HomeMy WebLinkAboutECHDA21-02 Spring CreekOrganizational Summary and Consent of Spring Creek II LLC
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Organizational Summary & Consent | Spring Creek II LLC
This instrument is the Organizational Summary & Consent (the “Summary”) of Spring Creek II
LLC, a Colorado limited liability company (the “Company”). Pursuant to the Operating
Agreement of the Company (the “Operating Agreement”), and applicable law, the undersigned,
being the Members and Managers of the Company (the “Parties”), acting without notice or a
meeting, waive notice and the holding of a meeting and unanimously consent to, adopt, and agree
as stated in this Summary and the Operating Agreement. The Parties agree that such actions and
resolutions shall have the same force and effect as if duly taken and adopted at a meeting of the
Parties, duly called and legally held. The Parties agree to be bound by their telecopied signatures
and agree that the Company may rely on their telecopied signatures. This Summary may be
executed in multiple counterparts which together will constitute one and the same instrument.
(1) The Articles of Organization, as amended and restated, as filed in the office of the
Secretary of State of Colorado are approved, ratified, and adopted. The actions of
the Organizer are ratified. The Organizer, in his capacity as organizer and filer of
the Articles, is discharged of any further duty to the Company.
(2) The Members and Managers have received the Operating Agreement in the form
presented, attached, and incorporated hereto, and by signing this Summary,
acknowledge they have read and understand each and every aspect of the Operating
Agreement, and agree as stated herein and therein.
(3) As specified in the Member roster below, and in exchange for the Capital
Contributions made by each Member, the receipt of which is acknowledged by the
Company, each owns the Membership Interest set forth below (respectively). Except
for as set forth in the roster below, no other Units have been authorized or issued as
of the date of this Consent.
Name of Member Capital Contribution Capital
Interest Units Profits
Interest
Spring Creek Apartments LLC
Cash: $957,021.00
Land: $4,000,000.00**
Development: $2,044,166.00**
(total sum: $7,001,187.00)
87.49% 900 90%
PCS Holdings LLC.
Cash: $1,000,000.00
12.50% 100 10%
Eagle County Housing and
Development Authority
(“ECHDA”) (Special Member)
Cash: $100.00 0.01% 0 0%
TOTALS: $ 8,001,287.00 100% 1,000 100%
** The Parties agree the fair market value of the Land and Development Costs contributed
by Spring Creek Apartments LLC are the amounts stated in the table, above.
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Organizational Summary and Consent of Spring Creek II LLC
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(4) The above listed Members agree to make their respective Capital Contributions and
are admitted as Members to the Company.
(5) Each Member (other than ECHDA) covenants and represents (respectively) that it is
an “accredited investor” as defined in Regulation D promulgated under the
Securities Act of 1933, and as defined in any corollary “blue-sky” law of the State
of Colorado, all as amended.
(6) The number of Managers of the Company shall be at least 1 and no more than 2.
(7) The general structure of the Company is set forth in the organizational chart, below.
(8) The following named Persons are the duly appointed and elected Managers of the
Company, to serve until qualified successors are duly elected:
Spring Creek Apartments LLC
(9) The Management Fee to the Managers for services rendered is to be determined per
the Operating Agreement.
(10) The following named person is elected as the Partnership Representative for the
Company to serve until a qualified successor is elected.
Gerald E. Flynn
(11) The “Majority of the Members” is 51% and any vote, consent, or approval requiring
a Majority of the Members will pass if the total Units voted in favor, compared
to/divided by the total number of Units entitled to vote on the matter, are equal to or
greater than such percentage.
(12) The marketability discount rate applied to Units, as referenced in the Operating
Agreement, is 15%.
(13) The business purpose of the Company is to develop, construct, own, and operate
the Project 1, and lease and/or sell real estate in Eagle County, Colorado, and all
activities necessary, customary, convenient, or incident to the business purpose.
(14) The Manager is authorized to conduct activities and execute documents on behalf of
the Company in connection with the management and operation of the Company.
(15) The Parties authorize and direct the Manager to cause the Company to take the
actions listed above. A third party is entitled to rely upon the authority given herein,
and a third party is under no obligation to make any inquiries or other investigation
to verify or confirm the authority given herein.
(16) All definitions, terms, conditions, and agreements contained in this Summary and/or
the Operating Agreement are incorporated into and apply to both this Summary and
the Operating Agreement. This Summary may be executed in counterparts, with
copies exchanged electronically, each of which when taken together will constitute
one and the same document.
1 As defined in Section 2.08(a); the “Project” means the approximately 132-unit multifamily rental housing development
and other improvements to be constructed, owned and operated thereon by the Company, and to be known as Spring Creek
II.
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Business Expenses
(Business costs such as management fees, development fees,
professional fees, marketing costs, operational costs, etc)
Gross Revenue
Ordinary “Net Cash Flow” Distributions
The first $4,000,000.00 of Net Cash Flow distributed will be made in the proportional
amounts of 75% to Spring Creek Apartments LLC and 25% to PCS Holdings LLC; and
then to the Members based on their Profits Interest percentages
Liquidating Distributions
Liquidating distributions will be made to the Members proportionally based on positive
Capital Account balances
Customer/Client
Spring Creek II LLC
(LLC w/Partnership Taxation) (LL
nt
LC
xation)
Revenue Stream
Goods/Services
Lease/Sell Real Estate
Spring Creek
Apartments LLC
(Member)
900 Units
90% Profits Interest
$7,001,187 Capital Contrib.
87.49% Capital Interest
PCS Holdings LLC.
(Member)
100 Units
10% Profits Interest
$1,000,000 Capital Contrib.
12.5% Capital Interest
Eagle County Housing
and Development
Authority
(Special Member)
0 Units
0% Profits Interest
$100 Capital Contrib.
0.001% Capital Interest
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Matt Scherr
Commissioner
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Operating Agreement of Spring Creek II LLC
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Operating Agreement | Spring Creek II LLC
NOTICE:
There are substantial restrictions on transfers of ownership interest contained in this
agreement. The interests described, represented, and acquired pursuant to this agreement
have not been registered under the securities act of 1933, as amended, or any applicable state
securities laws (the “securities laws”) and may be restricted securities as that term is defined
in rule 144 under the securities laws. To the extent the interests constitute securities under the
securities laws, the securities may not be offered for sale, sold, or otherwise transferred except
pursuant to an effective registration statement of qualification under the securities laws or
pursuant to an exemption from registration under the securities laws, the availability of which
is to be established by opinion of counsel to the satisfaction of the company. The sale or other
transfer of ownership interest is also restricted by certain provisions of this agreement.
Recitals
This operating agreement (the “Agreement”) of Spring Creek II LLC, a Colorado Limited Liability
Company (the “Company”) is made and entered the Effective Date stated in the Organizational
Summary & Consent, by and among the Company, each of the Members and Managers whose
signatures appear on the Organizational Summary & Consent, and each person or entity who
subsequently becomes a Manager, Member, or a Unitholder.
On 04/01/2020 (the “Formation Date”), Articles of Organization for the Company were filed with the
Colorado Secretary of State.
The specification of certain voting requirements, the Member roster, the Managers, and other
pertinent information is detailed in the “Organizational Summary & Consent” attached as the cover
to this Agreement and incorporated herein. All definitions, terms, conditions, and agreements
contained in this Operating Agreement and/or the Organizational Summary & Consent are
incorporated into and apply to both this Operating Agreement and the Organization Summary &
Consent.
The Parties acknowledge they have read and understand this Agreement and by signing the
Organizational Summary & Consent as the signature page for this Agreement, they agree as stated
herein and therein.
For and in consideration of the mutual covenants, representations, and agreements exchanged herein,
the Company, Unitholders, Members, and Managers agree to be bound by this Agreement and agree
as provided herein.
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Article One – Definitions
As used in this Agreement, the following capitalized terms have the following meanings:
Section 1.01 “Accredited Investor”
“Accredited Investor” means an “accredited investor,” as defined in Regulation D promulgated under
the Securities Act of 1933, as amended.
Section 1.02 “Acts”
“Acts” means the Colorado Limited Liability Company Act and any successor statute thereto, as
amended from time to time, and the Colorado Corporations and Associations Act and any successor
statute thereto, as amended from time to time.
Section 1.03 “Adjusted Capital Account Deficit”
“Adjusted Capital Account Deficit” means, with respect to any Unitholder, the deficit balance, if any,
in such Unitholder’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to
the following adjustments:
(a) Credit to such Capital Account any amounts that such Unitholder 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 sections 1.704-2(g)(1) and 1.704-
2(i)(5) of the Regulations; and
(b) Debit to such Capital Account the items described in sections 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) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the
provisions of section 1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently
therewith.
Section 1.04 “Affiliate”
“Affiliate” means, with respect to a Unitholder, any Person that directly or indirectly, through one or
more intermediaries, controls, is controlled by, or is under common control with such Unitholder. The
term “control,” as used in the immediately preceding sentence, means, with respect to a Person that
is a corporation, the right to exercise, directly or indirectly, more than ten percent (10%) of the voting
rights attributable to the shares of the controlled corporation, and with respect to a Person that is not
a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of the controlled person.
Section 1.05 “Articles of Organization”
“Articles of Organization” means the articles of organization of the Company, as amended from time
to time.
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Section 1.06 “Bankruptcy”
“Bankruptcy” of a Person means: (a) making a general assignment for the benefit of creditors; (b)
filing a voluntary bankruptcy petition; (c) becoming the subject of an order for relief or being declared
insolvent in any federal or state bankruptcy or insolvency proceeding; (d) filing a petition or answer
seeking for the Person a reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any law; (e) filing an answer or other pleading admitting or failing
to contest the material allegations of a petition filed against the Person in a proceeding of the type
described in subclauses (a) through (d) of this Section 1.6; (f) seeking, consenting to, or acquiescing
in the appointment of a trustee, receiver, or liquidator of the Person or of all or any substantial part of
the Person’s properties; or (g) the commencement of an involuntary proceeding against the Person:
(i) which seeks reorganization, arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any law and the failure to have such proceeding dismissed within ninety (90) days;
or (ii) pursuant to which a trustee, receiver, or liquidator of the Person or of all or any substantial part
of the Person’s properties has been appointed and ninety (90) days have expired without the
appointment having been vacated or stayed, or ninety (90) days have expired after the date of
expiration of a stay if the appointment has not previously been vacated.
Section 1.07 “Capital Account”
“Capital Account” means, with respect to any Unitholder, the Capital Account maintained for such
Unitholder, which, subject to the final determination by the Company’s accountant, will be
maintained according to the following general terms:
(a) To each Unitholder’s Capital Account (respectively) there shall be credited such
Unitholder’s Capital Contributions, such Unitholder’s distributive share of Profits,
and any item in the nature of income or gain that is specially allocated pursuant to
Section 5.02 or Section 5.03 hereof, and the amount of any Company liabilities that
are assumed by such Unitholder or that are secured by any property distributed to
such Unitholder.
(b) To each Unitholder’s Capital Account (respectively) there shall be debited the
amount of cash and the Gross Asset Value of any property distributed to such
Unitholder pursuant to any provision of this Agreement, such Unitholder’s
distributive share of Losses, and any item in the nature of expenses or losses that is
specially allocated pursuant to Section 5.02 or Section 5.03 hereof, and the amount
of any liabilities of such Unitholder that are assumed by the Company or that are
secured by any property contributed by such Unitholder to the Company.
(c) In the event that all or a portion of an interest in the Company is Transferred in
accordance with the terms of this Agreement, the transferee shall succeed to the
Capital Account of the transferor to the extent it relates to the Transferred interest.
(d) In determining the amount of any liability for purposes of paragraphs (a) and (b)
hereof, there shall be taken into account Code section 752(c) and any other
applicable provisions of the Code and the Regulations.
The foregoing provisions and the other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with section 1.704-1(b) of the Regulations and shall be
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interpreted and applied in a manner consistent with such Regulations. In the event that the Manager
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 that are secured
by contributed or distributed property or that are assumed by the Company or the Unitholders), are
computed in order to comply with such Regulations, the Manager may make such modification;
provided that it is not likely to have a material effect on the amounts distributable to any Unitholder
pursuant to Article Fifteen hereof upon the dissolution of the Company. The Manager also shall: (i)
make any adjustments that are necessary or appropriate to maintain equality between the Capital
Accounts of the Unitholders and the amount of Company capital reflected on the Company’s balance
sheet, as computed for book purposes, in accordance with section 1.704-1(b)(2)(iv)(q) of the
Regulations; and (ii) make any appropriate modifications in the event unanticipated events might
otherwise cause this Agreement not to comply with section 1.704-1(b) of the Regulations.
Section 1.08 “Capital Contribution”
“Capital Contribution” means any contribution by a Unitholder to the capital of the Company, which
contributions may be in the form of cash, property, or services rendered or a promissory note or other
obligation to contribute cash or property or to perform services, net of liabilities assumed or to which
the assets are subject.
Section 1.09 “Capital Interest”
“Capital Interest” is an item of intangible personal property and entitles the holder to a distribution of
its allocable share of the proceeds if and when the Company’s assets are sold at fair market value in
connection with a complete liquidation of the Company; and entitles the holder to those items making
specific references to “Capital Interest” in this Agreement. A Unitholder’s Capital Interest percentage
is determined by the proportion of the Unitholder’s Capital Account to the total Capital Accounts of
all the Unitholders. The term “Capital Interest” alone shall include no voting rights or other rights of
the Members.
Section 1.10 “Code”
“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor
statute. Any reference to a specific section of the Code shall be deemed to include a reference to any
corresponding provision of any such successor statute.
Section 1.11 “Depreciation”
“Depreciation” means, for each Fiscal Year or other period, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an asset for such year or other
period; provided, however, that if the Gross Asset Value of an asset differs from its adjusted basis for
federal income tax purposes at the beginning of such year or other period, Depreciation shall be an
amount that bears the same ratio to such beginning Gross Asset Value as the federal income tax
depreciation, amortization, or other cost recovery deduction for such year or other period bears to
such beginning adjusted tax basis; provided further that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined
with reference to such beginning Gross Asset Value using any reasonable method selected by the
Manager.
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Section 1.12 “Event of Dissolution”
“Event of Dissolution” has the meaning set forth in Section 15.01.
Section 1.13 “Event of Withdrawal”
“Event of Withdrawal” has the meaning given such term in Section 14.01.
Section 1.14 “Fiscal Year”
“Fiscal Year” means the Company’s fiscal year, which shall be the calendar year.
Section 1.15 “Gross Asset Value”
“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income
tax purposes except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Unitholder to the
Company shall be the gross fair market value of such asset, as determined in good
faith by the Manager.
(b) The Gross Asset Values of all Company assets shall be adjusted to equal their
respective gross fair market values, as determined by the Manager, as of the
following times: (i) the acquisition of additional Units in the Company by any new
or existing Unitholder in exchange for more than a de minimis Capital
Contribution; (ii) the distribution by the Company to a Unitholder of more than a
de minimis amount of property as consideration for an interest in the Company; and
(iii) the liquidation of the Company within the meaning of section 1.704-
1(b)(2)(ii)(g) of the Regulations; provided, however, that adjustments pursuant to
clauses (i) and (ii) above shall be made only if the Manager reasonably determines
that such adjustments are necessary or appropriate to reflect the relative economic
interests of the Unitholders in the Company.
(c) The Gross Asset Value of any Company asset distributed to any Unitholder shall
be the gross fair market value of such asset on the date of distribution.
(d) 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 section
734(b) or Code section 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to section 1.704-
1(b)(2)(iv)(m) of the Regulations; provided, however, that Gross Asset Values shall
not be adjusted pursuant to (d) of this Section to the extent the Manager determines
that an adjustment pursuant to (b) of this Section is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment pursuant
to (d) of this Section.
If the Gross Asset Value of an asset has been determined or adjusted pursuant to (a), (b), or (d) of this
Section, 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.
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Section 1.16 “Immediate Family”
“Immediate Family” means, with respect to any individual Person, the spouse, lineal descendants
(including adopted children), and spouses of the lineal descendants of such Person or a trust for the
exclusive benefit of any one or more of the foregoing individuals.
Section 1.17 “Interest Rate”
“Interest Rate” means a rate per annum equal to the lesser of: (a) a varying rate per annum that is
equal to the interest rate publicly quoted by the Wall Street Journal, or its successor, from time to
time as its prime commercial or similar reference interest rate, with adjustments in that varying rate
to be made on the same date as any change in that rate; and (b) the maximum rate permitted by
applicable law.
Section 1.18 “Majority of the Members” (Voting)
“Majority of the Members” means the Members whose combined Units represent equal to or more
than 51% of the Units then held by all Members entitled to vote on the matter, including the Units of
the Members not present at any meeting of the Members at which a vote is taken. In other words, any
vote, consent, or approval requiring a vote/consent of the Majority of the Members will pass if the
total Units voted in favor, compared to/divided by the total number of Units entitled to vote on the
matter, are equal to or greater than such percentage.
Section 1.19 “Manager”
“Manager” means the Persons named in the Organizational Summary & Consent as an initial
Manager(s) of the Company and any Person thereafter appointed as a Manager of the Company as
provided in this Agreement but does not include any Person that subsequently ceases to be a Manager
pursuant to the provisions of this Agreement. So long as there is a single Manager of the Company,
any reference to “Managers” in this Agreement shall be understood to refer to the sole Manager. In
the event that subsequently there is more than one Manager of the Company, all references in this
Agreement to the “Manager” in the singular or as “it,” “itself,” “him,” “her,” or other like references
shall also, where the context so requires, be deemed to include the plural or the masculine, feminine,
or neuter gender, as the case may be.
Section 1.20 “Member”
“Member” means the initial Members, together with each other Person, if any, that subsequently
becomes a duly admitted additional or substituted Member in accordance with this Agreement, but
excluding any Person that subsequently ceases to be a Member pursuant to the provisions of this
Agreement. All determinations regarding a Person’s status as a Member shall be made based solely
as reflected in the Company’s books and records.
Section 1.21 “Membership Interest”
“Membership Interest” means an item of intangible personal property owned by an admitted Member
of the Company and evidences: (a) a right to be allocated a portion of the Profits, Losses, other items
of income, gain, loss, deduction and credit of the Company; (b) a right to receive distributions, if any,
from the Company; and (c) an obligation (if any) to make Capital Contributions to the Company, in
each case as determined pursuant to this Agreement and the Acts. The Membership Interest includes
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all indicia of a Member’s ownership in the Company, including the the Member’s respective Capital
Account, Capital Interest, Units, Profits Interest, and the voting rights specified in this Agreement.
Section 1.22 “Net Cash Flow”
“Net Cash Flow” means the gross cash proceeds of the Company (including without limitation, loan
proceeds and cash from any other source whatsoever) less the portion thereof retained and used to
pay or establish reserves for all Company expenses (including the compensation of the Manager),
debt payments, capital improvements, replacements, and contingencies, all as reasonably determined
by the Manager or as required under any agreements between the Company and third parties. Net
Cash Flow shall not be reduced by depreciation, amortization, cost recovery deductions, or similar
allowances.
Section 1.23 “Permitted Transfer”
“Permitted Transfer” has the meaning set forth in Section 13.02.
Section 1.24 “Person”
“Person” means any individual, corporation, government or governmental subdivision or agency,
business trust, estate, trust, limited liability company, partnership, association, or other legal entity.
Section 1.25 “Profits Interest”
“Profits Interest” is an item of intangible personal property and means the holder’s proportionate share
and percentage interest in those items making specific references to “Profits Interest” in this
Agreement, determined by the proportion of the Unitholder’s Units to the total issued Units of the
Company. “Profits Interest” does not entitle the holder to receive a share of the proceeds distributed
following a hypothetical sale of the LLC’s assets in connection with a complete liquidation of the
LLC. The term “Profits Interest” alone shall include no voting rights or other rights of the Members.
Section 1.26 “Proceeding”
“Proceeding” means any threatened, pending, or contemplated action, suit, or proceeding, whether
civil, criminal, administrative, arbitrative, or investigative, or any appeal therefrom, or any inquiry or
investigation that could lead thereto.
Section 1.27 “Profits” or “Losses”
“Profits” or “Losses” means, for each Fiscal Year or 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:
(a) 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 Section
shall be added to such taxable income or loss.
(b) Any expenditures of the Company described in Code section 705(a)(2)(B) or
treated as Code section 705(a)(2)(B) expenditures pursuant to section 1.704-
1(b)(2)(iv)(i) of the Regulations and not otherwise taken into account in computing
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Profits or Losses pursuant to this Section shall be subtracted from such taxable
income or loss.
(c) In the event that the Gross Asset Value of any Company asset is adjusted pursuant
to Section 1.14(b) or (d) above, 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.
Gain or loss resulting from any disposition of property of the Company 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.
(d) 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 Section 1.13 above.
(e) 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 section 1.704-
1(b)(2)(iv)(m)(4) of the Regulations to be taken into account in determining Capital
Accounts as a result of a distribution other than in liquidation of a Unitholder’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.
(f) Notwithstanding any other provision in this Section, any items that are specially
allocated pursuant to Section 5.02 or Section 5.03 hereof 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 Section 5.02 or Section 5.03 hereof shall be determined by applying rules
analogous to those set forth in paragraphs (a) to (f) hereof.
Section 1.28 “Regulations”
“Regulations” means the Income Tax Regulations, including Temporary Regulations, promulgated
under the Code, as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
Section 1.29 “Transfer”
“Transfer” means, as a noun, any voluntary or involuntary transfer, sale, pledge, hypothecation, or
other disposition and, as a verb, voluntarily or involuntarily to transfer, sell, pledge, hypothecate, or
otherwise dispose of.
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Section 1.30 “Unit”
“Unit” means an item of intangible personal property owned by a Unitholder and is used to determine
each Unitholder’s proportional Profits Interest and for other items making specific reference to
“Units” in this Agreement. A “Unit” does not entitle the holder to receive a share of the proceeds
distributed following a hypothetical sale of the LLC’s assets in connection with a complete liquidation
of the LLC. The term “Unit” alone shall include no voting rights or other rights of the Members.
Section 1.31 “Unitholders”
“Unitholders” means all holders of Units and Capital Accounts in the Company, regardless of whether
they are Members. Any reference to “Unitholders” in this Agreement shall be deemed a reference
both to Unitholders who are Members and Unitholders who are not Members, but any reference to
“Members” in this Agreement shall be deemed a reference only to those Unitholders who are
Members. Unitholders (other than duly admitted Members) only hold an economic interest consisting
of their Capital Interest and Profits Interest in the Company and have no rights of Members, such as
no right to vote on Company actions, and as further specified in Section 13.06. If at any time, there is
no duly admitted Member of the Company, an unadmitted Unitholder may be deemed the admitted
Member of the Company.
Article Two - Organization
Section 2.01 Formation.
The Company has been organized as a Colorado limited liability company by delivering to the
Colorado Secretary of State for filing Articles of Organization under and pursuant to the Acts. The
rights and liabilities of the Unitholders shall be determined pursuant to the Acts and this Agreement.
To the extent that the rights or obligations of any Unitholder or Member or Manager are different, by
reason of any provision of this Agreement, than they would be in the absence of such provision, this
Agreement shall, to the extent permitted by the Acts, control.
Section 2.02 Name.
The name of the Company is as specified in the Articles of Organization and all Company business
must be conducted in that name or such other names (trade names, dba’s, etc.) that comply with
applicable law as the Manager may select from time to time.
Section 2.03 Term.
The Company shall commence on the date the Articles of Organization are filed with the Colorado
Secretary of State and shall continue in existence in accordance with the terms and provisions hereof.
Section 2.04 Registered Agent; Registered Agent Address; Principal Office in the
United States; Other Offices.
The registered agent and the registered agent address of the Company in the State of Colorado shall
be the initial registered agent and registered agent address named in the Articles of Organization or
such other Person or Persons and/or address as the Manager may designate from time to time in the
manner provided by law. The principal office of the Company in the United States shall be at such
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place as the Manager may designate from time to time, which need not be in the State of Colorado.
The Company may have such other offices as the Manager may designate from time to time.
Section 2.05 Purpose and Scope.
The business purpose of the Company is to develop, construct, own, and operate the Project (As
defined in Section 2.08(a); the “Project” is the approximately 132-unit multifamily rental housing
development and other improvements to be constructed, owned and operated thereon by the
Company, and to be known as Spring Creek II., and all activities necessary, customary, convenient,
or incident to the business purpose. The Company shall not engage in any other business nor acquire,
own, or develop any other property except with the prior approval of a Majority of the Members. The
legal description of the approximately 11.5 acre parcel for the Project is as follows:
PARCEL A:
PARCEL 12, THIRD AMENDMENT TO THE FINAL PLAT STRATTON FLATS PLANNED
UNIT DEVELOPMENT FILING NO. 1, ACCORDING TO PLAT THEREOF RECORDED
JULY 27, 2020 UNDER RECEPTION NO. 202012022, COUNTY OF EAGLE, STATE OF
COLORADO.
PARCEL B:
PARCEL 14B AND TRACT V-2, MINOR PLAT AMENDMENT PARCEL 14A AND
PARCEL 14B, AND TRACT V-1 AND V-2, ACCORDING TO THE PLAT THEREOF
RECORDED OCTOBER 26, 2018 UNDER RECEPTION NO. 201818368, COUNTY OF
EAGLE, STATE OF COLORADO.
Section 2.06 Title to Property.
All real and personal property owned by the Company shall be owned by the Company as an entity,
and no Unitholder shall have any ownership interest in such property in her individual name or right,
and each Unitholder’s interest in the Company shall be personal property for all purposes. Except as
otherwise provided in this Agreement, the Company shall hold all of its real and personal property in
the name of the Company and not in the name of any Manager or Unitholder.
Section 2.07 Payments of Individual Obligations.
The Company’s credit and assets shall be used solely for the benefit of the Company, and no asset of
the Company shall be transferred or encumbered for or in payment of any individual obligation of
any Unitholder.
Section 2.08 Colorado Housing and Finance Authority.
Notwithstanding anything to the contrary contained herein, the following provisions shall control for
so long as the Colorado Housing and Finance Authority holds a deed of trust on the Project:
(a) The “Project” means the approximately 132-unit multifamily rental housing
development and other improvements to be constructed, owned and operated
thereon by the Company, and to be known as Spring Creek II.
(b) The Company’s sole function shall be the ownership and operation of the Project.
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(c) The Company is authorized to execute and deliver a promissory note and deed of
trust to the Colorado Housing and Finance Authority relating to the Project, and is
also authorized to execute a regulatory agreement and such other loan documents
as are required by the Colorado Housing and Finance Authority in connection with
such loan.
(d) The regulatory agreement shall be a binding obligation upon the Company, its
successors and assigns. Any incoming Member shall, as a condition of receiving an
interest in the Company agree to be bound by the said promissory note, deed of
trust, and regulatory agreement, and such other loan documents required by the
Colorado Housing Finance Authority, to the same extent and on the same terms as
the other Members.
(e) The Company is authorized to execute such other notes, deed of trusts, loan
agreements, loan commitments or other loan documents or agreements as may be
necessary to effectuate the purposes of this agreement.
(f) No Members will voluntarily withdraw from, or be substituted by, the Company
without the Colorado Housing and Finance Authority's prior written approval,
which approval will not be unreasonably withheld if there are one or more
remaining or substitute Members who, in the Colorado Housing Finance
Authority's opinion and sole discretion, are financially capable and competent to
cause the Company to have the capacity to effectively own and operate the Project
subject to the terms and provisions of the regulatory agreement and of this
Operating Agreement.
(g) The Company created by this Operating Agreement may not change its form of
entity without the express written consent of the Colorado Housing and Finance
Authority.
(h) No amendments will be made to this agreement which would affect the Colorado
Housing and Finance Authority’s rights under the note, deed of trust, regulatory
agreement or other loan documents made between the Colorado Housing Finance
Authority and the Company without the Colorado Housing Finance Authority’s
prior written approval.
(i) In the event that there is a conflict or inconsistency between any term or provision
in this Operating Agreement and any term or provision in any of the Colorado
Housing Finance Authority loan documents, then the terms and provisions
contained in the loan documents shall control.
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Article Three – Membership
Section 3.01 Initial Members.
The initial Members of the Company are the Persons identified in the Organizational Summary &
Consent, each of whom has made their initial Capital Contributions, executed this Agreement, and is
admitted to the Company as a Member.
Section 3.02 Certificates.
The Company will not issue any certificates of Units, but will, at the written request of a Unitholder,
provide statements of Units certified by the Manager based upon the Company’s books and records,
stating the interest owned by the Unitholder, and the respective interest owned by all other
Unitholders, as well as any effective assignments of rights with respect to such Units, as of the date
the statement is provided.
Section 3.03 Preemptive Rights.
(a) Each Member, in accordance with Section 3.03(b), shall have a preemptive right
with respect to: (i) the issuance or sale of Units by the Company; (ii) the issuance
of any obligations, evidences of indebtedness, or interests in the Company
convertible into, exchangeable for, or accompanied by any rights to receive,
purchase, or subscribe to any Units; or (iii) the issuance of any right of, subscription
to, right to receive, or any warrant or option for the purchase of, any of the foregoing
(each an “Interest” or “Interests”).
(b) If the Company proposes to issue Units or Interests in which the Members have
preemptive rights, the Manager shall give written notice to the Members at least
30-days prior to the proposed issuance (“Participation Notice”). The Participation
Notice shall specify the type and number of Interests the Company proposes to sell
along with the price, terms, and closing date of such proposed sale. Each Member
must notify the Manager in writing within 15-days of the receipt of the Participation
Notice whether such Member shall accept the offer to purchase a portion of the
Interests on the terms and at the price stipulated in the Participation Notice. If no
response has been received by the Manager from a Member within such 15-day
period, the Member shall be deemed to have refused the offer. The maximum
number of Interests a Member shall have the right to purchase shall be equal to the
total number of Interests offered multiplied by a fraction, (i) the numerator of which
is the number of Units then owned by such Member, and (ii) the denominator of
which is the total number of Units then owned by all Members. The notice given
by the Member must state the number of Interests the Member desires to purchase;
provided, however, that the notice may indicate that the Member desires to
purchase a greater number of Interests of the proposed offering than shall be
allocated to such Member in the event another Member fails to accept the entire
amount of such other Member’s allocation. The closing of the proposed sale to the
Members and to the third party (if the Members do not accept the entire proposed
offering) shall be on the closing date and on the terms and conditions stipulated in
the Participation Notice. If the proposed sale is not completed within 6 months from
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the date of the Participation Notice, the Company may not issue Units or other
Interests of the Company without again complying with this Section 3.03.
Section 3.04 Creation and Issuance of Additional Units.
Subject to Section 3.03, and upon the consent of the Majority of the Members, the Manager is
authorized to cause the issuance of additional Units, including Units in one or more classes, or one or
more series of such classes, which classes or series shall have, subject to the provisions of applicable
law, such designations, preferences, and relative, participating, optional, or other special rights as shall
be fixed by the Manager, including, without limitation, with respect to: (a) the Capital Contribution
to be required by each such class or series; (b) the allocation of Profits or Losses to each such class or
series; (c) the right of each such class or series to share in distributions; (d) the rights of each such
class or series upon dissolution and liquidation of the Company; (e) the price at which, and the terms
and conditions upon which, each such class or series of Units may be redeemed by the Company if
any such class or series is so redeemable; (f) the rate at which, and the terms and conditions upon
which, each such class or series may be converted into another class or series of Units; and (g) the
right of each such class or series to vote on, or take action with respect to, Company matters, including
matters relating to the relative rights, preferences, and privileges of such class or series, to the extent
permitted by applicable law, if any such class or series is granted such voting rights. Any purchaser
of new or additional Units in accordance with this Section 3.04 will be admitted to the Company as a
Member upon satisfaction of the requirements in this Agreement, along with the execution of the
subscription, this Agreement, and other documents as the Manager shall determine, and upon receipt
of the purchaser’s Capital Contribution.
Section 3.05 Covenant Not to Withdraw or Dissolve.
Notwithstanding any provision of the Acts, each Member hereby covenants and agrees that the
Members have entered into this Agreement based on their mutual expectation that all Members will
continue as Members and carry out the duties and obligations undertaken by them hereunder and that,
except as otherwise expressly required or permitted hereby, no Member shall withdraw or resign as a
Member from the Company or be entitled to demand or receive a return of such Member’s
contributions or profits (or a bond or other security for the return of such contributions or profits)
without the consent of a Majority of the Members (without regard to the withdrawing/resigning
Member’s Units, see also Article Fourteen). Any Member who withdraws or resigns in breach of this
covenant shall be liable in damages to the Company, without requirement of a prior accounting, for
all costs and liabilities that the Company or any Member may incur as a result of such withdrawal or
resignation. No withdrawal of any kind whatsoever, in and of itself, will cause or result in the
dissolution of the Company.
Section 3.06 Limited Liability.
No Unitholder or Member shall be personally liable for any debt, obligation, or liability of the
Company, whether that liability or obligation arises in contract, tort, or otherwise. The Unitholders
and Members are not liable under a judgment, decree, or order of a court, or in any other manner, for
a debt, obligation, or liability of the Company as provided in C.R.S. § 7-80-705. If any Unitholder or
Member receives a distribution from the Company, the Unitholder/Member will have no liability
under the Act or other applicable law for the amount of the distribution except to the extent required
by law or except to the extent that the amount of the distribution was incorrect or made by mistake.
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Section 3.07 Time Devoted by Members.
Each Member (acting by and through its authorized personnel if such Member is not an individual)
is required to devote a reasonable amount of time to the affairs of the Company as the Manager
reasonably determines is necessary, and each such Person shall be free to serve any other Person or
enterprise in any capacity that it may deem reasonably appropriate so long as the Member complies
with its duties described herein and in Article Nine.
Article Four – Capital Contributions
Section 4.01 Capital Contributions.
The initial Capital Contributions of the Members are set forth in the Company’s Organizational
Consent, and a record of Capital Contributions will be maintained and updated in the books and
records maintained by the Manager. Each Person who acquires any Units may be admitted to the
Company as a Member upon (a) the acceptance of her subscription by the Manager, (b) the
satisfactory completion (including execution and delivery) of any documents required by this
Agreement or the Manager, and (c) as otherwise required/specified by this Agreement.
Section 4.02 Additional Assessments.
Except as set forth in Section 4.01 above and in this Section 4.02, no Unitholder is required to make
any additional Capital Contribution.
Additional Capital Contributions (“Additional Assessments”) are only required upon a vote in favor
by the Majority of the Members. Such vote will state the amount of the total Additional Assessments
needed and a description of what it is needed for.
In the event Additional Assessments are required, a Manager will provide the Unitholders written
notice of the Additional Assessments (a “Capital Call Notice”). Each Unitholder shall be required to
make an additional contribution to the capital of the Company (pursuant to a Capital Call Notice in
accordance with this Section 4.02) in an amount equal to the total Additional Assessment requested
by the Manager multiplied by the ratio of such Unitholder’s Units to the Units of all of the Unitholders.
The Capital Call Notice will specify, among other things, each Unitholder’s proportionate share of an
Additional Assessment, state a description of what the contribution is needed for, and the due date of
such Additional Assessments, which due date must be at least 15 days after delivery of the Capital
Call Notice. Each Unitholder is required to contribute its share of the Additional Assessment to the
capital of the Company on the date stated in the Capital Call Notice.
Section 4.03 Failure to Contribute.
If a Unitholder does not contribute by the time required its proportionate share of an Additional
Assessment that such Unitholder is required to make as provided in this Agreement (the “Delinquent
Unitholder”) (the amount of such Additional Assessment that such Delinquent Unitholder failed to
make is referred to herein as the “Unpaid Contribution”), then any non-defaulting Member may make
a Capital Contribution to the Company in an amount equal to the Unpaid Contribution, and such
Capital Contribution for the Unpaid Contribution will be credited to the Capital Account of the non-
defaulting Member making the contribution. In the event a Capital Contribution is made by a non-
defaulting member pursuant to this Section 4.03, the Capital Accounts, Capital Interest, Units, and
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Profits Interest percentage of the Delinquent Unitholder and contributing non-defaulting Member will
be adjusted as follows:
The Delinquent Unitholder’s Units and Profits Interest percentage will
be diluted and reduced by its respective proportionate percentage of
the Additional Assessment multiplied by 1.5, and the Delinquent
Unitholder’s Units will be adjusted accordingly.2
The Units and Profits Interest percentage of the non-defaulting
Member that makes the contribution of the Unpaid Contribution will
be increased by the amount of Units equal to the reduced number of
Units and Profits Interest of the Delinquent Unitholder.3
Appropriate adjustments will be made to the Capital Accounts, Capital
Interests, Units, and Profits Interests of each Unitholder, and will be
made in the books and records of the Company accordingly.
This Agreement constitutes a security agreement as defined in the Uniform Commercial Code as
enacted and amended from time to time in the State of Colorado, and the Capital Account and Units
and ownership interest in the Company of each Unitholder is collateral hereunder to secure payment
of Capital Contributions/Additional Assessments when due. The Company is the secured party under
this security agreement, and each Unitholder is a debtor. The security interest of the Company attaches
from the moment a Unitholder obtains a Unit. Each Unitholder agrees to execute and perfect the
security interest created hereby.
Section 4.04 Return of Contributions.
No Unitholder is entitled to the return of any part of her Capital Contributions or to be paid interest
in respect of either her Capital Account or her Capital Contributions or to any priority over any other
Unitholder as to the return of Capital Contributions or her Capital Account except as expressly
provided in this Agreement. Any Capital Contribution that is not repaid is not a liability of the
Company or of any Unitholder. A Unitholder will not be required to contribute or to lend any cash or
property to the Company to enable the Company to return any Unitholder’s Capital Contributions.
Section 4.05 Advances by Members, Loans.
If the Company does not have sufficient cash to pay its obligations and the Manager does not submit
a request for an Additional Assessment, any Member, upon the consent of the Majority of the
Members, may advance all or part of the needed funds to or on behalf of the Company. Any advance
2 Further explained by example with hypothetical numbers:
Additional Assessment of $700,000 is duly called by a Capital Call Notice.
A Unitholder then holding Units with a respective Sharing Ratio percentage of 15% (e.g. 900 of a total 6,000 Units) fails
to duly make its proportionate contribution of 15% of the $700,000, equaling $105,000.
A non-defaulting Member makes the Unpaid Contribution in that amount.
The Delinquent Unitholder’s Sharing Ratio percentage will be reduced by 15% x 1.5, equaling 23%. To determine the
change in Sharing Ratio percentage, reduce the Delinquent Unitholder’s Sharing Ratio of 15% by 23%, which in this
scenario is 3%, resulting in the Delinquent Unitholder being diluted from 15% Sharing Ratio percentage to a 12% Sharing
Ratio. The Units of the Delinquent Unitholder are also diluted based on the diluted percentage, thus in this scenario, diluting
from 900 of a total 6,000 issued Units (15%) to 720 of a total 6,000 issued Units (12%).
3 Based on the above example, the Units of the non-defaulting Member that makes the Unpaid Contribution will increase
by 180 Units.
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described in this Section 4.05 shall constitute a loan from the Member to the Company, shall bear
interest at the Interest Rate from the date of the advance until the date of payment, and shall not be a
Capital Contribution. The Company will promptly deliver a promissory note to the Member making
the loan as evidence of the indebtedness and duty to repay same.
Section 4.06 Loan Guarantees.
In the event that any Unitholder guarantees a loan to the Company, and, as a result of such guarantee,
such Unitholder is subsequently obligated to repay more than its proportional Capital Interest
percentage of such loan, the Unitholders that are required to pay less than their pro rata share of such
loan shall contribute to the Unitholders who are required to pay more than their pro rata share so that
liability for such loan is ultimately shared by all Unitholders pro rata according to Capital Interest
percentages. Each Unitholder hereby grants to all other Unitholders a security interest in its Units and
Capital Account to secure such obligation. For purposes of the foregoing provisions, any guarantee
or payment by an Affiliate of a Unitholder shall be deemed to be a guarantee or payment by the
Unitholder.
Article Five – Allocations
Section 5.01 Profits and Losses.
After giving effect to the special allocations set forth in Section 5.02 and Section 5.03 hereof, Profits
or Losses for any Fiscal Year shall be allocated among the Unitholders in accordance with the
structure of Distributable Net Cash Proceeds under Section 6.01.
Section 5.02 Special Allocations Required by Tax Law.
The Company shall make the following special allocations:
(a) Limitation on Allocation of Losses.
Notwithstanding any other provision of this Agreement, no allocation of Losses, or
any item in the nature of expenses or losses, shall be made to a Unitholder if such
allocation would cause or increase an Adjusted Capital Account Deficit for such
Unitholder. The amount otherwise allocable to a Unitholder but for the foregoing
sentence shall instead be allocated to the other Unitholders in the manner set forth in
Section 5.01, subject again to the first sentence of this Section 5.02(a).
(b) Qualified Income Offset.
In the event that a Unitholder receives any adjustments, allocations, or distributions
described in Regulations sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of
Company income and gain (consisting of a pro rata portion of each item of Company
income, including gross income, and gain for such year) shall be specially allocated
to that Unitholder in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, any Adjusted Capital Account Deficit of that Unitholder
as quickly as possible, provided that an allocation pursuant to this Section 5.02(b)
shall be made only if and to the extent that the Unitholder would have an Adjusted
Capital Account Deficit after all other allocations provided for in this Agreement have
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been tentatively made as if this Section 5.02(b) were not in this Agreement. The
provisions of this Section 5.02(b) are intended to comply with the requirements of
Regulations section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
(c) Special Provisions Applicable in the Event of Nonrecourse Borrowings.
Capitalized terms used in this Section 5.02(c) and not otherwise defined shall have the
meaning given them in Regulations section 1.704-2.
(1) Nonrecourse Deductions.
Nonrecourse Deductions of the Company for any Fiscal Year or other period
shall be allocated among the Unitholders proportionally based on their
respective Profits Interests.
(2) Partner Nonrecourse Deductions.
Any Partner Nonrecourse Deductions for any Fiscal Year shall be specially
allocated to the Unitholder who bears the economic risk of loss with respect
to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations section 1.704-
2(i)(1).
(3) Minimum Gain Chargeback.
Except as otherwise provided in Regulations section 1.704-2(f),
notwithstanding any other provision of this Article V, if there is a net decrease
in Partnership Minimum Gain during any Company Fiscal Year, each
Unitholder 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 Unitholder’s share of the net decrease in Partnership Minimum
Gain, determined in accordance with 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 Unitholder pursuant
thereto. The items to be so allocated shall be determined in accordance with
Regulations sections 1.704-2(f)(6) and 1.704-2(j)(2). This paragraph (c)(3) is
intended to comply with the minimum gain chargeback requirement in
Regulations section 1.704-2(f) and shall be interpreted consistently therewith.
(4) Partner Minimum Gain Chargeback.
Except as otherwise provided in Regulations section 1.704-2(i)(4),
notwithstanding any other provision of this Article V, if there is a net decrease
in Partner Nonrecourse Debt Minimum Gain attributable to a Partner
Nonrecourse Debt during any Company Fiscal Year, each Unitholder who has
a share of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with section 1.704-
2(i)(5) of the Regulations, shall be specially allocated items of Company
income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
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Years) in an amount equal to such Unitholder’s share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Regulations section 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
Unitholder pursuant thereto. The items to be so allocated shall be determined
in accordance with Regulations sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Section 5.02(c)(4) is intended to comply with the minimum gain chargeback
requirement in Regulations section 1.704-2(i)(4) and shall be interpreted
consistently therewith.
(5) Excess Nonrecourse Liabilities.
Solely for purposes of determining a Unitholder’s proportionate share of the
“excess nonrecourse liabilities” of the Company within the meaning of
Regulations section 1.752-3(a)(3), the Unitholders’ interests in Company
Profits are proportional based on their respective Profits Interests.
(6) Distributions.
To the extent permitted by Regulations section 1.704-2(h)(3), the Company
shall endeavor to treat distributions of cash as having been made from the
proceeds of a Nonrecourse Liability or a Partner Nonrecourse Liability only
to the extent that such distributions would cause or increase an Adjusted
Capital Account Deficit for any Unitholder.
(d) Section 754 Adjustment.
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 section 1.704-
1(b)(2)(iv)(m)(2) or section 1.704-1(b)(2)(iv)(m)(4) of the Regulations, to be taken
into account in determining Capital Accounts as the result of a distribution to a
Member in complete liquidation of 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 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 that section 1.704-1(b)(2)(iv)(m)(2)
of the Regulations applies, or to the Members to whom such distribution was made in
the event that section 1.704-1(b)(2)(iv)(m)(4) of the Regulations applies.
Section 5.03 Curative Allocations.
The allocations set forth in Section 5.02 hereof (the “Regulatory Allocations”) are intended to comply
with certain requirements of the Regulations. It is the intent of the Unitholders 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, or deduction pursuant to this Section
5.03. Therefore, notwithstanding any other provision of this Article Five (other than the Regulatory
Allocations), the Manager (with the advice of the Company’s CPA) shall make such offsetting special
allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate
so that, after such offsetting allocations are made, each Unitholder’s Capital Account balance is, to
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the extent possible, equal to the Capital Account balance such Unitholder would have had if the
Regulatory Allocations were not part of this Agreement and all Company items were allocated
pursuant to Section 5.01. In exercising its discretion under this Section 5.03, the Manager (with the
advice of the Company’s CPA) shall take into account future Regulatory Allocations under Section
5.02(c)(3) and (c)(4) that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Section 5.02(c)(1) and (c)(2).
Section 5.04 Tax Allocations: Code Section 704(c).
In accordance with Code section 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 Unitholders 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 Section 1.14(a) hereof).
In the event that the Gross Asset Value of any Company asset is adjusted pursuant to Section 1.14(b)
hereof, 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 section 704(c) and the Regulations
thereunder.
Any elections or other decisions relating to such allocations shall be made by the Manager (with the
advice of the Company’s CPA) in any manner that reasonably reflects the purpose and intention of
this Agreement; provided that the Company shall elect to apply the allocation method determined by
the Manager (with the advice of the Company’s CPA) and permitted by the Regulations under Code
section 704(c). Allocations pursuant to this Section 5.04 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 Unitholder’s
Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of
this Agreement.
Except as otherwise provided in this Agreement, all items of Company income, gain, loss, deduction,
and any other allocations not otherwise provided for shall be divided among the Members in the same
proportions as they share Profits or Losses, as the case may be, for the Fiscal Year.
Section 5.05 Other Allocation Rules.
(a) 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 Members using any permissible
method under Code section 706 and the Regulations thereunder.
(b) The Members are aware of the income tax consequences of the allocations made
by this Article Five and hereby agree to be bound by the provisions of this Article
Five in reporting their shares of Company Profits and Losses for income tax
purposes except to the extent otherwise required by law.
(c) Solely for purposes of determining a Member’s proportionate share of the “excess
nonrecourse liabilities” of the Company within the meaning of section 1.752-
3(a)(3) of the Regulations, the Members’ interests in Company Profits are in
proportion to their interests.
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(d) The Manager may rely upon, and shall have no liability to the other Members or
the Company if it does rely upon, the opinion of accountants retained by the
Company from time to time with respect to all matters (including disputes with
respect thereto) relating to computations and determinations required to be made
under this Article Five or other provisions of this Agreement.
Article Six – Distributions
Section 6.01 Net Cash Flow Distributions.
All Distributions of Net Cash Flow shall be made at such times and in such amounts as determined
by the Manager(s) pursuant to the following structure:
(a) The first $4,000,000.00 of Net Cash Flow distributed will be made in the proportional
amounts of 75% to Spring Creek Apartments LLC and 25% to PCS Holdings LLC
(respectively); and
(b) Then, after making the distributions specified in the preceding paragraph immediately
above, all other Distributions of Net Cash Flow will be made to the Unitholders
proportionally based on their respective Profits Interests.
Section 6.02 Tax Distributions.
During each Fiscal Year of the Company and, in any event, no later than March 31 of the following
Fiscal Year (or if the Company has a valid and accepted extension to file, no later than 10 days after
filing the Company tax return), each Unitholder who has been allocated net taxable income of the
Company (determined in accordance with Code section 703(a)) for such Fiscal Year shall be entitled
to receive a cash distribution (or distributions) equal to its allocable share of such net taxable income
multiplied by a percentage equal to the highest rate of tax imposed on individuals for federal income
tax purposes for such Fiscal Year (without regard to alternative minimum taxes or tax surcharges),
plus 5% (a “Tax Distribution”). Any Tax Distributions shall be deemed to be an advance distribution
of amounts otherwise distributable to the Unitholders pursuant to Section 6.01, and will reduce the
amounts that would subsequently otherwise be distributable to the Unitholders pursuant to Section
6.01 by the amount of the advance distribution. The Company may distribute Tax Distributions in
quarterly installments on an estimated basis prior to the end of a Fiscal Year, but if the amounts
distributed by the Company to a Unitholder as estimated quarterly Tax Distributions exceed the
greater of: (a) the amount of Tax Distributions to which such Unitholder is entitled for such Fiscal
Year; or (b) the total amount of distributions to which such Unitholder is otherwise entitled in such
Fiscal Year, the Unitholder will, within 15 days after the tax return for such Fiscal Year is filed, return
such excess to the Company, and such excess shall be treated as a distribution to such Unitholder
pursuant to Section 6.01 until it is returned (or if for any reason such excess is not returned, then such
excess shall be set off against any future distributions to which such Unitholder otherwise would be
entitled).
Section 6.03 General Distribution Rules.
(a) For purposes of determining the Unitholders entitled to receive a distribution, the
date on which the Manager determines to make such distribution shall be the record
date for such determination of Unitholders.
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(b) All amounts withheld pursuant to the Code or any provision of any state or local
tax law with respect to any distribution shall be treated as amounts actually
distributed to the Unitholders. The Manager is authorized to withhold from
distributions, or with respect to allocations, to the Unitholders and to pay over to
federal, state, or local government any amounts required to be so withheld pursuant
to the Code or any provisions of any other federal, state, or local law and shall
allocate such amounts to the Unitholders with respect to which such amount was
withheld. In the event that the Company is obligated to withhold in respect of an
allocation to a Unitholder, and such withholding obligation is in excess of the
amount otherwise distributable to such Unitholder, such excess withholding
obligation shall be treated as an interest-free loan to the Unitholder by the
Company. Such loan shall be repaid out of future distributions from the Company
to the Unitholder. If such distributions are insufficient to repay such loan, the
Unitholder shall be obligated to repay the remaining balance of such loan to the
Company upon the Withdrawal of the Unitholder or upon an Event of Dissolution
of the Company, whichever comes first.
(c) Except as otherwise set forth in this Agreement, the Company shall not distribute
any asset other than cash without the Majority consent of the Members. No
Unitholder may be compelled to accept a distribution of any asset in kind from the
Company to the extent that the percentage of the asset distributed to her differs from
the percentage in which she shares in distributions from the Company.
(d) No distribution shall be made by the Company to the extent that, after giving effect
to the distribution, the liabilities of the Company would exceed the fair market
value of the Company’s assets.
(e) All distributions to the Unitholders are subject to set-off by the Company for any
amount owed the Company by the Unitholder or any assignor of such Unitholder
other than amounts owed by any Unitholder in the ordinary course of business
operations with the Company.
Section 6.04 Suspended Distributions.
Notwithstanding any other provision of this Agreement, the cumulative distributions to any
Unitholder during any Fiscal Year shall be limited to the maximum amount that can be distributed to
such Unitholder without creating an Adjusted Capital Account Deficit (computed taking into account
any allocations or reasonably anticipated allocations for the current Fiscal Year). Any distribution
prevented by this Section 6.04 (a “Suspended Distribution”) shall be set aside by the Company. All
or a portion of any Suspended Distribution shall be made to the Unitholder to whom, but for this
Section 6.04, the Suspended Distribution would have been made at the earliest possible time that such
distribution can be made without violating the provisions of this Section 6.04. Suspended
Distributions not distributed pursuant to the previous sentence prior to the dissolution of the Company
pursuant to Section 15.01 hereof shall be treated as proceeds from the liquidation of the Company’s
assets and distributed to the Unitholders pursuant to Section 15.02 hereof.
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Article Seven – Manager
Section 7.01 Management by Manager.
The Manager(s) of the Company are specified in the Organizational Summary & Consent. Except for
situations in which the approval of the Members is required by this Agreement or by nonwaivable
provisions of applicable law: (i) the powers of the Company shall be exercised by or under the
authority of, and the business and affairs of the Company shall be managed under the direction of, the
Manager; and (ii) the Manager may make all decisions and take all day-to-day and ordinary business
actions for the Company not otherwise provided for in this Agreement, including, without limitation,
the following:
(a) Acquire by purchase, lease, or otherwise any real or personal property that may be
necessary, convenient, or incidental to the accomplishment of the purposes of the
Company;
(b) Operate, maintain, finance, improve, construct, own, grant options with respect to,
sell, convey, assign, mortgage, and lease any real estate and any personal property
necessary, convenient, or incidental to the accomplishment of the purposes of the
Company;
(c) Execute any and all agreements, contracts, documents, certifications, loan
documents, closing documents, and instruments necessary or convenient in
connection with the management, maintenance, and operation of the property of the
Company or in connection with managing the affairs of the Company;
(d) Borrow money and issue evidences of indebtedness necessary, convenient, or
incidental to the accomplishment of the purposes of the Company and secure the
same by mortgage, pledge, or other lien on any property of the Company;
(e) Execute, in furtherance of any or all of the purposes of the Company, any deed,
lease, mortgage, deed of trust, mortgage note, promissory note, bill of sale, contract,
or other instrument purporting to convey or encumber any or all of the property of
the Company;
(f) Prepay in whole or in part, refinance, recast, increase, modify, or extend any
liabilities affecting the property of the Company and, in connection therewith,
execute any extensions or renewals of encumbrances on any or all of the property
of the Company;
(g) Care for and distribute funds to the Unitholders by way of cash, income, return of
capital, or otherwise, all in accordance with the provisions of this Agreement, and
perform all matters in furtherance of the objectives of the Company or this
Agreement;
(h) Contract on behalf of the Company for the employment and services of employees
and/or independent contractors, such as lawyers, accountants, and investment
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advisors, and delegate to such Persons the duty to manage or supervise any of the
assets or operations of the Company;
(i) Engage in any kind of activity and perform and carry out contracts of any kind
necessary or incidental to, or in connection with, the accomplishment of the
purposes of the Company as may be lawfully carried on or performed by a limited
liability company under the laws of each state in which the Company is then formed
or qualified;
(j) Take, or refrain from taking, all actions not expressly proscribed or limited by this
Agreement as may be necessary or appropriate to accomplish the purposes of the
Company;
(k) Institute, prosecute, defend, settle, compromise, and dismiss lawsuits or other
judicial or administrative proceedings brought on or in behalf of, or against, the
Company or the Unitholders in connection with activities arising out of, connected
with, or incidental to this Agreement and to engage counsel or others in connection
therewith;
(l) Establish reserves for debts, liabilities, and obligations of the Company (whether
accrued, contingent, or otherwise) and for capital improvements to the Company’s
property and for any other contingencies that the Manager determines are
necessary;
(m) To reinstate the Company if it is delinquent; and
(n) Take such other action and perform such other services as are necessary, customary,
or appropriate for the ordinary and day-to-day operation of the Company.
Except as otherwise expressly provided in this Agreement or the Acts, the Members shall have no
right to control or manage, nor shall they take any part in the control or management of, the property,
business, or affairs of the Company, but they may exercise the rights and powers of the Members
under this Agreement, including, without limitation, the right to approve certain matters as provided
herein.
Section 7.02 Authority to Bind.
Unless authorized to do so by this Agreement or by the Manager in writing, no attorney-in-fact,
employee, or other agent shall have any power or authority to bind the Company in any way, to pledge
its credit, or to render the Company liable financially or otherwise for any purpose. No Unitholder or
Member shall have any power to bind the Company unless such Unitholder has been authorized by
the Manager to act as agent of the Company in accordance with the previous sentence.
Section 7.03 Restrictions on Authority of Manager.
Notwithstanding the provisions of Section 7.01, the Manager may not cause the Company to do any
of the following without obtaining the prior written consent of a Majority of the Members (unless
otherwise specified):
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(a) Sell, exchange, or otherwise dispose of (other than by way of a pledge, mortgage,
deed of trust, or trust indenture) all or substantially all of the Company’s assets;
(b) Be a party to a merger with, or conversion to, another entity;
(c) Change or modify the business purpose of the Company;
(d) Issue or redeem any Units;
(e) Amend or restate the Articles of Organization or this Operating Agreement;
(f) Knowingly do any act in contravention of this Agreement except as required by
applicable law;
(g) Knowingly do any act which would make it impossible to carry on the ordinary
business of the Company except as otherwise provided by this Agreement or
required by applicable law;
(h) Knowingly perform any act which would expose the Members to unlimited liability
for any debt of the Company;
(i) Any action that requires the vote, approval, or consent of the Members as specified
elsewhere in this Agreement; or
(j) Dissolve the Company.
Section 7.04 Time Devoted by Manager.
Each Manager (acting by and through its authorized personnel if such Manager is not an individual)
shall be required to devote only such time to the affairs of the Company as such Manager determines
may be necessary to manage and operate the Company, and each such Person shall be free to serve
any other Person or enterprise in any capacity that it may deem reasonably appropriate so long as the
Manager complies with its duties described in this Article and in Article Nine.
Section 7.05 Execution of Documents.
(a) Any document or instrument may be executed and delivered on behalf of the
Company by the Manager (or by any Manager if more than one), including, without
limitation, any deed, mortgage, note or other evidence of indebtedness, lease,
security agreement, financing statement, contract, contract of sale, or other
instrument purporting to convey or encumber, in whole or in part, any or all of the
assets of the Company at any time held in its name, or any compromise or
settlement with respect to accounts receivable or claims of the Company; and,
subject to the authorization requirements set forth herein or in the Acts, no other
signature shall be required for any such instrument to bind the Company.
(b) Any Person dealing with the Company may rely (without duty of further inquiry)
upon a certificate signed by the Manager as to: (i) the identity of the Manager or
Unitholder; (ii) the existence or nonexistence of any fact or facts that constitute a
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condition precedent to acts by the Manager or that are in any other manner germane
to the affairs of the Company; (iii) the Persons who are authorized to execute and
deliver any instrument or document of the Company; or (iv) any act or failure to
act by the Company or any other matter whatsoever involving the Company or any
Unitholder.
Section 7.06 Compensation of Manager.
In consideration of its performance of services on behalf of the Company, each Manager shall receive,
as a fee for services rendered and not as a distribution, a reasonable fee in the amount determined
from time to time by the majority vote of the following individuals (Notwithstanding anything in this
Agreement to the contrary, for purposes of this Section 7.06, each of the below individuals shall have
one vote, and Five or more in favor (of Seven total) constitutes a majority vote) (the “Management
Fee”).
1) Jeffery M. Spanel
2) Gerald E. Flynn
3) Jacques A. Machol, III
4) Lenn Haffeman
5) Richard Patriacca
6) Billy Jack Cummings
7) Ryan D. Smith
Section 7.07 Expenses of Company.
The Company shall pay all expenses as are necessary to, or appropriate for, the prudent operation of
the Company. Certain expenses incurred by the Manager in connection with the Company’s business
activity may, in the Manager’s discretion, be deemed non-reimbursable expenses by the Company.
Section 7.08 Number and Term of Office.
The Company shall have the number of Managers specified in the Organizational Summary &
Consent, as amended from time to time by the consent of the Majority of the Members. Each Manager
shall hold office until it has resigned or been removed in accordance with this Agreement. Managers
need not be residents of the State of Colorado nor Members of the Company.
Section 7.09 Vacancies; Removal; Resignation.
Any removal of a Manager and any Manager position to be filled for any reason shall be filled at an
annual or special meeting of the Members called for that purpose. The removal and/or election of a
Manager shall be determined from time to time by the majority vote of the following individuals
(Notwithstanding anything in this Agreement to the contrary, for purposes of this Section 7.09, each
of the below individuals shall have one vote, and Five or more in favor (of Seven total) constitutes a
majority vote).
1) Jeffery M. Spanel
2) Gerald E. Flynn
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3) Jacques A. Machol, III
4) Lenn Haffeman
5) Richard Patriacca
6) Billy Jack Cummings
7) Ryan D. Smith
A Manager chosen to fill a vacancy shall serve the unexpired term of its predecessor in office. A
Manager chosen to fill a position resulting from an increase in the number of Managers shall hold
office for such term as the Members may designate. A vacancy occurs, specifically but without
limitation, when a Manager resigns, is removed, dies, is determined incapacitated, or when a Manager
that is an entity (whether a Trust, LLC, Inc., LLP, or otherwise) is dissolved or its designated
representative resigns, is removed, dies, is determined incapacitated, or ceases to have a managerial
or ownership interest in such entity.
At any meeting of the Members at which a quorum is present and which is called expressly for that
purpose, or pursuant to a unanimous written consent adopted pursuant to this Agreement, any or all
Managers may be removed by a vote as specified in this Section 7.09; provided, however, that until
the Fourth Anniversary of the effective date of this Operating Agreement a Manager may be removed
only “for cause,” which shall mean the gross negligence or willful misconduct of the Manager with
respect to the Company’s business, properties, or affairs or the Manager’s breach of this Agreement.
Any Manager may resign at any time subject to the following conditions:
(a) The Manager presents its resignation at a meeting of the Members, duly called and
at which a successor Manager is appointed by a Majority of the Members; or
(b) The Manager delivers written notice of its desire to resign to all the Members, and
a Majority of the Members consent to waive the requirement in subsection (a)
above, and consent to the Manager giving written notice of its resignation to the
Members, and upon delivery of such notice the resignation of the Manager will take
effect upon receipt of notice thereof by the Members or at such later time as shall
be specified in such notice. Unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 7.10 Meetings of the Managers.
(a) The Managers may, but need not, hold annual or regular meetings at such time and
places as they shall determine. Special meetings of the Managers may be called by
any Manager by written notice to all the Managers, given not less than 5 days nor
more than 15 days before the date of the meeting, and stating the place, time, date,
and purpose of such special meeting. The place, time, and date of all meetings shall
be reasonably convenient for all Managers.
(b) Each Manager shall have one vote, which must be exercised by the Manager
personally and not by proxy.
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(c) Minutes of each meeting of the Managers shall be prepared, circulated to the
Managers, and retained with the records of the Company.
(d) Notwithstanding the foregoing provisions, the Managers may delegate to one or
more of their number the right and power to deal with any aspect of the Company’s
business and/or take any action that the Managers are authorized to take, without
the further consent of the other Managers.
Section 7.11 Action Without a Meeting.
Action required or permitted to be taken by the Managers may be taken without a meeting if the action
is evidenced by one or more written consents describing the action taken, signed by each Manager
and delivered to the Company for inclusion in the minutes or for filing with the Company records.
Action taken pursuant to this Section 7.11 is effective when all Managers entitled to vote have signed
the consent unless the consent specifies a different effective date. The record date for determining
Managers entitled to take action without a meeting shall be the date the first Manager signs a written
consent.
Section 7.12 General Vote Requirements of Managers.
Except as otherwise specified in this Agreement, any matter in this Agreement that specifically calls
for the Managers vote, consent, or approval will be voted on using the unanimous standard. If there
is a vote, consent, or approval of the Managers where a Manager has an adverse or conflicting interest
regarding the matter, and such adverse or conflicting interest is unique and personal to such Manager
as compared to all the other Managers, then the adverse/conflicting Manager (and its respective voting
power) shall recuse herself from the vote, consent, or approval.
Section 7.13 Officers.
(a) The Manager may, from time to time, designate one or more individuals to be
officers of the Company. No officer need be a resident of the State of Colorado, a
Unitholder, or a Manager. Any officers so designated shall have such authority and
perform such duties as the Manager may, from time to time, delegate to them. The
Manager may assign titles to particular officers. Unless the Manager decides
otherwise, if the title is one commonly used for officers of a business corporation
formed under the Colorado Business Corporation Act (or any successor statute
thereto), the assignment of such title shall constitute the delegation to such officer
of the authority and duties that normally are associated with that office, subject to
any specific delegation of authority and duties made to such officer by the Manager
and subject to all standards of care and restrictions applicable to the Members and
the Manager hereunder. Each officer shall hold office until her successor shall be
duly designated and shall qualify, until her death, or until she shall resign or shall
have been removed in the manner hereinafter provided. Any number of offices may
be held by the same person. The salaries or other compensation, if any, of the
officers and agents of the Company shall be fixed from time to time by the Manager.
(b) Any officer may resign as such at any time. Such resignation shall be made in
writing and shall take effect at the time specified therein or, if no time is specified,
at the time of its receipt by the Manager. The acceptance of a resignation shall not
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be necessary to make it effective unless expressly so provided in the resignation.
Any officer may be removed as such, either with or without cause, by the Manager
whenever, in its judgment, the best interests of the Company will be served thereby;
provided, however, that such removal shall be without prejudice to the contract
rights, if any, of the Person so removed. Any vacancy occurring in any office of the
Company (other than Manager) may be filled by the Manager.
Article Eight – Meetings of Members
Section 8.01 Meetings.
(a) All meetings of the Members shall be held at the principal place of business of the
Company or at such other place within or outside the State of Colorado as shall be
specified or fixed in the notices or waivers of notice thereof; provided that any or
all Members may participate in any such meeting by means of conference
telephone, video conference, or similar communications equipment, where all
Persons participating in the meeting can hear each other, and participation in such
meeting shall constitute attendance and presence in person at such meeting except
where a Person participates in the meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting is not lawfully called
or convened.
(b) An annual meeting of the Members for the transaction of such business as may
properly come before the meeting may be held at such place, within or outside the
State of Colorado, on such date and at such time as the Manager shall fix and set
forth in the notice of the meeting. Annual meetings of the Members are not required
but are desired. Special meetings of the Members may be called at any time by the
Manager or by a Majority of the Members.
(c) Written or printed notice stating the place, day, and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is called,
shall be given by, or at the direction of, the person calling the meeting, not less than
10 nor more than 30 days before the date of the meeting, to each Member of record
entitled to vote at such meeting.
(d) The date on which notice of a meeting of Members is mailed or the date on which
the Manager declares a distribution, as the case may be, shall be the record date for
the determination of the Members entitled to notice of, or to vote at, such meeting,
including any adjournment thereof, or the Unitholders entitled to receive such
distribution.
(e) A quorum shall be present at a meeting of the Members if a Majority in Interest of
the Members is represented at the meeting in person or by proxy. With respect to
any matter, other than a matter for which the affirmative vote of the holders of a
specified portion of the Units of all Members entitled to vote is required by the Acts
or this Agreement, the affirmative vote of a quorum shall be the act of the Members.
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Section 8.02 Voting List.
The Manager shall make, at least 10 days before each meeting of Members, a complete list of the
Members entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order
with the address of, and the Units held by, each, which list, for a period of 10 days prior to such
meeting, shall be kept on file for the Company and shall be subject to inspection by any Member at
any time during usual business hours. Such list also shall be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any Member during the entire time of
the meeting. The original Membership records shall be prima facie evidence as to the Members who
are entitled to examine such list or to vote at any meeting of Members. Failure to comply with the
requirements of this Section 8.02 shall not affect the validity of any action taken at the meeting.
Section 8.03 Proxies.
A Member may vote either in person or by proxy executed in writing by the Member. All proxies and
ballots shall be delivered to the Manager, who shall decide all questions relating to the qualification
of voters, the validity of the proxies, and the acceptance or rejection of votes.
The death or incapacity or revocation of the Member appointing a proxy does not affect the right of
the Manager to accept the proxy’s authority unless notice of the death or incapacity or revocation is
received by the Manager before the proxy exercises its authority under the appointment.
Subject to this Section 8.03 and any express limitation on the proxy’s authority appearing on the
appointment form, the Manager is entitled to accept the proxy’s vote or other action as that of the
Member making the appointment.
The Company is entitled to reject a vote, consent, waiver, proxy appointment, or proxy appointment
revocation if the Manager, acting in good faith, has reasonable basis for doubt about the validity of
the signature on it or about the signatory’s authority to sign for the Member. Neither the Company
nor its Manager or officers, if any, nor any agent who accepts or rejects a vote, consent, waiver, proxy
appointment, or proxy appointment revocation in good faith and in accordance with the standards of
this Section 8.03 shall be liable in damages for the consequences of the acceptance or rejection.
Section 8.04 Conduct of Meetings.
All meetings of the Members shall be presided over by the Manager, who shall determine the order
of business and the procedure at the meeting, including such regulation of the manner of voting and
the conduct of discussion as seem to the Manager to be in order, subject to the requirements of this
Agreement.
Section 8.05 Action by Written Consent.
Action required or permitted to be taken by the vote, approval, or consent of the Members or at a
meeting of the Members may be taken without a meeting if the action is evidenced in writing
describing the action taken, duly executed by the Members having the sufficient affirmative vote to
pass the action, and delivered to the Company for inclusion in the minutes or for filing with the
Company records.
Section 8.06 General Vote Requirements of Members.
Except as otherwise specified in this Agreement, any matter in this Agreement or in the Acts that calls
for the Members vote, consent, or approval, including without limitation, any act of the Company that
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is not in the ordinary course of the business of the Company and not otherwise specifically designated
as a Manager decision, will be voted on using the Majority of the Members. If there is a vote, consent,
or approval of the Members where a Member has an adverse or conflicting interest regarding the
matter and such adverse or conflicting interest is unique and personal to such Member as compared
to all the other Members (as determined in the sole discretion of the Manager), then the
adverse/conflicting Member (and its respective Units) shall recuse herself from the vote, consent, or
approval.
Article Nine – Rights and Duties of Members and Managers; Breaches;
Covenant of Confidentiality
Section 9.01 Duty of Care of the Managers.
In performing its duties hereunder, each Manager and officer (if any) of the Company shall, subject
to the provisions of this Article, discharge its duties in accordance with its duty of care in the conduct
and winding up of the business of the Company, which duty shall be limited to refraining from
engaging in grossly negligent or reckless conduct, intentional misconduct, fraud, or a knowing
violation of the law.
The Managers do not, in any way, guarantee the return of the Member’s Capital Contributions or a
profit for the Members from the operations of the Company or otherwise, and will not be liable for
same, if, in connection with such action or omission, it performed its duties of the position in
compliance with this Section 9.01.
A Manager, or officer shall not be liable to the Company or its Members for any actions it takes or
omits to take as a Manager or officer, as the case may be, if, in connection with such action or
omission, it performed its duties of the position in compliance with this Section 9.01.
This Section 9.01 is intended to modify the duties set forth in C.R.S. § 7-80-404.
Section 9.02 Duty of Loyalty of the Managers.
The Manager’s duty of loyalty to the Company and Members is limited to the duty to not deal with
the Company in the conduct or winding up of the Company business as, or on behalf of, a party having
an interest adverse to or in conflict with the Company.
The Manager has no duty to refrain from, and has the right to, engage in other businesses and activities
that may indirectly or directly compete with the business of the Company.
The Manager has no duty to present any particular opportunity to the Company, even if the character
of the opportunity is one that could be taken by the Company, and has the right to appropriate any
such opportunity for herself.
This Section 9.02 is intended to modify the duties set forth in C.R.S. § 7-80-404.
Section 9.03 Compliance with and Exceptions to Duty of Care and Duty of Loyalty.
The Managers’ duties of care and duties of loyalty specified above are deemed complied with
pursuant to the following terms and/or are subject to the following exceptions.
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(a) A Manager shall not be deemed to have breached any of the duties in Section 9.01
or Section 9.02 if a Majority of the Members (without regard to the interested
Manager’s interest/Units as a Member, if any), knowing the material facts of the
transaction and the Manager’s interest, consent to, authorize, approve, or ratify the
transaction.
(b) A Manager does not violate a duty or obligation to the Company solely because the
Manager’s conduct furthers the Manager’s own interest.
(c) A Manager may lend money to, and transact other business with, the Company,
provided that any such transaction is made on terms and conditions that are
approved as by a Majority of the Members (without regard to the interested
Manager’s interest/Units as a Member, if any). The rights and obligations of a
Manager who lends money to, and transacts business with, the Company are the
same as those of a Person who is not a Manager, subject to other applicable law and
the other provisions of this Agreement.
(d) The Managers have no exclusive duty to the Company or the Members to act on
behalf of the Company.
(e) The Managers have no exclusive duty or liability to the Company or Members as a
result of engaging in or possessing an interest in other business ventures of any and
every nature and description, independently or with others.
(f) Neither the Company nor the Members have, and each of them hereby expressly
waives, any right by virtue of this Agreement, to share or participate in any other
permitted/allowed investments or activities of any Manager, or to the income or
profits derived therefrom.
This Section 9.03 is intended to modify the duties set forth in C.R.S. § 7-80-404.
Section 9.04 Standards by Which Duties and Obligations are to be Measured.
In performing its duties hereunder, each Manager shall be entitled to rely on information, opinions,
reports, or statements of the following Persons or groups unless it has knowledge concerning the
matter in question that would cause such reliance to be unwarranted:
(a) One or more employees or other agents of the Company whom the Manager
reasonably believes to be reliable and competent in the matters presented; and
(b) Any attorney, public accountant, or other Person as to matters that the Manager
reasonably believes to be within such Person’s professional or expert competence.
A Manager shall not be liable to the Company for any action it takes or omits to take as a Manager if,
in connection with such action or omission, it performed its duties of the position in compliance with
this Section 9.05.
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Section 9.05 Information.
(a) In addition to the other rights specifically set forth in this Agreement, each Member,
upon reasonable written demand that states the purpose of the demand, shall have
the right, at her cost and expense during normal business hours and subject to the
Member’s demonstration (in the reasonable discretion of the Manager) of a purpose
reasonably related to the Member’s interest as a Member of the Company, to:
(1) Inspect and copy the records of the Company, as described in Section 12.01
of this Agreement; and
(2) Obtain from the Company from time to time: (A) true and full information
regarding the business and financial condition of the Company and any
other information regarding the affairs of the Company to the extent
permitted under the Acts; and (B) promptly after becoming available, a copy
of the Company’s federal, state, and local income tax returns for the last
three years.
(b) Each Unitholder agrees to hold in strict confidence any information she receives
regarding the Company and shall not disclose such information to any Person, other
than another Unitholder, except for disclosures: (i) compelled by law (but the
Unitholder must notify the Company promptly of any request for that information
before disclosing it, if practicable); (ii) to advisors or representatives of the
Unitholder or Persons to which that Unitholder’s Units may be Transferred as
permitted by this Agreement but only if the recipients have agreed to be bound by
the provisions of this Section 9.06(b); or (iii) of information that the Unitholder
also has received from a source independent of the Company; provided that the
Unitholder reasonably believes that such source obtained the information without
breach of any obligation of confidentiality. The Unitholders acknowledge that
breach of the provisions of this Section 9.06(b) may cause irreparable injury to the
Company for which monetary damages are inadequate, difficult to compute, or
both. Accordingly, the Unitholders agree that the provisions of this Section 9.06(b)
may be enforced by specific performance.
Section 9.06 Limitation on Liability of Managers.
Except as otherwise provided in this Agreement, the Managers are not liable under a judgment,
decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the Company
as provided in C.R.S. § 7-80-705.
Section 9.07 Breach by Unitholders
(a) Any Unitholder who does any of the following will be considered to have breached
and will be in default of this Agreement: Attempting an unpermitted withdrawal
from the Company or any unpermitted Transfer; Materially and detrimentally
interfering in the management of the Company’s business; Engaging in conduct
that results in the Company losing its elected tax status; Owning Units that become
subject to a charging order, attachment, garnishment, or similar legal proceedings;
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Termination of any “employment” or services agreement between the Company
and the Unitholder; Any material breach of this Agreement; Failure to make a
required Additional Assessment; Breaching any confidentiality provisions of this
Agreement; or Failing to discharge a legal duty to the Company (except as
otherwise permitted by this Agreement).
(b) Any Unitholder who breaches this Agreement will be liable to the Company for
damages caused by the breach. The Company may offset damages against any
payments, distributions, or return of capital to the Unitholder who has breached this
Agreement by delivering Notice to the breaching Unitholder with an explanation
of the damages to be offset.
(c) If an event of default occurs, the Manager will deliver a Notice to the defaulting
Unitholder with an explanation of the default. The defaulting party will have 30
days from the date of Notice to cure the default. The Manager has sole discretion
to determine if the breach has been cured by the deadline. If the defaulting Party
fails to cure the default as provided herein, then the non-defaulting parties may
exercise the procedures and rights regarding expulsion and/or deadlock specified
in this Agreement.
(d) If a Unitholder breaches this Agreement and fails to cure as specified in (c) above,
the Unitholder may be expelled subject to the following requirements:
(1) The Majority of Members (without regard to any Units held by the
defaulting Unitholder) votes to expel the defaulted Unitholder.
(2) The Manager delivers notice to the defaulted Unitholder with an
explanation and reason for expulsion.
(3) The Company or the other Members (on a proportional basis to their Profits
Interests, if more than one Member desires to participate), redeeming or
purchasing from the defaulted Unitholder, for an amount pursuant to the
price and payment terms of Section 14.03(b) and subject to an additional
10% discount and less any damages pursuant to (b) above, the breaching
Unitholder’s Units. An expelled Unitholder loses all rights as, and ceases to
be, a Unitholder of the Company.
(4) Upon the expulsion of the breaching Unitholder and the
redemption/purchase of her Units, the remaining Unitholders’ Capital
Accounts, interest percentages, and Units will be equitably and
proportionally adjusted on the Company’s books and records, respectively,
as a result of the redemption/purchase.
(5) An expelled Unitholder loses all rights as, and ceases to be, a Unitholder
and/or Member (as the case may be) of the Company.
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Section 9.08 Confidentiality.
The Managers, Members, and Unitholders agree to the following.
(a) “Confidential Information” means all nonpublic information concerning or arising
from the Company’s business and/or all information learned or developed during
such Persons time with the Company that derives independent economic value from
being not generally known or readily ascertainable by other persons who could
obtain economic value from its disclosure or use. Confidential Information includes
without limitation, trade secrets as defined in C.R.S. 7-74-102(4).
(b) The Unitholders, Members, and Managers covenant to not, at any time, directly or
indirectly, use, disclose, Misappropriate (as defined in C.R.S. § 7-74-102(2)), or
otherwise communicate any Confidential Information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever, and
not use Confidential Information for personal or financial gain, personally or for
any other person or entity; and agrees to not permit unauthorized access to
Confidential Information at any time, to anyone, whether or not employed or
retained by the Company, and will take all reasonable steps to prevent unauthorized
dissemination of the Confidential Information.
Article Ten – Indemnification
Section 10.01 Right to Indemnification.
Subject to the limitations and conditions as provided in this Article Ten, each Person who was or is
made a party or is threatened to be made a party to, or is involved in, any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or
investigative (hereinafter a “Proceeding”), or any appeal in such a Proceeding, or any inquiry or
investigation that could lead to such a Proceeding, by reason of the fact that she, or a Person for whom
she is the legal representative, is or was a Member or Manager of the Company or while a Member
or Manager of the Company is or was serving at the request of the Company as a manager, director,
officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another
foreign or domestic limited liability company, corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise shall be indemnified by the Company
to the fullest extent permitted by the Acts, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the Company to provide
broader indemnification rights than said law permitted the Company to provide prior to such
amendment) against judgments, penalties (including excise and similar taxes and punitive damages),
fines, settlements, and reasonable expenses (including, without limitation, attorney’s fees) actually
incurred by such Person in connection with such Proceeding, and indemnification under this Article
Ten shall continue as to a Person who has ceased to serve in the capacity that initially entitled such
Person to indemnity hereunder. The rights granted pursuant to this Article Ten shall be deemed
contract rights, and no amendment, modification, or repeal of this Article Ten shall have the effect of
limiting or denying any such rights with respect to actions taken or Proceedings arising prior to any
such amendment, modification, or repeal. It is expressly acknowledged that the indemnification
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provided in this Article Ten does not include indemnification for such persons willful or gross
negligence, intentional misconduct, fraud, deceit, or under theories of strict liability.
Section 10.02 Advance Payment.
The right to indemnification conferred in this Article Ten shall include the right to be paid or
reimbursed by the Company the reasonable expenses incurred by a Person of the type entitled to be
indemnified under Section 10.01 who 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 her good-faith
belief that she has met the standard of conduct necessary for indemnification under this Article Ten
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
Article Ten or otherwise.
Section 10.03 Indemnification of Officers, Employees, and Agents.
The Company may, in the Manager’s discretion, but is not obligated to, indemnify and advance
expenses to an employee or agent of the Company to the same extent and subject to the same
conditions under which it may indemnify and advance expenses to Members or Managers under this
Article Ten. The Company also may, but is not obligated to, indemnify and advance expenses to
Persons who are not or were not employees or agents of the Company but who are or were serving at
the request of the Company as a manager, director, officer, partner, venturer, proprietor, trustee,
employee, agent, or similar functionary of another foreign or domestic limited liability company,
corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other
enterprise against any liability asserted against her and incurred by her in such a capacity or arising
out of her status as such a Person to the same extent that it may indemnify and advance expenses to
Members under this Article Ten.
Section 10.04 Appearance as a Witness.
Notwithstanding any other provision of this Article Ten, the Company may pay or reimburse expenses
incurred by a Member or Manager in connection with her appearance as a witness or other
participation in a Proceeding at a time when she is not a named defendant or respondent in the
Proceeding.
Section 10.05 Nonexclusivity of Rights.
The right to indemnification and the advancement and payment of expenses conferred in this Article
Ten shall not be exclusive of any other right that a Member or other Person indemnified pursuant to
Section 10.03 may have or hereafter acquire under any law (common or statutory), a provision of the
Articles of Organization or this Agreement, another agreement, vote of Members, or otherwise.
Section 10.06 Insurance.
The Company may purchase and maintain insurance, at its expense, to protect itself, its Members,
Managers, and any Person who is or was serving as an employee or agent of the Company or is or
was serving at the request of the Company as a manager, director, officer, partner, venturer, proprietor,
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trustee, employee, agent, or similar functionary of another foreign or domestic limited liability
company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or
other enterprise against any expense, liability, or loss, whether or not the Company would have the
power to indemnify such Person against such expense, liability, or loss under this Article Ten.
Section 10.07 Savings Clause.
If this Article or any portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Company nevertheless shall indemnify and hold harmless each Member,
Manager, or any other Person indemnified pursuant to this Article Ten as to costs, charges, expenses
(including attorney’s fees), judgments, fines, and amounts paid in settlement with respect to any
action, suit, or proceeding, whether civil, criminal, administrative, or investigative, to the full extent
permitted by any applicable portion of this Article Ten that shall not have been invalidated and to the
fullest extent permitted by applicable law.
Article Eleven – Taxes
Section 11.01 Tax Returns.
The Manager shall cause to be prepared and timely filed all tax returns, including federal and state
income tax information returns, state and local sales and use tax returns, property tax returns, and
employment tax returns, required to be filed by the Company pursuant to the Code and all applicable
laws of each jurisdiction in which the Company does business. Within a reasonable time after the
filing of the Company’s tax returns, the Manager will furnish the Unitholders with information
necessary for the preparation of their tax returns, and, upon request, copies of all returns filed by the
Company, or summaries thereof, shall be furnished to the Unitholders within a reasonable time after
the filing thereof.
Section 11.02 Partnership Representative.
(a) Appointment.
The Members hereby appoint the Manager specified in the Organizational Summary
& Consent as the “partnership representative” (the “Partnership Representative”) as
provided in Code Section 6223(a) (as amended by the BBA). The Partnership
Representative may resign at any time. Upon any such resignation, a Majority of the
Members of the Company shall appoint a new Partnership Representative.
(b) Tax Examinations and Audits.
The Partnership Representative is authorized and required to represent the Company
(at the Company’s expense) in connection with all examinations of the Company’s
affairs by Taxing Authorities, including resulting administrative and judicial
proceedings, and to expend Company funds for professional services and costs
associated therewith. Each Member agrees that such Member will not independently
act with respect to tax audits or tax litigation of the Company, unless previously
authorized to do so in writing by the Partnership Representative, which authorization
may be withheld by the Partnership Representative in its sole and absolute discretion.
The Partnership Representative (with the advice of the Company’s CPA and attorney)
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shall have sole discretion to determine whether the Company (either on its own behalf
or on behalf of the Members) will contest or continue to contest any tax deficiencies
assessed or proposed to be assessed by any Taxing Authority.
(c) BBA Elections.
To the extent permitted by applicable law, the Company will not elect into the
partnership audit procedures enacted under Section 1101 of the BBA (the “BBA
Procedures”) for any tax year beginning before January 1, 2018, and, to the extent
permitted by applicable law and regulations, the Company will annually elect out of
the BBA Procedures for tax years beginning on or after January 1, 2018 pursuant to
Code Section 6221(b) (as amended by the BBA). For any year in which applicable
law and regulations do not permit the Company to elect out of the BBA Procedures,
then within forty-five (45) days of any notice of final partnership adjustment, the
Company will elect the alternative procedure under Code Section 6226, as amended
by Section 1101 of the BBA, and furnish to the Internal Revenue Service and each
Member during the year or years to which the notice of final partnership adjustment
relates a statement of the Member’s share of any adjustment set forth in the notice of
final partnership adjustment.
(d) Tax Returns and Tax Deficiencies.
Each Member agrees that such Member shall not treat any Company item
inconsistently on such Member’s federal, state, foreign or other income tax return with
the treatment of the item on the Company’s return. Any deficiency for taxes imposed
on any Member (including penalties, additions to tax or interest imposed with respect
to such taxes and taxes imposed pursuant to Code Section 6226 as amended by the
BBA) will be paid by such Member and if required to be paid (and actually paid) by
the Company, will be recoverable from such Member.
(e) Income Tax Elections.
Except as otherwise provided herein, the Partnership Representative shall have (with
the advice of the Company’s CPA) sole discretion to make any determination
regarding income tax elections it deems advisable on behalf of the Company;
provided, that the Partnership Representative will make an election under Code
Section 754, if requested in writing by another Member, provided the Company may,
in its discretion, require the requesting Member to pay the costs of tax reporting and
preparation associated with such election.
Article Twelve – Books, Records, Reports, and Bank Accounts
Section 12.01 Maintenance of Books.
(a) The Company shall maintain the following books and records and such other books
and records as it deems necessary or appropriate:
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(1) True and full information regarding the business and financial condition of
the Company, including written resolutions and minutes, if any, of the
Company;
(2) A copy of the Company’s federal, state, and local income tax returns for the
last three years;
(3) A current list of the name and last-known business, residence, or mailing
address of each Unitholder and Manager;
(4) A copy of the Company’s Articles of Organization and a copy of this
Agreement;
(5) True and full information regarding the amount of cash and a description
and statement of the agreed value of any other property or services
contributed by each Unitholder, and that each Unitholder has agreed to
contribute in the future, and the date on which each became a Unitholder.
(b) On or before the due date of the Company’s federal tax return (including extensions
thereof) for each Fiscal Year, there shall be delivered to each Unitholder a statement
setting forth the Unitholder’s distributive share of the Company’s income, gain,
loss, deduction, or credit required to be shown on the Company’s federal tax return
and, to the extent provided for by form or accompanying instructions, any
additional information that may be required to apply particular provisions of
Subtitle A of the Code to the Unitholder with respect to items related to the
Company.
Section 12.02 Reports.
In addition to the tax returns, or summaries thereof, required to be provided under Section 12.01, the
Manager shall furnish to the Members, within 60 days after the end of each Fiscal Year during the
term of the Company, an annual report containing: (a) a balance sheet as of the end of such Fiscal
Year, statements of income, Unitholders’ equity and changes in financial position, and a cash flow
statement on a federal income tax basis; and (b) a report of distributions to each Unitholder for the
period covered by the report. If requested by a Majority of the Members, the Manager shall furnish
the Company and the Members with a report, reviewed or certified by the Company’s independent
accountants, containing the information described in the preceding sentence.
Section 12.03 Accounts.
The Manager or officers, if any, shall establish and maintain one or more separate bank and
investment accounts and arrangements for Company funds in the Company name with financial
institutions and firms that the Manager or officers, if any, shall determine. The Manager and officers,
if any, shall not commingle the Company’s funds with the funds of any Person.
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Article Thirteen – Transfers of Interests
Section 13.01 Restriction on Transfers.
Except as otherwise permitted or required by this Agreement, a Unitholder shall not have the right or
power to Transfer all or any part of her Units or voluntarily Withdrawal from the Company. In the
event of a Transfer of Units, the transferee, in all cases, shall be bound by the terms of this Agreement,
including, without limitation, the provisions of this Article Thirteen. Each Unitholder acknowledges
and agrees to the reasonableness of this restriction on Transfer and/or Withdrawal. Accordingly, the
restrictions on Transfer contained herein are specifically enforceable.
Section 13.02 Permitted Transfers.
Subject to the conditions and restrictions set forth in Section 13.03 hereof, a Member may at any time
Transfer all or any portion of her Units:
(a) With the express written consent of a Majority of the Members (without regard for
the transferring Unitholder’s Units), which consent may be withheld, or
conditionally or unconditionally granted, as the Members shall determine in their
absolute discretion.
(b) To a Member.
(c) To a trust the current beneficiaries of which are solely the Member or members of
the Member’s Immediate Family (a “Family Trust”); provided, however, that the
Member is the sole trustee of such trust, and upon the death or incapacity of the
Member, the Family Trust will be converted to a Unitholder without any rights of
a Member.
(d) To an entity that is wholly owned by Persons to whom Units may be Transferred
under the foregoing paragraphs of this Section 13.02; provided, however, that if
any interest in such entity ceases to be so owned, the entity shall be deemed to have
withdrawn from the Company.
Any such Transfer is referred to in this Agreement as a “Permitted Transfer.”
Section 13.03 Conditions to Permitted Transfers.
A Transfer shall not be treated as a Permitted Transfer under Section 13.02 hereof unless and until
the following conditions are satisfied; provided, however, that any such conditions may be waived by
consent of the Majority of the Members:
(a) Except in the case of a Transfer of Units involuntarily by operation of law, the
transferor and transferee shall execute and deliver to the Company such documents
and instruments of conveyance as may be necessary or appropriate in the opinion
of counsel to the Company to effect such Transfer and to confirm the agreement of
the transferee to be bound by the provisions of this Agreement. In the case of a
Transfer of Units involuntarily by operation of law, the Transfer shall be confirmed
by presentation to the Company of legal evidence of such Transfer, in form and
substance satisfactory to counsel to the Company. In all cases, the Company shall
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be reimbursed by the transferor and/or transferee for all costs and expenses that the
Company reasonably incurs in connection with such Transfer, including reasonable
attorney’s fees.
(b) Except in the case of a Transfer involuntarily by operation of law, the transferor
shall furnish to the Company an opinion of counsel, at the transferor’s expense,
which counsel and opinion shall be satisfactory to the Company, that the Transfer
will not cause the Company to terminate for federal income tax purposes.
(c) The transferor and transferee shall furnish the Company with the transferee’s
taxpayer identification number, and any other information reasonably necessary to
permit the Company to file all required federal, state, and local tax returns and other
legally required information statements or returns. Without limiting the generality
of the foregoing, the Company shall not be required to make any distribution
otherwise provided for in this Agreement with respect to any Transferred Units
until it has received such information.
(d) Except in the case of a Transfer of Units involuntarily by operation of law, either:
(i) such Units shall be registered under the Securities Act of 1933, as amended, and
any applicable state securities laws; or (ii) the transferor shall provide an opinion
of counsel, at transferor’s expense, which opinion and counsel shall be satisfactory
to the Company, to the effect that such Transfer is exempt from all applicable
registration requirements and that such Transfer will not violate any applicable
federal or state securities laws regulating the Transfer and will not disrupt,
invalidate, or interfere with any tax election or treatment of the Company.
(e) If, as of the proposed effective date of a Transfer, there is a mortgage or other
agreement in effect by which the Company or any of its assets are bound that
permits the holder of indebtedness secured thereby to accelerate the indebtedness
in the event of the Transfer of Units or more than a specified number or percentage
of Units, then, without the consent of the Manager and a Majority of the Members,
no Unitholder may Transfer any Units to the extent such Transfer would entitle the
holder of such indebtedness to accelerate the indebtedness.
Section 13.04 Right of First Refusal.
In addition to the other limitations and restrictions set forth in this Article Thirteen, except as permitted
by Section 13.02 hereof, no Unitholder shall Transfer all or any portion of her Units (the “Offered
Units”) unless such Unitholder (the “Seller”) first offers to sell the Offered Units pursuant to the terms
of this Section 13.04.
(a) No Transfer may be made under this Section 13.04 unless the Seller has received a
bona fide written offer (the “Purchase Offer”) from a Person (the “Purchaser”) to
purchase the Offered Units for a purchase price (the “Offer Price”) denominated
and payable in United States dollars at closing or according to specified terms, with
or without interest, which offer shall be signed by the Purchaser and shall be
irrevocable for a period ending no sooner than the business day following the end
of the Offer Period, as hereinafter defined.
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(b) Prior to making any Transfer that is subject to the terms of this Section 13.04, the
Seller shall give to the Company and the other Members written notice (the “Offer
Notice”), which shall include a copy of the Purchase Offer and an offer to sell the
Offered Units to the Company and the other Members for the Offer Price, payable
according to the same terms as (or more favorable terms than) those contained in
the Purchase Offer; provided that the offer shall be made without regard to the
requirement of any earnest money or similar deposit required of the Purchaser prior
to closing, without regard to any security (other than the Offered Units) to be
provided by the Purchaser for any deferred portion of the Offer Price, and without
regard to any consideration other than cash.
(c) The offer to the Company and the other Members shall be irrevocable for a period
ending at 11:59 p.m. (local time at the Company’s principal office) on the 45th day
following the date of the Offer Notice (the “Offer Period”).
(d) At any time during the first 20 days of the Offer Period, the Manager, upon the
consent of a Majority of the Members, may accept the offer in its entirety on behalf
of the Company. If the Company does not accept the offer within such 20-day
period, any Member (other than the Seller) may accept the offer as to that portion
of the offered Units that corresponds to the ratio of her Units to the total Units held
by all Members (other than the Seller) by giving written notice of such acceptance
to the Seller on or before the expiration of the Offer Period. If less than all of the
Members desire to accept the offer, the interested Members may purchase all
available Offered Units. In the event that the Members, in the aggregate, accept the
offer with respect to all of the Offered Units, the offer shall be deemed to be
accepted. If the Members do not accept the offer as to all of the Offered Units during
the Offer Period, the offer shall be deemed to be rejected in its entirety.
(e) In the event that the offer is accepted, the closing of the sale of the Offered Units
shall take place within 30 days after the offer is accepted or, if later, the date of
closing set forth in the Purchase Offer. The Seller, the Manager, and the accepting
Members, if applicable, shall execute such documents and instruments as may be
necessary or appropriate to effect the sale of the Offered Units pursuant to the terms
of the offer and this Article Thirteen.
(f) If the offer is not accepted in the manner provided hereinabove, the Seller may sell
the Offered Units to the Purchaser at any time within 60 days after the last day of
the Offer Period; provided that such sale shall be made on terms no more favorable
to the Purchaser than the terms contained in the Purchase Offer; and provided
further that such sale complies with other terms, conditions, and restrictions of this
Agreement that are applicable to sales of Units. In the event that the Offered Units
are not sold in accordance with the terms of the preceding sentence, the Offered
Units shall again become subject to all of the conditions and restrictions of this
Section 13.04.
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Section 13.05 Prohibited Transfers.
Any purported Transfer of Units that is not a Permitted Transfer or made in conformity with Section
13.04 shall be null and void and of no effect whatsoever; provided that if the Company is required to
recognize a Transfer that is not a Permitted Transfer (or if the Company, in its sole discretion, elects
to recognize a Transfer that is not a Permitted Transfer), the Units Transferred shall be strictly limited
to the rights as set forth in Section 13.06.
In the case of a Transfer or attempted Transfer of Units that is not a Permitted Transfer or made in
conformity with Section 13.04, the parties engaging or attempting to engage in such Transfer shall be
liable to indemnify and hold the Company and the other Members harmless from all costs, liabilities,
and damages that any of such indemnified Persons may incur (including, without limitation,
incremental tax liability and attorney’s fees and expenses) as a result of such Transfer or attempted
Transfer and efforts to enforce the indemnity granted hereby.
Section 13.06 Rights of Unadmitted Assignees and Transferor Members.
(a) A Person who acquires one or more Units through a Permitted Transfer but who is
not admitted as a substituted Member pursuant to Section 13.07 hereof shall be
entitled only to allocations and distributions with respect to such Units in
accordance with this Agreement, which allocations and distributions may be
applied (without limiting any other legal or equitable rights of the Company or the
other Members) to satisfy any debts, obligations, or liabilities for damages that the
transferor or transferee of such Units may have to the Company or the other
Members. Such Person shall have no right to any information or accounting of the
affairs of the Company, shall not be entitled to inspect the books or records of the
Company, and shall not have any of the rights of a Member under the Acts or this
Agreement (including, without limitation, any voting rights) except the economic
rights of a Unit.
(b) Any Member who has Transferred some or all of her Units through a Permitted
Transfer or in conformity with Section 13.04 shall automatically cease (as of the
date of such Transfer) to have any rights as a Member in the Company as to the
Units Transferred and shall be relieved of all obligations and liabilities hereunder
except those that have accrued or that are due and payable prior to the date of the
Permitted Transfer.
Section 13.07 Admission of Transferee as Member.
Subject to the other provisions of this Article Thirteen, the transferee of Units in the Company may
be admitted to the Company as a substituted Member only upon satisfaction of the conditions set forth
below in this Section 13.07:
(a) The Majority of Members consents in writing to such admission; provided,
however, that such consent is not required in the case of any Units acquired by an
existing Member in accordance with Section 13.04 or Section 13.02;
(b) The Units with respect to which the transferee is being admitted were acquired by
means of a Permitted Transfer;
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(c) The transferee becomes a party to this Agreement as a Member and executes such
documents and instruments as the Manager may reasonably request to confirm such
transferee as a Member in the Company and such transferee’s agreement to be
bound by the terms and conditions hereof; and
(d) The transferee pays or reimburses the Company for all reasonable legal, filing, and
publication costs and expenses, if any, that the Company incurs in connection with
the admission of the transferee as a Member with respect to the Transferred Units.
A person to whom all of a Member’s membership interest has been assigned or transferred and who
has been admitted as a Member has all the rights and powers and is subject to all the restrictions and
liabilities of the assignor or transferor with respect to the portion of the membership interest assigned
or transferred. The admission of the assignee or transferee terminates the assignor’s or transferor’s
rights and powers as a Member with respect to the portion of the membership interest assigned or
transferred and releases the assignor or transferor from liability to the Company other than for
liabilities under C.R.S. § 7-80-502 or C.R.S. § 7-90-606 of the Act.
Section 13.08 Distributions and Applications in Respect to Transferred Units.
If any Units are sold, assigned, or Transferred during any accounting period in compliance with the
provisions of this Article Thirteen, Profits, Losses, each item thereof, and all other items attributable
to the Transferred Units for such period shall be divided and allocated between the transferor and the
transferee by taking into account their varying interests during the period in accordance with Code
section 706(d), using any conventions permitted by law and selected by the Manager (upon the advice
of the Company’s accountant). All distributions on or before the date of such Transfer shall be made
to the transferor, and all distributions thereafter shall be made to the transferee. Solely for purposes
of making such allocations and distributions, the Company shall recognize such Transfer not later
than the end of the calendar month during which the Company is given notice thereof and all
conditions precedent for such Transfer have been satisfied. If the Company does not receive a notice
stating the date such Units were Transferred and such other information as the Manager may
reasonably require within 30 days after the end of the accounting period during which the Transfer
occurs, then all of such items shall be allocated, and all distributions shall be made, to the Person who,
according to the books and records of the Company on the last day of the accounting period during
which the Transfer occurs, was the owner of the Units. Neither the Company nor the Manager shall
incur any liability for making allocations and distributions in accordance with the provisions of this
Section 13.08, whether or not the Manager or the Company has knowledge of any Transfer of
ownership of any Units.
Article Fourteen – Withdrawal of Unitholder
Section 14.01 Withdrawal.
A Unitholder shall be deemed to have withdrawn from the Company upon the resignation,
Bankruptcy, death, termination of existence, expulsion, dissolution and commencement of winding-
up, or incompetency (as determined by decree of a court of competent jurisdiction) of the Unitholder,
or if the Unitholder is an entity (whether a Trust, LLC, Inc., LLP, or otherwise) when its designated
representative resigns, is removed, dies, is determined incapacitated, or ceases to have a managerial
or ownership interest in such entity, or upon the occurrence of any other event that causes the
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Unitholder to be deemed to have withdrawn from the Company under the terms of this Agreement
(an “Event of Withdrawal”). Notwithstanding the foregoing, in no event shall an Event of Withdrawal
be deemed to have occurred merely by reason of a Permitted Transfer by a Unitholder. A Unitholder
who has withdrawn from the Company is referred to herein as a “Withdrawing Unitholder.”
Section 14.02 Status of a Holder of Withdrawing Unitholder’s Units.
Any holder of a Withdrawing Unitholder’s Units (including, without limitation, a Member who
withdraws and continues to own Units) shall be treated as a “non-Member” Unitholder unless
admitted to the Company as a Member under the provisions of Article Thirteen. If a Withdrawing
Unitholder is a Manager, it shall be deemed to have resigned as a Manager.
Section 14.03 Economic Consequence of Withdrawal.
In the event that any Unitholder withdraws, the following provisions shall apply:
(a) Within 60 days following the date upon which the Company receives notice of an
Event of Withdrawal, the Majority of the Members may elect for the Company to
redeem all of the Units that were held by the Withdrawing Unitholder (regardless
of the present owner of such Units).
(b) The amount payable for the Units will be equal to the net amount that the Unitholder
of such Units would have received if: (i) all items of Company property (which, for
this purpose, shall not be considered to include any goodwill or going concern
value) were sold for fair market value as of the last day of the month in which the
Event of Withdrawal occurred; (ii) the liabilities of the Company as of such date
were paid; and (iii) the Company was liquidated in accordance with the provisions
of Section 15.02. For this purpose, the amount that would be realized pursuant to
clause (i) of the foregoing sentence shall be determined by the Managers (with the
advice of the Company’s CPA), which determination shall be final and binding,
provided it is reasonable and made in good faith. If the Managers are deadlocked
in determining the amount pursuant to clause (i) of this subsection (a), the Company
will hire an appraiser to make the determination. The amount due the Unitholder
whose Units are to be acquired under this subsection (b) are subject to and reduced
by an automatic marketability discount at the rate specified in the Organizational
Summary & Consent, and shall be paid in 8 semiannual installments, without
interest, with the first such payment due on the last day of the 6th month following
the Event of Withdrawal (or expulsion, as the context requires); provided, however,
that if the Company is subsequently dissolved pursuant to Section 15.01, all
remaining amounts due to the Unitholder shall become due and payable upon the
final distribution to the Company’s Unitholders pursuant to Section 15.02.
(c) Upon the redemption of the Withdrawing Unitholder’s Units, the remaining
Unitholders’ Capital Accounts, interest percentages, and Units will be equitably
and proportionally adjusted on the Company’s books and records (as necessary),
respectively, as a result of the redemption.
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Section 14.04 Life Insurance.
The Company may contract for disability and/or life insurance on the lives of each Unitholder, in an
amount reasonably equal to the value of each Unitholder’s Units. In the event a Unitholder dies, the
Majority of Members may direct the Company to use the insurance proceeds it receives because of
the Unitholder’s death, to purchase all (but not less than all) of the deceased Unitholder’s Units,
pursuant to Section 14.03. Spouses, children, family, creditors, and parties other than the Company
have no claim to any proceeds of any disability and/or life insurance policy owned by the Company
on the life of a Unitholder.
Article Fifteen – Dissolution, Liquidation, And Termination
Section 15.01 Dissolution.
The Company shall dissolve and its affairs shall be wound up on the first to occur of the following
(“Event of Dissolution”):
(a) The written consent of a Majority of the Members; or
(b) Entry of a judicial decree of dissolution pursuant to the Act (specifically C.R.S. §
7-114-301, as amended).
Section 15.02 Winding Up.
The dissolution and winding up of the affairs of the Company and the liquidating distributions of its
assets shall be conducted exclusively by the Manager(s) pursuant to this Article. The Managers are
hereby authorized to take all actions necessary, including without limitation, selling any Company
assets they deem necessary or appropriate to sell.
Section 15.03 Liquidating Distributions Upon Dissolution.
In settling accounts after dissolution, the liabilities of the Company shall be paid and liquidating
distributions shall be made in the following order:
(a) First, to creditors, in the order of priority as provided by law, except those to owners
of the Company on account of their Capital Accounts;
(b) Second, to owners of the Company with respect to their positive Capital Accounts
(as determined after taking in to account all Capital Account adjustments for the
Company’s taxable year during which the liquidation occurs) (it is intended that the
distributions set forth in this Section comply with the intention of Regulation
Section 1.704-1(b)(2)(ii)(b)(2) that liquidating distributions be made in accordance
with positive capital accounts).
Section 15.04 Distributions in Kind.
No property of the Company shall be distributed in-kind or directly to Members except in the
Manager’s sole discretion and otherwise in accordance with this Agreement. Any property
distributed in kind 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
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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 this agreement.
Section 15.05 Deficit Capital Accounts.
Notwithstanding anything to the contrary contained in this Agreement and notwithstanding any
custom or rule of law to the contrary, to the extent that the deficit, if any, in the Capital Account of
any Unitholder results from or is attributable to deductions and losses of the Company (including
noncash items such as depreciation) or distributions of money, such deficit shall not be an asset of the
Company, and no Unitholder shall be obligated to contribute any such deficit to the Company to bring
the balance of its Capital Account to zero.
Section 15.06 Rights of Unitholders.
Except as otherwise provided in this Agreement, upon a Liquidating Event, (a) each Unitholder shall
look solely to the assets of the Company for the return of its Capital Contribution and shall have no
right or power to demand or receive property other than cash from the Company, and (b) unless
otherwise expressly provided herein, no Unitholder (other than in her capacity as a creditor of the
Company) shall have priority over any other Unitholder as to the return of her Capital Contributions,
distributions, or allocations. If the Company property remaining after the payment or discharge of the
debts and liabilities of the Company is insufficient to return the Capital Contributions of each owner,
such owner shall have no recourse against any other Unitholder or Manager.
Article Sixteen – Power of Attorney
Section 16.01 Manager as Attorney-in-Fact.
Each Unitholder hereby makes, constitutes, and appoints the Manager (and each of them if more than
one), with full power of substitution and resubstitution, its true and lawful attorney-in-fact in its name,
place, and stead and for its use and benefit, to sign, execute, certify, acknowledge, swear to, file, cause
to be delivered to the secretary of state for filing, and record: (a) all certificates and instruments that
the Manager may deem necessary or appropriate to form, qualify, or continue the business of the
Company as a limited liability company; (b) any and all amendments or changes to this Agreement
and the instruments described in clause (a) above that the Manager may deem necessary or appropriate
to effect a change or modification of the Company in accordance with the terms of this Agreement;
(c) all Certificates of Cancellation and other instruments that the Manager deems necessary or
appropriate to effect the dissolution and termination of the Company pursuant to the terms of this
Agreement; and (d) any other instrument that is now or may hereafter be required by law to be filed
on behalf of the Company or is deemed necessary or appropriate by the Manager to carry out fully
the provisions of this Agreement in accordance with its terms. Each Unitholder authorizes each such
attorney-in-fact to take any further action that such attorney-in-fact shall consider necessary or
advisable in connection with any of the foregoing, hereby giving each such attorney-in-fact full power
and authority to do and perform each and every act or thing whatsoever requisite or advisable to be
done in connection with the foregoing as fully as such Unitholder might or could do personally, and
hereby ratifying and confirming all that any such attorney-in-fact shall lawfully do or cause to be done
by virtue thereof or hereof. This provision shall not give the Manager a proxy or any other authority
to vote on behalf of any Member of the Company.
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Section 16.02 Nature as Special Power.
The power of attorney granted pursuant to this Article Sixteen:
(a) Is a special power of attorney coupled with an interest and is irrevocable;
(b) May be exercised by any such attorney-in-fact by listing the Unitholders executing
any agreement, certificate, instrument, or other document with the single signature
of any such attorney-in-fact acting as attorney-in-fact for all such Unitholders; and
(c) Shall survive the Bankruptcy, insolvency, dissolution, or cessation of existence of
a Unitholder and shall survive the delivery of an assignment by a Unitholder of the
whole or a portion of her Units; except that where the assignment is of all of such
Unitholder’s Units and the assignee is admitted as a substituted Member, the power
of attorney shall survive the delivery of such assignment for the sole purpose of
enabling any such attorney-in-fact to effect such substitution.
Article Seventeen – General Provisions
Section 17.01 Authority.
The undersigned represent and warrant they are authorized to sign this Agreement on behalf of a party
hereto, and have full power and authority to bind such party to each and every provision herein.
Section 17.02 Creditors.
None of the provisions of this Agreement shall be for the benefit of, or enforceable by, any creditor
of the Company.
Section 17.03 Notices; Writings and Signatures.
(a) Notices.
Except as expressly set forth to the contrary in this Agreement, all notices, requests,
or consents provided for or permitted to be given under this Agreement must be in
writing and such writing must be delivered to the other parties entitled to or required
to receive same by (i) hand delivered, (ii) sent via email, (iii) by mail with tracking
information, or (iv) as otherwise required by law. Notices shall be deemed effective
upon hand delivery or upon email transmission to the other Party, or, if sent via
mail, then on the date of delivery as specified in the tracking information, or if sent
pursuant to law, on the date specified by law.
All notices, requests, and consents to be sent to a Unitholder must be sent to or
made at the address reflected for that Unitholder on the Company’s books, which
address may be changed from time to time as that Unitholder may specify by
written notice to the Company.
All notices, requests, or consents to be sent to the Company must be sent to the
Company’s principal place of business addressed to the Manager or, if the
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Company has no principal place of business, to its registered agent address
addressed to its registered agent.
If 3 successive notices mailed to the last-known address of any Unitholder are
returned as undeliverable, no further notices to such Unitholder shall be necessary
until another address for such Unitholder is made known to the Company in writing.
(b) Writings and Signatures.
The term “writing” or “written” may include electronic-mail messages or other
electronic records as defined in the Uniform Electronic Transactions Act, C.R.S.A.
§ 24-71.3-102(7), but any such writing will not constitute notice hereunder or under
the Acts unless delivered in accordance with Section 18.04(a). For purposes of this
Agreement and the Acts, the term “signature” shall mean: (i) manual signatures of
the applicable party or such party’s authorized representative, which signatures
may be delivered by facsimile, digital, or in portable document format, tagged
image format or other electronic format, (ii) any electronic mail message or other
writing in machine-readable format that includes the phrase “signed by [name]” or
the notation “/s/ [name]” or words of similar import, or (iii) any electronic mail
message or other writing that the Managers determine evidences the intent of the
applicable party to create a signature, and any document or instrument bearing such
a signature shall be considered “signed” or “executed,” as applicable, hereunder.
The decision of the Managers to accept or reject any signature shall be final and
determinative.
Section 17.04 Entire Agreement.
This Agreement together with the organizational consent and that certain Addendum to Operating
Agreement of Spring Creek II LLC dated to be effective February 1, 2021 constitutes the entire
agreement of the parties hereto relating to the Company and supersedes all prior contracts or
agreements with respect to the Company, whether oral or written.
Section 17.05 Construction.
The headings in this Agreement are inserted for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent, or intent of this Agreement or any provision
hereof. The words “herein,” “hereof,” and “hereunder,” when used in this Agreement, refer to this
Agreement in its entirety. The word “include” and its derivatives mean by way of example and not
by way of exclusion or limitation. Whenever the context requires, the gender of all words used in this
Agreement includes the masculine, feminine, and neuter. All references to Articles and Sections refer
to articles and sections of this Agreement, unless otherwise indicated, and all references to the
Organizational Summary & Consent, attachments, exhibits, and schedules are to items attached
hereto, each of which is made a part hereof for all purposes. This Agreement should be interpreted as
if it were a contract negotiated, understood, and voluntarily signed by all the parties. The parties agree
the language of this Agreement will not be construed presumptively against any of the parties, drafter
or otherwise. The term “day” or “days” means calendar days, unless otherwise specified elsewhere in
this Agreement.
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Section 17.06 Confidentiality.
Each Member and Manager agrees to maintain all business information with respect to the Company
in confidence and agrees not to Misappropriate, use, or disclose any business information, Trade
Secrets, processes, or confidences of the Company in competition with the Company. This obligation
of confidentiality shall survive the withdrawal of any Member or the resignation of any Manager.
Section 17.07 Divorce; Dissolution of Marriage.
Each Member/Assignee binds himself, herself, and his or her spouse, and all persons ever to claim
under him or her, that upon a dissolution of marriage with a spouse, neither the spouse, nor anyone
claiming through the spouse, has the right to or will seek to partition the community property of the
spouse and the Member/Assignee as it relates to any of the Member’s Interest and/or Interest in the
Company. The spouse of each Member has joined in the execution of this Agreement to evidence the
spouse’s knowledge of its existence and to acknowledge that this Agreement is fair, equitable and in
the spouse’s best interests, and to evidence the spouse’s desire to bind the spouse’s interest, if any, in
the Interest and Interest of the Member (including Interest/Interests acquired in the future) to the
performance of this Agreement.
Section 17.08 Waiver.
A waiver or consent, express or implied, to or of any breach or default by any Person in the
performance by that Person of her obligations with respect to the Company is not a consent or waiver
to or of any other breach or default in the performance by that Person of the same or any other
obligations of that Person with respect to the Company. Failure on the part of a Person to complain
of any act of any Person or to declare any Person in default with respect to the Company, irrespective
of how long that failure continues, does not constitute a waiver by that Person of her rights with
respect to that default until the applicable statute-of-limitations period has run.
Section 17.09 Amendment or Modification.
This Agreement may be amended or modified from time to time only by a written instrument adopted,
executed, and agreed to unanimously by the Members; and the economic interests of a Unitholder
(other than dilution of such interests and other than as otherwise permitted by this Agreement) may
not be materially adversely affected unless pursuant to an express provision of this Agreement or
pursuant to the consent of the Unitholder.
Section 17.10 Binding Effect.
Subject to the restrictions on Transfers set forth in this Agreement, this Agreement is binding on and
shall inure to the benefit of the Unitholders and their respective heirs, legal representatives,
successors, and permitted assigns.
Section 17.11 Governing Law; Venue, Waiver of Jury.
THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF COLORADO, EXCLUDING ANY CONFLICT-OF-LAWS
RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR THE
CONSTRUCTION OF THIS AGREEMENT TO THE LAW OF ANOTHER JURISDICTION.
VENUE FOR ANY PROCEEDING WILL BE IN THE COUNTY WHERE THE COMPANY’S
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PRINCIPAL OFFICE IS LOCATED. THE PARTIES KNOWINGLY AND VOLUNTARILY
WAIVE AND DISCLAIM A RIGHT TO JURY TRIAL.
Section 17.12 Further Assurances.
In connection with this Agreement and the transactions contemplated hereby, each Unitholder shall
execute and deliver any additional documents and instruments and perform any additional acts that
may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those
transactions.
Section 17.13 Sole and Absolute Discretion.
Except as otherwise provided in this Agreement, all actions that the Manager may take and all
determinations that the Manager may make pursuant to this Agreement shall be taken and made at
the sole and absolute discretion of the Manager unless specified otherwise herein.
Section 17.14 Indemnification.
To the fullest extent permitted by law, each Unitholder shall indemnify the Company, each Manager,
and each other Unitholder and hold them harmless from and against all losses, costs, liabilities,
damages, and expenses (including, without limitation, costs of suit and attorney’s fees) they may incur
on account of any breach by that Unitholder of this Agreement.
Section 17.15 Recitals.
The recitals at the beginning of this Agreement are material to this Agreement and are incorporated
by this reference.
Section 17.16 Partition
Each of the Unitholders hereby irrevocably waives, during the term of the Company, any right such
Unitholder may have to maintain any action for partition with respect to any property of the Company.
Section 17.17 Rights and Remedies Cumulative.
The rights and remedies provided by this 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 remedies are given in addition to any other rights the parties may have by law, statute, ordinance,
or otherwise.
Section 17.18 Severability.
A determination by the court of competent jurisdiction that any part of this Agreement is illegal or
unenforceable will not cancel or invalidate the remainder of such part or this Agreement, instead the
Agreement shall be amended to the smallest degree possible to effectuate its purpose and the Parties’
intentions absent the illegal or unenforceable provision, and the remainder of the provision and this
Agreement shall remain in full force and effect.
Section 17.19 Notice to Unitholders of Provisions of this Agreement.
BY EXECUTING THIS AGREEMENT, EACH UNITHOLDER ACKNOWLEDGES THAT SHE
HAS ACTUAL NOTICE OF: (A) ALL OF THE PROVISIONS OF THIS AGREEMENT,
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INCLUDING, WITHOUT LIMITATION, THE LIMITATIONS ON THE FIDUCIARY DUTIES
OF THE MANAGER AND THE RESTRICTION ON THE TRANSFER OF UNITS SET FORTH
IN Article Thirteen; AND (B) ALL OF THE PROVISIONS OF THE ARTICLES OF
ORGANIZATION. EACH UNITHOLDER HEREBY AGREES THAT THIS AGREEMENT
CONSTITUTES ADEQUATE NOTICE OF ALL SUCH PROVISIONS, AND EACH
UNITHOLDER HEREBY WAIVES ANY REQUIREMENT THAT ANY FURTHER NOTICE
HEREUNDER BE GIVEN.
Section 17.20 Representation by Karp Neu Hanlon, P.C.
In connection with this Agreement and the purposes for which the Company has been formed, Karp
Neu Hanlon, P.C. (“KNH”) is representing Gerald E. Flynn and Jeffery M. Spanel and Spring Creek
Apartments LLC. KNH does not represent any other Party to this Agreement. All Parties
acknowledge that they have been advised to obtain their own separate and independent counsel (legal,
tax, and otherwise) to represent them in signing this Agreement. In the event of any dispute between
any Parties, all Parties consent to the continued representation of the Company by KNH in such
dispute.
Section 17.21 Unregistered Interests.
Each Unitholder acknowledges and agrees: (a) that the Units and ownership interests of the Company
are being offered and sold without registration under the Securities Act of 1933, as amended, or under
similar provisions of state law, (b) acknowledges that such Person is fully aware of the economic risks
of an investment in the Company, and that such risks must be borne for an indefinite period of time,
(c) such Person represents and warrants that such Person is acquiring Units and an ownership interest
for such Person’s own account, for investment, and with no view to the distribution of the Units, (d)
that such Person is an Accredited Investor, and (e) not to Transfer, or attempt to Transfer, all or any
part of the Units or ownership interest without registration under the Securities Act of 1933, as
amended, and any applicable state securities laws, unless the Transfer is exempt from such registration
requirements.
Section 17.22 Counterparts.
The signature page for this Agreement is on the Organizational Summary & Consent, and may be
exchanged by electronic or any other means, all of which taken together constitute one and the same
original Agreement with the same effect as if each of the signatures were originals affixed to the same
instrument.
Section 17.23 Securities Law Disclosure
Each Member acknowledges and agrees: (a) that the Membership Interest and ownership interests of
the Company are being offered and sold without registration under the Securities Act of 1933, as
amended, or under similar provisions of state law (the “securities laws”), (b) acknowledges that such
Person is fully aware of the economic risks of an investment in the Company, and that such risks must
be borne for an indefinite period of time, (c) such Person represents and warrants that such Person is
acquiring Membership Interest and an ownership interest for such Person’s own account, for
investment, and with no view to the distribution of the Membership Interest, (d) that such Person is
an Accredited Investor, and (e) not to Transfer, or attempt to Transfer, all or any part of the
Membership Interest or ownership interest without registration under the Securities Act of 1933, as
amended, and any applicable state securities laws, unless the Transfer is exempt from such registration
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requirements. The Membership Interests are being offered and sold in reliance upon one or more
exemptions from registration under applicable federal and state securities laws. Each Member further
represents that he is relying on his own tax, investment, and legal counsel with respect to the financial
and tax benefits and other legal and investment aspects of his investment in the Company. There are
substantial restrictions on transfers of ownership interest contained in this agreement, and such
interests and may be restricted securities as that term is defined in rule 144 under the securities laws.
To the extent the interests constitute securities under the securities laws, the securities may not be
offered for sale, sold, or otherwise transferred except pursuant to an effective registration statement
of qualification under the securities laws or pursuant to an exemption from registration under the
securities laws, the availability of which is to be established by opinion of counsel to the satisfaction
of the Company. The sale or other transfer of ownership interest is also restricted by certain provisions
of this Agreement. Each Member further represents it has not become aware of any advertisement in
printed media of general and regular paid circulation (or other printed public media), radio, television
or telecommunications or other form of advertisement (including electronic display) with respect to
the distribution of the Membership Interest; and it has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of its investment in the
Membership Interest and is able to bear the economic risks of such investment; and it has the capacity
to protect its own interests in connection with the purchase of the Membership Interest; and it has a
preexisting relationship (personal or business) with the Company, a Manager, or any of their officers
or directors, or controlling persons; and it acknowledges that there are risks associated with the
purchase of the Membership Interest; and it acknowledges that there are restrictions on the
Subscriber's ability to resell the Membership Interest and it is the responsibility of the Subscriber to
find out what those restrictions are and to comply with them before selling the securities.
{Signatures on the Organizational Summary & Consent of this Agreement}
DocuSign Envelope ID: E99C4EF9-3D41-454E-8E21-B68CB13DD450
DocuSign Envelope ID: E99C4EF9-3D41-454E-8E21-B68CB13DD450