%
|
|
Eagle
Energy LLC
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
10,094.595
Class D Units
|
$10,094,595
|
42.10%
|
|
ICM
Inc.
▇▇▇
▇. ▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇▇ [67030]
|
1,000.000
Class B Units
|
$1,000,000
|
4.17%
|
|
TOTAL
|
24,025.000
Units
|
$23,975,000
|
100.00%
|
SECONDED
AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC
A-1