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r3 REGULATIONS OF MORE AU MANAGE, MIENT, LLC A Texas Limited Liability Company tkL h '' • aq ' ` C;\MD\Carp& LLC\MOREAU MANAGEMENMeguln0ons I TABLE OF CONTENTS (f ARTICLEIDEFINITIONS .................I 1.1 "Act".........................................................................................................................1 L2"Adjusted Capital Account Deficit".........................................................................1 1.3'Affiliate ............................ .......................................................................................1 1.4'Articles"................................................................................................................A 1.5 "Bankrupt Member.".....................................................................................I...........2 1.6 "Business Day"........................................................................................................2 13 "Capital Account" .................................................. 1.8 "Capital Contribution" .......................................... 1.9 "Code".................................................................... 1.10 "Company ..................... ....... ............ ...................... , 1,11"Company lvAnimumGain "......... .... I.................... 1,12 "Company Prop erty................................................ 1.13 1.14 1.15 1.16 1.17 1.18 1.19 1.20 1.21 1.22 1.23 1,24 1.25 1.26 1.27 1.28 1.29 1.30 1.31 1.32 1.33 "Depreciation"... ..................................... - .... "Interest Rate" ....................................................... "Gross Asset Value" .............................................. "Immediate Family"..... ... .......... I ................ ......... °lbfanaging Member" ............................................ t it ...............................2 ............................3 ............. ......... ............. :....... 3 ...........................................3 .......................................... 3 ...........................................3 ...........................................4 .4 Member................................................................................................................... „Member Nonrecourse Debt"..................................................................................5 "Member Nonrecourse Debt Minimum Gain".........................................................5 "Membership Interest".............................................................................................5 "Membership Interest".............................................................................................5 "Net Cash Flow"...........................................................................I..........................5 "Nonrecourse Deductions" ............................................... "Nonrecourse Liability"..., ......................................... I ... - "Person"............................................................................ "Profits" or. "Losses"......................................................... "Regulations".................................................................... "Required Interest"........................................................... "Sharing Ratio"................................................................. "TB CA " .. . ............... .... .. ... ............................. . ... .. ... . ........... "Transfer.,' ........ .................................. ...................... .......... "Treasury Regulations....................................................... i ............................6 r; .....................................6 ..........6 .........................7 .....................................7 .....................................7 ARTICLEH ORGANIZATION......................................................................................................7 2.1 Formation, ........ ............................... ............7. 2.2 Name........................................................................................................................7 2.3 Registered Office; Registered Agent; Principal Office in the United States; Other Offices......................... ............................................................ ....,.,...... ,...... ........... .,.7 2.4 Purposes...................................................................................................................7 2.5 Foreign Qualifications.............................................................................................7 2.6 Term.........................................................................................................................9 17 Mergers and Exchanges...........................................................................................8 2.8 No State -Law Partnership........................................................................................8 { i COMTorp & LLOMORBAU MANAGEME MY Aulations ARTICLE III MEMBERSHIP; DISPOSITIONS OF INTERESTS ...............................................8 t 3.1 Initial Members ........................ 8 3.2 Representations and Warranties ................................................................... ......... -8 3.3 Additional Members .......... ............... ..................................................................... 9 3.4 : Information ............................ .................................... ............................................ 9 3.5 Liability to, Third Parties ........................ ........................................................... I ..... 9 3.6 Withdrawal ........ - ......... -- ....................... ............................................................... 9 3.7 Authority ..... * ............... I-, .................................................... ......................... - ...... 111.9 3.8 Conflicts of Interest .................................................................................. ............. to ARTICLE IV CAPITAL CONTRIBUTIONS ....... ........................... 1- ........... ...' ........................ 10 4.1 Capital Contributions ............ ............................................................................... 10 4.2 Additional Contributions ................... ............. ................................................. 10 4.3 Return of Contributions ....................... - ................................................................ to 4.4 Advances by Members ........................................................................................... 10 ARTICLEV ALLOCATIONS......._.........._ ............ ..", ............................. ....... I ................... ... ..to 10 5.1 Profits and Losses ..................................................... ............................................ 5.2 Special Allocations ..................................................................................... . ......... 10 53 Curative Allocations ............ ....................................................................... ......... 12 5.4 Other Allocation Rules ........ ............................. ............................................... 12 5.5 Tax Allocations: Code Section 704(c) ................................................ .................. 13 ARTICLEVI DISTRIBUTIONS -- ....................... ...................... ..................................... ........ 13 6.1 Net Cash Flow ......................................... .............................................................. 13 6.2 Amounts Withheld ......................................... ...... ................. - ............................. 13 ARTICLE VIT MANAGING MEMBER ........................................ ......... I .................................... 14, 7.1 Management by Managing Member .......................................................... - ......... 14 7,2 Restrictions on Authority of Managing Member ................. ....... ............ ........... 15 7.3 Election of Managing Member .......................................... .......... ........................ 15 7.4 Approval or Ratification of Acts or Contracts by Members ..................................15 7.5 Compensation ...................... .............................................................................. -15 ARTICLE VI11 MEETINGS OF MEMBERS ................ __ .......................................................... 16 8.1 Meetings .......................................................................................................... ..... 16 8.2 Voting List. ............ ...... ................................ ............ .......................... ........... 17 8.3 Proxies.. .................. ............ ........ ......................................................................... 17 8.4 Conduct of Meetings .................. .................................... ................. .................... 18 8.5 Action by Written Consent of Telephone Conference ...........................................18 ARTICLEIX INDEMNIFICATION .... .............................. ........... ........................ ....... ........... 19 9.1 Right to Indemnification ........................................ ................................. ....... __19 9.2 Advance Payment ................................ ............. ........................ . - ........ 19 9.3 Indemnification of Officers, Employees and Agents .............................................20 9.4 Appearance as a Witness .................. ............................................................... 20 9.5 . Nonexclusivity of Fights .......... ........... I .......... I ............................... ...... .20 C-.VvMkCorp & LLMOREAU MANAGEMENraegulaflom 9.6 Insurance ................................... ............ ................................................................. 20 9.7 Savings Clause.......................................................................................................20 ARTICLEX TAXES ................. ......................... ...................................................... I ........ ..:......... 20 10.1 Tax Returns............................................................................................................21 10.2 Tax Elections.........................................................................................................21 10.3 Tax Matters Partner ..................................................... ARTICLE XI BOOI{S, RECORDS, REPORTS, AND BANK ACCOUNTS .............................22 11.1 Maintenance of Books...........................................................................................22 11.2 Reports...................................................................................................................22 11.3 Accounts.........................................:......................................................................22 ARTICLE XII TRANSFERS OF INTERESTS............................................................................22 12.1 Restriction on Transfers..........................................................................................22 12.2 Permitted Transfers................................................................................................22 12.3 Conditions to Permitted Transfers.........................................................................23 12.4 Prohibited Transfers...............................................................................................23 12.5 Rights of Unadmitted Assignees............................................................................24- 12.6 Admission of Transferee as Members...................................................................24 12.7 Distributions and Applications in Respect to Transferred Interests ......................24 ARTICLE XIII BANKRUPTCY OF A MEMBER......................................................................25 I13.1 Bankrupt Members ........... ........................................... ................................... :....... 25 ARTICLE XIV DISSOLUTION, LIQUIDATIONS, AND TERMINATION .............................26 14.1 Dissolution.............................................................................................................26 14.2 Liquidation and Termination..................................................................................26 14.3 Deficit Capital Accounts........................................................................................27 14.4 Deemed Distribution and Recontribution..............................................................27 14.5 Rights of Members.................................................................................................28 14.6 Articles of Dissolution...........................................................................................28 ARTICLE XV GENERAL PROVISIONS....................................................................................29 15.1 Offset ... ........... ............................................... ................. ..... ....... I ...... I ....................28 15.2 Notices...................................................................................................................28 15.3 Entire Agreement...................................................................................................28 15.4 Construction...........................................................................................................28 15.5 Effect of Waiver of Consent..................................................................................29 15.6 Amendment or Modification.. .......................................... ................ .................... 29 15.7 Binding Effect........................................................................................................29 I5.8 Governing Law, Severability.................................................................................29 15.9 Further Assurances.................................................................................................29 15.10 Waiver of Certain Rights.......................................................................................30 15.11 Indemnification......................................................................................................30 15.12 Notice to Members of Provisions of these Regulations.........................................30 I15.13 Counterparts...........................................................................................................30 M CAMMCorp & LLOMOREAU MANAGEMENTTvgulaltons REGULATIONS OF MORE AU MANAGEMENT, LLC A Texas Limited Liability Company These REGULATIONS OF MOREAU MANAGEMENT, LLC (these "Regulations'), dated as of November IS 2002, are adopted by the Members (as defined below) and executed and agreed to, for good and valuable consideration, by the Members. ARTICLE I DEFINITIONS As used in these Regulations, the following terms have the following meanings: 1.1 "Act" means the Texas Limited Liability Company Act and any successor statute thereto, as amended from time to time. 1.2 "Adjusted Capital Account Deficit" means, with respect to any Member, the deficit balance, if any, in such Members Capital Account as of the end of the relevant fiscal year, after giving effect to the following adjustments: (a) Credit to 'such Capital Account any amounts which such Member is ( obligated to restore pursuant to any provision of these Regulations or is deemed -to be obligated to restore pursuant to the penultimate sentences of Section 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations; and (b) Debit to such Capital Account the items described in Sections 1.704- 1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations. The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Section 1,704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted consistently therewith. 1.3' "Affiliate" means, with respect to a Member, any Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or under common control with such Member. The term 'control," as used in the immediately preceding sentence, means, with respect to a Person that is a corporation, the right to exercise, directly or indirectly, more than ten percent (10%) of the voting rights attributable to the shares of the controlled corporation, and with respect to a Person that is not a corporation, the possession, directly or indirectly, or the power to direct or cause the direction of the management or policies of the controlled Person. 1.4 "Articles" has the meaning given that term in Section 2.1. a c\mtl\coxnGllc\MOREAO MANAGEMENT\xequlations t 1.5 "Bankrupt Member" means (except to the extent a Required Interest consents 1 otherwise) any Member (a) that (1) makes a general assignment for the benefit of creditors; (hi) files a voluntary bankruptcy petition; (iii) becomes the subject of an order for relief or is declared insolvent in any federal state bankruptcy or insolvency proceedings; (iv) files a petition or answer seeking for the Member a reorganization, arrangement, composition, readjustment, liquidation; dissolution, or similar relief under any law; (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the Member in a proceeding of the type described in subclauses (i) through (iv) of this clause (a); or (vi) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the Member's or of all or any substantial part of the Member's properties; or (b) against which, a proceeding seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any law has been commenced and 120 days have expired without dismissal thereof or with respect to which, without the Member's consent or acquiescence, a trustee, receiver, or liquidator of the Member or of all or any sulistantial part of the Member's properties has been appointed and 90 days have expired without the appointment's having been vacated or stayed, or 90 days have expired after the date of expiration of a stay, if the appointment has not previously been vacated. 1.6 "Business Day" means any day other than a Saturday, a Sunday, or a holiday on A which national banking associations in the State of Texas are closed. 1.7 "Capital Account" means, with respect to any Member, the Capital Account maintained for such Person in accordance with the following provisions: C(a) To each Person's Capital Account there shall be credited such Person's Capital Contributions, such Person's distributive share of Profits and any items in the nature of income or gain which are specially allocated pursuant to Section 5.2 or Section 5.3 hereof, and the amount of any Company liabilities which are assumed by such Person or which are secured by any Company Property distributed to such Person. (b) To each Person's Capital Account there shall be debited the amount of cash and the Gross Asset Value of any Company Property distributed to such Person pursuant to any provision of these regulations, such Person's distributive share of Losses and any items in the nature of expenses of losses which are specially allocated pursuant to Section 5.2 or Section 5.3 hereof, and the amount of any liabilities of such Person which are assumed by the Company or which are secured by any property contributed by such Person to the Company. (c) In the event all or a portion of an interest in the Company is transferred in accordance with the terms of these Regulations, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred interest. (d) A Member that has more than one Membership Interest shall have a single capital account that reflects all its Membership Interests, regardless of the class of Membership Interests owned by that Member and regardless of the time or manner in which those Membership Interests were acquired. c\md\corp&11c\MORUAU MANAGEMENT\regulations (e) In determining the amount of any liability for purposes of Sections 1.7(a) and 1.7(b) hereof, there shall be taken into account Code. Section 752(c) and any other applicable provisions of the Code and the Treasury Regulations. The foregoing provisions and the other provisions of these Regulations relating to the maintenance of Capital Accounts are intended to comply with Section 1.704-1(b) of the Treasury Regulations, and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event the Managing Member shall determine that it is prudent to modify the manner in which the Capital Accounts, or any debits or credits thereto (including, without limitation, debits or credits relating to liabilities which are secured by contributed or distributed property or which are assumed by the Company, or the Members), are computed in order to comply with such Treasury Regulations, the Managing Member may make such modification, provided that it is not likely to have a material effect on the amounts distributable to any Person pursuant to Article UV hereof upon the dissolution of the Company. The Managing Member also shall (i) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of Company capital reflected on the Company's balance sheet, as computed for book purposes, in accordance with Section 1.704- I(b)(2)(iv)(q) of the Treasury Regulations, and (h) make any appropriate modifications in the event unanticipated events (for example, the acquisition by the Company or oil or gas properties) might otherwise cause these Regulations not to comply with Section 1.704-1(b) of the Treasury Regulations. 1.8 "Capital Contribution " means any contribution by a Member to the capital of the 1 Company. 1.9 "Code" means the Internal Revenue Code of 1986 and any successor statute thereto, as amended from time to time. 1.10 "Company" means MOREAU MANAGEMENT, I,1,C, a Texas limited' liability company. 1.11 "Company Minimum Gain" has the meaning set forth in Sections 1.704-2(b)(2) and 1.704-2(d) of the Treasury Regulations. 1,12 "Company Property" shall mean all of the property initially contributed to the capital of the Company by the Members mud any other property purchased or otherwise acquired by the Company or contributed by the Members subsequent to the execution of these Regulations, 1.13 "Depreciation" means, for each fiscal year or other period, an amount equal to the depreciation, amortization, or other cost recovery deduction allowable with respect to an asset for such year or other period; provided, however, that if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax depreciation, amortization, or other cost recovery ., p CNMd\Corp&llc\MOAEAU MANAGEMENTVagulations deduction for such year or other period bears to such beginning adjusted tax basis; provided; further that if the federal income tax depreciation, amortization, or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Managing Member. 1.14 "Interest Rate" means a rate per annum equal to the lesser of (a) a varying rate per annum that is equal to the interest rate publicly quoted by Texas Commerce Bank, or its successor, from time to time as its prime commercial or similar reference interest rate, with adjustments in that varying rate to be made on the same date as any change in that rate, and (b) the maximum rate permitted by applicable law. 1.15 "Gross Asset Value" means, with respect to any asset, the asseVs adjusted basis for federal income tax purposes, except as follows: (a) The initial Gross Asset Value. of any asset contributed by a Member to the Company shall be the gross fair market value of such asset, as determined by the contributing Member and the.Company, provided that the initial Gross Asset Values of the assets originally contributed to the Company pursuant to Section 4.1 hereof shall be as set forth in Schedule A, and provided furtber that if the contributing Member is the Managing Member, the determination for the fair market value of a contributed asset shall require the agreement of a majority in interest of the Members (without regard to the membership Interests of the Managing Member). ( .4 (b) The Gross Asset Values of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Managing Member, as of the following times: (a) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis Capital Contribution, (b) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company; and (c) the liquidation of the Company within the meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations; provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the Managing Member reasonably determines that such adjustments are necessary or appropriate to reflect the relative economic interests for the, Member in the Company; (e) The Gross Asset Value of any Company asset distributed to any Member shall be the gross fair market value of such asset on the date of distribution; and (d) The Gross Asset Values of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent that sucb adjustments art;' taken into account in determining Capital Accounts pursuant to Section 1.704- 1(b)(2)(iv)(m) of the Treasury Regulations and Section 5.2(g) hereof; provided, however, that Gross Asset Values shall not be adjusted pursuant to this Section 1.15 to the extent that Managing Member determines that an adjustment pursuant to Section 1.15(b) hereof is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this Section 1.15(d). i C\md\corpalrc\MOREAD MANAGEMENT\regulations If the Gross Asset Value of an asset has been determined or adjusted pursuant to Section 1.15(a), 1,15(b), or 1.15(d) hereof, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses. 1.16 "Irrsrrediate Family" means, with respect to any individual Person, the spouse, lineal descendants and spouses of the lineal descendants of such Person or a trust for the exclusive benefit of any one or more of the foregoing individuals. A' 1.17 "11lauaging Member" means the People designated in Section 7.3 as the initial Managing Member and each successor Member who is elected Managing Member in accordance with these Regulations. 1.18 "Afamber" means each Person executing these Regulations as of the date of these Regulations as a member, together with each other Person (if any) that subsequently becomes an additional or substituted Member in aceordauce with these Regulations, but excluding any Person that subsequently ceases to be a Member pursuant to the provisions of these Regulations. 1.14 "Member Nonrecourse Debt" as the meaning set forth in Section 1.704-2(b)(4) of the Treasury Regulations. 1.20 "Member Nonrecourse Debt Minilaum Gain" means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Section 1.704-2(i)(3) of the Treasury Regulations. 1.21 "Member` Nonrecourse Deductions" as the meaning set forth in Sections 1.704- 2(i)(1) and 1.704-2(i)(2) of the Treasury Regulations. 1.22 "Membership Interest" means the interest of a Member in the Company, including, without limitation, rights to distributions (liquidating or otherwise), allocations, information, and to consent or approve. 1.23 "Net Cash Flow" means the gross cash proceeds of the Company less the portion thereof retained for investment by the Company and any amounts used to pay or establish reserves for all Company expenses, debt payments, capital improvements, replacements, and contingencies, all as determined by the Managing Member. Net Cash Flow shall not be reduced by depreciation, amortization, cost recovery deductions, or similar allowances, but shall be increased by any reductions of reserves previously established. 1.24 "NwuecourseDeductions" has the meaning set forth in Section 1.704-2(b)(1) of the Treasury Regulations. 1.25 "Nonrecourse Liability" has the meaning set forth in Section 1.704-2(b)(3) of the Treasury Regulations. c\md\corp&11c\MOAEAU MANAGEMENT\regulations a i 1.26 "Person" has the meaning given that term in Article 1,02(A)(4) of the Act. 1.27 "Profits" or "Losses" means, for each fiscal year or other period, an amount equal to the Company's taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss, or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments: (a) Any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits or Losses pursuant to this Section 1.27 shall be added to such taxable income or loss; (b) Any expenditures of the. Company described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section 1,704- 1(b)(2)(iv)(i) of the Treasury Regulations and not otherwise taken into account in computing Profits or Losses pursuant to this Section 1,27 shall be subtracted from such taxable income or loss; (c) In the event the Gross Asset Value of any Company asset is adjusted " pursuant to Section 1,15(b) or Section 1.14(d) hereof, the amount of such adjustment' ' shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits or Losses; -1 (d) Gain or loss resulting from any disposition of Company Property with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Gross Asset Value; (e) In lieu of the depreciation, amortization, and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period, computed in accordance with Section 1.12, 113 hereof, and (f) Notwithstanding any other provision in this Section 1.27, any items that are specially allocated pursuant to Section 5.2 or Section 5.3 hereof shall not be taken into account in computing Profits or Losses. E 1,28 "Regulations" has the meaning given that term in the introductory paragraph. .. . 1.29 "Required Interest" means one or more Members having among them more than 67% of the Sharing Ratios of all Members. 1.30 "Sharing Ratio" means, at all times, the ratio that such Members interest in the Company bears to the interests in the Company of all Members. The original C\Md\COrprllC\MOREAU MANAGEMENT\regulations Sharing Ratio of each Member is set forth on Schedule A to these Regulations. C1.31 "TBCA" means the Texas Business Corporation Act and any successor statue, as amended form time to time. 1.32 "Transfer" meaas,'as a noun, any voluntary or involuntary transfer, sale, pledge, hypothecation, or other disposition and, as a verb, .voluntarily or involuntarily to transfer, sell, pledge, hypothecate, or otherwise dispose of. 1.33 "Treasury Regulations" means the Income Tax Regulations, including A' y Temporary Regulations, promulgated under the Code, as such regulations may be amended from. time to time (including corresponding provisions of succeeding regulations). ARTICLE II ORGANIZATION 2.1 Formation. The Company has been organized as a Texas limited liability company by the filing of Articles of Organization (the "Articles'D under and pursuant to the Act and the issuance of a certificate of organization for the Company by the Secretary of State of the State of Texas. 2.2 Name. The name of the Company is "MOREAU MANAGEMENT, LLC" and all Company business must be conducted in that name or such other names that comply with " applicable law as the Members may select from time to time. 2.3 Registered Office; Registered Agent- Principal Office in the United States; Other Offices. The registered office of the Company required by the Act to be maintained in the State of Texas shall be the office of the initial registered agent named in the Articles or such other office (which need not be a place of business of the Company) as the Members may designate from time to time in the manner provided by law. The registered agent of the x> Company in the State of Texas shall be the initial registered agent named in the Articles or such - other Person or Persons as the Members may designate from time to time in the manner provided by law. The principal office of the Company in the United States shall be at such place as the Members may designate from time to time, which need not be in the State of Texas, and the Company shall maintain records there as required by Article 2.22 of the Act. The Company may have such other offices as the Members may designate from time to time. 2.4 Purposes. The purposes of the Company are those set forth in the Articles. 2.5 Foreign Qualification. Prior to the Company's conducting business in any jurisdiction other than Texas, the Members shall cause the Company to comply, to the extent procedures are available and those matters are reasonably within the control of the Members, with all requirements necessary to qualify the Company as a foreign limited liability company in that jurisdiction. Each Member shall from time to time execute, acknowledge, swear to, and deliver all certificates and other instruments conforming with these Regulations that are necessary or appropriate to qualify, continue, and 1�erniinate the Company as a foreign limited c\md\C0rp&11c\M0REAU MANAGEMENT\regulations W t liability company in all such jurisdictions in which the Company may conduct business, 2.6 Term.. The Company commenced on the date of the Secretary of State of Texas issued a certificate of organization for the Company and shall continue in existence for the period fixed in the Articles for the duration of the Company, or such earlier time as these Regulations may specify. 2.7 Mergers and Exchanges. The Company may be a party to (a) merger, or (b) an exchange or acquisition of the type described in Article 5.02 of the TBCA, subject to the requirements of Section 7.2(ii). 2.8 No State -Law Partnership. The Members intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Member be a partner or joint venturer of any other Member, for any purposes other than federal and state tax purposes, and these Regulations may not be construed to suggest otherwise. ARTICLE, III MEMBERSHIP; DISPOSITIONS OF INTERESTS 3.1 Initial Members, The initial members of the company are the Persons identified as such in the Articles. 3.2 Representations and Warranties, Each Member hereby represents and warrants C i to the Company and each other Member that (a) if that Member is a corporation, it is duly organized, validly existing, and in good standing under the law of the state of its corporation and is duly qualified and in good standing as a foreign corporation in the jurisdiction of its principal place of business (if not incorporated therein); (b) if that Member is a limited liability company, it is duly organized, validly existing, and (if applicable) in good standing under the law of the state of its organization and is duly qualified and (if applicable) in good standing as a foreign limited liability company in the jurisdiction of its principal place of business (if not organized therein); (c) if the Member is a partnership, trust, or other entity, it is duly formed, validly existing, and (if applicable) in good standing under the law of the state of its formation, and if required by law is duly qualified to do business and (if applicable) in good standing in the jurisdiction of its principal place of business (if not formed therein), and the representations and warranties in clause (a), (b) or (c), as applicable, are true and correct with respect to each partner (other than limited partners), trustee, or other member thereof; (d) that such Member has full corporate, limited liability company, partnership, trust, or other applicable power and authority to execute and agree to these Regulations and to perform its obligations hereunder and all necessary actions by the board of directors, shareholders, managers, members, partners, trustees, beneficiaries, or other Persons necessary for the due authorization, execution; delivery, and :1 performance of these Regulations by that Member have been duly taken; (e) that such Member has duly executed and delivered these Regulations; and (f) that such Member's authorization, execution, delivery, and performance of these Regulations do not conflict with any other agreement or arrangement to which that Member is a party or by which it is bound. c\md\C0rp&11c\M0REAU MANAGEMENT\regulations 3.3 Additional Members. With the written consent of a Required Interest, additional i Persons may be admitted to the Company as Members and Membership Interests may be created and issued to those Persons and to existing Members, on such terms and conditions as such Required Interest may determine at the time of admission. The terms of admission or issuance must specify the Sharing Ratios and may provide for the creation of different classes or groups of Members, including classes or groups baving different rights, powers, and duties. Any such admission also must comply with the provisions of Section 12.3 and is effective only after the now. Member has executed and delivered a document including the new Member's notice address, if agreement to the bound by these Regulations, and its representation and warranty that the representations and warranties in Section 3.2 are true and correct with respect to the new Member. The provisions of this Section 3.3 shall not apply to 'Transfers of Membership Interests. 3.4 Information. (a) In addition to the other rights specifically set forth in these Regulations, each Member is entitled to all information to which that Member is permitted to have access pursuant to Article 2.22 of the Act under the circumstances and subject to the conditions therein stated. (b) The Members acknowledge that, from time to time, they may receive information from or regarding the Company in the nature of trade secrets or that otherwise is confidential, the release of which may be damaging to the Company or Persons with which it does business. Each Member shall hold in strict confidence any information is receives regarding the Company that is identified as being confidential (and if that information is provided in writing, that is so marked) and may not disclose it to any Person other than another Member or a Manager, except for C.. l disclosures (i) compelled by law (but the Member must notify the Managers promptly of any request for that information, before disclosing it if practicable), (ii) to advisers or representatives of the Member or Persons to which that Member's Membership Interest may be transferred as permitted by these Regulations, but only if the recipients have agreed to be bound by the provisions of this Section 3.4(b), or (iii) of information that the Member also has received from a source independent of the Company provided that the Member reasonably believes that such source obtained the information without breach of any obligation of confidentiality. The Members acknowledge that breach of the provisions of the Section 3.4(b) may cause irreparable injury to the Company for which monetary damages are inadequate, difficult to compute, or both. Accordingly, the Members agree that the provisions of this Section 3.4(b) may be enforced by specific performance. 3.5 Liability to Third Parties. No Member shall be liable for the debts, obligations or liabilities of the Company, including under a judgment decree or order of a court. 3.6 Witbdrawal. A Member does not have the right or power to withdraw firm the Company as a member. 3.7 Authority* Although under the Act each Member is an agent of the Company for the purpose of its business, and the act of every Member, each Member acknowledges that the Managing Member will manage the day-to-day business and operations of the Company. Each Member (other than any Member then serving as the Managing Member) hereby covenants and c\1Kd\C0rp&11C\M0RNAU MANAGEMENT\regulations er 4. agrees not to enter into agreements in the name of or on behalf of the Company without the prior written consent of the Managing Member. 3.8 Conflicts of Interest. Subject to the other express provisions of these Regulations, each Member of the Company at any time and from time to time may engage in and possess interests in other business ventures of any and every type and description, independently or with others, including ones in competition with the Company, with no obligation to offer to the Company or any other Member the right to participate therein. The Company may transact business with any Member or Affiliate thereof, provided the terns of those transactions are no less favorable than those the Company could obtain from uurelated third parties. ARTICLE, IV CAPITAL CONTRIBUTIONS 4.1 Capital Contributions. Contemporaneous with the execution by each Member of these Regulations, each Member has made or is making the Capital Contribution set forth opposite such Membei's name on Schedule A. 4.2 Additional Contributions, Without the unanimous consent of the Members, no Member shall be required to contribute additional cash or capital to the Company. 4.3 Return of Contributions. A Member is not entitled to the return of any part of its Capital Contributions or to be paid interest in respect of either its Capital Account or its Capital Contributions. An unrepaid Capital Contribution is not a liability of the Company or any \ Member. A Member is not required to contribute or to lend any cash or property to the Company to enable the Company to return any Member's Capital Contributions. 4.4 Advances by Members. If the Company does not have sufficient cash to pay its obligations, any Member(s) may advance all or part of the needed funds to or on behalf of the Company. Any advance described in this Section 4.4 shall constitute a loan from the Member to the Company, shall bear interest at the Interest Rate from the date of the advance until the date of payment, and shall not be a Capital Contribution. ARTICLE, V ALLOCATIONS 5.1 Profits and Losses. After giving effect to the special allocations set forth in Sections 5.2 and 5.3 hereof, Profits or Losses for any fiscal year shall be allocated among the Members in proportion to their Sharing Ratios. 5.2 Special Allocations. The following special allocations shall be made in the " following order: (a) Minimum Gain Chargeback. Except as otherwise provided in Section 1.704-2(f) of the Treasury Regulations, notwithstanding any other provision of this Article V, if there is a net decrease in Company Minimum Gain during any fiscal year, i c\md\corp&lie\HOREAU HANAGEMEHT\regulations 10 each Member shall be specially allocated items of Company income and gain for such i fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to such Members share of the net decrease in Company Minimum Gain, determined in accordance with Section 1.704-2(g) of the Treasury Regulations. Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(f)(6) and 1.704-20)(2) of the Treasury Regulations. This Section 5.2(a) is - intended to comply with the minimum gain chargeback requirement in Section 1.704-2(f) of the Treasury Regulations and shall be interpreted consistently therewith. (h) Member Minimum Gain Chargeback. Except as otherwise provided in ' Section 1.704-2(i)(4) of the Treasury Regulations, notwithstanding any other provision of this Article V, if there is a net decrease in Member Nonrecourse Debt Minimum Gain attributable to a Member Nonrecourse Debt during any fiscal year, each Member who has a share of the Member Nomecourse Debt Minimum Gain attributable to such Member Nomecourse Debt, determined in accordance with Section 1.704-2(i)(5) of the Treasury Regulations, shall be specially allocated items of Company income and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Section 1.704-2(i)(4) of the Treasury Regulations. Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Sections 1.704-2(i)(4) and 1.704-20)(2) of the Treasury Regulations. This Section 5.2(b) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Treasury Regulations and shall be interpreted consistently therewith. (e) Qualified Income Offset. In the event any Member unexpectedly receives any adjustments, allocations, or distributions described in Section 1.704- 1(b)(2)(ih)(d)(4), Section 1.704-1(b)(2)(ii)(d)(S), or Section 1.704-1(b)(2)(ii)(d)(6) of the Treasury Regulations, items of Company income and gain shall be specially allocated to. each such Member in an amount and manner sufficient to eliminate, to the extent required by these Regulations, the Adjusted Capital Account Deficit of such Member as quickly as possible, provided that an allocation pursuant to this Section 5.2(c) shall be made only if and to the extent that such Member has an Adjusted Capital Account Deficit after all other allocations provided for in this Article V have been tentatively made as if this Section 5.2(c) were not in these Regulations. (d) Gross Income Allocation. In the event any Member has a deficit Capital Account at the end of any Company fiscal year which is in excess of the such of (i) the amount such Member is obligated to restore pursuant to any provision of these Regulations and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentences of Sections 1.704-2(g)(1) and 1.704-2(i)(5) of the Treasury Regulations, each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible, provided that an c\md\corp&11c\MOREAU MANAGEMENT\regulations IN allocation pursuant to the Section 5.2(d) shall be made only if and to the extent that such m suafter all other allocations provided for in this Article V have been tentatively made a, as if Section 5.2(c) hereof and this Section 5.2(d) were not in these Regulations. (e) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or other period shall be specially allocated among the Members in proportion to their Sharing Ratios. (f) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Section 1.704-2(i)(1) of the Treasury Regulations. (g) Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is required, pursuant to Section 1.704-1(b)(2)(iv)(in)(2) or Section 1.704-1(b)(2)(iv)(n:)(4) of the Treasury Regulations, to be taken into account in determining Capital Accounts, the amount of such adjustment to Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and.such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company in the event Section 1.704-1(b)(2)(iv)(m)(2) of the Treasury Regulations applies, or to the Member to whom such distribution was made W 1 the event Section 1.704-I(b)(2)(iv)(m)(4) of the Treasury Regulations applies, 5.3 Curative Allocations. The allocations set forth in Section 5.2 hereof (the "Regulatory Allocations") are intended to comply with certain requirements of the Treasury Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 5.3. Therefore, notwithstanding any other provision of this Article V (other than the Regulatory Allocations), the Managing Member shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Members Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory allocations were not part of these Regulations and all Company items were allocated pursuant to Section 5.1. In exercising its direction under this Section 5.3, the Managing Member shall take into account future Regulatory Allocations under Sections 5.2(a) and 5.2(b) that, although not yet made, are likely to offset other Regulatory Allocations previously made under Sections 5.2(e) and 5.2(f). 5.4 Other Allocation Rules (a) For purposes of determining the Profits, Losses, or any other items allocable to any period, Profits, Losses, and any such other items shall be determined on a daily, monthly, or other basis, as determined by the Managing Member using any permissible method under Code Section 706 c\md\coop&11c\MGREAU MANAGEMENT\regulations 12 and the Treasury Regulations thereunder. C1 (b) All allocations to the Members pursuant to this Article V shall, except as otherwise provided, be divided among diem in proportion to their Sharing Ratios. (c) Solely for the purposes of determining a Member's proportionate share of the "excess nonrecourse liabilities" of the Company within the meaning of Section 1.752- 3(a)(3) of the Treasury Regulations, the Members' interests in Company profits are in proportion to their Sharing Ratios. 5.5 Tax Allocations: Code Section 704(c). &, In accordance with Code Section 704(c) and the Treasury Regulations thereundez,. . income, gain, loss, and deduction with respect to any property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its initial Gross Asset Value (computed in accordance with Section 1.15(a) hereof). In the event the Gross Asset Value of any Company asset is adjusted pursuant to Section 1.15(b) hereof, subsequent allocations of income, gain, loss, and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Gross Asset Value in the same mamrer as under Code Section 704(c) and the Treasury Regulations thereunder. Any elections or other decisions relating to such allocations shall be made by the Managing Member in any manner that reasonably reflects the purpose and intention of these Regulations. Allocations pursuant to this. Section 5.5 are solely for purposes of federal, state, and local taxes and shall not affect, or in any way be taken into account in computing, any Person's Capital Account or share of Profits, Losses, other items, or distributions pursuant to any provision of these Regulations. ARTICLE VI DISTRIBUTIONS 6.1 Net Cash Flom. Except as otherwise provided in Article V thereof, Net Cash Flow, if any, shall from time to time, but not less often than once annually, be distributed among the Members in proportion to their Sharing Ratios. 6.2 Amounts Withheld. All amounts withheld pursuant to the Code or any provision of any state or local tax law with respect to any payment, distribution, or allocation to the Company or the Members shall be treated as amounts distributed to the Members pursuant to this Article VI for all purposes under these Regulations. The Managing Member are authorized to withhold from distributions, or with respect to allocations, to the Members and to pay over to any federal, state, or local government any amounts required to be so withheld pursuant to the Code or any provisions of any other federal, state, or local law, and may allocate any such amounts ( among the Members in any manner that is in accordance with applicable law. c\md\c6rp&11c\MGR6AU PLANAGEMENT\regulations 13 et; s ARTICLE VII MANAGING MEMBER 7.1 Management by Managing Member. Except for situations in which the approval of the Members is required by these Regulations or by nonwaivable provisions of applicable law, and subject to the provisions of Section 7.2,(i) the powers of the Company shall be exercised by or under the authority of, and the business and affairs of the Company shall be managed under the direction of, the Managing Member; and (ii) the Managing Member may make all decisions and take all actions for the Company not otherwise provided for in these Regulations, including, without limitation, the following: (a) acquire by purchase, lease, or otherwise any real or personal property which may be necessary, convenient, or incidental to the accomplishment of the purposes of the Company; (b) operate, maintain, finance, improve, construct, own, grant options with respect to, sell, convey, assign, mortgage, and lease any real estate any personal property necessary, convenient, or incidental to the accomplishment of the purposes of the Company; (c) execute any and all agreements, contracts, documents, certifications, and instruments necessary or convenient in connection with the management, maintenance,,, , and operation of the Company Property, or in connection with managing the affairs of the Company; (d) borrow money and issue evidences of indebtedness necessary, convenient, or Incidental to the accomplishment of the purposes of the Company, and secure the same by mortgage, pledge, or other lien on any Company Property; (e) execute, in furtherance of any or all of the purposes of the Company, any deed, lease, mortgage, deed of trust, mortgage note, promissory note, bill of sale, contract, or other instrument purporting to convey or encumber any or all of the Company Property; (1) prepay in whole or in part, refinance, recast, increase, modify, or extend any liabilities affecting the property of the Company and in connection therewith execute any extensions or renewals of encumbrances on any or all of the property of the Company Property; (g) care for and distribute funds to the Members by way of cash, income, retuni of capital, or otherwise, all in accordance with the provisions of this these Regulations, and perform all matters in furtherance of the objectives of the Company or these Regulations; c\md\cOrp&lrc\MOREAU MANAGWENT\regulatiane 14 C l (h) contract on behalf of the Company for the employment and services of employees and/or independent contractors, such as lawyers, accountants, and investment advisors, and delegate to such Persons the duty to manage or supervise any of the assets or operations of the Company; (i) engage in any kind of activity and perform and carry out contracts of any kind (including contracts of insurance covering risks to Company Property and Managing Member liability) necessary or incidental to, or in connection with, the accomplishment of the purposes of the company, as may be lawfully carried on or performed by a partnership under the laws of each state in which the Company is then formed or qualified; 0) take, or refrain from taking, all actions, not expressly proscribed or limited by these Regulations, as may be necessary or appropriate to accomplish the purposes of the Company; and . • • (lc) institute, prosecute, defend, settle, compromise, and dismiss lawsuits or other judicial or administrative proceedings brought on or in behalf of, or against, the Company or the Members in connection with activities arising out of, connected with, or incidental to these Regulations, and to engage counsel or others in connection therewith. 7.2 Restriction on Author4ty of Managing Member. Notwithstanding the provisions of Section 7.1, the Managing Member may not cause the Company to do any of the `J following without obtaining the prior written consent of a Required Interest: (i) sell, lease, exchange or otherwise dispose of (other than by way of a pledge, mortgage, deed of trust or trust indenture) all or substantially all of the Company's property and assets (with or without good will), other than in the usual and regular course of the Company's business; (ii) be a party to (1) a merger, or (ii) an exchange or acquisition of the type described in Article 5.02 of the TBCA; (iii) amend or restate the Articles. 7.3 Election of Managing Member, The initial Managing Member of the Company is CHARLES S. MOREAU. Each year at the annual meeting of the Members, the Members shall elect a Managing Member who shall serve in such capacity until the next annual meeting of the Members, unless he shall sooner die, resign or be removed by a Required Interest at a special meeting of the Members. 7.4 Approval or Ratification of Acts or Contracts by Members. The Managing Member in their discretion may submit any act or contract for approval or ratification at any meeting of the Members, and any act or contract that shall be approved or be ratified by a Required Interest shall be as valid and as binding upon the Company and upon all Members as if c\md\corp&11c\M0REAu MANAGEMENMegulations 15 it shall have been approved or ratified by every Member of the Company. 7.5 Compensation. The Managing Member shall receive such compensation, if any, for their services as may be designated from time to time by a Required Interest. In addition, the Managing Member shall be entitled to be reimbursed for out-of-pocket costs and expenses incurred in the course of their service hereunder. ARTICLE VIII MEETINGS OF MEMBERS 8.1 Meetings. (a) A quorum shall be present at a meeting of Members if the bolders of a Required Interest are represented at the meeting in person or by proxy. With respect to any matter, other than a matter for which the affirmative vote of the holders of a specified portion of the Sharing Ratios of all Members entitle to vote is required by the Act, the affirmative vote of a majority -in -interest at a meeting of Members at which a quorum is present shall be the act of the Members, (b) All meetings of the Members shall be held at the principal place of business of the Company or at such other place within or without the State of Texas as l shall be specified or fixed in the notices or waivers of notice thereof; provided that any or all Members may participate in any such meeting by means of conference telephone or similar communications equipment pursuant to Section 8.5. (e) Notwithstanding the other provisions of the Articles or these Regulations, the chairman of the meeting or the holders of a Required Interest shall have the power to adjourn such meeting from time to time, without any notice other than announcement at the meeting of the time and place of the holding of the adjourned meeting. If such meeting is adjourned by the Members, such time and place shall be determined by vote of the holders of a Required Interest. Upon the resumption of such adjourned meeting, any business may be transacted that might have been transacted at the meeting as originally called. (d) An annual meeting of the Members, for the election of the Managing Member and for the transaction of such other business as may properly come before the meeting, shall be held at such place, within or without the State of Texas, on such date and at such time as the Managers shall fix and set forth in the notice of the meeting, which date shall be within 13 months subsequent to the date of organization of the Company or the last annual meeting of Members, whichever most recently occurred. (e) Special meetings of the Members for any proper purpose or purposes may be called at any time by the Managing Member or the holders of at Ieast ten percent of the Sharing Ratios of all Members. If not otherwise stated in or fixed in accordance with c\md\c0xp4i1c\1-J0REA9 MANAGEMENT\regulations 16 the remaining provisions hereof, the record date for determining Members. cntttled to call ! a special meeting is the date any Member first signs the notice of that meeting. Only business within the purpose or purposes described in the notice (or waiver thereof) required by these Regulations may be conducted at a special meeting of the Members. (1) Written or printed notice stating the place, day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten or more than 60 days before the date of the meeting, either personally or by mail, by or at the direction of the Managing Member or Person calling the meeting, to each Member, entitled to vote at such meeting. If mailed, any such notice shall be deemed to be delivered when deposited in the United States ail, addressed to the Member at the address provided for in Section 15.2, with postage thereon prepaid. " (g) The date on which notice of a meeting of Members is mailed or the date on which the Managing Member declare a distribution is adopted, as the case may be, shall be the record date for the determination of the Members entitled to notice of or to vote at such meeting, including any adjournment thereof, or the Members entitled to receive such distribution. (h) The right of Members to cumulative voting in the election of Managers is expressly denied. 8.2 Voting List. The Managing Member shall make, at least ten days before each meeting of Members, a complete list of the Members entitled to vote at such meeting or any adjournment thereof, arrangement in alphabetical order, with the address of and the Sharing Ratios held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office or principal place of business of the 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 membership records shall be prima facie evidence as to who are the Members entitled to examine such list or transfer records or to vote at any meeting of Members. Failure to comply with the requirements a n of Section shall not affect the validity of any action taken at the meeting. .. I- 8.3 Proxies. A Member may vote either in person or by proxy executed in writing by the Member. A telegram, telex, cablegram or similar transmission by the Member, or a photographic, photostatic, facsimile or similar transmission by the Member, shall be treated as an execution in writing for purposes of this Section. Proxies for use at any meeting of Members or in connection with the taking of any action by written consent shall be Sled with the Members, before or at the time of the meeting or execution of the written consent, as the case may be. All proxies shall be received and taken charge of and all ballots shall be received and canvassed by the Members, who shall decide all questions touching upon the qualification of voters, the validity of the proxies, and the acceptance or rejection of votes, unless an inspector or inspectors shall have been appointed by the chairman of the meeting, in which event such inspector or 1 inspectors shall decide all such questions. No proxy shall be valid after I months from the date c\md\coxpsllc\MOaEAU NANAGE4ENT\xegulations 17 of its execution unless otherwise provided in the proxy. A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest. Should a proxy designate two or more Persons to act as proxies, unless that instrument shall provide to the contrary, a majority of such Persons present at any meeting at which their powers thereunder are to be exercised shall have any may exercise all the powers of voting or giving consents thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an oven number attend and a majority do not agree on any particular issue, the Company shall not be required to recognize such proxy with respect to such issue if such proxy does not specify how the Sharing Ratios that are the subject of such proxy are to be voted with respect to such issue. 8.4 Conduct of Meetings. All meetings of the Members shall be presided over by the Managing Member, who shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seem to them in order. 8.5 Action by Written Consent or Telephone Conference. (a) Any action required or permitted to 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 not less than the minimum Sharing Ratios that would be necessary to take such action at a meeting at which the holders of all Sharing Ratios n entitled to vote on the action were present and voted. Every written consent shall bear the date of signature of each Member who signs the consent. No written consent shall be effective to take the action that is the subject to the consent unless, within 60 days after the date of the earliest dated consent delivered to the Company in the manner required by this Section, a consent or consent signed by the holder or holders of not less than the minimum Sharing Ratios that would be necessary to take the action that is the subject of the consent are delivered to the Company by delivery to its registered office, its principal place of business, or the Managing Member. Delivery shall be by hand or certified or registered mail, return receipt requested. Delivery to the Company's principal place of business shall be addressed to the Managing Member. A telegram, telex, cablegram or similar transmission by a Member, or a photographic, photostatic, 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. (b) 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 Company by delivery to its registered office, its principal place of business, or the Managing Member. Delivery „ shall be by hand or by certified or registered mail, return receipt requested. Delivery to - the Company's principal place of business shall be addressed to the Managing Member. c\md\corp6rlc\MOREAU MANAGEMENT\regulatians 18 i• A. (c) If any action by the Members is taken by written consent, any articles or �i documents filed with the Secretary of State of Texas as aresult of the taking of the action shall state, in lieu of any statement required by the Act or the TBCA concerning any vote of Members, that written consent has been given in accordance with the provisions of the Act and the TBCA and that any written notice required by the Act and the TBCA has been given. (d) Members may participate in and hold a meeting 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 such meeting shall constitute attendance and 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. ARTICLE IX INDEMNIFICATION 9.1. Right to Indemnification. Subject to the limitations and conditions as provided in this Article IX, each Person who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit of proceeding, whether civil, criminal, administrative, arbitrative or investigative (hereinafter a "Proceeding"), or any appeal in such a Proceeding or any inquiry or investigation that could lead to such Proceeding, by reason of the fact that he or she, or a Person of whom he or she is the legal representative, is or r was a Managing Member of the Company or while a Managing Member of the Company is or was serving at the request of the Company as a manager, director, officer, partner, venturer, proprietor, trustee, employee, agent, or partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise shall be indemnified by the Company to the fullest extent permitted by the Act and the TBCA, as the same exist or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights that said law permitted the Company to provide prior to such amendment) against judgments, penalties (including excise and similar taxes and punitive damages), fines, settlements and reasonable expenses (including, without limitation, attorneys' fees) actually incurred by such Person in connection with such Proceeding, and indemnification under the Article IX shall continue as to a Person who has ceased to serve in the capacity which initially entitled such Person to indemnity hereunder. The rights granted pursuant to this Article IX shall be deemed contract rights, and no amendment, modification or repeal of this Article IX shall have the effect of limiting or denying any such rights with respect to actions taken or Proceedings arising prior to any such amendment, modification or repeal. It is expressly acknowledged that the indemnification provided in this Article IX could involve indemnification for negligence or under theories of strict liability. 9.2 Advance Payment. The tight to indemnification conferred in this Article IX shall include the right to be paid or reimbursed by the Company the reasonable expenses incurred by a Person of the type entitled to be indemnified under Section 9.1 who was, is or is threatened to be made a named defendant or respondent in a Proceeding in advance of the final ( disposition of the Proceeding and without any determination as to the Person's ultimate c\md\coipf,i1C\M0REA17 MANAGEMENT\reVIations 19 entitlement to indemnification; provided, however, that the payment of such expenses incurred by any such Person in advance of the final disposition of a Proceeding, shall be made only upon delivery to the Company of a written affirmation by such Manager of his or her good faith belief that he has met the standard of conduct necessary for indemnification under this Article IX and a written undertaking, by or on behalf of such Person, to repay all amounts so advanced if it shall t ultimately be determined that such indemnified Person is not entitled to be indemnified undei this Article IX or otherwise. 9.3 Indemnification of Officers, Employecs and Agents. The Company may indemnify and advance expenses to an employee or agent of the Company to the same extent and subject to the same conditions under which it may indemnify and advance expenses to Members under this Article IX; and, the Company may indemnify and advance expenses to Persons who are not or were not employees or agents of the Company but who are or were serving at the request of the 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 and incurred by him or her in such a capacity or arising out of their status as such a Person to the same extent that it may indemnify and advance expenses to Members under this Article IX. 9.4 Appearance as a Witness. Notwithstanding any other provision of this Article IX, the Company may pay or reimburse expenses incurred by a Member in connection with his or leer 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. 9.5 Nonexclusivity of Rights. The right to indemnification and the advancement and payment of expenses conferred in the Article IX shall not be exclusive of any other right which a Member or other Person indemnified pursuant to Section 9.3 may have or hereafter acquire rider any law (common or statutory), provision of the Articles or these Regulations, agreement, vote of Members of otherwise. 9,6 Insurance. The Company may purchase and maintain insurance, at its expense, to protect itself and any Person who is or was serving as a Managing Member, employee or agent of the Company or is or was serving at the request of the 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, 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 expense, liability or loss, whether or not the Company would have the power to indemnify such Person against such expense, liability or loss under this Article IX. 9.7 Savings Clause. If this Article IX or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Member or any other Person indemnified pursuant to'tbis ' Article IX as to costs, charges and expenses (including attorneys' fees), judgments, fines and c\md\corp&11C\MOREAV MANAGEMENT\regulations 20 Ai 1. criminal, administrative or investigative to the full extent permitted by any applicable portion of ( this Article IX that shall not have been invalidated and to the fullest extent permitted by applicable law. ARTICLE X TAXES 10.1 Tax Returns. The Managing Member shall cause to be prepared and filed all necessary federal and state income tax returns for the Company, including making the elections described in Section 10.2. Each Member shall furnish to the Managing Member all pertinent information in its possession relating to Company operations that is necessary to enable the Company's income tax returns to be prepared and filed. 10.2 Tax Elections. The Company shall make the following elections on the appropriate tax returns: (a) to adopt the calendar year as the Company's fiscal year; (b) if a distribution of Company property as described in Section 734 of the Code occurs or if a transfer of a Membership Interest as described in Section 743 of the Code occurs, on written request of any Member, to elect, pursuant to Section 754 of the Code, to adjust the basis of Company properties; (c) to elect to amortize the organizational expenses of the Company and the startup expenditures of the Company under Section 195 of the Code ratably over a period of 60 months as permitted by Section 709(b) of the Code; and (d) any other election the Managing Member may deem appropriate and in the best interests of the Members. Neither the Company nor its Member may make an election for the Company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law, and not provision of these Regulations (including, without limitation, Section 2.8) shall be construed to sanction or approve such an election. 10.3 Tax Matters Partner. The Managing Member shall be the "tax matters partner" of the Company pursuant to Section 6231(a)(7) of the Code. The Managing Member shall take such action as may be necessary to cause each other Member to become a "notice partner" within the meaning of Section 6223 of the Code. The Managing Member shall inform each other Member of all significant matters that may come to its attention in its capacity as "tax matters partner" by giving notice thereof on or before the fifth Business Day after becoming aware thereof and, within that time, shall forward to each other Member copies of all significant written communications it may receive in that capacity. The Managing Member may not take any action contemplated by Sections 6222 through 6232 of the Code without the consent of a Required Interest, but this sentence does not authorize the Managing Member (or any other Member) to take any action left to the determination of an individual Member under Sections 6222 through 1 c\md\corpsllc\MORGAU MANAGEMENT\regulations 21 6232 of the Code. ARTICLE XI BOOKS, RECORDS, REPORTS, AND BANK ACCOUNTS r 11.1 Maintenance of Books, The Company shall keep books and records of accounts and shall keep minutes of the proceedings of its Members. On or before the due date of the Company's federal tax return (including extensions thereof) for each calendar year, there shall be delivered to each Member a statement setting forth the Member's distributive share of Company's income, gain, loss, deduction, or credit required to be shown on the Company's federal tax return and, to the extent provided for by form or accompanying instructions, any additional information that may be required to apply particular provisions of Subtitle A of Code to the Member with respect to items related to the Company. 11.2 Reports. On or before the 120th day following the end of each fiscal year during the term of the Company, the Managing Member shall cause each Member to be furnished with a balance sheet, an income statement, and a statement of changes in Members' capital of the Company for, or as of the end of, that year certified by a recognized firm of certified public accountants. These financial statements must be prepared in accordance with generally accepted accounting principles consistently applied (except as therein noted) and must be accompanied by a report of the certified public accountants certifying the statements and stating that their examination was made in accordance with generally accepted auditing standards and, in their opinion, the financial statements fairly present the financial position, financial results of operations, and changes in Members' capital in accordance with accounting principles generally consistently applied (except as therein noted). The Managing Member also may cause to be ' prepared or delivered such other reports as they may deem appropriate. The Company shall bear the costs of all these reports. 11.3 Accounts. The Managing Member shall establish and maintain one or more separate bank and investment accounts and arrangements for Company funds in the Company name with financial institutions and firms that the Managing Member shall determine. The Managing Member may not commingle the Company's funds with the funds of any Member; however, Company funds may be invested in a manner the same as or similar to the Managing Member's investment of their own funds or investments by their Affiliates. ARTICLE XII TRANSFERS ORINTERESTS 12.1 Restriction on Transfers. Except as otherwise permitted by this Agreement, no Member shall Transfer all or any portion of its Membership Interest, 12.2 Permitted Transfers. Subject to the conditions and restrictions set %rth in Section 12.3 hereof, a Member may at any time Transfer all or any portion of its Membership Interest to (1) any other Member, (2) any members of such Member's Immediate Family, (3) if. C ) such Member is a trust, the beneficiary or beneficiaries thereof, (4) any Wholly Owned Affiliate c%md\Corp&11❑\M0AEAU MANAGEMENT\regulations 22 q• L. of the transferor, or (5) the guardian or legal representative of a Member as to whose estate a guardian or legal representative is appointed and to the executor or administrator of the estate of a deceased Member (any such Transfer being referred to in this Agreement as a "Permitted Transfer"). 12.3 Conditions to Permitted Transfers. A Transfer shall not be treated as a Permitted Transfer under Section 12.2 hereof unless and until the following conditions are satisfied; provided, however, that any sueb conditions may be waived in writing by the Managing Member: (a) Except in the case of Transfer of a Membership Interest involuntarily by operation of law, the transferor and transferee shall execute and deliver to the Company such documents and instruments of conveyance as may be necessary or appropriate in the opinion of counsel to the Company to effect such Transfer and to confirm the agreement of the transferee.to be bound by the provisions of this Article XII. In the case of a Transfer of a Membership Interest involuntarily by operation of law, the Transfer shall be. confirmed by presentation to the Company of legal evidence of such Transfer, in form and substance satisfactory to counsel to the Company. In all cases, the Company shall be reimbursed by the transferor and/or transferee for all costs and expenses that it reasonably incurs in connection with such Transfer. (b) Except in the case of a Transfer involuntarily by operation of law, the transferor shalt furnish to the Company an opinion of counsel, which counsel and opinion shall be satisfactory to the Company, that the Transfer will not cause the Company to terminate for federal income tax purposes. (c) The transferor and transferee shall furnish the Company with the transferee's taxpayer identification number, sufficient information to determine the transferee's initial tax basis in the Membership Interest transferred, and any other information reasonably necessary to permit the Company to filb all required federal, state and local tax returns and other legally required information statements or returns. Without limiting the generality of the foregoing, the Company shall not be required to make any distribution otherwise provided for in these Regulations with respect to any transferred Membership Interest until it has received such information. (d) Except in the case of a Transfer of a Membership Interest involuntarily by ' operation of law, either (a) such Membership Interest shall be registered under the Securities Act of 1933, as amended, and any applicable state securities laws, or (b) the transferor shall provide an opinion of counsel, which opinion and counsel shall be satisfactory to the Company, to the effect that such Transfer is exempt from all applicable registration requirements and that such Transfer will not violate any applicable laws regulating the Transfer of securities. 12.E Prohibited Transfers. Any purported Transfer of Membership Interests that is not a Permitted Transfer shall be null and void and of no effect whatever; provided that if the Company is required to recognize a Transfer that is not a Permitted Transfer (or if the Company, o\md\conp5110\MOBEAU MANAGEMENT\iegulatlons 23 in its sole discretion, elects to recognize a Transfer that is not a Permitted Transfer), the Membership Interest Transferred shall be strictly limited to the transferor's rights to allocations and distributions as provided by these Regulations with respect to the transferred Membership Interests, which allocations and distributions may be applied (without limiting any other legal or equitable rights of the Company) to satisfy any debts, obligations, or liabilities for damages that the transferor or transferee of such Membership Interests may have to the Company. In the case of a Transfer or attempted Transfer of Membership Interests that is not a Permitted Transfer, the parties engaging of attempting to engage in such Transfer shall be liable to indemnify and hold harmless the Company and the other Members from all cost, liability, and damage that any of such indemnified Persons may incur (including, without limitation, incremental tax liability and lawyers' fees and expenses) as a result of such Transfer or attempted Transfer and efforts to enforce the indemnity granted hereby. 12.5 Rights of Unadmitted Assi pees. A Person who acquires one or more Membership Interests but who is not admitted as a substituted Member pursuant to Section 12.6 hereof shall be entitled only to allocations and distributions with respect to such Membership Interests in accordance with these Regulations, but shall have no right to any information or accounting of the affairs of the Company, shall not be entitled to inspect the books or records of the Company, and shall not have any of the rights of a Member under the Act or these Regulations. 12.6 Admissions of Transferee as Members, Subject to the other provisions of this Article XII, the transferee of a Membership Interest in the Company may be admitted to the Company as a substituted a Member only upon satisfaction of the conditions set forth below in n, this Section 12.6: (a) The Managing Member consent to such admission; (b) The Membership Interest with respect to which the transferee is being admitted was acquired by means of a permitted Transfer; (c) The transferee becomes a party to these Regulations as a Member and executes such documents and instruments as the Managing Member may reasonably request to confirm such transferee as a Member in the Company and such transferee's agreement to be bound by the terms and conditions hereof; and (d) The transferee pays or reimburses the Company for all reasonable legal, filing, and publication costs and expenses that the Company incurs in connection with the admission of the transferee as a Member with respect to the transferred Membership Interest. 12.7 Distributions and Applications bi Respect to Transferred Interests. If any Membership Interest is sold, assigned, or transferred during any accounting period in compliance with the provisions of this Article XIL Profits, Losses, each item thereof, and all other items attributable to the transferred interest for such period shall be divided and allocated between thU " o\md\ccrp&11c\11OREAU MANAGEMENT\regulations 24 transferor and the transferee by taking into account their varying interests during the period in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Managing Member. All distributions on or before the date of such transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee. Solely for purposes of making such allocations and distributions, the Company shall recognize such transfer not later than the end of the calendar month during 'which it is given company does not receive a notice stating the date such Membership Interest was transferred an such other information as the Managing Member may reasonably require within 30, days after the end of the accounting period during which the transfer occurs, then all of such items shall be allocated, and all distributions shall be make, to the Person who, according to the books and records of the Company, on the last day of the accounting period during which the transfer occurs, was the owner of the Membership Interest. Neither the Company nor the Managing Member shall incur any liability for making allocations and distributions in accordance with the provisions of this Section 12.7, whether or not the Managing Member of the Company has knowledge of any transfer of ownership of any Membership Interest. *. ARTICLE XIH ' BANKRUPTCY OF A MEMBER 13.1 Bankrupt Members. Subject to Section 14.1(c), if any Member becomes a Bankrupt Member, the Company shall have the option, exercisable by notice from a majority -in - interest of the non -Bankruptcy Members to the Bankrupt Member (or its representative) at any time prior to the 180th day after receipt of notice of the occurrence of the event causing it to ( } become a Bankrupt Member, to buy, and on the exercise of this option the Bankrupt Member or its representative shall sell, its Membership Interest. The purchase price shall be an amount equal to the fair market value thereof determined by agreement by the Bankrupt Member (or its representative) and the Notice Members; however, if those Persons do not agree on the fair market value on or before the 30th day following.the exercise of the option, either such Person, by notice to' the other, may require the determination of fair market value to be make by an independent appraiser specified in that notice. If the Person receiving that notice objects on or before the tenth day following receipt to the independent appraiser designated in that notice, and those Persons otherwise fail to agree on an independent appraiser, either such Person may petition the United States District Judge for the Southern District of Texas (Houston Division) then senior in service to designate an independent appraiser. The determination of the independent appraiser, however designated, is final and binding on all parties. The Bankrupt a _ Member and the Company each shall pay one-half of the costs of the appraisal. The purchaser; , shall pay the fair market value as so determined in four equal cash installments, the first due on closing the remainder (together with accumulated interest on the amount unpaid at the Interest Rate) due on each of the first three anniversaries thereof. The payment to be make to the Bankrupt Member (or its representative) pursuant to this Section 13.1 is in complete liquidation and satisfaction of all the rigbts and interest of the Bankrupt Member and its representative (and of all Persons claiming by, through, or under the Bankrupt Member and its representative) in and in respect of the Company, including, without limitation, any Membership Interest, any rights in specific Company Property, and any rights against the Company and (insofar as the affairs of the Company are concerned) against the Members, and constitutes a compromise to which all ( ' Members have agreed pursuant to Article 5.02(D) of the Act. c\md\corp&11c\M0REAG MANAGEMEMT\regulations 25 r1 ARTICLE XIV DISSOLUTION, LIQUIDATION, AND TERMINATION 14.1 Dissolution. The Company shall dissolve aril its affairs shall be wound up on thg. first to occur of the following: (a) the unanimous written consent of the Members; (b) the expiration of the period, if any, fixed for the duration of the Company set forth in the Articles; (c) any Member shall become a Bankrupt Member (with or without the consent of a Required Interest); provided, however, that if the event described in this Section 14.1(c) shall occur and there shall be at least one other Member remaining, the Company shall not be dissolved, and the business of the Company shall be continued, if all Members so agree; and (d) entry of a decree of judicial dissolution of the Company under Article 6.02 of the Act. Except as provided in Section 14.1(c), the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member, or the occurrence of any other event that terminates the continued membership of a Member in the Company, shall not cause a dissolution of the Company. 14.2 Liquidation and Termination. On dissolution of the Company, the Managing Member shall act as liquidators or may appoint one or more Members as liquidator. The liquidator shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Act. The costs of liquidation shall be home as a Company expense. Until final distribution, the liquidator shall continue to operate the Company Properties with all of the power and authority of the Managing Member. The steps to be accomplished by the liquidator are as follows: (a) as promptly as possible after dissolution and again after final liquidation, the liquidator shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Company's assets, liabilities, and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable; (b) the liquidator shall cause the notice described in Article 6.05(A)(2) of the Act to be mailed to each (mown creditor of and claimant against the Company in the manner described in such Article 6.05(A)(2); (c) The liquidator shall pay, satisfy or discharge from Company funds all of 0\Md\c0rp611c\M0REAU MANAGEMENT\regulations 26 Rn the debts, liabilities and obligations of the Company (including, without limitation, all i expenses incurred in liquidation and any advances described in Section 4.4) or otherwise make adequate provision. for payment and discharge thereof (including, without limitation, the establishment of a cash escrow fund for contingent liabilities in such amount and for such term as the liquidator may reasonably determine); and (d) all remaining assets of the Company shall be distributed to the Members as follows: (i) the liquidator may sell any or all Company Property, including to members, and any resulting gain or loss from each sale shall be computed and allocated to the Capital Accounts of the Members; (ii) with respect to all Company Property that has not been sold, the fair market value of that property shall be determined and the Capital Accounts of the Members shall be adjusted to reflect the manner in which the unrealized income, gain, loss, and deduction inherent in property that has not been reflected in the capital accounts previously would be allocated among the Members if there were a taxable disposition of that property for the fair market value of that property on the date of distribution; and (iii) Company Property shall be distributed among the Members in accordance with the positive Capital Account balances of the Members, as determined after taking into account all Capital Account adjustments for the taxable determined after ( taking into account all Capital Account adjustments for the taxable year of the Company during which the liquidation of the Company occurs (other than those made by reason of Us clause (iii); and those distributions shall be made by the end of the taxable year of the Company during which the liquidation of the Company occurs (or, if later, 90 days after the date of the liquidation). All distributions in kind to the Members shall be made subject to the liability of each distributee for costs, expenses, and liabilities theretofore incurred or for which the Company has committed prior to the date of termination and those costs, expenses, and liabilities shall be allocated to the distributee pursuant to this Section 14.2. The distribution of cash and/or property to a Member in accordance with the provisions of this Section 14.2 constitutes a complete return to the Member of its Capital Contributions and a complete distribution to the Member of its Membership Interest and all the Company's Property and constitutes a compromise to which all Members have consented within the meaning of Article 5.02(D) of the Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds. 14:3 Deficit Capital Accounts. Notwithstanding anything to the contrary contained in these Regulations, and notwithstanding any custom or rule of law to the contrary, to the extent that the deficit, if any, in the Capital Account of any Member results from or is attributable to deductions and losses of the Company (including non-casb items such as depreciation), or distributions of money pursuant to these Regulations to all Members in proportion to their respective Sharing Ratios, upon dissolution of the Company such deficit shall not be an asset of the Company and such Members shall not be obligated to contribute such amount to the c\md\COrp&11c\MOREAU 14ANAGENENT\regu1ations 27 rCompany to bring the balance of such Member's Capital Account to zero. t 14.4 Deemed Distribution and Recontribution. Notwithstanding any other provision of this Article XIV, in the event the Company is liquidated -within the meaning of Section 1.704-1(b)(2)(li)(g) of the Regulations but no event has occurred under Section 14.1, the Company Property shall not be liquidated, the Company's liabilities shall not be paid or m discharged, and the Company's affairs shall not be wound up. Instead, solely for federal income •• tax purposes, the Company shall be deemed to have distributed the Company Property in kind to the Members, who shall be deemed to have assumed and taken subject to all Company liabilities, all in accordance with their respective Capital Accounts. Immediately thereafter, the Members shall be deemed to have recontributed the Company Property in kind to the Company, which shall be deemed to have assumed and taken subject to all such liabilities. 14,5 Rights of Members. Except as otherwise provided in these Regulations, (a) each Member shall look solely to the assets of the Company for the retun of its Capital Contribution and shall have no right or power to demand or receive property other than cash from the Company and (b) no Member shall have priority over any other Member as to the return of its Capital Contributions, distributions, or allocations. 14.6 Articles of Dissolution. On completion of the distribution of Company assets as provided herein, the Company is terminated, and the Managing Member (or such other Person or persons as the Act may require or permit) shall file Articles of Dissolution with the Secretary of State of Texas, cancel any other filings made pursuant to Section 2.5, and take such other actions as may be necessary to terminate to the Company. ARTICLE XV GENERAL PROVISIONS 15.1 Offset. Whenever -the Company is to pay any sum to any Member, any amounts that Member owes the Company maybe deducted from that sum before payment: 15.2 Notices. Except as expressly set forth to the contrary in these Regulations, all notices, requests, or consents provided for or permitted to be given under these Regulations must be in writing and must be given either by depositing that writing in the Th-tited States mail, addressed to the recipient, postage paid, and registered or certified with return receipt requested or by delivering that writing to the recipient in person, by courier, or by facsimile transmission; and a notice, request, or consent given under these Regulations is effective on receipt by the Person to receive it. All notices, requests, and consents to be sent to a Member must be sent to or made at the addresses given for that Member on Exhibit A, or such other address as that Member may specify by notice to the other Members. Whenever any notice is required to be given by law, the Articles or these Regulations, a written waiver thereof, signed by the Person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. 15.3 Entire Agreement. These Regulations constitute the entire agreement of the c\md\cocp&11c\M0REAa MRNAGENENT\regulations 28 k Members and their affiliates relating to the Company and supersedes all prior contracts or agreements with respect to the Company, whether oral or written. 15A Construction. Whenever the context requires, the gender of all words used in these Regulations includes the masculine, feminine, and neuter. All references to Articles and Sections refer to articles and sections of these Regulations, unless otherwise indicated, and all references to Exhibits are to Exhibits attached hereto, each of which is made a part hereof for all purposes. 15.5 Effect of Waiver or Consent. A waiver or consent, express'or implied, to or of any breach or default by any Person in the performance by that Person of its obligations with respect to the Company is not a consent or waiver to or of any other breach or default in the performance by the Person of the same or any other obligations of that Person with respect to the Company. Failure on, the part of a Person to complain of any act of any Person or to declare any Person in default with respect to the Company, irrespective of how long that failure continues, does not constitute a waiver by that Person of its rights with respect to that default until the applicable statute -of -limitations period has run. 15.6 Amendment of Modification. These Regulations may be amended or modified from time to time only by a written instrument adopted, executed and agreed to by a Required Interest;_ provided, however, that (a) an amendment or modification reducing a Member's Sharing Ratio (other than to reflect changes otherwise provided by these Regulations) is effective only with the Member's consent, (b) an amendment or modification reducing the required Sharing ( i Ratio or other measure for any consent or vote in these Regulations is effective only with the consent or vote of Members having the Sharing Ratio or other measure theretofore required, and (c) amendments of the type described in Section 3.3 may be adopted as therein provided. 15.7 Binding Effect. Subject to the restrictions on Transfers set forth in these Regulations, these Regulations are binding on and inure to the benefit of the Members and their respective heirs, legal representatives, successors, and assigns. 15.8 Governing Law; Sever•abiIity. THESE REGULATIONS ARE GOVERNED BY AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF TEXAS, EXCLUDING ANY CONFLICT -OF -LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE OR TFIE CONSTRUCTION OR THESE REGULATIONS TO THE LAW OF ANOTHER JURISDICTION. In the event of a direct conflict between the provisions of these Regulations and (a) any provision of the Articles, of (b) any mandatory provision of the Act of (to the extent such statutes are incorporated into the Act)' the TBCA or the Texas Miscellaneous Corporation Laws Act, the application provision of the Articles, the Act, the TBCA or the Texas Miscellaneous Corporation Laws Act shall control. If any provision of these Regulations or the application thereof to any Person or circumstance is held invalid or unenforceable to any extent, the remainder of these Regulations and the application of that provision to other Persons or circumstances is not affected thereby and that provision shall be enforced to the greatest extent permitted by law. C 15.9 l<urther Assurances. In connection with these Regulations and the transactions c\md\corp&11c\M0REAll 13ANAGEMENT\x©gulations 29 contemplated hereby, each Member shall execute and deliver any additional documents and [� instruments and perform any additional acts that may be necessary or appropriate to effectuate and perform the provisions of these Regulations and those transactions. 15.10 'Waiver of Certain Riphts. Each Member irrevocably waives any right it may have to maintain any action for dissolution of the Company or for partition of the Company Property. 15.11 Indemnification. To the fullest extent permitted by law, each Member shall' indemnify the Company, each Manager and each other Member and hold them harmless from and against all losses, costs, liabilities, damages, and expenses (including, without limitation, costs of suit and attorneys' fees) they may incur on account of any breach by that Member of these Regulations. 15.12 Notice to Members of Provisions of these Regulations. By executing these Regulations, each Member acknowledges that it has actual notice of (a) all of the provisions of these Regulations, including, without limitation, the restriction on the transfer of Membership Interests set forth in Article 111, and (b) all of the provisions of the Articles. Each Member hereby agrees that these Regulations constitute adequate notice of all such provisions, including, without limitation, and notice requirement under Article 2.19(D) of the TBCA and Chapter 8 of the Texas Uniform Commercial Code, and each Member hereby waives any requirement that any further notice thereunder be given. 1 15.13 Counterparts. These Regulations may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument. IN WITNESS WBEREOF, following adoption of these Regulations by the. Managers, the Members have executed these Regulations as of the date first set forth above. I i ) I' c\md\GorPS11c\G1OAEAU MIANAGEMENT\regUlationa 30 L Name, Address and Social Security Number of Each Member Charles S Moreau SSN, FXMBIT A Capital Contribution $1,000.00 c\md\corp&llc\MORBAN MANAGEMENT\regulations Initial Sharing Ratio 100% Membership Units 1,000.00 31