Form 8-4

This long-form member-managed company agreement is best used for larger businesses, where there are many members, or in situations where the members are unrelated parties without prior, trusted business dealings. In addition, this company agreement includes provisions for more than one class of members.

This form can be modified to include any provision related to the regulation and management of the company as long as the provision is not inconsistent with law or the certificate of formation of the company. See Tex. Bus. Orgs. Code § 101.052(d). To the extent the company agreement does not oth­erwise provide, the Texas Business Organizations Code (TBOC) will govern the internal affairs and management of the business of the company. See Tex. Bus. Orgs. Code §§ 101.052(b), 101.252. Con­versely, the agreement may waive or modify the TBOC provisions. In the case of those items listed in section 101.054, a waiver or modification requires that the company agreement contain a provision that the item is intended to be waived or modified and who must approve the waiver or modification.

References to the TBOC are included following certain sections of this form to allow the practitioner to consider alternative language that might be appropriate for inclusion and to provide additional guid­ance on areas that should be addressed in the agreement.

Company Agreement of [name of member-managed LLC]

[Long Form]

This Company Agreement (“Agreement”) of [name of limited liability company], a Texas limited liability company (“Company”), is entered into effective [date] (“Effective Date”), by and between [names of members] (collectively referred to herein as the “Mem­bers” and individually as a “Member”).

Article 1 

Definitions

1.1Definitions. As used in this Agreement, the following terms have the following meanings:

“Affiliate” means, with reference to any person, any other person controlling, con­trolled by, or under direct or indirect common control with that person.

“Assignee” means a person who receives a Transfer of all or a portion of the Member­ship Interest of a Member but who has not been admitted to the Company as a Member.

“Bankrupt” or “Bankruptcy” means with respect to any Person that (a) the Person (i) makes an assignment for the benefit of creditors; (ii) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal or state bank­ruptcy or insolvency proceedings; (iv) files a petition or answer seeking for that Person a reor­ganization, arrangement, composition, readjustment, liquidation, dissolution, termination, or similar relief under any law; (v) files an answer or other pleading admitting or failing to con­test the material allegations of a petition filed against that Person in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or acqui­esces in the appointment of a trustee, receiver, or liquidator of that Person or of all or any sub­stantial part of that Person’s properties or (b) against that Person, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any law has been commenced and one hundred twenty (120) days have expired without dismissal thereof or with respect to which, without that Person’s consent or acquies­cence, a trustee, receiver, or liquidator of that Person or of all or any substantial part of that Person’s properties has been appointed and ninety (90) days have expired without the appoint­ment’s having been vacated or stayed, or ninety (90) days have expired after the date of expi­ration of a stay, if the appointment has not previously been vacated.

“Business Day” means any day other than a Saturday, a Sunday, or a holiday on which national banking associations in the state of Texas are closed.

“Capital Account” means a capital account maintained for a Member as provided by Treasury Regulations section 1.704–1(b)(2)(iv), of the regulations of the Internal Revenue Service.

“Capital Contribution” means the amount of money and the Net Value of property other than money contributed to the Company by a Member.

“Class” means a group of one or more Members or Membership Interests established in this Agreement which has certain relative rights, powers, duties, voting rights, or distribution rights, as set forth herein. Initially, there will be two Classes of Membership Interests: Class A Membership Interests and Class B Membership Interests. Except as specifically set forth in sections 5.1 and 5.2 of this Agreement, all Classes shall be identical with each other in every respect. The Company may establish additional Classes upon the unanimous vote of the Mem­bers. The rights, powers, or duties of a Class may be senior to the rights, powers, or duties of any other Class, including a previously established Class.

“Code” means the Texas Business Organizations Code, including any successor statute, as amended from time to time.

“Default Interest Rate” means a rate per year equal to the prime rate published in the Wall Street Journal on the day the rate is determined (or the most recent day on which the Wall Street Journal was published if the paper is not published on the day the rate is deter­mined).

“Fundamental Business Transaction” has that meaning assigned to it by the definitions in the Code, as may be amended from time to time, and includes (a) a merger, (b) an interest exchange, (c) a conversion, or (d) a sale or transfer of all or substantially all the Company’s assets.

“Internal Revenue Code” means the Internal Revenue Code of 1986 and any successor statute, as amended from time to time.

“Member” means any person executing this Agreement as of the date of this Agreement as a Member or hereafter admitted to the Company as a Member as provided in this Agree­ment but does not include any person who has ceased to be a Member of the Company.

“Membership Interest” is a Member’s right (a) to an allocable share of the Profits and Losses, income, gains, deductions, credits, and distributions of the Company and (b) to a dis­tributive share of the assets of the Company. Membership Interests shall include, unless spe­cifically identified otherwise, all Class A Membership Interests and all Class B Membership Interests. Membership Interest does not include the voting rights or management rights reserved to the Members under the terms of this Agreement (or the right to vote the Percent­age Interests relating thereto) until the holder of the Membership Interest has been admitted to the Company as a Member as to that Membership Interest.

“Net Value” means, in connection with a Capital Contribution of property, the value of the asset less any indebtedness to which the asset is subject when contributed.

“Percentage Interest” means the increment of interest assigned to each Member in con­nection with and equal to that Member’s Membership Interest for the purpose of voting under the terms of this Agreement. The sum of the Members’ Percentage Interests shall be one hun­dred percent (100%).

“Person” means any business entity, trust, estate, executor, administrator, or individual, including, where applicable, the Company, or a Member.

“Preferred Return” means, with respect to any Member owning a Class A Membership Interest, an amount calculated as a cumulative, [noncompounded/compounded] per-year rate equal to [percent] percent ([percent]%) on the average daily balance of the unreturned Capital Contributions of such Member.

“Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative.

“Profit and Loss” means, for each fiscal year of the Company (or other period for which Profit or Loss must be computed), the Company’s taxable income or loss determined in accor­dance with Internal Revenue Code section 703(a), with the following adjustments:

a.all items of income, gain, loss, and deduction required to be stated separately pur­suant to Internal Revenue Code section 703(a)(1) shall be included in computing tax­able income or loss;

b.any tax-exempt income of the Company not otherwise taken into account in com­puting Profit or Loss shall be included in computing taxable income or loss;

c.any expenditures of the Company described in Internal Revenue Code section 705(a)(2)(B) (or treated as such pursuant to Treasury Regulations section
1.704–1(b)(2)(iv)(i)) and not otherwise taken into account in computing Profit or Loss shall be subtracted from taxable income or loss;

d.gain or loss resulting from any disposition of Company property shall be com­puted by reference to the book value of the property;

e.in lieu of the depreciation, amortization, or cost recovery deductions allowable in computing taxable income or loss, there shall be taken into account book depreciation (as allowable for federal income tax purposes); and

f.if the book value of an asset of the Company is adjusted in accordance with the winding up and termination of the Company, any increase or decrease in the book value of the asset as a result of the adjustment shall be treated as gain or loss, respectively, from the disposition of the asset and shall be taken into account in computing Profits or Losses.

“Simple Majority” means fifty-one percent (51%) of the Percentage Interests of all Members participating in a vote. If a decision or action is set forth in this Agreement as being made or required by the Members and that decision or action does not specify what Percent­age Interest vote is required, the decision or action shall be by a Simple Majority of the Mem­bers.

“Super Majority” means seventy-five percent (75%) of the Percentage Interests of all Members participating in a vote.

“Transfer” means any sale, assignment, conveyance, transfer, encumbrance, gift, dona­tion, assignment, pledge, hypothecation, or other form of disposition of a Membership Interest or any portion of a Membership Interest, whether voluntary or involuntary, whether attempted or completed, and whether during the transferor’s lifetime or upon or after the transferor’s death, including by operation of law, court order, judicial process, foreclosure, levy, or attach­ment.

1.2Other Definitions. Other terms defined hereinafter are used herein as so defined.

Article 2 

Organization

2.1Formation. The Company has been organized as a Texas limited liability company by filing a certificate of formation (“Certificate”) with the Texas secretary of state on the Effective Date, which may be amended or restated from time to time.

2.2Name. The name of the Company is [name of limited liability company], and all Company business must be conducted in that name or other names that comply with applica­ble law that a [Simple Majority/Super Majority] of the Members may select from time to time.

2.3Registered Agent and Office. The registered agent for the service of process is [name], and the address is [address]. The principal office of the Company shall be located at [address]. The Company may have other offices and places of business at locations, both within and without the state of Texas, as a Simple Majority of the Members may from time to time determine or as the business and affairs of the Company may require.

2.4Purposes. The purpose and business of the Company shall be to [list company’s purpose] and all related activities incidental thereto and the transaction of any other business or activity allowed under the Code that is approved by a [Simple Majority/Super Majority] of the Members. The Company shall have the authority to do all things necessary or convenient to accomplish its purpose and operate its business as described in this section 2.4. The Com­pany may not, however, (a) engage in a business or activity that is expressly unlawful or pro­hibited by a law of the state of Texas or cannot lawfully be engaged in by the Company under those laws; (b) operate as a bank, trust company, savings association, insurance company, cemetery organization (except as authorized under the Texas Health and Safety Code), or abstract or title company governed by title 11 of the Texas Insurance Code; or (c) [specify other prohibited purpose(s)].

2.5Powers. The Company shall have all powers necessary, suitable, or convenient for the accomplishment of the purposes of the Company, including, without limitation, to (a) make and perform all contracts; (b) engage in all activities and transactions; and (c) have all powers available to a limited liability company under (i) the Code, (ii) any other laws of the state of Texas, and (iii) the laws of any other jurisdiction where the Company conducts busi­ness.

2.6Foreign Qualification. Before the Company conducts business in any jurisdiction other than Texas, the Members shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Members, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. Each Member shall immediately execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with this Agreement that are necessary or appropriate to qualify or continue the Company as a foreign limited liability company in all jurisdictions in which the Company may conduct business.

2.7Term. The Company will commence as provided in the Certificate and will con­tinue in existence [perpetually/for the period of duration set forth in the Certificate] or until the termination of the Company in accordance with the provisions of Article 15 of this Agree­ment or the Code.

2.8No State-Law Partnership. The Members intend that the Company not be a part­nership (including a limited partnership) or a joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than applicable tax laws, and this Agreement may not be construed to suggest otherwise.

Article 3 

Membership

3.1Initial Members, Capital Contributions, Membership Interests, and Percentage Interests. Each person listed on Schedule 1 (a copy of which is attached hereto and incorpo­rated herein) is hereby admitted to the Company as a Member, effective contemporaneously with the Effective Date. Set forth opposite the name of each Member listed on Schedule 1 is that Member’s initial Capital Contribution, Class, and his Membership Interest and Percent­age Interest. Schedule 1 may be amended from time to time to reflect changes in or additions to the membership of the Company. Any such amended Schedule 1 shall (a) supersede all prior Schedule 1s, (b) become part of this Agreement, and (c) be kept on file at the principal office of the Company.

3.2Additional Members. Additional persons may be admitted to the Company as Members on terms and conditions as shall be determined by unanimous consent of the Mem­bers. The terms of admission or issuance must specify the Membership Interests, Percentage Interests, Class, and Capital Contributions applicable thereto.

3.3Member Rights. Except as otherwise specifically provided in this Agreement, no Member shall have the right to (a) sell, transfer, or assign its interest in the Company; (b) require partition of the property of the Company; (c) compel the sale of Company assets; or (d) cause the winding up of the Company.

3.4Representations and Warranties of Members

a.Each Member hereby represents and warrants to the Company and each other Member that, if that Member is a business entity, (i) that Member is duly organized, validly existing, and in good standing under the law of the state of its organization; (ii) that Member is duly qualified to do business in the jurisdiction of its principal place of business; (iii) that Member has full power and authority to execute and agree to this Agreement and to perform its obligations hereunder; (iv) all necessary actions by the board of directors, shareholders, Members, or other representative of that Member nec­essary for the due authorization, execution, delivery, and performance of this Agree­ment have been duly taken; and (v) that Member’s authorization, execution, delivery, and performance of this Agreement do not conflict with any other agreement or arrangement to which that Member is a party or by which it is bound.

b.Each Member further hereby represents and warrants to the Company and each other Member that (i) the Member is familiar with the existing or proposed business, financial condition, properties, operations, and prospects of the Company; (ii) the Member has asked the questions and conducted the due diligence concerning the acqui­sition of his Membership Interest in the Company that he has desired to ask and con­duct, and all those questions have been answered to the Member’s full satisfaction; (iii) the Member has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the Company; (iv) the Member understands that owning the Membership Interest in the Company involves various risks, including the restrictions on transfers as set forth in Article 12 and Article 13 of this Agreement, the lack of any public market for the Membership Interests, the risk of owning the Membership Interest for an indefinite time, and the risk of losing his entire investment in the Company; (v) the Member is able to bear the economic risk of the investment; (vi) the Member is acquiring the Membership Interest in the Company for investment, solely for his own beneficial account and not with a view to, or any present intention of, directly or indirectly selling, transferring, offering to sell or trans­fer, participating in any distribution, or otherwise disposing of the Membership Interest; and (vii) the Member acknowledges that the Membership Interests have not been regis­tered under the Securities Act, or any other applicable federal or state securities laws, and that the Company has no intention, and shall not have any obligation, to register or to obtain an exemption from registration for the Membership Interests or to take action so as to permit sales pursuant to the Securities Act.

3.5No Authority. Except as otherwise specifically provided in this Agreement, no Member has the authority or power to (a) transact business in the name of or on behalf of the Company; (b) bind or obligate the Company; or (c) incur any expenditures on behalf of the Company.

3.6Withdrawal. A Member does not have the right or power to withdraw, resign, or retire from the Company as a Member. The Company, or the remaining Members, may not expel a member from the Company.

Article 4 

Capital Contributions

4.1Initial Capital Contributions. Each Member has made the initial Capital Contribu­tion to the Company set forth on Schedule 1.

[Name of member] promises and agrees to make a contribution of [specify property or amount of cash] to the Company on or before [date of deadline]. The Member is obligated to make the contribution without regard to the death, disability, or other change in circumstances of the Member.

4.2Additional Contributions

[Name of member] promises and agrees to make a contribution of [specify property or amount of cash] to the Company on or before [date of deadline]. The Member is obligated to make the contribution without regard to the death, disability, or other change in circumstances of the Member.

No Member shall be required to make any additional Capital Contributions other than those specifically described in Schedule 1 or this section 4.2 unless unanimously agreed to by all Members or otherwise required to do so by the Code.

4.3Return of Capital Contributions. Capital Contributions shall be expended in fur­therance of the business of the Company. No Member is entitled to the return of any part of his Capital Contributions or to be paid interest in respect of either his Capital Account or his Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or of any Member. This section 4.3, however, is subject to section 5.2 of this Agreement.

4.4Capital Accounts. A Capital Account shall be established on behalf of each Mem­ber. The Capital Account on behalf of each Member—

a.shall consist of (i) the amount of money contributed by that Member to the Com­pany and (ii) the fair market value of property contributed by that Member to the Com­pany (net of liabilities secured by the contributed property that the Company is considered to assume or take subject to under section 752 of the Internal Revenue Code);

b.shall be increased by allocations to that Member of Company income and gain (or items thereof), including income and gain exempt from tax and income and gain described in Treasury Regulations section 1.704–1(b)(2)(iv)(g) but excluding income and gain described in Treasury Regulations section 1.704–1(b)(4)(i); and

c.shall be decreased by (i) the amount of money distributed to that Member by the Company, (ii) the fair market value of property distributed to that Member by the Com­pany (net of liabilities secured by the distributed property that the Member is consid­ered to assume or take subject to under section 752 of the Internal Revenue Code), (iii) allocations to that Member of expenditures of the Company described in section 705(a)(2)(B) of the Internal Revenue Code, and (iv) allocations of Company loss and deduction (or items thereof), including loss and deduction described in Treasury Regu­lations section 1.704–1(b)(2)(iv)(g), but excluding items described in clause 4.4(c)(iii) above and loss or deduction described in Treasury Regulations section 1.704–1(b)(4)(i) or 1.704–1(b)(4)(iii).

The Capital Account of each Member also shall be maintained and adjusted as permit­ted by the provisions of Treasury Regulations section 1.704–1(b)(2)(iv)(f) and as required by the other provisions of Treasury Regulations sections 1.704–1(b)(2)(iv) and 1.704–1(b)(4), including adjustments to reflect the allocations to the Members of depreciation, depletion, amortization, and gain or loss as computed for tax purposes, as required by Treasury Regula­tions section 1.704–1(b)(2)(iv)(g). On the transfer of all or part of a Membership Interest, the Capital Account of the transferor that is attributable to the transferred Membership Interest or part thereof shall carry over to the transferee in accordance with the provisions of Treasury Regulations section 1.704–1(b)(2)(iv)(l).

4.5Ownership of Assets. All assets and property of the Company shall be owned by the Company, subject to the terms and provisions of this Agreement, and no Member, individ­ually, shall have any ownership of those assets or property. Legal title to all assets and prop­erty of the Company shall be held and conveyed in the name of the Company.

Article 5 

Allocations and Distributions

5.1Allocations

a.Until the time that each Member owning a Class A Membership Interest has received a return of one hundred percent (100%) of his initial and additional, if any, cash Capital Contributions made to the Company plus his Preferred Return, all items of income, gain, loss, deduction, and credit shall be allocated to the Members in accor­dance with their Membership Interests, to the exclusion of any Member owning a Class B Membership Interest. Thereafter, as may be required by section 704(c) of the Internal Revenue Code and Treasury Regulations section 1.704–1(b)(2)(iv)(f)(4), all items of income, gain, loss, deduction, and credit of the Company shall be allocated among the Members in accordance with their Membership Interests.

b.All items of income, gain, loss, deduction, and credit allocable to any Membership Interest that may have been transferred shall be allocated between the transferor and the transferee based on the portion of the calendar year during which each was recognized as owning that Membership Interest, without regard to the results of Company opera­tions during any particular portion of that calendar year and without regard to whether cash distributions were made to the transferor or the transferee during that calendar year; this allocation, however, must be made in accordance with a method permissible under section 706 of the Internal Revenue Code and the regulations thereunder.

5.2Distributions

a.Until the time that each Member owning a Class A Membership Interest has received the return of one hundred percent (100%) of his initial or additional, if any, cash Capital Contribution made to the Company plus his Preferred Return, all distribu­tions shall be made to the Members in accordance with their Membership Interests, to the exclusion of any Member owning a Class B Membership Interest.

b.From time to time (but at least once each calendar quarter) a Simple Majority of the Members shall determine in their reasonable judgment to what extent (if any) the Company’s cash on hand exceeds its current and anticipated needs, including, without limitation, for operating expenses, debt service, acquisitions, and a reasonable contin­gency reserve. If such an excess exists, the Company shall distribute to the Members, subject to section 5.2(a) above, in accordance with their Membership Interests, an amount in cash equal to that excess.

c.From time to time by vote of a Simple Majority of the Members, the Members may cause property of the Company other than cash to be distributed to the Members, which distribution must be made in accordance with their Membership Interests and may be made subject to existing liabilities and obligations. However, until such time as each Member owning a Class A Membership Interest has received the return of one hundred percent (100%) of his initial or additional, if any, cash Capital Contribution made to the Company plus his Preferred Return, all distributions made in accordance with this section 5.2(c) shall be made to those Members in accordance with their Mem­bership Interests, to the exclusion of any Member owning a Class B Membership Inter­est. Immediately before such a distribution, the Capital Accounts of the Members shall be adjusted as provided in Treasury Regulations section 1.704–1(b)(2)(iv)(f).

5.3Prohibited Distributions. Distributions may not be made to Members if, immedi­ately after making the distribution, the Company’s total liabilities exceed the fair value of the Company’s total assets as set forth in Code section 101.206 (“Prohibited Distribution”). For the purposes of calculating the Prohibited Distribution, the liabilities of the Company do not include a liability related to the Member’s Membership Interest. A Member who receives a Prohibited Distribution is not required to return the Prohibited Distribution unless the Member had knowledge of the violation of this section 5.3 or the Code. A Prohibited Distribution does not include an amount constituting reasonable compensation for present or past services or a reasonable payment made in the ordinary course of business under a bona fide retirement plan or another benefits program.

Article 6 

Management

6.1Management by Members. Management of the Company shall be completely vested in the Members. The Members shall have the sole and exclusive control of the manage­ment, business, and affairs of the Company. The Company shall not have “managers” as that term is used in the Code. In managing the business and affairs of the Company, the Members shall act (a) collectively through resolutions adopted at meetings and in written consents in accordance with section 6.8 of this Agreement, (b) through committees in accordance with section 6.10 of this Agreement, and (c) through Members to whom specific authority and duties have been delegated by a Simple Majority of the Members.

6.2Actions and Decisions Requiring Member Consent of Super Majority Interest or Unanimous Interest. Notwithstanding any power or authority granted to a Simple Majority of the Members under the Code, the Certificate, or the provisions of this Agreement, a Simple Majority of the Members may not make any decision or take any action for which the consent of a Super Majority interest or unanimous interest is expressly required by the Certificate or this Agreement, without first obtaining that consent, and specifically, a Simple Majority may not make any decision or take any action listed below in sections 6.2(a) or 6.2(b) without first obtaining the consent described therein:

a.Super Majority Approval. The following decisions and actions require the approval of a Super Majority of the Members:

i.causing or permitting the Company to dispose of any asset with a fair mar­ket value or book value in excess of $[amount];

ii.causing or permitting the Company to enter into or engage in any transac­tion that is unrelated to the Company’s purpose set forth in the Certificate and in section 2.4; and

iii.causing or permitting the Company to become Bankrupt.

b.Unanimous Approval. The following decisions and actions require the unani­mous approval of the Members:

i.entering into a Fundamental Business Transaction and

ii.doing any act that would make it impossible to carry on the ordinary busi­ness of the Company (except in connection with the winding up of the Com­pany).

6.3Reliance by Third Parties. No third party dealing with the Company shall be required to ascertain whether a Member is acting in accordance with the provisions of this Agreement. All third parties may rely on a document executed by the Members as binding the Company. If a Member acts outside the authority set forth in this Agreement or as provided in the Certificate or the Code, he shall be liable to the remaining Members for any damages aris­ing out of his unauthorized actions.

6.4Conflicts of Interest. Subject to the other express provisions of this Agreement, [include if applicable: except for [specify exception(s)],] each Member and officer of the Com­pany at any time and from time to time may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company or any other Member or officer the right to participate therein. The Company may transact business with any Member, officer, or Affiliate thereof, provided the contract or transaction is fair to the Company as of the time it is authorized [and/or] ratified by a [Simple Majority/Super Major­ity] of the Members.

6.5Compensation. For their services in the management of the Company and its oper­ations, the Members may receive such compensation, if any, as may be designated from time to time by a Simple Majority of the Members.

6.6Reimbursement. The Members are not required to advance any funds to pay costs and expenses of the Company. If a Member advances such funds, however, the Member shall be entitled to reimbursement for out-of-pocket costs and expenses incurred in the course of his service hereunder, [including/but not including] the portion of his overhead reasonably alloca­ble to Company activities.

6.7Meetings of Members

a.Unless otherwise required by law or provided in the Certificate or this Agreement, a Simple Majority of the Members shall constitute a quorum for the transaction of busi­ness of the Company, and the act of a Simple Majority of the Members present at a meeting at which a quorum is present shall be the act of the Members, unless a greater number is specified in this Agreement. Any Member who is present at a meeting of the Members at which action on any Company matter is taken shall be presumed to have assented to the action unless his dissent is entered in the minutes of the meeting or unless he files his written dissent to the action with the person acting as secretary of the meeting before the adjournment thereof or delivers his dissent to the Company immedi­ately after the adjournment of the meeting. The right to dissent shall not apply to a Member who voted in favor of the action. Jointly held membership interests shall be voted pursuant to Code section 6.157.

b.Meetings of the Members may be held at a place or places as shall be determined from time to time by resolution of the Members. Attendance of a Member at a meeting shall constitute a waiver of notice of the meeting, except where a Member attends a meeting for the purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

c.Meetings of the Members shall be held at times that shall be designated from time to time by resolution of Members owning Percentage Interests of at least ten percent (10%). The chairperson of the meeting will be a Member selected by a Simple Majority of the Members present at the meeting. The Members may take any action whether or not the action is included in the notice of meeting.

d.Written notice stating the place, day, and hour of the meeting, the purpose or pur­poses of the meeting, and the communication system to be used for the meeting, if any, shall be delivered either personally or by mail to each Member of record entitled to vote at the meeting not less than ten (10) days or more than sixty (60) days before the date of the meeting. The record date shall be the date notice of the meeting is given as provided herein. Notwithstanding the foregoing, written notice of a meeting is not required if the provisions of Code section 6.053 are met.

e.Members may participate in and hold a meeting by using a conference telephone or similar communications equipment, another suitable electronic communications sys­tem, including videoconferencing technology or the Internet, or any combination, if the telephone or other equipment or system permits each Member participating in the meet­ing to communicate with all other Members participating in the meeting. If voting is to take place at the meeting, the Company must implement reasonable measures to verify that every person voting at the meeting is sufficiently identified and shall keep a record of any vote or other action taken. Participation in the meeting shall constitute atten­dance and presence in person at the meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

f.A Member may vote at a meeting by a written proxy executed by that Member and delivered to another Member. A proxy shall be revocable unless it is stated to be irrevo­cable.

6.8Member Action without Meeting. Any action permitted or required by the Code, the Certificate, or this Agreement to be taken at a meeting of the Members may be taken without a meeting if a consent in writing, setting forth the action to be taken, is signed by all the Mem­bers. Every written consent shall bear the date of signature of each Member who signs the consent, and the consent may be in one or more counterparts. The record date determining the Members entitled to sign the written consent shall be set forth in the written consent, or if no date is designated, the date the consent is delivered to the principal office of the Company. A telegram, telex, cablegram, facsimile, e-mail, or similar transmission by the Member, or a photographic, photostatic, facsimile, or similar reproduction of a writing signed by the Mem­ber, shall be regarded as signed by the Member for purposes of this section 6.8. The consent shall have the same force and effect as a unanimous vote at a meeting and may be stated as such in any document or instrument filed with the Texas secretary of state, and the execution of the consent shall constitute attendance or presence in person at a meeting of the Members. The signed consent or a signed copy of the consent shall be kept on file at the principal office of the Company.

6.9Liability of Members. Members shall not be liable as Members for the debts, obli­gations, or liabilities of the Company, including a debt, obligation, or liability under a judg­ment, decree, or order of a court. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under this Agreement or the Code shall not be grounds for imposing personal liability on a Member for liabilities of the Company.

6.10Committees of the Members. A Simple Majority of the Members may designate one or more committees of the Members consisting of one or more Members. The Members may also designate a Member to serve as an alternate committee member if a committee member is absent or disqualified. A committee formed hereunder may exercise the authority of the Members as specified in the resolution by the Members in forming the committee. The designation of a committee does not relieve the remaining Members of any responsibility imposed by law or this Agreement. The Members may remove a committee member for any reason. Committee meetings shall be set by the committee. The act of a majority of the com­mittee members shall be the act of the committee.

Article 7 

Confidential Information

7.1Confidential Information. The Members acknowledge that, from time to time, they may receive information from or regarding the Company in the nature of trade secrets or that otherwise is confidential, the release of which may be damaging to the Company or persons with which it does business. Each Member shall hold in strict confidence any information he receives regarding the Company that is identified as being confidential (and if that informa­tion is provided in writing, that is so marked) and may not disclose it to any person other than another Member, except for disclosures (a) compelled by law (but all Members thus com­pelled must notify all other Members promptly of any request for that information, before dis­closing it, if practicable); (b) to advisers or representatives of the Member or persons to which that Member’s Membership Interest may be transferred as permitted by this Agreement, but only if the recipients have agreed to be bound by the provisions of this section 7.1; or (c) of information that Member also has received from a source independent of the Company that the Member reasonably believes obtained that information without breach of any obligation of confidentiality.

7.2Specific Performance. The Members acknowledge that breach of the provisions of section 7.1 of this Agreement may cause irreparable injury to the Company for which mone­tary damages are inadequate, difficult to compute, or both. Accordingly, the Members agree that the provisions of section 7.1 of this Agreement may be enforced by specific performance.

Article 8 

Officers

8.1Qualification. A Simple Majority of the Members may, from time to time, desig­nate one or more persons to be officers of the Company. No officer need be a resident of the state of Texas or a Member. Any officers so designated shall have the authority and perform the duties as the Members may, from time to time, delegate to them. The Members may assign titles to particular officers. Unless the Members decide otherwise, if the title is one commonly used for officers of a business corporation, the assignment of the title shall constitute the dele­gation to the officer of the authority and duties that are normally associated with that office, subject to any specific delegation of authority and duties made to the officer by the Members in accordance with this section 8.1. Each officer shall hold office until his successor shall be duly designated and qualify for the office, until his death, or until he shall resign or shall have been removed in the manner hereinafter provided. Any vacancy occurring in any office of the Company may be filled by the Members. Any number of offices may be held by one person.

8.2Compensation. The salaries or other compensation, if any, of the officers and agents of the Company shall be fixed from time to time by a Simple Majority of the Members. However, election or appointment of an officer or agent shall not of itself, nor shall anything in this Agreement, create contract rights.

8.3Resignation. Any officer may resign as such at any time. The resignation shall be made in writing and shall take effect at the time specified therein, or if no time is specified, at the time of its receipt by the Members. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.

8.4Removal. Any officer may be removed as such, either with or without cause, by a Simple Majority of the Members.

Article 9 

Indemnification

9.1Right to Indemnification. Subject to the limitations and conditions as provided in this Article 9, each person who was or is made a party or is threatened to be made a party to or is involved in any Proceeding, or any appeal in such a Proceeding, or any inquiry or investiga­tion that could lead to such a Proceeding, by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a Member of the Company shall be indemnified by the Company to the fullest extent permitted by the Code against judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements, and reasonable expenses (including, without limitation, attorney’s fees) actually incurred by the person in connection with the Proceeding, and indemnification under this Article 9 shall con­tinue for a person who has ceased to serve in the capacity which initially entitled the person to indemnity hereunder. The rights granted under this Article 9 shall be deemed contract rights, and no amendments, modification, or repeal of this Article 9 shall have the effect of limiting or denying any such rights with respect to actions taken or Proceeding arising before any such amendment, modification, or repeal. It is expressly acknowledged that the indemnification provided in this Article 9 could involve indemnification for negligence or under theories of strict liability. A Member shall not, however, be indemnified if the actions or conduct of the Member that gave rise to the litigation, actions, or conduct are for the following:

a.intentional or willful misconduct or a knowing violation of the law;

b.gross negligence;

c.a breach of the duty of loyalty to the Company or its Members;

d.an act or omission not in good faith that constitutes a breach of duty;

e.a transaction from which the Member received an improper benefit to the detri­ment of the Company, regardless of whether the benefit resulted from an action taken within the scope of the Member’s duties; or

f.an act or omission for which the liability of a governing person is expressly pro­vided by an applicable statute.

Notwithstanding anything to the contrary in this Article 9, the Company shall indem­nify the parties as set forth herein in this Article 9 if the person is wholly successful, on the merits or otherwise, in the defense of the Proceeding.

9.2Advance Payment. The right to indemnification conferred in this Article 9 shall include the right to be paid or reimbursed by the Company the reasonable expenses incurred by a person entitled to be indemnified under section 9.1 of this Agreement 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 about the person’s ultimate entitlement to indemnification. The payment of the expenses incurred by any such person in advance of the final disposition of a Proceeding, however, shall be made only upon delivery to the Company of a written affirmation by that person of his good-faith belief that he has met the standard of conduct necessary for indemnification under this Article 9 and a written under­taking, by or on behalf of the person, to repay all amounts so advanced if it shall ultimately be determined that the indemnified person is not entitled to be indemnified under this Article 9 or otherwise.

9.3Indemnification of Officers, Employees, and Agents. The Company, by adoption of a resolution by a Simple Majority of the Members, may indemnify and advance expenses to an officer, employee, or agent of the Company to the same extent and subject to the same con­ditions under which it may indemnify and advance expenses to a Member under this Article 9.

9.4Exclusivity of Rights. The right to indemnification and the advancement and pay­ment of expenses conferred in this Article 9 shall not be exclusive of any other right which a Member or other person indemnified under this Article 9 may have or hereafter acquire under any law (common or statutory), under any provision of the Certificate, this Agreement, or another agreement, or under a vote of disinterested Members, or otherwise.

9.5Insurance. The Company may purchase and maintain insurance, at its expense, to protect itself and any person who is or was a Member, officer, employee, or agent of the Com­pany against any expense, liability, or loss, whether or not the Company would have the power to indemnify the person against the expense, liability, or loss under this Article 9.

Article 10 

Taxes

10.1Tax Returns. The Members shall cause to be prepared and filed all necessary fed­eral and state income tax returns for the Company, including making the elections described in section 10.2 of this Agreement. Each Member shall furnish all pertinent information in his possession relating to Company operations that is necessary to enable the Company’s income tax returns to be prepared and filed.

10.2Tax Elections. The Company shall make the following elections on the appropriate tax returns:

a.to adopt the calendar year as the Company’s fiscal year;

b.to adopt the cash method of accounting for keeping the Company’s books and records;

c.if a distribution of Company property as described in section 734 of the Internal Revenue Code occurs or if a transfer of a Membership Interest as described in section 743 of the Internal Revenue Code occurs, on written request of any Member, to elect, pursuant to section 754 of the Internal Revenue Code, to adjust the basis of Company properties;

d.to elect to amortize the organizational expenses of the Company and the start-up expenditures of the Company under section 195 of the Internal Revenue Code ratably over a period of sixty (60) months as permitted by section 709(b) of the Internal Reve­nue Code; and

e.any other election the Members may deem appropriate and in the best interest of the Members.

Neither the Company nor any Member may make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1, subtitle A, of the Internal Revenue Code or any similar provisions of applicable state law, and no provision of this Agreement shall be construed to sanction or approve such an election.

10.3“Tax Matters Partner.” The Members shall designate one of the Members to be the “tax matters partner” of the Company. Any Member who is designated tax matters partner shall inform each other Member of all significant matters that may come to his attention in his capacity as tax matters partner by giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each other Member cop­ies of all significant written communications he may receive in that capacity. Any Member who is designated tax matters partner may not take action contemplated by the Internal Reve­nue Code without the consent of a Simple Majority of the Members, but this sentence does not authorize the Member to take any action left to the determination of an individual Member under the Internal Revenue Code.

Article 11 

Books, Records, Reports, and Bank Accounts

11.1Maintenance of Books. The Company shall keep at its principal office (a) books and records of accounts; (b) minutes of the proceedings of its Members and each committee of the Members; (c) a current record of the name, mailing address, and Membership Interest and Percentage Interest of each Member of the Company; (d) a current record of the Members in each class, if any; (e) income tax returns for each of the six (6) preceding tax years along with state and local tax information; (f) a copy of the Certificate, including any amendments or restatements; and (g) a copy of this Agreement, including any amendments or restatements. The books of account for the Company shall be maintained on a cash basis in accordance with the terms of this Agreement, except that the Capital Accounts of the Members shall be main­tained in accordance with Article 4 of this Agreement. The calendar year shall be the account­ing year of the Company.

11.2Access to Books and Records. A Member shall have reasonable access to the books and records set forth in section 11.1 of this Agreement for any reasonable purpose and may examine and copy them at the Member’s expense. Notwithstanding the foregoing, on written request by a Member, the Company shall provide a free copy of the Certificate and any amendments thereto and restatements thereof, the Agreement and any amendments thereto and restatements thereof, and income tax returns of the Company for each of the six (6) pre­ceding tax years.

11.3Accounts. The Members shall establish and maintain one or more separate bank and investment accounts and arrangements for Company funds in the Company name with financial institutions and firms that the Members determine. The Members may not commin­gle the Company’s funds with the funds of any Member. Company funds may, however, be invested in a manner the same as or similar to a Member’s investment of their own funds or investments by their Affiliates.

Article 12 

Transfers

12.1Limited Right to Transfer. No Member or Assignee (referred to in this Article 12 as the “Assignor”) shall make any Transfer of all or any part of his Membership Interest, whether now owned or hereafter acquired, except (a) with the unanimous consent of the Members; (b) as provided by Article 13 of this Agreement; (c) as a Defaulting Member as provided by sec­tion 14.1(f) of this Agreement; or (d) upon winding up or termination, as provided by Article 15 of this Agreement. Any attempted Transfer by a person of an interest or right, or any part thereof, in or in respect of the Company other than as specifically provided by this Agreement shall be, and is hereby declared, null and void ab initio.

12.2Rights of an Assignee of a Membership Interest

a.Unless the Assignee of a Membership Interest becomes a Member of the Com­pany, the Assignee shall be entitled only (i) to receive an allocation of income, gain, loss, deduction, credit, or similar items and to receive distributions to which the assignor is entitled to the extent these items were assigned; (ii) to receive reasonable information or account of transactions of the Company; and (iii) to make reasonable inspection of the books and records of the Company for any proper purpose. The Assignee shall have no right (i) to participate in the operations or management of the Company; (ii) to become a Member of the Company; or (iii) to exercise any rights of a Member of the Company.

b.If an Assignee becomes a Member of the Company, the Assignee is (i) entitled, to the extent assigned, to the same rights and powers granted or provided to a Member of the Company by this Agreement or the Code; (ii) subject to the same restrictions and liabilities placed or imposed on a Member of the Company by this Agreement or the Code; and (iii) liable for the Assignor’s obligation to make contributions to the Com­pany and any other liabilities of the Assignor to the Company, but only to the extent the Assignee had knowledge of such on the date of becoming a Member or such could be ascertained from the terms of this Agreement.

c.The Assignor continues to be a Member of the Company and is entitled to exercise any unassigned rights or powers until the Assignee becomes a Member of the Com­pany. An Assignor is not released from the assignor’s liability to the Company for lia­bilities not assigned to Assignee as set forth in section 12.2(b)(iii) of this Agreement.

12.3Legal Opinion. For the right of a Member to transfer a Membership Interest or any part thereof or of the Assignee or any Person to be admitted to the Company in connection therewith to exist or be exercised, the Company must receive an opinion from legal counsel acceptable to the Members that states (a) the Transfer is exempt from registration under fed­eral and state securities laws; (b) the Transfer will not cause the Company to be in violation of federal and state securities laws; (c) the Transfer will not adversely affect the status of the Company as a partnership under the Internal Revenue Code or Treasury regulations; and (d) the Transfer will not result in the Company’s being considered to have terminated within the meaning of the Internal Revenue Code or Treasury regulations. The Members, however, may waive the requirements of this section 12.3.

12.4Admission as a Member. An Assignee has the right to be admitted to the Company as a Member along with receiving the Membership Interest and Percentage Interest so trans­ferred to the person, upon the following conditions:

a.the Assignor making the Transfer grants the Assignee the right to be so admitted;

b.the Transfer is consented to in accordance with section 12.1 of this Agreement; and

c.a written, signed, and dated instrument evidencing the Transfer has been filed with the Company in form and substance reasonably satisfactory to the Members, and the instrument contains (i) the agreement by the Assignee to be bound by all the terms and provisions of this Agreement; (ii) any necessary or advisable representations and war­ranties, including that the Transfer was made in accordance with all applicable laws, regulations, and securities laws; (iii) the Membership Interests and Percentage Interests being transferred; and (iv) the name, address, and any other pertinent information of the Assignee necessary for an amended Schedule 1 and to make distributions.

12.5Reasonable Expenses. The Assignor and the Assignee shall pay, or reimburse the Company for, all costs incurred by the Company in connection with the Transfer (including, without limitation, the legal fees incurred in connection with the legal opinions referred to in section 12.3 of this Agreement) on or before the tenth (10th) day after the receipt of the Com­pany’s invoice for the amount due. If payment is not made by the date due, interest shall accrue on the unpaid amount from the date due until paid at a rate per year equal to the Default Interest Rate.

Article 13 

Buyout of Membership Interest

13.1Termination of Marital Relationship. If the marital relationship of a Member is ter­minated by death or divorce and the Member does not succeed to all the Member’s spouse’s community or separate interest, if any, in the Membership Interest (the spouse is referred to hereafter in this Article 13 as the “Assignee Spouse”), the Member shall have the option to purchase at Fair Value (as determined in accordance with the terms of section 13.6 of this Agreement) the Assignee Spouse’s interest in the Membership Interest to which the Member does not succeed. This option must be exercised within ninety (90) days after the death of or the Member’s divorce from the Assignee Spouse. Should the Member fail to exercise this option within this period, the remaining Members, in such proportions as they mutually agree or in proportion to their respective Membership Interests, shall have the option to purchase the subject Membership Interest at Fair Value for a period of ninety (90) days. If the remaining Members do not exercise their options on all the subject Membership Interest, the Company shall be obligated to purchase all, and not less than all, of the subject Membership Interest at Fair Value.

13.2Death of Member. Commencing upon the death of a Member, the surviving Mem­bers, in such proportions as they mutually agree or in proportion to their respective Member­ship Interests, shall for a period of ninety (90) days have the option to purchase all or any portion of the deceased Member’s Membership Interest at Fair Value (determined as of the date of the death of the Member). If the surviving Members do not exercise their options on all the deceased Member’s Membership Interest, the Company shall be obligated to purchase all, and not less than all, of the deceased Member’s Membership Interest at Fair Value.

13.3Bankruptcy of Member. If any Member becomes Bankrupt, the Company shall have the option, exercisable by notice from the Members to the Bankrupt Member (or his rep­resentative) at any time before the expiration of one hundred eighty (180) days after receipt of notice of the occurrence of the event causing him to become a Bankrupt Member, to purchase all or any portion of the Bankrupt Member’s Membership Interest at Fair Value (determined as of the date that notice of the exercise of the option is given by the Members). The exercise of the option, however, shall require the approval of the unanimous consent of the Members. If that notice of the exercise of the option is given by the Members to the Bankrupt Member (or his representative), the Bankrupt Member shall sell his interest to the Company as pro­vided by this Article 13.

13.4Insufficient Surplus. If the Company does not have sufficient surplus to permit it lawfully to purchase the Membership Interest under section 13.1, 13.2, or 13.3 of this Agree­ment at the time of the closing, the other Members may take action to vote their respective Membership Interests to reduce the capital of the Company or to take other steps that may be appropriate or necessary to enable the Company lawfully to purchase the Membership Inter­est.

13.5Exercise of Option. Any option to purchase a Membership Interest as provided by this Agreement shall be deemed exercised at the time the purchasing party delivers to the sell­ing party written notice of intent to exercise the option along with an initial payment in the form of a certified or cashier’s check in the amount of ten percent (10%) of the estimated pur­chase price anticipated by the purchaser, in person or by United States registered mail, prop­erly stamped and addressed to the last known address of the selling party.

13.6Determination of Fair Value. The “Fair Value” of a Membership Interest means the amount the Member holding the interest would receive if the assets of the Company were sold for cash and the proceeds, net of liabilities, were distributed to the holders of all Member­ship Interests in accordance with this Agreement. If the Fair Value of a Membership Interest is to be determined under this Agreement, the Members shall select a qualified independent appraiser (“Independent Appraiser”) to make the determination, and the Members shall make the books and records available to the Independent Appraiser for that purpose. The determina­tion of Fair Value made by the Independent Appraiser shall be final, conclusive, and binding on the Company, all Members, and all Assignees of a Membership Interest. If the sale of the Member’s ownership interest is due to the death or divorce of the Member or death of a Mem­ber’s spouse, then in addition to the Independent Appraiser selected by the Members, the spouse, the estate of the selling Member, or the estate of the deceased spouse may select its own appraiser (“Seller’s Appraiser”). Should the Seller’s Appraiser determine a Fair Value of the interest in a different amount than the Independent Appraiser, the Seller’s Appraiser and the Independent Appraiser shall select a third appraiser (“Third Appraiser”), who will make a determination of the Fair Value. In this circumstance, the determination of Fair Value made by the Third Appraiser shall be final, conclusive, and binding on the Company, all Members, and all Assignees of a Membership Interest.

13.7Fees and Expenses of Appraiser. In the case of a purchase and sale of Membership Interest under section 13.1 or 13.2 of this Agreement, the fees and expenses of the appraiser shall be paid by the Company. In the case of a purchase and sale of Membership Interest under section 13.3 or 14.1 of this Agreement (the Bankruptcy or default of a Member), the fees and expenses of the appraiser shall be paid by the Bankrupt Member or Defaulting Member, by deducting at closing the fees and expenses from the purchase price to be paid to the Bankrupt Member or Defaulting Member, and remitting the same to the Company. Otherwise, the fees and expenses of the appraiser shall be shared equally by the purchaser and seller.

13.8Right-to-Withdraw Option. If a Member has exercised an election to purchase a Membership Interest under this Agreement and Fair Value has been determined as provided by section 13.6 of this Agreement, the Member may elect to terminate his right to purchase within fifteen (15) days following his receipt of the determination of Fair Value by delivery of written notice to the Company, the Assignee, and any other party involved in the purchase of whom the Member has been made aware. In such an event, the initial payment shall be returned to the Member withdrawing the option, and the other Members may elect to purchase the Membership Interest (or portion thereof) in such proportions as they mutually agree or in proportion to their respective Membership Interests.

13.9Terms of Purchase

a.The closing date for any sale and purchase made in accordance with this Article 13 shall be the later of (i) thirty (30) days after the notice of the exercise of option has been received by the selling party or (ii) thirty (30) days after the parties have received notice of the Fair Value of the Membership Interest.

b.Payment of the purchase price for a Membership Interest may be made by the Company or the other Members as follows: (i) a down payment equal to ten percent (10%) of the Fair Value to be made at closing and (ii) the balance of the purchase price, bearing interest at the Default Interest Rate determined on the date of closing, to be paid in thirty-six (36) equal monthly installments, with the first payment due thirty (30) days after the date of closing. Any such purchaser shall have the right to pay all or any part of the obligation at any time or times in advance of maturity without penalty. If the Company becomes a party to a Fundamental Business Transaction, the obligation (or remaining portion thereof) shall be paid in full within thirty (30) days of the date that the Company becomes a party to the transaction.

c.At the closing, the person selling the Membership Interest will transfer the Mem­bership Interest free and clear of any liens or encumbrances, other than those which may have been created to secure any indebtedness or obligations of the Company.

d.In each event that a Membership Interest in the Company is purchased as described in this Agreement, upon the execution and delivery of the notes or payment of the cash as required herein, this Agreement shall operate as an automatic transfer to the purchaser of the Membership Interest in the Company. The payment to be made to the selling Member, Assignee, or its representative shall constitute complete release, liquidation, and satisfaction of all the rights and interest of the selling Member, Assignee, or its representative (and of all persons claiming by, through, or under the selling Member, Assignee, or its representative) in and in respect of the Company, including, without limitation, any Membership Interest, any rights in specific Company property, and any rights against the Company and (insofar as the affairs of the Com­pany are concerned) against the Members. The parties shall perform such actions and execute such document that may be reasonably necessary to effectuate and evidence the purchase and sale, and release as provided by this section 13.9.

13.10Third Party’s Offer. If a Member desires to sell all or any portion of his Member­ship Interest to another person (other than an existing Member and referred to hereafter in this section 13.10 as the “Third Party”), the selling Member shall first offer to sell the Membership Interest to the other existing Members. Upon the receipt of an offer from the Third Party to purchase the Membership Interest, the selling Member shall promptly deliver a copy of the Third Party’s offer to all other Members. Each Member will have fifteen (15) days from the date of receipt of the Third Party’s offer to notify the selling Member in writing that the other Member intends to purchase the Membership Interest upon the terms and conditions of the Third Party’s offer. If more than one other Member desires to purchase the Membership Inter­est, each of the purchasing Members shall purchase a portion of the Membership Interest that is proportional to that Member’s Percentage Interest. If none of the other Members give noti­fication within fifteen (15) days of an intention to purchase the Membership Interest, the sell­ing Member shall be permitted to sell the Membership Interest to the Third Party upon the terms and conditions of the Third Party’s offer. Consent by the Members to the sale of the interest to the Third Party shall not be deemed consent to admission of the Third Party as a Member, and it is agreed that substitution is governed by section 12.4 of this Agreement.

Article 14 

Default of Member

14.1Failure to Contribute. If a Member does not contribute, by the time required, all or any portion of a Capital Contribution that Member is required to make as provided in this Agreement, the Company may exercise, on notice to that Member (the “Defaulting Mem­ber”), one or more of the following remedies:

a.The Company may take action (including, without limitation, court proceedings) that the other Members (“Nondefaulting Members”) may deem appropriate to obtain payment by the Defaulting Member of the portion of the Defaulting Member’s Capital Contribution that is in default, together with interest thereon at the Default Interest Rate from the date that the Capital Contribution was due until the date that it is made, all at the cost and expense of the Defaulting Member.

b.The Company may permit the Nondefaulting Members in proportion to their Membership Interests or in such other percentages as they may agree (the “Lending Member,” whether one or more) to advance the portion of the Defaulting Member’s Capital Contribution that is in default, with the following results:

i.the sum advanced constitutes a loan from the Lending Member to the Defaulting Member and a Capital Contribution of that sum to the Company by the Defaulting Member in accordance with the applicable provisions of this Agreement;

ii.the principal balance of the loan and all accrued unpaid interest thereon is due and payable in whole on the tenth (10th) day after written demand therefor by the Lending Member to the Defaulting Member;

iii.the amount lent bears interest at the Default Interest Rate from the day that the advance is deemed made until the date that the loan, together with all inter­est accrued on it, is repaid to the Lending Member;

iv.all distributions from the Company that otherwise would be made to the Defaulting Member (whether before or after termination of the Company) instead shall be paid to the Lending Member until the loan and all interest accrued on it have been paid in full to the Lending Member (with payments being applied first to accrued and unpaid interest and then to principal);

v.the payment of the loan and interest accrued on it is secured by a security interest in the Defaulting Member’s Membership Interest, as more fully set forth in section 14.2 of this Agreement; and

vi.the Lending Member has the right, in addition to the other rights and reme­dies granted to it under this Agreement or available to it at law or in equity, to take any action (including, without limitation, court proceedings) that the Lend­ing Member may deem appropriate to obtain payment by the Defaulting Mem­ber of the loan and all accrued and unpaid interest on it, at the cost and expense of the Defaulting Member.

c.The Company may exercise the rights of a secured party under the Uniform Com­mercial Code of the state of Texas.

d.The Company may reduce the Defaulting Member’s Membership Interest or other interest in the Company.

e.The Company may subordinate the Defaulting Member’s Membership Interest to the Defaulting Member.

f.The Company may force a sale of the Defaulting Member’s Membership Interest at Fair Value and upon the terms of purchase as provided in Article 13.

g.The Company may forfeit the Defaulting Member’s Membership Interest.

h.The Company may exercise any other rights and remedies available at law or in equity.

14.2Security. Each Member grants to the Company, and to each Lending Member with respect to any loans made by the Lending Member to that Member as a Defaulting Member under this Article 14, as security, equally and ratably, for the payment of all Capital Contribu­tions that Member has agreed to make and the payment of all loans and interest accrued on them made by Lending Members to that Member as a Defaulting Member in accordance with section 14.1(b) of this Agreement, a security interest in, and a general lien on, its Membership Interest and the proceeds thereof, all under the Uniform Commercial Code of the state of Texas. It is expressly agreed that the security interest created thereby shall be governed by chapter 8 of the Uniform Commercial Code of the state of Texas. On any default in the pay­ment of a Capital Contribution or in the payment of such a loan or interest accrued on it, the Company or the Lending Member, as applicable, is entitled to all the rights and remedies of a secured party under the Uniform Commercial Code of the state of Texas with respect to the security interest granted in this Article 14. Each Member shall execute and deliver to the Company and the other Members all financing statements and other instruments that the Members or the Lending Member, as applicable, may request to effectuate and carry out the preceding provisions of this Article 14. At the option of the Members or a Lending Member, this Agreement or a carbon, photographic, or other copy hereof may serve as a financing state­ment.

14.3Compromise or Release. The obligation of a Defaulting Member or its legal repre­sentative or successor to make a contribution or otherwise pay cash or transfer property or to return cash or property paid or distributed to the Defaulting Member in violation of the Code or this Agreement may be compromised or released only with the approval of the unanimous consent of the Members. Notwithstanding the compromise or release, a creditor of the Com­pany who extends credit or otherwise acts in reasonable reliance on that obligation may enforce the original obligation if the obligation is signed by the Defaulting Member and is not amended or canceled to reflect the compromise or release.

Article 15 

Winding Up and Termination

15.1Events Requiring Winding Up. The Company shall begin to wind up its affairs upon the first of the following to occur:

a.the expiration of any period of duration fixed for the Company in the Certificate;

b.the execution of an instrument approving the termination of the Company by unanimous consent of the Members;

c.the occurrence of any event that terminates the continued membership of the last remaining Member of the Company, provided, however, that the Company is not required to wind up if, no later than ninety (90) days after the termination of the mem­bership of the last remaining Member, the legal representative or successor of the last remaining Member, or the legal representative’s or successor’s designee, agrees to con­tinue the Company and to become a Member as of the date of termination;

d.entry of a decree of judicial dissolution of the Company; or

e.the act of a Simple Majority of the Members, if no capital has been paid into the Company, and the Company has not otherwise commenced business.

No other event will cause the Company to wind up.

15.2Liquidation. As soon as possible following an event requiring winding up of the Company, the Members shall appoint one or more Members as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as pro­vided herein and in the Code. The Company may, however, continue its business wholly or partly, including delaying the disposition of the property of the Company, for the limited period necessary to avoid unreasonable loss of the Company’s property or business. The costs of liquidation shall be borne as a Company expense. Until final distribution, the liquidator shall continue to operate the Company properties to the extent necessary to wind up its busi­ness with all the power and authority of the Members. The steps to be accomplished by the liquidator follow:

a.as promptly as possible after that event and again after final liquidation, the liqui­dator shall cause a proper accounting to be made by a recognized firm of certified pub­lic accountants of the Company’s assets, liabilities, and operations through the last day of the calendar month in which the termination occurs or the final liquidation is com­pleted, as applicable;

b.the liquidator shall cause the notice described in Code section 11.052 to be deliv­ered to each known claimant against the Company;

c.the liquidator shall pay, satisfy, or discharge from Company funds all the debts, liabilities, and obligations of the Company (including, without limitation, all expenses incurred in liquidation) or otherwise make adequate provision for payment and dis­charge thereof (including, without limitation, the establishment of a cash escrow fund for contingent liabilities in an amount and for a term that the liquidator may reasonably determine); and

d.all remaining assets of the Company shall be distributed based on their respective Membership Interests to the Members as follows:

i.the liquidator may sell any or all Company property, including to Mem­bers, and any resulting gain or loss from each sale shall be computed and allo­cated to the Capital Accounts of the Members;

ii.with respect to all Company property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts of the Members shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the Capital Accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and

iii.Company property shall be distributed among the Members in accordance with the positive Capital Account balances of the Members, as determined after taking into account all Capital Account adjustments for the taxable year of the Company during which the liquidation of the Company occurs (other than those made by reason of this clause 15.2(d)(iii)), and those distributions shall be made by the end of the taxable year of the Company during which the liquidation of the Company occurs (or, if later, ninety (90) days after the date of liquidation).

All distributions in kind to the Members shall be made subject to the liability of each distributee for costs, expenses, and liabilities theretofore incurred or for which the Company has committed before the date of termination, and those costs, expenses, and liabilities shall be allocated to the distributee in accordance with this section 15.2. Upon completion of all distributions to the Member, the distribution shall constitute a complete return to the Member of its Capital Contributions and release all claims against the Company.

15.3Deficit Capital Accounts. Notwithstanding anything to the contrary contained in this Agreement, and notwithstanding any custom or rule of law to the contrary, to the extent that the deficit, if any, in the Capital Account of any Member results from or is attributable to deductions and losses of the Company (including noncash items such as depreciation) or dis­tributions of money in accordance with this Agreement to all Members in proportion to their respective Membership Interests, upon termination of the Company that deficit shall not be an asset of the Company and that Member shall not be obligated to contribute that amount to the Company to bring the balance of that Member’s Capital Account to zero.

15.4Revocation. If an event described in section 15.1(b) of this Agreement occurs or any other voluntary decision is made by the Members to wind up the Company, before the ter­mination of the Company, a Super Majority of the Members may revoke the winding up and continue the Company’s business.

15.5Cancellation. Should an event requiring winding up occur, other than as a result of the event set forth in section 15.1(a), the Members by unanimous consent may cancel the event no later than one (1) year after the event and continue the Company’s business. Should the Company’s period of duration expire, the Members by unanimous consent may cancel the expiration no later than three (3) years after such and extend the Company’s period of dura­tion and continue its business.

15.6Certificate of Termination. On completion of the distribution of Company assets as provided herein, the Company is terminated, and the Members shall execute, acknowledge, and cause to be filed a certificate of termination, at which time the Company shall cease to exist as a limited liability company.

Article 16 

Amendment or Modification

This Agreement, the Certificate, or any restated certificate of formation, may be amended or modified from time to time only with a written instrument executed by unani­mous consent of the Members.

Article 17 

General Provisions

17.1Construction. Whenever the context requires, the gender of all words used in this Agreement includes the masculine, feminine, and neuter. If there is only one Member, refer­ences to Members in the plural should be construed as singular. The singular form of other nouns, pronouns, and verbs shall include the plural and vice versa.

17.2Offset. Whenever the Company is to pay any sum to any Member, any amounts that Member owes the Company may be deducted from that sum before payment.

17.3Notices. Except as expressly set forth to the contrary in this Agreement, all notices, requests, or consents provided for or permitted to be given under this Agreement must be in writing and must be given either by depositing that writing in the United States mail, addressed to the recipient, postage paid, and registered or certified with return receipt requested or by delivering that writing to the recipient in person, by courier, or by facsimile transmission; and a notice, request, or consent given under this Agreement is effective on receipt by the person. All notices, requests, and consents to be sent to a Member must be sent to or made at the addresses given for that Member on Schedule 1 or another address as that Member may specify by notice to the other Members. Any notice, request, or consent to the Company must be given at the following address:

[Address of the company]

Whenever any notice is required to be given by law, the Certificate, or this Agreement, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of notice.

17.4Effect of Waiver or Consent. A waiver or consent, express or implied, to or of any breach or default by any person in the performance by that person of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by that person of the same or any other obligations of that person with respect to the Company. Failure on the part of a person to complain of any act of any person or to declare any person in default with respect to the Company, irrespective of how long that fail­ure continues, does not constitute a waiver by that person of its rights with respect to that default until the applicable statute-of-limitations period has run.

17.5Binding Effect. Subject to the restrictions on Transfers set forth in this Agreement, this Agreement shall be binding upon and inure to the benefit of the Members and their respective heirs, legal representatives, successors, and assigns. Unless and until properly admitted as a Member, however, no Assignee will have any rights of a Member beyond those provided expressly set forth in this Agreement or granted by the Code to assignees.

17.6Governing Law. This Agreement is governed by and shall be construed in accor­dance with the laws of the state of Texas, excluding any conflict-of-laws rule or principle that might refer the governance or the construction of this Agreement to the laws of another juris­diction.

17.7Severability. If any provision of this Agreement or the application thereof to any person or circumstance is held invalid or unenforceable to any extent, the remainder of this Agreement and the application of that provision to other persons or circumstances is not affected thereby, and that provision shall be enforced to the greatest extent permitted by law.

17.8Further Assurances. In connection with this Agreement and the transactions con­templated hereby, each Member shall execute and deliver any additional documents and instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of this Agreement and those transactions.

17.9Indemnification by Members. To the fullest extent permitted by law, each Member shall indemnify the Company and each other Member and hold them harmless from and against all losses, costs, liabilities, damages, and expenses (including, without limitation, costs of suit and attorney’s fees) they may incur on account of any breach by that Member of this Agreement.

17.10Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all signing parties had signed the same instrument.

17.11Invalidity of Provisions. If any provision of this Agreement is declared or found to be illegal, unenforceable, or void, in whole or in part, the parties shall be relieved of all obli­gations arising under that provision, but only to the extent that it is illegal, unenforceable, or void, it being the intent and agreement of the parties that this Agreement shall be deemed amended by modifying that provision to the extent necessary to make it legal and enforceable while preserving its intent or, if that is not possible, by substituting therefor another provision that is legal and enforceable and achieves the same objectives.

17.12Enforceability against Company. This Agreement is enforceable by or against the Company regardless of whether the Company has signed or otherwise expressly adopted this Agreement.

17.13Entire Agreement; Supersedes Other Agreements. This Agreement includes the entire agreement of the Members and the Company relating to the Company and supersedes all prior contracts or agreements with respect to the Company, whether oral or written.

IN WITNESS WHEREOF, the Members have adopted and executed this Company Agreement of [name of limited liability company] as of the Effective Date.

[Name of company]

By:      
     [Name of member]

Schedule 1