Exhibit A: LLC Operating Agreement (“Agreement’)

Plaintiff’s Second Amended Verified Complaint and Jury Demand

Kenneth F. Phillips,

Plaintiff,

vs.

Presley Reed,

Stacey Grace

Reed Group, Ltd

Reed Group, LLC

Defendants

)

)

)

)

)

)

)

)

)

)

)

)

)

Case No.: No. 07-CV-3417(RO)DCF)

JURY TRIAL DEMANDED

ECF CASE

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 1 of 37
March 25, 2005 

Version: 1

OPERATING AGREEMENT 

OF 

REED GROUP, LLC 

(A Colorado Limited Liability Company) 

By and Between 

Reed Group, LLC 

(the Company), 

Presley Reed, Stacey Grace Reed, and the Presley Reed 1999 Family Trust 

(its members) 

and 

those persons indicated on the attached Schedule A 

as its Economic Interest Owners 

Dated as of _______________, 2005 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 2 of 37
CONTENTS 

ARTICLE I — DEFINITIONS...............................................................................1

1.01. Act ..........................................................................................................1 

1.02. Articles of Organization..........................................................................1 

1.03. Capital Account ......................................................................................1 

1.04. Capital Contribution ...............................................................................2 

1.05. Capital Interest .......................................................................................2 

1.06. Code .......................................................................................................2 

1.07. Company.................................................................................................2 

1.08. Deficit Capital Account...........................................................................2 

1.09. Distributable Cash ..................................................................................2 

1.10. Economic Interest ...................................................................................2 

1.11. Economic Interest Owner........................................................................2 

1.12. Encumber................................................................................................2 

1.13. Entity ......................................................................................................3

1.14. Fiscal Year..............................................................................................3 

1.15. Lineal Descendant...................................................................................3 

1.16. Majority Interest .....................................................................................3 

1.16. Manager .................................................................................................3 

1.17. Member...................................................................................................3 

1.18. Membership Interest................................................................................3 

1.19. Net Profit and Net Losses........................................................................3 

1.20. Operating Agreement ..............................................................................3 

1.21. Person.....................................................................................................3 

1.22. Profits Interest ........................................................................................4 

1.23. Related Party ..........................................................................................4 

1.24. Reserves..................................................................................................4 

1.25. Selling Member.......................................................................................4 

1.26. Transfer..................................................................................................4 

1.27. Transferring Member..............................................................................4 

ARTICLE II — FORMATION OF COMPANY ...................................................4

2.01. Name.......................................................................................................4 

2.02. Principal Place of Business.....................................................................4 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 3 of 37
- ii - 

ARTICLE III — BUSINESS OF COMPANY .......................................................5

ARTICLE IV — NAMES AND ADDRESSES OF MEMBERS ...........................5

ARTICLE V — GOVERNANCE AND MANAGEMENT....................................5

ARTICLE VI — RIGHTS AND OBLIGATIONS OF MEMBERS.................... 10

6.01. Limitation of Liability ........................................................................... 10 

6.02. Liability for Company Debt................................................................... 10 

6.03. List of Members .................................................................................... 10 

6.04. Priority and Return of Capital............................................................... 10 

6.05. Liability of a Member to the Company .................................................. 10

ARTICLE VII — MEETINGS OF MEMBERS.................................................. 11

7.01. Annual Meeting..................................................................................... 11 

7.02. Special Meetings................................................................................... 11 

7.03. Place of Meetings.................................................................................. 11 

7.04. Record Date.......................................................................................... 11 

7.05. Quorum................................................................................................. 11 

7.06. Manner of Acting .................................................................................. 12 

7.07. Proxies.................................................................................................. 12 

7.08. Action by Members Without a Meeting.................................................. 12

7.09. Waiver of Notice ................................................................................... 12 

ARTICLE VIII — CAPITAL CONTRIBUTIONS AND ACCOUNTS.............. 13

8.01. Initial Capital Contributions................................................................. 13 

8.02. No Permitted or Required Additional Contributions.............................. 13 

8.04. Capital Accounts................................................................................... 13 

8.04. Vesting of Jim’s Capital Account .......................................................... 15 

8.05. Withdrawal or Reduction of Capital Contributions................................ 15 

ARTICLE IX — ALLOCATIONS AND INCOME TAX MATTERS................ 15

9.01. Allocation of Profits and Losses............................................................ 15 

9.02. [Reserved] ............................................................................................ 15 

9.03. [Reserved] ............................................................................................ 15 

9.04. Distributions......................................................................................... 15 

9.05. Limitation Upon Distributions............................................................... 16 

9.06. Accounting Principles........................................................................... 16 

9.07. Accounting Period................................................................................. 16 

9.08. Interest On and Return of Capital Contributions................................... 16 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 4 of 37
- iii - 

9.09. Loans to Company ................................................................................ 16 

9.10. Returns and Other Elections.................................................................. 16 

ARTICLE X — TRANSFERS AND PURCHASES OF MEMBERSHIP 

INTERESTS .......................................................................................................... 17

10.01. General Restrictions on Transfers......................................................... 17 

10.02. Transfers of Membership Interests Without Consent.............................. 17 

10.03. Transfers of Membership Interests With Consent................................... 17 

10.04. Mandatory Sale and Purchase............................................................... 18 

10.05. [Reserved] ............................................................................................ 20 

10.06. Obligations of Transferees.................................................................... 20 

10.07. Transferee Not Member in Absence of Unanimous Consent .................. 21 

ARTICLE XI — ADDITIONAL MEMBERS...................................................... 21

ARTICLE XII — DISSOLUTION AND TERMINATION................................. 22

12.01. Dissolution............................................................................................ 22 

12.02. Effect of Filing of Dissolving Statement ................................................ 22 

12.03. Winding Up, Liquidation, and Distribution of Assets............................. 22 

12.04. Articles of Dissolution........................................................................... 24 

12.05. Certificate of Dissolution ...................................................................... 24 

12.06. Return of Contributions Nonrecourse to Other Members....................... 24 

ARTICLE XIII — MISCELLANEOUS PROVISIONS...................................... 24

13.01. Notices.................................................................................................. 24 

13.02. Records................................................................................................. 25 

13.03. Application of Colorado Law................................................................ 26 

13.04. Waiver of Action for Partition............................................................... 26 

13.05. Amendments.......................................................................................... 26 

13.06. Execution of Additional Instruments...................................................... 26 

13.07. Construction ......................................................................................... 26 

13.08. Headings............................................................................................... 26 

13.09. Waivers................................................................................................. 26 

13.10. Rights and Remedies Cumulative .......................................................... 26 

13.11. Severability ........................................................................................... 26 

13.12. Heirs, Successors, and Assigns.............................................................. 27 

13.13. Creditors............................................................................................... 27 

13.14. Counterparts......................................................................................... 27 

13.14. Counterparts......................................................................................... 27 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 5 of 37
- iv - 

SCHEDULE A — INITIAL CAPITAL CONTRIBUTIONS, PROFITS 

INTERESTS, VESTED INTERESTS .................................................................... 29

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 6 of 37
OPERATING AGREEMENT 

OF 

REED GROUP, LLC 

 This OPERATING AGREEMENT of Reed Group, LLC is entered into by 

and between Reed Group, LLC (the “Company”), Presley Reed (“Presley”), Stacey Grace 

Reed (“Stacey”), the Presley Reed 1999 Family Trust (the “Trust”), and those persons 

indicated on the attached Schedule A as being its Economic Interest Owners, to be 

effective as of _______________, 2005 (the “Effective Date”).

 In consideration of the mutual promises set forth below, the parties 

therefore agree that the Operating Agreement of the Company shall be set forth as 

follows: 

ARTICLE I — DEFINITIONS 

 The following terms, when used throughout this Agreement, shall have the 

meanings specified, unless the context clearly requires otherwise: 

 1.01. “Act” shall mean the Colorado Limited Liability Company Act, 

C.R.S. 7-80-101 et seq., as it presently exists, as it may be amended, or any successor 

statute of similar purpose 

 1.02. “Articles of Organization” shall mean the Articles of Organization 

of the Company as filed with the Secretary of State of Colorado, and as the same may be 

amended from time to time. 

 1.03. “Capital Account” shall mean an account which the Company 

maintains on its financial books and records and which consists of the aggregate Capital 

Contributions that a Member has made to the Company and that has been adjusted up to 

the date in question in accordance with the provisions of Article VIII. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 7 of 37
- 2 - 

 1.04. “Capital Contribution” shall mean a contribution by a Member, 

whenever made and whether in cash or property, to the capital of the Company. 

 1.05. “Capital Interest” shall mean the proportion that a Member’s 

positive Capital Account bears to the aggregate positive Capital Accounts of all Members 

whose Capital Accounts have positive balances, as they may be adjusted from time to 

time. For purposes of the preceding calculation, all of the Members’ Capital Accounts 

shall be rounded to the nearest multiple of $10 (with Capital Accounts that are a multiple 

of $5.00 or greater being rounded upwards). 

 1.06. “Code” shall mean the Internal Revenue Code of 1986, as it 

presently exists, as it may be amended, or any successor statute of similar purpose. 

 1.07. “Company” shall mean Reed Group, LLC 

 1.08. “Deficit Capital Account” shall mean, with respect to any Member, 

the deficit balance, if any, in such Member’s Capital Account as of the end of the taxable 

year, after taking into account all Capital Account adjustments for that taxable year. 

 1.09. “Distributable Cash” shall mean all cash, revenues and funds 

received by the Company, less the sum of the following, to the extent paid or set aside by 

the Company: [a] all principal and interest payments on indebtedness of the Company and 

all other sums paid to lenders; [b] all cash expenditures that the Company has incurred and 

that are incident to the normal operation of the Company’s business; [c] such Reserves as 

the Members deem reasonably necessary to the proper operation of the Company’s 

business. 

 1.10. “Economic Interest” shall mean a Member’s or an Economic 

Interest Owner’s share of and entitlement to the Company’s Net Profits, Net Losses, and 

distributions of the Company’s assets pursuant to this Operating Agreement and the Act, 

but shall not include any right to participate in the management or affairs of the Company, 

including the right to vote on, consent to, or otherwise participate in any decision of the 

Members. 

 1.11. “Economic Interest Owner” shall mean those persons indicated as 

such on the attached Schedule A, who shall be the owners of an Economic Interest who 

are not Members. 

 1.12. “Encumber” shall mean to create, incur, assume, or suffer to exist 

any lien, security interest, pledge, claim, option, right of first refusal, or other 

encumbrance. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 8 of 37
- 3 - 

 1.13. “Entity” shall mean any general partnership, limited partnership, 

limited liability company, corporation, joint venture, trust, business trust, cooperative or 

association or any foreign trust or foreign business organization. 

 1.14. “Fiscal Year” shall mean the Company’s fiscal year, which shall be 

the calendar year. 

 1.15. “Lineal Descendant” shall mean any natural child of any person and 

any child legally adopted by any person; any lineal descendant of any such natural or 

legally adopted child by blood or adoption shall be considered a child or the descendant of 

such person and the descendant of such person’s ancestors.

 1.16. “Majority Interest” shall mean one or more Membership Interests 

which taken together exceed 50 percent of the aggregate of all Capital Interests of the 

Members (but not of any Economic Interests Owners). 

 1.17. “Managers” shall mean Presley Reed and Stacey Grace Reed or 

such other person or entity selected by the Members pursuant to this Agreement to 

manage the Company. 

 1.18. “Member” shall mean each of the parties who executes a 

counterpart of this Operating Agreement as a Member and each of the Persons who may 

subsequently become a Member. If a Person is a Member immediately prior to the 

purchase or other acquisition by such Person of an Economic Interest, such Person shall 

have all the rights of a Member with respect to such purchased or otherwise acquired 

Membership Interest or Economic Interest, as the case may be. 

 1.19. “Membership Interest” shall mean a Member’s entire interest in the 

Company, including such Member’s Economic Interest and such other rights and 

privileges that a Member may enjoy by being a Member. 

 1.20. “Net Profits” and “Net Losses” shall mean the income, expense, 

gain, and loss of the Company, in the aggregate or separately stated, as appropriate, 

determined at the close of each fiscal year under the method of accounting employed on 

the Company’s information tax return filed for federal income tax purposes. 

 1.21. “Operating Agreement” shall mean this Operating Agreement as it 

is originally executed and as it may be amended from time to time. 

 1.22. “Person” shall mean any individual or Entity, and the heirs, 

executors, administrators, legal representatives, successors, and assigns of such “Person” 

where the context so permits. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 9 of 37
- 4 - 

 1.23. “Profits Interest” shall mean the percentage interest of a Member 

or Economic Interest Owner in the Net Profits and Net Losses of the Company as 

determined from time to time under Sections 9.01 and 9.02. 

 1.24. “Related Party” shall mean, with respect to any Person, [a] any 

Entity of which such Person is a shareholder, partner, member, or beneficiary, [b] any 

Entity of which such Person is a director, officer, trustee, or other fiduciary, and [c] any 

ancestor, spouse, or descendant of such Person. 

 1.25. “Reserves” shall mean, with respect to any fiscal period, funds set 

aside or amounts allocated in such amounts as the Members deem sufficient for the 

purpose of providing for working capital and to pay taxes, insurance, debt service or other 

costs or expenses incident to the ownership or operation of the Company’s business. 

 1.26. “Selling Member” shall mean any Member or Economic Interest 

Owner which, for consideration, Transfers or Encumbers all or any portion of his or her 

Membership Interest or Economic Interest. 

 1.27. “Transfer” shall mean any sale, exchange, assignment, gift, bequest, 

devise, or other method of disposition, whether voluntary, involuntary, or by operation of 

law. 

 1.28. “Transferring Member” shall collectively mean a Selling Member 

and any Member or Economic Interest Owner who gifts, bequeaths, or otherwise transfers 

for no consideration (by operation of law or otherwise, except with respect to bankruptcy) 

all or any part of his or her Membership Interest or Economic Interest. 

ARTICLE II — FORMATION OF COMPANY 

 2.01. Name. The name of the Company is Reed Group, LLC 

 2.02. Principal Place of Business. The principal place of business of the 

Company within the State of Colorado shall be at 10155 Westmoor Drive, Suite 210, 

Westminster, Colorado 80021. The Company may locate its places of business and 

registered office at any other place or places as the Members may from time to time deems 

advisable. 

 2.03. Term. The period of duration of the Company shall be perpetual, 

from the date of filing of Articles of Organization with the Secretary of State for the State 

of Colorado, unless the Company is earlier dissolved in accordance with the provisions of 

either the Act or this Operating Agreement. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 10 of 37
- 5 - 

ARTICLE III — BUSINESS OF COMPANY 

 The business of the Company shall be: 

 [a] To accomplish any other lawful business whatsoever, or which shall 

at any time appear conducive to or expedient for the protection or benefit of the Company 

and its assets; 

 [b] To exercise all other powers necessary to or reasonably connected 

with the Company’s business which may be legally exercised by limited liability companies 

under the Act; 

 [c] To engage in all activities necessary, customary, convenient, or 

incident to any of the preceding businesses. 

ARTICLE IV — NAMES AND ADDRESSES OF MEMBERS 

 The names and addresses of the Members are as follows: 

Name Address 

Presley Reed 10155 Westmoor Drive, Suite 210 

Westminster, Colorado 80021 

Stacey Grace Reed 10155 Westmoor Drive, Suite 210 

Westminster, Colorado 80021 

Presley Reed 1999 Family Trust 999 Eighteenth Street, Suite 3000 

Denver, Colorado 80202 

ARTICLE V — GOVERNANCE AND MANAGEMENT 

 5.1 Management. The business and affairs of the Company shall be 

managed by its Managers. The Managers shall direct, manage and control the business of 

the Company to the best of their ability. Except for situations in which the approval of the 

members is expressly required by this Operating Agreement or by non-waivable provisions 

of applicable law, the Managers shall have full and complete authority, power and 

discretion to manage and control the business, affairs and properties of the Company, to 

make all decisions regarding those matters and to perform any and all other acts or 

activities customary or incident to the management of the Company’s business. At anytime 

when there is more than one Manager, any one Manager may take any action permitted to 

be taken by the Manager, unless the approval or more than one of the Managers is 

expressly required pursuant to this Operating Agreement or the Act. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 11 of 37
- 6 - 

 5.2 Number, Tenure and Qualification. The Company shall initially have 

two Managers. The number of Managers of the Company shall be fixed from time to time 

by a vote of the members holding a Majority Interest, but in no instance shall there be less 

than two Managers. The initial Managers serve as Managers until their resignation or 

removal pursuant to the terms of this Operating Agreement. 

 5.3 Certain Powers of Managers. 

 [a] Without limiting the generality of Section 5.1, the Managers shall 

have the power and authority, on behalf of the Company:

 [i] To acquire property from any Person as the Managers may 

determine. The fact that a Manager or a Member is directly or indirectly affiliated 

or connected with any such Person shall not prohibit the Managers from dealing 

with that Person; 

 [ii] To borrow money for the Company from banks, other lending 

institutions, the Managers, the Members, or Affiliates of the Managers or the 

Members, and in connection therewith, to hypothecate, encumber and grant 

security interests in the assets of the Company to secure repayment of the 

borrowed sums. No debt shall be contracted or liability incurred by or on behalf of 

the Company except by the Managers, or to the extent permitted under the 

Colorado Act, by agents or employees of the Company expressly authorized to 

contract such debt or incur such liability by the Managers; 

 [iii] To purchase liability and other insurance to protect the Company’s 

property and business; 

 [iv] To hold and own any Company real and/or personal properties in 

the name of the Company; 

 [v] To invest any Company funds temporarily [by way of example bit 

not limitation] in time deposits, short-term governmental obligations, commercial 

paper or other investments; 

 [vi] Upon the affirmative vote of the Members holding at least twothirds of the Profits Interests, to sell or otherwise dispose of all or substantially all 

of the assets of the Company as part of a single transaction or plan so long as such 

disposition is not in violation of or a cause of a default under any other agreement 

to which the Company may be bound, provided, however, that the affirmative vote 

of the Members shall not be required with respect to any sale or disposition of the 

Company’s assets in the ordinary course of the Company’s business; 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 12 of 37
- 7 - 

 [vii] To execute on behalf of the Company all instruments and 

documents, including, without limitation, checks, drafts, notes and other negotiable 

instruments; mortgages or deeds of trust; security agreements; financing 

statements; documents providing for the acquisition, mortgage or disposition of 

the Company’s property; assignments; bills of sale; leases; partnership agreements, 

operating agreements of other limited liability companies; and any other 

instruments or documents necessary, in the opinion of the Managers, to the 

business of the Company. 

 [viii] To employ accountants, legal counsel, managing agents or other 

experts to perform services for the Company and to compensate them from 

Company funds; 

 [ix] To enter into any and all other agreements on behalf of the 

Company, with any other Person for any purpose, in such forms as the Managers 

may approve; and 

 [x] To do and perform all other acts as may be necessary or 

appropriate to the conduct of the Company’s business. 

Unless authorized to do so by this Operating Agreement or by the Managers, no attorneyin-fact, employee or other agent of the Company shall have any power or authority to bind 

the Company in any way, to pledge its credit or to render it liable pecuniarily for any 

purpose. No Member shall have any power or authority to bind the Company unless the 

Member has been authorized by the Managers to act as an agent of the Company in 

accordance with the previous sentence. 

 5.4 Restrictions on Authority of the Managers. 

 [a] No Manager shall have the authority to, and each Manager 

covenants and agrees that it shall not, do any of the following acts without the consent of 

two-thirds the Members: 

 [i] Cause or permit the Company to engage in any activity that is not 

consistent with the purposes of the Company as set forth in Section 3.1 hereof; 

 [ii] Knowingly do any act in contravention of this Operating 

Agreement; 

 [iii] Knowingly do any act which would make it impossible to carry on 

the ordinary business of the Company, except as otherwise provided in this 

Operating Agreement; 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 13 of 37
- 8 - 

 [iv] Confess a judgment against the Company in an amount in excess of 

$25,000.00; 

 [v] Possess property, or assign rights in specific property, for other 

than a Company purpose; 

 [vi] Knowingly perform any act that would cause the Company to 

conduct business in a state which has neither enacted legislation which permits 

limited liability companies to organize in such state nor permits the Company to 

register to do business in such state as a foreign limited liability company; 

 [vii] Cause the Company to voluntarily take any action that would cause 

a bankruptcy of the Company; 

 [viii] Cause a significant change in the nature of the Company’s business; 

 [ix] Cause the Company to admit any additional Members other than 

pursuant to Article XI hereof; 

 [x] Sell or otherwise dispose of all or substantially all of the Company’s 

assets other than in the ordinary course of the Company’s business, except for a 

liquidating sale in connection with the dissolution of the Company. 

 5.5 Liability for Certain Acts. Each Manager shall perform his duties as 

Manager in good faith, in a manner he reasonably believes to be in the best interest of the 

Company, and with such care as an ordinarily prudent person in a like position would use 

under similar circumstances. A Manager who so performs the duties as Manager shall not 

have any liability by reason of being or having been a Manager of the Company. The 

Managers do not, in any way, guarantee the return of the Members’ Capital Contributions 

or a profit for the Members from the operations of the Company. The Managers shall not 

be liable to the Company or to any Member for any loss or damage sustained by the 

Company or any Member, unless the loss or damage shall have been the result of fraud, 

deceit, gross negligence, willful misconduct, breach of this Agreement or a wrongful 

taking by the Managers. 

 5.6 Managers and Members Have No Exclusive Duty to Company. No 

Manager or Member shall be required to manage the Company as a sole and exclusive 

function and any Manager and/or Member may have other business interest and may 

engage in other activities in addition to those relating to the Company. Neither the 

Company nor any Member shall have the right, by virtue of this Operating Agreement, to 

share or participate in such other investments or activities of any Manager and/or Member 

or to the income or proceeds derived therefrom. Neither any Manager nor any Member 

shall incur any liability to the Company or to any of the Members as a result of engaging in 

any other business or venture. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 14 of 37
- 9 - 

 5.7 Bank Accounts. The Managers may from time to time open bank 

accounts in the name of the Company, and the Managers shall be the sole signatory 

thereon, unless the Managers determine otherwise. 

 5.8 Indemnity of the Managers, Employees and Other Agents. The 

Company shall indemnify the Managers and make advances for the expenses to the 

maximum extent permitted under Section § 7-80-410 of the Colorado Act. The Company 

shall indemnify its employees and other agents who are not Managers to the fullest extent 

permitted by law, provided that such indemnification in any given situation is approved by 

a vote of the members holding a Majority Interest. 

 5.9 Resignation. Any Manager of the Company may resign at any time by 

giving written notice to the Members of the Company. The resignation of any Manager 

shall take effect upon receipt of the notice thereof or at such later time as shall be specified 

in such notice; and, unless otherwise specified therein, the acceptance of such resignation 

shall not be necessary to make it effective. The resignation of a Manager who is also a 

Member shall not affect the Manager’s rights as a Member and shall not constitute a 

Dissociation of a Member. 

 5.10 Removal. At a meeting called expressly for that purpose, all or any 

lesser number of Managers may be removed at any time, with or without cause, by a vote 

of the members holding a Majority Interest. The removal of a Manager who is also a 

Member shall not affect the Manager’s rights as a Member and shall not constitute a 

Dissociation of a Member. 

 5.11 Vacancies. Any vacancy occurring for any reason in the number of 

Managers of the Company may be filled by the affirmative vote of a majority of the 

remaining Managers then in office, provided that if there are no remaining Managers, the 

vacancy shall be filled by a vote of the members holding a Majority Interest. Any 

Manager’s position to be filled by the affirmative vote of a majority of the Managers then 

in office or by an election at an annual meeting or at a special meeting of Members called 

for that purpose or by the Members’ unanimous written consent. A Manager elected to fill 

a vacancy shall be elected for the unexpired term of his predecessor in office and shall hold 

office until the expiration of such term and until his successor shall be elected and shall 

qualify or until his earlier death, resignation or removal. A Manager chosen to fill a 

position resulting from an increase in the number of Managers shall hold office until the 

next annual meeting of Members and until his successors shall be elected and shall qualify, 

or until his earlier death, resignation or removal. 

 5.12 Compensation. The compensation of the Managers shall be fixed from 

time to time by a vote of the members holding a Majority Interest, and no Manager shall 

be prevented from receiving such compensation by reason of the fact that he is also a 

Member of the Company. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 15 of 37
- 10 - 

 5.14 Right to Rely on the Managers. 

 [a] Any Person dealing with the Company may rely (without duty of 

further inquiry) upon a certificate signed by any Manager as to: 

 [i] The identity of any Manager or any Member; 

 [ii] The existence or nonexistence of any fact or facts which constitute 

a condition precedent to acts by any Manager or which 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 Member. 

ARTICLE VI — RIGHTS AND OBLIGATIONS OF MEMBERS 

 6.01. Limitation of Liability. Each Member’s liability shall be limited as 

set forth in the Act, this Operating Agreement, and other applicable law. 

 6.02. Liability for Company Debt. No Member shall be personally liable 

for any debts or losses of the Company beyond such Member’s respective Capital 

Contributions and any obligation of the Members under Article VIII to make Capital 

Contributions, except as provided in Section 6.05 or as otherwise required by law. 

 6.03. List of Members. Upon written request of any Member to the 

Managers, the Managers shall provide a list showing the names, addresses, and 

Membership Interests and Economic Interests of all Members and Economic Interest 

Owners. 

 6.04. Priority and Return of Capital. Except as may be expressly 

provided in Article IX, no Member or Economic Interest Owner shall have priority over 

any other Member or Economic Interest Owner, either as to the return of Capital 

Contributions or as to Net Profits, Net Losses, or distributions, provided that this Section 

shall not apply to loans (in contrast to Capital Contributions) which a Member has made 

to the Company. 

 6.05. Liability of a Member to the Company. A Member or Economic 

Interest Owner who receives a distribution made by the Company which is either — 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 16 of 37
- 11 - 

[a] in violation of this Operating Agreement, or 

[b] when the Company’s liabilities exceed its assets (after giving 

effect to the distribution), 

is liable to the Company for a period of six years after such distribution for the amount of 

the distribution. 

ARTICLE VII — MEETINGS OF MEMBERS 

 7.01. Annual Meeting. There shall be held an annual meeting of the 

Members at such date and time each year and at such place as the Managers may 

determine. Written notice stating the place, day, and hour of the meeting shall be given 

personally or mailed to each Member at least thirty days prior to the date fixed for the 

annual meeting. The annual meeting of the Members shall be for the purpose of electing 

officers and for the transaction of such other business as may come before the meeting. 

 7.02. Special Meetings. Special meetings of the Members may be called 

at any time by the Managers or by the Members holding one–third of the Membership 

Interests. Special meetings shall be held at such time and place as may be designated by 

the authority calling such meeting. Notice stating the place, day, and hour of every special 

meeting shall be given to each Member either by mailing such notice at least twenty days 

before, or by an oral or written communication personally delivered at least fifteen days 

before, the date fixed for the meeting. The notice of such special meeting shall specify the 

business to be transacted at and the purpose of any special meeting of the Members. 

 7.03. Place of Meetings. The Members may designate any place, either 

within or outside the State of Colorado, as the place of meeting for any meeting of the 

Members. If no designation is made, or if a special meeting is called, the place of meeting 

shall be at the principal office of the Company. 

 7.04. Record Date. For the purpose of determining Members entitled to 

notice of or to vote at any meeting of Members or any adjournment of any such meeting, 

or Members entitled to receive payment of any distribution, or in order to make a 

determination of Members for any other purpose, the date on which notice of the meeting 

is mailed or the date on which the resolution declaring such distribution is adopted, as the 

case may be, shall be the record date for such determination of the Members. When a 

determination of Members entitled to vote at any meeting of Members has been made as 

provided in this Section, such determination shall apply to any adjournment of such 

meeting. 

 7.05. Quorum. Members holding at least a majority of all Capital 

Interests, represented in person or by proxy, shall constitute a quorum at any meeting of 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 17 of 37
- 12 - 

Members. Less than a quorum may adjourn from time to time without further notice until 

a quorum is secured. However, if the adjournment is for more than 60 days, or if after the 

adjournment a new record date is fixed for the adjourned meeting, a notice of the 

adjourned meeting shall be given to each Member of record entitled to vote at the 

meeting. At such adjourned meeting at which a quorum shall be present or represented, 

any business may be transacted which might have been transacted at the meeting as 

originally noticed. The Members present at a duly organized meeting may continue to 

transact business until adjournment, notwithstanding the withdrawal during such meeting 

of that number of Capital Interests whose absence would cause less than a quorum. 

 7.06. Manner of Acting. If a quorum is present, the affirmative vote of 

Members holding at least a majority of all the Capital Interests represented in person or by 

proxy at such meeting shall be the act of the Members, unless the vote of a greater or 

lesser proportion or number is otherwise required by the Act, by the Articles of 

Organization, or by this Operating Agreement. Unless otherwise expressly provided in this 

Agreement or required under applicable law, Members who have an interest (economic or 

otherwise) in the outcome of any particular matter upon which the Members vote or 

consent may vote or consent upon any such matter and their vote, or consent, as the case 

may be, shall be counted in the determination of whether the requisite matter was 

approved by the Members. 

 7.07. Proxies. At all meetings of Members, a Member may vote in person 

or by proxy executed in writing by the Members or by a duly authorized attorney-in-fact. 

Such proxy shall be filed with the Managers of the Company before or at the time of the 

meeting. No proxy shall be valid after eleven months from the date of its execution, unless 

otherwise provided in the proxy. 

 7.08. Action by Members Without a Meeting. Any action required or 

permitted to be taken at a meeting of Members may be taken without a meeting if the 

action is evidenced by one or more written consents describing the action taken, signed by 

each Member entitled to vote and delivered to the Secretary of the Company for inclusion 

in the minutes or for filing with the Company records. Any action taken under this Section 

is effective when all Members entitled to vote have signed the consent, unless the consent 

specifies a different effective date. The record date for determining Members entitled to 

take action without a meeting shall be the date the first Member signs a written consent. 

 7.09. Waiver of Notice. When any notice is required to be given to any 

Member, a waiver in writing of such notice signed by the person entitled to such notice, 

whether before, at, or after the time stated in such notice, shall be equivalent to the giving 

of such notice. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 18 of 37
- 13 - 

ARTICLE VIII — CAPITAL CONTRIBUTIONS AND ACCOUNTS 

 8.01. Initial Capital Contributions. Upon execution of this Agreement, 

each Member shall contribute such amount of money or property as is set forth on the 

attached Schedule A. 

 8.02. No Permitted or Required Additional Contributions. Except to the 

extent that this Agreement may specifically provide to the contrary, no Member shall be 

permitted or required to make any additional Capital Contributions. 

 8.03. Capital Accounts. 

 [a] A separate Capital Account shall be maintained for each Member 

and Economic Interest Owner. Each Member’s and Economic Interest Owner’s Capital 

Account will be increased by — 

[1] the amount of money contributed by such Member or 

Economic Interest Owner to the Company; 

[2] the fair market value of property contributed by such 

Member or Economic Interest Owner to the Company (net of liabilities 

secured by such contributed property that the Company is considered to 

assume or take subject to under Section 752 of the Code); 

[3] allocations to such Member or Economic Interest Owner of 

Net Profits; and 

[4] allocations to such Member or Economic Interest Owner of 

income of the Company that is exempt from federal income taxes. 

Each Member’s or Economic Interest Owner Capital Account will be decreased by — 

[1] the amount of money distributed by the Company to such 

Economic Interest Owner ; 

[2] the fair market value of property distributed by the 

Company to such Member or Economic Interest Owner (net of liabilities 

secured by such distributed property that such Member or Economic 

Interest Owner is considered to assume or take subject to under Section 

752 of the Code); 

[3] allocations to such Member or Economic Interest Owner of 

expenditures that are not deductible in computing the Company’s taxable 

income and that are not properly capitalizable as a Company asset; and 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 19 of 37
- 14 - 

[4] allocations to such Member or Economic Interest Owner of 

Net Losses. 

 [b] In the event of a permitted sale or exchange of a Membership 

Interest or an Economic Interest in the Company, the Capital Account of the transferor, to 

the extent it relates to the transferred Membership Interest or Economic Interest, shall 

become the Capital Account of the transferee, in accordance with Treasury Regulation 

§ 1.704-1(b)(2)(iv). 

 [c] The manner in which Capital Accounts are to be maintained 

pursuant to this Section 8.03 is intended to comply with the requirements of Section 

704(b) of the Code and its accompanying Treasury Regulations. If, in the opinion of the 

Company’s accountants, the manner in which Capital Accounts are to be maintained 

pursuant to the provisions of this Section 8.03 should be modified in order to comply with 

Section 704(b) of the Code and its accompanying Treasury Regulations, then 

notwithstanding anything to the contrary contained in the provisions of this Section 8.03, 

the method in which Capital Accounts are maintained shall be so modified; provided, 

however, that any change in the manner of maintaining Capital Accounts shall not 

materially alter the economic agreement between or among the Members or Economic 

Interest Owners. 

 [d] Upon the liquidation of the Company (or any Member’s 

Membership Interest or Economic Interest Owner’s Economic Interest), liquidating 

distributions will be made in accordance with the positive Capital Account balances of the 

Members and Economic Interest Owners, as determined after taking into account all 

Capital Account adjustments for the Company’s taxable year during which the liquidation 

occurs. Liquidation proceeds will be paid within sixty days of the end of the taxable year 

(or, if later, within 120 days after the date of the liquidation). The Company may offset 

damages for breach of this Operating Agreement by a Member or Economic Interest 

Owner whose interest is liquidated (either upon the withdrawal of the Member or the 

liquidation of the Company) against the amount otherwise distributable to such Member. 

 [e] Except as otherwise required in the Act (and subject to Section 

8.01 and 8.02), no Member or Economic Interest Owner shall have any liability to restore 

all or any portion of a deficit balance in such Member’s or Economic Interest Owner’s 

Capital Account. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 20 of 37
- 15 - 

 8.04. Vesting of Economic Interest Owners’ Capital Accounts. As of the 

Effective Date, each Economic Interest Owner shall be deemed to have Vested in his or 

her Capital Account to the extent set forth on the attached Schedule A. The Capital 

Account of each Economic Interest Owner shall further Vest at the rate of 25 percent for 

each full calendar year in which such Economic Interest Owner continues to be an 

Economic Interest Owner under this Operating Agreement. 

 8.05. Withdrawal or Reduction of Capital Contributions. 

[a] No Member or Economic Interest Owner shall be entitled to 

withdraw all or any part of such Member’s or Economic Interest Owner’s 

Capital Contributions, except upon dissolution of the Company to the 

extent provided in Article XII or except upon the unanimous agreement of 

all of the other Members. In either event, a Member or Economic Interest 

Owner shall not receive out of the Company’s property any part of his or 

her Capital Contributions until all liabilities of the Company, except 

liabilities to Members or Economic Interest Owner on account of their 

Capital Contributions, have been paid or there remains property of the 

Company sufficient to pay them. 

[b] A Member or Economic Interest Owner, irrespective of the 

nature of his or her Capital Contributions, has only the right to demand and 

receive cash in return for his or her Capital Contributions. 

ARTICLE IX — ALLOCATIONS AND INCOME TAX MATTERS 

 9.01. Allocation of Profits and Losses. The Net Profits and Net Losses of 

the Company for each fiscal year shall be allocated to the Members and the Economic 

Interest Owners in in the percentages set forth on the attached Schedule A. 

 9.02. [Reserved]

 9.03. [Reserved] 

 9.04. Distributions. Except as provided in Section 8.03[c], all 

distributions of cash or other property shall be made to the Members or Economic Interest 

Owners, as the case may be, pro rata in proportion to the respective Profits Interests of 

the Members or Economic Interest Owners on the record date of such distribution. All 

amounts withheld pursuant to the Code or any provisions of state or local tax law with 

respect to any payment or distribution to the Members or Economic Interest Owners from 

the Company shall be treated as amounts distributed to the relevant Member or Economic 

Interest Owners pursuant to this Section. To the greatest extent possible, consistent with 

sound business practices, the Company shall distribute to each Member and Economic 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 21 of 37
- 16 - 

Interest Owner each year no less than an amount that the Managers reasonably believe to 

be adequate to allow each such Member and Economic Interest Owner defray the federal 

and state income tax liability associated with such Member’s or Economic Interest 

Owner’s Profits Interest for such year, calculated by applying the highest marginal income 

tax rates. 

 9.05. Limitation Upon Distributions. No distribution shall be declared 

and paid unless, after the distribution is made, the assets of the Company are in excess of 

all liabilities of the Company, except liabilities to Members on account of their 

contributions. 

 9.06. Accounting Principles. The profits and losses of the Company shall 

be determined in accordance with generally accepted accounting principles applied on a 

consistent basis using the cash basis method of accounting. It is intended that the 

Company will elect those accounting methods which provide the Company with the 

greatest tax benefits. 

 9.07. Accounting Period. The Company’s accounting period shall be the 

calendar year. 

 9.08. Interest On and Return of Capital Contributions. No Member shall 

be entitled to interest on his or her Capital Contributions or to return of his or her Capital 

Contributions, except as otherwise specifically provided for in this Agreement. 

 9.09. Loans to Company. Nothing in this Operating Agreement shall 

prevent any Member from making secured or unsecured loans to the Company by 

agreement with the Company. 

 9.10. Returns and Other Elections. The Managers shall cause the 

preparation and timely filing of all tax and information returns required to be filed by the 

Company pursuant to the Code and all other tax returns deemed necessary and required in 

each jurisdiction in which the Company does business. Copies of such returns, or pertinent 

information therefrom, shall be furnished to the Members within a reasonable time after 

the end of the Company’s fiscal year. For Colorado tax purposes, each Member and 

Economic Interest Owner which is a nonresident of Colorado shall execute and deliver to 

the Managers a Form DR 0107 (“Nonresident Tax Agreement”) no later than 60 days 

after becoming a Member or Economic Interest Owner, as the case may be. The Managers 

shall timely file with the Colorado Department of Revenue, together with the Company’s 

annual Colorado return, a Nonresident Tax Agreement with respect to each Nonresident 

Member and Economic Interest Owner. All elections permitted to be made by the 

Company under federal or state laws shall be made by the Managers in their sole 

discretion, provided that the Managers shall make any tax election requested by the 

Members owning a Majority Interest. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 22 of 37
- 17 - 

ARTICLE X — TRANSFERS AND 

PURCHASES OF MEMBERSHIP INTERESTS 

 10.01. General Restrictions on Transfers. Except as otherwise specifically 

provided in this Agreement, no Member shall Transfer or Encumber all or any part of his 

or her Membership Interest without the prior written consent of all of the other Members. 

 10.02. Transfers of Membership Interests Without Consent. 

Notwithstanding the provisions of Section 10.01, a Member may Transfer, but only by 

gift, bequest, or devise, all or any part of such Member’s Membership Interest, without the 

consent of any other Member, to — 

[a] the spouse of a Member, 

[b] a direct lineal descendant of a Member, 

[c] a trust all of the present, future, and contingent beneficiaries 

of which are, at all times, limited to one or more Members, or the spouse 

or spouses or the direct lineal descendant or descendants of one or more 

Members, or 

[d] a corporation all of the issued and outstanding capital stock 

of which is owned by one or more Members, or spouse or spouses or the 

direct lineal descendant or descendants of one or more Members, or a trust 

all of the present, future, and contingent beneficiaries of which are limited 

to the preceding. 

all of which, together with all of the beneficiaries of a trust described in [c], shall be 

known as “Permitted Transferees.” No further transfer by a Permitted Transferee shall be 

a transfer permitted under this Section. Any Permitted Transferee under this Section, for 

so long as such Permitted Transferee is under the age of 18 years, shall be deemed to hold 

only an Economic Interest, and not a Membership Interest until such Permitted 

Transferee’s eighteenth birthday, at which time such Permitted Transferee shall be deemed 

to hold the actual interest transferred to such Permitted Transferee. 

 10.03. Transfers of Membership Interests With Consent. A Member who 

desires to Transfer or Encumber all or any portion of his or her Membership Interest to or 

in favor of any transferee (other than in connection with a transfer permitted by Section 

10.02) shall deliver to all the nontransferring Members a written notice stating all the 

terms and conditions upon which the transfer is proposed to be made and the 

consideration, if any, to be received for such transfer. If all of the nontransferring 

Members consent to such transfer, then the transferring Member shall be entitled to 

transfer such transferring Member’s Membership Interest only upon the terms and 

conditions set forth in such written notice, and the nontransferring Members shall have no 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 23 of 37
- 18 - 

right of first refusal with respect to the transferred interest and no right to transfer such 

nontransferring Members’ Membership Interests to the proposed transferee or to any 

other transferee on any similar terms or any other terms, without the consent of the other 

Members in accordance with this Section. Whether or not such consent is given, the rights 

of any transferee or security holder shall be subordinate and subject to the rights and 

obligations which this Agreement creates. 

 10.04. Mandatory Sale and Purchase of an Economic Interest Owner’s 

Economic Interest. 

 [a] For purposes of this Section 10.04, a “Mandatory Sale Event” shall 

mean any the following events with respect to an Economic Interest Owner, effective as of 

the effective date (the “Mandatory Sale Date”) indicated: 

[1] The Economic Interest Owner’s death. 

[2] The Economic Interest Owner’s permanent disability, which shall 

be deemed to have occurred when a physician licensed to practice 

medicine shall deliver to the Managers a certification in writing that 

there exists a condition resulting from age, physical injury or illness, 

mental impairment, or other sickness or illness which renders the 

Economic Interest Owner substantially incapable of performing the 

normal duties and services previously performed by the Economic 

Interest Owner in his or her regular occupation with the Company 

and such condition has existed for at least six consecutive calendar 

months. 

[3] The termination by the Company of the Economic Interest Owner’s 

employment with the Company for reasons other than the 

Economic Interest Owner’s breach of the terms of his or her 

employment agreement, if any, effective as of the date of such 

termination. 

[4] The Economic Interest Owner’s voluntary retirement or resignation 

from employment with the Company or the termination by the 

Company of the Economic Interest Owner’s employment with the 

Company by virtue of the Economic Interest Owner’s breach of the 

terms of his or her employment agreement, if any, effective as of 

the date of such retirement, resignation, or termination 

[5] The Economic Interest Owner’s bankruptcy, effective as of the date 

of filing of a petition or other initial pleading, whether voluntary or 

involuntary, by or against the Economic Interest Owner under the 

federal bankruptcy laws. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 24 of 37
- 19 - 

[6] The entry of a decree by a trial court of competent jurisdiction 

ordering the transfer of the Economic Interest Owner’s 

Membership Interest to a person who is not a party to this 

Agreement, effective upon the date of entry of such decree. 

For purposes of this Section 10.04, an event described above in [4], [5], and [6] shall not 

constitute a Mandatory Sale Event unless, within ten days after the effective date of such 

event, the Company has delivered written notice to the Economic Interest Owner of its 

intention to treat such event as a Mandatory Sale Event under this Section. Also for 

purposes of this Section 10.04, the term “Selling Group” shall collectively mean the 

Economic Interest Owner, the holders of all Economic Interests which the Economic 

Interest Owner permissibly transferred under Sections 10.02 and 10.03 at any time prior to 

the Mandatory Sale Date, and their legal representatives, successors, and assigns, as the 

case may be. 

 [b] Effective as of the Mandatory Sale Date, and whether or not the 

applicable event constitutes a Mandatory Sale Event — 

[i] each member of the Selling Group who was a Member immediately 

prior to the Mandatory Sale Date shall cease to be a Member for all 

purposes under this Agreement other than Section 6.05 (relating to 

a Member’s liability upon a return of that Member’s contributions), 

[ii] each member of the Selling Group shall be considered to hold only 

an Economic Interest determined under this Section 10.04 at all 

times after the Mandatory Sale Date until the complete liquidation 

of the interests of all the members of the Selling Group, 

[iii] the Selling Group shall forfeit that portion of its Capital Accounts 

that is not “Vested” within the meaning of Section 8.04, and such 

portion shall be reallocated and deemed to belong to the Members 

in proportion to their Capital Interests. 

 [c] Upon the occurrence of a Mandatory Sale Event, the Company 

shall be obligated to liquidate the interests of the members of the Selling Group in the 

Company and in the property of the Company, and, in exchange therefor, shall be 

obligated to pay to the Selling Group an amount (the “Redemption Price”) equal to the 

amount that the Selling Group would have received. with respect to that portion of the 

Selling Group’s Capital Account that has Vested within the meaning of Section 8.04, as a 

distribution pursuant to Article XII, upon the liquidation of the Company after sale by the 

Company of all of its assets for an amount equal to their net book value, the discharge of 

all of its liabilities, and the allocation of the resulting gain or loss pursuant to Article IX. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 25 of 37
- 20 - 

 Within 30 days after the occurrence of a Mandatory Sale Event, the 

Company shall pay to the Selling Group, in cash, 10 percent of that portion of the 

Redemption Price described in above [i] and shall deliver to the Selling Group one or 

more nonnegotiable promissory notes providing for the payment of the balance of that 

portion of the Redemption Price described in above [i] in five equal installments on each 

anniversary of the end of the calendar quarter in which the Mandatory Sale Date occurred, 

which notes shall bear simple interest at a rate that is equal to one percent above the prime 

rate published in the Wall Street Journal on the Mandatory Sale Date, and which notes 

shall be subject to prepayment, in whole or in part, at any time without penalty. 

 10.05. [Reserved]. 

 10.06. Obligations of Transferees. As an express condition of the 

Company’s and the other Members’ recognition of any transfer or encumbrance or, if 

applicable, the substitution of a new Member as against the Company or otherwise, each 

transferring Member and each transferee permitted under Sections 10.02 and 10.03 shall 

execute, acknowledge, and deliver to the Company and to the remaining Members such 

instruments of transfer, assignment, and assumption and such other certificates, 

representations and documents, and perform all such other acts which the remaining 

Members may reasonably request from time to time in connection with such Transfer or 

Encumbrance or which the remaining Members may deem necessary or desirable to: 

[a] constitute such transferee as a Member, donee, or 

successor-in-interest, as applicable; 

[b] confirm that the person acquiring or desiring to acquire an 

interest or interests in the Company, or to be admitted as a Member, has 

accepted, assumed and agreed to be subject and bound by all of the terms, 

obligations and conditions of the Operating Agreement, as the same may 

have been further amended (whether such Person is to be admitted as a 

new Member or will merely be an Economic Interest Owner); 

[c] preserve the Company after the completion of such sale, 

transfer, assignment, or substitution under the laws of each jurisdiction in 

which the Company is qualified, organized or does business;

[d] indemnify the Company and the remaining Members against 

any and all loss, damage, or expense (including, without limitation, tax 

liabilities or loss of tax benefits) arising directly or indirectly as a result of 

the transfer, 

[e] preserve the Company after the completion of such Transfer 

or Encumbrance under the laws of each jurisdiction in which the Company 

is qualified, organized or does business; 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 26 of 37
- 21 - 

[f] maintain the status of the Company as a partnership for 

federal tax purposes; and 

[g] assure compliance with any applicable state and federal laws 

including securities laws and regulations. 

Whether or not such purchaser, donee, or successor–in–interest has executed such 

instruments, certificates, representations, and documents, such purchaser, donee, or 

successor–in–interest shall nonetheless hold such Membership Interest or Economic 

Ownership Interest subject to the terms of this Agreement and shall automatically be 

deemed a party to this Agreement. 

 10.07. Transferee Not Member in Absence of Unanimous Consent. 

 [a] Notwithstanding anything contained in this Agreement to the 

contrary, if all of the remaining Members do not approve by unanimous written consent of 

the proposed sale of the Transferring Member’s Membership Interest or Economic 

Interest to a transferee or donee which is not a Member immediately prior to the sale or 

gift, then the proposed transferee or donee shall have no right to participate in the 

management of the business and affairs of the Company or to become a Member, and the 

transferee or donee shall be merely an Economic Interest Owner. No transfer of a 

Member’s interest in the Company (including any transfer of the Economic Interest or any 

other transfer which has not been approved by unanimous written consent of the 

Members) shall be effective unless and until written notice (including the name and 

address of the proposed transferee or donee and the date of such transfer) has been 

provided to the Company and the nontransferring Members. 

 [b] The restrictions on transfer contained in this Section 10.07 are 

intended to comply (and shall be interpreted consistently) with the restrictions on transfer 

set forth in C.R.S. Section 7-80-702(1). 

ARTICLE XI — ADDITIONAL MEMBERS 

 Any Person or Entity acceptable to all of the Members may become a 

Member in this Company either by the issuance by the Company of Membership Interests 

for such consideration as the Members by their unanimous votes shall determine, or by 

means of a transfer one or more Members’ Membership Interest or any portion thereof, 

subject to the terms and conditions of this Operating Agreement. No new Members shall 

be entitled to any retroactive allocation of losses, income or expense deductions incurred 

by the Company. The Company may, at the time a Member is admitted, close the 

Company books (as though the Company’s tax year had ended) or make pro rata 

allocations of loss, income and expense deductions to a new Member for that portion of 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 27 of 37
- 22 - 

the Company’s tax year in which a Member was admitted in accordance with the 

provisions of Section 706(d) of the Code. 

ARTICLE XII — DISSOLUTION AND TERMINATION 

 12.01. Dissolution. The Company shall be dissolved if a Member or 

Members owning Capital Interests which in the aggregate constitute not less than two–

thirds of the Capital Interests of all the Members vote to dissolve the Company at a 

meeting of the Members pursuant to Article VII. 

 12.02. Effect of Filing of Dissolving Statement. Upon the filing by the 

Colorado Secretary of State of a statement of intent to dissolve, the Company shall cease 

to carry on its business, except insofar as may be necessary for the winding up of its 

business, but its separate existence shall continue until a certificate of dissolution has been 

issued by the Secretary of State or until a decree dissolving the Company has been entered 

by a court of competent jurisdiction. 

 12.03. Winding Up, Liquidation, and Distribution of Assets. 

 [a] Upon dissolution, an accounting shall be made by the Company or 

its independent accountants of the accounts of the Company and of the Company’s assets, 

liabilities and operations, from the date of the last previous accounting until the date of 

dissolution. The Members shall immediately proceed to wind up the affairs of the 

Company. 

 [b] Upon dissolution, each Economic Interest Owner shall forfeit that 

portion of its Capital Accounts that is not “Vested” within the meaning of Section 8.04, 

and such portion shall be reallocated and deemed to belong to the Members in proportion 

to their Capital Interests. 

 [c] If the Company is dissolved and its affairs are to be wound up, the 

Members shall: 

[1] Sell or otherwise liquidate all of the Company’s assets as 

promptly as practicable (except to the extent the Members may determine 

to distribute any assets to the Members in kind), 

[2] Allocate any profit or loss resulting from such sales to the 

Capital Account of each Member and, to the extent Vested within the 

meaning of Section 8.04, each Economic Interest Owners in accordance 

with Article IX, 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 28 of 37
- 23 - 

[3] Discharge all liabilities of the Company, including liabilities 

to Members and Economic Interest Owners who are creditors, to the 

extent otherwise permitted by law, other than liabilities to Members and 

Economic Interest Owners for distributions, and establish such Reserves as 

may be reasonably necessary to provide for contingent or liabilities of the 

Company (for purposes of determining the Capital Accounts of the 

Members and Economic Interest Owners, the amounts of such Reserves 

shall be deemed to be an expense of the Company), 

[4] Distribute the remaining assets in the following order: 

[i] If any assets of the Company are to be distributed in 

kind, the net fair market value of such assets as of 

the date of dissolution shall be determined by 

independent appraisal or by agreement of the 

Members. Such assets shall be deemed to have been 

sold as of the date of dissolution for their fair market 

value, and the Capital Accounts of the Members and 

Economic Interest Owners shall be adjusted 

pursuant to the provisions of Article IX and Section 

8.03 of this Operating Agreement to reflect such 

deemed sale. 

[ii] The positive balance (if any) of each Member’s and 

Economic Interest Owner’s Capital Account (as 

determined after taking into account all Capital 

Account adjustments for the Company’s taxable 

year during which the liquidation occurs) shall be 

distributed to the Members, either in cash or in kind, 

as the Members may determine, with any assets 

distributed in kind being valued for this purpose at 

their fair market value as determined pursuant to 

Section 12.03[b][i]. Any such distributions to the 

Members in respect of their Capital Accounts shall 

be made in accordance with the time requirements 

set forth in Treasury Regulation § 1.704-

1(b)(2)(ii)(b)(2). 

 [d] Notwithstanding anything to the contrary in this Operating 

Agreement, upon a liquidation within the meaning of Section 1.704-1(b)(2)(ii)(g) of the 

Treasury Regulations, if any Member has a Deficit Capital Account (after giving effect to 

all contributions, distributions, allocations, and other Capital Account adjustments for all 

taxable years, including the year during which such liquidation occurs), such Member shall 

have no obligation to make any Capital Contributions, and the negative balance of such 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 29 of 37
- 24 - 

Member’s Capital Account shall not be considered a debt owed by such Member to the 

Company or to any other Person for any purpose whatsoever. 

 [e] Upon completion of the winding up, liquidation and distribution of 

the assets, the Company shall be deemed terminated. 

 [f] The Members shall comply with any applicable requirements of 

applicable law pertaining to the winding up of the affairs of the Company and the final 

distribution of its assets. 

 12.04. Articles of Dissolution. When all debts, liabilities and obligations 

have been paid and discharged or adequate provisions have been made therefor and all of 

the remaining property and assets have been distributed to the Members, articles of 

dissolution shall be executed in duplicate and verified by the person signing the articles, 

which articles shall set forth the information required by the Act. Duplicate originals of 

such articles of dissolution shall be delivered to the Colorado Secretary of State. 

 12.05. Certificate of Dissolution. Upon the issuance of the certificate of 

dissolution, the existence of the Company shall cease, except for the purpose of suits, 

other proceedings and appropriate action as provided in the Act. The Members shall have 

authority to distribute any Company property discovered after dissolution, convey real 

estate and take such other action as may be necessary on behalf of and in the name of the 

Company. 

 12.06. Return of Contributions Nonrecourse to Other Members. Except as 

provided by law or as expressly provided in this Operating Agreement, upon dissolution, 

each Member shall look solely to the assets of the Company for the return of his or her 

Capital Contributions. If the Company property remaining after the payment or discharge 

of the debts and liabilities of the Company is insufficient to return the cash contribution of 

one or more Members, such Member or Members shall have no recourse against any other 

Member. 

ARTICLE XIII — MISCELLANEOUS PROVISIONS 

 13.01. Notices. Any notice, demand, or communication required or 

permitted to be given by any provision of this Operating Agreement shall be deemed to 

have been sufficiently given or served for all purposes if delivered personally to the party 

or to an executive officer of the party to whom the same is directed or, if sent by 

registered or certified mail, postage and charges prepaid, addressed to the Member’s 

and/or Company’s address, as appropriate, which is set forth in this Operating Agreement. 

Except as otherwise provided in this Agreement, any such notice shall be deemed to be 

given three business days after the date on which the same was deposited in a regularly 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 30 of 37
- 25 - 

maintained receptacle for the deposit of United States mail, addressed and sent as 

aforesaid. 

 13.02. Records and Reports. At the expense of the Company, the 

Managers shall keep or cause to be kept proper and complete records and books of 

account, in which shall be entered fully and accurately all transactions and other matters 

relating to the Company’s business in such detail and completeness as is customary and 

usual for businesses of the type engaged in by the Company. At a minimum the Company 

shall keep at its principal place of business the following records: 

[a] A current list of the full name and last known business, residence, 

or mailing address of each Member and Economic Interest Owner, 

both past and present; 

[b] A copy of the Articles of Organization of the Company and all 

amendments thereto, together with executed copies of any powers 

of attorney pursuant to which any amendment has been executed; 

[c] Copies of all of the Company’s annual operating, capital, and 

special budgets; 

[d] Copies of statements revealing the financial condition and 

operations of the Company, its receipts and disbursements, and a 

list of its assets and liabilities, prepared in accordance with generally 

accepted accounting principles applied on a consistent basis from 

year to year. 

[e] Copies of the Company’s federal, state, and local income tax 

returns and reports, if any, for the four most recent years; 

[f] Copies of the Company’s currently effective written Operating 

Agreement, copies of any writings permitted or required with 

respect to a Member’s obligation to contribute cash, property or 

services, and copies of any financial statements of the Company for 

the three most recent years; 

[g] Minutes of every annual, special meeting and court-ordered 

meeting; 

[h] Any written consents obtained from Members for actions taken by 

Members without a meeting; 

[i] All other relevant Company documents. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 31 of 37
- 26 - 

Such books and records shall be at all times maintained at the principal executive office of 

the Company and shall be open to the reasonable inspection and examination of the 

Members, Economic Interest Owners, or their duly authorized representatives during 

reasonable business hours. 

 13.03. Application of Colorado Law. This Operating Agreement and its 

interpretation, shall be governed exclusively by its terms and by the laws of the State of 

Colorado, and specifically the Act. 

 13.04. Waiver of Action for Partition. Each Member and Economic 

Interest Owner irrevocably waives during the term of the Company any right that it may 

have to maintain any action for partition with respect to the property of the Company. 

 13.05. Amendments. This Operating Agreement may not be amended 

except by the unanimous written agreement of all of the Members. 

 13.06. Execution of Additional Instruments. Each Member hereby agrees 

to execute such other and further statements of interest and holdings, designations, powers 

of attorney and other instruments necessary to comply with any laws, rules or regulations. 

 13.07. Construction. Whenever the singular number is used in this 

Operating Agreement and when required by the context, the same shall include the plural 

and vice versa, and the masculine gender shall include the feminine and neuter genders and 

vice versa. 

 13.08. Headings. The headings in this Operating Agreement are inserted 

for convenience only and are in no way intended to describe, interpret, define, or limit the 

scope, extent or intent of this Operating Agreement or any of its provisions. 

 13.09. Waivers. The failure of any party to seek redress for violation of or 

to insist upon the strict performance of any covenant or condition of this Operating 

Agreement shall not prevent a subsequent act, which would have originally constituted a 

violation, from having the effect of an original violation. 

 13.10. Rights and Remedies Cumulative. The rights and remedies 

provided by this Operating Agreement are cumulative and the use of any one right or 

remedy by any party shall not preclude or waive the right to use any or all other remedies. 

Said rights and remedies are given in addition to any other rights the parties may have by 

law, statute, ordinance or otherwise. 

 13.11. Severability. If any provision of this Operating Agreement or the 

application thereof to any person or circumstance shall be invalid, illegal or unenforceable 

to any extent, the remainder of this Operating Agreement and the application thereof shall 

not be affected and shall be enforceable to the fullest extent permitted by law. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 32 of 37
- 27 - 

 13.12. Heirs, Successors, and Assigns. Each and all of the covenants, 

terms, provisions and agreements in this Agreement contained shall be binding upon and 

inure to the benefit of the parties and, to the extent permitted by this Operating 

Agreement, their respective heirs, legal representatives, successors and assigns. 

 13.13. Creditors. None of the provisions of this Operating Agreement 

shall be for the benefit of or enforceable by any creditors of the Company or its Members. 

 13.14. Counterparts. This Operating Agreement may be executed in 

counterparts, each of which shall be deemed an original but all of which shall constitute 

one and the same instrument. 

 13.15. Disclosure of Schedule A. In order to preserve the confidentiality of 

this Agreement and the Company’s relationship with certain of its employeesm agents, and 

other persons, the Company shall be authorized to prepare a redacted version of Schedule 

A that contains only the pertinent information relating to each Member and Economic 

Interest Owner and to deliver a copy of this Operating Agreement containing such a 

redacted version to each such Member and Economic Interest Owner in lieu of a complete 

copy of Schedule A. 

[Signatures on following page]

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 33 of 37
- 28 - 

 The undersigned hereby agree, acknowledge and certify that the preceding 

Operating Agreement constitutes the Operating Agreement of Reed Group, LLC adopted 

by the Members of the Company and accepted by each Economic Interest Owner of the 

Company who has signed a separate signature page, all to be effective as of 

_______________, 2005. 

MEMBERS: 

Date: _______________________ __________________________________

Presley Reed 

Date: _______________________ __________________________________

Stacey Grace Reed 

Date: _______________________ __________________________________

Peter B. Nagel, Trustee of the 

Presley Reed 1999 Family Trust 

[separate signature page for each Economic Interest Owner] 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 34 of 37
SCHEDULE A 

Initial Capital Contributions, Profits Interests, Vested Interests

Name and Address 

Capital 

Contribution 

Profits 

Interest 

Vested 

Percentage 

Members 

Presley Reed 

10155 Westmoor Drive, Suite 210

Westminster, Colorado 80021 $_____.__ 30.00 Percent N/A 

Stacey Grace Reed 

10155 Westmoor Drive, Suite 210

Westminster, Colorado 80021 $_____.__ 30.00 Percent N/A 

Presley Reed 1999 Family Trust 

999 Eighteenth Street, Suite 3000 

Denver, Colorado 80202 $_____.__ 30.00 Percent N/A 

Economic Interest Owners 

Ken _____________ 

_______________

_______________ $0.00 2.00 Percent 100.00% 

Shauna Bryngleson 

_______________

_______________ $0.00 1.00 Percent 0.00% 

Judith Combs 

_______________

_______________ $0.00 1.00 Percent 0.00% 

Tom _____________ 

_______________

_______________ $0.00 0.25 Percent 100.00% 

Any _____________ 

_______________

_______________ $0.00 0.25 Percent 0.00% 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 35 of 37
- 30 – 

Karen _____________ 

_______________

_______________ $0.00 0.25 Percent 0.00% 

Denise _____________ 

_______________

_______________ $0.00 0.25 Percent 0.00% 

Marty _____________ 

_______________

_______________ $0.00 1.00 Percent 0.00% 

Total 96.00 Percent 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 36 of 37
- 31 – 

Exhibit 2a. Moran’s CEO Goals FY2005 

Exhibit 2b. Phillips’ Completion of Moran’s FY2005Goals 

Mr. Morans CEO Goals Mr. Phillips Activities relative to the 

goal 

STRATEGY :Determine If A Joint Venture w/Clear 

Technology And Sycamore Ventures In the WC Makes 

Sense For Reed 

Mr. Phillips met numerous times with 

Sycamore, Mr. Ash Roy, Clear Technology, 

and prepared a 50 page analysis that was 

reviewed by Sycamore. 

STRATEGY: Determine If A Relationship With ACOEM Can 

Be Finalized 

Mr. Phillips spent 2000 hours and 

personally financed the Proof of Concept. 

This is now a major RGL product 

MARKETING Hire A New Chief Marketing Officer Mr. Phillips sourced and assisted in hiring 

Mr. Marty Reader, who still consults for the 

firm 

TECHNOLOGY: Determine If Investment In New Technology 

Is Right For Reed 

Mr. Phillips consulted to this project under 

the direct supervision of President Grace. 

OPERATIONS: Create STD Product Offering And Streamline 

Implementation Flow

Worked 100’s of hours with teams at RGL 

to develop new method and workflow. 

SALES: Refocus Partnership Strategy And Rework Business 

Arrangements As Time Permits

Worked with VP Sales on almost all deals 

in her pipeline 

CORPORATE: Establish New LLC. Worked on team, managed by Presley 

created this structure. 

Case 1:07-cv-03417-LAP-DCF Document 54-1 Filed 08/01/13 Page 37 of 37