THE INTERESTS IN THE LIMITED LIABILITY COMPANY THAT IS REGULATED BY THESE
REGULATIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE COLORADO SECURITIES AND INVESTOR PROTECTION ACT, AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACTS. THE INTERESTS MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED
WITHOUT REGISTRATION UNDER SUCH ACTS OR AN OPINION OF COUNSEL THAT SUCH TRANSFER
MAY BE LEGALLY EFFECTED WITHOUT SUCH REGISTRATION. ADDITIONAL RESTRICTIONS ON
TRANSFER AND SALE ARE SET FORTH IN THESE REGULATIONS.
--------------------------------------------------------------------------------
OPERATING AGREEMENT
OF
THREE FORKS NO. 1, LLC
A COLORADO LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made effective as of November 12, 2012 by
and among the Owners of the Company, Three Forks No 1, LLC.
ARTICLE I - DEFINITIONS
The following terms used in this Operating Agreement shall have the
following meanings unless otherwise expressly provided herein:
"ADDITIONAL OWNER" shall mean any Person or Entity who is or
which is admitted to the Company as an Additional Owner pursuant to Title 7,
Article 80, Part 701 of the Colorado Revised Statutes.
"AFFILIATE" shall mean, with respect to any Person, (i) any
Person directly or indirectly controlling, controlled by or under common control
with such Person, (ii) any officer, director, shareholder, member or partner of
such Person, (iii) any person who is an officer, director, shareholder, member,
partner, trustee or employee of any Person described in clauses (i) and (ii) of
this sentence, or (iv) any child, grandchild (whether through marriage, adoption
or otherwise), parent, brother, sister or spouse of a Person. For purposes of
this definition, the term "controls, is controlled by, or is under common
control with" shall mean the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
"CAPITAL ACCOUNT" means a capital account to be established
for each Owner, and including any transferee of an Owner, and maintained in
accordance with the rules of Code Section 704(b) and Code Regulations Section
1.704-1(b)(2)(iv), as amended from time to time.
In cases where Code Section 704(c) and Code Regulations
Section 1.704-3 apply to property of the Company, the Capital Accounts
of the Owners shall be adjusted in accordance with Code Regulations
Section 1.704-1(b)(2)(iv)(g) for allocations to such Owners of income,
gain, loss and deduction (including depreciation, depletion,
amortization or other cost recovery) as computed for book purposes with
respect to the property. Adjustment to an Owner's Capital Account
hereunder shall be made with reference to the Federal tax treatment of
the item giving rise to the adjustment at the Company level without
regard to any elective tax treatment of such item at the Owner's level.
In the event any Owner transfers an Economic Interest in the
Company in accordance with the terms of this Operating Agreement, the
transferee shall succeed to the Capital Account of the transferor Owner
to the extent such Capital Account relates to such transferred Economic
Interest. In determining the amount of any liability for purposes of
this section, there shall be taken into account Code Section 752(c) and
any other applicable provisions of the Code and Code Regulations
promulgated thereunder.
"CAPITAL CONTRIBUTION" shall mean any contribution to the
capital of the Company in cash or property by an Owner whenever made. "INITIAL
CAPITAL CONTRIBUTION" shall mean the initial contribution to the capital of the
Company pursuant to this Operating Agreement, such value to be determined by
agreement between the parties, net of liabilities, assumed by the Company or to
which the contributed property is subject. The Initial Capital Contribution of
each Owner is set forth opposite such Owner's name on the attached EXHIBIT "A."
"ADDITIONAL CAPITAL CONTRIBUTION" shall mean any additional capital contribution
to the capital of the Company pursuant to this Operating Agreement.
"CODE" shall mean the Internal Revenue Code of 1986 or
corresponding provisions of subsequent superseding federal revenue laws.
"COMPANY" shall refer to this Colorado limited liability
company.
"DISTRIBUTABLE CASH" shall mean all cash, revenues and funds
received by the Company from the Company operations, less the sum of the
following to the extent paid or set aside by the Company: (i) all principal and
interest payments on indebtedness of the Company and all other sums paid to
lenders; (ii) all cash expenditures incurred incident to the normal operation of
the Company's business; and (iii) such cash reserves as the Manager(s) deem
reasonably necessary to the proper operation of the Company's business.
"ECONOMIC INTEREST" shall mean a Member's or Economic Interest
Owner's share of the Company's Net Profits, Net Losses and distributions of the
Company's assets pursuant to this Operating Agreement and the Colorado Revised
Statutes, but shall not, of itself, include any right to vote on, consent to or
-2-
otherwise participate in any decision of the Members or Managers. The Initial
Economic Interests are set forth in EXHIBIT "A" hereto.
"ECONOMIC INTEREST OWNER" Shall mean the owner of an Economic
Interest who is a Member.
"ENTITY" shall mean any general partnership, limited
partnership, limited liability company, corporation, joint venture, trust,
business trust, cooperative or association.
"FISCAL YEAR" shall mean the Company's fiscal year, which
shall be from January 1 to December 31.
"COLORADO STATUTES" shall mean the Colorado Revised Statutes
Title 7 Article 80, as amended.
"GROSS ASSET VALUE" means, with respect to any asset of the
Company, the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Gross Asset Value of any asset
contributed by an Owner to the Company shall be the gross fair market
value of such asset as determined by the contributing Owner and the
Company;
(ii) The Gross Asset Value of all Company assets
shall be adjusted to equal their respective gross fair market values
(taking into account Code Section 7701(g)) as determined by the
Company, as of the following times:
a) The acquisition of an additional Economic
Interest in the Company by any new or existing Owner in
exchange for more than a de minimis Capital Contribution;
b) The distribution by the Company to an
Owner (or an assignee of an Owner with respect to the Owner's
Economic Interest in the Company) of more than a de minimis
amount of Company assets as consideration for the disposition
of an interest in the Company; and
c) The liquidation of the Company within the
meaning of Code Regulations Section 1.704-1(b)(2)(ii)(g).
Adjustments pursuant to subsections a) and b) above shall be
made only if the Manager(s) reasonably determine that such adjustments
are necessary or appropriate to reflect the relative Economic Interests
of the Owners in the Company;
(iii) If the Gross Asset Value of an asset has been
determined or adjusted as provided in this definitional Section (other
than subparagraph (iv) below), Gross Asset Value of the respective
asset thereafter shall be adjusted by the Depreciation taken into
account with respect to the asset for purposes of computing Profit and
Loss;
-3-
(iv) The Gross Asset Value of any Company asset
distributed to any Owner shall be the gross fair market value of the
distributed asset, as determined by the Company, on the date of
distribution; and
(v) The Gross Asset Value of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted
basis of the Company assets pursuant to Code Section 732(d), Code
Section 734(b) or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining the Owner's Capital
Account pursuant to Code Regulations Section 1.704-1(b)(2)(iv)(m). The
Gross Asset Value of the Company assets, however, shall not be adjusted
under this subparagraph (v) to the extent that the Manager(s) determine
that an adjustment pursuant to subparagraph (ii) is not necessary or
appropriate in connection with a transaction that otherwise would
result in an adjustment pursuant to this subparagraph (v).
"INTERESTS" shall mean the Economic Interests or Voting
Interests of a Member, as the use of such term may imply. For the purposes of a
purchase or sale between Members of their respective Interests in the Company,
it shall mean both the Economic Interests and the Voting Interests in the
aggregate for the selling Member.
"MANAGER" shall mean Three Forks, Inc., a Colorado corporation
upon its resignation, or any other Person or Entity that succeeds any of such
persons or entities in that capacity. References to the Manager in the singular
or as him, her, it, itself, or other like references shall also, where the
context so requires, be deemed to include the corporate plural or the masculine
or feminine reference, as the case may be.
"MEMBER" shall mean each of the parties who executes a
counterpart of this Operating Agreement as a Member and each of the parties who
may hereafter become Additional or Substitute Owners having voting rights
pursuant to the terms of this Agreement. Each Member shall have the right to
vote his or her respective Voting Interests set forth in EXHIBIT "B" hereto.
"NET PROFITS" shall mean, for each Fiscal Year, the income and
gains of the Company determined in accordance with the accounting principals
consistently applied from year to year, as reported, separately or in the
aggregate, as appropriate, on the Company's information tax return filed for
federal income tax purposes, plus any income described in Code Section
705(a)(1)(B).
"NET LOSSES" shall mean, for each Fiscal Year, the losses and
deductions of the Company determined in accordance with accounting principals
consistently applied from year to year as reported separately or in the
aggregate, as appropriate, on the Company's information tax return filed for
federal income tax purposes, plus any expenditures described in Code Section
705(a)(2)(B).
"OPERATING AGREEMENT" shall mean this Operating Agreement as
originally executed and as amended from time to time, and which shall constitute
-4-
the "Regulations" or "Operating Agreement" of the Company under Title 7, Article
80, Part 108 of the Colorado Revised Statutes.
"ORGANIZATION EXPENSES" shall mean those expenses incurred in
connection with the formation of the Company.
"OWNERS" shall mean collectively the Members and the
non-voting Economic Interest Owners of this Company.
"PERSON" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such "PERSON" where the context so admits.
"PROFIT AND LOSS" means, for each fiscal year and other
period, an amount equal to the Company's taxable income or loss for such year or
period, determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments:
(i) Any income of the Company that is exempt from
federal income tax and not otherwise taken into account in computing
Profit or Loss pursuant to this definition shall be added to such
taxable income or loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B) of the Code or treated as Code Section
705(a)(2)(B) expenditures pursuant to Code Regulations Section
1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing
Profit or Loss pursuant to this definition shall be subtracted from
taxable income or loss;
(iii) In the event the Gross Asset Value of any
Company asset is adjusted pursuant to subparagraphs (ii) and (iv) of
the definition of "Gross Asset Value" hereinabove, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profit or Loss;
(iv) Gain or loss resulting from any disposition of
Company property 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 property disposed of, notwithstanding that the
adjusted tax basis of such property differs from its Gross Asset Value;
(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;
(vi) To the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Code Regulations Section
-5-
1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of an
Owner's Economic 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 Profit or Loss; and
(vii) To the extent an adjustment to the adjusted tax
basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Code Regulations Section
1l704-1(b)(2)(iv)(m) to be taken into account in determining Capital
Accounts as a result of a distribution to an Owner in complete
liquidation of his or her 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 such basis) or loss (if the adjustment
decreases such basis), and such gain or loss shall be specially
allocated to the Owners in accordance with their Economic Interests in
the Company in the event that Code Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or the Owner to whom such distribution
was made in the event that Code Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
"RESERVES" shall mean, with respect to any fiscal period,
funds set aside or amounts allocated during such period to reserves which shall
be maintained in amounts deemed sufficient by the Manager(s) for working capital
and to pay taxes, insurance, debt service or other costs or expenses incident to
the ownership or operation of the Company's business.
"SUBSTITUTE OWNER" shall mean any Person or Entity who or
which is admitted to the Company as a Substitute Owner pursuant to Title 7
Article 80 Part 702(3) of the Colorado Revised Statutes.
"VOTING INTEREST" shall mean the percentage voting interest of
a Member in the Company as set forth in EXHIBIT "B" hereto, according to its pro
rata ownership interest.
ARTICLE II - FORMATION OF THE COMPANY
2.1 FORMATION. On November 8, 2012 the Company was organized as a
Colorado Limited Liability Company under and pursuant to the Colorado Limited
Liability Company Act within the Colorado Revised Statutes. The Company is not a
partnership (including a limited partnership) or any other venture. Except as
provided by law, no Member will be construed to be a partner in the Company or a
partner of any other Member or person, and the Articles, this Operating
Agreement and the relationships created thereby and arising therefrom will not
be construed to suggest otherwise. The foregoing statement regarding partnership
status does not apply for purposes of classifying the Company as a partnership
or its Members as partners for income tax purposes under Section 301.7701-2 of
the Income Tax Regulations promulgated under the Code, as such regulations may
be amended from time to time.
2.2 NAME. The name of the Company is Three Forks No. 1, LLC
-6-
2.3 PRINCIPAL PLACE OF BUSINESS. The Company may locate its places of
business and registered office at any other place or places as the Manager(s)
may deem advisable from time to time.
2.4 REGISTERED OFFICE AND REGISTERED AGENT. The Company's registered
agent and its registered office shall be at the offices of its registered agent
Michael A. Littman, Attorney at Law, at 7609 Ralston Road, Arvada, CO 80002.
2.5 TERM. The term of the Company shall be for 20 years from the date
of filing the Articles of Organization with the Secretary of the State of
Colorado, unless the Company is earlier dissolved or continued in accordance
with either the provisions of the Articles of Organization, this Operating
Agreement or the relevant Colorado Statutes.
ARTICLE III - BUSINESS OF THE COMPANY
3.1 PERMITTED BUSINESS. The business of the Company shall be:
(a) To conduct a private offering of $3,125,000 to acquire
participation in oil and gas exploration and production activities through
leases, farmouts or other forms of participation.
(b) To exercise all other powers necessary to or reasonably
connected with the Company's business which may be legally exercised by limited
liability companies under the Colorado Statutes; and
(c) To engage in all activities necessary, customary,
convenient, or incident to any of the foregoing.
ARTICLE IV - NAMES AND ADDRESSES OF OWNERS
The names and addresses of the initial Owners are as set forth in
EXHIBIT "B" hereto which will be amended from time to time as additional members
are admitted.
ARTICLE V - RIGHTS AND DUTIES OF MANAGER(S)
5.1 MANAGEMENT. The business and affairs of the Company shall be
managed solely by its designated Manager(s), which the Manager(s) need not be a
Member. The Members shall from time to time select a Manager, who shall be the
Executive and Operating Manager of the Company and shall have the authority to
bind the Company in all matters in the ordinary course of business. Three Forks,
Inc. is hereby designated as the current Manager until the resignation or
removal from office or until his successor is elected and qualified. The
Manager(s) may, from time to time, apportion and delegate responsibilities among
the various Manager(s). In the event that there is only one Manager elected by
the Members, it will automatically become the Sole Manager. Three Forks, Inc.
shall serve as manager, and shall have authority to bind the Company for any
consulting service obligation and for any LLC administrative function of banking
or finance.
-7-
5.2 NUMBER, TENURE AND QUALIFICATIONS. The number of Managers of the
Company shall be fixed from time to time by the Members holding a super-majority
of two-thirds (2/3) of the Voting Interests in a duly constituted meeting of
such. By signing this Operating Agreement, the Members confirm that the Manager
is currently Three Forks, Inc. Each Manager shall hold office until the next
annual meeting of Members or until its successor shall have been elected and
qualified. Managers shall be elected by the Members holding a majority of the
Voting Interests in a duly constituted meeting of such. A Manager need not be a
resident of the State of Colorado or a Member of the Company.
5.3 CERTAIN POWERS OF THE MANAGER(S). Without limiting the generalities
of Section 5.1 hereof, but subject to the express provisions of this Section
5.3, the Manager(s) shall have full, complete and unilateral power to do any and
all things, including acting through a Manager or through any duly authorized
manager or other agent, except as otherwise provided herein, on behalf of the
Company:
(a) To acquire oil and gas leases, farmouts, or other
participation in the drilling, completion and production of oil and gas.
(b) To purchase liability and other insurance to protect the
Company's property and business;
(c) To hold and own any Company real and/or personal
properties in the name of the Company;
(d) To invest any Company funds temporarily (by way of example
but not limitation) in time deposits, short-term governmental obligations,
commercial paper and other investments;
(e) Upon the affirmative vote of the Members holding a
super-majority of two-thirds (2/3) of the Voting Interests, to sell or otherwise
dispose of all or substantially all of the assets of the Company as part of a
single transaction or plan so long as such disposition is not in violation of or
a cause of a default under agreement to which to Company may be bound;
(f) To execute on behalf of the Company all instruments and
documents, including without limitation, checks, drafts, notes and other
negotiable instruments, or documents providing for the acquisition, or
disposition of the Company's property, assignment, bills of sale, and any other
instruments or documents necessary, in the sole and absolute opinion of such
Manager, to the business of the Company.
(g) To employ accountants, legal counsel, managing agents or
other experts to perform services for the Company and to compensate them from
Company funds;
(h) To enter into any and all other agreements on behalf of
the Company, with any other Person or Entity for any purpose, in such forms as
the Manager(s) may approve; and
-8-
(i) To do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's business.
(j) To appoint a Secretary to act as an officer of the
Company, for administrative purposes only.
5.4 SPECIFIC LIMITATIONS ON MANAGER(S). Notwithstanding anything to the
contrary in this Operating Agreement or the Colorado Statutes, without the prior
approval of the Members of the specific act in question, the Manager(s) shall
have no right, power or authority to do any of the following acts, each of which
is considered outside of the ordinary course of Company business:
(a) Any act in contravention of this Operating Agreement;
(b) Change or reorganize the Company into any other legal
form;
(c) Make any capital expenditure for equipment or other
assets;
(d) Reconstitute the Company and continue its business
following a dissolution of the Company;
(e) Knowingly or willingly do any act that would cause the
Company to be classified as an association under Code Section 7701 taxable as a
corporation, except for such acts that are expressly provided for herein; or
(f) Knowingly perform any act that would subject any Owner to
liability as a general partner in any jurisdiction.
Unless authorized to do so by this Operating Agreement or by a Manager
of the Company, no Member, agent or employee of the Company shall have any power
or authority to bind the Company in any way, to pledge its credit or to render
it liable pecuniary for any purpose. However, a Manager may act by a duly
authorized attorney-in-fact.
5.5 LIABILITY FOR CERTAIN ACTS. Manager(s) shall exercise its business
judgment in managing the business, operations and affairs of the Company. Unless
fraud, deceit, gross negligence, willful misconduct or a wrongful taking shall
be proved by a nonappealable court order, judgment, decree or decision, Manager
shall not be liable or obligated to the Owners for any mistake of fact or
judgment or the doing of any act or the failure to do any act by such Manager(s)
in conducting the business, operations and affairs of the Company, which may
cause or result in any loss or damage to the Company or its Owners. Manager does
not, in any way, guarantee the return of the Owner's Capital Contributions or a
profit for the Owners from the operation of the Company. No Manager shall be
responsible to any Owner because of a loss of his investments or a loss in
operations, unless the loss shall have been the result of fraud, deceit, gross
negligence, willful misconduct or a wrongful taking by such Owner proved as set
forth in this Section 5.5. Manager shall incur no liability to the Company or to
any Owner as a result of engaging in any other business or venture.
-9-
5.6 MANAGER HAS NO EXCLUSIVE DUTY TO COMPANY. Manager shall not be
required to manage the Company as its sole and exclusive function and he may
have other business interests and may engage in other activities in addition to
those relating to the Company. Neither the Company nor any Owner shall have any
right, by virtue of this Operating Agreement, to share or participate in such
other investments or activities of a Manager or to the income or proceeds
derived therefrom.
5.7 BANK ACCOUNTS. Manager may from time to time open bank accounts in
the name of the Company, and Manager shall be a signatory thereon, unless the
Manager determine otherwise.
5.8 INDEMNITY OF THE MANAGER(S). Manager shall be indemnified by the
Company under the following circumstances and in the manner and to the extent
indicated:
(a) In any threatened, pending or completed action, suit or
proceeding to which a Manager was or is a party or is threatened to be made a
party by reason of the fact that it is or was a Manager of the Company (other
than an action by or in the right of the Company) involving an alleged cause of
action for damages arising from the performance of his activities on behalf of
the Company, the Company shall indemnify such Manager against expenses,
including attorneys' fees, judgments and amounts paid in settlement, actually
and reasonably incurred by it in connection with such action, suit or proceeding
if a Manager acted in good faith and in a manner it reasonably believed to be in
or not opposed to the best interests of the Company, and provided that its
conduct has not been found by a nonappealable court judgment, order, decree or
decision to constitute gross negligence, willful or wanton misconduct, or a
breach of its fiduciary obligations to the Owners. The termination of any
action, suit or proceeding by judgment, order, or settlement shall not, of
itself, create a presumption that such Manager did not act in good faith and in
a manner which it reasonably believed to be in or not opposed to the best
interests of the Company.
(b) To the extent a Manager has been successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
subparagraph 5.8(a) above, or in defense of any claim, issue or matter therein,
the Company shall indemnify such Manager against the expenses, including
attorneys' fees, actually and reasonably incurred by him in connection
therewith.
(c) The indemnification set forth in this paragraph shall in
no way cause the Owners to incur any liability beyond their total Capital
Contributions plus their share of any undistributed profits of the Company, nor
shall it result in any liability of the Owners to any third party.
5.9 RESIGNATION. Manager of the Company may resign at any time by
giving written notice to the Members of the Company. The resignation of such a
Manager shall take effect upon receipt of the notice thereof or at such later
time as shall be specified in such notice; and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
-10-
5.10 REMOVAL. At a meeting called expressly for that purpose, a
Manager, may be removed at any time, with or without cause, by the Members
holding a super-majority of two-thirds (2/3) of the Voting Interests in a duly
constituted meeting of such.
5.11 VACANCIES. Any vacancy occurring for any reason in the number of
Managers of the Company shall be filled by the Members holding a super-majority
of two-thirds (2/3) of the Voting Interests in a duly constituted meeting of
such. Any Manager's position to be filled by reason of an increase in the number
of Managers shall be filled by the affirmative vote of the Members holding a
super-majority of two-thirds (2/3) of the Voting Interests in a duly constituted
meeting of such. A Manager elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office and shall hold office until the
expiration of such term and until his successor shall be elected and shall
qualify, or until his earlier death, resignation or removal. A Manager chosen to
fill a position resulting from an increase in the number of Managers shall hold
office until the next annual meeting of Members and until his successor shall be
elected and qualify, or until his earlier death, resignation or removal.
5.12 SALARIES. The salaries and other compensation of Manager shall be
fixed from time to time by the Members holding a super-majority of two-thirds
(2/3) of the Voting Interests in a duly constituted meeting of such, and no
Manager shall be prevented from receiving such salary by reason of the fact that
he is also a Member of the Company. As compensation for acting as Manager the
Company shall pay Three Forks, Inc the sum of $000000 per month from revenues
from operations.
5.13 OTHER OFFICES. The Manager may elect such other officers such as
President, Vice President, Secretary and Treasurer, as they deem appropriate and
the Manager(s) shall set the duties of such officers.
5.14 RIGHT TO RELY ON OFFICERS. No Person or governmental body dealing
with the Company shall be required to inquire into, or to obtain any other
documentation as to, the authority of any officer acting on behalf of the
Company. Furthermore, any Person or governmental body dealing with the Company
may rely upon a certificate signed by any officer of the Company as to the
following:
(a) The identity of the Manager(s) and Owners;
(b) The existence or nonexistence of any fact or facts that
constitute a condition precedent to acts by the officer or that are in any other
manner directly or indirectly related to or otherwise involve the affairs of the
Company;
(c) The Persons who are authorized to execute and deliver any
instrument or document of the Company; or
(d) Any act or failure to act by the Company on any other
matter whatsoever involving the Company or any Owner.
-11-
ARTICLE VI - RIGHTS AND OBLIGATIONS OF MEMBERS
6.1 LIMITATION OF LIABILITY. Each Owner's liability shall be limited as
set forth in the Colorado Statutes and other applicable law.
6.2 COMPANY DEBT LIABILITY. An Owner will not personally be liable for
any debts or losses of the Company beyond his or her respective Capital
Contributions, except as provided in Section 6.6 herein or as otherwise required
by law.
6.3 LIST OF OWNERS. Upon written request of any Owner, the Manager(s)
shall provide a list showing the names, addresses and interests of all Owners in
the Company.
6.4 APPROVAL OF SALE OF ASSETS. The Members holding a super-majority of
two-thirds (2/3) of the Voting Interests shall have the right, voting in a duly
constituted meeting of such, to approve the sale, exchange, or other disposition
of all, or substantially all, of the Company's assets which is to occur as part
of a single transaction or plan, however, it is the intent that the assets be
distributed in kind 14 months after date hereof.
6.5 COMPANY BOOKS. Manager shall maintain and preserve, during the term
of the Company, and for five (5) years thereafter, all accounts, books, and
other relevant Company documents. Upon request, each Owner shall have the right,
during ordinary business hours, to inspect and copy such Company documents at
the Owner's expense.
6.6 PRIORITY AND RETURN OF CAPITAL. No Owner shall have priority over
any other Owner, either as to the return of Capital Contributions or as to Net
Profits, Net Losses or distributions; provided that this Section shall not apply
to loans (as distinguished from Capital Contributions) which an Owner has made
to the Company.
ARTICLE VII - MEETINGS OF MEMBERS
7.1 ANNUAL MEETING. The annual meeting of the Members shall be held at
such time and place as shall be determined by resolution of the Members,
commencing with the year following the year of this Agreement, for the purpose
of the transaction of such business as may come before the meeting.
7.2 SPECIAL MEETINGS. Special meetings of the Members, for any purpose
or purposes, unless otherwise prescribed by statute, may be called by the
Manager or the Manager(s) upon written request of Members of record holding in
the aggregate ten percent (10%) or more of the Voting Interests entitled to
vote, such written request to state the purpose or purposes of the meeting and
to be delivered to the Manager or the Manager(s).
7.3 PLACE OF MEETINGS. The Manager or the Manager(s) may designate any
place, either within or outside the State of Colorado as the place of meeting or
any meeting of the Members. If no designation is made, or if a special meeting
be otherwise called, the place of meeting shall be the principal office of the
Company in the State of Colorado.
-12-
7.4 NOTICE OF MEETINGS. Except as provided in Section 7.5 hereof,
written notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given by or at the direction
of the Manager(s) or Members of record holding in the aggregate ten percent
(10%) or more of the Voting Interests entitled to vote, not less than two (2)
nor more than fifty (50) days before the date fixed for such meeting; except if
the Economic Interests are to be affected in any manner, directly or indirectly,
at least ten (10) days notice shall be given. A waiver of such notice, in
writing, signed by the Person or Persons entitled to said notice, whether before
of after the time stated herein, shall be deemed equivalent to such notice.
Except as otherwise required by statute, notice of any adjourned meeting of the
Members shall not be required. If mailed, such notice shall be deemed to be
delivered.
7.5 MEETING OF ALL MEMBERS. If all the Members shall meet at any time
and place, either within or outside the State of Colorado, and consent to the
holding of a meeting at such time and place, such meeting shall be valid without
call or notice, and at such meeting lawful action may be taken.
7.6 RECORD DATE. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to receive payment of any distribution, or in order to make a
determination of Members for any other purpose, the date on which notice of the
meeting is mailed or the date on which the resolution declaring such
distribution is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to vote at
any meeting of Members has been made as provided in this Section, such
determination shall apply to any adjournment thereof.
7.7 QUORUM. The majority of the Voting Interests represented in person
or by proxy, shall constitute a quorum at any meeting of Members. In the absence
of a quorum at any such meeting, the Member so represented may adjourn the
meeting from time to time for a period not to exceed sixty (60) days without
further notice. However, if the adjournment is for more than sixty (60) days, or
if after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting may be given to Member or record entitled to
vote at the meeting.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding the
withdrawal during such meeting of that number of Voting Interests whose absence
would cause less than a quorum.
7.8 VOTING. Except as may otherwise be provided by statute or this
Operating Agreement, Member shall at every meeting of the Members be entitled to
vote that percentage in Voting Interests, as shown on the attached EXHIBIT "A",
in person or by proxy, then held by such Member. No proxy, however, shall be
voted on after eleven (11) months from its date, unless the proxy provides for a
longer period.
-13-
7.9 MANNER OF ACTING. If a quorum is present, the affirmative vote of a
majority of the Voting Interests represented at the meeting and entitled to vote
on the subject matter shall be the act of the Members, unless the vote of a
greater or lesser proportion or number is otherwise required by the Colorado
Statutes, by the Articles of Organization, or by this Operating Agreement.
7.10 PROXIES. At all meetings of Members, a Member may vote in person
or by proxy executed in writing by the Member or by a duly authorized
attorney-in-fact. Such proxy shall be filed with the Manager(s) of the Company
before or at such time of the meeting. No proxy shall be valid after eleven (11)
months from the date of its execution, unless otherwise provided in the proxy.
7.11 ACTION BY MEMBERS WITHOUT A MEETING. Action required or permitted
to be taken at a meeting of Members may be taken without a meeting if the action
is evidenced by one or more written consents describing the action taken, signed
by Member entitled to vote and delivered to the Manager of the Company for
inclusion in the minutes or for filing with the Company records. Action taken
under this Section 7.11 is effective when all Members entitled to vote have
signed the consent, unless the consent specifies a different effective date. The
record date for determining Members entitled to take action without a meeting
shall be the date that the first Member signs a written consent.
7.12 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver therefore in writing signed by the Person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
ARTICLE VIII - CONTRIBUTIONS TO THE COMPANY AND CAPITAL ACCOUNTS
8.1 MANAGERS INITIAL CAPITAL CONTRIBUTIONS. Three Forks, Inc. will
serve as Manager but will not make any Capital Contributions to the LLC and will
not participate in the revenues. Three Forks, Inc., and its related parties will
purchase and pay for its separate working interests in the lease. The LLC will
enter into a Purchase and Sale Agreement with Three Forks, Inc. to acquire
eighty-seven percent (87%) of the working interest in the Archer County Farmout
of nine (9) wells, at Manager's basis
8.2 CAPITAL CONTRIBUTIONS. The joining members shall, make Capital
Contributions of $31,250 per 1% interest (in accordance with the terms of this
Operating Agreement) to capitalize the business of the Company and its
investment. Each new joining member shall sign a copy of this Operating
Agreement or a Joinder Agreement and agreeing to the terms hereof.
8.3 THIRD PARTY INVESTORS. If any of the total amount of a Capital
Contribution required by the Company is not collected by the Company within a
reasonable amount of time after such request is made of the Owners, then the
Manager will be permitted to offer Economic Interests to third parties upon
terms no more favorable than those offered previously to the Owners. Any such
sale of Economic Interests to third parties must be made in accordance with the
terms of this Operating Agreement, including without limitation Article 13
hereof.
-14-
8.4 RETURN OF CAPITAL CONTRIBUTIONS. No Owner shall be entitled to
withdraw or demand the return of any part of his capital contribution except
upon dissolution of the Company and as specifically provided for in this
Operating Agreement.
8.5 CAPITAL ACCOUNTS.
(a) A separate Capital Account will be maintained for each
Owner. Each Owner's Capital Account will be INCREASED by (1) the amount of money
contributed by such Owner to the Company; (2) the fair market value of property
or other consideration contributed by such Owner to the Company (net of
liabilities secured by any contributed property that the Company is considered
to assume or take subject to under Code Section 752); and (3) the amount of Net
Profits allocated to such Owner. Each Owner's Capital Account will be DECREASED
by (1) the amount of money distributed to such Owner by the Company; (2) the
fair market value of property distributed to such Owner by the Company (net of
liabilities secured by such distributed property that such Owner is considered
to assume or take subject to under Code Section 752); and (3) the amount of Net
Losses allocated to such Owner.
(b) In the event of a permitted sale or exchange of an
Economic Interest, the Capital Account of the transferor shall become the
Capital Account of the transferee to the extent it relates to the transferred
interest.
(c) The manner in which Capital Accounts are to be maintained
pursuant to this Section 8.5 is intended to comply with the requirements of Code
Section 704(b) and the Treasury Regulations promulgated thereunder.
(d) Upon liquidation of the Company (or any Owner's Economic
Interest), liquidating distributions will be made in accordance with the
positive Capital Account balances of the Owners, as determined after taking in
to account all Capital Account adjustments for the Company's taxable year during
which the liquidation occurs. Liquidation proceeds will be paid within sixty
(60) days of the date of the end of the taxable year (or, if later, within 90
days after the date of liquidation).
8.6 WITHDRAWAL OR REDUCTION OF OWNERS' CONTRIBUTIONS TO CAPITAL. An
Owner shall not receive out of the Company's property any part of its
contributions to capital until:
(a) All liabilities of the Company, except liabilities to
Owners on account of their contribution to capital, have been paid or sufficient
property of the Company remains to pay them.
(b) The consent of the Members holding a super-majority of
two-thirds (2/3) of the Voting Interests is had, unless the return of the
contribution to capital may be rightfully demanded as provided in the Colorado
Statutes.
(c) The Articles of Organization are canceled or so amended as
to set out the withdrawal reduction.
-15-
ARTICLE IX - ALLOCATIONS, INCOME TAX, ELECTIONS AND REPORTS
9.1 ALLOCATION OF PROFITS. Profits for each fiscal year of the Company
shall be allocated:
(a) First, to any Owner previously allocated losses under
Section 9.2 hereof, to the extent of such losses (reduced by allocations under
this Section 9.1(a) for all prior years), ratably and in inverse order to the
manner in which such losses were allocated; and
(b) The remainder, if any, to the Owners in accordance with
their respective Economic Interests.
9.2 ALLOCATION OF LOSS. Loss for each fiscal year of the Company shall
be allocated:
(a) First, to the Owners up to the positive balance of their
Capital Account, ratably in accordance with the positive balances of their
Capital Account; and
(b) The remainder, if any, to the Owners in accordance with
their respective Economic Interests.
9.3 ALLOCATION OF RECAPTURE ITEMS. If any gain on the sale or other
disposition of depreciable Company assets is recaptured as ordinary income, such
ordinary income shall be allocated among the Owners in the same ratio as the
depreciation deductions giving rise to such gains were allocated, but not in
excess of the amount of the gain otherwise allocable under this Article IX.
9.4 MINIMUM GAIN CHARGEBACK. Except as otherwise provided in Code
Regulations Section 1.704-2(f), notwithstanding any other provision of this
Article IX, if there is a net decrease in Company Minimum Gain during any year,
each Owner shall be specially allocated items of income and gain for such year
(and, if necessary, subsequent years) in an amount equal to such Owner's share
of the net decrease in Company Minimum Gain, determined in accordance with Code
Regulations Section 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 Owner pursuant thereto. The items to be so allocated shall be determined
in accordance with Code Regulations Sections 1.704-2(f)(6) and 1.704-(j)(2).
This Section 10.4 is intended to comply with the minimum gain chargeback
requirement in Code Regulations Section 1.704-2(f) and shall be interpreted
consistently therewith.
9.5 CODE SECTION 704(C). If any Owner contributed any property to the
Company that has Gross Asset Value in excess or less than its adjusted basis for
federal income tax purposes at the time of such contribution, then all gain,
loss and deduction with respect to the contributed property, solely for federal
income tax purposes, shall be allocated among the Owners so as to take account
of the variation between the adjusted basis of such property and its initial
Gross Asset Value as required by Code Section 704(c) and the Code Regulations
thereunder.
-16-
(a) In accordance with Code Section 704(c) and the Code
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company, solely for tax purposes,
shall be allocated among the Owners 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.
(b) any elections or other decisions relating to such
allocations shall be made by the Manager(s) in any manner that reasonably
reflects the purpose and intention of this Operating Agreement. The Manager(s)
may select any reasonable method or methods for making such allocations,
including, without limitation, any method described in Code Regulation Sections
1.704-3(b), (c) or (d). In the event that allocations pursuant to this Section
9.5 with respect to an item of Company property are limited by ceiling rule in
any taxable year, and the Company elects to use curative allocations pursuant to
Code Regulations Section 1.704-3(c):
(i) The Company may make curative allocations in
subsequent taxable years over a reasonable period of time, such as the
economic life of such item of property, to offset the effective ceiling
rule to the extent permitted by Code Regulations Section 1.704(c)(ii);
and
(ii) The Company may make curative allocations of
gain from the sale or other taxable disposition of such property to
offset the effect of the ceiling rule on allocations of depreciation or
other cost recovery with respect to such property to the extent
permitted by Code Regulations Section 1.704-3(c)(3)(iii)(B).
9.6 COMPANY ASSET ADJUSTMENTS. In the event any of any other Company
assets are adjusted pursuant to Article I, under the definition of "Gross Asset
Value," subsequent Company allocations of income, gain, loss or 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 required under the Code Section 704(c) and the Code
Regulation thereunder.
9.7 ADJUSTMENTS BY THE OWNERS. Any elections or other decisions
relating to Company tax allocations pursuant to Sections 9.5 and 9.6 hereof
shall be made by the Manager(s) in a manner that reasonably reflects the purpose
and intention of this Operating Agreement. Company tax allocations pursuant to
Sections 9.5 and 9.6 hereof 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 Owner's Capital Account or, other than is provided in Sections 9.5 and 9.6
hereof, any Owner's share of the Profit or Loss (or any item thereof), or
Company distributions to any of the Owners under these Regulations.
9.8 OTHER ALLOCATION RULES.
(a) For purposes of determining the Profit, Loss or any other
items allocable to any period, Profit, Loss and any such other items shall be
determined on a daily, monthly or other basis, as determined by the Manager(s)
using any permissible Method of Accounting under Code Section 706 and the
regulations thereunder.
-17-
(b) The Owners are aware of the income tax consequences of the
tax allocations made under this Article X and hereby agree to be bound by the
provisions of this Article X in reporting their share of the Company's income
for federal income tax purposes.
(c) Except as otherwise provided in these Regulations, all
Company income, gain, loss, deduction and any items thereof as determined for
federal income tax purposes shall be allocated among the Owners in the same
proportions as they share Profit or Loss, as the case may be, for the fiscal
year.
(d) All Company Profits and Losses allocated to the Owners
shall be allocated among them in proportion to the Economic Interests owned by
each Owner. In the event that any Owner is admitted to the Company on different
dates during any Company fiscal year, Company Profit and Loss allocated to any
Owner for each such fiscal year shall be allocated to each Owner in proportion
to the Economic Interest owned by each Owner from time to time during such
fiscal year in accordance with Code Section 706, using any convention permitted
by law and selected by the Manager(s).
9.9 DISTRIBUTIONS. All distributions of cash or other property shall be
made to the Owners according to the manner in which Net Profits and Net Losses
were allocated pursuant to Section 10.1. All distributions of Distributable Cash
and property shall be made at such time as determined by the Manager(s). All
amounts withheld pursuant to the Code or any provisions of state or local tax
law with respect to any payment or distribution to the Owners from the Company
shall be treated as amounts distributed to the relevant Owner pursuant to this
Section 9.9.
9.10 LIMITATION UPON DISTRIBUTIONS. No distribution shall be declared
and paid, unless, after the distribution is made, the assets of the Company are
in excess of all liabilities of the Company, except liabilities to Owners on
account of their contributions.
9.11 ACCOUNTING PRINCIPLES. The profits and losses of the Company shall
be determined in accordance with accounting principles applied on a consistent
basis under the method of accounting determined by the Manager(s) to be
consistent with the business of the Company.
9.12 INTEREST ON AND RETURN OF CAPITAL CONTRIBUTIONS. No Owner shall be
entitled to interest on its Capital Contribution or to return of its Capital
Contribution, except as otherwise specifically provided for herein.
9.13 RECORDS AND REPORTS. At the expense of the Company, the Manager(s)
shall maintain records and accounts of all operations and expenditures of the
Company. At a minimum the Company shall keep at its principal place of business
the following records:
(a) A current list of the full name and last known business,
residence, or mailing address of each Owner and Manager, both past and present;
-18-
(b) A copy of the Articles of Organization of the Company and
all amendments thereto, together with executed copies of any powers of attorney
pursuant to which any amendment has been executed;
(c) Copies of the Company's federal, state and local income
tax returns and reports, if any, for the three (3) most recent years;
(d) Copies of the Company's currently effective written
Operating Agreement, copies of any writings permitted or required with respect
to an Owner's obligation to contribute cash, property or services, and copies of
any financial statements of the Company for the three (3) most recent years;
(e) Minutes of every annual, special meeting and court-ordered
meeting;
(f) Any written consents obtained from members for actions
taken by Members without a meeting.
9.14 RETURNS AND OTHER ELECTIONS. The Manager(s) shall cause the
preparation and timely filing of all tax returns required to be filed by the
Company pursuant to the Code and all other tax returns deemed necessary and
required in each jurisdiction in which the Company does business. Copies of such
returns, or pertinent information therefrom, shall be furnished to the Owners
within a reasonable time after the end of the Company's fiscal year.
All elections permitted to be made by the Company under federal or
state laws shall be made by the Manager(s).
ARTICLE X - TRANSFER RESTRICTIONS
10.1 PERMITTED TRANSFER.
(a) No Owner shall dispose of all or part of his Economic
Interest except in compliance with the terms and conditions of this Operating
Agreement. Any other proposed disposition, whether voluntary or involuntary,
shall be void and shall not operate to transfer any interest or title in any
Interest.
(b) Notwithstanding anything to the contrary in this Operating
Agreement:
(i) An individual Owner may at any time and from time
to time without compliance with Sections 10.2 to 10.7 hereof make a
gift of all or a part of his Economic Interest to one or more of
his Family Donees (as defined in Section 10.6 hereof) if each such
Family Donee upon acquisition of such interest becomes a party to
this Operating Agreement; provided, however, that the Family Donee
shall not participate in the management of the Company without the
consent of the Members holding a majority of the Voting Interests;
(ii) A Family Donee of an individual Owner may at any
time and from time to time without compliance with Sections 10.2 to
10.7 hereof make a gift of all or any part of his Economic Interest
back to such Owner or to another Family Donee of the same Owner if
-19-
upon acquisition of such Interest the recipient Family Donee
becomes a party to this Operating Agreement; provided, however,
that the recipient Family Donee shall not participate in the
management of the Company without the consent of the Members
holding a majority of the Voting Interests;
(iii) An Owner may at any time and from time to time,
without compliance with Section 10.2 hereof to one or more
Affiliates, transfer all or part of its Economic Interest to one or
more Affiliates if such Affiliate upon acquisition of such Economic
Interest becomes a party to this Operating Agreement and if
permitted by the Colorado Statutes; provided, however, that the
Affiliate shall not participate in the management of the Company
without the consent of the Members holding a majority of the Voting
Interests;
(iv) Dispositions of an Economic Interest by an Owner,
an Affiliate or a Family Donee to the Company or to an Owner may be
made without compliance with Sections 10.2 or 10.7 hereof.
10.2 COMPANY'S OPTION TO PURCHASE ECONOMIC INTEREST. An Owner (the
"Offering Interest Owner") who desires to dispose of any Economic Interest shall
give a notice ("Notice") signed by the Offering Interest Owner to the Company
and to each of the other Owners. The Notice shall specify the Economic Interest
("Offered Interest") the Offering Interest Owner intends to dispose of, identify
and give the address of the Person to whom the Offering Interest Owner intends
to dispose of the Offered Interest, and indicate the price, terms and conditions
of the proposed disposition. In the event that an Owner is not able to provide
Notice of any proposed disposition of Economic Interest, the legal
representative, successor in interest or proposed transferee of such Owner shall
so notify the Company of such proposed disposition.
(a) In the case of a proposed sale to a bona fide prospective
purchaser who has offered in writing to purchase the Offered Interest at a
stated price, the Company shall have the irrevocable and exclusive first option,
but not the obligation, to purchase all or, subject to Section 10.5 hereof, a
part of the Offered Interest with payment to be made in accordance with the
provisions of Article XI hereof, provided that such purchase by the Company
shall be at the price and upon the terms and conditions equal to those offered
by such prospective purchaser (as evidenced by a copy of such offer to purchase
which shall accompany the Notice), and provided further that the Company gives
notice of its election to purchase to the Offering Interest Owner within thirty
(30) days after the Company receives the Notice.
(b) In the case of any other proposed disposition (including
any involuntary disposition) of any Economic Interest, the Company shall have
the irrevocable and exclusive first option, but not the obligation, to purchase
all or part of the Economic Interest at a price per percentage Economic Interest
to be purchased equal to Fair Market Value (as defined in Section 10.10 hereof)
and with payment to be made in accordance with the provisions of Article XI
hereof. The Company shall give notice of its election to purchase the Economic
Interest to the Offering Interest Owner (or other party giving notice of the
proposed disposition) within thirty (30) days after the Company receives notice
of such proposed disposition.
-20-
10.3 OWNERS' OPTION TO PURCHASE ECONOMIC INTEREST. If the Company does
not elect, as provided by Section 10.2 hereof, to purchase all of the Offered
Interest covered by the Notice, then, subject to Section 10.7 hereof, each Owner
other than the Offering Interest Owner shall have the irrevocable and exclusive
option, but not the obligation, to purchase from the Offering Economic Interest
Owner that part of the Offered Interest that the Company has not elected to
purchase, pro rata in the proportion that the Interest owned by such Owner on
the date of the Notice bears the aggregate Economic Interests owned by all
Owners (exclusive of the Offered Interest offered for sale or otherwise owned by
the Offering Interest Owner).
(a) In the case of a proposed sale to a bona fide prospective
purchaser who has offered in writing to purchase the Offered Interest at a
stated price, at the price and upon any terms and conditions equal to those
offered by such prospective purchaser (as evidenced by a copy of such offer to
purchase which shall accompany the Notice); and
(b) In the case of any other proposed disposition of any
Economic Interest, at a price per percentage of Economic Interest being
purchased equal to Fair Market Value with payment to be made in accordance with
the provisions of Article XI hereof.
Each Owner that elects to purchase all or a part of his pro rata portion of the
Offered Interest shall give notice of such election to the Offering Interest
Owner and to the other Owners within thirty (30) days after the receipt of the
Notice by the Company. Each such notice shall state the percentage of Economic
Interest which the Owner giving the notice elects to purchase. If any Owner
fails to exercise his right to purchase his full pro rata portion of the Offered
Interest, each other Owner who has given notice of election to purchase his full
pro rata portion of the offered interest shall have an additional ten (10) days
after the expiration of such 30-day period in which to give the Offering
Interest Owner and to the other Owners further notice (the "Further Notice") of
his election to purchase all or a part of the Remaining Interest (as defined
below). Each Further Notice shall state the number of Remaining Interest which
the Owner giving the Further Notice elects to purchase. The Remaining Interest
shall be apportioned among those Members who have given a Further Notice
according to the procedures described in Sections 10.3(c) and 10.3(d) hereof, or
in such different portions as such Owners may agree among themselves.
(c) Each of the Participating Owners (as defined below) shall
be apportioned (i) that number of Remaining Interest that such Participating
Owner elected to purchase in his Further Notice and which have not yet been
apportioned to such Participating Owner pursuant to this Section 10.3(c), or
(ii) such Participating Owner's Pro Rata Portion of the Unpurchased Interest (as
defined below), whichever is less.
(d) If the apportionment in Section 10.3(c) hereof is followed
and there remain at least one Participating Owner and any Unpurchased Interest,
the procedure described in Section 11.3(c) shall be repeated.
(e) For purposes of this Section 10.3, the following
definitions shall apply:
(i) The "Remaining Interest" shall mean the Offered
Interest that the Company and Owners have not theretofore elected
to purchase.
-21-
(ii) A "Participating Owner" shall mean an Owner who
has given a Further Notice and who has not yet been apportioned
pursuant to Section 10.3(c) hereof that number of additional
Interest that such Interest Owner's elected to purchase in his
Further Notice.
(iii) "Unpurchased Interest" shall mean the Remaining
Interest that has not yet been apportioned to Participating Owners
pursuant to Section 10.3(c) hereof.
(iv) A Participating Owner's "Pro Rata Portion" of the
Unpurchased Interests shall mean the number of Unpurchased Interest
multiplied by the fraction formed by dividing the percentage
Economic Interest that such Participating Owner held on the date
the Company received the Notice by the total percentage Economic
Interest all of the Participating Owners held on the date the
Company received the Notice.
10.4 EFFECT OF AN ELECTION. The Company and each Owner giving notice of
election to purchase pursuant to Sections 10.2 and 10.3 hereof, respectively,
shall be obligated severally and not jointly to purchase from the Offering
Interest Owner, and the Offering Interest Owner, provided the Company or such
other Owners, or a combination of the Company and such other Owners elect to
purchase all the Offered Interest, shall be obligated to sell to the Company or
such other Owners, or the Company and such other Owners, as the case may be, the
portion of Offered Interest stated therein, at the price and on the conditions
determined pursuant to Sections 10.2 and 10.3 hereof and Article XI.
10.5 CONSEQUENCES IF ENTIRE ECONOMIC INTEREST IS NOT TO BE PURCHASED.
If an Offering Interest Owner gives notice and the Company and other Owners do
not elect, pursuant to Sections 10.2 and 10.3 hereof, to purchase all of the
Offered Interest, the Offering Interest Owner may elect to:
(a) Sell to the Company if it has elected to purchase part of
the Offered Interest and to the Owners, if any, who have elected to purchase
part of the Offered Interest, the aggregate portion of such Offered Interest
which the Company and such Owners have elected to purchase at the price and on
the terms and conditions determined pursuant to Sections 10.2 and 10.3 hereof
and Article XI, and at any time or times after the 30th day following the date
of the Notice but before the 60th day following the date of the Notice
("Disposition Period"), such Offering Interest Owner may dispose of all the
remaining Offered Interest at the price and on any other terms and conditions
specified in the Notice to the Person or Persons identified in the Notice;
provided, however, that such Person or Persons shall not participate in the
management of the Company without the consent of the Members holding a majority
of the Voting Interests. Each such Person acquiring any of the Offered Interest
must become a party to this Operating Agreement upon such acquisition. Any
Economic Interest not so disposed of by such Offering Interest Owner during the
Disposition Period may not thereafter be disposed of, except in compliance with
the terms and conditions of this Operating Agreement;
(b) At any time or times during the Disposition Period,
dispose of all the Offered Interest to the Person or Persons, at the price, and
on any other terms and conditions specified in the Notice, provided that each
-22-
such Person acquiring any Economic Interest in any of the Offered Interest
becomes a party to this Operating Agreement upon such acquisition, and any
Economic Interest not so disposed of by such Offering Interest Owner during the
Disposition Period may not thereafter be disposed of, except in compliance with
the terms and conditions of this Operating Agreement; or
(c) Withdraw the Notice and thereafter such Economic Interest
may not be disposed of, except in compliance with the terms and conditions of
this Operating Agreement.
10.6 FAMILY DONEE. "Family Donee" with respect to an Owner shall mean:
(a) Any parent, child, descendant, or sibling of the Owner,
the spouse of any of the foregoing, or the spouse of the Owner;
(b) Any trust established by the Owner, or any trustee,
custodian, fiduciary, or foundation which will hold the interest for charitable
purposes or for the benefit of the Owner or any of the Persons described in
Section 10.6(a) above;
(c) Committees, guardians, or other legal representatives of
the Interest Owner (whether alive or deceased) or of any of the Persons
described in Section 10.6(a) hereof.
10.7 SUBSTITUTE OWNER. Assuming that the provisions of Section 10.1
hereof have been complied with and said transfer duly approved, or assuming the
provisions of Sections 10.2 to 10.7 hereof apply thereto, no assignee or
transferee of the whole or any portion of an Owner's Interest, including any
trustee in bankruptcy, shall have the right to become a Substitute Owner in
place of the assignor unless all of the following conditions are satisfied:
(a) The fully executed and acknowledged written instrument of
assignment which has been filed with the Company setting forth the intention of
the assignor that the assignee become a Substitute Owner;
(b) The assignor and assignee execute and acknowledge such
other instruments as the Manager(s) may deem necessary or desirable to effect
such admission, including the written acceptance and adoption by the assignee of
the provisions of this Operating Agreement and his execution, acknowledgment and
delivery to the Manager(s) of such documents as the Manager(s) may require in
their sole discretion, the form and content of which shall be provided by the
Manager(s);
(c) The assignee pays a transfer fee to the Company in an
amount sufficient to cover all reasonable expenses connected with the admission
of the assignee as a Substituted Member; and
(d) The other Members holding a majority of the Voting
Interests consent to the assignee becoming a Substitute Owner, which consent may
be withheld for any reason.
-23-
10.8 ADDITIONAL CONDITIONS. The following additional conditions shall
apply with respect to a transfer of an Economic Interest:
(a) The Manager(s) may not treat an assignee who has not
become a Substitute Owner as a Substitute Owner in the place of his assignor.
(b) The Manager(s) will be required to promptly amend the
Operating Agreement to reflect the substitution of Owners. Until the Operating
Agreement is so amended, an assignee shall not become a Substitute Owner for any
purpose.
(c) Upon the death or legal incompetency of an individual
Owner, his personal representative shall have all of the rights of an Owner for
the purpose of settling or managing his estate, and such power as the decedent
or incompetent possesses to constitute a successor as an assignee of its
Economic Interest in the Company and to join with such assignee in making
application to substitute such assignee as an Owner. A trustee in bankruptcy for
any individual Owner shall have only those rights of an assignee or general
unsecured creditor of such Owner and shall not be entitled to be substituted as
an Owner or participate in the management of the Company except as expressly
provided herein.
(d) Upon the bankruptcy, insolvency, dissolution or other
cessation to exist as a legal entity of an Owner not an individual, the
authorized representative of such entity shall have all the rights of an Owner
for purposes of effecting the orderly winding up and disposition of the business
of such entity an such power as such entity possessed to constitute a successor
as an assignee of its Economic Interest in the Company and to join with such
assignee in making application to substitute such assignee as an Owner.
(e) Anything in this Operating Agreement to the contrary
notwithstanding, no Owner or other Person who has become the holder of Economic
Interests in the Company shall transfer, assign or encumber all or any portion
of his Economic Interests in the Company during any fiscal year if such
transfer, assignment or encumbrance would (in the sole and unreviewable opinion
of the Manager(s)) result in the termination of the Company being taxed as a
partnership for the purpose of the then-applicable provisions of the Internal
Revenue Code of 1986, as amended.
(f) In the event a vote of the Members shall be taken pursuant
to this Operating Agreement for any reason, a Member shall, solely for the
purpose of determining the percentage of Voting Interests held by him in
weighing his vote, be deemed the holder of any Voting Interest assigned by him
in respect of which the assignee has not become a Substitute Owner having voting
rights.
(g) Anything in this Operating Agreement to the contrary
notwithstanding, no Owner or other Person who has become the holder of an
Economic Interest shall transfer, assign, or encumber all or any portion of his
Economic Interests in the Company without obtaining the prior written consent of
the Director of the appropriate state Securities Commission, if required under
the Commission's rules, or the opinion of counsel for the Company that the
-24-
transfer will not violate any federal or applicable state securities laws;
provided, however, that receipt of an opinion may be waived by the Manager.
10.9 VOLUNTARY WITHDRAWAL. In the event that an Owner wishes to
withdraw from the Company, such Owner may withdraw by making an assignment
pursuant to Section 10.2 hereof and giving thirty (30) days notice pursuant to
this paragraph to all remaining Owners of such Owner's intention to withdraw and
of the assignment of such withdrawing Owner's membership. As a result of such
voluntary withdrawal, such withdrawing Owner shall forfeit all rights to his
Capital Account and shall have no further liability to the Company.
10.10 FAIR MARKET VALUE; APPRAISAL METHOD. (a) fair market value per
percentage Economic Interest shall be determined by dividing (i) the fair market
value established for the Company pursuant to the appraisal method outlined
below by (ii) 100.
(b) APPRAISAL METHOD. In the event that the fair market value
per percentage Economic Interest, or for the Company, as the case may be, cannot
be agreed upon between the Members, following (10) days after the determination
by either party that such fair market value cannot be determined by the Members
(the "Event"), the fair market value shall be determined by an appraiser
familiar by experience with similar companies agreed upon by the Members. If
they fail to agree upon the appointment of an appraiser within twenty (20) days
of the Event, then the disposing Member shall name an appraiser and the
purchasing Member shall name an appraiser within ten (10) days after the
expiration of such 20-day period by sending notification of such selection to
the other Member. Any party failing to meet such deadline shall lose the right
to name an appraiser. If two appraisers are selected in this manner, they shall,
within ten (10) days after appointment of the second appraiser, select a third
appraiser. The appraisers so selected shall determine the fair market value of
the Company by majority vote. The valuation by the appraisers shall be made
within thirty (30) days of appointment of the last appraiser required to be
appointed by this Section 5(a). The fair market value of the Company determined
pursuant to this Section 10.10(b) shall be final and binding on all parties. The
cost of any valuation undertaken pursuant to the terms of this Section 10.10(b)
shall be paid by the Company.
(c) Unless otherwise provided in the applicable Section, the
closing shall be held within fifteen (15) days after a determination of fair
market value pursuant to Section 10.10(b) hereof.
(d) If the disposing Member fails at the closing to tender the
transfer certificates representing the Interests being transferred, the Company
shall treat such transfer as completed if the purchasing Member delivers to the
Secretary of the Company, for the benefit of the disposing Member, a certified
check payable to the order of the disposing Member in the amount of the purchase
price payable at the closing. The Company shall deliver such check to the
disposing Member at such time as the appropriate Interest certificates have been
delivered to the Company for cancellation. Upon completion of such transfer, the
disposing Member no longer shall have any right, title or interest in the
Interests so transferred.
-25-
ARTICLE XI - METHOD OF PURCHASE
11.1 MANNER OF PAYMENT. The Company and each Owner, if any, purchasing
an Economic Interest pursuant to Article XI hereof shall pay for such Economic
Interest as follows:
(a) In the case of a proposed sale to a bona fide purchaser
who has offered in writing to purchase the Offered Interest at a stated price,
payment shall be made in the manner and upon any terms and conditions set forth
in the Notice or the offer attached thereto (if such stated price includes any
property other than case, such stated price shall be deemed to be the amount of
any cash included in the stated price plus the value as determined by an
independent appraiser selected by the remaining Members holding a majority of
the Voting Interests and approved by the Offering Interest Owner, which approval
shall not be unreasonably withheld, of such other property included in such
price, the fees and expenses of such appraiser to be paid for pro rata by the
Company and any Owners purchasing the Offered Interest in proportion to the
portion of Offered Interest purchased by each of them); or
(b) In the case of any other proposed disposition of Economic
Interest, payment shall be made in full, in cash or by wire transfer or
certified bank check.
11.2 MANNER OF CLOSING.
(a) In the case of any purchase of an Economic Interest by the
Company and Owners pursuant to Sections 10.2 to 10.7 hereof, the closing of such
purchase shall take place at 10:00 a.m., Eastern Standard Time, on the 15th
business day after the date that the Company the Owner, as the case may be,
gives notice of its or his election to purchase pursuant to the terms hereof, at
the principal office of the Company, or at such different date, different place,
or both as the parties to such purchase agreement agree.
(b) Certificates representing the Economic Interest purchased
shall be delivered by the selling Owner at the closing against payment. By
delivering the Economic Interest at the closing, the selling Owner shall be
deemed to represent that the sale of the Economic Interest has been duly
authorized by all necessary corporate action on the part of the selling Owner,
the certificates evidencing the Economic Interest have been duly and validly
endorsed and delivered for transfer to the purchaser and that the purchaser of
such Interest will receive good title to such Interest, free and clear of all
liens, security interests, pledges, charges or encumbrances other than those
created by this Operating Agreement.
11.3 LEGEND. A legend shall be placed on each certificate or other
document, if any, evidencing a Voting Interest in the Company stating the
following:
The Interests represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, or
the securities laws of any state. These Interests have been
acquired for investment and may not be sold, transferred,
pledged or hypothecated in the absence of any effective
registration statement for such Interests under the Securities
Act of 1933, as amended, and any applicable state securities
-26-
laws or an opinion of counsel acceptable to counsel for the
Company that registration is not required under such laws. In
addition, the sale, transfer, pledge or hypothecation of these
Interests substantially restricted by that certain Operating
Agreement by and among the Company and its Owners, dated
effective November 12, 2012, a copy of which is on file with
the Company at its principal place of business.
ARTICLE XII - OWNERS' COVENANTS
12.1 OWNER'S PERSONAL DEBTS. In order to protect the property and
assets of the Company from any claim against any Owner for personal debts owed
by such Owner, each Owner shall indemnify, defend, protect and hold the Company
harmless from any claim that might be made to the detriment of the Company by
any personal creditor of such Owner.
12.2 ALIENATION OF ECONOMIC INTEREST. No Owner shall, except as
specifically provided in this Operating Agreement, sell, assign, mortgage, or
otherwise encumber such Owner's Economic Interest in its capital assets or
property; or enter into any agreement of any kind that will result in any
Person, firm, or other organization becoming interested with such Owner in the
Company; or do any act detrimental to the best interests of the Company.
ARTICLE XIII - ADDITIONAL OWNERS
13.1 ADMISSION OF NEW OWNERS. From the date of the formation of the
Company, with the written consent of the Members holding a super-majority of
two-thirds (2/3) of the Voting Interests, any Person acceptable to such Members
may, subject to the terms and conditions of this Operating Agreement: (i) become
an Additional Owner in this Company by the sale of new Economic Interests for
such consideration as such Members by their written consent shall determine, or
(ii) become a Substitute Owner as a transferee of an Owner's Economic Interests
or any portion thereof in accordance with the provisions of Article X.
13.2 ALLOCATIONS TO NEW OWNERS. No Additional or Substitute Owner shall
be entitled to any retroactive allocation of losses, income or expense
deductions incurred by the Company. The Manager may, at his option, at the time
an Additional or Substitute Owner is admitted, close the Company's books (as
though the Company's tax year had ended) or make pro rata allocations of loss,
income and expense deductions to an Additional or Substitute Owner for that
portion of the Company's tax year in which an Additional or Substitute Owner for
that portion of the Company's tax year in which an Additional or Substitute
Owner was admitted, in accordance with the provisions of Section 706(d) and the
Treasury Regulations promulgated thereunder.
13.3 ADDITIONAL ECONOMIC INTEREST OWNERS. Any person or Entity approved
by the Members holding a super-majority of two-thirds (2/3) of the Voting
Interests may become an Economic Interest Owner subject to the terms and
conditions of this Operating Agreement.
13.4 ADDITIONAL VOTING MEMBERS/VOTING INTERESTS. Notwithstanding
anything contained in this Agreement to the contrary, an Economic Interest Owner
may only become a voting Member by the approval of the Members holding a
-27-
super-majority of two-thirds (2/3) of the then-existing Voting Interests. Upon
such approval, the Voting Interests shall be reallocated among the existing
voting Members and such additional voting Member in order to equal one hundred
percent (100%).
ARTICLE XIV - DISSOLUTION AND TERMINATION
14.1 DISSOLUTION.
(a) The Company shall be dissolved upon the occurrence of any
of the following events:
(i) when the period fixed for the duration of the
Company shall expire;
(ii) by the written consent of an affirmative vote to
dissolve the Company of Members holding the then existing Voting
Interests; or
(iii) upon the death, retirement, resignation,
expulsion, bankruptcy, dissolution of a Member or occurrence of any
other event which terminates the continued membership of a Member
in the Company (a "WITHDRAWAL EVENT"), unless the business of the
Company is continued by the consent of the Members holding two
thirds (2/3) of the Voting Interests and there are at least two
remaining Members; or
(b) As soon as possible following the occurrence of any of the
events specified in this Section effecting the dissolution of the Company, the
appropriate representative of the Company shall execute a statement of intent to
dissolve in such form as shall be prescribed by the Colorado Secretary of State
and file same with the Colorado Secretary of State's office.
14.2 EFFECT OF FILING OF DISSOLVING STATEMENT. Upon the filing with the
Colorado Secretary of State of a statement of intent to dissolve, the Company
shall cease to carry on its business, except insofar as may be necessary for the
winding up of its business, but its separate existence shall continue until a
certificate of dissolution has been issued by the Secretary of State or until a
decree dissolving the Company has been entered by a court of competent
jurisdiction.
14.3 DISTRIBUTION OF ASSETS UPON DISSOLUTION. In settling accounts
after dissolution, the liabilities of the Company shall be entitled to payment
in the following order:
(a) those to creditors, in the order of priority as provided
by law, except those to Owners of the Company on account of their Capital
Contributions;
(b) those to Owners of the Company with respect to their
Capital Accounts in accordance with Section 9.4(d) hereof; and
(c) those to Owners in respect of their shares of the profits
and other compensation.
-28-
14.4 ARTICLES OF DISSOLUTION. When all debts, liabilities and
obligations have been paid or discharged or adequate provisions have been made
therefore and all of the remaining property and assets have been distributed to
the Owners, articles of dissolution shall be executed in duplicate and verified
by the Person signing the articles, which articles shall set forth the
information by the Colorado Statutes.
14.5 FILING OF ARTICLES OF DISSOLUTION.
(a) Duplicate originals of such articles of dissolution shall
be delivered to the Colorado Secretary of State.
(b) Upon the issuance of the certificate of dissolution, the
existence of the Company shall cease, except for the purpose of suits, other
proceedings and appropriate action as provided in the Colorado Statutes. The
Manager or Manager(s) in office at the time of dissolution, or the survivors of
them, or if none, the Members, shall thereafter be trustee for the Owners and
creditors of the Company and as such shall have authority to distribute any
Company property discovered after dissolution, convey real estate and take such
other action as may be necessary on behalf of an in the name of the Company.
14.6 WINDING UP. Except as provided by law, upon dissolution, each
Owner shall look solely to the assets of the Company for the return of its
Capital Contributions. If the Company property remaining after the payment or
discharge of the debts and liabilities of the Company is sufficient to return
the Capital Contributions of each Owner, such Owner shall have no recourse
against any other Owner. The winding up of the affairs of the Company and the
distribution of its assets shall be conducted exclusively by the Manager(s), who
are hereby authorized to take all actions necessary to accomplish such
distribution, including without limitation, selling any Company assets the
Manager(s) deem necessary or appropriate to sell.
14.7 DISTRIBUTIONS IN KIND. Any property distributed in kind in
liquidation shall be valued and treated as though the property were sold and the
cash proceeds were distributed. The difference between the value of property
distributed in kind and its book value shall be treated as a gain or loss on
sale of the property and shall be credited or charged to the Owners in the
manner set forth in Section 9.1 hereof.
ARTICLE XV - MISCELLANEOUS PROVISIONS
15.1 NOTICES. Any notice, demand, or communication required or
permitted to be given by any provision of this Operating Agreement shall be
deemed to have been sufficiently given or served for all purposes if delivered
personally to the party or to an executive officer of the party to whom the same
is directed or, if sent by registered or certified mail or reputable overnight
courier, postage and charges prepaid, addressed to the Owner's and/or Company's
address as it appears in the Company's records, as appropriate. Except as
otherwise provided herein, any such notice shall be deemed to be given (a) three
business days after the date on which the same was deposited in a regularly
maintained receptacle for the deposit of United States mail, addressed and sent
-29-
as aforesaid or (b) one business day after the date on which the same was given
to a reputable overnight courier, and sent as aforesaid.
15.2 BOOKS OF ACCOUNT AND RECORDS. Proper and complete records and
books of account shall be kept or shall be caused to be kept by the Manager(s)
in which shall be entered fully and accurately all transactions and other
matters relating to the Company's business in such detail and completeness as is
customary and usual for businesses of the type engaged in by the Company. Such
books and records shall be maintained in accordance with generally accepted
accounting principles. The books and records shall at all times be maintained at
the principal executive office of the Company and shall be open to the
reasonable inspection and examination of the Owners of their duly authorized
representatives during business hours.
15.3 APPLICATION OF COLORADO LAW. This Operating Agreement and the
application of interpretation hereof, shall be governed exclusively by its terms
and by the laws of the State of Colorado, and specifically the Colorado
Statutes.
15.4 WAIVER OF ACTION FOR PARTITION. Each Owner irrevocably waives
during the term of the Company any right that it may have to maintain any action
for partition with respect to the property of the Company.
15.5 AMENDMENTS. Any amendment to this Operating Agreement may be
proposed by any voting Member of the Company. A vote on an amendment to this
Operating Agreement shall be taken within thirty (30) days after notice thereof
has been given to the Members unless such period is otherwise extended by
applicable law, regulations or agreement of the Members. This Operating
Agreement may be amended at any time by the Members holding a super-majority of
two-thirds (2/3) of the Voting Interests;
(a) without the consent of the Owner to be adversely affected
by the amendment, this Operating Agreement may not be amended as to (i) modify
the limited liability of an Owner, or (ii) alter the interest of any Owner in
the Net Profits or Net Losses or in cash distributions of the Company; and
(b) in the case of any provision hereof which requires the
action, consent, or approval of a specified percentage in Voting Interests of
the Members, such provision may not be amended without the consent of such
specified percentage Voting Interests of the Members.
A copy of any amendment shall be promptly mailed or delivered to each
Owner at his or her last known address.
15.6 EXECUTION OF ADDITIONAL INSTRUMENTS. Each Owner hereby agrees to
execute such other and further statements of interest and holdings,
designations, powers of attorney and other instruments necessary to comply with
any laws, rules or regulations.
15.7 CONSTRUCTION. Whenever the singular number is used in this
Operating Agreement and when required by the context, the same shall include the
plural, and the masculine gender shall include the feminine and neuter genders
and vice versa.
-30-
15.8 HEADINGS. The headings in this Operating Agreement are inserted
for convenience only and are in no way intended to describe, interpret, define,
or limit the scope, extent of this Operating Agreement or any provision hereof.
15.9 WAIVERS. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Operating Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
15.10 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies provided
by this Operating Agreement are cumulative and the use of any one right or
remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and parties may have by law, statute, ordinance or
otherwise.
15.11 SEVERABILITY. If any provision of this Operating Agreement or the
application thereof to any Person or circumstances shall be invalid, illegal or
unenforceable to any extent, the remainder of this Operating Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
15.12 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon the
inure to the benefit of the parties hereto and, to the extent permitted by this
Operating Agreement, their respective heirs, legal representatives, successors
and assigns.
15.13 CREDITORS. None of the provisions of this Operating Agreement
shall be for the benefit of or enforceable by any creditors of the Company.
15.14 EXECUTION IN COUNTERPARTS. For the convenience of the parties,
this Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same document.
Telefacsimile transmissions of any executed original and/or retransmission of
any executed telefacsimile transmission shall be deemed to be the same as the
delivery of an executed original. At the request of any party hereto, the other
parties hereto shall confirm telefacsimile transmissions by executing duplicate
original documents and delivering the same to the requesting party or parties.
-31-
IN WITNESS WHEREOF, the following initial Owner has caused this
Operating Agreement to be duly executed as of the date first above written.
MANAGER
THREE FORKS, INC.
By:_______________________________________
Don Walford, Chief Executive Officer
-32-
EXHIBIT "A"
INITIAL CAPITAL CONTRIBUTIONS/VOTING INTERESTS/ECONOMIC INTERESTS
VOTING ECONOMIC DATE OF
NAME AND ADDRESS INTEREST % INTEREST % CONTRIBUTION CONTRIBUTION
---------------- ---------- ---------- ------------ ------------
----% ---% $-------
EXHIBIT B
CAPITAL CONTRIBUTIONS/VOTING INTERESTS/ECONOMIC INTERESTS
AS OF NOVEMBER __, 2012