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<br />. <br /> <br />. <br /> <br />Section 2.11 Patronage Distributions. The corporation's annual income in excess of <br />amounts needed to pay its current expenses and losses shall be paid on an annual basis to each <br />shareholder on the basis of such shareholder's water usage, except to the extent such income is <br />retained by the corporation as determined by the board of directors of the corporation to create a <br />reasonable reserve for the payment of future expenses and losses of the corporation. <br /> <br />ARTICLE III <br /> <br />BOARD OF DIRECTORS <br /> <br />Section 3.1 General Powers. The business and affairs of the corporation shall be <br />managed by its board of directors, except as otherwise provided in the Colorado Nonprofit <br />corporation Act, the articles of incorporation or these bylaws. <br /> <br />Section 3.2 Number. Election. Tenure and Oualifications. The number of directors of <br />the corporation shall be seven. Directors shall be elected by the shareholders at each annual <br />meeting of the shareholders. Each director shall hold office until the next annual meeting of the <br />shareholders and thereafter until such director's successor shall have been elected and qualified, <br />or until such director's earlier death, resignation or removal. Directors must be a shareholder (or <br />representative ofa shareholder) of the corporation, and at least 18 years old, but need not be <br />residents of Colorado. The Colorado River Water Conservation District, Eagle River Water & <br />Sanitation District, Upper Eagle Regional Water Authority or Vail Associates, Inc., for so long as <br />such party is a shareholder of not less than 1000 shares of the Class A common stock of the <br />corporation, shall each be entitled to nominate and elect one director to the board of directors. <br />Directors shall be removable in the manner provided by the statutes of Colorado. In the event <br />that any of the foregoing named shareholders transfers 1000 or more of its shares of the Class A <br />common stock of the corporation to any third party not named herein, the transferor may, upon <br />written notice to the corporation, transfer to the transferee its rights under the foregoing provision <br />to elect directors to the corporation. <br /> <br />Section 3.3 Vacancies. Any director may resign at any time by giving written notice <br />to the chairman of the board, to the president or to the secretary of the corporation. A director's <br />resignation shall take effect at the time specified in such notice, and unless otherwise specified <br />therein, the acceptance of such resignation shall not be necessary to make it effective. Any <br />vacancy occurring in the board of directors may be filled by the affirmative vote of a majority of <br />the remaining directors though less than a quorum. A director elected to fill a vacancy shall be <br />elected for the unexpired term of such director's predecessor in office. Any directorship to be <br />filled by reason of an increase in the number of directors shall be filled by the affirmative vote of <br />a majority of the directors then in office or by an election at a meeting of the shareholders called <br />for that purpose, and a director so chosen shall hold office until the next election of directors and <br />thereafter until such director's successor shall have been elected and qualified, or until such <br />director's earlier death, resignation or removal. <br /> <br />fd0985 <br /> <br />-4- <br />