Document:

2nd Amend/Restated Operating Agr - Front Range Energy

    EXHIBIT
      10.4

    

    SECOND
      AMENDED AND RESTATED

    OPERATING
      AGREEMENT

    OF

    FRONT
      RANGE ENERGY, LLC

    

    THIS
      SECOND AMENDED AND RESTATED OPERATING AGREEMENT (“Agreement”)
      which
      amends and restates the First Amended and Restated Operating Agreement of Front
      Range Energy, LLC, a Colorado limited liability company (the “Company”),
      is
      hereby amended and restated in its entirety effective as of the 20th day of
      October, 2005 (the “Effective
      Date”),
      by the
      undersigned being all the members of the Company.

     

    SECTION
      1.

    Definitions

     

    SECTION
      1.1 Definitions.
      For
      purposes of this Agreement, capitalized terms shall have the meaning ascribed
      to
      them in Appendix I attached hereto.

     

    SECTION
      1.2 References
      and Construction.

     

    
      	 	
              (a)

            	
              Words
                of the masculine gender shall be deemed to include the feminine and
                neuter
                genders, and vice versa, where applicable. Words of the singular
                number
                shall be deemed to include the plural number, and vice versa, where
                applicable.

            

    

     

    
      	 	
              (b)

            	
              Unless
                otherwise indicated, any reference herein to a “Section”, “Exhibit”,
                “Appendix”, “Subsection”, “Paragraph”, or to a subpart of any of them,
                shall be to the applicable section, exhibit, appendix, subsection
                or
                paragraph of or to this Agreement or subpart
                thereof.

            

    

     

    
      	 	
              (c)

            	
              The
                words “this Agreement”, “herein”, “hereof”, “hereby”, “hereunder”, and
                words of similar import refer to this Agreement as a whole and not
                to any
                particular subdivision unless expressly so
                limited.

            

    

     

    
      	 	
              (d)

            	
              The
                word “includes” and its derivatives means “includes, but is not limited
                to” and corresponding derivative
                expressions.

            

    

     

    
      	 	
              (e)

            	
              Unless
                the context otherwise requires or unless otherwise provided herein,
                the
                terms defined in this Agreement which refer to a particular agreement,
                instrument, or document also refer to and include all renewals, extension,
                modifications, amendments, or restatements of such agreement, instrument,
                or document.

            

    

     

    SECTION
      2.

    Organization

     

    SECTION
      2.1 Formation.
      The
      Company was formed on July 29, 2004 under and pursuant to the provisions of
      the
      Act. Except as otherwise required by the nonwaivable provisions of the Act
      or
      the Articles, the rights, duties and obligations of the Members and Managers,
      and the operation of the Company shall be governed by the provisions of this
      Agreement.

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -1-

        
          

        

      

      
        
        

      

    

    SECTION
      2.2 Name
      and Principal Office.
      The
      Company shall conduct its business under the name of “Front Range Energy, LLC”,
      or such other name or names as the Managers may determine. The Company’s
      principal office shall be located at such place as the Managers may, from time
      to time, determine.

     

    SECTION
      2.3 Term.
      The
      Company’s existence commenced on July 29, 2004 and shall continue until
      dissolved as provided herein.

     

    SECTION
      2.4 Business
      Purpose.
      The
      Company is organized for profit and it may engage in any and all lawful business
      for which limited liability companies may be organized under the Act, and engage
      in any or all activities related or incidental thereto.

     

    SECTION
      2.5 Ratification
      of Prior Acts.
      All
      contracts, agreements, letters of intent, and all other actions heretofore
      undertaken and performed on behalf of the Company by its Managers, officers,
      or
      by any Member are hereby ratified, approved and confirmed,

     

    SECTION
      3.

    Capital
      Contributions

     

    SECTION
      3.1 Initial
      Units.
      Until
      such time as additional classes or series of Units of the Company are created
      and issued pursuant to Section 10.1 hereof, the Company shall have two classes
      of Units (Class A Units and Class B Units). Each outstanding Unit shall be
      entitled to one (1) vote on matters submitted to a vote of all members or
      submitted to a vote of a particular class of Members.

     

    SECTION
      3.2 Initial
      Capital Contributions.
      Each of
      the Initial Members shall make the capital contribution set forth for such
      Member on Exhibit
      A
      attached
      hereto. In consideration of such capital contributions, each such Member shall
      receive the number and classes of Units indicated on Exhibit
      A
      attached
      hereto.

     

    SECTION
      3.3 Additional
      Capital Contributions.
      The
      Members recognize that the Company may require additional capital from time
      to
      time in order to accomplish the business purpose for which it is formed. The
      Company may, by written notice, call for additional contributions to the capital
      of the Company (each, an “Additional
      Capital Contribution”)
      to be
      made by all Members if a Two-Thirds Interest determines that such an Additional
      Capital Contribution is appropriate or necessary for the operation of the
      Company. Within thirty (30) days following the giving of such a notice, each
      Member shall contribute, in cash, to the capital of the Company a proportion
      of
      an Additional Capital Contribution equal to the proportion that the number
      of
      Class B Units held by such Member bears to the total issued and outstanding
      Class B Units (the “Required
      Contribution”).
      Each
      Member making a Required Contribution under this Section 3.3 or Section 3.4
      shall be credited with one (1) Class B Unit (or appropriate portion thereof)
      for
      each $1,000 (or portion thereof) of Required Contribution made by that
      Member.

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    SECTION
      3.4 Failure
      to Contribute.
      If any
      Member fails or refuses for any reason to make in a timely manner any part
      or
      all of a Required Contribution, such Member shall be in default hereunder and
      shall be deemed to be a “Defaulting
      Member”
      to the
      extent of the unpaid part of the Required Contribution (the “Unpaid
      Required Contribution”).
      For a
      period often (10) days after the earlier of the expiration of the thirty (30)
      day period described in Section 3.3 or notice to Daniel A. Sanders from the
      Defaulting Member that the Defaulting Member shall not make all or any portion
      of the Additional Capital Contribution, Daniel A. Sanders, as Class A Member,
      shall have the right — but not the obligation — to make all or such part of the
      Unpaid Required Contribution as he so determines. In the event or to the extent
      Daniel A. Sanders does not make all of the Unpaid Required Contribution, for
      a
      period of ten (10) days after the earlier of the expiration of the ten (10)
      day
      period described in the preceding sentence or Daniel A. Sanders’ giving notice
      to the other Members holding Class B Units of his intention not to make the
      entire Unpaid Required Contribution, Members holding Class B Units other than
      the Defaulting Member shall have the right — but not the obligation — to make a
      proportion of the remaining Unpaid Required Contribution equal to the proportion
      that the number of Class B Units held by such Member bears to the total issued
      and outstanding Class B Units (excluding those held by the Defaulting Member).
      In the event any portion of the Unpaid Required Contribution remains unmade
      at
      the end of the ten (10) day period described in the immediately preceding
      sentence, the following shall apply:

     

    
      	 	
              (a)

            	
              The
                Unpaid Required Contribution shall constitute an obligation of such
                Defaulting Member to the Company and shall bear interest from the
                from the
                [sic?]
                expiration of the thirty (30) day period described in Section 3.3
                at a
                floating annual rate of interest equal to the lesser of (i) eight
                percent
                (8%), or (ii) the maximum rate permitted by law. Interest shall be
                compounded monthly. The Company may upon the decision of a Majority
                in
                Interest (determined by excluding all of the Units of the Defaulting
                Member), institute suit in any court of competent jurisdiction to
                enforce
                such obligation of the Defaulting Member. In addition, the Company
                shall
                be entitled to recover in such suit all costs and expenses, including,
                but
                not limited to, court costs and reasonable attorneys’ fees, thereby
                incurred by the Company and any damages (except incidental or
                consequential damages) sustained by the Company as a result of the
                default
                by the Defaulting Member.

            

    

     

    
      	 	
              (b)

            	
              By
                executing this Agreement, each Member shall be deemed to have granted
                to
                the Company a first and prior lien and security interest upon such
                Member’s Units as security for the payment of all Required Contributions
                of such Member. This Agreement shall be deemed to be a security agreement
                with respect to such security interest and collateral and each Member
                shall promptly execute and deliver to the Company any financing statements
                or other instruments that the Company, or any other Member, may request
                for purposes of perfecting or continuing such security interest.
                Upon the
                failure of a Member to execute and deliver such financing statements
                or
                other instruments, the other Members, and each of them, as
                attorney-in-fact for such Member, may execute and deliver such financing
                statements or other instruments for, in the name and on behalf of
                such
                Member. 

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    With
      respect to a Defaulting Member, the Company, acting upon the decisions of a
      Majority in Interest (determined by excluding all of the Units of the Defaulting
      Member), shall have all of the rights and remedies of a secured party under
      the
      Colorado Uniform Commercial Code, including, without limitation, and in addition
      to the rights under such law, the right to sell, effective as of the first
      day
      of the fiscal quarter in which the default occurs or such subsequent date as
      the
      Company may determine, by public or private sale upon five (5) days advance
      notice to the Defaulting Member, the Defaulting Member’s Units or any part
      thereof, and the Company and the other Members shall be permitted purchasers
      at
      any such sale. In addition, the Company shall have the right to retain and
      set-off against the Unpaid Required Contribution of a Defaulting Member and
      any
      accrued interest thereon all amounts becoming otherwise distributable (including
      all distributions, mandatory or otherwise to which the Defaulting Member would
      otherwise have been entitled under Section 4.1 hereof) or payable to such
      Defaulting Member by the Company. Any amount so retained and set-off by the
      Company shall be deemed to be a constructive cash distribution to the Defaulting
      Member and a constructive repayment by such Member to the Company. Any
      repayment, whether constructive or actual, shall be applied first against any
      unpaid accrued interest on the Defaulting Member’s Unpaid Required Contribution
      and the remainder shall be applied against such Member’s Unpaid Required
      Contribution.

     

    SECTION
      3.5 Capital
      Accounts.
      A
      separate capital account (“Capital
      Account”)
      shall
      be maintained for each Member. Each Member’s Capital Account shall be maintained
      as follows:

     

    
      	 	
              (a)

            	
              To
                each Member’s Capital Account there shall be credited such Member’s
                Capital Contributions, such Member’s distributive share of Profits and any
                items in the nature of income or gain which are specially allocated
                pursuant to Section 4.4 or Section 4.5, and the amount of any Company
                liabilities assumed by such Member or which are secured by any asset
                distributed by the Company to such
                Member;

            

    

     

    
      	 	
              (b)

            	
              To
                each Member’s Capital Account there shall be debited the amount of cash
                and the Gross Asset Value of any asset distributed to such Member
                pursuant
                to any provision of this Agreement, such Member’s distributive share of
                Losses and any items in the nature of expenses or losses which are
                specially allocated pursuant to Section 4.4 or Section 4.5, and the
                amount
                of any liabilities of such Member assumed by the Company or which
                are
                secured by any property contributed by such Member to the
                Company;

            

    

     

    
      	 	
              (c)

            	
              In
                the event all or a portion of an interest in the Company is Transferred
                in
                accordance with the provisions of this Agreement, the Transferee
                shall
                succeed to the Capital Account of the Transferor to the extent it
                relates
                to the Transferred interest; and

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    
      	 	
              (d)

            	
              In
                determining the amount of any liability for purposes of clauses (a)
                and
                (b) above, there shall be taken into account Code § 752(c) and any
                other applicable provisions of the Code and
                Regulations,

            

    

     

    This
      Section and the other provisions of this Agreement relating to the maintenance
      of Capital Accounts are intended to comply with Regulations § 1.704-1(b),
      and shall be interpreted and applied in a manner consistent therewith. In the
      event the Managers shall determine that it is prudent to modify the manner
      in
      which the Capital Accounts, or any debits or credits thereto (including, without
      limitation, debits or credits relating to liabilities which are secured by
      contributed or distributed property or which are assumed by the Company or
      the
      Members), are computed in order to comply with such Regulations, the Managers
      may make such modification, provided that it is not likely to have a material
      effect on the amounts distributable to any Member upon the dissolution of the
      Company. The Managers also shall (1) make any adjustments that are necessary
      or
      appropriate to maintain equality between the Capital Accounts of the Members
      and
      the amount of Company capital reflected on the Company’s balance sheet, as
      computed for book purposes, in accordance with Regulations
§ 1.704-1(b)(2)(iv)(g), and (ii) make any appropriate modifications in the
      event unanticipated events (for example, the acquisition by the Company of
      oil
      and gas properties) might otherwise cause this Agreement not to comply with
      Regulations § 1.704-1(b).

     

    SECTION
      3.6 Capital
      Withdrawal Rights, Interest and Priority.
      Except
      as otherwise provided herein, no Member shall be entitled to (i) a return of
      any
      part of such Member’s Capital Contributions or Capital Account, (ii) be paid any
      interest on such Member’s Capital Contributions or Capital Account, or (iii)
      priority over any other Member as to the return of such Member’s Capital
      Contributions or Capital Account.

     

    SECTION
      3.7 Loans.
      No
      Member shall be required to make any loan to the Company. A Member may make
      a
      loan to the Company in such amounts, at such times and on such terms and
      conditions as may be determined by the Manager. A loan by a Member to the
      Company shall not be considered a contribution to the capital of the
      Company.

     

    SECTION
      3.8 Securities
      Law Representations and Warranties of Members.
      Each
      Member hereby represents and warrants to the Company and acknowledges that:
      (i) such Member has knowledge and experience in financial and business
      matters and is capable of evaluating the merits and risks of an investment
      in
      the Company and making an informed investment decision with respect thereto;
      (ii) such Member has reviewed and evaluated all information necessary to assess
      the merits and risks of his, her or its investment in the Company and has had
      answered to its satisfaction any and all questions regarding such information;
      (iii) such Member is able to bear the economic and financial risk of an
      investment in the Company for an indefinite period of time; (iv) such Member
      is
      acquiring Units in the Company for investment only and not with a view to,
      or
      for resale in connection with, any distribution to the public or public offering
      thereof; (v) the Units in the Company have not been registered under the
      securities laws of any jurisdiction, and can be disposed of only in accordance
      with applicable securities laws and the provisions of this Agreement; (vi)
      the
      execution, delivery and performance of this Agreement have been duly authorized
      by such Member and do not require such Member to obtain any consent or approval
      that has not been obtained and do not contravene or result in a default under
      any provision of any law or regulation applicable to such Member or other
      governing documents or any agreement or instrument to which such Member is
      a
      party or by which such Member is bound, (vii)
      the
      determination of such Member to purchase Units in the Company has been made
      by
      such Member independent of any other Member and independent of any statements
      or
      opinions as to the advisability of such purchase or as to the properties,
      business, prospects or condition (financial or otherwise) of the Company and
      its
      subsidiaries which may have been made or given by any other Member or by any
      agent or employee of any other Member and (viii) this Agreement is valid,
      binding and enforceable against such Member in accordance with its
      terms.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

     

    SECTION
      4.

    Allocations
      and Distributions

     

    SECTION
      4.1 Distributions.
      The
      amount, if any, of Available Cash shall be distributed to the Members in the
      following order of priority:

     

    
      	 	
              (a)

            	
              First,
                to all Members in an amount equal to the estimated federal and state
                income tax liability attributable to such Member’s proportionate share of
                the Company’s net taxable income. This estimated tax liability, which
                shall be computed by the accountant who regularly prepares the Company’s
                tax returns, shall be computed on the basis of the highest marginal
                rate
                applicable to individuals on capital gains and other taxable income
                for
                the Fiscal Year in question. Unless the Company does not have sufficient
                Available Cash or is otherwise prevented from making any distributions
                under applicable state law, or determined not to be in the best interest
                of the Company as determined in good faith by the Manager, the minimum
                mandatory distribution shall be paid on or before the date on which
                such
                tax liability is due. The Manager’s determination of the amount of minimum
                mandatory distribution shall be binding and conclusive on all
                Members.

            

    

     

    
      	 	
              (b)

            	
              Second,
                to Members holding all Units in proportion to the percentage of
                outstanding Units held by each Member but reduced by any amount
                distributed to that Member pursuant to Section 4.1(a). Thus, all
                Class A
                Units and Class B Units shall be treated equally with regard to any
                and
                all distributions under this Section 4.1(b) and if distributions
                made
                under Section 41(a) were treated as if they were made under Section
                4.1(b).

            

    

     

    SECTION
      4.2 Allocations
      of Profit and Losses.
      After
      giving effect to the special allocations set forth in Sections 4.3 and 4.4,
      Profits or Losses for any Fiscal Year shall be allocated among the Members
      in
      proportion to their Units.

     

    SECTION
      4.3 Special
      Allocations.
      The
      following special allocations shall be made in the following order:

     

    
      	 	
              (a)

            	
              Minimum
                Gain Chargeback.
                Except as otherwise provided in Regulations § 1.704-2(f),
                notwithstanding any other provision of this Section 4, if there is
                a net
                decrease in Company Minimum Gain during any Fiscal Year, each Member
                shall
                be specially allocated items of Company income and gain for such
                Fiscal
                Year (and, if necessary, subsequent Fiscal Years) in an amount equal
                to
                such Member’s share of the net decrease in Company Minimum Gain,
                determined in accordance with Regulations § 1.704-2(g). Allocations
                pursuant to the previous sentence shall be made in proportion to
                the
                respective amounts required to be allocated to each Member pursuant
                thereto. The items to be so allocated shall be determined in accordance
                with Regulations §§ 1.704-2(f)(6) and 1704-2(j)(2). This Subsection
                is intended to comply with the minimum gain chargeback requirement
                in
                Regulation § 1.704-2(f) and shall be interpreted consistently
                therewith.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    
      	 	
              (b)

            	
              Member
                Minimum Gain Chargeback.
                Except as otherwise provided in Regulations § 1.704-2(i)(4),
                notwithstanding any other provision of this Section 4, if there is a
                net decrease in Member Nonrecourse Debt Minimum Gain attributable
                to a
                Member Nonrecourse Debt during any Fiscal Year, each Member who has
                a
                share of the Member Nonrecourse Debt Minimum Gain attributable to
                such
                Member Nonrecourse Debt, determined in accordance with Regulation
                § 1.704-2(i)(5), shall be specially allocated items of Company income
                and gain for such Fiscal Year (and, if necessary, subsequent Fiscal
                Years)
                in an amount equal to such Member’s share of the net decrease in Member
                Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse
                Debt, determined in accordance with Regulations § 1.704-2(i)(4).
                Allocations pursuant to the previous sentence shall be made in proportion
                to the respective amounts required to be allocated to each Member
                pursuant
                thereto. The items to be so allocated shall be determined in accordance
                with Regulations § 1.704-2(i)(4) and 1.704-2(j)(2). This Subsection
                is intended to comply with the minimum gain chargeback requirement
                in
                Regulations § 1.704-2(i)(4) and shall be interpreted consistently
                therewith.

            

    

     

    
      	 	
              (c)

            	
              Qualified
                Income Offset.
                In the event any Member unexpectedly receives any adjustments,
                allocations, or distributions described in Regulations
                § 1.704-1(b)(2)(ii)(d)(4), Regulations § 1.704-1
                (b)(2)(ii)(d)(5) or Regulations § 1.704-1(b)(2)(ii)(d)(6), items of
                Company income and gain shall be specially allocated to each such
                Member
                in an amount and manner sufficient to eliminate, to the extent required
                by
                the Regulations, the Adjusted Capital Account Deficit of such Member
                as
                quickly as possible, provided that an allocation pursuant to this
                Section
                4.4(c) shall be made only if and to the extent that such Member would
                have
                an Adjusted Capital Account Deficit after all other allocations provided
                for in this Section 4 have been tentatively made as if this Section
                4.4(c)
                were not in the Agreement. This Subsection is intended to comply
                with the
                qualified income offset requirement in Regulations
                § 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
                therewith.

            

    

     

    
      	 	
              (d)

            	
              Nonrecourse
                Deductions.
                Nonrecourse Deductions for any Fiscal Year shall be specialty allocated
                among the Members in proportion to their
                Units.

            

    

     

    
      	 	
              (e)

            	
              Member
                Nonrecourse Deductions.
                Any Member Nonrecourse Deductions for any Fiscal Year shall be specially
                allocated to the Member who bears the economic risk of loss with
                respect
                to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions
                are attributable in accordance with Regulations § 1704-
                2(i)(l).

            

    

     

    
      	 	
              (f)

            	
              Code
                § 754 Adjustment.
                To the extent an adjustment to the adjusted tax basis of any Company
                asset
                pursuant to Code § 734(b) or Code § 743(b) is required, pursuant
                to Regulations § 1.704-1(b)(2)(iv)(m)(2) or Regulations
                § 1.704-1 (b)(2)(iv)(m)(4), to be taken into account in determining
                Capital Accounts as the result of a distribution to a Member in complete
                liquidation of such Member’s interest in the Company, the amount of such
                adjustment to the Capital Accounts shall be treated as an item of
                gain (if
                the adjustment increases the basis of the asset) or loss (if the
                adjustment decreases such basis) and such gain or loss shall be specially
                allocated to the Members in accordance with their interests in the
                Company
                in the event Regulations § 1.704-1(b)(2)(iv)(m)(2) applies, or to the
                Member to whom such distribution was made in the event Regulations
                § 1.704-1 (b)(2)(iv)(m)(4)
                applies.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    SECTION
      4.4 Curative
      Allocations.
      The
      allocations set forth in Section 4.3 (the “Regulatory
      Allocations”)
      are
      intended to comply with certain requirements of the Regulations.

     

    It
      is the
      intent of the Members that, to the extent possible, all Regulatory Allocations
      shall be offset either with other Regulatory Allocations or with special
      allocations of other items of Company income, gain, loss, and deduction pursuant
      to this Section 4.4. Therefore, notwithstanding any other provision of this
      Section 4 (other than the Regulatory Allocations), the Company shall make such
      offsetting special allocations in whatever manner the Managers determine
      appropriate so that, after such offsetting allocations are made, each Member’s
      Capital Account balance is, to the extent possible, equal to the Capital Account
      balance such Member would have had if the Regulatory Allocations were not part
      of this Agreement and all Company items were allocated pursuant to Sections
      4.2.
      In exercising the discretion under this Section 4.4, the Managers shall take
      into account future Regulatory Allocations under Sections 4.3(a) and 4.3(b)
      that, although not yet made, are likely to offset other Regulatory Allocations
      previously made under Sections 4.3(d) and 4.3(e).

     

    SECTION
      4.5 Other
      Allocation Rules.

     

    
      	 	
              (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
                Managers using any permissible method under Code § 706 and the
                Regulations thereunder.

            

    

     

    
      	 	
              (b)

            	
              Solely
                for purposes of determining a Member’s proportionate share of the “excess
                nonrecourse liabilities” of the Company, within the meaning of Regulations
                § 1.752-3(a)(3), the Members’ interests in Company profits are in
                proportion to their Units.

            

    

     

    
      	 	
              (c)

            	
              To
                the extent permitted by Regulations § 1.704-2(h)(3), the Members
                shall endeavor to treat distributions of Available Cash as having
                been
                made from the proceeds of a Nonrecourse Liability or a Member Nonrecourse
                Debt only to the extent that such distributions would cause or increase
                an
                Adjusted Capital Account Deficit for any
                Member.

            

    

     

    SECTION
      4.6 Tax
      Allocations: Code § 704(c).
      In
      accordance with Code § 704(c) and the Regulations thereunder, income, gain,
      loss, and deduction with respect to any property contributed to the capital
      of
      the Company shall, solely for tax purposes, be allocated among the Members
      so as
      to take account of any variation between the adjusted basis of such property
      to
      the Company for federal income tax purposes and its initial Gross Asset Value
      (computed in accordance with Paragraph (r)(i) of Appendix
      I).

     

    In
      the
      event the Gross Asset Value of any Company asset is adjusted pursuant to
      Paragraph (r)(ii) of Appendix I, subsequent allocations of income, gain, loss,
      and deduction with respect to such asset shall take account of any variation
      between the adjusted basis of such asset for federal income tax purposes and
      its
      Gross Asset Value in the same manner as under Code § 704(c) and the
      Regulations thereunder.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    Any
      elections or other decisions relating to such allocations shall be made by
      the
      Managers in any manner that reasonably reflects the purpose and intention of
      this Agreement. Allocations pursuant to this Section are solely for purposes
      of
      federal, state, and local taxes and shall not affect, or in any way be taken
      into account in computing, any Member’s Capital Account or share of Profits,
      Losses, other items, or distributions pursuant to any provision of this
      Agreement.

     

    SECTION
      5.

    Books
      and Returns

     

    SECTION
      5.1 Books
      and Records.
      The
      Company shall maintain at its principal office, or at such other place as the
      Managers may designate, full and accurate books and records. A Member shall
      have
      the right at such Member’s expense to examine and make copies of such books and
      records at reasonable times. The Company shall use the accrual method for tax
      and accounting purposes unless otherwise decided by the Managers. As soon as
      practicable after the end of each Fiscal Year, each Member shall be furnished
      with an income statement and balance sheet for or as of the end of such Fiscal
      Year. The Company shall provide monthly financial statements to the Members
      for
      the first two Fiscal Years of operation and provide quarterly financial
      statements to Members beginning with the third Fiscal Year.

     

    SECTION
      5.2 Tax
      Returns and Annual Report.
      The
      Company shall prepare and timely file all federal, state and local income tax
      returns required by applicable law. As soon as practicable after the end of
      each
      Fiscal Year, each Member shall be furnished with all necessary tax information
      for such Fiscal Year. The Company shall prepare and timely file the annual
      report required by the Act.

     

    SECTION
      5.3 Section
      754 Election.
      In the
      event a distribution of Company assets occurs which satisfies the provisions
      of
      Code § 734 or in the event a Transfer of an interest in the Company occurs
      which satisfies the provisions of Code § 743, the Company shall, if
      requested to do so by the distributee or Transferee, elect, pursuant to Code
      § 754, to adjust the basis of the Company’s assets to the extent allowed by
      Code § 734 or Code § 743. Any expenses incurred by the Company in
      connection with making or maintaining such basis adjustment shall be reimbursed
      to the Company by the distributee of such assets or the Transferee of such
      interest who benefits from the making and maintenance of such basis
      adjustment.

     

    SECTION
      5.4 Bank
      Accounts.
      The
      Company’s funds shall be deposited in the name of the Company in one or more
      bank or similar accounts designated by the Managers. Withdrawals there from
      shall be made by Persons authorized to do so by the Managers.

     

    SECTION
      6.

    Management

     

    SECTION
      6.1 Designation
      of Managers.
      In
      accordance with Section 6.3 below, the Members shall designate one or more
      Persons to manage the business and affairs of the Company (individually a
“Manager”
      and
      collectively the “Managers”).
      The
      Members hereby designate Daniel A. Sanders as the initial manager of the
      Company. A Manager shall serve until such Manager resigns, ceases to serve
      because of death or disability, or is removed, with or without cause, by the
      Members in accordance with Section 6.3. In the event a Manager hereafter ceases
      to act as a Manager, the Members of the applicable Class of Units shall appoint
      a new Manager to replace such Manager in accordance with Section 6.3. A Manager
      need not be a Member of the Company.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    SECTION
      6.2 Powers,
      Duties and Compensation of the Managers.
      Except
      as otherwise provided herein, the Managers, by the vote of a majority of them,
      shall have the right and power to manage, direct, control and conduct the
      business and affairs of, and enter into contracts, incur liabilities, borrow
      money and give collateral therefor, and buy, sell and lease assets on behalf
      of
      the Company, all without joinder of the Members. The Managers shall supervise
      and direct the business and operations of the Company efficiently and with
      proper economy. The Managers’ duties hereunder shall include: (a) maintaining
      the Company’s books and records, (b) preparing and filing the Company’s tax
      returns and annual report, (c) approving the annual Budget, (d) hiring and
      firing all personnel necessary to perform and carry out the Company’s business
      or affairs, including paying and withholding all necessary taxes and filing
      all
      necessary forms in relation to such employees, and (e) performing such other
      activities and tasks as are necessary or appropriate for the business or affairs
      of the Company. A Manager’s compensation for services to the Company, if any,
      shall be determined by the Members.

     

    The
      Managers may, from time to time, designate such committees and officers of
      the
      Company as they may deem advisable, with titles for such officers including
      but
      not limited to “chief executive officer”, “chairman”, “chief operating officer”,
“chief financial officer”, “president”, “vice president”, “secretary”,
“treasurer” and “controller”. Any committee or officer so designated shall have
      such authority and perform such duties as the Managers may, from time to time,
      delegate to such committee or officer. Any Person designated to a committee
      or
      office may be removed from such committee or office, with or without cause,
      by
      the Managers and/or any other officer of the Company who is delegated such
      authority by the Managers. A Person may serve on any number of committees and
      offices, and need not be Members or Managers of the Company. The compensation,
      if any, of any Person designated to a committee or office shall be determined
      by
      the Managers or such officer who is delegated such authority by the Managers.
      The Managers and Persons designated to a committee or office shall be reimbursed
      by the Company for all reasonable and necessary expenses incurred in carrying
      out and discharging their duties hereunder.

     

    SECTION
      6.3 Election
      of Managers.
      The
      Company shall have one (1) Manager. A Majority in Interest of the Class A Units
      shall have the right to appoint the Manager. A Manager may be removed, with
      or
      without cause, by the Member(s) responsible for electing such Manager. The
      Managers shall meet at least quarterly, whether in person, telephone or video
      conferencing if all of the Managers participating in such meeting can hear
      one
      another for the entire discussion of such meeting; provided, however, that
      special meetings of the Managers may be called by any Manager. The affirmative
      vote of a majority of the Managers shall be required to approve any action
      or
      matter coming before them. In the event a Manager is absent from any meeting
      or
      abstains from voting on any matter at a meeting, the Manager(s) who were
      appointed by the same class of Units as such absent or abstaining Manager (if
      any) shall have the right to cast all votes for the absent Manager at such
      meeting or cast the vote for the abstaining Manager on such matter, as the
      case
      may be.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

    SECTION
      6.4 Limitation
      of Powers.
      Notwithstanding anything herein to the contrary, any Manager and/or Member
      or
      officer of the Company shall not take any action for, in the name or on behalf
      of the Company that requires the consent of a Majority in Interest or some
      other
      consent under the provisions of this Agreement unless such action has been
      approved or authorized by such consent.

     

    SECTION
      6.5 Certain
      Powers of the Manager.
      Without
      limiting the generality of Section 6.2 but subject to the limitations of Section
      6.6, the Manager shall have power and authority, on behalf of the Company,
      to:

     

    
      	 	
              (a)

            	
              Acquire
                property not to exceed a cumulative total in any Fiscal Year of $300,000
                from any Person as the Managers may determine (the fact that a Manager
                or
                an Equity Owner is directly or indirectly affiliated or connected
                with any
                such Person shall not prohibit the Managers from dealing with that
                Person);

            

    

     

    
      	 	
              (b)

            	
              Borrow
                money not to exceed a cumulative total in any Fiscal Year of $300,000
                for
                the Company from banks, other lending institutions, the Managers,
                Equity
                Owners, or Affiliates of the Managers or Equity Owners on such terms
                as
                the Managers deem appropriate and, in connection therewith, to Hypothecate
                Company Property to secure repayment of the borrowed
                sums;

            

    

     

    
      	 	
              (c)

            	
              Purchase
                liability and other insurance to protect the Company’s property and
                business;

            

    

     

    
      	 	
              (d)

            	
              Hold
                and own any Company real or personal properties in the name of the
                Company;

            

    

     

    
      	 	
              (e)

            	
              Invest
                any Company funds not to exceed a cumulative total in any Fiscal
                Year of
                $300,000 (by way of example but not limitation) in time deposits,
                short-term governmental obligations, commercial paper, or other
                investments;

            

    

     

    
      	 	
              (f)

            	
              Execute
                on behalf of the Company all instruments and documents, including
                checks,
                drafts, notes and other negotiable instruments; mortgages or deeds
                of
                trust; security agreements; financing statements; documents providing
                for
                the acquisition, mortgage, or disposition of Company Property;
                assignments; bills of sale; leases; partnership agreements; operating
                (or
                limited liability company) agreements of other limited liability
                companies; and any other instruments or documents necessary, in the
                opinion of the Managers, to the conduct of the business of the
                Company;

            

    

     

    
      	 	
              (g)

            	
              Enter
                into any and all other agreements on behalf of the Company, with
                any other
                Person for any purpose and in such forms as the Managers may
                approve;

            

    

     

    
      	 	
              (h)

            	
              Execute
                and file such other instruments, documents, and certificates which
                may
                from time to time be required by the laws of Colorado or any other
                jurisdiction in which the Company shall determine to do business,
                or any
                political subdivision or agency thereof; to effectuate, implement,
                continue, and defend the valid existence of the
                Company;

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    
      	 	
              (i)

            	
              Open
                bank accounts in the name of the Company and to be the sole signatory
                thereon unless the Managers determine
                otherwise;

            

    

     

    
      	 	
              (j)

            	
              Do
                and perform all other acts as may be necessary or appropriate to
                the
                conduct of the Company’s business.

            

    

     

    
      	 	
              (k)

            	
              Employ
                accountants, legal counsel, managing agents, or other experts to
                perform
                services for the Company and to compensate them from Company
                funds;

            

    

     

    
      	 	
              (l)

            	
              Purchase
                liability and other insurance to protect the Company’s property and
                business;

            

    

     

    
      	 	
              (m)

            	
              Hold
                and own any Company real or personal properties in the name of the
                Company;

            

    

     

    
      	 	
              (n)

            	
              Invest
                any Company funds in excess of a cumulative total in any Fiscal Year
                of
                $300,000 (by way of example but not limitation) in line deposits,
                short-term governmental obligations, commercial paper, or other
                investments;

            

    

     

    
      	 	
              (o)

            	
              Compromise
                or settle any claim against or inuring to the benefit of the Company
                involving an amount in controversy not to exceed a cumulative total
                in any
                Fiscal Year of $300,000.

            

    

     

    SECTION
      6.6 Limitations
      on Authority (Actions Requiting Board Approval).
      Notwithstanding any other provision of this Agreement, the Managers shall not
      cause or commit the Company to do any of the following without the consent
      of a
      Two-Thirds Vote: 

     

    
      	 	
              (a)

            	
              Sell
                or otherwise dispose all or substantially all of the Company Property
                or
                any Company Property other than in the ordinary course of
                business;

            

    

     

    
      	 	
              (b)

            	
              Acquire
                property from any Person or Persons in excess of a cumulative total
                in any
                Fiscal Year of $300,000;

            

    

     

    
      	 	
              (c)

            	
              Enter
                into a joint venture or partnership with any other business
                organization[;]

            

    

     

    
      	 	
              (d)

            	
              Enter
                into a merger, conversion or participate in any other form of
                reorganization;

            

    

     

    
      	 	
              (e)

            	
              Borrow
                money in excess of a cumulative total in any Fiscal Year of $300,000
                from
                any Person and to hypothecate property of the Company to secure repayment
                of the borrowed sums;

            

    

     

    
      	 	
              (f)

            	
              Lend
                money in excess of a cumulative total in any Fiscal Year of $300,000
                to,
                or guaranty or become surety for the obligations of any Person or
                Persons
                in excess of a cumulative total in any Fiscal Year of $300,000;
                or

            

    

     

    
      	 	
              (g)

            	
              Sell
                or otherwise dispose all or substantially all of the Company Property
                or
                any Company Property other than in the ordinary course of business;
                or

            

    

    

      
        	 	
                (h)

              	
                Cause
                  the Company to commence a voluntary case as debtor under the United
                  States
                  Bankruptcy Code.

              

      

       

    

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    Any
      unauthorized action taken by such Person(s) may be subsequently ratified by
      the
      applicable consent. Notwithstanding anything herein to the contrary, such Person
      shall not be liable to the Company or its Members for any inadvertent
      unauthorized action which is not subsequently ratified by the applicable consent
      if (i) such inadvertent action was undertaken in good faith and in a manner
      such
      Person reasonably believed to be in, or not opposed to, the interests of the
      Company and (ii) did not constitute fraud, gross negligence, or willful or
      wanton misconduct.

     

    SECTION
      6.7 Board
      Members and Action.
      Each
      Member shall have the authority to appoint, remove and replace one “Board
      Member,”
      with
      each Board Member being designated by reference to the Member appointing him
      or
      her. A Member may also appoint, remove and replace an alternate Board Member
      who
      may act in the absence of the Member’s appointed Board Member (collectively, the
      Board Members are referred to herein as the “Board”).
      The
      Board may, but shall not be required to, hold any periodic, or other formal
      meetings. Consent or ratification of the Board may be evidenced by one or more
      written consents describing the action taken by the Board and signed by Board
      Members sufficient to approve the consented to transaction. Board Action taken
      under this Section 6.7 is effective when Board Members sufficient to approve
      the
      action have signed the consent, unless the consent specifies a different
      effective date. The Board Members appointed by Members shall jointly have a
      vote
      or consent in actions brought before the Board equal to the percentage of
      outstanding Units held at the time of the appointment by the Member appointing
      those Board Members. Thus, for example, based on Exhibit
      A,
      the
      Board Members appointed by Daniel A. Sanders would be entitled to a vote equal
      to 52%. All parties understand that each Board Member is acting in a
      representative capacity, owes his or her primary duties to the Member appointing
      him or her, and will not be liable to the Company or any other Member for acting
      on behalf of the Member appointing him or her. Notwithstanding the foregoing,
      each of the Members and the Board Members representing them shall have an
      obligation to act in good faith considering the best interests of the Company
      in
      performing their duties as Board Members.

     

    SECTION
      6.8 Powers
      of Members.
      No
      Member shall have the right or authority to enter into agreements, execute
      contracts or other instruments, incur obligations or otherwise bind or act
      for,
      in the name or on behalf of the Company in any manner solely by virtue of being
      a Member. Any Member who takes any action in violation of this Section shall
      be
      solely responsible for all losses and expenses incurred by the Company as a
      result of such unauthorized action and shall indemnify and hold the Company
      harmless with respect thereto.

     

    SECTION
      6.9 Liability
      of Managers, Members, and Board Members.
      Except
      in the case where a Manager is guilty of fraud, gross negligence, or willful
      or
      wanton misconduct, a Manager shall not be liable to the Company or any Member
      for any loss, damage, liability or expense suffered by the Company or any Member
      on account of any action taken or omitted to be taken by such Manager. No Member
      shall be liable under any judgment, decree or order of a court, or in any other
      manner, for a debt, obligation or liability of the Company, except as otherwise
      provided herein.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    SECTION
      6.10 Annual
      Operating Plan.
      The
      Manager has prepared and the Board has Approved (a “Annual
      Operating Plan”)
      for the
      Fiscal Year including the Effective Date. The Manager shall prepare for the
      Approval of the Board each Fiscal Year (no later than thirty (30) days before
      the Fiscal Year to which the Animal Operating Plan applies) an Annual Operating
      Plan for the next Fiscal Year, setting forth at a minimum the estimated receipts
      (including capital calls) and expenditures (capital, operating and other) of
      the
      Company in sufficient detail to provide an estimate of cash flow, capital
      proceeds, and other financial requirements of the Company for such year. Any
      such Annual Operating Plan shall also include such other information or other
      matters thought appropriate by the Manager or reasonably required by the Board.
      The Board shall review the proposed Annual Operating Plan and shall offer any
      revisions thereto within 10 days after receipt. After the final Annual Operating
      Plan has been Approved by Two Thirds Vote of the Board, the Manager shall
      implement the Annual Operating Plan and shall be authorized to make only the
      expenditures and incur only the obligations provided for therein.
      Notwithstanding the foregoing, the Manager may make any expenditure or incur
      any
      obligation, whether or not such expenditure or obligation is provided for in
      an
      Annual Operating Plan, which is the legal obligation of the Company and not
      within the reasonable control of the Managers (e.g.,
      real or
      personal property taxes). If the Board, acting reasonably and in good faith,
      is
      not able to agree on an Annual Operating Plan for any year, each line item
      in
      the Annual Operating Plan for the prior year shall be increased by the
      percentage increase in the CPI Index from the first day for which the previous
      Annual Operating Plan was in effect to the first day for which the new Annual
      Operating Plan is to be in effect. If the CPI Index is no longer published,
      published less frequently, or altered in some other manner, then the Manager
      shall, from time to time, adopt a substitute index or substitute procedure
      which
      reasonably reflects and monitors consumer prices, and the resulting plan shall
      be the Annual Operating Plan for the current year.

     

    SECTION
      6.11 Indemnification.

     

    
      	 	
              (a)

            	
              The
                Company, to the fullest extent permitted by law, shall indemnify
                and hold
                harmless each Manager, Member, and all officers, directors, trustees,
                partners, members, principals, employees, and agents of a Manager
                and
                Member (individually, an “Indemnitee”)
                from and against any and all losses, claims, demands, costs, damages,
                liabilities, expenses of any nature (including attorneys’ fees and
                disbursements), judgments, fines, settlements, and other amounts
                arising
                from any and all claims, demands, or proceedings in which an Indemnitee
                may be involved, or threatened to be involved, as a party or otherwise,
                arising out of or incidental to the business of the Company, including
                liabilities under the federal and state securities laws, regardless
                of
                whether an Indemnitee continues to be a Manager, Member, or an officer,
                director, trustee, partner, member, principal, employee, or agent
                of a
                Manager or Member at the time any such liability or expense is paid
                or
                incurred, if (i) the Indemnitee acted in good faith and in a manner
                he,
                she or it reasonably believed to be in, or not opposed to, the interests
                of the Company, and, with respect to any criminal proceeding, had
                no
                reason to believe its, his, or her conduct was unlawful, and (ii)
                the
                Indemnitee’s conduct did not constitute fraud, gross negligence, or
                willful or wanton misconduct.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

    
      	 	
              (b)

            	
              The
                indemnification provided by this Section shall be in addition to
                any other
                rights to which each Indemnitee may be entitled under the Act or
                under any
                agreement as a matter of law or otherwise, both as to action in the
                Indemnitee’s capacity as a Manager, Member, or as an officer, director,
                trustee, partner, member, principal, employee, or agent of a Manager
                or
                Member, and to action in another capacity, and shall continue as
                to an
                Indemnitee who has ceased to serve in such capacity and shall inure
                to the
                benefit of the heirs, successors, assigns, administrators, and personal
                representatives of such Indemnitee.

            

    

     

    
      	 	
              (c)

            	
              The
                Company may purchase and maintain insurance on behalf of any one
                or more
                Indemnitees, and other such Persons as the Managers shall determine,
                against any liability which may be asserted against or expense which
                may
                be incurred by such Person in connection with the Company’s activities,
                whether or not the Company would have the power to indemnify such
                Person
                against such liability under the provisions of this
                Agreement.

            

    

     

    
      	 	
              (d)

            	
              Any
                indemnification hereunder shall be satisfied solely out of the property
                of
                the Company, and the Managers and Members shall not be subject to
                personal
                liability by reason of these indemnification
                provisions.

            

    

     

    
      	 	
              (e)

            	
              An
                Indemnitee shall not be denied indemnification in whole or in part
                under
                this Section because the Indemnitee had an interest in the transaction
                with respect to which the indemnification applies if the transaction
                was
                otherwise permitted by the terms of this
                Agreement.

            

    

     

    
      	 	
              (f)

            	
              The
                provisions of this Section are for the benefit of the Indemnitees
                and the
                heirs, successors, assigns, administrators, and personal representatives
                of the Indemnitees and shall not be deemed to create any rights for
                the
                benefit of any other Persons.

            

    

     

    
      	 	
              (g)

            	
              The
                right to indemnification conferred in this Section shall include
                the right
                to be paid or reimbursed by the Company the reasonable expenses (including
                attorney fees, disbursements and expenses) incurred by a Person entitled
                to be indemnified who was, is or is threatened to be made a named
                defendant or respondent in a proceeding in advance of the final
                disposition of the proceeding and without any determination as to
                the
                Person’s ultimate entitlement to indemnification; provided,
                however,
                that the payment of such expenses incurred by any such Person in
                advance
                of the final disposition of a proceeding shall be made only upon
                delivery
                to the Company of a written affirmation by such Person of his, her
                or its
                good faith belief that such Person has met the standard of conduct
                necessary for indemnification and a written undertaking, by or on
                behalf
                of such Person, to repay all amounts so advanced if it shall ultimately
                be
                determined that such indemnified Person is not entitled to be indemnified
                under this Section or otherwise.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    SECTION
      6.12 Other
      Business Ventures.
      The
      Managers and Members may engage in or possess an interest in other business
      ventures of every nature and description, independently or with others, whether
      or not similar to or in competition with the business of the Company and neither
      the Company nor the Members shall have any right by virtue of this Agreement
      in
      or to such other business ventures or to the income or profits derived
      therefrom. The Managers shall not be required to devote all of their time nor
      business efforts to the affairs of the Company, but the Managers shall devote
      so
      much of their time and attention to the Company as is reasonably necessary
      and
      advisable to manage the business and affairs of the Company to the best
      advantage of the Company and to perform their duties hereunder.

     

    SECTION
      6.13 Conflicts.
      The
      Company may enter into or modify various agreements or transactions with one
      or
      more of the Managers and/or Members on terms approved by the
      Managers.

     

    SECTION
      6.14 Confidential
      Information.
      Without
      limiting the applicability of any other agreement to which any Member may be
      subject, a Manager and/or Member shall not, directly or indirectly disclose,
      either during his, her or its association or employment with the Company or
      thereafter, any Confidential Information of which such Manager or Member is
      or
      becomes aware. A Manager or Member in possession of Confidential Information
      shall take all appropriate steps to safeguard such information and to protect
      it
      against disclosure, misuse, espionage, loss and theft. Notwithstanding the
      above, a Manager and/or Member may disclose Confidential Information to the
      extent (i) the disclosure is necessary for the Manager, Member and/or the
      Company’s agents, representatives, and advisors to fulfill their duties to the
      Company pursuant to this Agreement and/or other written agreements, (ii) the
      disclosure is required by law or a court order, (iii) to the extent necessary
      to
      enforce rights hereunder and (iv) the disclosure is of a general nature
      regarding general financial information, return on investment and similar
      information, including without limitation, in connection with communications
      to
      direct and indirect beneficial owners of Units and controlling Persons and
      general marketing efforts.

     

    SECTION
      6.15 Other
      Matters Concerning the Managers.

     

    
      	 	
              (a)

            	
              The
                Managers and officers shall have no fiduciary duty (including, but
                not
                limited to, any duty of loyalty or duty of care) to the Company or
                to any
                Member, except (i) a duty to act in good faith, (ii) a general obligation
                of fair dealing with respect to the Company and its property, (iii)
                any
                duty expressly set forth in this Agreement, and (iv) any duty expressly
                set forth in other written
                agreements.

            

    

     

    
      	 	
              (b)

            	
              The
                Managers and officers may rely and shall be protected in acting or
                refraining from acting upon any resolution, certificate, statement,
                instrument, opinion, report notice, request, consent, order, bond,
                debenture, or other paper or document believed in good faith by the
                Manager or officer to be genuine and to have been signed or presented
                by
                the proper party or parties.

            

    

     

    
      	 	
              (c)

            	
              The
                Managers and officers may consult with legal counsel, accountants,
                appraisers, management consultants, investment bankers, and other
                consultants and advisers selected by the Managers or officers, and
                any
                opinion of such Person as to matters which the Managers or officers
                believe in good faith to be within such Person’s professional or expert
                competence shall be full and complete authorization in respect of
                any
                action taken or suffered or omitted by the Managers or officers hereunder
                in good faith and in accordance with such
                opinion.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

    SECTION
      7.

    Meetings
      of Members

     

    SECTION
      7.1 No
      Required Meetings.
      The
      Members may, but shall not be required to, hold any annual, periodic, or other
      formal meetings. Consent or ratification of the Members may be evidenced by
      one
      or more written consents describing the action taken and signed by Members
      holding sufficient Units to approve the transaction consented to. Action taken
      under this Section 7.1 is effective when Members holding the requisite Units
      have signed the consent, unless the consent specifies a different effective
      date.

     

    SECTION
      7.2 Annual
      Meeting.
      An
      annual meeting of the Members may be held at the time and place determined
      by
      the Managers, at which the Members shall transact such business as may be
      brought before the annual meeting.

     

    SECTION
      7.3 Special
      Meetings.
      Special
      meetings of the Members, for any purpose or purposes, may be called upon the
      written request of the Managers, or any Member or group of Members holding
      at
      least twenty percent (20%) of the Units then entitled to vote. Such request
      shall state the purpose or purposes of the special meeting. Business transacted
      at any special meeting of the Members shall be limited to the purpose or
      purposes stated in the notice.

     

    SECTION
      7.4 Notice
      of Meetings.
      Written
      or printed notice stating the time and place of any annual or special meeting
      of
      the Members and, in the case of a special meeting, the purpose or purposes
      for
      which the meeting is called, shall be delivered to each Member entitled to
      vote
      at such meeting not less than three (3) days before the date of such meeting.
      Attendance of a Member at a meeting shall constitute a waiver of notice of
      such
      meeting, except when the Member attends a meeting for the express purpose of
      objecting, at the beginning of the meeting, to the transaction of any business
      because the meeting is not lawfully called or convened. Written waiver by a
      Member of notice of a meeting, signed by such Member, whether before or after
      the time for notice to be given, shall be deemed equivalent to
      notice.

     

    SECTION
      7.5 Voting
      at Meetings.
      At all
      meetings of the Members every Member entitled to vote in person, or by proxy
      appointed by an instrument in writing subscribed by such Member and bearing
      a
      date not more than three (3) years prior to said meeting, unless said instrument
      provides for a longer period, shall be entitled to a vote equal to the number
      of
      Units then entitled to vote that registered in such Member’s name on the books
      of the Company. All questions to be decided by the Members shall be decided
      by a
      Majority in Interest unless otherwise required by this Agreement.

     

    SECTION
      7.6 Members
      Shall Register Address.
      It
      shall be a condition on the right of each Member to receive any notice from
      the
      Company that such Member shall have furnished to the Company, from time to
      time,
      over such Member’s signature, the address to which notices to such Member shall
      be mailed.

     

    SECTION
      7.7 Consent
      of Members in Lieu of Meeting.
      Any
      action required or permitted to be taken at any meeting of the Members may
      be
      taken without a meeting, prior notice or a vote, if a written consent, setting
      forth the action so taken, shall be signed by a Majority in Interest, or if
      such
      act requires some other consent, by such other consent.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -17-

        
          

        

      

      
        
        

      

    

    SECTION
      7.8 Telephonic
      or Video Meeting.
      Members
      of the Company may participate in any meeting of the Members by means of
      conference telephone, video conference or similar communication if all Members
      participating in such meeting can hear one another for the entire discussion
      of
      the matters to be voted upon. Participation in a meeting pursuant to this
      Section shall constitute presence in person at such meeting.

     

    SECTION
      7.9 Designation
      of Representative.
      Each
      Member that is a corporation, partnership, limited liability company, trust
      or
      other legal entity shall designate in writing one individual to represent that
      Member at all meetings of the Members or to sign consents on behalf of that
      Member. Such individual may be removed or replaced at any time by the Member
      appointing such Person upon written notice to the Company.

     

    SECTION
      8.

    Transfer
      of Units

     

    SECTION
      8.1 General
      Restrictions.
      No
      Person shall Transfer all or any part of such Person’s Units, except as provided
      in this Agreement. Any purported Transfer of all or any part of a Unit in
      violation of the terms of this Agreement shall be null and void and of no
      effect. In addition, to the extent that any Member has attempted or purported
      to
      Transfer all or any portion of that Person’s Units in violation of this
      Agreement that Person shall be deemed to have withdrawn or resigned with respect
      to all or such portion of the Person’s Units within the meaning of the
      Act.

     

    SECTION
      8.2 Permitted
      Transfers.
      A
      Person shall have the right to Transfer, by written instrument, all or part
      of
      such Person’s Units provided that (a) the Transferee is admitted as a Substitute
      Member in accordance with Section 8.3, (b) such Transfer would not be in
      violation of any applicable law, rule or regulation (for example, federal or
      state securities laws), and (c) in the event of a Transfer of Units, such
      Transfer has been approved in writing by a Majority in Interest of the Members
      (determined by excluding all of the Transferor’s Units); provided, however, that
      no such approval shall be required with respect to a Transfer by a Member to
      (i) one or more members of such Member’s Immediate Family, or (ii) a
      revocable living trust of which such Member is the sole grantor and trustee,
      and
      which has no beneficiary during such Member’s lifetime other than such Member
      and/or one or more members of his or her Immediate Family. If an event occurs
      which would cause Units owned by a trust described in clause (ii) above to
      be
      subject to purchase pursuant to Section 8 of this Agreement if it were then
      owned by the grantor of such trust, then such Units shall be deemed to be owned
      by the grantor of such trust and shall be subject to purchase to the same extent
      and on the same terms and conditions that would apply if the grantor actually
      owned such Units. All Transfers of Units by the trustee of a trust described
      in
      clause (ii) above shall be subject to the terms and conditions of this Agreement
      and shall be deemed to be made by the trust’s grantor.

     

    SECTION
      8.3 Substitute
      Members.
      The
      Company shall not recognize any Transfer of a Unit in accordance with the terms
      of this Agreement unless and until the Transferee of such Unit shall become
      a
      Substitute Member by: 

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -18-

        
          

        

      

      
        
        

      

    

    
      	 	
              (a)

            	
              executing
                an instrument reasonably satisfactory to the Managers accepting and
                adopting the terms and provisions of this Agreement;
                and

            

    

     

    
      	 	
              (b)

            	
              paying
                all reasonable expenses of the Company in connection with the admission
                of
                the Transferee as a Substitute
                Member.

            

    

     

    Until
      such time as the Transferee shall become a Substitute Member in accordance
      with
      the foregoing, such Transfer shall be null and void and of no
      effect.

     

    SECTION
      8.4 Transfer
      of All Rights Associated with Units.
      Any
      Transfer of a Unit in accordance with the terms of this Agreement shall require
      a Transfer by the Transferor to the Transferee of all ownership rights
      associated with such Unit. Notwithstanding any provision of the Act to the
      contrary, a Transferor shall not have the right to Transfer some but not all
      of
      the ownership rights associated with any Unit (including, without limitation,
      the right to vote such Unit).

     

    SECTION
      8.5 Redemption
      of Units.
      The
      Company may purchase one or more Units from any Person on such terms and
      conditions mutually acceptable to such Person and a Majority in Interest
      (determined by excluding all Units held by such Person). Any Units acquired
      by
      the Company pursuant to this Section 8.5 or the option granted under
      Section 8.9 shall be canceled.

     

    SECTION
      8.6 Grant
      of Options to Members.
      Each
      Member hereby grants to the other Member(s) who hold Units an irrevocable option
      to purchase, at the price, in the manner and on the terms and conditions set
      forth herein, that part of such Member’s Units that is actually involved in or
      affected by the occurrence of any of the following events (the “Subject
      Units”):
      

     

    
      	 	
              (a)

            	
              such
                Member shall desire to voluntarily Transfer any of such Member’s Units,
                other than in a Transfer permitted by Section 8.2, in which event
                such
                Member shall obtain a bona fide written offer from a third party
                (the
                “Bona
                Fide Offer”)
                stating an aggregate purchase price payable in the form of cash and/or
                a
                promissory note (with the terms and conditions of such promissory
                note
                being stated) and conditioned only upon assignment of good title
                to the
                Subject Units, free and clear of liens and
                encumbrances;

            

    

     

    
      	 	
              (b)

            	
              any
                of such Member’s Units shall become subject to involuntary Transfer,
                whether by judicial decree, divorce, sale upon execution or in foreclosure
                of any lien or charge or by acquisition of an interest therein by
                a
                trustee in bankruptcy or similar officer or otherwise, to a Person
                other
                than permitted under Section 8.2;

            

    

     

    
      	 	
              (c)

            	
              any
                of such Member’s Units are subject to a Transfer to a Person other than
                permitted under Section 8.2 due to the death, termination, liquidation
                or
                dissolution of such Member; or

            

    

     

    
      	 	
              (d)

            	
              any
                time after two (2) years and before the expiration of four (4) years
                from
                the Effective Date, the Daniel A. Sanders, as a Member holding Class
                A
                Units may elect to purchase the Units owned at any time by ICM, Inc.
                by
                giving notice to the person or persons holding those Units at the
                time of
                exercise.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -19-

        
          

        

      

      
        
        

      

    

    For
      purposes of this Section only that part of a Member’s Units that is to be
      disposed of or affected by any event specified in clauses (a) through (d) shall
      be deemed to be actually involved in or affected by the occurrence of an event
      described therein. A Member whose Units are subject to an option granted herein
      which becomes exercisable is referred to as the “Disposing
      Member.”

     

    SECTION
      8.7 Notice
      of Events.
      Upon
      the occurrence of an event described in clauses (a), (b), or (c) of Section
      8.6,
      the Disposing Member (or the Disposing Member’s legal representative, as the
      case may be) shall give notice thereof to the Members and the Company,
      including, if applicable, the portion of the Member’s Units to be Transferred,
      the terms and conditions of any proposed Transfer, the names of the Person
      or
      Persons to whom Transfers are proposed to be made, if known, or who have
      allegedly acquired the Subject Units, a copy of any Bona Fide Offer made by
      any
      proposed purchaser, and an affidavit of such Disposing Member stating that
      such
      bona fide is subject to no terms or conditions other than those set forth
      therein. In the event the Disposing Member (or the Disposing Member’s legal
      representative) fails to give such notice, any other Member may give such notice
      on behalf of the Disposing Member (or the Disposing Members legal
      representative). All notices given under this Section shall be in writing and
      signed by the party giving such notice.

     

    SECTION
      8.8 Exercise
      of Option by Member(s).
      The
      options under Section 8.6 shall become exercisable upon the occurrence of any
      event described therein and such option shall remain exercisable until the
      expiration of the later of (i) sixty (60) days after notice of such event is
      given under Section 8.7 or 8.6(d) as the case may be, or (ii) fifteen (15)
      days
      after delivery of the written notice of the purchase price under Section
      8.11(c). Daniel A. Sanders, as holder of the Class A Units shall have the right
      at any time before the expiration of ten (10) days after receipt of notice
      to
      designate all or a lesser number of the Subject Units with respect to an option
      under Section 8.6 (a), (b), or (c) he desires to purchase. Thereafter, all
      Members (including Daniel A. Sanders) shall be entitled [to]
      purchase
      the remaining Units with respect to an option under Section 8.6 (a), (b), or
      (c)
      as provided in the next sentence. If there shall be more than one Member who
      shall desire to purchase part of the Subject Units with respect to an option
      under Section 8.6 (a), (b), or (c), each of such Member shall be entitled to
      purchase (i) such proportionate part of the Subject Units available for purchase
      as the Units then owned by such Member bears to the total Units then owned
      by
      all of the Members who desire to purchase part of the Subject Units, or (ii)
      such part of the Subject Units available for purchase as shall be agreed upon
      by
      all of the Members who shall desire to purchase part of the Subject Units.
      Each
      Member may exercise such option by giving notice of exercise to the Disposing
      Member (or the Disposing Member’s legal representative) and the Company in the
      manner required by Section 8.10.

     

    SECTION
      8.9 Option
      Granted to Company.
      In the
      event that the Member(s) shall waive or fail to timely exercise their Right
      to
      purchase all or any part of the Subject Units under the options granted to
      them
      under Section 8.6 (a), (b), or (c), then the Company shall have an irrevocable
      option to purchase all, but not less than all, of the Subject Units not
      purchased by the Member(s) at the price, in the manner and on the terms and
      conditions set forth herein. The option granted to the Company shall become
      exercisable upon the earlier of (i) the giving of notice by the Member(s) that
      they are not exercising their option as to all of the Subject Units, or (ii)
      the
      expiration of the option of such Member(s); and such option of the Company
      shall
      remain exercisable for a period of fifteen (15) days thereafter. The Company
      may
      exercise such option by giving notice of exercise to the Disposing Member (or
      the Disposing Members legal representative) in the manner required by Section
      8.10.

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -20-

        
          

        

      

      
        
        

      

    

    SECTION
      8.10 Contents
      of Notices; Expiration of Options.
      Notices
      given under Section 8.6(d), 8.8 or Section 8.9 shall be in writing and
      signed by the party giving such notice and shall set forth (i) such party’s
      intention to purchase or not purchase part of the Subject Units and (ii) the
      part of the Subject Units to be purchased (a Member may simply state such
      Member’s desire to purchase the maximum part of the Subject Units to which such
      Member is entitled). If any option is not exercised within the applicable period
      herein provided, such option shall expire on the last day of such
      period.

     

    SECTION
      8.11 Purchase
      Price and Terms.

     

    
      	 	
              (a)

            	
              If
                the event causing an option wanted herein to become exercisable shall
                be a
                proposed sale pursuant to a Bona Fide Offer, as described in Section
                8.6,
                the aggregate purchase price for the Subject Units shall be the purchase
                price set forth in the Bona Fide
                Offer.

            

    

     

    
      	 	
              (b)

            	
              If
                the event causing an option granted herein to become exercisable
                shall be
                other than a proposed sale pursuant to a Bona Fide Offer, as described
                in
                Section 8.6 (b), (c), or (d), the aggregate purchase price for the
                Subject
                Unit shall be the purchase price determined under Section 8.11(c)
                below.

            

    

     

    
      	 	
              (c)

            	
              The
                value of the Subject Units shall be their fair market value as determined
                by the Disposing Member and a Majority in Interest (determined by
                excluding all of the Units of the Disposing Member). If they are
                unable to
                agree upon the fair market value, the fair market value of the Subject
                Units shall be determined by an appraiser selected by them. If they
                are
                unable to agree upon a single appraiser, the fair market value of
                the
                Subject Units shall be determined by a panel of three (3) appraisers
                consisting of one appraiser selected by the Disposing Member, one
                selected
                by a Majority in Interest (determined by excluding all of the Units
                of the
                Disposing Member), and the third selected by the two appraisers.
                They
                shall each select their respective appraiser and notify the other
                in
                writing of such selection within fifteen (15) days following delivery
                of
                the notice under Section 8.7. If the two appraisers are unable to
                agree
                upon a third appraiser, such third appraiser shall be appointed by
                the
                Administrative Judge of the Nineteenth Judicial District, District
                Court,
                Weld County, Colorado. In the event the three appraisers are unable
                to
                agree upon the fair market value of the Subject Units, an average
                of the
                appraisals made individually by them shall be computed. The individual
                appraisal that deviates the most from such average shall be disregarded
                and an average of the remaining two individual appraisals shall constitute
                the fair market value of the Subject Units. The appraisers shall
                take into
                account minority interest and lack of marketability discounts to
                the
                extent they are deemed appropriate. All fees and expense reimbursement
                payable to the appraisers shall be borne equally between the Disposing
                Member and the purchaser or purchasers. The appraisers shall give
                written
                notice of the fair market value of the Subject Units to the Company
                and
                all Members (and, if applicable, the Disposing Member’s legal
                representative) promptly following determination
                thereof.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -21-

        
          

        

      

      
        
        

      

    

    
      	 	
              (d)

            	
              The
                aggregate purchase price shall be allocated proportionately among
                the
                purchasers, if more than one. If the event causing an option granted
                herein to become exercisable shall be a proposed sale pursuant to
                a Bona
                Fide Offer, the price and terms specified in such Bona Fide Offer
                shall be
                controlling. Otherwise, each purchaser’s purchase price shall be
                paid[.]
                At
                the closing the purchaser or purchasers shall deliver to the seller
                or
                sellers (i) the releases from liability for debts of the Company,
                as
                contemplated by subparagraphs (a) and (b) above, and (ii) payment
                shall be
                made in the form a promissory note payable in six (6) equal annual
                installments of principal and interests a floating annual rate of
                interest
                equal to the lesser of (i) eight percent (8%), or (ii) the maximum
                rate
                permitted by law compounded monthly with the first such payment due
                at
                closing. Notwithstanding the foregoing, if the Company is a purchaser,
                and
                if the Disposing Member is then indebted to the Company, the Company
                may
                set-off all or any portion of such indebtedness against the purchase
                price
                payable by the Company, even if such indebtedness is not then due
                and
                payable.

            

    

     

    SECTION
      8.12 Closing.
      The
      closing of all of the purchases and sales of the Subject Units shall be held
      concurrently at the principal office of the Company within fifteen (15) days
      after the expiration of the options granted herein, or at such other time and
      place as may be agreed upon by the purchasers and seller. At the closing, each
      purchaser shall deliver to the Seller, in the manner set forth in Section 8.11,
      the consideration payable by such purchaser and each purchaser (other than
      the
      Company) shall deliver to the Company the executed instrument and payment
      required under Section 8.3 for such purchaser to be admitted as a Substitute
      Member with respect to the purchased Units. At the closing, the seller shall
      deliver to each purchaser an assignment and bill of sale duly Transferring
      such
      part of the Subject Units purchased by such purchaser free and clear
[of]
      all
      liens, encumbrances, security interests, charges and claims of others of every
      kind or character (other than the options granted in this Section
      8).

     

    SECTION
      8.13 All
      of
      Subject Units Need Not Be Purchased.
      Notwithstanding any other provision herein, a Disposing Member shall be required
      to sell any part of the Subject Units pursuant to the options granted herein
      and, in the event less than all of the Subject Units are purchased at the
      closing by the Company and/or the other Members, shall be entitled to consummate
      the sale of the unsold Units pursuant to the Bona Fide Offer described
      above.

     

    SECTION
      8.14 Automatic
      Transfer of Subject Units.
      If an
      option granted herein becomes exercisable and is exercised and the Disposing
      Member fails or refuses to deliver to the purchaser an assignment and bill
      of
      sale for that part of the Subject Units purchased by such purchaser, then
      payment for the Subject Units shall be made by the purchaser to the Company,
      which shall thereupon, by vote of a Majority in Interest (determined by
      excluding all of the Units of the Disposing Member) and as attorney-in-fact
      for
      the Disposing Member, take all action necessary to effect the Transfer to the
      purchaser of the Subject Units, including the execution and delivery of an
      assignment and bill of sale. The Disposing Member shall not thereafter own
      any
      interest in such part of the Subject Units or have any rights with respect
      thereto except to receive from the Company the purchase price therefor once
      such
      Transfer is effected. Each Member hereby appoints the Company as its
      attorney-in-fact for the purposes specified in this Section 8.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -22-

        
          

        

      

      
        
        

      

    

    SECTION
      8.15 Warranties
      of Disposing Member.
      Each
      Member hereby warrants that the Subject Units to be sold by such Member pursuant
      to the options granted herein shall be free and clear of all liens,
      encumbrances, security interests, charges and claims of others of every kind
      or
      character (other than the options granted in this Section 8). In the event
      any
      part of the Subject Units are subject to any lien, encumbrance, security
      interest, charge or claim, the purchaser of such part of the Subject Units
      may
      elect to: 

     

    
      	 	
              (a)

            	
              Postpone
                payment of the purchase price of such part of the Subject Units until
                such
                time as the lien, encumbrance, security interest, charge or claim
                has been
                discharged;

            

    

     

    
      	 	
              (b)

            	
              Deduct
                from the purchase price of such part of the Subject Units and disburse
                directly to such lienholder, encumbrance or claimant, if the amount
                of
                such claim has been determined, such part of the purchase price as
                may be
                adequate to discharge such lien, encumbrance, security interest,
                charge or
                claim;

            

    

     

    
      	 	
              (c)

            	
              In
                the event any such lien, encumbrance, security interest, charge or
                claim
                is not liquidated, postpone the payment of the purchase price of
                such part
                of the Subject Units until final determination of such claim and
                make
                payment at that time to the lienholder, encumbrancer or claimant
                and to
                the Disposing Member, as their respective interests may appear;
                or

            

    

     

    
      	 	
              (d)

            	
              In
                the event that any such lien, encumbrance, security interest, charge
                or
                claim is in excess of the amount of the purchase price of such part
                of the
                Subject Units, then such purchaser may, but shall not be obligated
                to,
                disburse (if liquidated, or if not liquidated, when finally determined)
                the purchase price for such part of the Subject Units to such lienholder,
                encumbrancer or claimant and thereupon the lien, encumbrance, security
                interest, charge or claim against such part of the Subject Units
                shall be
                fully released and discharged and such part of the Subject Units
                shall be
                Transferred to such purchaser free and clear of all liens, encumbrances,
                security interests, charges and
                claims.

            

    

     

    SECTION
      8.16 Non-Exercise
      of Options Upon Voluntary Transfer.
      If or
      to the extent the options granted herein to the Members and the Company with
      respect to an event described in Section 8.6(a) shall be waived or shall not
      be
      exercised before the expiration thereof or shall be exercised as to less than
      all of the Subject Units, then the Disposing Member shall have the right, for
      a
      period of ninety (90) days following the expiration of all of the options,
      to
      Transfer all, but not less than all, of the Subject Units, provided that such
      Transfer shall be upon the same terms and conditions and to the same Persons
      as
      specified in the notice given pursuant to Section 8.7 and such Persons are
      admitted as Substitute Members in accordance with Section 8.3.

     

    SECTION
      8.17 Non-Exercise
      of Options Upon Involuntary Transfer.
      If the
      options granted herein to the Members and the Company with respect to an event
      described in Section 8.6(b) shall be waived or shall not be exercised
      before the expiration thereof or shall be exercised as to less than all of
      the
      Subject Units, then the involuntary Transfer causing such options to become
      exercisable with respect to the Subject Units shall be recognized by the
      Company, provided that such Transfer shall be upon the same terms and conditions
      and to the same Persons as specified in the notice given pursuant to Section
      8.7
      and such Persons are admitted as Substitute Members in accordance with Section
      8.3.

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -23-

        
          

        

      

      
        
        

      

    

    SECTION
      8.18 Non-Exercise
      of Options After Death, Termination, Liquidation or Dissolution.
      If the
      options granted herein to the Members and the Company with respect to an event
      described in Section 8.6(c) shall be waived or shall not be exercised before
      the
      expiration thereof or shall be exercised as to less than all of the Subject
      Units, then the Transfer causing such options to become exercisable with respect
      to the Subject Units shall be recognized by the Company, provided that such
      Transfer shall be upon the same terms and conditions and to the same Persons
      as
      specified in the notice given pursuant to Section 8.7 and such Persons are
      admitted as Substitute Members in accordance with Section 8.3.

     

    SECTION
      8.19 Subsequent
      Transfers,
      The
      Transfer of all or any part of a Member’s Units shall not affect the status of
      such Units as being subject to this Section 8 and the options granted herein
      on
      any subsequent Transfer of such Units (or Change of Ownership, as the ease
      may
      be), and such Units shall in all respects remain subject to this Section 8
      and
      the options granted herein upon the occurrence of any event specified in Section
      8.6 to any Member or Substitute Member of such Units.

     

    SECTION
      8.20 Membership
      Certificates.
      The
      Company may issue to each Member or Transferee one or more certificates
      evidencing the Units owned by such Person. All certificates issued by the
      Company shall contain the following statement which shall be conspicuously
      printed or typed on the front of back of the certificate: 

     

    “THE
      MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES
      LAWS, IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION
      REQUIREMENTS.

     

    THE
      MEMBERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER
      RESTRICTIONS AND CERTAIN BUYOUT RIGHTS IN ACCORDANCE WITH THE TERMS OF THE
      COMPANY’S AMENDED AND RESTATED OPERATING AGREEMENT, AS AMENDED FROM TIME TO
      TIME.”

     

    If
      issued, the Company shall develop procedures for the issuance of new
      certificates upon (i) the Transfer of Units or (ii) the loss or destruction
      of
      previously issued certificates.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -24-

        
          

        

      

      
        
        

      

    

    SECTION
      8.21 Buy-Sell
      Agreement.

     

    
      	 	
              (a)

            	
              The
                owners of the Class A Units or the owners of the Class B Units acting
                collectively as a group (the “Offeror”)
                may at any time make a buy-sell offer (the “Offer”)
                to the other group, excluding owners or affiliates owning only Non-Units
                (the “Offeree”)
                by notifying the Offeree in writing of the exercise of this right
                and
                stating in such notice the price at which the Offeror is willing
                either to
                buy all of the Units of the Company owned by the Offeree, or to sell
                the
                Offeree all of the Units of the Company owned by the Offeror, with
                the
                price per Unit and Non-Unit being the same for both the purchase
                and the
                sale. The Offer shall be deemed to include as an additional term
                and
                condition a promise by the Offeror to cause the release of the Offeree
                from all liabilities of the Company for which the Offeree or any
                asset of
                the Offeree is liable or subject to attachment as a result of being
                a
                guarantor or co-maker of such liabilities or a pledgor or mortgagor
                of
                assets securing such liabilities; provided, however, that any Person
                who
                will continue to be a Member of the Company after the closing shall
                not be
                entitled to such a release. The Offer shall not be revocable once
                the
                aforesaid notice has been delivered to the
                Offeree,

            

    

     

    
      	 	
              (b)

            	
              Within
                thirty (30) days after receipt by the Offeree of the Offeror’s written
                notice of the Offer, the Offeree shall send to the Offeror a written
                notice stating whether the Offeree elects (i) to purchase from the
                Offeror
                all of the Units of the Company owned by the Offeror at the price
                stated
                in the Offer and in accordance with the other terms and conditions
                thereof
                (including a release of the Offeror from personal liability for debts
                of
                the Company), or (ii) to sell to the Offeror all of the Units of
                the
                Company owned by the Offeree at the price stated in the Offer and
                in
                accordance with the other terms and conditions thereof (including
                a
                release of the Offeree from personal liability for debts of the
                Company).

            

    

     

    
      	 	
              (c)

            	
              Any
                Offer, notice or election which may be given by a group hereunder
                shall
                not be effective unless it is signed by all Persons included in such
                group. If the Offeree shall fail to notify the Offeror whether the
                Offeree
                elects to buy or sell within the time period specified in subparagraph
                (b)
                above, or if the notice delivered by the Offeree pursuant to such
                subparagraph is not signed by all of the Persons included in the
                Offeree
                group, the Offeree and each Person included in the Offeree group
                shall be
                deemed to have elected to sell all of their Units of the Company
                to the
                Offeror.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -25-

        
          

        

      

      
        
        

      

    

    
      	 	
              (d)

            	
              The
                closing of the sale shall be held at the Company’s principal office (or at
                such other place as the Offeror and the Offeree may in writing agree)
                no
                later than fifteen (15) days after the expiration of the notice period
                specified in clause (b) above. At the closing the purchaser or purchasers
                shall deliver to the seller or sellers (i) the releases from liability
                for
                debts of the Company, as contemplated by subparagraphs (a) and (b)
                above,
                and (ii) payment shall be made in the form a promissory note payable
                in
                six (6) equal annual installments of principal and interests a floating
                annual rate of interest equal to the lesser of (i) eight percent
                (8%), or
                (ii) the maximum rate permitted by law compounded monthly with the
                first
                such payment due at closing, except if the seller is then indebted
                to the
                purchaser, such purchaser may set-off the purchase price against
                and to
                the extent of such indebtedness, even if such indebtedness is not
                then due
                and payable. Further, at the closing each seller shall deliver to
                the
                purchaser or purchasers an assignment and bill of sale duly Transferring
                all of such seller’s Units of the Company. Each Member hereby covenants
                and warrants that any Unit of the Company which is sold by such Member
                pursuant to this Section will be free and clear of all liens,
                encumbrances, security interests, charges and claims of others of
                every
                kind or character as of the
                closing.

            

    

     

    
      	 	
              (e)

            	
              Notwithstanding
                the foregoing, no Offer may be made pursuant to this Section (i)
                within
                four (4) years from the date of this Agreement, or (ii) after an
                occurrence of an event causing an option under Section 8.6 to become
                exercisable with respect to all or part of the Units of the Offeror
                or
                Offeree until such time as such option has expired or, if exercised,
                such
                Units have been purchased pursuant
                thereto.

            

    

     

    SECTION
      8.22 Preemptive
      Rights

     

    
      	 	
              (a)

            	
              Offer
                to Sell.
                If the Company authorizes the issuance or sale of any Units, then
                the
                Company shall first offer to sell to each Member a portion of such
                Units
                (or such Rights thereto) equal to (i) the number of Units held by
                such
                Member divided by (ii) the sum of the number of Units
                outstanding.

            

    

     

    
      	 	
              (b)

            	
              Right
                to Purchase.
                In order to accept an offer under Section 8.22(a), each Member of
                the
                class of Units so authorized to be issued or sold must, within fifteen
                (15) days after receipt of written notice from the Company describing
                in
                reasonable detail the Units (or Rights) being offered, the purchase
                price
                thereof, the payment terms and such Member’s percentage allotment, deliver
                a written notice to the Company accepting such
                offer.

            

    

     

    
      	 	
              (c)

            	
              Sale
                of Unsubscribed Units.
                During the Ninety (90) days following the expiration of such fifteen
                (15)
                day offering period, the Company shall be entitled to sell any such
                Units
                (or any such Rights) so authorized to be issued or sold, which the
                holders
                of such Units have not elected to purchase, on terms and conditions
                no
                more favorable to the purchasers thereof than those offered to such
                holders. Any Units or securities offered or sold by the Company after
                such
                ninety (90) day period must be re-offered to the holders of the Units
                (or
                any such Rights) so authorized to be issued or sold pursuant to the
                terms
                of this Section 8.22.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -26-

        
          

        

      

      
        
        

      

    

    
      	 	
              (d)

            	
              Exclusion
                from Preemptive Rights.
                The provisions of this Section 8.22 shall not apply to any issuance
                of
                Units (or Rights to acquire any Units) (i) in connection with the
                acquisition of another business (whether by purchase of stock, purchase
                of
                assets, merger or otherwise), (ii) pursuant to any obligation of
                the
                Members to purchase additional securities as a result of a capital
                call by
                the Company, (iii) in connection with a debt financing, (iv) as a
                distribution with respect to the outstanding Units, (v) issued in
                exchange
                for consideration other than cash such as property or services, (vi)
                as
                part of an Additional Capital Contribution pursuant to Sections 3.3
                and
                3.4, or (vii) pursuant to any agreement in effect on the date of
                this
                Agreement.

            

    

     

    SECTION
      8.23 Acknowledgment
      and Authorization of a Transfer of Units.
      The
      Members understand, and agree that Exhibit
      A
      attached
      to this Agreement has been modified, amended and restated to reflect, that
      all
      of the Units (as stated in Exhibit
      A
      of the
      First Amended and Restated Operating Agreement of Front Range Energy, LLC,
      dated
      August 31, 2005) previously held by the Daniel A. Sanders and Launa J. Sanders
      Revocable Living Trust and all rights, duties and obligations attached thereto
      have been Transferred to and assumed by Daniel A. Sanders such that the Daniel
      A. Sanders and Launa J. Sanders Revocable Living Trust is no longer a Member
      of
      the Company. The Members and the Daniel A. Sanders and Launa J. Sanders
      Revocable Living Trust hereby consent to, and waive any rights in respect of,
      such Transfer.

     

    SECTION
      9.

    Dissolution

     

    SECTION
      9.1 Dissolution.
      The
      Company shall be dissolved upon the occurrence of any of the following events:
      

     

    
      	 	
              (a)

            	
              Upon
                the Approval of a Two Thirds Vote of the Units;
                or

            

    

     

    
      	 	
              (b)

            	
              The
                entry of a decree of judicial dissolution under the
                Act.

            

    

     

    SECTION
      9.2 Winding
      Up.
      The
      Company shall cease to carry on its business, except insofar as may be necessary
      for the winding up of its business and affairs, but its separate existence
      shall
      continue until it is dissolved in accordance with the laws of Colorado. The
      Managers (or, in the event there is no Manager, a Person authorized by a
      Majority in Interest) shall proceed to collect the Company’s assets; convey and
      dispose of such assets as are not to be distributed in kind to the Members;
      pay,
      satisfy, or discharge the Company’s liabilities and obligations or make adequate
      provisions for the payment or discharge thereof; and do all other acts required
      to liquidate its business and affairs.

     

    SECTION
      9.3 Resignation
      or Withdrawal.
      Each
      Member agrees not to resign or otherwise voluntarily withdraw from the Company
      except (i) with the written consent of the Managers, or (ii) in connection
      with
      a Transfer of all of his, her or its Units in a manner permitted under Section
      8.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -27-

        
          

        

      

      
        
        

      

    

    SECTION
      9.4 Distribution
      of Assets Upon Dissolution.
      In
      settling accounts after dissolution, the assets of the Company shall be applied
      and distributed in the following order of priority: 

     

    
      	 	
              (a)

            	
              First,
                to the payment of debts and liabilities of the Company, in the order
                of
                priority as provided by law, except those liabilities to Members
                on
                account of their Capital Contributions;
                and

            

    

     

    
      	 	
              (b)

            	
              The
                balance, if any, to the Members in accordance with their respective
                Capital Account balances after giving effect to all contributions,
                distributions and allocations for all Fiscal
                Years.

            

    

     

    This
      Section is intended to comply with the Act and Regulations
§ 1.704-1(b)(2)(ii)(b)(2) and shall be interpreted consistently
      therewith.

     

    SECTION
      9.5 Deficit
      Capital Accounts.
      In the
      event the Company is “liquidated” within the meaning of Regulations
§ 1.704-1(b)(2)(ii)(g), if any Member’s Capital Account has a deficit
      balance (after giving effect to all contributions, distributions, and
      allocations for all Fiscal Years, including the Fiscal Year during which such
      liquidation occurs), such Member shall have no obligation to make any
      contribution to the capital of the Company with respect to such deficit balance,
      and such deficit shall not be considered a debt owed the Company or any other
      Person for any purpose whatsoever.

     

    SECTION
      10.

    Miscellaneous

     

    SECTION
      10.1 Issuance
      of Additional Units.
      Subject
      to Section 8.22 and the terms and conditions stated herein, the Company, by
      the
      written consent of a Majority in Interest, may issue additional Units (including
      new classes or series thereof having rights that are different than the rights
      of any then-existing class or series) upon such terms and conditions as such
      consent may specify.

     

    SECTION
      10.2 Liquidation
      Safe Harbor Valuation.
      This
      Section 10.2 shall apply after the effective date of any final Regulations
      or of
      final guidance by the Internal Revenue Service with respect to the Transfer
      of
      Units to a new or existing Member of the Company in connection with the
      performance of services for the Company or otherwise under which the Company
      may
      make an election (a “Safe
      Harbor Election”)
      to
      treat the liquidation value of Units so Transferred as being the fair market
      value of those Units for purposes of Section 83 of the Code. From and after
      the
      effective date of any final Regulations or of final guidance by the Internal
      Revenue Service, each Member and each Person (including any Person to whom
      any
      Units are Transferred in connection with the performance of services for the
      Company or otherwise) and each assignee and Transferee of a Member who acquires
      Units agrees that that (a) the Company is authorized and directed to make the
      Safe Harbor Election, and (b) each such Person agrees to comply with all
      requirements of such Regulations or guidance with respect to all Units so
      Transferred while the Safe Harbor Election remains effective. The Safe Harbor
      Election may be revoked by the vote of a Majority in Interest of the
      Members.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -28-

        
          

        

      

      
        
        

      

    

    SECTION
      10.3 Mediation
      and Arbitration.

     

    
      	 	
              (a)

            	
              To
                the maximum extent permitted by law, the parties mutually consent
                to the
                resolution by arbitration, and not litigation, of all claims, causes
                of
                action and disputes which may arise out of or in connection with
                this
                Agreement. In the event of any such dispute, the parties agree they
                shall
                attempt to resolve such dispute by good faith negotiations prior
                to the
                institution of mediation or arbitration proceedings. If the dispute
                cannot
                be resolved by such negotiations, then any party, by written notice
                to the
                other party, may call for private mediation of the issue before a
                mediator
                to be agreed upon by the parties. The parties agree to conclude such
                private mediation within thirty (30) days of the filing by a party
                of a
                request for such mediation. In the event the dispute cannot be resolved
                by
                such mediation, either party may, by written notice to the other
                party,
                may [sic?]
                commence arbitration proceedings as provided
                below.

            

    

     

    
      	 	
              (b)

            	
              Disputes
                to be resolved by arbitration shall be submitted to binding arbitration
                to
                be held in a neutral location to be mutually agreed upon by and between
                the parties, by either one or three independent arbitrators in accordance
                with the Federal Arbitration Act, Title 9 of the U.S. Code, and the
                Commercial Arbitration Rules of the American Arbitration Association
                pursuant to the procedure set forth
                below.

            

    

     

    
      	 	
              (c)

            	
              Any
                aggrieved party may demand such arbitration in writing by notice,
                which
                demand shall include the name of the arbitrator appointed by the
                party
                demanding arbitration and a statement of the matter in
                controversy.

            

    

     

    
      	 	
              (d)

            	
              If
                there are two parties to the dispute, then unless the parties have
                agreed
                on a single arbitrator within ten (10) days after such demand, the
                other
                party shall name its arbitrator, and the two arbitrators so selected
                shall
                select a third arbitrator within ten (10) days or, in lieu of an
                agreement
                on the third arbitrator by the two arbitrators so appointed, a third
                arbitrator shall be appointed by the American Arbitration Association.
                If
                a second arbitrator is not selected within the time provided, the
                first
                arbitrator shall serve as sole arbitrator. If there are more than
                two
                parties to the dispute, then an independent single arbitrator shall
                be
                appointed by the American Arbitration Association to resolve the
                dispute.

            

    

     

    
      	 	
              (e)

            	
              The
                arbitrators shall have the power to determine the procedure to be
                followed, whether discovery is to be allowed and to what extent,
                and to
                establish a schedule for resolving the controversy and allocating
                costs of
                arbitration among the parties as they shall solely determine in their
                discretion, including the power to award costs and attorney fees
                of the
                prevailing party against the losing party. The arbitrators shall
                have the
                power to award punitive or exemplary damages, but only when, in their
                sole
                discretion, they determine that a dispute brought or claim pursued
                by a
                party was not brought in good faith. The decision of a majority of
                the
                arbitrators shall be the decision of the arbitrators. All decisions
                shall
                be in writing. The decision of the arbitrators shall be final and
                binding
                upon the parties and shall not be appealable. The parties understand
                and
                agree that they are waiving all right to have all claims, causes
                of action
                or disputes adjudicated by a court or
                jury.

            

    

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -29-

        
          

        

      

      
        
        

      

    

    
      	 	
              (f)

            	
              The
                parties agree that the provisions of this Section 10.2 shall be a
                complete
                defense to any suit, action, or other proceeding instituted in any
                federal, state, or local court or before any administrative tribunal
                with
                respect to any controversy or dispute arising out of this Agreement,
                that
                judgment may be rendered in any court of competent jurisdiction on
                any
                award made by the arbitrators pursuant to this Agreement, and that
                the
                arbitration provisions hereof shall survive the termination of this
                Agreement for any reason.

            

    

     

    SECTION
      10.4 Title
      to Assets.
      Title
      to all assets acquired by the Company shall be held in the name of the Company.
      No Member shall individually have any ownership interest or rights in the assets
      of the Company, except indirectly by virtue of such Member’s ownership of one or
      more Units. No Member shall have any right to seek or obtain a partition of
      the
      assets of the Company, nor shall any Member have the right to any specific
      assets of the Company upon the liquidation of or any distribution from the
      Company.

     

    SECTION
      10.5 Grant
      of Power of Attorney.
      Each
      Member constitutes and appoints the Managers as the Member’s true and lawful
      attorney-in-fact, and in the Member’s name, place and stead, to make, execute,
      sign, acknowledge, and file: 

     

    
      	 	
              (a)

            	
              All
                documents (including amendments to the Articles) which the
                attorney-in-fact deems appropriate to reflect any written amendment,
                change or modification of this Agreement approved in accordance with
                this
                Agreement;

            

    

     

    
      	 	
              (b)

            	
              Upon
                the requisite approval, if any, required elsewhere in this Agreement,
                any
                and all other certificates or other instruments required to be filed
                by
                the Company under the laws of any state or jurisdiction, including,
                without limitation, any certificate or other instruments necessary
                in
                order for the Company to continue to qualify as a limited liability
                company under the applicable laws;

            

    

     

    
      	 	
              (c)

            	
              One
                or more applications to use an assumed name;
                and

            

    

     

    
      	 	
              (d)

            	
              All
                documents which may be required to dissolve and terminate the Company
                and
                to cancel its Articles upon the requisite approval required elsewhere
                in
                this Agreement.

            

    

     

    The
      foregoing power of attorney is irrevocable and is coupled with an interest,
      and,
      to the extent permitted by applicable law, shall survive the death or disability
      of a Member. It also shall survive the Transfer of a Unit, except that if the
      Transferee is approved for admission as a Substitute Member, this power of
      attorney shall survive the delivery of the assignment for the sole purpose
      of
      enabling the attorney-in-fact to execute, acknowledge and file any documents
      needed to effectuate the substitution. Each Member shall be bound by any
      representations made by the attorney-in-fact acting in good faith pursuant
      to
      this power of attorney, and each Member hereby waives any and all defenses
      which
      may be available to contest, negate or disaffirm the action of the
      attorney-in-fact taken in good faith under this power of attorney.

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -30-

        
          

        

      

      
        
        

      

    

    SECTION
      10.6 Tax
      Classification.
      The
      Members intend that the Company not be a partnership (including, without
      limitation, a limited partnership or a joint venture) for any purpose other
      than
      for federal and state tax purposes, that no Member shall be a partner or joint
      venturer of any other Member by virtue of this Agreement, and that neither
      this
      Agreement nor any other document entered into by the Company or any Member
      shall
      be construed to suggest otherwise. The Members intend that the Company shall
      be
      treated as a partnership for federal and state income tax purposes, and each
      Member and the Company shall file all tax returns and shall otherwise take
      all
      tax and financial reporting positions in a manner consistent with such
      treatment.

     

    SECTION
      10.7 Tax
      Controversies.
      In the
      event the Company is or becomes required to designate a “tax matters partner”
pursuant to Code § 6231, the Company, by the consent of a Majority in
      Interest, shall designate a Member to act as the tax matters partner for the
      Company (the “Tax
      Matters Partner”).
      The
      Tax Matters Partner is authorized and required to represent the Company (at
      the
      Company’s expense) in connection with all examinations of the Company’s affairs
      by tax authorities, including resulting administrative and judicial proceedings.
      The Tax Matters Partner agrees to notify each Manager and Member as to the
      initiation of any such examination or administrative or judicial proceeding,
      and
      to keep each Manager and Member reasonably informed of the status thereof.
      The
      Tax Matters Partner shall obtain the consent of a vote of a Majority in Interest
      prior to entering into any settlement of any such examination. Each Manager
      and
      Member agrees to cooperate with the Tax Matters Partner and to do or refrain
      from doing any or all things reasonably required by the Tax Matters Partner
      in
      connection with the conduct of such proceedings.

     

    SECTION
      10.8 Headings.
      Section
      and other headings contained in this Agreement are for reference purposes only
      and are not intended to describe, interpret, define, or limit the scope, extent,
      or intent of this Agreement or any provision herein.

     

    SECTION
      10.9 Survival.
      All
      rights of contribution and indemnity contained in this Agreement shall survive
      and remain in full force and effect notwithstanding any dissolution of the
      Company or this Agreement.

     

    SECTION
      10.10 Notices.
      Except
      as otherwise provided by this Agreement or by law, any notice required or
      permitted to be given by this Agreement shall be sufficient if in writing and
      shall be deemed effective only if transmitted by personal delivery or mailed
      by
      certified mail, return receipt requested, postage prepaid, to the address of
      the
      Member as it appears on the records of the Company; provided that a waiver
      in
      writing signed by any person entitled to notice, whether made before or after
      the time for notice to be given, is equivalent to the giving of notice. Any
      such
      notice shall be deemed to be delivered and received as of the date so delivered,
      if delivered personally, or as of the second business day following the day
      sent, if sent by certified mail.

     

    SECTION
      10.11 Entire
      Agreement.
      This
      Agreement contains the entire agreement between the Members relative to the
      operation of the Company, and it shall not be amended, altered, modified or
      changed except by a written document duly executed by a Majority in Interest
      at
      the time of such alteration, modification or change. Notwithstanding the
      foregoing, the provisions of Section 3, Section 4, Section 6.6, Section 6.7
      and
      Section 8 may not be altered, modified or changed with respect to any Member
      without the written consent of such Member.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -31-

        
          

        

      

      
        
        

      

    

    SECTION
      10.12 Severability.
      In the
      event any provision of this Agreement is held to be illegal, invalid or
      unenforceable to any extent, the legality, validity and enforceability of the
      remainder of this Agreement shall not be affected thereby and shall remain
      in
      full force and effect and shall be enforced to the greatest extent permitted
      by
      law.

     

    SECTION
      10.13 Binding
      Agreement.
      The
      provisions of this Agreement shall be binding upon, and inure to the benefit
      of,
      the parties hereto and their respective heirs, personal representatives,
      successors and assigns.

     

    SECTION
      10.14 Jointly
      Negotiated.
      The
      parties hereto have participated jointly in the negotiation and drafting of
      this
      Agreement. In the event an ambiguity or question of intent or interpretation
      arises, no presumption or burden of proof shall arise favoring or disfavoring
      any party by virtue of the authorship of any of the provisions of this
      Agreement.

     

    SECTION
      10.15 Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original and all of which shall constitute one agreement that
      is
      binding upon all of the parties hereto, notwithstanding that all parties are
      not
      signatories to the same counterpart. 

     

    SECTION
      10.16 Governing
      Law.
      The
      laws of the State of Colorado shall govern the validity of this Agreement,
      the
      construction of its terms, and the interpretation of the rights and duties
      of
      the parties hereto.

     

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed effective as of the Effective Date.

     

    Daniel
      A. Sanders

    

    

    /s/
      Daniel A.
      Sanders                               
     

    Signature

    

    

    Eagle
      Energy LLC

    

    

    By  
      /s/
      David M.
      Flick                               
    

    Its  
      President                                                    

    

    

    ICM,
      Inc.

    

    

    By  
      /s/
      Jerry
      Jones                                      
     

    Its  
      CFO                                                        
          

    

    

    Daniel
      A. Sanders and Launa J. Sanders

    Revocable
      Living Trust

    

    

    By  
      /s/
      Daniel A.
      Sanders                          
    

    Daniel
      A.
      Sanders, As Trustee

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -32-

        
          

        

      

      
        
        

      

    

    Appendix
      I

     

    Definitions

     

    Terms
      Defined Herein.
      Unless
      the context otherwise requires, the following terms shall have the following
      meanings: 

     

    (a) “Act”
      means
      the Colorado Limited Liability Company Act, as amended from time to time (or
      any
      corresponding provision of succeeding law).

     

    (b) “Additional
      Capital Contribution”
      has the
      meaning given it in Section 3.3.

     

    (c) “Adjusted
      Capital Account Deficit”
      means,
      with respect to any Member, the deficit balance, if any, in such Member’s
      Capital Account as of the end of the relevant Fiscal Year, after giving effect
      to the following adjustments: 

     

    
      	 	
              i.

            	
              Credit
                to such Capital Account any amounts which such Member is obligated
                to
                restore pursuant to any provision of this Agreement or is deemed
                to be
                obligated to restore pursuant to the penultimate sentences of Regulations
                §§ 1.704-2(g)(1) and 1.704-2(0(5);
                and

            

    

     

    
      	 	
              ii.

            	
              Debit
                to such Capital Account the items described in Regulations
                §§ 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
                1.704-1(b)(2)(ii)(d)(6).

            

    

     

    The
      foregoing definition of Adjusted Capital Account Deficit is intended to comply
      with the provisions of Regulations § 1.704-1(b)(2)(ii)(d) and shall be
      interpreted consistently therewith.

     

    (d)
      “Agreement”
      means
      this Operating Agreement, as amended from time to time.

     

    (e) “Annual
      Operating Plan”
      means
      the Annual Operating Plan adopted as provided in Section 6.10.

     

    (f) “Articles”
      means
      the Articles of Organization of the Company or such other document filed in
      accordance with the Act in order to form the Company under the laws of Colorado,
      as amended or restated from time to time.

     

    (g) “Available
      Cash”
      means
      the aggregate amount of cash on hand or in bank, money market or similar
      accounts of the Company derived from any source which the Managers determine
      is
      available for distribution after taking into account any amount required or
      appropriate to maintain a reasonable amount of working capital and reserves
      for
      outstanding obligations and anticipated future expenditures of the Company,
      and
      any limitations on distribution imposed by any agreement to which the Company
      is
      a party.

     

    (h) “Board”
      means a
      board consisting of the Board Members, as described in Section 6.7.

     

    (i) “Board
      Member”
      has the
      meaning given it in Section 6.7.

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -33-

        
          

        

      

      
        
        

      

    

    (j) “Bona
      Fide Offer”
      means a
      bona fide offer as described in Section 8.6(a).

     

    (k) “Capital
      Account”
      means
      the capital account maintained for each Member in accordance with Section
      3.5.

     

    (l) “Capital
      Contributions”
      means,
      with respect to any Member, the amount of cash and the initial Gross Asset
      Value
      of any property (other than cash) contributed to the capital of the Company.
      The
      principal amount of a promissory note which is not readily traded on an
      established securities market and which is contributed to the Company by the
      maker of the note (or a person related to the maker of the note within the
      meaning of Regulations § 1.704-1 (b)(2)(ii)(c)) shall not be included in
      the Capital Account of any Member until the Company makes a taxable disposition
      of the note or until (and to the extent) principal payments are made on the
      note, all in accordance with Regulations
§ 1.704-1(b)(2)(iv)(d)(2).

     

    (m) “Class
      A Units”
and
      “Class
      B Units”
      refer to
      the classes of Units created pursuant to Section 3.1.

     

    (n) “Code”
      means
      the Internal Revenue Code of 1986, as amended from time to time (or any
      corresponding provisions of succeeding law).

     

    (o) “Company”
      means
      Front Range Energy, LLC, a Colorado limited liability company.

     

    (p) “Company
      Minimum Gain”
      means
“partnership minimum gain” as that term is defined in Regulations
§§ 1.704-2(b)(2) and 1.704-2(d).

     

    (q) “Confidential
      Information”
      means
      the terms of this Operating Agreement, the name of any Member, together with
      any
      other information that is not generally known to the public and that is used,
      developed or obtained by the Company in connection with its business, including
      but not limited to (i) financial information and projections, (ii) business
      strategies, (iii) products or services, (iv) fees, costs and pricing structures,
      (v) designs, (vi) analysis, (vii) drawings, photographs and reports, (viii)
      computer software, including operating systems, applications and program
      listings, (ix) flow charts, manuals and documentation, (x) data bases, (xi)
      accounting and business methods, (xii) inventions, devices, new developments,
      methods and processes, whether patentable or unpatentable and whether or not
      reduced to practice, (xiii) customers and clients and customer or client lists,
      (xiv) copyrightable works, (xv) all technology and trade secrets, and (xvi)
      all
      similar and related information in whatever form.

    

      (r)
        “Defaulting
        Member”
        means a
        defaulting member as described in Section 3.4.

       

    

    (s) “Depreciation”
      means,
      for each Fiscal Year, an amount equal to the depreciation, amortization, or
      other cost recovery deduction allowable with respect to an asset for such Fiscal
      Year, except that if the Gross Asset Value of an asset differs from its adjusted
      basis for federal income tax purposes at the beginning of such Fiscal Year,
      Depreciation shall be an amount which bears the same ratio to such beginning
      Gross Asset Value as the federal income tax depreciation, amortization, or
      other
      cost recovery deductions for such Fiscal Year or other period bears to such
      beginning adjusted tax basis; provided, however, that if the adjusted basis
      for
      federal income tax purposes of an asset at the beginning of such Fiscal Year
      is
      zero, Depreciation shall be determined with reference to such beginning Gross
      Asset Value using any reasonable method selected by the
      Managers.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -34-

        
          

        

      

      
        
        

      

    

    (t) “Disposing
      Member”
      means a
      disposing Member as described in Section 8.6.

     

    (u) “Effective
      Date”
      means
      the date first set forth and defined as the Effective Date in the first
      paragraph of this Agreement.

     

    (v) “Fiscal
      Year”
      means on
      or after the Effective Date (i) the period commencing on the Effective Date,
      and
      ending on the next December 31st,
      (ii)
      any subsequent twelve (12) month period commencing on January 1st
      and
      ending on December 31st,
      or
      (iii) any portion of the period described in clause (ii) for which the Company
      is required to allocate Profits, Losses, and other items of Company income,
      gain, loss, or deduction pursuant to Section 4.

     

    (w) “Gross
      Asset Value”
      means,
      with respect to any asset, the asset’s adjusted basis for federal income tax
      purposes, except as follows: 

    

      
        	
                i.

                 

              	
                The
                  initial Gross Asset Value of any asset contributed by a Member
                  to the
                  Company shall be the gross fair market value of such asset, as
                  determined
                  by the Managers;

                 

              
	
                ii.

                 

              	
                The
                  Gross Asset Values of all Company assets shall be adjusted to equal
                  their
                  respective gross fair market values as of the following times:
                  (a) the
                  acquisition of an additional interest in the Company by any new
                  or
                  existing Member in exchange for more than a de minimis Capital
                  Contribution; (b) the distribution by the Company to a Member of
                  more than
                  a de minimis amount of Company assets as consideration for an interest
                  in
                  the Company; and (c) the liquidation of the Company within the
                  meaning of
                  Regulations § 1.704-1 (b)(2)(ii)(g); provided, however, that
                  adjustments pursuant to clauses (a) and (b) above shall be made
                  only if
                  the Managers reasonably determine that such adjustments are necessary
                  or
                  appropriate to reflect the relative economic interests of the Members
                  in
                  the Company;

                 

              
	
                iii.

                 

              	
                The
                  Gross Asset Value of any Company asset distributed to any Member
                  shall be
                  adjusted to equal the gross fair market value of such asset on
                  the date of
                  distribution as determined by the Managers; and

                 

              
	
                iv.

                 

              	
                The
                  Gross Asset Values of Company assets shall be increased (or decreased)
                  to
                  reflect any adjustments to the adjusted basis of such assets pursuant
                  to
                  Code § 734(b) or Code § 743(b), but only to the extent that such
                  adjustments are taken into account in determining Capital Accounts
                  pursuant to Regulations § 1.704-1(b)(2)(iv)(m) and Paragraph (bb)(vi)
                  of this Appendix and 4.4(f); provided, however, that Gross Asset
                  Values
                  shall not be adjusted pursuant to this clause (iv) to the extent
                  the
                  Managers determine that an adjustment pursuant to clause (ii) above
                  is
                  necessary or appropriate in connection with a transaction that
                  would
                  otherwise result in an adjustment pursuant to this clause
                  (iv).

              

      

    

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -35-

        
          

        

      

      
        
        

      

    

    If
      the
      Gross Asset Value of an asset has been determined or adjusted pursuant to
      clauses (i), (ii) or (iv) above, such Gross Asset Value shall thereafter be
      adjusted by the Depreciation taken into account with respect to such asset
      for
      purposes of computing Profits and Losses.

     

    (x) “Immediate
      Family”
      means,
      with respect to a Member, such Member’s spouse and lineal descendants (excluding
      adopted descendants).

     

    (y) “Indemnitee”
      means a
      Person entitled to be indemnified by the Company pursuant to Section
      6.11.

     

    (z) “Majority
      in Interest”
      means
      any Member or group of Members holding an aggregate of more than fifty percent
      (50%) of the applicable Units then entitled to vote. Unless otherwise expressly
      limited in this Agreement to the vote of a specific class of Unit, Class A
      Units, and Class B Units shall be entitled to vote for purposes of determining
      a
“Majority in Interest.”

     

    (aa) “Manager”
      means
      the Person designated as a manager of the Company in accordance with Section
      6.1. “Managers”
means
      all such Persons.

     

    (bb) “Member”
      means
      any Person who is a party hereto or who is hereafter admitted as a new Member
      or
      Substitute Member of the Company pursuant to the provisions of this Agreement.
      “Members”
mean
      all such Persons.

     

    (cc) “Member
      Nonrecourse Debt”
      means
“partner nonrecourse debt” as that term is defined in Regulations
§ 1.704-2(7b)(4).

     

    (dd) “Member
      Nonrecourse Debt Minimum Gain”
      means an
      amount, with respect to each Member Nonrecourse Debt, equal to the Company
      Minimum Gain that would result if such Member Nonrecourse Debt were treated
      as a
      Nonrecourse Liability, determined in accordance with Regulations
§ 1.704-2(i)(3).

     

    (ee) “Member
      Nonrecourse Deductions”
      means
“partner nonrecourse deductions” as that term is defined in Regulations
§§ 1.704-2(i)(1) and 1.704-2(I)(2) [1.704-2(i)(2)?].

     

    (ff) “Nonrecourse
      Deductions”
      has the
      meaning set forth in Regulations § 1.704-2(b)(1).

     

    (gg) “Nonrecourse
      Liability”
      has the
      meaning set forth in Regulations § 1.704-2(b)(3).

     

    (hh) “Offer,”
      “Offeror”
      and
“Offeror”
      has the
      meaning set forth in Section 8.21.

     

    (ii) “Person”
      means
      any individual, corporation, partnership, limited liability company, trust
      or
      other legal entity.

     

    (jj) “Profits”
      and
“Losses”
      means,
      for each Fiscal Year, an amount equal to the Company’s taxable income or loss
      for such Fiscal Year, determined in accordance with Code § 703(a) (for this
      purpose, all items of income, gain, loss, or deduction required to be stated
      separately pursuant to Code § 703(a)(1) shall be included in taxable income
      or loss), with the following adjustments: 

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -36-

        
          

        

      

      
        
        

      

    

    
      	 	
              i.

            	
              Any
                income of the Company that is exempt from federal income tax and
                not
                otherwise taken into account in computing Profits or Losses pursuant
                to
                this Subsection shall be added to such taxable income or
                loss;

            

    

     

    
      	 	
              ii.

            	
              Any
                expenditures of the Company described in Code § 705(a)(2)(B) or
                treated as Code § 705(a)(2)(B) expenditures pursuant to Regulations
                § 1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
                computing Profits or Losses pursuant to this Subsection shall be
                subtracted from such taxable income or
                loss;

            

    

     

    
      	 	
              iii.

            	
              In
                the event the Gross Asset Value of any Company asset is adjusted
                pursuant
                to Paragraph (o)(ii) or (o)(iii) of this Appendix, the amount of
                such
                adjustment shall be taken into account as gain or loss from the
                disposition of such asset for purposes of computing Profits or
                Losses;

            

    

     

    
      	 	
              iv.

            	
              Gain
                or loss resulting from any disposition of a Company asset with respect
                to
                which gain or loss is recognized for federal income tax purposes
                shall be
                computed by reference to the Gross Asset Value of the asset disposed
                of,
                notwithstanding that the adjusted tax basis of such asset differs
                from its
                Gross Asset Value;

            

    

     

    
      	 	
              v.

            	
              In
                lieu of the depreciation, amortization, and other cost recovery deductions
                taken into account in computing such taxable income or loss, there
                shall
                be taken into account Depreciation for such Fiscal Year or other
                period,
                computed in accordance with Paragraph (m) of this
                Appendix;

            

    

     

    
      	 	
              vi.

            	
              To
                the extent an adjustment to the adjusted tax basis of any Company
                asset
                pursuant to Code § 734(b) or Code § 743(b) is required pursuant
                to Regulations § 1.704-1(b)(2)(iv)(m)(4) to be taken into account in
                determining Capital Accounts as a result of a distribution other
                than in
                liquidation of a Member’s interest in the Company, the amount of such
                adjustment shall be treated as an item of gain (if the adjustment
                increases the basis of the asset) or loss (if the adjustment decreases
                the
                basis of the asset) from the disposition of the asset and shall be
                taken
                into account for purposes of computing Profits or Losses;
                and

            

    

     

    
      	 	
              vii.

            	
              Notwithstanding
                any other provision of this Subsection, any items which are specifically
                allocated pursuant to Section 4.4 or Section 4.5 shall not be taken
                into
                account in computing Profits or
                Losses.

            

    

     

    The
      amounts of the items of Company income, gain, loss, or deduction available
      to be
      specially allocated pursuant to Sections 4.4 and 4.5 shall be determined by
      applying rules analogous to those set forth in clauses (i) through (vi)
      above.

     

    (kk) “Regulations”
      means
      the Income Tax Regulations, including Temporary Regulations, promulgated under
      the Code, as amended from time to time (including corresponding provisions
      of
      succeeding Regulations).

     

    (ll) “Regulatory
      Allocations”
      mean the
      allocations pursuant to Section 4.4.

     

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -37-

        
          

        

      

      
        
        

      

    

    (mm) “Required
      Contribution”
      means a
      required contribution as described in Section 3.3.

     

    (nn) “Right”
      means a
      warrant, right, call or option or security exercisable for or convertible into
      a
      Unit.

     

    (oo) “Safe
      Harbor Election”
      means
      the Safe Harbor Election as described in Section 10.2.

     

    (pp) “Substitute
      Member”
      means a
      Person admitted to the Company as a Member and entitled to all the rights and
      bound by all the obligations of the Member for which such Person is
      substituted.

     

    (qq) “Subject
      Units”
      means
      subject units as described in Section 8.6.

     

    (rr) “Tax
      Matters Partner”
      means
      the tax matters partner as described in Section 10.7.

     

    (ss) “Transfer”,
      “Transferred”,
      etc.
      means, with respect to a Unit, to sell, Transfer, assign, give, bequeath,
      mortgage, alienate, pledge, hypothecate or otherwise encumber or dispose of
      such
      Unit. “Transfer”, “Transferred”, etc. includes with respect to a Unit owned by a
      Member that is not a natural person, the cumulative transfer (voluntarily,
      involuntarily or by operation of law, including by merger or other
      reorganization) of more than 50% of the equity ownership of the
      Member.

     

    (tt) “Two-Thirds
      Interest”
      means
      any on or more Board Members appointed by Members holding an aggregate of more
      than sixty-six and two thirds percent (66 2/3%) of the Units then outstanding.
      Unless otherwise expressly limited in this Agreement to the vote of a specific
      class of Unit, Class A Units and Class B Units shall be entitled to vote for
      purposes of determining a “Two Thirds Interest”.

     

    (uu) “Unit”
      means a
      Unit issued by and representing an ownership interest in the Company including
      a
      Class A Unit, a Class B Unit, and any other class or series of Units created
      and
      issued pursuant to Section 10.1. “Units” mean all such Units.

     

    (vv) “Unpaid
      Required Contribution”
      means an
      unpaid required contribution as described in Section 3.4.

    
      
        SECONDED
          AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

        
        

      

      
        -38-

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A

    

    As
      of
      October 20, 2005.

    

    NOTE:
       Exhibit
      A
      may be amended from time to time to reflect adjustments to Members’
Accounts.

    

      
        	 	 	 	 
	
                 

                Member

                 

              	
                 

                Units

                 

              	
                 

                Cash
                  Capital 

                Contribution

                 

              	
                 

                %

                 

              
	
                Daniel
                  A. Sanders

                6867
                  Hogan Road

                Gresham,
                  OR 97080

              	
                50.000
                  Class A Units

              	
                $-0-

              	
                .1%

              
	
                Daniel
                  A. Sanders

                6867
                  Hogan Road

                Gresham,
                  OR 97080

              	
                12,880.405
                  Class B Units

              	
                $12,880,405

              	
                53.72%

              
	
                Eagle
                  Energy LLC

                2113
                  Pebble Beach Land

                Brandon,
                  SD 57005

              	
                10,094.595
                  Class D Units

              	
                $10,094,595

              	
                42.10%

              
	
                ICM
                  Inc.

                310
                  N. First

                Colwich,
                  KS 67030k [67030]

              	
                1,000.000
                  Class B Units

              	
                $1,000,000

              	
                4.17%

              
	
                 

                TOTAL

                 

              	
                 

                24,025.000
                  Units

                 

              	
                 

                $23,975,000

                 

              	
                 

                100.00%

                 

              

      

    SECONDED
      AMENDED AND RESTATED OPERATING AGREEMENT OF FRONT RANGE ENERGY, LLC

     

    A-1Amend. 1 to 2nd Amended & Restated Operating Agr

    EXHIBIT
      10.5

     

    

    AMENDMENT
      NO. 1, DATED AS OF OCTOBER 17, 2006,

    OF
      THE SECOND AMENDED AND RESTATED OPERATING AGREEMENT

    OF
      

    FRONT
      RANGE ENERGY, LLC

    TO
      ADD A SUBSTITUTE MEMBER AND FOR CERTAIN OTHER PURPOSES

    

    By
      this
      amendment, dated as of the 17th day of October, 2006, the undersigned parties
      amend that certain agreement (the “Agreement”),
      entitled “Second Amended and Restated Operating Agreement of Front Range Energy,
      LLC,” dated as of October 20, 2005, as follows:

    

    Section
      1

    ADMISSION
      OF NEW MEMBER

    

    Pacific
      Ethanol California, Inc., a California corporation (“Pacific”)
      is
      hereby admitted as a member of Front Range Energy, LLC. By signing this
      Agreement, Pacific shall be bound by all of the terms and conditions of the
      Agreement as amended by this Amendment.

    

     

    Section
      2

    AMENDMENT
      OF PROVISIONS OF AGREEMENT

    

    The
      following provisions of the Agreement are amended as follows:

    

    SECTION
      6.14 Confidential
      Information.
      Without
      limiting the applicability of any other agreement to which any Member may be
      subject, a Manager and/or Member shall not, directly or indirectly disclose,
      either during his, her or its association or employment with the Company or
      thereafter, any Confidential Information of which such Manager or Member is
      or
      becomes aware. A Manager or Member in possession of Confidential Information
      shall take all appropriate steps to safeguard such information and to protect
      it
      against disclosure, misuse, espionage, loss and theft. Notwithstanding the
      above, a Manager and/or Member may disclose Confidential Information to the
      extent (i) the disclosure is necessary for the Manager, Member and/or the
      Company’s agents, representatives, and advisors to fulfill their duties to the
      Company pursuant to this Agreement and/or other written agreements, (ii) the
      disclosure is required by law or a court order, (iii) to the extent necessary
      to
      enforce rights hereunder and (iv) the disclosure is of a general nature
      regarding general financial information, return on investment and similar
      information, including without limitation, in connection with communications
      to
      direct and indirect beneficial owners of Units and controlling Persons and
      general marketing efforts. Notwithstanding the foregoing, (a) this Section
      6.14
      shall not prohibit the disclosure of Confidential Information by a Member or
      an
      affiliate of a Member to the extent such disclosure is reasonably determined
      to
      be required under applicable securities laws or under the terms of an applicable
      listing agreement between any Member or an affiliate of a Member and a national
      stock exchange, 

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

    (b)
      for
      all agreements entered into prior to the date hereof between the Company and
      a
      Member, or an affiliate of a Member which contain individual provisions
      concerning the disclosure of confidential information, including but not limited
      to, Confidential Information as defined herein, which conflict with this Section
      6.14, such agreements shall be governed by their individual provisions
      concerning the disclosure of confidential information, and (c) to the extent
      that the Company and a Member, or an affiliate of a Member enter into agreements
      prior to the date hereof which do not contain individual provisions concerning
      the disclosure of Confidential Information, this Section 6.14 shall control
      the
      disclosure of Confidential Information with respect to such agreements and
      each
      Member shall cause its affiliates to abide by the terms of this Section 6.14.
      For purposes of this Section 6.14, “affiliate” has the meaning set forth in Rule
      12b-2 of the regulations promulgated under the Securities Exchange Act of 1934,
      as amended.

     

    Section
      3

    AMENDMENT
      OF EXHIBITS

    

    The
      following exhibits of the Agreement are amended as follows:

    

    See
      attached Exhibit
      A
      hereto
      and by this reference incorporated herein.

    

    Section
      4

    NO
      OTHER AMENDMENTS

    

    Except
      as
      amended by this Amendment, all provisions and exhibits of the Agreement shall
      remain in full force and effect.

    

    

    [signature
      page to follow]

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    

    SIGNATURES
      OF THE PARTIES

    

    
      	 	
               

               

               

              /s/
                Daniel A.
                Sanders                                            
                

              Daniel
                A. Sanders 

            
	 	
               

              Eagle
                Energy, LLC

               

               

               

              By:
                /s/
                David M.
                Fink                                             

              Its:
                David
                M. Fink - President

            
	 	
               

              ICM
                Inc.

               

               

               

              By:
                /s/
                Jerry
                Jones                                                   

              Its:
                CFO

            
	 	
               

              Pacific
                Ethanol California, Inc.

               

               

               

              By:
                /s/
                Neil M.
                Koehler                                           
                

              Its:
                Neil
                M. Koehler

            

    

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    Exhibit
      A

    

    As
      of
      October 17, 2006

    

    NOTE:
      Exhibit A may be amended from time to time to reflect adjustments to Members’
Accounts.

    

    

    
      	 	 	 	 
	
               

              Member

               

            	
               

              Units

               

            	
               

              Cash
                Capital 

              Contribution

               

            	
               

              %

               

            
	
              Daniel
                A. Sanders

              6867
                Hogan Road

              Gresham,
                OR 97080

            	
               

              50.000
                Class A Units

               

            	
               

              $-0-

               

            	
               

              .1%

               

            
	
              Daniel
                A. Sanders

              6867
                Hogan Road

              Gresham,
                OR 97080

            	
               

              12,880.405
                Class B Units

               

            	
               

              $12,880,405

               

            	
               

              53.72%

               

            
	
              Pacific
                Ethanol California, Inc.

              5711
                N. West Avenue

              Fresno,
                CA 93711

            	
               

              10,094.595
                Class B Units

               

            	
               

              $10,094,595

               

            	
              42.10%

            
	
              ICM
                Inc.

              310
                N. First

              Colwich,
                KS 67030k

            	
               

              1,000.000
                Class B Units

               

            	
               

              $1,000,000

               

            	
               

              4.17%

               

            
	
              Total

               

            	
               

              24,025.000
                Units

               

            	
               

              $23,975,000 

               

            	
               

              100.00%

               

            

    

    
 

    A-1

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