Limited liability companies a summary of Texas law and ... · Limited liability companies a summary of Texas law and Anatomy of a limited liability company . 1. The Texas Legislature

Limited liability companies a summary of Texas law and Anatomy of a limited liability company 1. The Texas Legislature created a new type of business entity called a limited liability company (LLC). LLC’s are governed by the Texas Limited Liability Company Act. a. The BOC codified the provisions of the prior law found in the Texas Business Corporation Act (TBCA), Texas Non-Profit Corporation Act (TNPCA), Texas Miscellaneous Corporation Laws Act (TMCLA), Texas Limited Liability Company Act (TLLCA), Texas Revised Limited Partnership Act (TRLPA), Texas Real Estate Investment Trust Act (TREITA), Texas Uniform Unincorporated Nonprofit Associations Act (TUUNAA), Texas Professional Corporations Act (TPCA), Texas Professional Associations Act (TRPA), the Texas Revised Partnership Act (TRPA), the Cooperative Associations Act (CAA), and other provisions of the Texas laws that governed domestic business entities. b. The BOC became effective January 1, 2006.

c. The BOC does not apply to entities that existed on January 1, 2006 unless the entity expressly elects after January 1, 2006 to adopt the BOC as its governing statue. The code applies thereafter on January 1, 2010. The BOC applies and governs all new entities that are formed after January 1, 2006. 2. A LLC is a new entity that has the characteristics and benefits of both a corporation and a limited partnership. 3. A LLC may engage in any lawful business unless the business is for a limited purpose which is limited in its Certificate of Formation or the business is governed by another corporate law which prohibits the entity from doing business as a LLC. 4. A LLC may have the powers of a corporation under the Texas Business Corporations Act. 5. Its owners or investors are called members rather than shareholders. 6. A membership interest is a personal property interest and it may be evidenced by a membership certificate similar to a stock certificate. 7. The member, like a shareholder in a corporation, does not own any specific property in the LLC; all of the assets in a LLC are owned by and in the name of the LLC. 8. A LLC also has the benefits of a Subchapter S corporation, in that a LLC can shield its members from personal liability arising from the operation of the business . The entity is treated as if it were a partnership for federal income tax purposes. 9. A LLC itself is not subject to federal income tax as regular corporations are.

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10. A LLC provides the tax benefits of a Subchapter S corporation, however, a LLC does not have to meet the restrictions that are applicable to S corporations, i.e. limited to Thirty-five shareholders. 11. Many businesses which have previously elected to form a standard corporation, professional corporation, or limited partnership may choose to be formed as a LLC. 12. Attorneys and law firms may form LLC's or registered limited liability partnerships “RLLP”. 13. The most significant feature of the act is the limited liability for members and managers. Members and managers are not liable for the LLC's debts, including but not limited to, a judgment, a decree, or an order of the court. 14. A member of a LLC is not a proper party to a proceeding by or against the LLC, therefore, a LLC may provide more protection than a corporation. 15. A LLC will report for Federal Income Tax Purposes as a partnership. 16. A LLC will pay regular Texas Franchise tax. General Partnerships and sole practitioners in Texas do not pay franchise or business taxes. 17, The two terms used for the By Laws are Company Agreement or Regulations of the LLC. Statutory authority 1. Limited liability companies have the same power as a corporation under the Texas Business Organizations Code and a limited partnership under the Texas Revised Limited Partnership Act. 2. Except where the Company Agreement specifically provides otherwise, and to the extent the Company Agreement provides, a member or manager is not liable for the debts, obligations or liabilities of a limited liability company including under a judgment decree, or order of a court. 3. The Texas legislature, by enactment of this statute, intended that the legal existence of limited liability companies formed under this Act be recognized beyond the limits of Texas. In accordance with this intent and subject to any reasonable registration requirements, the legislature further provided that any such limited liability company transacting business outside of Texas should be granted the protection of full faith and credit under Section 1 of Article IV of the Constitution of the United States. 4. The powers and business and affairs of a limited liability company are exercised and directed by the manager or managers, except to the extent the Company Agreement reserves such authority to the members of the company in whole or part. 5. Any natural person who is at least 18 years old, or any other person (without regard to


place of residence, domicile, or organization) may act as an organizer of a limited liability company by signing the Certificate of Formation for the company and delivering the original and a copy to the Secretary of State together with a $ 300 filing fee. 6. Each domestic or foreign limited liability company must have and continuously maintain a registered office in Texas which may be, but need not be, the same as its place of business. In addition, limited liability companies are required to have a registered agent whose business office is identical to the registered office. Anatomy of a limited liability company

1. A LLC is organized and structured much like a standard Texas corporation. It is formed by the preparation and filing of Certificate of Formation by an organizer. This is similar to the filing Certificate of Formation (formerly known as Articles of Incorporation) by an incorporator for a Texas corporation. 2. LLC's are owned by members as compared to shareholders in a corporation. 3. A member may be any person, which includes: a. partnerships,

b. limited partnerships,

c. limited liability companies,

d. foreign limited liability companies,

e. trusts,

f. estates,

g. corporations,

h. custodians,

i. trustees,

j. executors, etc.

4. Members may be divided into one or more classes or groups with differing rights, powers, and duties. They may also have differing voting rights. 5. A LLC is managed by its managers or manager in the same or similar fashion as a corporation is managed by its directors. 6. A LLC does not require its managers to be natural persons. 7. A LLC uses a Company Agreement to provide its rules. The Company Agreement should be in writing.


8. A corporation is governed by its bylaws. LLC Company Agreements, although similar in form to corporate bylaws, are more akin to the traits of a partnership agreement. Limited liability company names 1. A limited liability company's name must contain the word "Limited Liability Company," or "Limited Company," or the abbreviations "L.C.C.," "LLC," "LC" or "L.C.". and any additional words that may be required by law. 2. It may not contain any word or phrase indicating or implying that it is organized for any purpose other than a purpose contained in the company's Certificate of Formation. 3. Furthermore, the company's name may not be the same as, or deceptively similar to, the name of any domestic limited liability company, corporation or limited partnership existing under the laws of Texas. 4. Likewise the name may not be the same as the name of any foreign limited liability company, corporation or limited partnership authorized to transact business in Texas. The name may not be the same as one which has been reserved pursuant to the Texas Limited Liability Company Act or any other statute providing for the reservation of names by a corporation or limited partnership with the Secretary of State. 5. A limited liability company's name may be similar to a name reserved by another limited liability company, corporation, or limited partnership if written consent is obtained from the existing entity. 6. Any domestic or foreign limited liability company having authority to transact business in Texas may do so under an assumed name by filing an assumed name certificate in the manner prescribed by law. Management of a Limited Liability Company

1. A LLC may be managed by its members, managers, or officers. The author prefers to have the LLC managed by a manager and not the members. 2. The Certificate of Formation must specify how the LLC will be managed. 3. The Company Agreement, if adopted, should state how the LLC will be managed. The Company Agreement may reserve the right to manage the LLC to the members, in whole or in part, or delegate the same to managers . 4. If the LLC is being managed by managers, managers act in a similar manner as directors of a corporation. 5. Managers are elected annually by the members, they do not need to be residents of Texas or members of the LLC.


6. Managers may be given the powers and duties that directors and officers would have in a corporation. 7. The act also provides that managers may designate one or more persons who are not managers to be officers of the LLC. 8. The officers may be given the powers as stated in the Company Agreement. Voting by the Limited Liability Members

1. The Company Agreement may specify the manner and procedure for voting by the members. 2. There may be one or more classes of members and the same applies to voting rights. 3. A LLC may have voting and non-voting members. 4. When one considers the above along with the management operations unique to LLC’s, a LLC has much more flexibility than a traditional corporation. Distribution of Limited Liability Company property

1. The Company Agreement should state the manner in which cash or other assets will be distributed. 2. In the absence of a provision in the Company Agreement, the distribution shall be made on a pro rata basis in accordance with the agreed value of the contributions of each member. Transferability of Limited Liability Company interests

1. A member may sale or assign his or her membership interest much like stock certificate. 2. The assignment does not give the assignee or purchaser the ability to exercise the rights or power of a member. 3. An assignment simply entitles the recipient to take the distributions that the assignor was entitled to. 4. One can only become a member of a LLC upon the consent of all the other members in the company. Of course the Company Agreement may provide for a majority vote. Admission of new limited liability members

1. After a LLC has been organized a person may become a new member pursuant to the terms of the Company Agreement.


Registered agents & offices for limited liability companies 1. LLC's are required to maintain registered offices and agents like corporations. 2. A member, manager or non-member/manager may be the registered agent. Amendment and mergers with limited liability companies 1. The Certificate of Formation and Company Agreement may be amended (just as corporations).

2. Established and existing businesses and corporations may be merged into or converted to a LLC, however, this may constitute a dissolution of the corporation for tax purposes, therefore, the practitioner should have the decision reviewed by competent tax counsel prior to making the decision. Dissolution of a limited liability company 1. A LLC may be dissolved as follows: a. At the end of the thirty (30) year time period, b. As stated in the Certificate of Formation or in the Company Agreement, c. By written consent of all of the members, d. Upon the following events to one of its members: i. death, ii. retirement, iii. resignation,

iv. expulsion, or v. bankruptcy. e. A LLC may continue its existence if all of the remaining members vote to continue the business. f. Certificate for withdrawal or dissolution. The 77th legislative session, Senate Bill 1123 amended Articles 6.08.A and Articles 7.10A of the Texas Limited Liability Act to provide that application must be accompanied with a certificate that states all taxes, penalties and interest administered by the Texas Comptroller’s Office under title 2 of the Texas Tax Code have been


paid by the Company. Prior to the amendment, the application only had to state that franchise taxes were paid. Failure to pay the taxes and other fees administered by the Comptroller will prevent the issuance of a certificate of dissolution of a domestic limited liability company. A foreign limited liability company must also show that it has paid all of its taxes as well. Special concerns for a LLC 1. Some special factors to consider before forming a LLC are as follows: a. Doing business in other states. Other states may not recognize a LLC, b. Lack of Recognition. Banks, Title Companies, or others may be uncomfortable dealing with a LLC and may impose different requirements than those imposed upon a corporation. Tax protection 1. The Company Agreement may be subject to attack by the IRS, consequently a LLC’s status may be challenged by the IRS. 2. A successful challenge by the IRS could do away with the intended tax benefits for forming a LLC. 3. Current tax law is well developed on corporate status, however, little law exists on LLC’s. Consequently member’s responsibilities are not as well defined as those in corporate law. 4. There is no limit on the number of members that a LLC may have, whereas, a Subchapter S Corporation is limited to 35 shareholders. Yet a LLC may have the same benefits as a Subchapter S Corporation assuming the IRS does not contest the LLC’s status, which assumption cannot be lightly made. 5. It is not certain whether one person can form a LLC and receive the same tax protection when a LLC is formed with more than one person. Since a LLC is taxed as if it were a partnership, the IRS may disallow LLC's which are comprised of a sole member since it takes more than one person to form a partnership. 6. Consequently it may be possible for a one person LLC to be legally recognized under state law, but disallowed under IRS regulations or rulings.


Certificate of Formation for a Limited liability company

1. A LLC is formed by filing Certificate of Formation by an organizer. 2. An organizer is the person who signs the Certificate of Formation and files the same with the Secretary of State's Office. 3. The Certificate of Formation is similar to Certificate of Formation/Articles of Incorporation for a corporation and must contain the following: a. The name of the LLC, b. The LLC's period of duration, which cannot exceed thirty (30) years (a corporation’s duration may be perpetual), c. The purpose for which the LLC is organized which can include the transaction of any and all lawful business which LLC's may be organized for under the Texas Limited Liability Company Act, d. State the LLC's principal place of business, e. State the LLC's registered agent and initial registered office address, f. State the organizer's name and address, g. A statement of whether the company is to be managed by a manager, managers, or its' members. It must also state the names and addresses of the initial managers or members, whichever one will be responsible for managing the company, h. The Certificate of Formation may also include an indemnification provision similar to the ones contained in Certificate of Formation/articles of incorporation, 4. The Certificate of Formation excludes the following statements which are found in Certificate of Formation/articles of incorporation: a. No reference need be made to the number of shares which will be issued, b. Or whether the same are par or no par, c. Likewise, there is no requirement for a statement as to the value of the shares, d. There is no requirement that a statement be made in the Certificate of Formation that the company will not begin conducting business until a required amount of capital, i.e. a thousand dollars, has been contributed,


e. LLC's are not required to state the limitations on pre-emptive rights of shareholders nor are LLC’s required to address the issue of cumulative voting.


Drafting the Certificate of Formation Certain basic statements must be set forth in the Certificate of Formation. The following information should be listed in the articles: 1. the name of the limited liability company, 2. the period of duration, [Under the prior law, the period was limited to 30 years from the date of filing; now the company’s duration may be perpetual like a standard corporation.] 3. the purpose for which the company was formed, 4. the name of the company's initial registered agent, 5. addresses of the following persons: a. the address of the company's principal place of business in Texas, b. the company's initial registered agent in Texas, and c. the initial managers. 6. a statement as to whether the company will be managed by the members or manager(s). The author prefers to have the LLC managed by a manager rather than the members. This may afford greater liability protection.


Matters to be included in the Certificate of Formation 1. The name of the limited liability company, 2. The period of its duration, 3. The purpose for which the limited liability company is formed, 4. The address of company's principal place of business in Texas, 5. The name and address of the company's initial registered agent in Texas, 6. A statement as to management of the company, a. The company may be managed by a manager(s) or its members. If the company will be managed by managers, then the document should state that the company will be so. managed.

b. The statement should list the names and addresses of managers who are to serve until the first annual meeting of members or until their successors are elected, c. If the management is reserved to the members, then list their names and addresses. 7. Any other provisions, not inconsistent with law, which the members elect to set out for the regulation of the internal affairs of the company.


Filing the Certificate of Formation and steps taken thereafter to organize the LLC

1. The Certificate of Formation must be signed by the organizer and then filed with the Secretary of State's Office. 2. The original and a copy of the Certificate of Formation should be filed along with the $300 filing fee at the Secretary of State's Office. 3. As with corporations, the practitioner may use the special handling service of the Secretary of State for a fee of twenty-five dollars ($25). 4. If the Certificate of Formation is approved by the Secretary of State's Office, the LLC will be issued a Certificate of Organization, which is similar to the Certificate of Incorporation issued to a corporation. 5. Thereafter, the LLC must be organized with an initial meeting like a corporation. 6. To complete the organization of the LLC the members should meet and agree to a Company Agreement formerly known as “operating agreement or regulations” and reduce the same to writing. 7. The managers named in the Certificate of Formation may adopt an initial company agreement for the LLC. 8. The company agreement, like a partnership agreement can contain provisions for the rules and management of the LLC as long as the same are not inconsistent with law or the Certificate of Formation. 9. The company agreement may include the following: a. The purpose for which the LLC has been organized, b. The names of the members and their capital contribution, c. The way in which the LLC will be managed, d. The powers and duties of the managers, e. The specific rules of the LLC as to how the business will be operated, f. How decisions will be made, g. How expenses will be incurred, i. How profits and/or losses will be distributed, j. Rules concerning the transferability of membership interests,


k. The procedure and events for dissolution or termination of the LLC. 10. It is advisable for the members to sign the Company Agreement so they will be bound by contract similar to the way a partner is bound by the partnership agreement. 11. The Texas Miscellaneous Corporation Laws Act Art 1302-7.07 and the Texas Revised Limited Partnership Act Art 6132a-1, §18:1304, have eliminated the requirement to file documents which have original signatures. The above statutes provide for the filing of any photostatic or facsimile copy of a signed instrument required or authorized to be filed with the Secretary of States office under any provision of the Texas Business Corporation Act, the Texas Non-Profit Corporation Act, The Texas Limited Liability Company Act, and the Texas Revised Limited Partnership Act. 12. The Secretary of State’s office maintains a plain paper facsimile machine for the receipt of documents and messages. The Secretary of State’s fax number is (512) 463-5709. If a document is to be submitted to the office by facsimile transmission, it requires either the simultaneous receipt of the filing fee, or the delivery of any applicable fees by the close of the same business day. If the applicable fees are not received on the same date as the transmission, the document will be returned without filing. 13. Corporate Limited Liability Company, Limited Partnership, and Registered Limited Liability Partnership documents bearing rubber stamp signatures of the person authorized to by statute to sign the document will satisfy the signature execution requirements.


Form: Certificate of Formation

CERTIFICATE OF FORMATION FOR A LIMITED LIABILITY COMPANY

[LIMITED LIABILITY COMPANY’S NAME], L.C.

I, the undersigned natural person, am acting in the capacity as an organizer of a limited liability company. I hereby adopt the following Certificate of Formation for a Texas limited liability company per the Texas Business Organizations Code.

ARTICLE 1. COMPANY NAME & ADDRESS

1.1 The type of entity being formed is a Texas Limited Liability Company. 1.2 The name of the Limited Liability Company is [Limited Liability Company’s Name]. 1.3 The address of the limited liability company’s principal place of business in this state is:

[Client's address] [Client's city], [Client's state] [Client's zip code]

ARTICLE 2. DURATION

2.2 The period of its duration is perpetual unless the company dissolves in accordance with its Company Agreement or by a law stating the maximum time so allowed, whichever time is greater.

ARTICLE 3. PURPOSES 3.1 The purpose for which this limited liability company is organized is to transact any or all lawful business for which limited liability companies may be organized for under the laws of Texas including but not limited to the following: a. To carry on any business or any other legal or lawful activity allowed by law. b. To acquire, own, use, convey and otherwise dispose of and deal in real or personal property or any interest therein. c. To manufacture, buy, sell and generally deal in goods, wares and merchandise of every class and description, both real and personal and tangible. d. To buy, rent, sell, manufacture, produce, assemble, distribute, repair and service any and all products or services in which the company desires to engage. e. To do such other things as are incidental to the foregoing or desirable in order to accomplish the purpose for which the company was formed.


f. To have and exercise all rights and powers that are now or may hereafter be granted to a limited liability company by law. 3.2 The foregoing shall be construed as objects, purposes and powers, and enumeration thereof shall not be held to limit or restrict in any manner, the powers hereafter conferred on this limited liability company by the laws of the State of Texas. 3.3 The limited liability company may in its Company Agreement confer powers, not in conflict with law, upon its manager(s) and members in addition to the foregoing and in addition to the powers and authorities expressly conferred upon them by statute.

ARTICLE 4. NAME & ADDRESS OF INITIAL REGISTERED AGENT 4.1 The Name of the Limited Liability Company’s initial Registered Agent is: [Name of initial Registered Agent]. 4.2 The address of the Limited Liability Company’s initial Registered Office is: [Address of initial Registered Office].

ARTICLE 5. INITIAL MEMBERS 5.1 The initial number of members are two. 5.2 The name and address of the persons who will serve as the initial members until the first meeting of the members or until their successors are elected and qualified are:

[Clients’ names] [Clients’ addresses] [Clients’ city], [Clients’ state] [Clients’ zip code]

ARTICLE 6. MANAGEMENT

6.1 The company shall be managed by a manager or managers. [insert members if members shall manage the company instead of a manager or managers]. 6.2 The name(s) and address(es) of the person(s) who are to serve as the initial manager(s) until the first annual meeting of its members or until successors are elected and qualified are: [Name(s) and address(es) of the manager(s) or the initial members].

ARTICLE 7. INDEMNIFICATION


7.1 To the extent permitted by law, no manager of the Company shall be liable to the Company or its members for monetary damages for an act or omission in the manager’s capacity as manager. 7.2 To the extent permitted by law, the Company shall indemnify any present or former manager, member, officer, employee, his or her heirs, executors and administrators, or agent of the Company against judgment, penalties (including excise and similar taxes), fines, settlements, and reasonable expenses actually incurred by the person in connection with a proceeding in which the person is or was a manager, member, officer, employee, or agent of the company. 7.3 Indemnification is being given since the manager(s) will be requested to act by the limited liability company, for and on behalf of the limited liability company's benefit. 7.4 Indemnification shall not be exclusive of other rights to which the manager(s) may be entitled. 7.5 The manager(s) shall be entitled to the fullest indemnification allowed by the current law or as may be amended hereafter. 7.6 A Manager(s) shall be liable to limited liability company for the following actions : a. A breach of his or her duty of loyalty to the limited liability company, or its members. b. An act or omission taken in bad faith and constituting a breach of the Manager’s duty to the limited liability company. c. To be liable hereunder the manager(s) must have acted in a grossly negligent, malicious or intentional manner as those terms are defined at law. d. A transaction in which the manager benefits to the detriment of the limited liability company or its members. e. An action which the manager is liable at law for which an indemnification is not allowed. 7.7 Non Unanimous Consent: Any action required to be taken at any annual or special meeting of the managers or members of the company, and any action which may be taken at any annual or special meeting of members or managers, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the managers or the members, as the case may be, having not less than the minimum number of votes that would be necessary to take such action at a meeting at which all managers or members, as the case may be, entitled to vote on the action were present and voted.


ARTICLE 8. SUPPLEMENTAL PROVISIONS AND MISCELLANEOUS 8.1 No contract or other transaction between the Limited Liability Company and any other Limited Liability Company shall be affected by the fact that one or more of the directors or officers of this Limited Liability Company is interested in or is a director or officer of such other Limited Liability Company.

ARTICLE 9 ORGANIZER 9.1 The name and address of the organizer is: [Name and address of the organizer].

ARTICLE 10 DATE EFFECTIVE 10.1 This document becomes effective [when the document is filed by the secretary of state, at a later date, which is not more than ninety (90) days from the date of signing, the following date ___________, upon the occurrence of a future event or fact, other than the passage of time or The following event or fact will cause the document to take effect in the manner described below:]

Signature Clause: For the purpose of forming a limited liability company under the laws of the State of Texas, I, the undersigned Organizer have signed this Certificate of Formation subject to the penalties imposed by law for the submission of a materially false or fraudulent instrument on _____________.

______________________________ Organizer

[There is no requirement for notarization, however some attorneys still prefer to have the document notarized.] State of Texas County of ____________ This instrument was acknowledged before me on ____________________ by ______________________________________________________________.

_____________________________________ Signature of officer _____________________________________ Notary's typed or printed name


My commission expires: ______________________ [or Notary's Stamp]


[Add this provision if the LLC is being organized as a professional limited liability

company]

ARTICLE 9. PROFESSIONAL SERVICE

9.1 The company is a professional limited liability company. The professional service that the company shall render is: [state the service i.e. law].

[Optional additional provisions to include in the Articles]

ARTICLE 10. CAPITAL & ADDITIONAL MEMBERS

10.1 Initial capital:

a. The Limited Liability Company will not commence business until it has received [amount] for the issuance of its Certificates of Membership Interest consideration consisting of money, labor done, a promissory note, or property received. 10.2 Additional Capital: a. Members [shall or shall not] be required to make additional contributions to the capital of the company. 10.3 Additional members: a. Additional members shall be admitted upon the written consent of ____________ all the members.

ARTICLE 11. VOTING 11.1 Each percentage of membership interest has one (1) vote on each matter on which the membership interest is entitled to vote. 11.2 Cumulative voting is not allowed. 11.3 There are no preemptive rights on behalf of any Member.

ARTICLE 12. INITIAL COMPANY AGREEMENT 12.1 The initial Company Agreement will be adopted by the Managers. 12.2 The powers to alter, amend, or repeal the Company Agreement or adopt a new Company Agreement is vested in the Managers, subject to repeal or change by action of the Members.


ARTICLE 13. MAJORITY VOTING 13.1 With respect to any matter, other than the election of the Managers, for which the affirmative vote of the holders of a specified portion of the membership interest entitled to vote is required by the Texas Limited Liability Company Act, and notwithstanding that such Act may require a portion of the membership interest entitled to vote that exceeds that specified in this Article, the act of the Members on that matter shall be the affirmative vote of the holders of a majority of the membership interest entitled to vote on that matter, rather than the affirmative vote otherwise required by such Act.

ARTICLE 14. COMPANY ACTIONS 14.1 Any action required by the Texas Limited Liability Company Act, and any amendments thereto, shall be taken at any annual or special meeting of Members of the Limited Liability Company. 14.2 Or any action which may be taken at any annual or special meeting of Members of the Limited Liability Company, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of membership interest having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all membership interest entitled to vote on the action were present and voted. 14.3 Any such written consent must be dated, signed and delivered in the manner required by, and shall be effective for the period specified by the Texas Limited Liability Company Act, and any amendments thereto, and the taking of any such action by written consent shall be subject to satisfaction of all applicable requirements of such Act. 14.4 Prompt notice of the taking of any action by Members without a meeting by less than unanimous written consent shall be given to those Members who did not consent in writing to the action.

ARTICLE 15. RESTRICTIONS ON ITS TRANSFERABILITY 15.1 The membership interest of the Limited Liability Company will be subject to restrictions on its transferability as set out in the Company Agreement of the Limited Liability Company, which Company Agreement will be kept with the records of the Limited Liability Company. 15.2 The Limited Liability Company will provide a copy of the Company Agreement without charge to any record holder of a membership interest upon written request addressed to the Limited Liability Company at its principal business office or its registered agent's address.

ARTICLE 16. CONTINUITY OF BUSINESS 16.1 All of the remaining members of the company may agree to continue the business upon the death, retirement, resignation, expulsion, bankruptcy or other withdraw of a member.



Form: Filing letter to the secretary of state’s office Office of the Secretary of State of Texas Statutory Filings Division Corporations Section Special Handling P.O. Box 13697 Austin, Texas 78711-3697 Dear Intake Division: Enclosed please find duplicate originals of the Certificate of Formation for the above-named limited liability company and a check for $300, the required amount for the filing fees. [Add, if desired: I have also enclosed a check in the amount of $25 to cover the costs for special handling.] Your expeditious cooperation is appreciated. Thank you in advance for your assistance and cooperation.

Very truly yours,

[Attorney's name]


Letter to a client that explains the differences and comparisons to limited liability companies and corporations and limited partnerships 1. The limited liability concept is relatively new and easy to misunderstand. Even though an attorney may explain the concept to a client, the lay person may not retain or understand the concept on the first go around. The following letter explains the limited liability company concept to the client and compares limited liability companies to corporations and limited partnerships. 2. The letter helps the client make some of important decisions about the type of business entity to choose.


Form: Letter to a client: Comparison of limited liability companies to corporations and limited partnerships

[Date] [Name of client] [Client's address]

Attorney-client communication: this document and its contents constitute legally privileged information

Regarding: What Are Limited liability companies? Dear [Client’s salutation]: Per our meeting, this letter is intended to summarize a relatively new form of business entity called a Limited Liability Company (LLC). The easiest explanation is that a LLC is a mixture of a subchapter S corporation and a limited partnership. The owners are called members rather than shareholders and it is run by managers rather than officers or directors.

1. Statutory Creation: The Texas Legislature recently created a new type of business entity called a limited liability company (LLC), pursuant to the Texas Limited Liability Company Act. It has the characteristics and benefits of both a corporation and a limited partnership.

2. Business Involvement: A LLC may engage in any lawful business unless the business is for a limited purpose which is limited in its Certificate of Formation or the business is governed by another corporate law which prohibits the entity from doing business as a LLC. A LLC may have the powers of a corporation under the Texas Business Corporations Act.

3. LLC Owners: Its owners or investors are called members rather than shareholders. A membership interest is a personal property interest and it may be evidenced by a membership certificate similar to a stock certificate. The stock may be subject to a contract and have restrictions, just like corporate stock. This way you can control the ownership of the LLC. Members, like shareholders in a corporation, do not own any specific property in the LLC; all of the assets in a LLC are owned by and in the name of the LLC.

4. Tax Benefits:


LLC has the benefits of a Subchapter S corporation, in that a LLC can shield its members from personal liability arising from the operation of the business . The entity is treated as if it were a partnership for federal income tax purposes. This is a real benefit. A LLC does not have the restrictions which limit the companies and owners who can do business as a subchapter S corporation. For instance a LLC does not have to meet the restrictions that are applicable to S corporations, i.e. limited to 35 shareholders. A LLC itself is not subject to federal income tax as regular corporations are because it is taxed in the same manner as a partnership. For this and other reasons, many businesses which have previously elected to form a standard corporation, professional corporation, or limited partnership may choose to operate as a LLC.

5. Management & Personal Liability: One of the most significant features of the act, is how LLC’s are managed. Many investors have liked the limited partnership form of business because they can invest money in a business and not be liable for the business’ debts or failure.. One drawback of a limited partnership is that the limited partners cannot direct the partnership’s day to day affairs and retain their limited liability. Now an investor can invest in a LLC and become a member or a manager. As a member or manager, the investor can have direct input and manage the LLC’s day to day affairs without assuming personal liability for the company’s debts. Both members and managers are not liable for the LLC's debts, including but not limited to, a judgment, a decree, or an order of the court against the LLC. A member of a LLC is not a proper party to a lawsuit by or against the LLC, therefore, a LLC may provide more protection than a corporation. The Certificate of Formation must specify how the LLC will be managed. The Company Agreement, if adopted, (like a corporation’s bylaws) should state how the LLC will be managed. The Company Agreement may reserve the right to manage the LLC to the members, in whole or in part, or delegate the same to managers .Managers may be given the powers and duties that directors and officers would have in a corporation. Therefore, a LLC is managed by its officers, managers or manager in the same or similar fashion as a corporation is managed by its officers and directors. A LLC does not require its managers to be natural persons. A LLC uses the Company Agreement to provide its rules. The Company Agreement should be in writing. A corporation is governed by its bylaws. LLC Company Agreements, although in form similar to corporate bylaws, are in substance, more like a partnership agreement. Managers are elected annually by the members, they do not need to be residents of Texas or members of the LLC. The act also provides that managers may designate one or more persons who are not managers to be officers of the LLC. The officers may be given the powers as stated in the Company Agreement.


6. Anatomy of a limited liability company

A LLC is organized and structured much like a standard Texas corporation. It is formed by the preparation and filing of Certificate of Formation by a organizer. This is similar to filing Certificate of Formation/Articles of Incorporation by an incorporator for a Texas corporation. LLC's are owned by members as compared to shareholders in a corporation. A member may be any person, which includes: 1. partnerships, 2. limited partnerships, 3. limited liability companies, 4. foreign limited liability companies, 5. trusts, 6. estates, 7. corporations, 8. custodians, 9. trustees, 10. executors, etc.. Members may be divided into one or more classes or groups with differing rights, powers, and duties. They may also have differing voting rights.

7. CERTIFICATE OF FORMATION The LLC’s Certificate of Formation is filed with the Secretary of State’s office by an organizer. A corporation files Certificate of Formation/articles of incorporation signed by an incorporator/organizer. An organizer is the person who signs the Certificate of Formation and files the same with the Secretary of State's Office. The Certificate of Formation are similar to Certificate of Formation/Articles of Incorporation and must contain the following: 1. The name of the LLC, 2. The LLC's period of duration, which cannot exceed thirty (30) years (a corporation’s duration may be perpetual),


3. The purpose for which the LLC is organized which can include the transaction of any and all lawful business which LLC's may be organized for under the Texas Limited Liability Company Act, 4. State the LLC's principal place of business, 5. State the LLC's registered agent and initial registered office address, 6. State the organizer's name and address, 7. A statement of whether the company is to be managed by a manager, managers, or its' members. It must also state the names and addresses of the initial managers or members, whichever one will be responsible for managing the company, 8. The Certificate of Formation may also include an indemnification provision similar to the ones contained in Certificate of Formation/articles of incorporation, 9. Certificate of Formation exclude the following statements which are found in a corporation’s Certificate of Formation/articles of incorporation: a. No reference need be made to the number of shares which will be issued, b. Or whether the same are par or no par, c. Likewise, there is no requirement for a statement as to the value of the shares, d. There is no requirement that a statement be made in the Certificate of Formation that the company will not begin conducting business until a required amount of capital, i.e. a thousand dollars, has been contributed, e. LLC's are not required to state the limitations on pre-emptive rights of members nor are LLC’s required to address the issue of cumulative voting.

8. Organizing the LLC If the Certificate of Formation is approved by the Secretary of State's Office, the LLC will be issued a Certificate of Organization, which is similar to the issuance of a Certificate of Incorporation which is given to a corporation. Thereafter, the LLC must be organized with an initial meeting like a corporation. To complete the organization of the LLC, the members should meet and agree to the Company Agreement and reduce the same to writing. This is similar to adopting corporate bylaws. The managers named in the Certificate of Formation may adopt an initial Company Agreement for the LLC. The Company Agreement, like a partnership agreement can contain provisions for


the regulation and management of the LLC as long as the same are not inconsistent with law or the Certificate of Formation. The Company Agreement may include the following: 1. The purpose for which the LLC has been organized, 2. The names of the members and their capital contribution, 3. The way in which the LLC will be managed, 4. The powers and duties of the managers, 5. The specific rules of the LLC as to how the business will be operated, 6. How decisions will be made, 7. How expenses will be incurred, 8. How profits and/or losses will be distributed, 9. Rules concerning the transferability of membership interests, 10. The procedure and events for dissolution or termination of the LLC. 11. It is advisable for the members to sign the Company Agreement so they will be bound by contract similar to the way a partner is bound by the partnership agreement.

9. LLC name requirements A LLC's name must contain the word “limited”, the abbreviation “Ltd.” or “L.C”. It may be preferable to use the word L.C. to avoid confusion with limited partnerships or registered limited liability partnerships. A LLC may also do business under an assumed name in which case it must file an assumed name certificate.

10. Voting The LLC’s Company Agreement may specify the manner and procedure for voting by the members. This is similar to the voting rights that shareholders have in a corporation. There may be one or more classes of members and the same applies to voting rights. A LLC may have voting and non-voting members.

11. Distribution of property


The Company Agreement should state the manner in which cash or other assets will be distributed. In the absence of a provision in the Company Agreement, the distribution shall be made on a pro rata basis in accordance with the agreed value of the contributions of each member.

12. Transferability of interests A member may sell or assign his or her membership interest much like stock certificate. The assignment does not give the assignee or purchaser the ability to exercise the rights or power of a member. An assignment simply entitles the recipient to take the distributions that the assignor was entitled to. One can only become a member of a LLC on the consent of all other members in the company. Of course, the Company Agreement may provide for a majority vote

13. New members After a LLC has been organized a person may become a new member pursuant to the terms of the Company Agreement. In the absence of rule to the contrary, a person can only become a member of the LLC by unanimous agreement. One can only become a member of a LLC upon the consent of all the other members in the company. Of course the Company Agreement may provide for a majority vote.

14. Registered agents & offices LLC's are required to maintain registered offices and agents like corporations. The registered agent accepts important documents, notices, and filings such as a summons in a lawsuit. A member, manager or non-member/manager may be the registered agent.

15. Amendment and mergers The Certificate of Formation and Company Agreement may be amended (just as corporations). Established and existing businesses and corporations may be merged into or converted to a LLC, however, this may constitute a dissolution of the corporation for tax purposes, therefore, you should have the decision reviewed by competent tax counsel prior to making the decision.

16. Dissolution A LLC may be dissolved as follows: 1. As stated in the Certificate of Formation or in the Company Agreement, 2. By written consent of all of the members, 3. Upon the following events to one of its members:


a. death, b. retirement, c. resignation, d. expulsion, or e. bankruptcy. A LLC may continue its existence if all of the remaining members vote to continue the business.

17. Special concerns for a LLC Some special factors to consider before forming a LLC are as follows: 1. Doing business in other states. Other states may not recognize a LLC, 2. Lack of Recognition. Banks, Title Companies, etc., may be uncomfortable dealing with a LLC and may impose different requirements on a LLC from those imposed upon a corporation. Most of these concerns are becoming minimized since many other states are enacting LLC legislation.

18. Other considerations The Company Agreement of the LLC may be subject to attack by the IRS or a court if the business is not run properly. A corporation can lose its status if corporate formalities are not observed, the same is true with following the statute that created LLC’s. Current tax law is well developed on corporate status, however, little law exists on LLC’s. Consequently member’s responsibilities are not as well defined as those in corporate law. There is no limit on the number of members that a LLC may have, whereas, a Subchapter S Corporation is limited to 35 shareholders. Yet a LLC may have the same benefits as a Subchapter S Corporation assuming the IRS does not contest the LLC’s status, which assumption cannot be lightly made.

Conclusion: LLC’s are unique and provide some interesting advantages over both corporations and partnerships. As you know general partners, including a general partner in a limited partnership have unlimited liability. Investors and business persons wanted to avoid the double taxation that can occur when one does business as a corporation, in the past, people have chosen partnerships for their tax advantages. Now, most everything to be done in a business can be done in a corporation or a partnership, can be done in a LLC.


I hope the above summary will assist you in deciding if a LLC is right for you. Please be advised that the above is only a partial listing of LLC, corporation and limited partnership law and business consideration. This letter is not intended to provide a complete discourse on all areas of business entities that you may encounter. It has been my pleasure to have discussed LLC’s, corporations and limited partnerships with you and I look forward to a continued relationship with you in the future. Please do not hesitate to call me should you have any questions about any of the matters discussed in this letter. If you have any questions, please call me.

Very truly yours

[Attorney’s name]


Form: Limited liability company pre-organization agreement

LIMITED LIABILITY COMPANY PRE-ORGANIZATION AGREEMENT This agreement is made on [date], among [name], of [address], [name], of [address], and [name], of [address]. 1. In consideration of the mutual promises, the parties hereto agree to form a limited liability company to be known as Limited liability company under the laws of the State of Texas, within ____ days hereafter, for the purposes of engaging in the business generally of [specify]. 2. The period of the limited liability company shall be [Duration]. 3. The initial registered office of the limited liability company shall be at [address], and the name of the limited liability company's initial registered agent at that address shall be [name],. 4. The Certificate of Formation of the limited liability company shall be substantially in the form and substance of attachment in Exhibit "A". It shall name the following as the initial members of the limited liability company: Name Address 5. The first officers of the limited liability company shall be [name], President; [name], Treasurer, and [name], Secretary. Upon organization of the limited liability company the initial members shall authorize and direct the officers to execute on behalf of the limited liability company an employment contract substantially in the form and the substance of the agreement attached as Exhibit "A". 6. The initial members shall, at the organizational meeting, adopt a Company Agreement for the limited liability company substantially in the form and of the substance of those attached as Exhibit "C". 7. Within fifteen (15) days following the organizational meeting, the company shall pay to the limited liability company the following sums, and the managers shall authorize and direct the officers of the limited liability company to issue certificates of the limited liability company having a par value of $ ____________ per share as follows: Name Consideration No. of Shares 8. All costs and expenses, including attorney's fees, required for the formation and organization of the limited liability company, shall be advanced by [names], in proportion to their ownership of shares of the limited liability company, and shall be refunded to them by the limited liability company. 9. No party shall have the right to transfer or assign his interest in this agreement without the


prior written consent of any other Party. 10. If any party hereto is a partnership, limited liability company and/or trust, such party represents that this agreement, the transaction contemplated herein, and the execution and delivery hereof, have been duly authorized by all necessary partnership, corporate or trust proceedings and actions, including without limitation, the action on the part of the directors, if the party is a limited liability company. Certified copies of such corporate or other resolutions authorizing this transaction shall be delivered at execution. 11. Time is of the essence in this agreement and accordingly all time limits shall be strictly construed and rigidly enforced. 12. The use of the neuter singular pronoun to refer to the Parties described herein shall be deemed a proper reference even though the Parties may be an individual, a partnership, a limited liability company, or group of two or more individuals, partnerships or limited liability company’s. The necessary grammatical changes required to make the provisions of this agreement apply in the plural sense where there is more than one party to this agreement, and to either limited liability companies, partnerships or individuals, males or females, shall in all instances, be assumed as though in each case fully expressed. 13. This agreement shall be subject to and governed by the laws of the State of Texas. Any and all obligations or payments are due and payable at [address]. 14. If any provision of this agreement shall, for any reason, be held violative of any applicable law, and so much of the agreement is held to be unenforceable, then the invalidity of a specific provision shall not be held to invalidate any other provisions, which other provisions shall remain in full force and effect unless removal of the invalid provisions destroys the legitimate purposes of this agreement, in which event this agreement shall be canceled. 15. This agreement shall represent the entire agreement by all the Parties except as otherwise provided herein, and it may not be changed except by written amendment duly executed by all parties hereto. 16. All notices or other communications required or permitted to be given pursuant to this agreement shall be in writing and shall be considered as properly given if mailed from within the United States by first class mail, postage prepaid, and addressed as follows: ____________. A party may change the address for notice by giving notice of the change to the other parties in writing. 17. This agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns. SIGNED, ACCEPTED AND AGREED TO on ________________, by the undersigned parties who hereby acknowledge that they have read and understand this agreement and the attachments thereto and execute this agreement voluntarily and of their own free will.


_________________________ [Signature]

_________________________

[Signature]

_________________________ [Signature]


Limited liability company information form and Limited liability company organization template 1. This form sets forth some of the important data and information that will be necessary in order to represent the client. 2. The client may question the attorney’s professionalism if the attorney has to frequently call the client for basic information needed to perform the legal work. Form: Limited liability company information form Client's name __________ Contact person __________ Type of business __________ Purpose of business __________ Date business to begin __________ Financial structure of business __________ Loans to be made to the company __________ Name of accountant __________ Address __________ Phone no. __________ Fax no. __________ Name of Insurance agent __________ Address __________ Phone no. __________ Fax no. __________ Referred By __________ Name of financial consultant __________ Address __________ Phone no. __________ Fax no. __________


Names of previous attorneys __________ Addresses __________ Phone no. __________ Fax no. __________ Matters handled by that attorney __________ State of limited liability company __________ Name of limited liability company 1st choice __________ 2nd choice __________ 3rd choice __________ Date checked for availability __________ Application for reservation of corporate name required-- Yes_____ No_____ Registered agent's name __________ Address __________ Phone no. __________ Fax no. __________ Principal place of business __________ Will the company use an assumed name certificate? Yes_____ No_____ If yes, assumed name to be used __________ Withdraw assumed name of unincorporated business Yes_____ No_____ Send Notice to creditors of company for an ongoing business Yes_____ No_____ Publish notice in newspaper for incorporation of an ongoing business


Yes_____ No_____ Counties to file assumed name in __________ File Assumed Name with secretary of state's office Yes_____ No_____ Fiscal or calendar year for company __________ Will company conduct business in other states? Yes _____ No _____ If yes, name of states and counties __________ Names under business will be conducted __________ Business location own _____ lease _____ assignment of lease _____ Preparation of lease __________ Name of landlord __________ Organizer's name __________ Addresses __________ Phone no. __________ Initial manager’s name __________ Address __________ Phone no. __________ Initial manager’s name __________ Address __________ Phone no. __________ Initial registered agent's name __________


Address __________ Phone no. __________ Period of duration perpetual __________ other __________ Corporate purposes: General purpose clause __________ Specific purpose clause __________ Capitalization common stock _____ number of authorized shares __________ Par value $ __________ classes __________ pre-emptive rights _________ Full _____ limited __________ denied __________ Cumulative voting--granted __________ denied __________ Other rights and preferences __________ Preferred stock ________ no. of shares ________ par value $ __________ Original members: Name __________ Address __________ Phone no. __________ Fax no. __________ Number of shares __________ Name __________ Address __________ Phone no. __________ Fax no. __________ Number of shares __________


Name __________ Address __________ Phone no. __________ Fax no. __________ Number of shares __________ Name __________ Address __________ Phone no. __________ Fax no. __________ Number of shares __________ Order Corporate minute book Yes _____ No _____ Type __________ Date ordered __________ Cost $ __________ Company Agreement Date approved: __________ Date and place for annual meeting of members__________ Add to calendar each year--Yes _____ No _____ Annual meeting--date __________ time __________ Place __________ Notice requirements __________ Regular meeting--date __________ time __________ Place __________ Notice requirements __________


Special meeting--date __________ time __________ Place __________ Notice requirements __________ Who may call special meetings other than the President or Managers ________________________________________________________________ Quorum requirements __________ Number of votes needed for action of which a quorum is required _____ Record Date for determination of members entitled to vote or Receive dividends __________ Proxy information for members __________ Managers: Number of managers __________ Name __________ Address __________ Phone no. __________ Fax no. __________ Name __________ Address __________ Phone no. __________ Fax no. __________ Name __________ Address __________ Phone no. __________ Fax no. __________ Name __________ Address __________


Phone no. __________ Fax no. __________ Term of managers __________ Staggered terms, if desired __________ Qualifications for serving __________ Compensation __________ Meeting of Managers Quorum requirements for directors __________ Officers: President __________ Vice-President __________ Secretary __________ Treasurer __________ Organizational meeting: Date __________ time __________ Place __________ Date of filing Certificate of Formation with secretary of state __________ Name of the chairman of the organizational meeting __________ Name of the secretary of the meeting __________ Bank information: Name and address where bank account will be located: Name __________ Address __________ Bank officer __________


Account no. __________ Banking resolutions to be prepared or use bank standard form Yes_____ No_____ Name and corporate office of persons authorized to draw checks or make loans on the corporation's behalf __________ Purchase of stock/shares Name __________ Amount __________ no. of shares __________ Address __________ No. of shares purchased by each person __________ Health and accident plan--Yes_____ No_____ 1244 Stock Plan--Yes_____ No_____ Maximum number of shares to be issued __________ Consideration __________ Maximum number of shares to be received __________ Other agreements: Buy-sell agreement--Yes_____ No_____ Employment or management agreement--Yes_____ No_____ Compensation agreement--Yes_____ No_____ Expense agreement--Yes_____ No_____ Restrictive covenant agreement--Yes_____ No_____ Retirement plan requested--Yes_____ No_____ Wills, estate plan or financial planning--Yes_____ No_____ Fee: $ __________


Special handling fee requested $ __________ Regular mail _____ Other __________ NOTES ______________________________________________________________ _______________________________________________________________ ______________________________________________________________ _______________________________________________________________


Limited liability company organization template 1. The following form is a calendaring tool designed to help the attorney complete the client’s legal matters in a timely fashion. It helps to insure that important legal work is not forgotten or neglected. 2. Insert the date that an item is due, then write down the date that the project was completed on. Form: Limited liability company organization template Limited Liability Company is abbreviated as “LLC” DATE DATE DUE COMPLETED ITEM __________ __________ Meet with client. __________ __________ Attorney agreement. __________ __________ Explain LLC form of business. __________ __________ Pre-incorporation agreement. __________ __________ Complete the LLC checklist. __________ __________ Call secretary of state to verify LLC name Yes_____ No_____ __________ __________ Reserve LLC name--Yes_____ No_____ __________ __________ Letter to client regarding formation of LLC and fee. __________ __________ Letter to client regarding operation of LLC. __________ __________ Letter to client regarding LLC responsibilities. __________ __________ Notice of intent to incorporate ongoing business. __________ __________ Publish notice to incorporate ongoing business Yes_____ No _____ __________ __________ Draft Certificate of Formation. __________ __________ File the same with the Secretary of State's office.


__________ __________ Upon receipt of LLC charter from the Secretary of State's office, prepare the Company Agreement, stock certificates, LLC options, if desired, i.e., Section 1244 stock plan, medical reimbursement plan. __________ __________ Order minute book Date ordered __________ From whom __________ __________ __________ Set day and time for organizational meeting. __________ __________ Hold organizational meeting. __________ __________ Obtain bank authorization. __________ __________ Issue stock certificates. __________ __________ Complete and mail in application for employer's ID number. __________ __________ Each year 30 days prior to date for annual meeting, send letters NOTES ______________________________________________________________ _______________________________________________________________ ______________________________________________________________ _______________________________________________________________


Limited liability company names 1. A limited liability company's name must contain the word "Limited Liability Company," or "Limited Company," or the abbreviations "L.C.C.," "LLC," "LC" or "L.C.". and any additional words that may be required by law. 2. It may not contain any word or phrase indicating or implying that it is organized for any purpose other than a purpose contained in the company's Certificate of Formation. 3. Furthermore, the company's name may not be the same as, or deceptively similar to, the name of any domestic limited liability company, corporation or limited partnership existing under the laws of Texas. 4. Likewise the name may not be the same as the name of any foreign limited liability company, corporation or limited partnership authorized to transact business in Texas. The name may not be the same as one which has been reserved pursuant to the Texas Limited Liability Company Act or any other statute providing for the reservation of names by a corporation or limited partnership with the Secretary of State. 5. A limited liability company's name may be similar to a name reserved by another limited liability company, corporation, or limited partnership if written consent is obtained from the existing entity. 6. Any domestic or foreign limited liability company having authority to transact business in Texas may do so under an assumed name by filing an assumed name certificate in the manner prescribed by law.


Form: Reservation of a limited liability company names Secretary of State Statutory Filings Division Corporations Section P.O. Box 13697 Austin, Texas 78711–3697 Dear Intake Division: Pursuant to the provisions of Article 2.04 of the Texas Limited Liability Company Act, the undersigned applies for reservation of the following limited liability company name for a period of one hundred twenty days:

___________________________ Limited Liability Company Name

_________________________ Name and Address of Applicant

_______________________

Signature of Applicant or Attorney or Agent of Applicant


Application for reservation of a foreign limited liability company name 1. Application for name registration by a foreign limited liability company Secretary of State Statutory Filings Division Corporations Section P.O. Box 13697 Austin, Texas 78711-3697 Dear Intake Division: Pursuant to the provisions of Article 2.04 of the Texas Limited Liability Company Act, the undersigned hereby applies for reservation of the following foreign liability company name for a period of one hundred twenty days: 1. The name of the foreign limited liability company is ____________. 2. It was organized under the laws of [state, territory or county of organization] on [date of organization]. 3. It is carrying on or doing business, and the following is a brief statement of the business in which it is engaged: ____________. 4. Attached is a certificate from the jurisdiction of organization evidencing that the foreign limited liability company is in existence. Signed on _________________________

______________________________ [Limited Liability Company’s Name]

By: ___________________________

Its ____________________________

[Authorized Manager or Member]


Payment of filing fees to the Texas Secretary of State’s office for LLC filings, filing documents by facsimile transmission (fax filings), fax filing form and standard filing letter 1. Filing fees may be paid by personal check, firm check, a client’s check, cashier’s check, money order, credit card, or debit system account. When filing documents by facsimile transmission, fees may be paid by credit card so that the fees will be paid on the same date as the transmission. The Secretary of State’s office does not accept cash. 2. Credit card charges. The Secretary of State’s office accepts Visa and MasterCard credit cards. The fees are subject to a transaction charge of 2.1% of total fees incurred. The 2.1% processing cost fee is subject to change and should be verified on a regular basis to see if fee has increased. 3. The transaction charge is assessed per the credit card transaction. To make payments by credit card, a completed credit card payment form must be sent with the transmission, or submit the following information along in writing. This can be included in the facsimile transmission.: a. The credit card to be used, MasterCard or Visa, b. The account number, c. The expiration date, d. The signature of the card holder, e. The total fees charged, and f. The transaction charge of 2.1% of the total fees incurred. 4. To pay filing fees pursuant to a debit system account, contact the Secretary of State’s office at (512) 463-5604. Debit fees are paid through an automated clearing house, a debit system account established between the account applicant and the financial institution under contract with the Secretary of State’s office. Payment of filing fees and fax filing 1. Facsimile filings are now accepted as well as payment of filing fees by credit cards. See the above sections for a discussion of the Secretary of State filing procedures, fees, and forms: 2. The following form may be used to pay fees by a credit card.


Payment of filing fees and fax filing

SECRETARY OF STATE CORPORATION’S SECTION

CREDIT CARD PAYMENT FORM

FAX NO. (512) 463-5709 Name of Cardholder: ______________________________ Address: ______________________________ Phone No: ______________________________ Circle Type of Credit Card: Master Card/Visa Card Number: ______________________________ Expiration Date: ______________________________ Signature: ______________________________ Document: ______________________________ Entity Name: ______________________________ Filing Fee(s): ______________________________ Special Handling: ______________________________ Trust Deposit: ______________________________ Certificates/Copies: ______________________________ Filing Guide: ______________________________ Subtotal: ______________________________ 2.1% Processing Charge: ______________________________ Total: ______________________________ File Number: ______________________________ FOR OFFICE USE ONLY Preliminary Approval: Yes/No Approval Number: _________________________ Document Rejected: Yes/No Register Number: ___________________ Post Authorization Uploaded: Yes/No


Form: Filing letter to the secretary of state’s office Office of the Secretary of State of Texas Statutory Filings Division Corporations Section Special Handling P.O. Box 13697 Austin, Texas 78711-3697 Regarding [Name of the new LLC] Dear Intake Division: Enclosed please find duplicate originals of the [ name of the form, i.e. Certificate of Formation] for the above-named limited liability company and a check for [amount of the filing fee i.e. $300], the required amount for the filing fees. [Add, if desired: I have also enclosed a check in the amount of $25 to cover the costs for special handling.] Your expeditious cooperation is appreciated. Thank you in advance for your assistance and cooperation.

Very truly yours,

[Attorney's name]


Company Agreement, Operating agreement of a limited liability company. 1. The affairs of a limited liability company are governed by its Company Agreement or operating agreement. The term regulations has been replaced by the terms Company Agreement and operating agreement . The Company Agreement may contain any provisions for the regulation and management of the company not inconsistent with law or the Certificate of Formation. 2. The power to adopt, alter, amend, or repeal the Company Agreement is vested in the members of the company unless vested in whole or part in the manager or managers of the company by the Certificate of Formation or Company Agreement. 3. The following form may be used as a Company Agreement for a limited liability company. These are similar to bylaws used in a corporation. 4. Meetings may be conducted by telephone.


Form: Company Agreement for a limited liability company

COMPANY AGREEMENT FOR [LLC'S NAME], A LIMITED LIABILITY COMPANY

ARTICLE 1.

OFFICES 1.1 Registered Office and Agent. The registered office and registered agent of the Limited Liability Company shall be as designated with the Secretary of State of the State of Texas, as they may be changed from time to time. 1.2 Principal Office. The principal office of the Limited Liability Company shall be at: [Client's address] [Client's city], [Client's state] [Client's zip code]. provided that the Managers shall have power to change the location of the principal office in their discretion. 1.3 Other Offices. The Limited Liability Company may also maintain other offices at such places within or without the State of Texas as the Managers may from time to time appoint or as the business of the Limited Liability Company may require.

ARTICLE 2. MEMBERS

2.1 Admission of Members. A. In connection with the formation of this Limited Liability Company, a person acquiring an interest as a member becomes a member on the latter of: (1) the date of formation of this Limited Liability Company; or (2) the date stated in the records of this Limited Liability Company as the date that the person becomes a member or, if no date is stated in the records, on the date that the person's admission is first reflected in the records of this Limited Liability Company. B. After the formation of this Limited Liability Company, a person becomes a new member: (1) in the case of a person acquiring a membership interest directly from this Limited Liability Company, on compliance with the provisions of this Company Agreement governing admission of new members or, if this Company Agreement contains no relevant admission provisions, on the written consent of all members; and (2) in the case of an assignee of a membership interest as provided by law.


C. Any person may be a member unless the person lacks the legal capacity to become a member of the LLC. 2.2 Classes and Voting. Unless the Certificate of Formation state to the contrary or as provided by this Company Agreement, two or more classes or groups of one or more members is established, there shall be one class of members. The Certificate of Formation or any amendments thereof or by a two-thirds vote of the Members of this Limited Liability Company at a duly authorized annual or special meeting my elect to establish two or more classes or groups of one or more Members. In the event of the establishment of two or more classes or groups of one or more Members, then the following provisions shall apply: A. The rights, powers, or duties of a class or group may be senior to those of one or more existing classes or groups of members. B. If two or more classes or groups of one or more Members are established, then each class or group of Members, as far as waiver of notices, action by consent without a meeting, establishment of a record date, quorum requirements, voting in person or by proxy, or any other matter relating to the exercise of the right to vote, shall be governed by the same provisions of this Company Agreement as pertain to one class or group of members. C. Prompt notice of the taking of an action under this Company Agreement that require less than unanimous written consent of the Members and that may be taken without a meeting shall be given to the Members who have not consented in writing to the taking of the action. D. For the purposes of this section, the taking of an action includes amending this Company Agreement or creating, under provisions of this Company Agreement, a class of membership interests that was not previously outstanding. 2.3 Place and Manner of Meeting. All meetings of the Members shall be held at such time and place, within or without the State of Texas, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Members may participate in such meetings by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting as provided herein shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. 2.4 Annual Meeting. The annual meeting of the Members for the election of Managers and for the transaction of all other business which may come before the meeting shall be held in March of each year at the hour specified in the notice of the meeting. If the annual meeting is not held on the date above specified, or if the election of Managers shall not be held on that date, the Managers shall cause a special meeting of the Members in lieu thereof to be held as soon thereafter as convenient, and any business transacted or election held at that meeting shall be as


valid as if held at the annual meeting. Failure to hold the annual meeting at the designated time shall not work a dissolution of the Limited Liability Company. 2.5 Voting Lists. The officer or agent having charge of the records reflecting the membership interest of each member of each class, if more than one class, shall make, at least ten (10) days before each meeting of Members, a complete list of the Members, entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order with the address of and percentage of membership interest of each member of each class, if more than one class, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Limited Liability Company and shall be subject to inspection by any Member at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any Member during the whole time of the meeting. The original records reflecting the membership interest of each member of each class, if more than one class, shall be prima-facie evidence as to who are the Members entitled to examine such list or records or to vote any meeting of Members. Failure to comply with the requirements of this Article shall not affect the validity of any action taken at such meeting. 2.6 Special Meetings. Special meetings of the Members may be called at any time by the President or the Managers. Special meetings of Members may also be called by the Secretary upon the written request of the holders of at least ten percent (10%) of the membership interest entitled to be voted at such meeting. Such request shall state the purpose or purposes of such meeting and the proposed matters upon which actions are to be taken. 2.7 Notice. Written or printed notice stating the place, day, and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten nor more than sixty days before the date of the meeting either personally or by mail, by or at the direction of the president, the secretary or the officer or person calling the meeting, to each Member entitled to vote at the meeting, provided that such notice may be waived as provided in this Company Agreement. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the Member at his address as it appears on the records of the Limited Liability Company, with postage thereon prepaid. Any notice required to be given to any Member hereunder or under the Certificate of Formation need not be given to the Member if: (A) notice of two consecutive annual meetings of the Limited Liability Company and all notices of meetings held during the period between those annual meetings, if any, or (B) all (but in no event less than two) payments (if sent by first class mail) of distributions or interest on securities during a twelve-month period have been mailed to that person, addressed at his address as shown on the records of the Limited Liability Company, and have been returned undeliverable. Any action or meeting taken or held without notice to such person shall have the same force and effect as if the notice had been duly given. 2.8 Quorum of Members. Unless otherwise provided in the Certificate of Formation, the holders of a majority of the membership interest entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of Members, but in no event shall a quorum consist of the holders of less than one-third (1/3) of the membership interest entitled to vote for each


class, if more than one class, and thus represented at such meeting. The vote of the holders of a majority of the membership interest entitled to vote for each class, if more than one class, and thus represented at a meeting at which a quorum is present shall be the act of the Members' meeting, unless the vote of a greater number is required by law, the Certificate of Formation or this Company Agreement. 2.9 Majority Vote; Withdrawal of Quorum. With respect to any matter when a quorum is present at any meeting, the vote of the holders of a majority of the membership interest, present in person or represented by proxy, having voting power with respect to that matter, shall decide such matter brought before such meeting, unless the matter is one upon which, by express provision of the Certificate of Formation or this Company Agreement, or by an express provision of the statutes which is applicable to such vote unless overridden by the Certificate of Formation, a different vote is required, in which case such express provision shall govern and control the decision of such matter. The Members present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough Members to leave less than a quorum. 2.10 Voting Of Membership Interest. Each outstanding membership interest, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of Members, except to the extent that the voting rights of the membership interest of any class or classes are limited or denied by the Certificate of Formation or by law. Membership interest owned by another Limited Liability Company or corporation, the majority of the membership interest or voting stock of which is owned or controlled by this Limited Liability Company, and membership interest held by this Limited Liability Company in a fiduciary capacity shall not be voted, directly or indirectly, at any meeting, and shall not be counted in determining the total membership interest in any given time. A Member may vote either in person or by proxy executed in writing by the Member or by his duly authorized attorney in fact. No proxy shall be valid after eleven (11) months from the date of its execution unless otherwise provided in the proxy. Each proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest. At each election for Managers every Member entitled to vote at such election shall have the right to vote, in person or by proxy, the percentage of membership interest owned by him for as many persons as there are Managers to be elected and for whose election he has a right to vote, or unless prohibited by the Certificate of Formation, to cumulate his votes by giving one candidate as many votes as the number of such Managers multiplied by the percentage of his membership interest shall equal, or by distributing such votes on the same principal among any number of such candidates. Any member who intends to cumulate his votes as herein authorized shall give written notice of such intention to the Secretary of the Limited Liability Company on or before the day preceding the election at which such Member intends to cumulate his votes. All members may cumulate their votes if any Member gives the written notice provided for herein.


2.11 Closing Record Books and Fixing Record Date. For the purpose of determining Members entitled to notice of or to vote at any meeting of Members or any adjournment thereof, or entitled to distribution or in order to make a determination of Members for any other proper purpose, the Managers may provide that the record books shall be closed for a stated period not exceeding sixty (60) days. If the record books shall be closed for the purpose of determining Members entitled to notice of or to vote at a meeting of Members, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the record books, this Company Agreement or in the absence of an applicable Company Agreement, the Managers may fix in advance a date as the record date for any such determination of Members, such date in any case to be not more than sixty (60) days and in the case of a meeting of Members, not less than ten (10) days prior to the date of which the particular action requiring such determination of Members is to be taken. If the record books are not closed and no record date is fixed for the determination of Members entitled to notice of or to vote at a meeting of Members, or Members entitled to receive distribution, the date on which notice of the meeting is mailed or the date on which the resolution of the Managers declaring such distribution is adopted, as the case may be, shall be the record date for such determination of Members. When a determination of Members entitled to vote at any meeting of Members has been made as provided in this section, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of record books and the stated period of closing has expired. 2.12 Fixing Record Dates for Consents to Action. Unless a record date shall have previously been fixed or determined herein, whenever action by Members is proposed to be taken by consent in writing without a meeting of Members, if provided for by the Certificate of Formation, the Managers may fix a record date for purposes of determining Members entitled to consent to that action, which record date shall not precede, and shall not be more than ten days after, the date upon which the resolution fixing the record date is adopted by the Managers. If no record date has been fixed by the Managers and the prior action of the Managers is not required by the Texas Limited Liability Company Act, and any amendments thereto, the record date for determining Members entitled to consent to action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Limited Liability Company by delivery to its registered office, its principal place of business, or an officer of the Limited Liability Company having custody of the books in which proceedings of meetings of Members are recorded. Delivery shall be by hand or by certified or registered mail, return receipt requested. Delivery to the Limited Liability Company's principal place of business shall be addressed to the president or the principal executive officer of the Limited Liability Company. If no record date has been fixed by the Managers and prior action of the Managers is required by the statute, the record date for determining Members entitled to consent to action in writing without a meeting shall be at the close of business on the date on which the Managers adopt a resolution taking such prior action. 2.13 Action Without Meeting. Any action required by the Texas Limited Liability Company Act, as amended, to be taken at a meeting of the Members, or any action which may be taken at a meeting of the Members, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall have been signed by the holder or holders of all the membership interest for each class, if more than one class, entitled to vote with respect to the action that is the subject matter of the consent, and such


consent shall have the same force and effect as a unanimous vote of the Members. If the Certificate of Formation of the Limited Liability Company so provide, any action required by the Texas Limited Liability Company Act, and any amendments thereto, to be taken at any annual or special meeting of Members, or any action which may be taken at any annual or special meeting of Members, may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holder or holders of membership interest of each class, if more than one class, having not less than the minimum number of votes that would be necessary to take such action at a meeting at which the holders of all membership interest of each class, if more than one class, entitled to vote on the action were present and voted. Every written consent pursuant to this Section shall be signed, dated and delivered in the manner required by, and shall become effective at the time and remain effective for the period specified by, the Texas Limited Liability Company Act, and any amendments thereto. A Telegram, telex, cablegram, or similar transmission by a Member, or a photographic, Photostat, facsimile, or similar reproduction of a writing signed by a Member, shall be regarded as signed by the Member for purposes of this Section. Prompt notice of the taking of any action by Members without a meeting by less than unanimous written consent shall be given to those Members who did not consent in writing to the action. For purposes of this section, the taking of an action includes amending this Company Agreement or creating, under provisions of these this Company Agreement, a class of membership interest that was not previously outstanding. 2.14 Assignment of Membership Interest. A. Unless otherwise provided by these this Company Agreement: (1) a membership interest is assignable in whole or in part; (2) an assignment of a membership interest does not entitle the assignee to become, or to exercise rights or powers of, a member; (3) an assignment entitles the assignee to receive distributions, to which the assignor was entitled, to the extent those items are assigned; and (4) until the assignee becomes a member, the assignor member continues to be a member and to have the power to exercise any rights or powers of a member, except to the extent those rights or powers are assigned. B. This Company Agreement provides that a Member's membership interest may be evidenced by a certificate of membership interest issued by this Limited Liability Company, provide for the assignment or transfer of membership interests represented by a certificate, and make other provisions with respect to the certificate. 2.15 Right Of Assignee to Become Member.


A. An assignee of a membership interest may become a Member if and to the extent that all Members consent. It is the intent of this Company Agreement that the tax status of this Limited Liability Company be the same as for a partnership, and except as allowed by the Internal Revenue Code and any corresponding rules and regulations, it is intended that this Limited Liability Company shall not allow free transferability of interests, and to the extent possible, this Company Agreement shall be read and interpreted to prohibit the free transferability of interests of any Member. B. An assignee who becomes a Member has, to the extent assigned, the rights and powers and is subject to the restrictions and liabilities of a Member under this Company Agreement and the Texas Limited Liability Company Act, as amended from time to time. Unless otherwise provided by this Company Agreement, an assignee who becomes a Member also is liable for the obligations of the assignor to make contributions but is not obligated for liabilities unknown to the assignee at the time the assignee became a Member and which could not be ascertained from this Company Agreement. C. Whether or not an assignee of a membership interest becomes a member, the assignor is not released from the assignor's liability to this Limited Liability Company. 2.16 Death, Resignations, Expulsion, Bankruptcy or Dissolution of a Member. Any Member may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time is specified, then at the time of its receipt by the President or Chairman. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. Any Member may be expulsed from this Limited Liability Company by an affirmative vote of at least 67% of the Members of each class or group to which the Member belongs at any annual or special meeting of the Members. This Limited Liability Company shall be dissolved upon the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member, or upon the occurrence of any other event that terminates the continued membership of a Member in this Limited Liability Company, unless the remaining Members consent unanimously, within ninety (90) days after an event of dissolution, to continue this Limited Liability Company. It is the intent of this Company Agreement that the tax status of this Limited Liability Company be the same as for a partnership, and except as allowed by the Internal Revenue Code and any corresponding rules and regulations, it is intended that this Limited Liability Company shall not have continuity of life and shall be read and interpreted as to prohibit continuity of life. 2.17 Distribution On Withdrawal. Except as otherwise provided by the Texas Limited Liability Company Act, as amended from time to time, the Certificate of Formation or this Company Agreement, on withdrawal, any withdrawing member is entitled to receive, within a reasonable time after withdrawal, the fair value of that Member's interest in this Limited Liability Company as of the date of withdrawal. 2.18 Distribution in Kind. Except as provided by the Certificate of Formation or this Company Agreement, a Member, regardless of the nature of the Member's contribution, may not demand or receive a distribution from this Limited Liability Company in any form other than cash.


2.19 Right to Distribution. Subject to the Texas Limited Liability Company Act, as amended from time to time, at the time that a Member becomes entitled to receive a distribution, with respect to a distribution, that Member has the status of and is entitled to all remedies available to a creditor of the Limited Liability Company. 2.20 Limitation on Distribution. A. This Limited Liability Company may not make a distribution to its Members to the extent that, immediately after giving effect to the distribution, all liabilities of this Limited Liability Company, other than liabilities to Members with respect to their interests and liabilities for which the recourse of creditors is limited to specified property of this Limited Liability Company, exceed the fair value of this Limited Liability Company assets, except that the fair value of property that is subject to a liability for which recourse of creditors is limited shall be included in this Limited Liability Company assets only to the extent that the fair value of that property exceeds that liability. B. A Member who receives a distribution that is not permitted under this Company Agreement has no liability under the Texas Limited Liability Company Act, as amended from time to time, to return the distribution unless the Member knew that the distribution violated the prohibition of the Texas Limited Liability Company Act, as amended from time to time. This does not affect any obligation of the Members under this Company Agreement or other applicable law to return the distribution. 2.21 Capital Accounts of the Members. A capital account will be established for each Member and maintained in such a manner to correspond with the capital of the Members as reported for federal income tax purposes. Each Member's capital account shall be credited with the value of a Member's contribution of cash or other property to the Limited Liability Company, and shall be credited or charged annually with the Member's distributive share of items of income, gain, loss, deduction and credit for federal income tax purposes. Distributions of cash or other property to Members shall be charged against their respective capital accounts as withdrawal of capital. The federal income tax basis of a Member's interest in the Limited Liability Company, of property contributed to the Limited Liability Company by a Member, and all other matters pertaining to the distributive share and taxation of items of income, gain, loss, deduction and credit will be as otherwise prescribed by Subchapter K of the Internal Revenue Code. The capital accounts will not bear interest.

ARTICLE 3. MANAGERS

3.1 Managers. The business and affairs of the Limited Liability Company shall be managed by a Manager or Managers. At anytime, upon written consent by the Managers, the Managers may assign the management of the Limited Liability Company to the Members. Managers need not be residents of the State of Texas or Members in the Limited Liability Company.


3.2 Number; Qualification; Election; Term. The number of Managers shall be not less than one nor more than ten. The number of initial Managers shall be the number fixed by the Certificate of Formation. Thereafter, within the limits above specified, the number of Managers shall be determined by resolution of the Managers. 3.3 Classification of Managers. At any time by affirmative vote of the Managers at an annual Managers' meeting or by affirmative vote of the holders of a majority of membership interest at an annual Members' meeting, this Company Agreement may provide that the Managers shall be divided into either two or three classes, each class to be as nearly equal in number as possible, the terms of office of Managers of the first class to expire at the first annual meeting of Members after their election, that of the second class to expire at the second annual meeting after their election, and that of the third class, if any, to expire at the third annual meeting after their election. If this classification of Managers is implemented, (1) the whole number of Managers of this Limited Liability Company need not be elected annually, and (2) at each annual meeting after such classification, the number of Managers equal to the number of the class whose term expires at the time of such meeting shall be elected to hold office until the second succeeding annual meeting, if there be two classes, or until the third succeeding annual meeting, if there be three classes. 3.4 Powers of Managers. Every Manager is an agent of this Limited Liability Company for the purpose of its business and the act of a Manager, including the execution in the name of the Limited Liability Company of any instrument for apparently carrying on in the usual way the business of this Limited Liability Company, binds the Limited Liability Company unless the Manager so acting otherwise lacks the authority to act for this Limited Liability Company and the person with whom the Manager is dealing has knowledge of the fact that the Manager has no such authority. 3.5 Removal. Any and all Managers may be removed, either for or without cause, at any special meeting of Members by the affirmative vote of a majority of the membership interest entitled to vote at elections of Managers. The notice calling such meeting shall give notice of the intention to act upon such matter, and if the notice so provides, the vacancy caused by such removal may be filled at such meeting by vote of a majority of the membership interest represented at such meeting and entitled to vote for the election of Managers. 3.6 Resignations. Any Manager may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified then at the time of its receipt by the President or Chairman. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation. 3.7 Vacancies. Any vacancy occurring in the Managers may be filled by the affirmative vote of a majority of the remaining Managers, though less than a quorum of the Managers. A Manager elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office. Any Manager position to be filled by reason of an increase in the number of Managers shall be filled by election at an annual meeting or at a special meeting of Members called for that purpose.


3.8 Election of Managers. Unless otherwise provided by the Certificate of Formation, Managers shall be elected by plurality of the votes cast by the holders of membership interest entitled to vote in the election of Managers at a meeting of Members at which a quorum is present. Cumulative voting shall not be permitted. 3.9 Place and Manner of Meetings. Meetings of the Managers, regular or special, may be held either within or without the State of Texas. Managers may participate in such meetings by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting as provided herein shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. 3.10 First Meetings. The first meeting of the newly elected Managers shall be held without further notice immediately following the annual meeting of Members, and at the same place, unless by unanimous consent of the Managers then elected and serving, such time or place shall be changed. 3.11 Regular Meeting of Managers. A regular meeting of the Managers may be held at such time as shall be determined from time to time by resolution of the Managers. 3.12 Special Meeting of Managers. The Secretary shall call a special meeting of the Managers whenever requested to do so by the President or by any two Managers. Such special meeting shall be held at the time specified in the notice of meeting. Except as otherwise expressly provided by statute, or by the Certificate of Formation, or by this Company Agreement, neither the business to be transacted at, nor the purpose of, any special meeting need be specified in a notice or waiver of notice. 3.13 Notice Of Managers' Meeting. All meetings of the Managers (annual, regular or special) shall be held upon five (5) days' written notice stating the date, place and hour of meeting delivered to each Manager either personally or by mail or at the direction of the President or the Secretary or the officer or person calling the meeting. In any case where all of the Managers execute a waiver of notice of the time and place of meeting, no notice thereof shall be required, and any such meeting (whether annual, regular or special) shall be held at the time and at the place (either within or without the State of Texas) specified in the waiver of notice. Attendance of Managers at any meeting shall constitute a waiver of notice of such meeting, except where the Managers attend a 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. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Managers need be specified in the notice or waiver of notice of such meeting. 3.14 Action Without Meeting. Any action required by statute to be taken at a meeting of the Managers, or any action which may be taken at a meeting of the Managers, may be taken without


a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the Managers. Such consent shall have the same force and effect as a unanimous vote at a meeting. 3.15 Quorum; Majority Vote. At all meetings of the Managers a majority of the number of Managers fixed by this Company Agreement shall constitute a quorum for the transaction of business unless a greater number is required by law or by the Certificate of Formation. The act of a majority of the Managers present at any meeting at which a quorum is present shall be the act of the Managers unless the act of a greater number is required by statute, by the Certificate of Formation or by this Company Agreement. If a quorum shall not be present at any meeting of the Managers, the Managers present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present. 3.16 Compensation. By resolution of the Managers, the Managers may be paid their expenses, if any, of attendance at each meeting of the Managers and may be paid a fixed sum for attendance at each meeting of the Managers or a stated salary as Manager. No such payment shall preclude any Manager from serving the Limited Liability Company in any other capacity and receiving appropriate compensation. Members of any special or standing committees may, by resolution of the Managers, be allowed like compensation for attending committee meetings. 3.17 Procedure. The Managers shall keep regular minutes of its proceedings. The minutes shall be placed in the minute book of the Limited Liability Company. 3.18 Interested Managers, Officers and Members. A. Interested Managers. No contract or transaction between this Limited Liability Company and one or more of its Managers or officers, or between this Limited Liability Company and any other limited liability company, corporation, partnership, association, or other organization in which one or more of its Managers or officers are managers or officers or have a financial interest, shall be void or voidable solely for this reason, solely because the Manager or officer is present at or participates in the meeting of Managers or of a committee of Managers which authorizes the contract or transaction, or solely because such Manager's or Managers' votes are counted for such purpose, if: (1) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Managers or the committee, and the Managers or committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested Managers, even though the disinterested Managers be less than a quorum; or (2) The material facts as to the relationship or interest and as to the contract or transaction are disclosed or are known to the Members entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the Members; or (3) The contract or transaction is fair as to this Limited Liability Company as of the time it is authorized, approved, or ratified by the Managers, a committee thereof, or the Members.


B. Common or interested Managers may be counted in determining the presence of a quorum at a meeting of the managers or of a committee which authorizes the contract or transaction. C. Non-Exclusive. This provision shall not be construed to invalidate any contract or transaction which would be valid in the absence of this provision.

ARTICLE 4. COMMITTEES OF THE MANAGERS

4.1 Designation. The Managers may, by resolution adopted by a majority of the Managers, designate from the Managers one or more committees, each of which shall be comprised of one or more of its Managers, and may designate one or more of its Managers as alternate members of any committee, who may, subject to any limitations imposed by the Managers, replace absent or disqualified Managers at any meeting of that committee. 4.2 Authority. Any such committee, to the extent provided in such resolution or the Certificate of Formation or by this Company Agreement, shall have and may exercise all of the authority of the Managers in the management of the business and affairs of the Limited Liability Company, subject to the limitations set forth in the Texas Limited Liability Company Act, and all amendments thereto. 4.3 Procedure. Each such committee shall keep regular minutes of its proceedings and report the same to the Managers when required. 4.4 Removal. Any members of any such committee may be removed by the Managers by the affirmative vote of a majority of the Managers, whenever in their judgment the best interests of the Limited Liability Company will be served thereby. 4.5 Responsibility. The designation of one or more committees and the delegation of authority to any such committee shall not operate to relieve the Managers of any responsibility imposed upon them by law.

ARTICLE 5. OFFICERS

5.1 Number. The officers of the Limited Liability Company shall consist of a president and a secretary, each of whom shall be elected by the Managers. Such offices may be held by the same person. 5.2 Election. The Managers, at their first meeting after each annual meeting of Members, shall choose a president and a secretary. No officers need be a Manager, a Member, or a resident of Texas.


5.3 Other Officers. The Managers may elect or appoint such other officers and agents as they shall deem necessary, who shall be appointed for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Managers. Any two or more offices may be held by the same person. 5.4 Term. Each officer of the Limited Liability Company shall hold office until his successor is chosen and qualified in his stead or until his death or until his resignation or removal from office. 5.5 Removal. Any officer or agent or member of a committee elected or appointed by the Managers may be removed by the Managers whenever in their judgment the best interest of the Limited Liability Company will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent or member of a committee shall not of itself create contract rights. 5.6 Vacancies. If any office becomes vacant for any reason, the vacancy may be filled by the Managers. The officer so elected shall be elected for the unexpired term of his predecessor in office. 5.7 Compensation. The compensation of all officers and agents shall be fixed by the Managers. 5.8 Power Of Officers. A. The Managers may designate one or more persons as officers of the Limited Liability Company who are not Managers. Every officer is an agent of the Limited Liability Company for the purpose of its business and the act of an officer, including the execution in the name of the Limited Liability Company of any instrument for apparently carrying on in the usual way the business of the Limited Liability Company, binds the Limited Liability Company unless the officer so acting otherwise lacks the authority to act for the Limited Liability Company and the person with whom the officer is dealing has knowledge of the fact that the officer has no such authority. B. Each officer shall have, subject to this Company Agreement, in addition to the duties and powers specifically set forth herein, such powers and duties as are commonly incident to his office and such duties and powers as the Managers shall from time to time designate. All officers shall perform their duties subject to the directions and under the supervision of the Managers. The president may secure the fidelity of any officers by bond or otherwise. 5.9 Chairman. The Chairman, if there shall be such an officer, shall, if present, preside at all meetings of the Managers and exercise and perform such other powers and duties as may from time to time be assigned to the Chairman or prescribed by this Company Agreement. 5.10 President. Subject to the supervisory powers, if any, as may be given by the Managers to the Chairman, if there be such an officer, the President shall be the chief executive officer of the Limited Liability Company, and subject to the control of the Managers, shall, in general,


supervise and control all of the business and affairs of the Limited Liability Company. He shall see that all orders and resolutions of the Managers are carried out, subject however, to the right of the Managers to delegate specific powers, to any other officer of the Limited Liability Company, except as may be by statute exclusively conferred on the President. The President shall preside at all meetings of the Members and the Managers in the absence of the Chairman. The President or any Vice President together with the Secretary or any Assistant Secretary may execute certificates of membership of the Limited Liability Company, any deeds, mortgages, bonds, contract or other instrument, in the name of the Limited Liability Company, which the Managers have authorized to be executed, except in cases where the signing and execution thereof shall be delegated by the Managers or by this Company Agreement to some other officer or agent of the Limited Liability Company, or shall be required by law to be otherwise signed and executed. If in accordance with this Company Agreement, the Limited Liability Company seal is to be affixed to an instrument, the President shall affix the Limited Liability Company seal to such instrument and the seal when so affixed shall be attested by the signature of the Secretary. The President shall be an ex-officio member of all standing committees, including the executive committee, if any. The President shall submit a report of the operations of the Limited Liability Company for the year to the Managers at their meeting next preceding the annual meeting of the Members and to the Members at their annual meeting. The President shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Managers and this Company Agreement. 5.11 Vice Presidents. In the absence or disability of the President, the Vice President shall perform all the duties of the President. If there is more than one Vice President, the Senior Vice President (in order of their rank as fixed by the Managers, or if not ranked, the Vice President designated by the Managers) shall perform all the duties of the President. When so acting such person shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Managers or this Company Agreement. 5.12 The Secretary and Assistant Secretaries. The Secretary shall attend all meetings of the Managers and all meetings of the Members and shall record all votes and the minutes of all proceedings in a book suitable for that purpose, and shall perform like duties for the standing committees when required. He shall give or cause to be given notice of all meetings of the Members and all meetings of the Managers required by this Company Agreement or law to be given. If for any reason the Secretary shall fail to give notice of any special meeting of the Managers called by one or more of the persons identified in this Company Agreement, or if he shall fail to give notice of any special meeting of the Members called by one or more of the persons identified in this Company Agreement, then any such person or persons may give notice of any such special meeting. It shall also be the duty of the Secretary to execute together with the President all certificates of membership issued by the Limited Liability Company. The Secretary shall also keep or cause to be kept, a certificate of membership book in which shall be correctly recorded all transactions pertaining to the membership interest of the Limited Liability Company. If in accordance with this Company Agreement the Limited Liability Company seal is to be affixed to an instrument, the Secretary shall attest with his or her signature after such seal has been affixed by the President in accordance with this Company Agreement. The Secretary shall keep in safe custody the seal of the Limited Liability Company. The Secretary shall have


such other powers and perform such other duties as from time to time may be prescribed by him by the Managers or this Company Agreement. The Assistant Secretaries in order of their seniority shall, in absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary. The Assistant Secretaries shall perform such other duties as the Managers shall prescribe or as provided in this Company Agreement. In the absence of the Secretary or an Assistant Secretary, the minutes of all meetings of the Managers and Members shall be recorded by such person as shall be designated by the President or by the Managers. 5.13 The Treasurer and Assistant Treasurers. The Treasurer shall have the custody of the Limited Liability Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Limited Liability Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Limited Liability Company in such depositories as may be designated by the Managers. The Treasurer shall disburse the funds of the Limited Liability Company as may be ordered by the Managers, taking proper vouchers for such disbursements. He shall keep and maintain or cause to be kept and maintained, the Limited Liability Company's books of account and shall render to the President and Managers an account of all his transactions as Treasurer and of the financial condition of the Limited Liability Company and exhibit his books, records and accounts to the President or Managers at any reasonable time. He shall disburse funds for capital expenditures as authorized by the Managers and in accordance with the orders of the President, and present to the President for his attention any requests for disbursing funds if in the judgment of the Treasurer any such request is not properly authorized. He shall make a detailed annual report of the entire business and financial condition of the Limited Liability Company. If required by the Managers, he shall give the Limited Liability Company a bond in such sum and with such surety or sureties as shall be satisfactory to the Managers for the faithful performance of the duties of his office and for the restoration to the Limited Liability Company, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Limited Liability Company. The Treasurer shall have such other powers and perform such other duties as from time to time may be prescribed for him by the Managers or this Company Agreement. The Assistant Treasurers in the order of their seniority shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer. When so acting such person shall have all the powers of and be subject to all the restrictions upon the Treasurer. The Assistant Treasurers shall perform such other duties and have such powers as the Managers shall prescribe or as provided in this Company Agreement. 5.14 Delegation of Authority. In the case of the absence of any officer of the Limited Liability Company or any other reason that the Managers may deem sufficient, the Managers may delegate some or all of the powers or duties of such officer to any other officer or to any Manager, employee, Member or agent for whatever period of time seems desirable, providing that a majority of the Managers concurs therein. 5.15 Filling of Offices. The Managers of the Limited Liability Company shall not be required to fill the offices of Vice President, Assistant Secretary, and Assistant Treasurer, or to name an executive committee or any other committee until, in the opinion of the Managers, there is a need for such offices, committees or any of them, to be filled.


5.16 Resignations. Any officer may resign at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or, if no time be specified then at the time of its receipt by the President or Secretary. The acceptance of a resignation shall not be necessary to make it effective, unless expressly so provided in the resignation.

ARTICLE 6.

INDEMNIFICATION 6.1 Definitions. For purposes of this Article VI: A. "Limited Liability Company" includes any domestic or foreign predecessor entity of the Limited Liability Company in a merger, consolidation, or other transaction in which the liabilities of the predecessor are transferred to the Limited Liability Company by operation of law and in any other transaction in which the Limited Liability Company assumes the liabilities of the predecessor but does not specifically exclude liabilities that are the subject matter of this Article. B. "Manager" means any person who is or was a Manager of the Limited Liability Company and any person who, while a Manager of the Limited Liability Company, is or was serving at the request of the Limited Liability Company as a Manager, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise. C. "Expenses" include court costs and attorneys' fees. D. "Official capacity" means: (1) when sued with respect to a Manager, the office of Manager in the Limited Liability Company; and (2) when used with respect to a person other than a Manager, the elective or appointive office in the Limited Liability Company held by the officer or the employment or agency relationship undertaken by the employee or agent in behalf of the Limited Liability Company; provided, however, that in each case described in paragraphs (1) and (2) of this Subsection (d), "official capacity" does not include service for any other foreign or domestic Limited Liability Company, corporation, or any partnership, joint venture, sole proprietorship, trust, employee benefit plan, or other enterprise. E. "Proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative, any appeal in such an action, suit, or proceeding, any inquiry or investigation that could lead to such an action, or proceeding.


6.2 Standard For Indemnification. The Limited Liability Company shall indemnify a person who was, is or is threatened to be made a named defendant or respondent in a proceeding because the person is or was a Manager of the Limited Liability Company only if it is determined in accordance with this Article that the person: A. conducted himself in good faith; B. reasonably believed: (1) in the case of conduct in his official capacity as a Manager of the Limited Liability Company, that his conduct was in the Limited Liability Company's best interests; and (2) in all other cases, that his conduct was at least not opposed to the Limited Liability Company's best interests; and C. in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. 6.3 Prohibited Indemnification. Except to the extent permitted by this Article, a Manager may not be indemnified under any section of this Article in respect of a proceeding: A. in which the person is found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the person's official capacity; or B. in which the person is found liable to the Limited Liability Company. 6.4 Effect of Termination of Proceeding. The termination of a proceeding by judgment, order, settlement, or conviction, or on a plea of nolo contendere or its equivalent is not of itself determinative that the person did not meet the requirements set forth in any section of this article. A person shall be deemed to have been found liable in respect of any claim, issue or matter only after the person shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom. 6.5 Extent of Indemnification. A person shall be indemnified under this Article against judgments, penalties (including excise and similar taxes), fines, settlements, and reasonable expenses actually incurred by the person in connection with the proceeding; but if the person is found liable to the Limited Liability Company or is found liable on the basis that personal benefit was improperly received by the person, the indemnification shall: A. be limited to reasonable expenses actually incurred, and B. not be made in respect of any proceeding in which the person shall have been found liable for willful or intentional misconduct in the performance of such person's duty to the Limited Liability Company.


6.6 Determination of Indemnification. A determination of indemnification under any section of this Article must be made: A. by a majority vote of a quorum consisting of Managers who at the time of the vote are not named defendants or respondents in the proceeding; B. if such a quorum cannot be obtained, by a majority vote of a committee of the Managers, designated to act in the matter by a majority vote of all Managers, consisting solely of two or more Managers who at the time of the vote are not named defendants or respondents in the proceeding; C. by a special legal counsel selected by the Managers or a committee of the Managers by vote as set forth in Subsection (A) and (B) of this Section, or if such a quorum cannot be obtained and such a committee cannot be established, by a majority vote of all Managers; or D. by the Members in a vote that excludes the membership interest held by Managers who are named defendants or respondents in the proceeding. 6.7 Authorization of Indemnification. Authorization of indemnification and determination as to reasonableness of expenses must be made in the same manner as the determination that indemnification is permissible, except that (i) if the determination that indemnification is permissible is made by special legal counsel, authorization of indemnification and determination as the reasonableness of expenses must be made in the manner specified by the foregoing section for the selection of special legal counsel, and (ii) the provision of this Article making indemnification mandatory in certain cases specified herein shall be deemed to constitute authorization in the manner specified by this Section of indemnification in such cases. 6.8 Successful Defense of Proceedings. Except as provided otherwise by law or by this Company Agreement, the Limited Liability Company shall indemnify a Manager against reasonable expenses incurred by him in connection with a proceeding in which he is a named defendant or respondent because he is or was a Manager if he has been wholly successful, on the merits or otherwise, in the defense of the proceeding. 6.9 Court Order in Suit For Indemnification. If, in a suit for indemnification required by the foregoing Section, a court of competent jurisdiction determines that the Manager is entitled to indemnification under that section, the court shall order indemnification and shall award to the Manager the expenses incurred in securing the indemnification. 6.10 Court Determination of Indemnification. If, upon application of a Manager, a court of competent jurisdiction determines, after giving any notice the court considers necessary, that the Manager is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he has met the requirements set forth in any Section of this Article or has been found liable in the circumstances described in any Section of this Article, the court may order the indemnification that the court determines is proper and equitable; but, if the person is found liable to the Limited Liability Company or is found liable on the basis that personal


benefit was improperly received by the person, the indemnification shall be limited to reasonable expenses actually incurred by the person in connection with the proceeding. 6.11 Advancement of Expenses. Reasonable expenses incurred by a Manager who was, is, or is threatened to be made a named defendant or respondent in a proceeding shall be paid or reimbursed by the Limited Liability Company in advance of the final disposition of the proceeding, without the authorization or determination specified in this Article, after the Limited Liability Company receives a written affirmation by the Manager of his good faith belief that he has met the standard of conduct necessary for indemnification under this Article and a written undertaking, which must be an unlimited general obligation of the Manager (and can be accepted without reference to financial ability to make repayment) but need not be secured, made by or on behalf of the Manager to repay the amount paid or reimbursed if it is ultimately determined that he has not met that standard or if it is ultimately determined that indemnification of the Manager against expenses incurred by him in connection with that proceeding is prohibited by this Article. A provision contained in the Certificate of Formation, this Company Agreement, a resolution of Members or Managers, or an agreement that makes mandatory the payment or reimbursement permitted under this Section shall be deemed to constitute authorization of that payment or reimbursement. 6.12 Expenses Of Witness. Notwithstanding any other provision of this Article, the Limited Liability Company may pay or reimburse expenses incurred by a Manager in connection with his appearance as a witness or other participation in a proceeding at a time when he is not a named defendant or respondent in the proceeding, given that such appearance or participation occurs by reason of his being or having been a Manager of the Limited Liability Company. 6.13 Indemnification of Officers. The Limited Liability Company shall indemnify and advance or reimburse expenses to a person who is or was an officer of the Limited Liability Company to the same extent that it shall indemnify and advance or reimburse expenses to Managers under this Article. 6.14 Indemnification of other Persons. The Limited Liability Company may indemnify and advance expenses to any person who is not or was not an officer, employee, or agent of the Limited Liability Company but who is or was serving at the request of the Limited Liability Company as a manager, director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise to the same extent that it shall indemnify and advance expenses to Managers under this Article. 6.15 Advancement of Expenses to Officers And Others. The Limited Liability Company shall indemnify and advance to an officer, and may indemnify and advance expenses to an employee or agent of the Limited Liability Company, or other person who is identified in the foregoing Section and who is not a Manager, to such further extent as such person may be entitled by law, agreement, vote of Members or otherwise. 6.16 Continuation of Indemnification. The indemnification and advance payments provided by this Article shall continue as to a person who has ceased to hold his position as a Manager,


officer, employee or agent, or other person described in any section of this Article, and shall inure to his heirs, executors and administrators. 6.17 Liability Insurance. The Limited Liability Company may purchase and maintain insurance or another arrangement on behalf of any person who is or was a Manager, officer, employee, or agent of the Limited Liability Company or who is or was serving at the request of the Limited Liability Company as a manager, director, officer, partner, venturer, proprietor, trustee, employee, agent, or similar functionary of another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, against any liability asserted against him and incurred by him in such a capacity or arising out of his status as such a person, whether or not the Limited Liability Company would have the power to indemnify him against that liability under this Article. If the insurance or other arrangement is with a person or entity that is not regularly engaged in the business of providing insurance coverage, the insurance or arrangement may provide for payment of a liability with respect to which the Limited Liability Company would not have the power to indemnify the person only if including coverage for the additional liability has been approved by the Members of the Limited Liability Company. Without limiting the power of the Limited Liability Company to procure or maintain any kind of insurance or other arrangement, the Limited Liability Company may, for the benefit of persons indemnified by the Limited Liability Company, (1) create a trust fund; (2) establish any form of self-insurance; (3) secure its indemnity obligation by grant of a security interest or other lien on the assets of the Limited Liability Company; or (4) establish a letter of credit, guaranty, or surety arrangement. The insurance or other arrangement may be procured, maintained, or established within the Limited Liability Company or with any insurer or other person deemed appropriate by the Managers regardless of whether all or part of the stock or other securities of the insurer or other person are owned in whole or part by the Limited Liability Company. In the absence of fraud, the judgment of the Managers as to the terms and conditions of the insurance or other arrangement and the identity of the insurer or other person participating in an arrangement shall be conclusive and the insurance or arrangement shall not be avoidable and shall not subject the Managers approving the insurance or arrangement to liability, on any ground, regardless of whether Managers participating in the approval are beneficiaries of the insurance or arrangement. 6.18 Report To Members. Any indemnification of or advance of expenses to a manager in accordance with this Article shall be reported in writing to the Members with or before the notice or waiver of notice of the next Members' meeting or with or before the next submission to Members of a consent to action without a meeting pursuant to Section A, Article 9.10, of the Texas Business Corporation Act, as amended from time to time, and as authorized by the Texas Limited Liability Company Act, as amended from time to time, and, in any case, within the twelve-month period immediately following the date of the indemnification or advance. 6.19 Service To Employee Benefit Plan. For purposes of this Article, the Limited Liability Company is deemed to have requested a Manager to serve an employee benefit plan whenever the performance by him of his duties to the Limited Liability Company also imposes duties on or otherwise involves services by him to the plan or participants or beneficiaries of the plan. Excise taxes assessed on a Manager with respect to an employee benefit plan pursuant to applicable law are deemed fines. Action taken or omitted by him with respect to an employee benefit plan in


the performance of his duties for a purpose reasonably believed by him to be in the interest of the participants and beneficiaries of the plan is deemed to be for a purpose which is not opposed to the best interests of the Limited Liability Company.

ARTICLE 7. CERTIFICATES AND MEMBERS

7.1 Certificates. Certificates in the form determined by the Managers shall be delivered representing all membership interest to which Members are entitled. Such certificates shall be consecutively numbered, and shall be entered in the books of the Limited Liability Company as they are issued. Each certificate shall state on the face thereof the holder's name, the class of membership, the membership interest, and such other matters as may be required by the laws of the State of Texas. They shall be signed by an officer of the Limited Liability Company, and may be sealed with the seal of the Limited Liability Company or a facsimile thereof if adopted. The signature of such officer upon the certificates may be facsimile. 7.2 Replacement of Lost or Destroyed Certificate. The Managers may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Limited Liability Company alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the holder of record thereof, or his duly authorized attorney or legal representative who is claiming the certificate to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Managers in their discretion and as a condition precedent to the issuance thereof, may require the owner of such lost or destroyed certificate or certificates or his legal representative to advertise the same in such a manner as it shall require or to give the Limited Liability Company a bond with surety and in form satisfactory to the Limited Liability Company (which bond shall also name the Limited Liability Company's transfer agents and registrars, if any, as obligees) in such sum as it may direct as indemnity against any claim that may be made against the Limited Liability Company or other obligees with respect to the certificate alleged to have been lost or destroyed, or to both advertise and also give such bond. 7.3 Transfer Of Membership Interest. Upon surrender to the Limited Liability Company or the transfer agent of the Limited Liability Company of a certificate for membership interest duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Limited Liability Company to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. 7.4 Registered Members. The Limited Liability Company shall be entitled to treat the holder of record of any certificate or certificate of membership interest of the Limited Liability Company as the owner thereof for all purposes and, accordingly shall not be bound to recognize any equitable or other claim to or interest in such membership interest or any rights deriving from such membership interest on the part of any other person, including (but without limitation) a purchaser, assignee or transferee, unless and until such other person becomes the holder of record of such membership interest, whether or not the Limited Liability Company shall have either actual or constructive notice of the interest of such person, except as otherwise provided by law.


7.5 Preemptive Rights. No Member or any other person shall have any preemptive right whatsoever. 7.6 Form Of Contribution. The contribution of a member may be in cash, property, or services rendered, or a promissory note or other obligation to pay cash or transfer property to the Limited Liability Company. 7.7 Liability for Contribution Obligations. A. A promise by a member to make a contribution to, or otherwise pay cash or transfer property to, a limited liability company is not enforceable unless set out in writing and signed by the member. B. Except as otherwise provided by the Certificate of Formation or this Company Agreement, a member or the member's representative or successor is obligated to the Limited Liability Company to perform an enforceable promise to make a contribution to or otherwise pay cash or transfer property to the Limited Liability Company, notwithstanding the member's death, disability, or other change in circumstances. If a member's legal representative or successor does not make a contribution or other payment of cash or transfer of property required by the enforceable promise, whether as a contribution or with respect to a contribution previously made, that member or the member's legal representative or successor is obligated, at the option of the Limited Liability Company, to pay to the Limited Liability Company an amount of cash equal to that portion of the agreed value, as stated in this Company Agreement or in the Limited Liability Company records required to be kept under the Texas Limited Liability Company Act, as amended from time to time, of the contribution represented by the amount of cash that has not been paid or the value of the property that has not been transferred. C. The interest of a Member who fails to make a payment of cash or transfer of property to the Limited Liability Company, whether as a contribution or with respect to a contribution previously made, required by an enforceable promise is subject to specified consequences. A consequence may take the form of a reduction of the defaulting Member's percentage or other interest in the Limited Liability Company, subordination of the Member's interest to that of non defaulting members, a forced sale of the Member's interest, forfeiture of the Member's interest, the lending of money to the defaulting member by other Members of the amount necessary to meet the defaulting Member's commitment, a determination of the value of the defaulting Member's interest by appraisal or by formula and redemption or sale of the interest at that value, or other penalty or consequence. The exercise of any of the foregoing consequences shall be at the exclusive option of the Managers. D. Unless otherwise provided by this Company Agreement, the obligation of a Member or a Member's 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 Member if violation of the Texas Limited Liability Company Act, as amended from time to time, or this Company Agreement may be compromised or released only by consent of all of the Members. Notwithstanding the compromise or release, a creditor of the Limited Liability Company who extends credit or otherwise acts in reasonable reliance on that obligation, after the Member signs


a writing that reflects the obligation and before the writing is amended or canceled to reflect the compromise or release, may enforce the original obligation. E. The Limited Liability Company, by and through the Managers, will have the authority to ask (but not require) the Members to contribute additional capital when: (1) additional capital is reasonably needed to pay existing or anticipated expenses of operation and administration; debt service for any amounts borrowed by the Limited Liability Company; insurance and tax payments; the cost of acquiring, maintaining and selling property of the Limited Liability Company; and (2) the calls for capital are not discriminatory, that is, when all Members are permitted to contribute capital to the extent of each Member's percentage interest in the Limited Liability Company. Failure to make the requested capital contribution may result in the consequences as otherwise provided in this Company Agreement. 7.8 Restriction Upon Ownership And Transfer of Ownership Interest. The membership interest and transferability of membership interest in the Limited Liability Company are substantially restricted. Neither record title nor beneficial ownership of a membership interest may be transferred or encumbered without the consent of the Managers and the consent of at least of the membership interest of the Members. This Limited Liability Company is formed by a closely-held group who know and trust one another, who will have surrendered certain management rights (in exchange for limited liability) based upon their relationship and trust. Capital is also material to the business and investment objectives of the Limited Liability Company and its federal tax status. An unauthorized transfer of a membership interest could create a substantial hardship to the Limited Liability Company, jeopardize its capital base, and adversely affect its tax structure. These restrictions upon ownership and transfer are not intended as a penalty, but as a method to protect and preserve existing relationships based upon trust and the Limited Liability Company's capital and its financial ability to continue. The ownership and transfer of a membership interest is further subject to the following disclosure and condition:

THE MEMBERSHIP INTEREST OF THE LIMITED LIABILITY COMPANY HAS NOT NOR WILL BE, REGISTERED OR QUALIFIED UNDER FEDERAL OR STATE SECURITIES LAWS. THE MEMBERSHIP INTEREST OF THE LIMITED LIABILITY COMPANY MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS SO REGISTERED OR QUALIFIED, OR UNLESS AN EXEMPTION FROM REGISTRATION OR QUALIFICATION EXISTS. THE AVAILABILITY OF ANY EXEMPTION FROM REGISTRATION OR QUALIFICATION MUST BE ESTABLISHED BY AN OPINION OF COUNSEL FOR THE OWNER THEREOF, WHICH OPINION AND COUNSEL MUST BE REASONABLY SATISFACTORY TO THE LIMITED LIABILITY COMPANY.

Notwithstanding the foregoing restrictions upon transfer and ownership, the following transfers are permitted.


Death of a Member. The personal representative of a deceased Member's estate, or his or her contract beneficiary, may exercise all of the decedent's rights and powers as a Member, and the decedent's membership interest in the Limited Liability Company will continue and pass to those entitled thereto upon the Member's death. It is specifically provided that a Member may prepare a written and acknowledged document in which he or she designates one or more beneficiaries of that person's membership interest, and his or her written designation will be binding upon the Limited Liability Company if delivered to the President before or within at least 60 days after the death of the Member. Incapacity of a Member. The personal representative of an incapacitated member, acting under a durable power of attorney or Letters of Guardianship, may exercise all of a Member's rights and powers and will be entitled to receive distributions of cash or other property from the Limited Liability Company. Neither the Limited Liability Company nor any officer or Manager will have a duty to inquire as to the application or use of funds delivered to a personal representative. Estate Planning Transfers. A Member will also have the right to make estate planning transfers of all or any part of his or her membership interest in the Limited Liability Company. The term "estate planning interest" will mean any transfer made during the life of a Member without value, or for less than full consideration by way of a marital partition agreement and/or transfer of all or any part of a membership interest to a trust whose beneficiary or beneficiaries are the Member and/or the spouse of a Member, and/or the descendants of a Member, and/or one or more beneficiaries qualified to receive a charitable gift under Section 170(c) of the Internal Revenue Code. The Certificate of Formation and this Company Agreement will bind the transferee of any estate planning transfer to the exact terms and conditions of the Certificate of Formation and this Company Agreement. The Limited Liability Company will not be required to recognize the interest of any transferee who has obtained a purported interest as the result of a transfer of ownership which is not an authorized transfer. If the membership interest is in doubt, or if there is reasonable doubt as to who is entitled to a distribution of the income realized from a membership interest, the Limited Liability Company may accumulate the income until this issue is finally determined and resolved. Accumulated income will be credited to the capital account of the Member whose interest is in question. If any person or agency should acquire the interest of a Member as the result of an order of a court of competent jurisdiction which the Limited Liability Company is required to recognize, or if a Member makes an unauthorized transfer of a membership interest which the Limited Liability Company is required to recognize, the interest of the transferee may then be acquired by the Limited Liability Company upon the following terms and conditions: (a) The Limited Liability Company will have the option to acquire the membership interest by giving written notice to the transferee of its intent to purchase within 90 days from the date it is finally determined that the Limited Liability Company is required to recognize the transfer.


(b) The Limited Liability Company will have 180 days from the first day of the month following the month in which it delivers notice exercising its option to purchase the membership interest. The valuation date for the membership interest will be the first day of the month following the month in which notice is delivered. (c) Unless the Limited Liability Company and the transferee agree otherwise, the fair market value of a Member's membership interest is to be determined by the written appraisal of a person or firm qualified to value this type of business. The appraiser selected by the Limited Liability Company must be a member of and qualified by the American Society of Appraisers, Business Valuations Division, P.O. Box 17265, Washington, DC 20041 to perform appraisals. (d) Closing of the sale will occur at the registered office of the Limited Liability Company at 10 o'clock A.M. on the first Tuesday of the month following the month in which the valuation report is accepted by the transferee (called the "closing date"). The transferee must accept or reject the valuation report within 30 days from the date it is delivered. If not rejected in writing within the required period, the report will be accepted as written. If rejected, closing of the sale will be postponed until the first Tuesday of the month following the month in which the valuation of the membership interest is resolved. The transferee will be considered a non-voting owner of the membership interest, and entitled to all items of income, deduction, gain or loss from the membership interest, plus any additions or subtraction’s therefrom until closing. (e) In order to reduce the burden upon the resources of the Limited Liability Company, the Limited Liability Company will have the option, to be exercised in writing delivered at closing, to pay its purchase money obligation in 10 equal annual installments (or the remaining terms of the Limited Liability Company if less than 10 years) with interest thereon at market rates, adjusted annually as of the first day of each calendar year at the option of the Managers. The term "market rates" will mean the rate of interest prescribed as its "prime rate" by Bank of America, Dallas, Texas, as of the first day of the calendar year. If Internal Revenue Code Sections 483 and 1274A apply to this transaction, the rate of interest of the purchase money obligation will be fixed at the rate of interest then required by law. The first installment of principal, with interest due thereon, will be due and payable on the first day of the calendar year following closing, and subsequent annual installments, with interest due thereon, will be due and payable, in order, on the first day of each calendar year which follows until the entire amount of the obligation, principal and interest, is fully paid. The Limited Liability Company will have the right to prepay all or any part of the purchase money obligation at any time without premium or penalty. (f) The Managers may assign the Limited Liability Company's option to purchase to one or more of the Members (this with the affirmative consent of no less than 67% of the remaining Members, excluding the interest of the Member or transferee whose interest is to be acquired), and when done, any rights or obligations imposed upon the Limited Liability Company will instead become, by substitution, the rights and obligations of the Members who are assignees.


(g) Neither the transferee of an unauthorized transfer nor the Member causing the transfer will have the right to vote during the prescribed option period, or if the option to purchase is timely exercised, until the sale is actually closed.

ARTICLE 8. NOTICE

8.1 Method. Whenever by statute or the Certificate of Formation or this Company Agreement, notice is required to be given to any Member or Manager, and no provision is made as to how the notice shall be given, it shall not be construed to mean personal notice, but any such notice may be given in writing, postage prepaid, addressed to the Manager or Member at the address appearing on the books of the Limited Liability Company, or in any other method permitted by law. Any notice required or permitted to be given by mail shall be deemed given at the time when the same is thus deposited in the United States mails. 8.2 Waiver. Whenever, by statute or the Certificate of Formation or this Company Agreement, notice is required to be given to any Member or Manager, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated in such notice, shall be equivalent to the giving of such notice. Attendance of a Manager at a meeting shall constitute a waiver of notice of such meeting, except where a Manager attends for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. 8.3 Dissolution. A. This Limited Liability Company shall be dissolved on the first of the following to occur: (1) When the period fixed for the duration of this Limited Liability Company expires. (2) On the occurrence of events specified in the Certificate of Formation or this Company Agreement to cause dissolution. (3) Written consent of all Members to dissolution. (4) Entry of a decree of judicial dissolution under the Texas Limited Liability Company Act. B. Judicial Dissolution. On application by or for a Member, a court of competent jurisdiction may decree dissolution of this Limited Liability Company if it is not reasonably practicable to carry on the business of this Limited Liability Company in conformity with its Certificate of Formation and this Company Agreement. C. Winding Up. On the dissolution of this Limited Liability Company, this Limited Liability Company's affairs shall be wound up as soon as reasonably practicable. The winding up shall be accomplished by the Managers or Members. In addition, a court of competent


jurisdiction, on cause shown, may wind up the Limited Liability Company's affairs on application of any Member or the Member's legal representative or assignee and, in connection with the winding up, may appoint a person to carry out the liquidation and may make all other orders, directions, and inquiries that the circumstances require. D. Transfer of Assets. On the winding up of the Limited Liability Company, its assets shall be paid or transferred as follows: (1) To the extent otherwise permitted by law, to creditors, including Members who are creditors in satisfaction of liabilities (other than for distributions) of the Limited Liability Company, whether by payment or by establishment of reserves; (2) Unless otherwise provided by the Certificate of Formation or this Company Agreement, to Members and former Members in satisfaction of the Limited Liability Company's liability for distributions; and (3) Unless otherwise provided by the Certificate of Formation or this Company Agreement, to Members in the manner provided in this Company Agreement. E. Distributions Upon Termination and Dissolution of the Limited Liability Company. Upon termination and dissolution of the Limited Liability Company, the Managers will proceed to wind up the affairs of the Limited Liability Company. The liabilities and obligations to creditors and all expenses incurred in its liquidation and dissolution will be paid and will have first priority in winding up as otherwise provided in this Company Agreement. The Managers may retain from available cash and other assets of the Limited Liability Company sufficient reserves for anticipated and contingent liabilities. Undistributed cash, and other property valued at its fair market value on the date of distribution, will be distributed to the Members in the following order: (1) Distributions will first be made to repay any loans to the Limited Liability Company by a Member, including the amount of any deferred payment obligation to a Member or a Member's personal representative as the result of a buy-out by the Limited Liability Company of a Member's interest. (2) Distributions will then be made to the Members in an amount equal to the credit balances in their capital accounts so that the capital account of each Member shall be brought to zero. For the purpose of determining distributions in liquidation, a negative capital account balance will be considered to be a loan from the Limited Liability Company to a Member. (3) The balance, if any, will be made to the Members in an amount equal to each Member's percentage interest in the Limited Liability Company as determined immediately prior to the distribution of the credit balances of the Member's capital accounts. The Managers, in making or preparing to make a partial or final distribution will have the authority to: (1) partition any asset or class of assets and deliver divided and segregated interests to Members; (2) sell any asset or class of assets (whether or not susceptible to partition in kind),


and deliver to the Members a divided interest in the proceeds of sale and/or divided or undivided interests in any note and security arrangement taken as part of the purchase price; and/or (3) deliver undivided interests in an asset or class of assets to the Members subject to any indebtedness which may be secured by the property. The Limited Liability Company may continue beyond its scheduled termination date for a time reasonably necessary to conclude the administration of the Limited Liability Company, pay expenses of termination and to distribute property to those entitled thereto.

ARTICLE 9. GENERAL PROVISIONS

9.1 Distributions and Reserves. A. Declaration and Payment. Subject to statute and the Certificate of Formation, distributions to the Members may be authorized by the Managers at any regular or special meeting and made by the Limited Liability Company. Distributions may be paid in cash or in property of the Limited Liability Company. The authorization and payment of distributions shall be at the discretion of the Managers. Distributions shall be made on the basis of the agreed value, as stated in the records required to be kept under the Texas Limited Liability Company Act, as amended from time to time, of the contributions made by each Member. B. Interim Distributions. Except as otherwise provided by this Company Agreement, a Member is entitled to receive distributions from a Limited Liability Company before the Member's withdrawal from the Limited Liability Company and before the winding up of the Limited Liability Company to the extent and at the times or on the occurrence of the events specified in this Company Agreement. C. Record Date. The Managers may fix in advance a record date for the purpose of determining Members entitled to receive any distribution by the Limited Liability Company, such record date to be not more than sixty days prior to the payment of such distribution. In the absence of any action by the Managers, the date upon which the Managers adopt the resolution authorizing the distribution shall be the record date. D. Reserves. By resolution the Managers may create such reserve or reserves out of the surplus of the Limited Liability Company or designate or allocate any part or all of the surplus of the Limited Liability Company in any manner for any proper purpose or purposes, and may increase, decrease or abolish any such reserve, designation or allocation in the same manner. E. Determination of a Member's Membership Interest in the Limited Liability Company as an Entity and the Allocation and Distribution of Income, Gain, Loss, Deduction and Credit, Including Liquidating Distributions. The percentage of membership interest of each Member will be determined by dividing the balance of the Member's capital account by the total of all of the capital accounts of all Members. A Member's percentage of membership interest will be determinative of: (1) the Member's membership interest in the Limited Liability


Company as an entity; (2) a Member's membership interest in the distribution of available cash; (3) a Member's allocable share of the items of income, gain, loss, deduction and credit; and (4) a Member's distributive share of cash and other property upon dissolution of the Limited Liability Company. All income realized by the Limited Liability Company from the service of a Member is to be allocated to the Member whose service generates the income. That Member will have the affirmative obligation to report all items of income, gain, loss, deduction and credit in strict compliance with Section 704(e) of the Internal Revenue Code. 9.2 Books and Records. A. The Limited Liability Company shall maintain those books and records as provided by statute and as it may deem necessary or desirable. All books and records provided for by statute shall be open to inspection of the Members from time to time and to the extent expressly provided by statute, and not otherwise. The Managers may examine all such books and records at all reasonable times. The Limited Liability Company shall keep and maintain the following records in its principal office in the United States or make them available in that office within five days after the date of receipt of a written request as may be specified in the Texas Limited Liability Company Act, as amended from time to time: (1) a current list that states: (a) the name and mailing address of each member; (b) the percentage or other interest in the Limited Liability Company owned by each member; and (c) if one or more classes or groups are established in or under the Certificate of Formation or this Company Agreement, the names of the Members who are Members of each specified class or group; (2) copies of the federal, state, and local information or income tax returns for the Limited Liability Company's six most recent tax years. (3) a copy of the Certificate of Formation and this Company Agreement, all amendments or restatements, executed copies of any powers of attorney, and copies of any document that creates, in the manner provided by the Certificate of Formation or this Company Agreement, classes or groups of members; (4) unless contained in the Certificate of Formation or this Company Agreement, a written statement of: (a) the amount of the cash contribution and a description and statement of the agreed value of any other contribution made by each member, and the amount of the cash


contribution and a description and statement of the agreed value of any other contribution that the member has agreed to make in the future as an additional contribution; (b) the times at which additional contributions are to be made or events requiring additional contributions to be made; (c) events requiring the Limited Liability Company to be dissolved and its affairs wound up; and (d) the date on which each member in the Limited Liability Company became a member. (5) correct and complete books and records of account of the Limited Liability Company. B. The Limited Liability Company shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time. C. The Limited Liability Company shall keep in its registered office in Texas and make available to Members on reasonable request the street address of its principal United States office in which the records required by this section are maintained or will be available. D. A member or an assignee of a membership interest, on written request stating the purpose, may examine and copy, in person or by the Member's or assignee's representative, at any reasonable time, for any proper purpose, and at the Member's expense, records required to be kept under this section and other information regarding the business, affairs, and financial condition of the Limited Liability Company as is just and reasonable for the person to examine and copy. E. On the written request by any Member or an assignee of a membership interest made to the person and address designated in this Company Agreement, the Limited Liability Company shall provide to the requesting Member or assignee without charge true copies of: (1) the Certificate of Formation and this Company Agreement and all amendments or restatements; and (2) any of the tax returns described in the Texas Limited Liability Company Act, as amended from time to time. 9.3 Checks, Notes, Drafts, Etc. All checks, drafts or other orders for payment of money, notes or other evidences of indebtedness issued in the name of or payable to the Limited Liability Company shall be signed or endorsed by such officer or officers or such other person or persons as the Managers may from time to time designate. 9.4 Fiscal Year. The fiscal year of the Limited Liability Company shall end on September 30 in each year.


9.5 Seal. The Limited Liability Company seal shall be circular in form and shall contain the name of the Limited Liability Company, the year of its organization and the state of organization (Texas). Such seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. The Limited Liability Company seal may be altered by an order of the Managers at any time. The use of the Limited Liability Company seal is not required but may be used at the discretion of the President. Failure to use the Limited Liability Company seal shall not affect the validity of any transaction. 9.6 Resignation. Any Manager, officer or agent may resign by giving written notice to the president or the secretary. The resignation shall take effect at the time specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 9.7 Amendments. This Company Agreement may be altered or repealed at any annual meeting of the Members or at any special meeting of the Members at which a quorum is present or represented, provided that notice of the proposed alteration or repeal is contained in the notice of such special meeting, by the affirmative vote of a majority of the membership interest entitled to vote at such meeting and present or represented thereat. This Company Agreement may also be amended or repealed at any annual or regular meeting of the Managers or at any special meeting of the affirmative vote of a majority of the Managers, provided that notice of the proposed alteration or repeal is contained in the notice of such special meeting, except that the Managers shall not alter, amend or repeal any provision of the Company Agreement adopted by the Members which expressly provides that the Managers may not amend or repeal that provision. 9.8 Management by Members. If the Certificate of Formation of the Limited Liability Company and each certificate representing its issued and outstanding membership interests states that the business and affairs of the Limited Liability Company shall be managed by the Members of the Limited Liability Company rather than Managers, then, whenever the context so requires the Members of the Limited Liability Company shall be deemed the Managers of the Limited Liability Company for purposes of applying any provision of this Company Agreement. If the Certificate of Formation reserve the management of the Limited Liability Company to its Members, then this Company Agreement shall be interpreted as follows: the tax status of this Limited Liability Company will be the same as for a partnership, and except as allowed by the Internal Revenue Code and any corresponding rules and regulations, it is intended that this Limited Liability Company shall not allow centralization of management, and to the extent possible, this Company Agreement shall be read and interpreted to prohibit centralization of management. 9.9 Insurance. The Limited Liability Company may purchase and maintain insurance on behalf of any person who is or was a Manager, officer, employee, or agent of the Limited Liability Company or who is or was serving at the request of the Limited Liability Company as a Manager, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary or another foreign or domestic limited liability company, corporation, partnership, joint venture, sole proprietorship, trust, other enterprise, or employee benefit plan, against any liability.


9.10 Headings. The headings used in this Company Agreement have been inserted for convenience only and do not constitute matter to be construed in interpretation. 9.11 Construction. Whenever the context so requires, the masculine shall include the feminine and neuter, and the singular shall include the plural, and conversely. If any portion of this Company Agreement shall be invalid or inoperative, then, so far as is reasonable and possible: A. The remainder of this Company Agreement shall be considered valid and operative; and B. Effect shall be given to the intent manifested by the portion held invalid or inoperative. 9.12 Taxable as a Partnership. The Limited Liability Company will constitute a partnership for federal income tax purposes, and the Limited Liability Company will report all items of income, gain, loss, deduction and credit as a partnership. The Limited Liability Company is to see to the preparation of all necessary tax reports and other information required by the Internal Revenue Service and a report for income tax purposes to each member of his, her, or its distributive share of items of income, gain, loss, deduction and credit. 9.13 Retention of Distributable Income as Capital Reserves. The Limited Liability Company may retain from distributions of available cash amounts needed, in the Managers' judgment, to provide capital reserves and working capital for anticipated investments and operating expenses. The undersigned, being all the initial members, as specified in the Certificate of Formation, hereby certify that the foregoing Company Agreement were unanimously adopted by the Managers effective Tuesday, March 01, 2016.

__________________________

Director

__________________________

President

__________________________

Secretary


Notice and call of organizational meeting of members

NOTICE AND CALL OF ORGANIZATIONAL MEETING OF MEMBERS OF

LIMITED LIABILITY COMPANY The undersigned person, calls the organizational meeting of the members of ____________ limited liability company, to be held at [time] on the [date], at [address], for the purpose of adopting a Company Agreement, electing officers, and transacting such other business as may come before the meeting. Dated: __________________

________________________ Name


Minutes of a limited liability company’s organizational meeting 1. The following form may be used for the organizational meeting minutes of the managers of a limited liability company. 2. It is used in the formation of a Texas Limited Liability Company. It is the document that organizes the company and allows the company to move forward and conduct business. It is patterned after and very similar to the minutes of an organizational meeting of a corporation. It accomplishes the same purpose.


Form: Waiver Of Notice Of Organizational Meeting

WAIVER OF NOTICE OF ORGANIZATIONAL MEETING The undersigned, members of [LLC's name], which constitute all of the initial members named in the Certificate of Formation of [LLC's name], hereby agree and consent to waive any notice that may be required to hold the Organizational Meeting. Dated: ___________________.

________________________ Manager

________________________ Member

________________________

Member


Form: Minutes of a limited liability company’s organizational meeting

MINUTES OF THE ORGANIZATIONAL MEETING OF MANAGERS OF [NAME]

A. Certificate of Formation. The Manager reviewed and approved the Certificate of Formation which have been filed in the office of the Secretary of State of Texas and the Certificate of Organization that has been issued by the Secretary of State of Texas. The Certificate of Formation will be inserted in the Minute Book of the Company. B. Company Agreement. The Manager adopted a Company Agreement and will present them for approval by the Members as the official Agreement of the Company which, together with the Texas Business Organizations Act and the Certificate of Formation, will govern and regulate the affairs of this Company. Upon approval by the Members, the executed the Company Agreement will be placed in the Minute Book of the Company. C. Membership Certificates. The Manager adopted the proposed form of membership certificate as the official membership certificate of the Company. A specimen certificate is attached to these Minutes as Exhibit "A". D. Organizational Expenses and Fees. The Manager will pay out of the funds of the Company all charges, expenses, and fees incident to the organization of this Company, including reimbursement to any person who made any disbursements for such purposes. E. Federal Employer's Identification Number. The Manager will obtain a Federal Identification Number and submit the necessary franchise tax forms. F. Depository. The Manager shall designate a bank in Texas as the depository for this Company, and the Manager will take such steps as are necessary to establish the Company accounts at such depository. G. Issuance of the Interests. The persons named in the attached Exhibit "B" have agreed to acquire interests as Members. The Manager is authorized to issue certificates of membership interests in the Company to the persons named in the Exhibit "B" in the amount of units set forth opposite their names. H. Accounting Period. The Manager adopted that the annual accounting period of the Company shall end on December 31st of each year. I. Insurance. The Manager of the Company will apply for and obtain appropriate and sufficient insurance to cover the Company and its employees in the normal, proper and probable liabilities of this Company. J. Principal Office. The principal office of the Company is established and shall be maintained at:


[Client's address] [Client's city], [Client's state] [Client's zip code].

K. Adoption By Unanimous Consent. By his signature below, the Manager consents to the holding of the organizational meeting without notice and adopts all actions taken at such meeting. L. Titles. The titles set forth below are hereby assigned to the following persons: [Client's name] President/Secretary/Treasurer [Client's name] Vice-President L. Lease. The Company shall execute a lease or assume a lease for the space presently occupied by the Company's offices and any Manager of the Company is authorized to execute all leases and other documents necessary and pertaining to this matter. There being no further business, the meeting was adjourned. Signed on ______________________.

________________________ Manager

________________________ Member

________________________

Member

A true copy of each of the following papers referred to in the foregoing minutes is appended hereto: Specimen Membership Interest Certificate

EXHIBIT "B"

Membership Interests of

[LLC'S NAME], LLC


MEMBER

INITIAL

COMMITMENT

INITIAL MEMBERSHIP

UNITS

INITIAL SHARING

RATIO

INITIAL MEMBERSHIP

INTEREST

[Client's name] $10.00 100.00 100.00% 100.00%

Totals: $10.00 100.00 100.00% 100.00%


Form: Letter advising client of action taken to form and organize limited liability company without holding formal organizational meeting of members

[date]

MEMORANDUM TO CLIENTS

ATTORNEY-CLIENT COMMUNICATION: THIS DOCUMENT AND ITS CONTENTS CONSTITUTE LEGALLY PRIVILEGED INFORMATION

Regarding: Ratification and Consent in Lieu of Organizational Meeting Dear [Client name]: Enclosed please find a Ratification and Consent in Lieu of an Organizational Meeting for your limited liability company and your limited liability company, Company Agreement. Please review the same and make sure they are correct and then sign in the appropriate places. If you have any questions, please call me. You should also periodically review the letter we sent you regarding your responsibilities as a officer of the limited liability company to make sure that company books, minutes, records, meetings, and other company formalities are held on a timely basis and performed correctly so that you will be able to preserve your company’s formalities. If you need my assistance in preparation of any company minutes, meetings, or notices, please contact me. We will be happy to assist you. Unless we receive a request from you regarding future legal assistance on your limited liability company we will presume that you are handling the same yourself and have not requested any further action from myself or my firm.

Very truly yours,

[Name of attorney]


Ratification and consent in lieu of organizational meeting of the members of the limited liability company

RATIFICATION AND CONSENT IN LIEU OF ORGANIZATIONAL MEETING

OF THE MEMBERS OF LIMITED LIABILITY COMPANY

1. Consent to Ratification 1.1 The undersigned members ____________, LLC., hereinafter referred to as "members," consent to and ratify the action which was taken to organize the limited liability company as herein stated.

2. Certificate of Formation 2.1 The Certificate of Formation for the limited liability company were filed on [date]. The Secretary of State of the State of Texas issued a formal Certificate of limited liability company on that date. The Certificate of Formation for the limited liability company has been inserted in the company minute book.

3. Company Agreement 3.1 The Company Agreement which regulates the conduct of the limited liability company's business and affairs have been duly prepared by [attorney]. The Company Agreement has been examined by the members of the limited liability company and have been adopted and inserted in the company minute book.

4. Shares 4.1 The Members have been authorized to issue, from time to time, the authorized shares of capital stock of the limited liability company as specified in the Certificate of Formation of the liability company for money paid, labor done, personal property, real estate, leases of other legal consideration thereof actually acquired by the limited liability company, upon such terms as the Board of Directors, in its discretion, may determine.

5. Officers 5.1 The following persons have been elected to the following positions: Managing Partner or President [Managing Partner] Vice President [Vice President] Secretary [Secretary] Treasurer [Treasurer]

6. Membership Interest Certificates


6.1 The members have approved a specimen Membership Interest Certificate to show the member's Interest in the limited liability company.

7. Limited Liability Company Record Book 7.1 The members adopted the use of a record book of containing a copy of the Certificate of Formation, the Certificate of Organization, the Company Agreement previously approved by the members, and the company desires to use the record book to maintain its company records.

8. Issuance of Certificates of Membership Interests 8.1 The Managers are, authorized to issue from time to time Certificates which shall show the Membership Interests for money paid, labor done, promissory note, or personal property or real estate or leases thereof actually acquired by [LLC’s name]'s , upon such terms as the Managers in their discretion may determine. 8.2 Certificates of Membership Interest have been issued to the following members in the percentages set opposite their names and for the consideration stated next thereto: . Member’s Name Member’s Interest Certificate Number

9. Commencing Business 9.1 Consideration has been received for the issuance of the certificates of Membership Interest, and the company is able to commence and transact business and to incur indebtedness.

10. Organizational Expenses 10.1 The treasurer is authorized to pay all charges and expenses incident to or arising out of the organization of and to reimburse any person who has made any disbursement therefor.

11. Bank Account 11.1 The treasurer is authorized to open a bank account on behalf of [LLC’s name]'s with any banks the president deems appropriate.

12. Office 12.1 An office has been established and shall be maintained at [Location] . Meetings of the Managers from time to time may be held either at the principal office or at such other place as the Managers shall from time to time order.

13. Licenses and Permits 13.1 The officers were directed to obtain in the name of the company, such other licenses and tax permits as may be required for the conduct of the business of by any federal, state, county, or


municipal governmental statute, ordinance, or regulations, and to do all things necessary or convenient to qualify to transact its business in compliance with the laws and regulations of any appropriate federal, state, or municipal governmental authority.

14. Other States 14.1 For the purpose of authorizing [LLC’s name] to do business in any state, territory or dependency of the United States or any foreign country in which it is necessary or expedient for to transact business, the proper officers are authorized to appoint and substitute all necessary agents or attorneys for service of process, to designate and change the location of all necessary statutory offices and, under the limited liability company seal, to make and file all necessary certificates, reports, powers of attorney and other instruments as may be required by the laws of such state, territory, dependency or country to authorize to transact business therein.

15. Fiscal Year 15.1 The fiscal year shall be the calendar year ending December 31 subject to change, as appropriate, at the discretion of the Managers by resolution.

16. Carry On Business 16.1 The signing of these minutes shall constitute full consent, confirmation, ratification, adoption and approval of the actions taken by the company, its members and managers. Signed on ______________________.

______________________ Member’s Name

______________________

Member’s Name

A true copy of each of the following papers referred to in the foregoing ratification is appended hereto: Specimen Membership Interest Certificate

____________________________________ [Signature]

____________________________________ [Signature]


Letter to the Internal Revenue Service for an employer identification number for a limited liability company 1. The incorporator should also send this letter to obtain a federal tax identification number for the limited liability company.


Form: Letter to the Internal Revenue Service for an employer identification number for a limited liability company Internal Revenue Service Center 3651 South Interregional Highway Austin, Texas 78740 Dear Employer Tax Identification Number Division: Enclosed please find an application for an employer identification number for the above captioned limited liability company. Thank you in advance for your assistance.

Very truly yours,

[Attorney's name]


Letter to the client regarding how to operate their limited liability company. 1. The following form contains an explanation letter that may be sent to a client to explain how one operates and organizes a limited liability company. 2. The limited liability company concept is a recent new entity concerning the forms of owning and operating new businesses. The letter helps to explain to the client what they need to do to maintain their company formalities. For Preview Only - Please Do Not Copy

Form: Letter to the client regarding how to operate their limited liability company.

[Date] [Name of client] [Client's address]

ATTORNEY-CLIENT COMMUNICATION: THIS DOCUMENT AND ITS CONTENTS CONSTITUTE LEGALLY PRIVILEGED INFORMATION

Dear [Client’s salutation]: Per our meeting, enclosed please find a summary of our discussion concerning business responsibilities which you must follow to maintain your limited liability company status. Failure to comply with limited liability company formalities can result in individual liability to the members if the "company veil is pierced." This letter summarizes our meeting wherein I informed you of the importance of keeping timely and accurate corporate records and following the limited liability company formalities. The purpose of this letter is to explain how limited liability companies operate and what you should do to preserve your limited liability company status. This letter explains some important procedures which are required by law in order to operate your company. Your limited liability company has been approved by the secretary of state and you should now hold or have already held the organizational meeting. Upon completing the organizational meeting, your limited liability company is officially approved. In order to insure the continued existence of the separate limited liability company entity, the following considerations should be reviewed and observed by the limited liability company employees, members and mangers. The Minute Book for the Limited Liability Company currently includes the following documents: 1. The Certificate of Formation filed with the Secretary of State of Texas. 2. The Company Agreement for of the Limited Liability Company a. These documents are like “by-laws” for a corporation. They reflect the structural framework of the Limited Liability Company. 3. The organizational Minutes of the Limited Liability Company.

a. These are like the organizational minutes for a corporation.


Certificate of Formation

The Certificate provides for: 1. A duration of thirty (30) years, and for the Limited Liability Company to conduct any business which is lawful under the laws of the State of Texas. a. The Limited Liability Company can issue certificates of membership interest to reflect the ownership interest of each member. 2. The post office address of the Limited Liability Company is .[Address] 3. [Name] is the registered agent for the Limited Liability Company. It will be necessary to file a notice with the Office of the Secretary of State indicating any change of registered agent or registered address. 4. [Names] have been elected as the initial Managers. 5. There are no "preemptive" rights on behalf of any Member, and cumulative voting is not allowed. 6. The Managers of the Limited Liability Company will be indemnified by the Limited Liability Company for any of their actions, so long as they act reasonably and exercise standard business judgment. 7. No contract by the Limited Liability Company will be nullified solely by reason of the fact that the Manager voting for the action is also the Manager of another limited liability company involved in the transaction. 8. The Limited Liability Company will also indemnify any persons who serve as managers or officers from and against any actions which arise solely by reason of the fact that the managers and officers are serving on behalf of the Limited Liability Company, except for claims arising from negligence or misconduct.

Company Agreement for the Limited Liability Company The Company Agreement for the Limited Liability Company are the basic operating rules for the Limited Liability Company. They should be reviewed any time the Limited Liability Company intends to take action. I have not summarized the Company Agreement for the Limited Liability Company due to their length

The Organizational Minutes


The Organizational Minutes are agreed upon at the Organizational Meeting of Members. The organizational minutes of the Members are effective as of [Date], and have the following effect: 1. [List the actions that occurred at the meeting, i. e. names of persons who were elected as Managers]. 2. The Organizational Minutes of the Managers are effective as of _______________ 3. These minutes document the "birth" of the Limited Liability Company. a. The minutes document the following actions and have the following effects: b. The Certificate of Formation are reviewed and accepted. c. The Company Agreement is reviewed and accepted. d. [Name] is elected President. e. [Name] is elected as Secretary-Treasurer. f. The minute book and seal of the Limited Liability Company is reviewed and adopted by the Limited Liability Company. g. The form of certificates of membership interest in the minute book are reviewed and adopted. h. Membership interest certificates are issued to the following persons in the percentage of membership interest and for the consideration stated next thereto:

Percentage of Membership Interest: Purchaser: Consideration: 1. The statutory requirement that consideration consisting of money, labor done, a promissory note, or property has been received before business can be conducted is confirmed. 2. Any organizational expenses incurred are authorized to be paid. 3. Authorization is given to open a bank account. 4. The location of the office of the Limited Liability Company is established. 5. The authorization for necessary license, permits, etc. is given. 6. Authorization is given for necessary documents needed to operate in other states. 7. A fiscal year ending on [End of Fiscal Year] is selected.


Directions for Completion of Organization

1. All of the Managers and Members need to sign the Organizational Minutes as appropriate.

Instructions for Future Business Operation. 1. The legal formalities involved in forming your Limited Liability Company have been completed. Your minute book and membership interest records are current and complete. Your Certificate of Formation has been executed and your Company Agreement has been adopted. Records of the issuance of your certificates of membership interest are completed, and minutes of your Managers reflect appropriate authorization for these initial steps. 2. As a continuing matter of sound practice, your accountant and your legal counsel should meet with you at least annually to make certain that all required steps are taken. [date] has been selected as the date for your annual meeting of Members and Managers.

Lawful Business Activity 1. The purpose clause stated in your Certificate of Formation is a general purpose clause and allows the Limited Liability Company to engage in all conceivable activities of the Limited Liability Company permitted by law. You are restricted, however, from engaging in the banking business, trust company business, building and loan associations, insurance business, railroad activities, cemetery business, abstract of title business, and other businesses requiring either a special license or organization under Texas Law. 2. Should the Limited Liability Company do business under a name other than the exact limited liability company name, an assumed name certificate must be filed with the Secretary of State, and with the County Clerk of the counties in which the registered office of the Limited Liability Company is located and if the principal office of the Limited Liability Company is located in a county other than the county containing the registered office, that county as well. If an event occurs which makes the information in the assumed name certificate misleading, a new certificate will need to be filed. Also, the certificate will need to be renewed within six months prior to its expiration. 3. Finally, should you open an office or acquire property in another state, you may be required to qualify as a foreign Limited Liability Company to be authorized to do business in that state. This entails filing your Certificate of Formation and paying initial and annual fees. Failure to qualify may prohibit you from suing to enforce your contracts in that state, or from receiving actual notice in the event you are sued.

Accounting 1. It is the responsibility of the officers and managers of the Limited Liability Company to make certain that accounting practices and auditing procedures customarily followed by similar


businesses are observed in a proper and timely fashion by the Limited Liability Company. Accordingly, your accountant should be kept currently and consistently informed regarding all of your Limited Liability Company's business activities. 2. Initially, the accountant should resolve questions regarding tax elections, transfers of accounts receivable and the payment of your accounts payable. All assets transferred by you to the Limited Liability Company should be appropriately entered upon the books of the Limited Liability Company by your accountant. Any assets so transferred become the property of the Limited Liability Company. All of your business insurance (public liability, disability, general insurance, etc.) must be acquired by the Limited Liability Company, either by assignment or binder. Accordingly, your insurance agent should be instructed to make such transfers or purchases of new coverages as soon as it is conveniently possible upon the commencement of business by your Limited Liability Company. 3. Your accountant should advise you if your first fiscal year should end on a date other than the calendar year end, of what tax elections should be made by you at that time and all matters related to the preparation and filing of tax returns.

Limited Liability for Company Debts 1. One of the principal advantages of forming a limited liability company is to limit or reduce your personal liability for business bills and debts. In some situations the officers, members and mangers may be personally liable for the limited liability company’s debts. 2. When you begin business many creditors may not extend credit unless you sign a personal guaranty agreement. The agreement renders you personally liable for the limited liability company's debts. A guaranty agreement creates an express contract which makes you liable for the company's debts. 3. You can also become liable for the company's debts by implied actions or negligent conduct as follows: 4. If you disregard limited liability company formalities or commingle your personal interests with the company’s assets or interests, you can open the door for an adverse party to "pierce the corporate veil" and render you personally liable for the limited liability company's debts. Consequently, you should never refer to your company as "my" business or "our" business. Such a statement could later be used against you as being a material representation that the business was a proprietorship or a partnership rather than a corporation. 5. Let us review all contracts and credit agreements prior to signing the same so that we can make sure they do not contain hidden personal liability representations or guaranties.

Limited Liability Company Formalities 1. I cannot overemphasize the importance of maintaining the formal integrity of your new limited liability company entity, which is a separate person from yourself.


2. As you are aware, one of the major advantages of a limited liability company status is the limited liability afforded to Members. Members of a Limited Liability Company will not normally be liable for the Limited Liability Company's debts and obligations beyond the amount they paid for their membership interest. Preservation of the Member's limited liability depends to a large extent, however, on the proper observation of limited liability company formalities. 3. If the business and affairs of a Limited Liability Company are conducted without required authorizations by Managers and Members, or if accurate records are not maintained, a court may choose to disregard the separate existence of such Limited Liability Company and hold its Members personally liable for the Limited Liability Company's obligations. In this event, limited liability company creditors of and claimants against the Limited Liability Company could reach the Members' personal assets. 4. In order to ensure your adherence to proper limited liability company formalities, it is important that all important transactions in your business be reflected in minutes of meetings of your Managers or Members, even where there is only one Member. 5. Without limiting the significance of the foregoing general admonition, it is important to realize that you are going to be required formally to consider, review and act upon the following:

a. All major contracts, including employment contracts, buy-sell agreements, profit sharing plans, pension plans, insurance plans, trust agreements, loans, leases, purchase contracts and limited liability brokerage and investment accounts should be made in the name and on behalf of the Limited Liability Company and with the required approval.

b. The establishment and adjustment of all salaries and bonuses of officers and employees of the Limited Liability Company.

c. Issuance of additional membership interest by the Managers. Any change in membership interest should not only be reported to your accountant and this firm, but should also be entered on the Certificates of Membership Interest and the membership register in the Limited Liability Company minute book.

d. Placement of restrictions on transfer of shares of Membership Interests.

e. Issuance of additional Membership Interests and purchase or sale of other Limited Liability Company's Membership Interests.

f. Acceptance of resignation, termination, or appointment of managers.

g. Change of Limited Liability Company name, registered office or registered agent.

h. Change of bank accounts.

i. Any other Limited Liability Company activities which are significant.


j. Application for Texas Sales and Use Tax Permit.

k. If the Limited Liability Company plans to engage in retail or rental business or perform taxable services, it must obtain a Limited Sales Tax Permit from the Comptroller of Public Accounts for the State of Texas for each place of business it operates within the state. No Limited Sales Tax Permit will be issued by the Comptroller until the applicant provides the Comptroller with a bond or security, in an amount to be determined by the Comptroller.

l. Acquisition of business or occupational licenses and taxes. m. Numerous business activities and occupations are subject to licensing requirements or require the payment of occupational taxes or fees. If the Limited Liability Company is subject to such occupational taxes or fees, they should be paid prior to the commencement of business. 6. Texas franchise tax a. The franchise tax is a tax on Limited Liability Companies for the privilege of doing business in Texas. At this time no franchise tax deposit for the Limited Liability Company has been paid. The Limited Liability Company will be required to file its initial franchise tax report as required by law. Thereafter the Limited Liability Company must file a franchise tax report on or before May 15 of each year. If the Limited Liability Company fails to pay its annual franchise tax, it will be subject to a penalty and interest on the amount unpaid and may forfeit its right to do business in Texas. Depending upon the capitalization of the Limited Liability Company, the amount of franchise tax can be significant. 7. Liability for non-payment of FICA taxes and federal withholding taxes. a. Funds collected by a Limited Liability Company as FICA taxes and payroll withholding taxes must be paid as provided by law, or the persons responsible for not doing so will be held personally liable. b. This liability is separate from that imposed upon the employer-limited liability company. The statutes imposing such liability are broad in scope and may be enforced against all officers or other personnel whose duties relate to the withholding function. 8. Commencement of Business. a. A Limited Liability Company may not commence to transact business or incur debt in the limited liability company name until such time as the Limited Liability Company has received consideration consisting of money, labor done, a promissory note, or property for the issuance of its Membership Interests. b. Under the Texas Limited Liability Company Act, actions of the Managers or Members of a Limited Liability Company may be taken either at an actual meeting, in which


case there will need to be written minutes of such meeting, or in the form of a unanimous written consent action embodying the desired resolutions. Unanimous written consent actions must be executed by all of the Members or Managers entitled to vote on the matters contained herein. c. For a Limited Liability Company such as yours, which has relatively few Managers and Members, we have found that it is generally simpler and more convenient to take limited liability company actions through unanimous written consent actions rather than through actual meetings. d. If the Limited Liability Company proposes to engage in a transaction affecting the basic structure or existence of the Limited Liability Company, such as a merger or consolidation with or an acquisition of another Limited Liability Company, a reorganization in another state or a dissolution of the Limited Liability Company, I would strongly recommend that you consult this firm or such other attorneys as you may choose to ensure that all of the necessary documents and consents are prepared, executed and, where necessary, filed with the appropriate governmental authorities. Failure to execute the proper documents and make the filings required by law could result in any such transaction being void and ineffective. General Legal Considerations 1. You should read and review the Certificate of Formation and Limited Liability Company Agreement. 2. If the company will engage in retail or rental business, or perform taxable services it must obtain a sales tax permit from the controller of public accounts for each place of business within the state. A limited sales tax permit will not be issued until the applicant provides the controller with a bond or other security. 3. Depending on the type of business or activity that the corporation may be engaged in, it may be subject to certain state licensing requirements or be required to pay certain fees or occupational taxes. 4. The limited liability company should apply to the Internal Revenue Service for an employer identification number on the required Internal Revenue Service form. 5. Funds collected by the limited liability company for FICA (social security) and withholding taxes must be paid according to the provisions under the Internal Revenue Code, or the persons who are responsible for the withholding and deposits will be held personally liable for nonpayment of the same. This liability is separate and distinct from the liability imposed upon the employer. 6. The State imposes a franchise tax on companies for the privilege of doing business in this state. If your limited liability company fails to pay its annual franchise tax, it will be subject to penalties and interest. Thereafter the limited liability company can forfeit its charter to do business in the state for said nonpayment.


7. You must obtain an Assumed Name Certificate if your company will be known as, or transact business under, any name other than the exact corporate name as stated on the certificate or Certificate of Formation. The Assumed Name Certificate must be filed with both the secretary of state and the county clerk's office of the county in which the corporation has its registered office as stated in the Certificate of Formation. 8. In order to protect your status as a corporation, certain formalities should be observed concerning the compensation and remuneration paid to its members. The Internal Revenue Service has the power to disallow deductions of the limited liability company for moneys paid in excess of what is considered as "reasonable compensation" paid to employees or members based on the person’s efforts and contributions to the business. 9. You should hold an annual member’s meeting. You should discuss and review the business activities which have transpired during the previous year at the annual meeting. Please contact this firm if you desire our assistance in helping you prepare the requisite resolutions and minutes which should accompany the member’s meetings. 10. You should at all times do business under the limited liability company name exactly as specified in the Certificate of Formation and not deviate therefrom unless an appropriate assumed name certificate has been filed. Accordingly, letterhead, invoices and stationery should be ordered to reflect the full, correct corporate name. 11. Whenever a person signs on behalf of or for the limited liability company, he or she should add his or her title next to the signature so that it will be clear that he or she is acting as an agent of the limited liability company rather than in his or her individual capacity. For instance, if you sign a contract with just your name and do not state your relationship to the limited liability company next to your name in the contract, you may be held personally liable for the contract. A correct signature would be:

XYZ LLC. By: ____________________________ [typed name], Vice President

12. Your bank and checking accounts should also reflect your company name. A new bank account should be opened in the name of the limited liability company. This should be accomplished easily by completing a limited liability company resolution which authorizes the company to open a bank account. 13. Any loans or banking activities should be conducted in the name of the company rather than your name individually or you may become personally liable for said obligations. If a loan is made and the lender requires you to endorse or guarantee the loan personally, you should have the above action approved by the board of directors and reflect the approval in an appropriately drafted resolution which is adopted and inserted into the minute book of the limited liability company.


14. Likewise, all leases, contracts and other arrangements which you have regarding your present equipment, office premises and furniture should be handled in the same fashion. 15. All important corporate transactions should be approved by the board of directors and adopted by the corporation pursuant to a properly prepared corporate resolution which is adopted and inserted into the corporate minute or record book. An example of items which should be approved by the board of directors includes such things as employment contracts, buy-sell agreements, profit sharing and pension plans, trust agreements, loans, leases, major purchases and important decisions which could effect the capital structure or finances of the corporation. 16. Stock certificates: The company should authorize the initial issuance of shares. A resolution should be obtained which states the consideration to be paid for the shares and authorizes the purchase of the stock. Do not issue the shares until the correct and full purchase price has been paid. 17. The corporation and its members may agree to impose restrictions on the shares of stock. If so, a stock agreement should be prepared and approved. 18. The Minute Book for the Limited Liability Company currently includes the following documents: a. The Certificate of Formation, filed with the Secretary of State of Texas. b. The Company Agreement of the Limited Liability Company i. These documents are like “by-laws” for a corporation. They reflect the structural framework of the Limited Liability Company. c. The organizational Minutes of the Limited Liability Company. i. These are like the organizational minutes for a corporation. Instructions for Future Business Operation. Lawful Business Activity 1. The purpose clause stated in your Certificate of Formation is a general purpose clause and allows the Limited Liability Company to engage in all conceivable activities of the Limited Liability Company permitted by law. You are restricted, however, from engaging in the banking business, trust company business, building and loan associations, insurance business, railroad activities, cemetery business, abstract of title business, and other businesses requiring either a special license or organization under Texas Law. 2. Should the Limited Liability Company do business under a name other than the exact limited liability company name, an assumed name certificate must be filed with the Secretary of State, and with the County Clerk of the counties in which the registered office of the Limited Liability Company is located and if the principal office of the Limited Liability Company is


located in a county other than the county containing the registered office, that county as well. If an event occurs which makes the information in the assumed name certificate misleading, a new certificate will need to be filed. Also, the certificate will need to be renewed within six months prior to its expiration. 3. Finally, should you open an office or acquire property in another state, you may be required to qualify as a foreign Limited Liability Company to be authorized to do business in that state. This entails filing your Certificate of Formation and paying initial and annual fees. Failure to qualify may prohibit you from suing to enforce your contracts in that state, or from receiving actual notice in the event you are sued. Accounting 1. It is the responsibility of the officers and managers of the Limited Liability Company to make certain that accounting practices and auditing procedures customarily followed by similar businesses are observed in a proper and timely fashion by the Limited Liability Company. Accordingly, your accountant should be kept currently and consistently informed regarding all of your Limited Liability Company's business activities. 2. Initially, the accountant should resolve questions regarding tax elections, transfers of accounts receivable and the payment of your accounts payable. All assets transferred by you to the Limited Liability Company should be appropriately entered upon the books of the Limited Liability Company by your accountant. Any assets so transferred become the property of the Limited Liability Company. 3. All of your business insurance (public liability, disability, general insurance, etc.) must be acquired by the Limited Liability Company, either by assignment or binder. Accordingly, your insurance agent should be instructed to make such transfers or purchases of new coverages as soon as it is conveniently possible upon the commencement of business by your Limited Liability Company. 4. Your accountant should advise you if your first fiscal year should end on a date other than the calendar year end, of what tax elections should be made by you at that time and all matters related to the preparation and filing of tax returns. Important Things To Do: 1. With the assistance of your accountant, and where necessary with our assistance, the following steps must be taken immediately prior to, contemporaneously with or subsequent to your commencing business in the limited liability company form. a. Any loans which you have made in your business should be transferred to and assumed by your Limited Liability Company when and if your accountant determines that no adverse tax consequences will result from such assumption of liability. b. New loans made after you commence business as a limited liability company


should be made in the name of the Limited Liability Company, even though you may be required to endorse or guarantee the same personally. c. Whenever such a loan is made, it should be approved by a meeting of the Managers of your Limited Liability Company and the appropriate resolution adopted and inserted in the Minute Book of the Limited Liability Company.

d. All leases, contracts and other arrangements which you have regarding your present equipment, office premises or furniture and any other contracts or arrangements which you have previously entered into in connection with your business should be modified, assigned, or rewritten in order to reflect the fact that the Limited Liability Company is the contracting party to each lease, contract, or obligation. Personal Liability 1. As you are aware, one of the major advantages of a limited liability company status is the limited liability afforded to Members. Members of a Limited Liability Company will not normally be liable for the Limited Liability Company's debts and obligations beyond the amount they paid for their membership interest. Preservation of the Member's limited liability depends to a large extent, however, on the proper observation of limited liability company formalities. 2. If the business and affairs of a Limited Liability Company are conducted without required authorizations by Managers and Members, or if accurate records are not maintained, a court may choose to disregard the separate existence of such Limited Liability Company and hold its Members personally liable for the Limited Liability Company's obligations. In this event, limited liability company creditors of and claimants against the Limited Liability Company could reach the Members' personal assets. 3. In order to ensure your adherence to proper limited liability company formalities, it is important that all important transactions in your business be reflected in minutes of meetings of your Managers or Members, even where there is only one Member. Limited Liability Company Disagreements 1. Most difficulties regarding the limited liability company formalities can be resolved by appropriate reference to your Company Agreement, employment contracts, and other documents. The President as the chief administrative officer of the Limited Liability Company is responsible for the day-to-day decision making process of the Limited Liability Company. The President in turn must account to the Managers and the Managers account to the Members. The majority of the Members in the Limited Liability Company will control the Managers. 2. The Managers should meet at least monthly in order for there to be an appropriate dissemination of information within the Limited Liability Company. No manager or officer of the Limited Liability Company should act independently or arbitrarily from the decision making process of the President, the Managers and the majority of the Members. Independent or arbitrary action on the part of any manager or officer of the Limited Liability Company threatens


limited liability company structure and existence. Therefore, any disputed action on the part of any manager or officer of the Limited Liability Company should be brought to the immediate attention of the President and the Managers of the Limited Liability Company, and the President should have the ultimate decision making responsibility for the Limited Liability Company. 3. In the event that any serious dispute should arise among the Members and Managers of your Limited Liability Company, feel free to contact me in order to arrive at resolutions designed to settle a dispute and promote limited liability company harmony in the interest of the Limited Liability Company and Members. Managers and Officers Responsibilities. 1. Principal officers and managers of every Limited Liability Company must be mindful of the following specific and important duties and responsibilities: a. Payments of Salaries to Employees. Officers responsible for the payment of salaries must see that those salaries are paid by the Limited Liability Company. Managers establish salaries for officers. b. Payroll Taxes. All payroll taxes must be paid by the Limited Liability Company. Nonpayment may result in personal, civil or criminal liability to the officers and managers. c. Duty to Inspect. A manager has the absolute right to inspect all limited liability company record books, records, documents and property at any time. If he or she does not exercise that right, he or she may be held liable for negligence in the event that the Limited Liability Company suffers loss or its creditors suffer loss by reason of failure to exercise diligence in such matters. Distinction between Managers and Officers. 1. Managers control the policy of the Limited Liability Company, (this is similar to a director in a corporation) and officers put that policy into effect. This difference must be understood. A Manager may not delegate his authority. An officer may delegate his responsibility and authority. A Manager may not give his proxy to vote at a meeting of the Managers, for example. 2. The officers of the Limited Liability Company serve at the pleasure of the Managers. Even though an officer may have an employment contract providing rights to compensation, the officer may be removed from office at any time by the Managers. A Manager, on the other hand, may be removed only upon the action of the Members under specific and special procedures. 3. A Manager or officer may resign at any time. Acceptance of the resignation is not necessary. A resignation is effective upon the delivery of the resignation to the Limited Liability Company. It need not await acceptance by the Managers or by any officer. The remaining Managers may appoint a new Manager to fill a vacancy without the action of Members. The Members may also elect a Manager to fill a vacancy not previously been filled by the Managers.


Distributions. 1. It is the Managers who have the power to declare distributions, not officers. Managers establish salaries, not the Members. Before declaring distributions, however, it would be wise to consult with your accountant and this firm since there are complex tax factors that must be taken into consideration upon the declaration of distributions. Duties to Limited Liability Company and Members. 1. A Manager may not compete with his own Limited Liability Company or take business opportunities from the Limited Liability Company for his own benefit. In any event, all such transactions will probably have to be disclosed, as a general matter, to the Members of the Limited Liability Company in any Limited Liability Company where the officers and Managers, on the one hand, and the Members on the other, are not the same individuals. 2. A Manager is ordinarily not entitled to compensation for his services as a Manager unless the compensation is provided for by contract, by an appropriate provision or by a limited liability company resolution. Remember that the Managers have the additional power to fix the salary of each and all of the officers. Elaborate compensation plans and the like must be submitted to the Members as well as the Managers for their approval and ratification in most instances. Other Liabilities. 1. The Manager of a Limited Liability Company must be concerned with other sources of liability which include improper declaration of distributions or repurchase of the Limited Liability Company's membership interest; improper guarantees by the Limited Liability Company's membership interest; improper guarantees by the Limited Liability Company; fraudulent entries in the limited liability company books or reports; failure to properly supervise the operations of the Limited Liability Company; failure to pay any franchise tax or to file required reports; and failure to pay compensation to employees or properly to withhold payroll taxes. Termination and Dissolution of Limited Liability Company 1. Neither the Limited Liability Company nor its employee benefit or compensation plans, if any, should be terminated or dissolved without further consultation with this firm or other legal counsel and the accountant for the Limited Liability Company. Dissolution is accomplished only as provided by the applicable Limited Liability Company laws of the State of Texas or in accordance with the Certificate of Formation or the Company Agreement of this Limited Liability Company. 2. This Limited Liability Company shall be dissolved upon the death, retirement, resignation, expulsion, bankruptcy or dissolution of a member, or upon the occurrence of any other event that terminates the continued membership of a Member of this Limited Liability Company, unless the remaining Members consent unanimously, within ninety (90) days after an


event of dissolution, to continue this Limited Liability Company. It is the intent of the Company Agreement that the tax status of this Limited Liability Company be the same as for a partnership, and except as allowed by the Internal Revenue Code and any corresponding rules and regulations, it is intended that this Limited Liability Company shall not have continuity of life. No pension or profit sharing plan or other compensation arrangement should be terminated or altered without careful review and study by your attorney and your accountant. Transferability of Membership Interest 1. An assignee of a membership interest may become a Member if and to the extent that all Members consent. It is the intent of the Company Agreement that the tax status of this Limited Liability Company be the same as for a partnership, and except as allowed by the Internal Revenue Code and any corresponding rules and regulations, it is intended that this Limited Liability Company shall not allow free transferability of interests. I hope the above summary will assist you in maintaining your status as a corporation. Please be advised that the above is a partial listing of some of the rights, responsibilities and duties of limited liability company practice and is not intended to provide a summary of all areas you may encounter. We hope that the foregoing will prove helpful. It has been my pleasure to assist you in the organization of your limited liability company, and I look forward to a continued relationship with you in the future. Please do not hesitate to call me should you have any questions about the enclosed documents or any of the matters discussed in this letter. We hope that the foregoing will prove helpful. It has been my pleasure to assist you in the organization of the LLC, and I look forward to a continued relationship with you in the future. Please do not hesitate to call me should you have any questions about the enclosed documents or any of the matters discussed in this letter.

Very truly yours

[Attorney’s name]


Fee statement 1. The purpose of the fee statement is to outline the fees for services performed by the attorney. 2. This fee statement embodies the assumptions that the attorney:

Interviewed the client; Discussed the various business entities and organizations that the client may use to conduct business in; Discussed the name reservation process, reserved the name for the limited liability company; Draft and file the certificate of formation, Draft the limited liability company’s Company Agreement, Hold the organizational meeting and draft the minutes of the meeting and Reviewed how to conduct business as a limited liability company with the client.


Form: Fee statement STATEMENT FOR PROFESSIONAL SERVICES RENDERED: Per your request, this firm has performed the following services for you:

Initial office interview and conference with the client; discuss the client’s business and desire to form a limited liability company; Discuss the various business entities and organizations that the client may use to conduct business in; Discuss the name reservation process, reserved the name for the limited liability company; Review the client’s choice of legal entity and discuss the advantages and disadvantages of the selection of a limited liability company with the client; Draft and file the certificate of formation, Draft the limited liability company’s Company Agreement, Hold the organizational meeting and draft the minutes of the meeting and Reviewed how to conduct business as a limited liability company with the client.

Advise the client of tax and estate planning issues including the advisability of hiring expert tax or estate planning professionals to review and/or reduce possible income or inheritance taxes and other taxes. Amount of client fee deposit: $ Total Fees: $ Total amount due: $ Please pay the total amount due within 10 days of the date of the invoice. Thank you.


Documents

Limited liability companies a summary of Texas law and ... · Limited liability companies a summary of Texas law and Anatomy of a limited liability company . 1. The Texas Legislature