Preview
4/14/2022 2:41 PM
Marilyn Burgess -District Clerk Harris County
Envelope No. 63591303
2022-22843 / Court: 152 By: Monica Jackson
Filed: 4/14/2022 2:41 PM
CAUSE NO.
PRO SELECT ACQUISITION, LTD. § IN THE DISTRICT COURT
Plaintiff,
v. ____ JUDICIAL DISTRICT
PRO SAFETY, LLC and PRO SAFETY
HOLDINGS, INC.
Defendants. HARRIS COUNTY, TEXAS
PLAINTIFF’S ORIGINAL PETITION
Plaintiff Pro Select Acquisition, Ltd. (Pro Select) files this Original Petition and respectfully
shows the following:
Discovery
1 For purposes of Rule 190.1, Plaintiff alleges that discovery should be conducted
pursuant to Rule 190.4 of the Texas Rules of Civil Procedure (Level 3).
Parties
2. Pro Select is a Texas limited partnership.
3 Defendant Pro Safety, LLC (PSLLC) is a Texas limited liability company. It may be
served with process through its registered agent for service, Paracorp Incorporated, at 14001 West
Highway 29, Suite 102, Liberty Hill, Texas 78642 or wherever it may be found.
4 Defendant Pro Safety Holdings, Inc. (PSHI) is a Texas limited liability company. It
may be served with process through its registered agent for service, Paracorp Incorporated, at 14001
West Highway 29, Suite 102, Liberty Hill, Texas 78642 or wherever it may be found.
Agency and Respondeat Superior
5 In this Petition, wherever it is alleged that any individual defendant did any act or
omission, the allegation means that the individual defendant and/or any agents, officers, servants,
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employees, or representatives of the defendant performed the act or omission, and it was done with
the full authorization or ratification of the defendant. Alternatively, the allegation means that the act
or omission was done in the normal routine, course, and scope of the agency or employment of the
defendant and/or the agents, officers, servants, employees, or representatives.
Jurisdiction and Venue
6. Pursuant to Texas Rule of Civil Procedure 47, Pro Select is seeking only monetary
relief of $250,000 or less, excluding interest, statutory or punitive damages and penalties, and
attorney fees and costs. Accordingly, this Court has jurisdiction over the parties because the amount
in controversy is within the jurisdictional limits of this Court.
7
This Court has jurisdiction over PSLLC and PSHI because both are Texas limited
liability companies and consented to jurisdiction via PSLLC’s Amended and Restated Company
Agreement.
8 Venue is mandatory in Harris County pursuant to the agreed-upon forum selection
clause in Pro Safety’s Amended and Restated Company Agreement.
Facts
9. In April 2020, Pro Select and PSHI entered into an Amended and Restated
Company Agreement (Company Agreement) for PSLLC. A true and correct copy of the Agreement
is attached as Exhibit “A.”
10. Pro Select and PSHI continue to operate PSLLC for the purposes of providing
safety materials and services to refineries.
11. PSLLC maintains books and records relating to the company’s business, operations,
and accounts at its office in California.
12. Pro Select is a member of PSLLC and therefore has a right to “examine and copy at
any reasonable time and at [its] expense: (1) records required under Sections 3.151 and 101.501 [of
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the Texas Business Organizations Code]; and (2) other information regarding the business, affairs,
and financial condition of the company that is reasonable for the person to examine and copy.” Tex.
Bus. Orgs. Code § 101.502.
13. On March 29, 2022, Pro Select sent a written request to Catherina Zember, the
President, CEO, and manager of PSLLC, for access to PSLLC’s books, files, and records for the
purpose of determining whether she was operating the company’s business and management of its
affairs in compliance with the law and the Company Agreement. At that time, Pro Select requested
that Zember provide dates and times at which Pro Select could access PSLLC’s books and records.
Zember did not provide any dates in response.
14. On April 7, 2022, Pro Select sent a second letter requesting access to PSLLC’s books
and records with specific reference to all “books and records between 2018 and 2022 (inclusive),
including, but not limited to, the Company’s bank statements, general ledger, and financial
statements.” This time, Pro Select said it wished to inspect the books and records the week of April
11, 2022. In response, PSHI said that the inspection would have to occur on a weekend—outside of
normal business hours. On April 13, 2022, Pro Select made one final request for access to the books
and records during normal business hours and was refused once again.
15. Additionally, on March 25, 2022, Pro Select exercised its option to purchase PSHI’s
units of membership interest in PSLLC. Following that occurrence, under the terms of the
Company Agreement, the parties were to jointly select an appraiser to appraise the company. Pro
Select suggested two possible appraisers, neither of which PSHI would agree to. Because the parties
could not agree on an appraiser, the Company Agreement required both Pro Select and PSHI to
select independent appraiser, who would perform their own appraisals. Those appraisers would then
choose a third appraiser to determine which of the appraisals most accurately reflected the value of
PSLLC.
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16. Pro Select then requested the identity of PSHI’s designated appraiser, which PSHI
never provided.
Cause of Action —’Texas Business Organizations Code Violations
17. Pro Select is a member of PSLLC. It made a valid and proper request to inspect
PSLLC’s books and records and identified a proper purpose for seeking such records. Defendants
have refused to comply with that request. Accordingly, Pro Select seeks an order compelling
Defendants to make PSLLC’s books and records available to Pro Select for inspection and copying.
18. As a result of the Defendants’ refusal to cooperate and provide the records to which
Pro Select is entitled, Pro Select has been required to seek the services of counsel. Therefore, in
accordance with Section 101.503 of the Texas Business Organizations Code, Pro Select seeks
reasonable attorneys’ fees and costs in addition to any damages and other relief to which he is
entitled.
Cause of Action — Breach of Contract
19. Pro Select invoked the appraisal provision of the Company Agreement and complied
with its contractual duty to select an independent appraiser. PSHI has not designated an appraiser
despite an obligation to do so. Therefore, Pro Select seeks an order that PSHI specifically perform
under the Company Agreement and designate its independent appraiser.
Conditions Precedent
20. All conditions precedent to filing this lawsuit have been performed or have occurred.
Prayer
Therefore, Plaintiff Pro Select Acquisition, Ltd. requests that the Defendants be cited to
appear and answer, and on final trial, that this Court enter a judgment ordering PSLLC to make its
books and records available to Pro Select and PSHI to perform under the Company Agreement by
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selecting an appraiser. Pro Select further seeks its attorney’s fees, costs of court, pre- and post-
judgment interest, and all other relief to which it may deem itself entitled.
Respectfully submitted,
BRANSCOMB LAW
4630 North Loop 1604 West, Suite 206
San Antonio, Texas 78249
Telephone: (210) 598-5400
Facsimile: (210) 598-5405
Cf See
By
Z,
Clint Buck
Cue
State Bar No. 24078280
cbuck@branscomblaw.com
Joe M. Davis
State Bar No. 05520350
jdavis@branscombpc.com
Attorneys for Plaintiff Pro Select Acquisition, Ltd.
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Exhibit A
PRO SAFETY, LLC
AMENDED AND RESTATED COMPANY AGREEMENT
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Table of Contents
ARTICLE I MEMBERS; PURPOSE AND AUTHORITY
11 Members..
1.2 Purpose and Authority. ..
ARTICLE II CAPITAL CONTRIBUTIONS
21 Contributions.
2.2 Return ofContributions.
ARTICLE II] ALLOCATIONS AND DISTRIBUTIONS
3.1 Allocations.
3.2 Tax Allocations
3.3 Distributions.
3.4 Tax Distributions.
ARTICLE IV MANAGEMENT.
41 Number of Managers; Management by Managers
42 Appointment; Resignation
43 Vacancy...
44 Change of Number.
45 Removal.
46 Committees. .
47 Written Consent
ARTICLE V MEETINGS OF MEMBERS
5.1 Meetings..
5.2 Location ofMeetings. .
5.3 Action by Telephone Conference
5.4 Notice.
5.5 Waiver ofNotice...
5.6 Quorum.
5.7 Majority Vote
5.8 Voting Rights.
5.9 Written Consent
ARTICLE VI OFFICERS
6.1 Officers.
6.2 Terms.
ARTICLE VII RESTRICTIONS ON DISPOSITIONS OF UNITS; WITHDRAWAL
7A Restrictions on the Disposition of Units.
7.2 Admission as a Member.
73 Option Trigger.
1A Expenses.
15 Withdrawal
7.6 Disputes.
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17 Registration Exemption.
ARTICLE VIII WINDING UP.
8.1 Winding Up...
8.2 Liquidation and Termination. .
8.3 Deficit Capital Accounts 10
8.4 Certificate of Termination. 10
ARTICLE IX TAXES 10
91 Tax Returns. 10
9.2 Tax Elections. 10
9.3 Tax Matters Member. 10
ARTICLE X LIABILITY; INDEMNIFICATION 11
ARTICLE XI RESTRICTIVE COVENANTS 11
11.1 Restrictive Covenants. 11
11.2 Disclosure and Confidentiality; Innovation 12
11.3 Consideration Given. 14
11.4 Good Faith Effort to Comply with Law... 14
ARTICLE XII GENERAL PROVISIONS 14
12.1 Member Activities. 14
12.2 No Agency... 14
12.3 Other Opportunities. . 14
12.4 Unit Certificates. 14
12.5 Entire Agreement; Amendments... 14
12.6 Binding Effect. 15
12.7 Governing Law; Severability. 15
12.8 WAIVER OF JURY TRIAL.. 15
12.9 Further Assurances. 15
12.10 Venue. 15
12.11 Attorney’s Fees. 15
12.12 Indemnification. 16
12.13 Counterparts 16
ARTICLE XIII DEFINITIONS 16
13.1 Definitions. 16
13.2 Construction. 16
13.3 Branscomb, PLLC 17
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PRO SAFETY, LLC
AMENDED AND RESTATED COMPANY AGREEMENT
The members of Pro Safety, LLC (the “company”) have adopted this amended and
restated company agreement (the “agreement”) as the company agreement for the company. This
agreement is intended to supersede and supplant any previous company agreement of the
company.
ARTICLE]
MEMBERS; PURPOSE AND AUTHORITY
La Members. The company’s members are Pro Safety Holdings, Inc. (“PSH”) and
Pro Select Acquisition, Ltd. (“PSA”).
122 Purpose and Authority. The company is authorized to engage in the sale, rental
and servicing of industrial safety equipment, the manufacturing of fresh air, and the provision of
support personnel in connection with rescue operations and/or use of safety equipment, together
with services ancillary thereto. The company is authorized to engage in any business consistent
with these purposes in which a limited liability company may legally engage
ARTICLE
CAPITAL CONTRIBUTIONS
24 Contributions. Members are not required to make any additional contributions to
the company
22 Return_of Contributions. Except as otherwise provided in Section 3.3, the
company will not be required to return a capital contribution to a member and no interest will
accrue on any capital contributions, except to the extent the law or this agreement requires the
company to do so.
ARTICLE Hi
ALLOCATIONS AND DISTRIBUTIONS
3.4 Allocations
(a) Except as provided in Section 3.1(d), for each fiscal year, after giving
effect to the allocations set forth in Section 3.1(c), profits will be allocated to the
members as follows:
@ First, to the members in proportion to and to the extent of any
amount by which the cumulative losses previously allocated to each such member
pursuant to Section 3.1(b)(i) exceeds the cumulative profits previously allocated
to them pursuant to this Section 3.1(a)(i); and
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Gi) Thereafter, to the members pro rata in accordance with their
relative holdings of Units.
(b) Except as provided in Section 3.1(d), for each fiscal year, after giving
effect to the allocations set forth in Section 3.1(c), losses will be allocated to the members
as follows:
@ First, to the members in accordance with their relative federal
income tax bases in their respective Units in an amount equal to, but not in
excess of, each such member’s federal income tax basis in such member’s Units,
as determined prior to the allocation provided for in this Section 3.1(b)(i); and
Gi) Thereafter, to the members pro rata in accordance with their
relative holdings of Units.
(c) Notwithstanding any of the foregoing provisions of this Section 3.1 to the
contrary, items of the company’s income, gain, loss, and deduction for each fiscal year
(determined in the same manner as such items are determined for purposes of
determining profits or losses) will be allocated among the members as follows:
@ Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2(f), notwithstanding any other provision of
this agreement to the contrary, if there is a net decrease in company minimum
gain for any fiscal year, each member will be specially allocated items of
company income and gain for such year (and if necessary, for subsequent years)
in an amount equal to such member’s share of the net decrease in company
minimum gain, determined in accordance with Treasury Regulations Section
1.704-2(g). This Subsection (c)(i) is intended to comply with the minimum gain
chargeback requirement in Treasury Regulations Section 1.704-2(f) and will be
interpreted consistently therewith.
Gi) Minimum Gain Chargeback for Member Nonrecourse Debt.
Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury
Regulations, notwithstanding any other provision of this agreement, if there is a
net decrease in member nonrecourse debt minimum gain for any fiscal year, any
member with a share of that member nonrecourse debt minimum gain, determined
in accordance with Section 1.704-2(i)(5), will be specially allocated items of
company income and gain for such year (and, if necessary, for subsequent years)
in an amount equal to such member’s share of the net decrease in the member
nonrecourse debt minimum gain. This Subsection (c)(ii) is intended to comply
with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the
Treasury Regulations and will be interpreted consistently therewith.
(iii) Qualified Income Offset. Subject to Subsections (c)(i) and (c)(ii),
but not withstanding any other provision of this agreement, if in any fiscal year a
member unexpectedly receives any adjustments, allocations, or distributions
described in Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Treasury
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Regulations which create or increase a deficit capital account of such member,
then items of income and gain (consisting of a pro rata portion of each item of
company income, including gross income, and gain for such year) will be
specially allocated to such member in an amount and manner sufficient to
eliminate such deficit as quickly as possible; provided, however, that an allocation
under this Subsection (c)(iii) will be made only if and to the extent that the
member would have a deficit capital account after all other allocations provided
for in this Article III have been tentatively made as if this Subsection (c)(iii) were
not in this agreement. It is the intent that this Subsection (c)(iii) be interpreted to
comply with the alternate test for economic effect set forth in Section 1.704-
1(b)(2)(ii)(d) of the Treasury Regulations.
(iv) Gross Income Allocation In the event a member has a deficit
capital account at the end of any fiscal year that is in excess of the sum of (i) the
amount the member is obligated to restore to the company pursuant to any
provision of this agreement, (ii) the amount that the member is deemed to be
obligated to restore to the company pursuant to Section 1.704-1(b)(2)(ii)(c) of the
Treasury Regulations, and (iii) the amounts that the member is deemed to be
obligated to restore to the company pursuant to Sections 1.704-2(g)(1) and 1.704-
2(i)(5) of the Treasury Regulations, such member will be specially allocated items
of company income and gain in an amount and manner sufficient to eliminate
such deficit as quickly as possible; provided, however, that an allocation under
this Subsection (c)(iv) will be made only if and to the extent that the member
would have a deficit capital account after all other allocations provided for in this
Article III have been tentatively made as if this Subsection (c)(iv) were not in this
agreement
(v) Company Nonrecourse Deductions. Each nonrecourse deduction
of the company will be specially allocated to the members in proportion to their
respective shares of net income or net loss, as applicable, for the fiscal year with
respect to which such allocation is made.
(vi) Member Nonrecourse Deductions. Any item of company loss or
expense that is attributable to member nonrecourse debt will be specially
allocated to the members in the manner in which they share the economic risk of
loss (as defined in Treasury Regulations Section 1.752-2) for such member
nonrecourse debt.
(d) If a winding up and termination occurs, then after making all allocations
required under Section 3.1(c) for the current year, the company will allocate all items of
income, gain, loss and deduction for the current year and any prior tax years that are still
open in such a manner as to cause each member’s capital account balance to equal the
amount of any distributions that such member will receive pursuant to Section 3.3 in
liquidation of the company.
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3.2 Tax Allocations.
(a) Except as otherwise provided in this Section 3.2, all income, gains, losses
and deductions of the company shall be allocated, for United States federal, state and
local income tax purposes, among the members in accordance with the allocation of such
income, gains, losses and deductions among the members for computing their capital
accounts.
(b) In accordance with Section 704(c) of the Code, the Treasury Regulations
thereunder, and the portions of the Treasury Regulations under Section 704(b) that apply
the principles of Section 704(c), income and deductions with respect to any property
carried on the books of the company at an amount that differs from such property's
adjusted tax basis shall, solely for federal income tax purposes, be allocated among the
members in a manner to take into account any variation between the adjusted tax basis of
such property to the company and such book value. In making such allocations, the
manager will use such method or methods as they determine to be reasonable and in
accord with applicable Treasury Regulations. If the manager does not make such a
determination, then the "traditional method subject to the ceiling rule" pursuant to
Treasury Regulation Section 1.704-3(b)(1) shall apply.
33 Distributions From time to time, the manager may cause the company to
distribute cash or other property to the members. Distributions (other than tax distributions,
which shall be made in accordance with Section 3.4) shall first be made to PSA until it has
received a preferred return of 2% simple interest per year on the unreturned portion of its
$300,000.00 initial capital contribution, and then to PSA until it has received a return of said
initial capital contribution. Thereafter, distributions will be made pro rata, in accordance with
the members' relative holdings of Units.
34 Tax Distributions. Notwithstanding Section 3.3, if the company has taxable
income for a fiscal year, and if the manager determines that the company has sufficient cash, the
company shall make a cash distribution to each member no later than 90 days after the end of
that fiscal year, in an amount equal to (i) such member's tax liability arising solely in respect of
its ownership of Units for such taxable year, minus (ii) all distributions that the company has
made to such member pursuant to Section 3.3 during such fiscal year. For the purposes of this
Section, a member 3g &, tax liability” for any period will be deemed to equal the product of (1) such
member's share of the company's taxable income for the applicable fiscal year, as reflected in
such member's K-1 from the company for such fiscal year, multiplied by (2) the maximum
federal income tax rates applicable to individual taxpayers filing a joint return for such fiscal
year, taking into account the character of any income or gain and the federal income tax rates
applicable thereto
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ARTICLE IV
MANAGEMENT
At Number of Managers; Management by Manager:
(a) The company will have one manager who will be Catherina Zember. The
company’s manager or officers will be responsible for the company’s day-to-day
operations. Except as otherwise provided herein, the manager is authorized to take all
actions and enter into such transactions as the manager, in her discretion, determines
necessary and appropriate to operate and enhance the business of company.
(b) Notwithstanding anything else in this agreement, the unanimous approval
of the members is required to cause the company to take any of the actions set forth on
Exhibit A attached hereto
42 Appointment; Resignation. Catherina Zember will serve as the sole manager until
her successor is appointed by the unanimous consent of the members.
4 23 Vacancy. Any vacancy in the manager's position will be filled by the unanimous
consent of the members. A manager appointed to fill a vacancy will serve until his successor is
elected
44 Change of Number. The members may not change the number of managers,
except by unanimous written consent of the members.
4.5 Removal The member by unanimous consent may remove the manager with or
without cause, at any time.
4G Committees. The manager may designate committees to act on the manager’s
behalf. Each committee will have any powers the manager may designate, subject to any
restrictions imposed by the TBOC. The manager may change the number and members of any
committee at any time, and may fill vacancies and discharge any committee or any member. The
requirements of this Article that govern manager’s meetings will also apply to committee
meetings.
4.7 Written Consent. Any action required or permitted to be taken at a committee
meeting may be taken without a meeting if a consent in writing, setting forth the action taken, is
signed by at least the minimum number of committee members necessary to take action at a
meeting at which all committee members were present and voted, or if the manager agrees in
advance that e-mail communication shall serve as a signed writing, then an e-mail
communication shall suffice as a means of authorizing any action of the committee members.
ARTICLE V
MEETINGS OF MEMBERS
5.4 Meetings. The members will not be required to hold annual meetings A
manager or the president may call members’ meetings. A manager or the president will call a
meeting if members owning one-tenth of all the Units request a meeting in writing, stating the
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purposes of the proposed meeting. Business transacted at a meeting will be limited to the
purposes stated in the notice of the meeting
32 Location of Meetings. Unless the notice of the meeting states otherwise, the
members will hold their meetings at the company's principal office.
8.3 Action by Telephone Conference Members may participate in and hold a
meeting by means of a conference telephone or similar communications equipment or other
suitable electronic communications equipment, including video conferencing technology, or the
internet, or a combination of those technologies, by means of which all members participating in
the meeting can hear each other and participate in the meeting. Participation in the meeting will
constitute attendance and presence in person at the meeting, except where a member 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.
SA Notice. A manager or the president will give each member written notice of each
meeting. The notice will state the place, day, hour, and purposes of the meeting. A manager or
the president will cause the notice to be delivered to the members either personally or by mail, at
their addresses on the company's books, not less than 10 nor more than 60 days before the
meeting date. Notice by mail will be deemed to be given three days after it is deposited in the
United States mail, postage paid.
5.5 Waiver of Notice. If a member signs a written waiver of notice (regardless of
when the waiver is signed), the member will be deemed to have received proper notice. If a
member attends or participates at a meeting, the member will be deemed to have waived notice
of the meeting, unless the member attends or participates for the express purpose of objecting to
the transaction of a business on the grounds that the meeting is not lawfully called or convened.
536 Quorum. The members holding a majority of the Units held by all members must
be present in person or represented by proxy to constitute a quorum for action, except as
otherwise required by law, the Certificate of Formation, or this agreement. Once a Unit is
represented for any purpose at a meeting, it is deemed present for quorum purposes for the
remainder of the meeting until the meeting is adjourned. If, however, a quorum does not exist,
the members who are present in person or represented by proxy will have the power to adjourn
the meeting. A manager or the president will give all members notice of the reconvening of any
adjourned meeting, in the manner required for calling a meeting
3.7 Majority Vote. If a quorum is present at a meeting, the vote of members holding
a majority of the Units present in person or represented by proxy will decide any matter at the
meeting, unless the question is one upon which a different vote is required by law, the Certificate
of Formation, or this agreement.
5.8 Voting Rights. Each Unit will be entitled to one vote on each matter submitted to
a vote. A member may vote either in person or by written proxy executed by the member or the
member's duly authorized attorney
5.9 Written Consent. Any action required or permitted to be taken at a members’ or
committee meeting may be taken without a meeting if a consent in writing, setting forth the
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action taken, is signed by at least the minimum number of members or committee members
necessary to take action at a meeting at which all members or committee members were present
and voted, or if the members agree in advance that e-mail communication shall serve as a signed
writing, then an e-mail communication shall suffice as a means of authorizing any action of the
members.
ARTICLE VI
OFFICERS
64 Officers. The manager may appoint a president and a secretary of the company,
and may also appoint other officers. The officers will be responsible for the company’s day-to-
day operations. Each officer will have the powers and responsibilities normally associated with
the office, and any other powers and responsibilities the manager may designate. An officer is
not required to be a member or a manager. A person may hold more than one office.
62 Terms. Each officer will hold office until the manager appoints a successor for
that officer. The manager will fill any vacancy in any office. The manager may remove any
officer at any time, with or without cause. If the manager removes an officer, the removal will
not affect any contract rights the officer has. The appointment of a person as an officer will not
of itself create contract rights.
ARTICLE VI
RESTRICTIONS ON DISPOSITIONS OF UNITS; WITHDRAWAL
FA Restrictions on the Disposition of Units. Except as provided in this agreement, no
member may make any Disposition of any Units without the written consent of all members.
Any attempted Disposition of Units that is not in accordance with this agreement will be null and
void
4
7 a Admission as a Member A Person to whom Units are transferred in accordance
with this agreement will be admitted as a member of the company, effective as of the date the
company receives the transferee's written agreement to be bound by this agreement as a member.
Until a transferee of Units becomes a member, the transferee will not have the right to vote as a
member, nor will the transferee have any of the other rights of a member, except as required by
the TBOC.
+7
7 3 Option Trigge:
(a) On the happening of any of the following events (“Triggering Events”)
with respect to a member, first the company and then the other member shall have the
option to purchase all or any portion of the Membership Interest in the company of such
member (“Selling Member”) at the price and on the terms provided herein:
@ the bankruptcy of a member;
Gi) the winding up and dissolution of a corporate member or merger or
other corporate reorganization of a corporate member as a result of which the
corporate member does not survive as an entity;
7
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(iii) the withdrawal of a member;
(iv) any transfer of fifty percent (50%) or more of the ownership or
voting control of any member which is a partnership or limited liability company;
(v) any transfer of ownership or voting control that would cause a
technical termination of a member under Internal Revenue Code section 708; or
(vi) the occurrence of any other event that is, or that would cause, a
transfer in contravention of this Agreement. Each member agrees promptly to
give a written notice of Triggering Event to the company and other member. In
that event:
(b) PSA and PSH will jointly select a qualified, independent appraiser to
appraise the company. If they cannot agree on an appraiser, then they will each select an
appraiser, and those two appraisers will choose a third appraiser. The first two appraisers
will appraise the company, based on the guidelines below, and deliver their appraisals to
the third appraiser. The third appraiser will then determine which appraisal most
accurately reflects the value of the company.
(c) The appraiser(s) will determine the cash price that could be obtained in a
sale of the company’s and its subsidiaries’ assets and business, taken together as a going
concern, whether structured as an asset sale or as a sale of all of the ownership interests
of the company or its subsidiaries, taking into account the assumption by the buyer of all
related liabilities, in an open (non-forced) sale, with ample time for marketing and
closing, but subject to adjustment to account for the fact that the company is qualified as
a certified woman-owned business (whether designated as a Minority Business
Enterprise, Minority Owned Business, Disadvantaged Business Enterprise, Historically
Underutilized Business, or any other similar designation) and derives revenue as a result
of such certification(s) that may not continue after the sale. The appraisal(s) will value
the company and its subsidiaries as of the end of the month prior to PSA exercising its
option to purchase.
(d) The purchase price will be equal to the appraised value, as determined
pursuant to Sections 7. (b) and (c), multiplied by a fraction, the numerator of which is the
number of Units to be sold, and the denominator of which is the total number of the
company’s then-issued and outstanding Units. The transaction will be closed within 30
days of the final appraisal and the seller shall deliver good and marketable title to the
Units free and clear of liens, restrictions or encumbrances of any sort. The purchase price
shall be payable one hundred percent (100%) in cash due at closing.
(©) PSH and PSA shall each pay for one half of the cost of each appraiser. All
appraisers will be given full access to the books, records, properties, and employees of
the company and its subsidiaries.
V4 Expense: The member effecting a Disposition and any person admitted to the
company in connection with the Disposition will pay, or reimburse the company for, all costs
{C2214694:9}
incurred by the company in connection with the Disposition or admission, on or before the tenth
day after receipt of the company's invoice for the amount due.
7S Withdrawal Except as provided in this agreement, a member does not have the
right or power to withdraw from the company as a member. A member may withdraw from the
company by delivering a letter to the company, signed by the member, notifying the company
that the member is withdrawing from the company and assigning the member’s entire
Membership Interest to the company. The member will not receive any consideration for such
an assignment. A member may also withdraw after the member has transferred all of his or her
Units in accordance with the terms of this agreement.
76 Disputes. In the event any dispute arises between the members regarding the
terms of this Agreement or operation of the company, such members shall use reasonable and
good faith efforts to resolve the dispute. In the event the members are unable to resolve the
dispute within fifteen (15) calendar days after the dispute arises (the “Informal Resolution
Expiration Date”), the members shall be obligated to commence mediation to resolve the dispute
no later than thirty (30) calendar days following the Informal Resolution Expiration Date. In the
event the members are unable to resolve the dispute by the earlier of (i) the date mediation is
completed, or (ii) forty-five (45) calendar days after the dispute arises (the “Formal Resolution
Expiration Date”), PSH shall have the option to purchase the entire Membership Interest of PSA
at the price established pursuant to, and payable in accordance with, Section 7.3 of this
Agreement. If PSH fails to consummate the purchase within sixty (60) days after the Formal
Resolution Expiration Date (“PSH Option Expiration Date”), PSA shall have the option to
purchase the entire Membership Interest of PSH at the price established pursuant to, and payable
in accordance with, Section 7.3 of this Agreement, which option shall expire sixty (60) days after
the PSH Option Expiration Date.
VT Registration Exemption. The sale of Membership Interests in the company has
not been qualified or registered under the securities laws of any state, or registered under the
Securities Act of 1933, as amended, in reliance upon exemptions from the registration provisions
of those laws. Notwithstanding any other provision of this Agreement, Membership Interests
may not be transferred or encumbered unless registered or qualified under applicable state and
federal securities law or unless, in the opinion of legal counsel satisfactory to the company, such
qualification or registration is not required. The member seeking to transfer its Membership
Interest shall be fully responsible for all legal fees incurred in connection with said legal opinion.
ARTICLE VIE
WINDING UP
81 Winding Up. The company will be wound up only if winding up is approved as
provided in Section 4.1(b), or if any other event occurs that, under the TBOC, requires the
company to be wound up
&2 Liquidation and Termination If the company is wound up, the manager will
appoint a liquidator. The liquidator will proceed diligently to wind up the company’s affairs.
Until the company's affairs are wound up, the liquidator will have all the power and authority the
manager customarily has to manage the company. The liquidator will take the following actions
{C2214694:9}
(a) Cause any notice required by the TBOC to be mailed to each known
creditor of and claimant against the company in the manner described in the TBOC;
(b) Cause the company to pay or perform all of its obligations (including all
expenses incurred in liquidation), or establish reserves for the payment and performance
of those obligations; and
(©) Cause the company to distribute all of its remaining assets to the members
pro rata, in accordance with the members' relative holdings of Units
8.3 Deficit Capital Accounts. Notwithstanding anything else in this agreement, and
notwithstanding any custom or rule of law to the contrary, no member will ever be obligated to
restore any deficit in the member's capital account.
8.4 Certificate of Termination. Once the company's assets have been applied and
distributed as required by law and this agreement, the manager will file a Certificate of
Termination with the Texas Secretary of State, and take any other actions that may be necessary
to terminate the company.
ARTICLE IX
TAXES
oA Tax Returns. The manager will cause all company tax returns to be prepared and
filed with the proper authorities. Each member will furnish to the company all information it has
that is necessary to enable the company's income tax returns to be prepared and filed
92 Tax Elections. Neither the company nor any member may make an election for
the company to be excluded from the application of the provisions of subchapter K of chapter 1
of subtitle A of the IRC.
93 Tax Matters Member. Unless and until another Person is so designated by the
manager, PSA is designated to be the “tax matters partner” within the meaning of Code Section
6231 prior to its amendment by the Bipartisan Budget Act of 2015 and shall be the “partnership
representative” of the company for any taxable period subject to the provisions of Code Section
6223, as amended by the Bipartisan Budget Act of 2015 and in such capacity is referred to herein
as the “Tax Matters Member.” The Tax Matters Member will represent the company, at the
company’s expense, in connection with all examinations of the company’s affairs by tax
authorities, including any resulting administrative or judicial proceedings. The Tax Matters
Member, on behalf of the company and the members, shall be authorized to make any elections,
enter into any settlement, make any filings (other than tax returns) with or enter into any
agreements with the Internal Revenue Service or any state, local or foreign tax authority, or
make any filings with any court or administrative taxing authority; provided, however, that the
company’s manager shall have the right to review and approve any and all such actions before
they are taken. The company shall reimburse the Tax Matters Member for all expenses
(including legal and accounting fees) incurred as Tax Matters Member pursuant to this Section
9.3 in connection with any administrative or judicial proceeding with respect to the tax liability
of the company. The Tax Matters Member shall be entitled to the benefits and obligations of
Article X with respect to indemnification and exculpation.
{C2214694:9} 10
ARTICLE X
LIABILITY; INDEMNIFICATION
NO PERSON WHO IS OR WAS A MEMBER, MANAGER OR OFFICER OF
THE COMPANY WILL BE LIABLE TO THE COMPANY OR ANY OTHER MEMBER
FOR ANY LOSS THE COMPANY OR ANY OTHER MEMBER MAY INCUR ARISING
OUT OF ANY ACTION OR INACTION BY THAT PERSON, EVEN IF THE PERSON’S
CONDUCT CONSTITUTED NEGLIGENCE, IF THE PERSON, IN GOOD FAITH,
DETERMINED THAT HIS OR HER CONDUCT WAS IN THE COMPANY’S BEST
INTERESTS, AND IF THAT CONDUCT DID NOT CONSTITUTE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. FURTHER, THE COMPANY HEREBY
WILL INDEMNIFY ANY PERSON WHO WAS, IS, OR IS THREATENED TO BE
MADE A NAMED DEFENDANT OR RESPONDENT IN A PROCEEDING BECAUSE
THE PERSON IS OR WAS A MEMBER, MANAGER OR OFFICER OF THE
COMPANY, EVEN IF THE PERSON'S CONDUCT CONSTITUTED NEGLIGENCE, BUT
NOT IF THE PERSON’S CONDUCT CONSTITUTED GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. THIS RIGHT TO INDEMNIFICATION WILL INCLUDE
THE RIGHT TO BE PAID BY THE COMPANY THE EXPENSES INCURRED IN
DEFENDING ANY SUCH PROCEEDING IN ADVANCE OF ITS_ FINAL
DISPOSITION.
ARTICLE XE
RESTRICTIVE COVENANTS
tid Restrictive Covenants. PSH, Indirect Owner, and their respective Affiliates (each
a “Non-Compete Party,” and together the “Non-Compete Parties”) acknowledges that one of the
purposes of this agreement is to provide incentive for supporting the growth of the company
while providing positive rewards to the members and the company, and for each to benefit from
the increased value of the company. The company will invest substantial time and money
developing relationships with vendors, suppliers, clients and potential clients and business
associates ("Contacts"), and each Non-compete Party’s conduct and relationship to the company
directly affects the company’s overall goodwill and business relationships with the contacts.
Each Non-Compete Party recognizes the reputation of the company in the community and
among Contacts is such that each Non-Compete Party’s relationship to the company provides
such Non-Compete Party with access to, or enhances access to, potential markets and
individuals, including Contacts, that are otherwise not available. Each Non-Compete Party
acknowledges and agrees that all of the company’s confidential or proprietary information and
the goodwill of the company constitute a proprietary property interest of the company and that
the company has a legitimate business interest in protecting its property, confidential and
proprietary information, and business goodwill. Each Non-Compete Party also acknowledges
that the company and the other members would not have entered into this agreement if each
Non-Compete Party had not agreed to the covenants in this Section
{C2214694:9} ll
Each Non-Compete Party agrees as follows:
(a) Except for on behalf of the company, or with the prior written consent of
all members, each Non-Compete Party agrees that it will not, directly or indirectly, for its
own account or for the account of othe
Preview
4/14/2022 2:41 PM Marilyn Burgess -District Clerk Harris County Envelope No. 63591303 2022-22843 / Court: 152 By: Monica Jackson Filed: 4/14/2022 2:41 PM CAUSE NO. PRO SELECT ACQUISITION, LTD. § IN THE DISTRICT COURT Plaintiff, v. ____ JUDICIAL DISTRICT PRO SAFETY, LLC and PRO SAFETY HOLDINGS, INC. Defendants. HARRIS COUNTY, TEXAS PLAINTIFF’S ORIGINAL PETITION Plaintiff Pro Select Acquisition, Ltd. (Pro Select) files this Original Petition and respectfully shows the following: Discovery 1 For purposes of Rule 190.1, Plaintiff alleges that discovery should be conducted pursuant to Rule 190.4 of the Texas Rules of Civil Procedure (Level 3). Parties 2. Pro Select is a Texas limited partnership. 3 Defendant Pro Safety, LLC (PSLLC) is a Texas limited liability company. It may be served with process through its registered agent for service, Paracorp Incorporated, at 14001 West Highway 29, Suite 102, Liberty Hill, Texas 78642 or wherever it may be found. 4 Defendant Pro Safety Holdings, Inc. (PSHI) is a Texas limited liability company. It may be served with process through its registered agent for service, Paracorp Incorporated, at 14001 West Highway 29, Suite 102, Liberty Hill, Texas 78642 or wherever it may be found. Agency and Respondeat Superior 5 In this Petition, wherever it is alleged that any individual defendant did any act or omission, the allegation means that the individual defendant and/or any agents, officers, servants, \\bpefs01\ BranscombL aw \ Clients \46688\0112\C2664516.DOCX Page 1 of5 employees, or representatives of the defendant performed the act or omission, and it was done with the full authorization or ratification of the defendant. Alternatively, the allegation means that the act or omission was done in the normal routine, course, and scope of the agency or employment of the defendant and/or the agents, officers, servants, employees, or representatives. Jurisdiction and Venue 6. Pursuant to Texas Rule of Civil Procedure 47, Pro Select is seeking only monetary relief of $250,000 or less, excluding interest, statutory or punitive damages and penalties, and attorney fees and costs. Accordingly, this Court has jurisdiction over the parties because the amount in controversy is within the jurisdictional limits of this Court. 7 This Court has jurisdiction over PSLLC and PSHI because both are Texas limited liability companies and consented to jurisdiction via PSLLC’s Amended and Restated Company Agreement. 8 Venue is mandatory in Harris County pursuant to the agreed-upon forum selection clause in Pro Safety’s Amended and Restated Company Agreement. Facts 9. In April 2020, Pro Select and PSHI entered into an Amended and Restated Company Agreement (Company Agreement) for PSLLC. A true and correct copy of the Agreement is attached as Exhibit “A.” 10. Pro Select and PSHI continue to operate PSLLC for the purposes of providing safety materials and services to refineries. 11. PSLLC maintains books and records relating to the company’s business, operations, and accounts at its office in California. 12. Pro Select is a member of PSLLC and therefore has a right to “examine and copy at any reasonable time and at [its] expense: (1) records required under Sections 3.151 and 101.501 [of \\bpefs01\ BranscombL aw \ Clients \46688\0112\C2664516.DOCX Page 2 of 5 the Texas Business Organizations Code]; and (2) other information regarding the business, affairs, and financial condition of the company that is reasonable for the person to examine and copy.” Tex. Bus. Orgs. Code § 101.502. 13. On March 29, 2022, Pro Select sent a written request to Catherina Zember, the President, CEO, and manager of PSLLC, for access to PSLLC’s books, files, and records for the purpose of determining whether she was operating the company’s business and management of its affairs in compliance with the law and the Company Agreement. At that time, Pro Select requested that Zember provide dates and times at which Pro Select could access PSLLC’s books and records. Zember did not provide any dates in response. 14. On April 7, 2022, Pro Select sent a second letter requesting access to PSLLC’s books and records with specific reference to all “books and records between 2018 and 2022 (inclusive), including, but not limited to, the Company’s bank statements, general ledger, and financial statements.” This time, Pro Select said it wished to inspect the books and records the week of April 11, 2022. In response, PSHI said that the inspection would have to occur on a weekend—outside of normal business hours. On April 13, 2022, Pro Select made one final request for access to the books and records during normal business hours and was refused once again. 15. Additionally, on March 25, 2022, Pro Select exercised its option to purchase PSHI’s units of membership interest in PSLLC. Following that occurrence, under the terms of the Company Agreement, the parties were to jointly select an appraiser to appraise the company. Pro Select suggested two possible appraisers, neither of which PSHI would agree to. Because the parties could not agree on an appraiser, the Company Agreement required both Pro Select and PSHI to select independent appraiser, who would perform their own appraisals. Those appraisers would then choose a third appraiser to determine which of the appraisals most accurately reflected the value of PSLLC. \\bpefs01\ BranscombL aw \ Clients \46688\0112\C2664516.DOCX Page 3 of 5 16. Pro Select then requested the identity of PSHI’s designated appraiser, which PSHI never provided. Cause of Action —’Texas Business Organizations Code Violations 17. Pro Select is a member of PSLLC. It made a valid and proper request to inspect PSLLC’s books and records and identified a proper purpose for seeking such records. Defendants have refused to comply with that request. Accordingly, Pro Select seeks an order compelling Defendants to make PSLLC’s books and records available to Pro Select for inspection and copying. 18. As a result of the Defendants’ refusal to cooperate and provide the records to which Pro Select is entitled, Pro Select has been required to seek the services of counsel. Therefore, in accordance with Section 101.503 of the Texas Business Organizations Code, Pro Select seeks reasonable attorneys’ fees and costs in addition to any damages and other relief to which he is entitled. Cause of Action — Breach of Contract 19. Pro Select invoked the appraisal provision of the Company Agreement and complied with its contractual duty to select an independent appraiser. PSHI has not designated an appraiser despite an obligation to do so. Therefore, Pro Select seeks an order that PSHI specifically perform under the Company Agreement and designate its independent appraiser. Conditions Precedent 20. All conditions precedent to filing this lawsuit have been performed or have occurred. Prayer Therefore, Plaintiff Pro Select Acquisition, Ltd. requests that the Defendants be cited to appear and answer, and on final trial, that this Court enter a judgment ordering PSLLC to make its books and records available to Pro Select and PSHI to perform under the Company Agreement by \\bpefs01\ BranscombL aw \ Clients \46688\0112\C2664516.DOCX Page 4 of 5 selecting an appraiser. Pro Select further seeks its attorney’s fees, costs of court, pre- and post- judgment interest, and all other relief to which it may deem itself entitled. Respectfully submitted, BRANSCOMB LAW 4630 North Loop 1604 West, Suite 206 San Antonio, Texas 78249 Telephone: (210) 598-5400 Facsimile: (210) 598-5405 Cf See By Z, Clint Buck Cue State Bar No. 24078280 cbuck@branscomblaw.com Joe M. Davis State Bar No. 05520350 jdavis@branscombpc.com Attorneys for Plaintiff Pro Select Acquisition, Ltd. \\bpefs01\ BranscombL aw \ Clients \46688\0112\C2664516.DOCX Page 5 of 5 Exhibit A PRO SAFETY, LLC AMENDED AND RESTATED COMPANY AGREEMENT {C2214694:9} Table of Contents ARTICLE I MEMBERS; PURPOSE AND AUTHORITY 11 Members.. 1.2 Purpose and Authority. .. ARTICLE II CAPITAL CONTRIBUTIONS 21 Contributions. 2.2 Return ofContributions. ARTICLE II] ALLOCATIONS AND DISTRIBUTIONS 3.1 Allocations. 3.2 Tax Allocations 3.3 Distributions. 3.4 Tax Distributions. ARTICLE IV MANAGEMENT. 41 Number of Managers; Management by Managers 42 Appointment; Resignation 43 Vacancy... 44 Change of Number. 45 Removal. 46 Committees. . 47 Written Consent ARTICLE V MEETINGS OF MEMBERS 5.1 Meetings.. 5.2 Location ofMeetings. . 5.3 Action by Telephone Conference 5.4 Notice. 5.5 Waiver ofNotice... 5.6 Quorum. 5.7 Majority Vote 5.8 Voting Rights. 5.9 Written Consent ARTICLE VI OFFICERS 6.1 Officers. 6.2 Terms. ARTICLE VII RESTRICTIONS ON DISPOSITIONS OF UNITS; WITHDRAWAL 7A Restrictions on the Disposition of Units. 7.2 Admission as a Member. 73 Option Trigger. 1A Expenses. 15 Withdrawal 7.6 Disputes. {C2214694:9} 17 Registration Exemption. ARTICLE VIII WINDING UP. 8.1 Winding Up... 8.2 Liquidation and Termination. . 8.3 Deficit Capital Accounts 10 8.4 Certificate of Termination. 10 ARTICLE IX TAXES 10 91 Tax Returns. 10 9.2 Tax Elections. 10 9.3 Tax Matters Member. 10 ARTICLE X LIABILITY; INDEMNIFICATION 11 ARTICLE XI RESTRICTIVE COVENANTS 11 11.1 Restrictive Covenants. 11 11.2 Disclosure and Confidentiality; Innovation 12 11.3 Consideration Given. 14 11.4 Good Faith Effort to Comply with Law... 14 ARTICLE XII GENERAL PROVISIONS 14 12.1 Member Activities. 14 12.2 No Agency... 14 12.3 Other Opportunities. . 14 12.4 Unit Certificates. 14 12.5 Entire Agreement; Amendments... 14 12.6 Binding Effect. 15 12.7 Governing Law; Severability. 15 12.8 WAIVER OF JURY TRIAL.. 15 12.9 Further Assurances. 15 12.10 Venue. 15 12.11 Attorney’s Fees. 15 12.12 Indemnification. 16 12.13 Counterparts 16 ARTICLE XIII DEFINITIONS 16 13.1 Definitions. 16 13.2 Construction. 16 13.3 Branscomb, PLLC 17 {C2214694:9} PRO SAFETY, LLC AMENDED AND RESTATED COMPANY AGREEMENT The members of Pro Safety, LLC (the “company”) have adopted this amended and restated company agreement (the “agreement”) as the company agreement for the company. This agreement is intended to supersede and supplant any previous company agreement of the company. ARTICLE] MEMBERS; PURPOSE AND AUTHORITY La Members. The company’s members are Pro Safety Holdings, Inc. (“PSH”) and Pro Select Acquisition, Ltd. (“PSA”). 122 Purpose and Authority. The company is authorized to engage in the sale, rental and servicing of industrial safety equipment, the manufacturing of fresh air, and the provision of support personnel in connection with rescue operations and/or use of safety equipment, together with services ancillary thereto. The company is authorized to engage in any business consistent with these purposes in which a limited liability company may legally engage ARTICLE CAPITAL CONTRIBUTIONS 24 Contributions. Members are not required to make any additional contributions to the company 22 Return_of Contributions. Except as otherwise provided in Section 3.3, the company will not be required to return a capital contribution to a member and no interest will accrue on any capital contributions, except to the extent the law or this agreement requires the company to do so. ARTICLE Hi ALLOCATIONS AND DISTRIBUTIONS 3.4 Allocations (a) Except as provided in Section 3.1(d), for each fiscal year, after giving effect to the allocations set forth in Section 3.1(c), profits will be allocated to the members as follows: @ First, to the members in proportion to and to the extent of any amount by which the cumulative losses previously allocated to each such member pursuant to Section 3.1(b)(i) exceeds the cumulative profits previously allocated to them pursuant to this Section 3.1(a)(i); and {C2214694:9} Gi) Thereafter, to the members pro rata in accordance with their relative holdings of Units. (b) Except as provided in Section 3.1(d), for each fiscal year, after giving effect to the allocations set forth in Section 3.1(c), losses will be allocated to the members as follows: @ First, to the members in accordance with their relative federal income tax bases in their respective Units in an amount equal to, but not in excess of, each such member’s federal income tax basis in such member’s Units, as determined prior to the allocation provided for in this Section 3.1(b)(i); and Gi) Thereafter, to the members pro rata in accordance with their relative holdings of Units. (c) Notwithstanding any of the foregoing provisions of this Section 3.1 to the contrary, items of the company’s income, gain, loss, and deduction for each fiscal year (determined in the same manner as such items are determined for purposes of determining profits or losses) will be allocated among the members as follows: @ Minimum Gain Chargeback. Except as otherwise provided in Treasury Regulations Section 1.704-2(f), notwithstanding any other provision of this agreement to the contrary, if there is a net decrease in company minimum gain for any fiscal year, each member will be specially allocated items of company income and gain for such year (and if necessary, for subsequent years) in an amount equal to such member’s share of the net decrease in company minimum gain, determined in accordance with Treasury Regulations Section 1.704-2(g). This Subsection (c)(i) is intended to comply with the minimum gain chargeback requirement in Treasury Regulations Section 1.704-2(f) and will be interpreted consistently therewith. Gi) Minimum Gain Chargeback for Member Nonrecourse Debt. Except as otherwise provided in Section 1.704-2(i)(4) of the Treasury Regulations, notwithstanding any other provision of this agreement, if there is a net decrease in member nonrecourse debt minimum gain for any fiscal year, any member with a share of that member nonrecourse debt minimum gain, determined in accordance with Section 1.704-2(i)(5), will be specially allocated items of company income and gain for such year (and, if necessary, for subsequent years) in an amount equal to such member’s share of the net decrease in the member nonrecourse debt minimum gain. This Subsection (c)(ii) is intended to comply with the minimum gain chargeback requirement in Section 1.704-2(i)(4) of the Treasury Regulations and will be interpreted consistently therewith. (iii) Qualified Income Offset. Subject to Subsections (c)(i) and (c)(ii), but not withstanding any other provision of this agreement, if in any fiscal year a member unexpectedly receives any adjustments, allocations, or distributions described in Sections 1.704-1(b)(2)(ii)(d)(4), (5), or (6) of the Treasury {C2214694:9} Regulations which create or increase a deficit capital account of such member, then items of income and gain (consisting of a pro rata portion of each item of company income, including gross income, and gain for such year) will be specially allocated to such member in an amount and manner sufficient to eliminate such deficit as quickly as possible; provided, however, that an allocation under this Subsection (c)(iii) will be made only if and to the extent that the member would have a deficit capital account after all other allocations provided for in this Article III have been tentatively made as if this Subsection (c)(iii) were not in this agreement. It is the intent that this Subsection (c)(iii) be interpreted to comply with the alternate test for economic effect set forth in Section 1.704- 1(b)(2)(ii)(d) of the Treasury Regulations. (iv) Gross Income Allocation In the event a member has a deficit capital account at the end of any fiscal year that is in excess of the sum of (i) the amount the member is obligated to restore to the company pursuant to any provision of this agreement, (ii) the amount that the member is deemed to be obligated to restore to the company pursuant to Section 1.704-1(b)(2)(ii)(c) of the Treasury Regulations, and (iii) the amounts that the member is deemed to be obligated to restore to the company pursuant to Sections 1.704-2(g)(1) and 1.704- 2(i)(5) of the Treasury Regulations, such member will be specially allocated items of company income and gain in an amount and manner sufficient to eliminate such deficit as quickly as possible; provided, however, that an allocation under this Subsection (c)(iv) will be made only if and to the extent that the member would have a deficit capital account after all other allocations provided for in this Article III have been tentatively made as if this Subsection (c)(iv) were not in this agreement (v) Company Nonrecourse Deductions. Each nonrecourse deduction of the company will be specially allocated to the members in proportion to their respective shares of net income or net loss, as applicable, for the fiscal year with respect to which such allocation is made. (vi) Member Nonrecourse Deductions. Any item of company loss or expense that is attributable to member nonrecourse debt will be specially allocated to the members in the manner in which they share the economic risk of loss (as defined in Treasury Regulations Section 1.752-2) for such member nonrecourse debt. (d) If a winding up and termination occurs, then after making all allocations required under Section 3.1(c) for the current year, the company will allocate all items of income, gain, loss and deduction for the current year and any prior tax years that are still open in such a manner as to cause each member’s capital account balance to equal the amount of any distributions that such member will receive pursuant to Section 3.3 in liquidation of the company. {C2214694:9} 3.2 Tax Allocations. (a) Except as otherwise provided in this Section 3.2, all income, gains, losses and deductions of the company shall be allocated, for United States federal, state and local income tax purposes, among the members in accordance with the allocation of such income, gains, losses and deductions among the members for computing their capital accounts. (b) In accordance with Section 704(c) of the Code, the Treasury Regulations thereunder, and the portions of the Treasury Regulations under Section 704(b) that apply the principles of Section 704(c), income and deductions with respect to any property carried on the books of the company at an amount that differs from such property's adjusted tax basis shall, solely for federal income tax purposes, be allocated among the members in a manner to take into account any variation between the adjusted tax basis of such property to the company and such book value. In making such allocations, the manager will use such method or methods as they determine to be reasonable and in accord with applicable Treasury Regulations. If the manager does not make such a determination, then the "traditional method subject to the ceiling rule" pursuant to Treasury Regulation Section 1.704-3(b)(1) shall apply. 33 Distributions From time to time, the manager may cause the company to distribute cash or other property to the members. Distributions (other than tax distributions, which shall be made in accordance with Section 3.4) shall first be made to PSA until it has received a preferred return of 2% simple interest per year on the unreturned portion of its $300,000.00 initial capital contribution, and then to PSA until it has received a return of said initial capital contribution. Thereafter, distributions will be made pro rata, in accordance with the members' relative holdings of Units. 34 Tax Distributions. Notwithstanding Section 3.3, if the company has taxable income for a fiscal year, and if the manager determines that the company has sufficient cash, the company shall make a cash distribution to each member no later than 90 days after the end of that fiscal year, in an amount equal to (i) such member's tax liability arising solely in respect of its ownership of Units for such taxable year, minus (ii) all distributions that the company has made to such member pursuant to Section 3.3 during such fiscal year. For the purposes of this Section, a member 3g &, tax liability” for any period will be deemed to equal the product of (1) such member's share of the company's taxable income for the applicable fiscal year, as reflected in such member's K-1 from the company for such fiscal year, multiplied by (2) the maximum federal income tax rates applicable to individual taxpayers filing a joint return for such fiscal year, taking into account the character of any income or gain and the federal income tax rates applicable thereto {C2214694:9} ARTICLE IV MANAGEMENT At Number of Managers; Management by Manager: (a) The company will have one manager who will be Catherina Zember. The company’s manager or officers will be responsible for the company’s day-to-day operations. Except as otherwise provided herein, the manager is authorized to take all actions and enter into such transactions as the manager, in her discretion, determines necessary and appropriate to operate and enhance the business of company. (b) Notwithstanding anything else in this agreement, the unanimous approval of the members is required to cause the company to take any of the actions set forth on Exhibit A attached hereto 42 Appointment; Resignation. Catherina Zember will serve as the sole manager until her successor is appointed by the unanimous consent of the members. 4 23 Vacancy. Any vacancy in the manager's position will be filled by the unanimous consent of the members. A manager appointed to fill a vacancy will serve until his successor is elected 44 Change of Number. The members may not change the number of managers, except by unanimous written consent of the members. 4.5 Removal The member by unanimous consent may remove the manager with or without cause, at any time. 4G Committees. The manager may designate committees to act on the manager’s behalf. Each committee will have any powers the manager may designate, subject to any restrictions imposed by the TBOC. The manager may change the number and members of any committee at any time, and may fill vacancies and discharge any committee or any member. The requirements of this Article that govern manager’s meetings will also apply to committee meetings. 4.7 Written Consent. Any action required or permitted to be taken at a committee meeting may be taken without a meeting if a consent in writing, setting forth the action taken, is signed by at least the minimum number of committee members necessary to take action at a meeting at which all committee members were present and voted, or if the manager agrees in advance that e-mail communication shall serve as a signed writing, then an e-mail communication shall suffice as a means of authorizing any action of the committee members. ARTICLE V MEETINGS OF MEMBERS 5.4 Meetings. The members will not be required to hold annual meetings A manager or the president may call members’ meetings. A manager or the president will call a meeting if members owning one-tenth of all the Units request a meeting in writing, stating the {C2214694:9} purposes of the proposed meeting. Business transacted at a meeting will be limited to the purposes stated in the notice of the meeting 32 Location of Meetings. Unless the notice of the meeting states otherwise, the members will hold their meetings at the company's principal office. 8.3 Action by Telephone Conference Members may participate in and hold a meeting by means of a conference telephone or similar communications equipment or other suitable electronic communications equipment, including video conferencing technology, or the internet, or a combination of those technologies, by means of which all members participating in the meeting can hear each other and participate in the meeting. Participation in the meeting will constitute attendance and presence in person at the meeting, except where a member 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. SA Notice. A manager or the president will give each member written notice of each meeting. The notice will state the place, day, hour, and purposes of the meeting. A manager or the president will cause the notice to be delivered to the members either personally or by mail, at their addresses on the company's books, not less than 10 nor more than 60 days before the meeting date. Notice by mail will be deemed to be given three days after it is deposited in the United States mail, postage paid. 5.5 Waiver of Notice. If a member signs a written waiver of notice (regardless of when the waiver is signed), the member will be deemed to have received proper notice. If a member attends or participates at a meeting, the member will be deemed to have waived notice of the meeting, unless the member attends or participates for the express purpose of objecting to the transaction of a business on the grounds that the meeting is not lawfully called or convened. 536 Quorum. The members holding a majority of the Units held by all members must be present in person or represented by proxy to constitute a quorum for action, except as otherwise required by law, the Certificate of Formation, or this agreement. Once a Unit is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting until the meeting is adjourned. If, however, a quorum does not exist, the members who are present in person or represented by proxy will have the power to adjourn the meeting. A manager or the president will give all members notice of the reconvening of any adjourned meeting, in the manner required for calling a meeting 3.7 Majority Vote. If a quorum is present at a meeting, the vote of members holding a majority of the Units present in person or represented by proxy will decide any matter at the meeting, unless the question is one upon which a different vote is required by law, the Certificate of Formation, or this agreement. 5.8 Voting Rights. Each Unit will be entitled to one vote on each matter submitted to a vote. A member may vote either in person or by written proxy executed by the member or the member's duly authorized attorney 5.9 Written Consent. Any action required or permitted to be taken at a members’ or committee meeting may be taken without a meeting if a consent in writing, setting forth the {C2214694:9} 6 action taken, is signed by at least the minimum number of members or committee members necessary to take action at a meeting at which all members or committee members were present and voted, or if the members agree in advance that e-mail communication shall serve as a signed writing, then an e-mail communication shall suffice as a means of authorizing any action of the members. ARTICLE VI OFFICERS 64 Officers. The manager may appoint a president and a secretary of the company, and may also appoint other officers. The officers will be responsible for the company’s day-to- day operations. Each officer will have the powers and responsibilities normally associated with the office, and any other powers and responsibilities the manager may designate. An officer is not required to be a member or a manager. A person may hold more than one office. 62 Terms. Each officer will hold office until the manager appoints a successor for that officer. The manager will fill any vacancy in any office. The manager may remove any officer at any time, with or without cause. If the manager removes an officer, the removal will not affect any contract rights the officer has. The appointment of a person as an officer will not of itself create contract rights. ARTICLE VI RESTRICTIONS ON DISPOSITIONS OF UNITS; WITHDRAWAL FA Restrictions on the Disposition of Units. Except as provided in this agreement, no member may make any Disposition of any Units without the written consent of all members. Any attempted Disposition of Units that is not in accordance with this agreement will be null and void 4 7 a Admission as a Member A Person to whom Units are transferred in accordance with this agreement will be admitted as a member of the company, effective as of the date the company receives the transferee's written agreement to be bound by this agreement as a member. Until a transferee of Units becomes a member, the transferee will not have the right to vote as a member, nor will the transferee have any of the other rights of a member, except as required by the TBOC. +7 7 3 Option Trigge: (a) On the happening of any of the following events (“Triggering Events”) with respect to a member, first the company and then the other member shall have the option to purchase all or any portion of the Membership Interest in the company of such member (“Selling Member”) at the price and on the terms provided herein: @ the bankruptcy of a member; Gi) the winding up and dissolution of a corporate member or merger or other corporate reorganization of a corporate member as a result of which the corporate member does not survive as an entity; 7 {C2214694:9} (iii) the withdrawal of a member; (iv) any transfer of fifty percent (50%) or more of the ownership or voting control of any member which is a partnership or limited liability company; (v) any transfer of ownership or voting control that would cause a technical termination of a member under Internal Revenue Code section 708; or (vi) the occurrence of any other event that is, or that would cause, a transfer in contravention of this Agreement. Each member agrees promptly to give a written notice of Triggering Event to the company and other member. In that event: (b) PSA and PSH will jointly select a qualified, independent appraiser to appraise the company. If they cannot agree on an appraiser, then they will each select an appraiser, and those two appraisers will choose a third appraiser. The first two appraisers will appraise the company, based on the guidelines below, and deliver their appraisals to the third appraiser. The third appraiser will then determine which appraisal most accurately reflects the value of the company. (c) The appraiser(s) will determine the cash price that could be obtained in a sale of the company’s and its subsidiaries’ assets and business, taken together as a going concern, whether structured as an asset sale or as a sale of all of the ownership interests of the company or its subsidiaries, taking into account the assumption by the buyer of all related liabilities, in an open (non-forced) sale, with ample time for marketing and closing, but subject to adjustment to account for the fact that the company is qualified as a certified woman-owned business (whether designated as a Minority Business Enterprise, Minority Owned Business, Disadvantaged Business Enterprise, Historically Underutilized Business, or any other similar designation) and derives revenue as a result of such certification(s) that may not continue after the sale. The appraisal(s) will value the company and its subsidiaries as of the end of the month prior to PSA exercising its option to purchase. (d) The purchase price will be equal to the appraised value, as determined pursuant to Sections 7. (b) and (c), multiplied by a fraction, the numerator of which is the number of Units to be sold, and the denominator of which is the total number of the company’s then-issued and outstanding Units. The transaction will be closed within 30 days of the final appraisal and the seller shall deliver good and marketable title to the Units free and clear of liens, restrictions or encumbrances of any sort. The purchase price shall be payable one hundred percent (100%) in cash due at closing. (©) PSH and PSA shall each pay for one half of the cost of each appraiser. All appraisers will be given full access to the books, records, properties, and employees of the company and its subsidiaries. V4 Expense: The member effecting a Disposition and any person admitted to the company in connection with the Disposition will pay, or reimburse the company for, all costs {C2214694:9} incurred by the company in connection with the Disposition or admission, on or before the tenth day after receipt of the company's invoice for the amount due. 7S Withdrawal Except as provided in this agreement, a member does not have the right or power to withdraw from the company as a member. A member may withdraw from the company by delivering a letter to the company, signed by the member, notifying the company that the member is withdrawing from the company and assigning the member’s entire Membership Interest to the company. The member will not receive any consideration for such an assignment. A member may also withdraw after the member has transferred all of his or her Units in accordance with the terms of this agreement. 76 Disputes. In the event any dispute arises between the members regarding the terms of this Agreement or operation of the company, such members shall use reasonable and good faith efforts to resolve the dispute. In the event the members are unable to resolve the dispute within fifteen (15) calendar days after the dispute arises (the “Informal Resolution Expiration Date”), the members shall be obligated to commence mediation to resolve the dispute no later than thirty (30) calendar days following the Informal Resolution Expiration Date. In the event the members are unable to resolve the dispute by the earlier of (i) the date mediation is completed, or (ii) forty-five (45) calendar days after the dispute arises (the “Formal Resolution Expiration Date”), PSH shall have the option to purchase the entire Membership Interest of PSA at the price established pursuant to, and payable in accordance with, Section 7.3 of this Agreement. If PSH fails to consummate the purchase within sixty (60) days after the Formal Resolution Expiration Date (“PSH Option Expiration Date”), PSA shall have the option to purchase the entire Membership Interest of PSH at the price established pursuant to, and payable in accordance with, Section 7.3 of this Agreement, which option shall expire sixty (60) days after the PSH Option Expiration Date. VT Registration Exemption. The sale of Membership Interests in the company has not been qualified or registered under the securities laws of any state, or registered under the Securities Act of 1933, as amended, in reliance upon exemptions from the registration provisions of those laws. Notwithstanding any other provision of this Agreement, Membership Interests may not be transferred or encumbered unless registered or qualified under applicable state and federal securities law or unless, in the opinion of legal counsel satisfactory to the company, such qualification or registration is not required. The member seeking to transfer its Membership Interest shall be fully responsible for all legal fees incurred in connection with said legal opinion. ARTICLE VIE WINDING UP 81 Winding Up. The company will be wound up only if winding up is approved as provided in Section 4.1(b), or if any other event occurs that, under the TBOC, requires the company to be wound up &2 Liquidation and Termination If the company is wound up, the manager will appoint a liquidator. The liquidator will proceed diligently to wind up the company’s affairs. Until the company's affairs are wound up, the liquidator will have all the power and authority the manager customarily has to manage the company. The liquidator will take the following actions {C2214694:9} (a) Cause any notice required by the TBOC to be mailed to each known creditor of and claimant against the company in the manner described in the TBOC; (b) Cause the company to pay or perform all of its obligations (including all expenses incurred in liquidation), or establish reserves for the payment and performance of those obligations; and (©) Cause the company to distribute all of its remaining assets to the members pro rata, in accordance with the members' relative holdings of Units 8.3 Deficit Capital Accounts. Notwithstanding anything else in this agreement, and notwithstanding any custom or rule of law to the contrary, no member will ever be obligated to restore any deficit in the member's capital account. 8.4 Certificate of Termination. Once the company's assets have been applied and distributed as required by law and this agreement, the manager will file a Certificate of Termination with the Texas Secretary of State, and take any other actions that may be necessary to terminate the company. ARTICLE IX TAXES oA Tax Returns. The manager will cause all company tax returns to be prepared and filed with the proper authorities. Each member will furnish to the company all information it has that is necessary to enable the company's income tax returns to be prepared and filed 92 Tax Elections. Neither the company nor any member may make an election for the company to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the IRC. 93 Tax Matters Member. Unless and until another Person is so designated by the manager, PSA is designated to be the “tax matters partner” within the meaning of Code Section 6231 prior to its amendment by the Bipartisan Budget Act of 2015 and shall be the “partnership representative” of the company for any taxable period subject to the provisions of Code Section 6223, as amended by the Bipartisan Budget Act of 2015 and in such capacity is referred to herein as the “Tax Matters Member.” The Tax Matters Member will represent the company, at the company’s expense, in connection with all examinations of the company’s affairs by tax authorities, including any resulting administrative or judicial proceedings. The Tax Matters Member, on behalf of the company and the members, shall be authorized to make any elections, enter into any settlement, make any filings (other than tax returns) with or enter into any agreements with the Internal Revenue Service or any state, local or foreign tax authority, or make any filings with any court or administrative taxing authority; provided, however, that the company’s manager shall have the right to review and approve any and all such actions before they are taken. The company shall reimburse the Tax Matters Member for all expenses (including legal and accounting fees) incurred as Tax Matters Member pursuant to this Section 9.3 in connection with any administrative or judicial proceeding with respect to the tax liability of the company. The Tax Matters Member shall be entitled to the benefits and obligations of Article X with respect to indemnification and exculpation. {C2214694:9} 10 ARTICLE X LIABILITY; INDEMNIFICATION NO PERSON WHO IS OR WAS A MEMBER, MANAGER OR OFFICER OF THE COMPANY WILL BE LIABLE TO THE COMPANY OR ANY OTHER MEMBER FOR ANY LOSS THE COMPANY OR ANY OTHER MEMBER MAY INCUR ARISING OUT OF ANY ACTION OR INACTION BY THAT PERSON, EVEN IF THE PERSON’S CONDUCT CONSTITUTED NEGLIGENCE, IF THE PERSON, IN GOOD FAITH, DETERMINED THAT HIS OR HER CONDUCT WAS IN THE COMPANY’S BEST INTERESTS, AND IF THAT CONDUCT DID NOT CONSTITUTE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. FURTHER, THE COMPANY HEREBY WILL INDEMNIFY ANY PERSON WHO WAS, IS, OR IS THREATENED TO BE MADE A NAMED DEFENDANT OR RESPONDENT IN A PROCEEDING BECAUSE THE PERSON IS OR WAS A MEMBER, MANAGER OR OFFICER OF THE COMPANY, EVEN IF THE PERSON'S CONDUCT CONSTITUTED NEGLIGENCE, BUT NOT IF THE PERSON’S CONDUCT CONSTITUTED GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THIS RIGHT TO INDEMNIFICATION WILL INCLUDE THE RIGHT TO BE PAID BY THE COMPANY THE EXPENSES INCURRED IN DEFENDING ANY SUCH PROCEEDING IN ADVANCE OF ITS_ FINAL DISPOSITION. ARTICLE XE RESTRICTIVE COVENANTS tid Restrictive Covenants. PSH, Indirect Owner, and their respective Affiliates (each a “Non-Compete Party,” and together the “Non-Compete Parties”) acknowledges that one of the purposes of this agreement is to provide incentive for supporting the growth of the company while providing positive rewards to the members and the company, and for each to benefit from the increased value of the company. The company will invest substantial time and money developing relationships with vendors, suppliers, clients and potential clients and business associates ("Contacts"), and each Non-compete Party’s conduct and relationship to the company directly affects the company’s overall goodwill and business relationships with the contacts. Each Non-Compete Party recognizes the reputation of the company in the community and among Contacts is such that each Non-Compete Party’s relationship to the company provides such Non-Compete Party with access to, or enhances access to, potential markets and individuals, including Contacts, that are otherwise not available. Each Non-Compete Party acknowledges and agrees that all of the company’s confidential or proprietary information and the goodwill of the company constitute a proprietary property interest of the company and that the company has a legitimate business interest in protecting its property, confidential and proprietary information, and business goodwill. Each Non-Compete Party also acknowledges that the company and the other members would not have entered into this agreement if each Non-Compete Party had not agreed to the covenants in this Section {C2214694:9} ll Each Non-Compete Party agrees as follows: (a) Except for on behalf of the company, or with the prior written consent of all members, each Non-Compete Party agrees that it will not, directly or indirectly, for its own account or for the account of othe