George Davis, M.D., Anteneh Roba, M.D., Levon Vartanian, M.D., Woodrow Dolino, M.D., Northwest Houston Emergency Specialist Group, PLLC, ESG MD, PLLC, and ESG MLP, LLC v. Alan Bentz, M.D.

Opinion

ACCEPTED 01-15-00230-CV FIRST COURT OF APPEALS HOUSTON, TEXAS 7/8/2015 3:46:53 PM CHRISTOPHER PRINE CLERK

No. 01-15-00230-CV

In The Court Of Appeals 1st COURT FILED IN OF APPEALS HOUSTON, TEXAS For The First District of Texas 7/8/2015 3:46:53 PM Houston, Texas CHRISTOPHER A. PRINE Clerk

GEORGE DAVIS, MD, ANTENEH ROBA, MD, LEVON VARTANIAN, MD, WOODROW DOLINO, MD, NORTHWEST HOUSTON EMERGENCY SPECIALIST GROUP, PLLC, ESG MD, PLLC AND ESG MLP, LLC, Appellants V.

ALAN BENTZ, MD, Appellee

FROM THE 190TH JUDICIAL DISTRICT COURT, HARRIS COUNTY, TEXAS CAUSE NO. 2012-44569 HONORABLE JUDGE KERRIGAN, PRESIDING

APPELLEE’S BRIEF

NORTON ROSE FULBRIGHT US LLP Andrew Price State Bar No. 24002791 andrew.price@nortonrosefulbright.com Rachel Roosth State Bar No. 24074322 rachel.roosth@nortonrosefulbright.com James Hartle State Bar No. 24082164 jim.hartle@nortonrosefulbright.com 1301 McKinney, Suite 5100 Houston, Texas 77010-3095 Telephone: (713) 651-5151 Telecopier: (713) 651-5246 Counsel for Appellee Alan Bentz, M.D.

CORRECTION REGARDING IDENTITY OF COUNSEL

Appellant’s Joint Brief provided the former name of the law firm representing Appellee: Fulbright & Jaworski, LLP. Its current and correct name is Norton Rose Fulbright US LLP.

The proper information of counsel for Appellee Alan Bentz, M.D. is as follows:

Andrew Price andrew.price@nortonrosefulbright.com Rachel Roosth rachel.roosth@nortonrosefulbright.com James Hartle jim.hartle@nortonrosefulbright.com NORTON ROSE FULBRIGHT US LLP 1301 McKinney, Suite 5100 Houston, Texas 77010-3095 Tel: (713) 651-5151 Fax: (713) 651-5246

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TABLE OF CONTENTS

CORRECTION REGARDING IDENTITY OF COUNSEL .................................. II TABLE OF CONTENTS ......................................................................................... V STATEMENT OF THE CASE ............................................................................ VIII STATEMENT REGARDING ORAL ARGUMENT ............................................. X STATEMENT OF ISSUES PRESENTED............................................................ XI STATEMENT OF FACTS .......................................................................................1 SUMMARY OF THE ARGUMENT .......................................................................8 I. Standard of Review ............................................................................13 II. Applying Texas law: the Award must be upheld ...............................14 A. Without a complete record of the arbitration proceedings, Appellants cannot overcome the presumption in favor of upholding the Award................................................................15 1. The issues decided by the Arbitrator were submitted in the arbitration, and without a complete record, the trial court had to presume that they were submitted .......................................................18 2. The evidence supported the damages awarded, and without a complete record, the trial court had to presume that it did .........................................................19 3. Appellants conceded the value of Dr. Bentz’s membership interest, and without a complete record, the trial court could not find otherwise ............. 22 B. The Arbitrator properly exercised his broad authority under Section 9.02 to decide all disputes other than those decided under Section 9.01 ......................................................24 1. Section 9.02 gave the Arbitrator authority to decide all disputes related to the Company Agreement other than disputes resolved pursuant to Section 9.01, and none of the disputes the Arbitrator decided were, or could have been, decided under Section 9.01 ............................................26

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2. The Arbitrator had authority to decide the appropriate remedies for the disputes submitted to him under Section 9.02 ..................................................28 a. There was no requirement that the parties agree to the remedies selected by the Arbitrator .............................................................29 b. Dr. Bentz did seek to recover the Fair Market Value of his interest, but regardless, this was an issue for the Arbitrator to decide ...... 32 3. The Award was rationally inferable from the Agreement, as shown by the Arbitrator’s well- reasoned discussion in the Award .................................33 a. The essence test does not allow the non-

prevailing party to retry the dispute ....................34 b. The Arbitrator correctly determined that Dr. Bentz was still a member after expulsion .....35 C. The Arbitrator did not award a double recovery, but even if he had, it would not be grounds for vacatur .........................39 1. Double recoveries do not warrant vacatur .....................39 a. Prohibiting double recoveries is not so fundamental a policy that it would outweigh public policy in favor of upholding arbitration awards ................................................40 b. Violating public policy is not a ground for vacatur under the Federal Arbitration Act .......... 43 2. The Award compensates Dr. Bentz for separate injuries and therefore does not grant a double recovery .........................................................................45 D. Even if the Court were to vacate the Award, it could not order the modification that Appellants request ........................47 CONCLUSION .......................................................................................................49 CERTIFICATE OF SERVICE ...............................................................................51 CERTIFICATE OF COMPLIANCE ......................................................................52

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APPENDIX 1. The Company Agreement (C.R. 112–36)

2. The Award (signed October 15, 2014) (C.R. 1488–92)

3. The Judgment (signed December 9, 2014) (C.R. 1794–95)

4. Order Confirming an Arbitration Award (signed December 9, 2014)

(C.R. 1796)

5. Order Denying Application for Partial Vacatur or Modification of Arbitration Award (signed December 9, 2014) (C.R. 1797)

6. Order Denying Individually Named Respondents’ Motion to Partially Vacate or Vacate Arbitration Award or in the Alternative, Motion to Modify Award (signed December 9, 2014) (C.R. 1798).

7. TEX. BUS. ORGS. CODE § 101.106 (West 2015)

8. TEX. CIV. PRAC. & REM. CODE § 171.087 (West 2015)

9. TEX. CIV. PRAC. & REM. CODE § 171.090 (West 2015)

10. 9 U.S.C. § 9 (West 2015)

11. Excerpts from Dr. Bentz’s Prehearing Brief

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INDEX OF AUTHORITIES

CASES:

Ancor Holdings, L.L.C. v. Peterson, Goldman & Villani, Inc., 294 S.W.3d 818 (Tex. App.—Dallas 2009, no pet.)………..…….……34–35

Anzilotti v. Gene D. Liggin, Inc., 899 S.W.2d 264 (Tex. App.—Houston [14th Dist.] 1995, no writ)……13–15

Barton v. Fashion Glass and Mirror, Ltd., 321 S.W.3d 641 (Tex. App.—Houston [14th Dist.] 2010, no pet.)……………………..…..24

Black v. Shor, 443 S.W.3d 154 (Tex. App.—Corpus Christi 2013, pet. denied)..................……………41, 43

Brockman v. Tyson, No. 01-03-01335-CV, 2005 WL 2850128 (Tex. App.—Houston [1st Dist.] Oct. 27, 2005, pet. denied)..…….18–19, 33

Burlington Resources Oil & Gas Co., LP v. San Juan Basin Royalty Trust, 249 S.W.3d 34 (Tex. App.—Houston [14th Dist.] 2007, pet. denied)....30–31

CC Williams Construction Co., Inc. v. Rico, No. 09-10-00472-CV, 2011 WL 2135074 (Tex. App.—Beaumont May 19, 2011, no pet.).….20–22

Centex/Vestal v. Friendship West Baptist Church, 314 S.W.3d 677 (Tex. App.—Dallas 2010, pet. denied)…….....................…..……..17–18, 24

City of Waco v. Kelly, 309 S.W.3d 536 (Tex. 2010)……………………………..48

CVN Group, Inc. v. Delgado, 95 S.W.3d 234 (Tex. 2002)………………40–42, 44

Executone Info Sys., Inc. v. Davis, 26 F.3d 1314 (5th Cir. 1994)…………….33–34

Forest Oil Corp. v. El Rucio Land and Cattle Co., Inc., 446 S.W.3d 58 (Tex. App.—Houston [1st Dist.] July 24, 2014, pet. filed)………………..24

Fortune v. Killebrew, 23 S.W. 172 (Tex. 1893)………………………………30–31

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GJR Mgmt. Holdings, L.P. v. Jack Raus, Ltd., 126 S.W.3d 257 (Tex. App.—San Antonio 2003, pet. denied)……………………….…13, 17

Goldman v. Buchanan, No. 05-12-00050-CV, 2013 WL 1281744 (Tex. App.—Dallas Mar. 21, 2013, no pet.)...............…………………….16

Goodyear Tire & Rubber Co. v. Sanford, 540 S.W.2d 478 (Tex. Civ. App.—Houston [14th Dist.] 1976, no writ)……..…………42, 44

Gulf Oil Corp. v. Guidry, 327 S.W.2d 406 (Tex. 1959)…………………30–31, 48

Hall St. Assocs., L.L.C. v. Mattel, Inc., 522 U.S. 576 (2008)…………………….43

IQ Holdings, Inc. v. Villa D’Este Condominium Owners’ Ass’n Inc., __ S.W.3d. __, No. 01-11-00914-CV, 2014 WL 982844 (Tex. App.—Houston [14th Dist.] Mar. 1, 2014, no pet.).…........…….14

Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266 (Tex. 1992)………………….26

Kline v. O’Quinn, 874 S.W.2d 776 (Tex. App.—Houston [14th Dist.] 1994, writ denied)……………………..14–15, 18–19, 24, 32, 47

Lee v. Daniels & Daniels, 264 S.W.3d 273 (Tex. App.—San Antonio 2008, pet. denied)…..…………….………..42, 45

Lee v. El Paso County, 965 S.W.2d 668 (Tex. App.—El Paso 1998, pet. denied)……………..................….42, 44–45

Mega Builders, Inc. v. Paramount Stores, Inc. No. 14-14-00744-CV, 2015 WL 3429060 (Tex. App.—Houston [14th Dist.] May 28, 2015, no pet. h.)………………………………………………21–22

Nafta Traders Inc. v. Quinn, 339 S.W.3d 84 (Tex. 2011)……………………15–17

Petroleum Analyzer Co. LP v. Olstowski, No. 01-09-00076-CV, 2010 WL 2789016 (Tex. App.—Houston [1st Dist.] 2010, no pet.)………44

Prudential Sec. Inc. v. Marshall, 909 S.W.2d 896 (Tex. 1995)………………….24

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Rapid Settlements, Ltd. v. Symetra Life Ins. Co., 234 S.W.3d 788 (Tex. App.—Tyler, no pet.)………………….…..42–43, 45

Roe v. Ladymon, 318 S.W.3d 502 (Tex. App.—Dallas 2010, no pet.)…...29, 41, 43

Royce Homes, L.P. v. Bates, 315 S.W.3d 77 (Tex. App.—Houston [1st Dist.] 2010, no pet.)……………….……….42–44

Schuster v. Wild, No. 13-13-00474-CV, 2014 WL 3804834 (Tex. App.—Corpus Christi March 5, 2015, pet. denied).………….….16–17

Smith v. Gladney, 98 S.W.2d 351, 352 (Tex. 1936)…………………………..42, 44

Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564 (Tex. App.—Dallas 2008, no pet.)………….…………………………15–17

Turner v. Package Exp., L.P., No. 14-12-00241-CV, 2013 WL 2149786 (Tex. App.—Houston [14th Dist.] May 16, 2013, no pet.)………..……….23

Vorwerk v. Williamson County Grain, No. 03-10-00549-CV, 2012 WL 593481 (Tex. App.—Austin Feb. 23, 2012, pet. denied)…..……17

Waite Hill Services, Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182 (Tex. 1996)…………………..…………………………..45

Werline v. E. Tex. Salt Water Disposal Co., 209 S.W.3d 888 (Tex. App.—Texarkana 2006) aff’d 307 S.W.3d 267 (Tex. 2010)...………41

Xtria L.L.C. v. Int’l Ins. Alliance, Inc., 286 S.W.3d 583 (Tex. App.—Texarkana 2009, pet. denied)…………….………………13, 41

STATUTES:

TEX. CIV. PRAC. & REM. CODE § 171.087 (West 2015)……………...…………..13

TEX. CIV. PRAC. & REM. CODE § 171.090 (West 2015)……………………..……30

9 U.S.C. § 9 (West 2015)…………………………………………………………13

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STATEMENT OF THE CASE

This case involves claims brought by Appellee, Dr. Alan Bentz, against the

Company (three limited liability companies Dr. Bentz co-founded) and the

Individual Appellants (the Company’s other founding members).1 In late 2011, the

Individual Appellants presented Dr. Bentz with a Hobson’s choice: he could accept

only $100,000 for the purchase of his membership interest in the Company, or he

would be expelled from it. Appellants’ Joint Brief at 1, n. 3. When Dr. Bentz

refused this low-ball offer, the Individual Appellants made good on their threat and

voted to expel him. Id. Under the Company Agreement, 2 however, Dr. Bentz

remained a member of the Company until he sold his membership interest.

C.R. 1489.3 After the expulsion vote, the Company elected to exercise its option

under the Company Agreement to purchase Dr. Bentz’s membership interest, but

the Company later refused to pay the purchase price, which was Fair Market

Value. Id. The Company also began paying Dr. Bentz’s share of the membership

distributions to the Individual Appellants instead of Dr. Bentz. Id. at 1490.

1 “The Company” refers to appellants Northwest Houston Emergency Specialists, P.L.L.C. (“NHESG”), ESG MD, P.L.L.C., and ESG MLP, L.L.C, collectively. “The Individual Appellants” refers to Dr. George Davis, Dr. Levon Vartanian, Dr. Anteneh Roba, and Dr. Woodrow Dolino, collectively. “Appellants,” as used herein, refers to the Company and the Individual Appellants, collectively. 2 “Company Agreement” refers to the Company Agreements of each of the Company entities, which are identical except for the name of the entity. See C.R. 112–136 (the Company Agreement). 3 The Clerk’s Record is cited herein as “C.R. _________.”

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The parties participated in a 5-day arbitration hearing in August 2014. A

complete transcript of the arbitration hearing was not made. At the hearing, and

through extensive pre- and post-hearing briefing, Dr. Bentz showed that the

Appellants’ actions constituted breaches of the Company Agreement, conversion,

and breaches of fiduciary duties. C.R. 1489–90. The Arbitrator then issued an

arbitration award in Dr. Bentz’s favor (the “Award”). See id. at 1488–92. The

Award granted Dr. Bentz the Fair Market Value purchase price of his membership

interest, his distributions that were wrongfully paid to the Individual Appellants,

pre-judgment interest, and attorneys’ fees. Id. at 1489–91. The Arbitrator also

declared that Dr. Bentz had remained a member of the Company until the date of

the Award. Id. at 1490.

Dr. Bentz then moved the trial court to confirm the Award. C.R. 1321–

1325. Unhappy with the Award, Appellants filed motions opposing confirmation

in which they sought to re-litigate the merits of the arbitration. C.R. 1413–1444,

1605–1623. But the Honorable Patricia Kerrigan, Judge of the 190th Judicial

District Court of Harris County, Texas, confirmed the Award, denied Appellants’

motions to vacate the Award, and signed the Judgment in Dr. Bentz’s favor.

C.R. 1794–98. Appellants’ motions for reconsideration of the confirmation were

denied, and Appellants filed a notice of appeal on March 9, 2015. C.R. 1962–63.

This appeal follows.

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STATEMENT REGARDING ORAL ARGUMENT

In this appeal, Appellants ask the Court to ignore Texas’s strong

presumption in favor of arbitration awards and set aside a just arbitration award

rendered by an arbitrator who acted with full authority. Furthermore, Appellants

misconstrue the Award and ask this Court to rely on an incomplete record in order

to overturn it. Thus, and as shown more fully below, Appellants’ asserted points of

error run so contrary to Texas law that they do not merit oral argument before the

Court.

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STATEMENT OF ISSUES PRESENTED

Issue 1: Did the trial court err by Confirming the Award over Appellants’

opposition when:

(a) The Arbitrator followed the Company Agreement’s mandate that all

disputes be arbitrated other than disputes over the narrow issues

enumerated in Section 9.01?

(b) The Arbitrator awarded Dr. Bentz that portion of Dr. Bentz’s

membership distributions which the Individual Appellants took for

themselves despite Dr. Bentz’s continuing right to those distributions

during the time period in which Dr. Bentz continued to own his

membership interest?

Issue 2: Did the trial court err by confirming the Award over Appellants’

opposition by awarding damages to Dr. Bentz for the Company’s failure to

complete the contractual process to purchase Dr. Bentz’s membership interest and

for the Company’s payment of Dr. Bentz’s membership distributions to the

Individual Appellants during that time that Dr. Bentz was still a member of the

Company?

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STATEMENT OF FACTS

Dr. Bentz and the Individual Appellants founded the Company, and each had

a 20% membership interest. C.R. 112–13, 136. The Company was composed of

three limited liability companies, and (along with NHESG’s wholly-owned

subsidiary, Houston Northwest Emergency Specialists, PLLC), it staffed the

emergency department of Houston Northwest Medical Center. Appellants’ Joint

Brief at 1. Over the years, Dr. Bentz served in various administrative and business

capacities for the Company, which became quite successful. See C.R. 1564

(Company income statement showing yearly profits in the millions from 2009 to

2011).

By mid-2011, however, Dr. Bentz’s relationship with the Individual

Appellants had soured over clashes of personalities, and the Individual Appellants

decided to oust him. Appellants’ Joint Brief at 1, n. 3. The Appellants offered

Dr. Bentz a Hobson’s choice in late 2011: the Company would pay him a mere

$100,000 to buy his membership interest, or the Individual Appellants would vote

to expel Dr. Bentz from the Company. Id. When Dr. Bentz refused this low-ball

offer, the Individual Appellants voted to expel him. Id.

Under the Company Agreement, however, expulsion did not cause a

member to automatically lose his membership interest. C.R. 1489. Instead,

expulsion merely triggered the Company’s and the other members’ right—but not

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obligation—to force the expelled member to sell his membership interest.

C.R. 1489; see also C.R. 114 at § 2.05 (“…during a period of 180 days following

the expulsion of a Member, the Company and the other Members shall have an

option (but not an obligation) to purchase all of the Membership Interest owned by

such…expelled Member….”). If the Company or other members elected to

exercise that option, the Company Agreement required instruments conveying the

membership interest to be exchanged for the purchase price at a closing. C.R. 115

at § 2.08. The purchase price would be “Fair Market Value” as defined in the

Company Agreement. See id. at § 2.09. There were no provisions for transferring

a membership interest in the event the Company or the other members exercised

their option to purchase the expelled member’s membership interest then failed to

close and pay the purchase price.

After the Individual Appellants voted to expel Dr. Bentz, the Company

elected to exercise its option to purchase Dr. Bentz’s membership interest.

Appellants’ Joint Brief at 1. While that process was pending, Dr. Bentz remained a

member. C.R. 1489–90. During that time, however, the Company did not pay

Dr. Bentz his share of membership distributions and instead paid them to the

Individual Appellants. C.R. 1489. For these reasons, amongst others, Dr. Bentz

filed for arbitration on November 1, 2012 under the arbitration provision of

Section 9.02 of the Company Agreement, which provided a mechanism for

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resolving “any Dispute under [the Company Agreement] which [was] not

otherwise resolved pursuant to other procedures under Section 9.01.” See

C.R. 128–29 at § 9.02; see also C.R. 137–153.

Section 9.02’s broad scope contrasted with the narrow scope of Section 9.01,

which only provided procedures to decide limited issues. Compare C.R. 128–29 at

§ 9.02 with C.R. 127–28 at § 9.01. In relevant part, Section 9.01 provided a

procedure to determine the “controlling opinion” on the Fair Market Value of a

membership interest. C.R. 127 at § 9.01(a). Per that procedure, Dr. Bentz and the

Company each appointed appraisers (the “party-appointed appraisers”).

C.R. 1418, 1489. Both party-appointed appraisers then opined on the Fair Market

Value of Dr. Bentz’s membership interest. C.R. 1418. The party-appointed

appraisers also appointed a third appraiser (the “common appraiser”), whose sole

task under Section 9.01 was to determine “which opinion [was] the controlling

opinion . . .” on the Fair Market Value of a membership interest. Id.; C.R. 127–28

at § 9.01. Aside from the selection of the controlling opinion on Fair Market

Value, there were only two other issues that could be decided under Section 9.01:

(1) who would serve as the party-appointed appraiser for the purchasers of a

membership interest; and (2) who would serve as the common appraiser. See

C.R. 127–28 at § 9.01. Neither of those two issues are relevant in this appeal.

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While the Section 9.01 proceeding to determine the controlling opinion was

pending, the Individual Appellants moved to stay the Section 9.02 arbitration,

arguing that any Section 9.01 proceeding had to be completed before the

arbitration could proceed under Section 9.02. C.R. 102–11. On April 4, 2013, the

trial court ordered the Section 9.02 arbitration stayed until the Section 9.01

procedure was completed. C.R. 522–24.

On January 3, 2014, the common appraiser chose the opinion of the

Company’s appraiser, Reed Tinsley, as the controlling opinion. C.R. 1418.

Mr. Tinsley’s opinion was that the Fair Market Value was either $257,969 under

an asset approach, or $526,796 under an income approach. C.R. 1555. With this

opinion chosen as the controlling opinion, the Section 9.01 proceeding was

complete.4 No other issues in the dispute were to be decided (or indeed, could be

decided) under Section 9.01. The path was clear for the Section 9.02 arbitration to

continue to resolve all other disputes between the parties.

4 Appellants repeatedly state throughout their brief that the Section 9.01 proceeding was completed. Appellants’ Joint Brief at 11 (“The parties finished the Section 9.01 process and a ‘Fair Market Value’ was determined. . . .”), 18 (“The determination of the controlling opinion as to Fair Market Value by Mr. Mr. Carr concluded the Section 9.01 Fair Market Value process.”), 20 (“Once the Section 9.01 process was finished, the parties moved to arbitration.”), and 26 (“The Section 9.01 proceeding was concluded on January 3, 2014.”). It is unclear, then, why Appellants suggest at the end of their brief that the Section 9.01 proceeding has not ended. Id. at 46 (“If the Award against the Company is vacated, the Section 9.01 process remains open until the parties close on the purchase option.”); n.38 (“This appeal must be resolved before the parties can conclude the Section 9.01 process. . . .”). In any event, as described below in Section II.B.1, the common appraiser had, as of the time of the Section 9.02 arbitration, already decided the only issue before him under Section 9.01—that is, which party-appointed appraiser’s opinion was the controlling opinion on Fair Market Value.

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After the Section 9.02 arbitration process resumed, the parties engaged in

extensive discovery, deposed seven individuals, and submitted over 100 pages of

prehearing briefing. C.R. 1324; see also C.R. 1419 (discussing post-hearing

briefing submitted to the Arbitrator). The hearing was then held from August 19,

2014 through August 22, 2014, and reconvened for a final day on August 29, 2014.

C.R. 1488. At the hearing, the Arbitrator received the testimony of Dr. Bentz, each

of the four Individual Appellants, three non-party witnesses, and three expert

witnesses. C.R. 1324, 1488. The Individual Appellants elected to have a court

reporter transcribe part of the opening statements and part of Dr. Bentz’s

testimony, but they declined to have the court reporter transcribe the rest, and no

other party made any record of the hearing. See C.R. 1782–93 (part of the

incomplete record). Appellants conceded that the Fair Market Value of

Dr. Bentz’s membership interest was $526,796. See C.R. 1489 (“All Parties have

acknowledged… that the appropriate Fair Market Value of Dr. Bentz’s

Membership Interest is $526,796.”). Following the arbitration hearing, each party

submitted post-hearing briefs to supplement the Parties’ already-extensive

prehearing briefs. Id.

The Arbitrator then issued the Award on October 15, 2014. C.R. 1488. In

it, the Arbitrator found that “all Parties have acknowledged. . . that the appropriate

Fair Market Value of Dr. Bentz’s Membership Interests [was] $526,796,” a figure

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consistent with the controlling opinion from the Section 9.01 proceedings.

C.R. 1489, 1555. The Arbitrator determined that Dr. Bentz was entitled to recover

that sum because the Company breached the Company Agreement by electing to

exercise the option to purchase Dr. Bentz’s interest and then failing to pay the

purchase price by the contractual deadline. C.R. 1489. The Arbitrator also

determined that Dr. Bentz was entitled to his pro rata share of membership

distributions made while Dr. Bentz remained a member because “[c]ommon sense,

logic and a careful reading of the Agreements compel that, until paid for his

Interest, a Member, even an expelled Member, is entitled to his share of any

distributions made by the [Company].” C.R. 1490. Finally, the Arbitrator also

awarded Dr. Bentz pre-judgment interest, costs, and attorneys’ fees.5 C.R. 1491.

The trial court later confirmed the Award over Appellants’ objections,

entered the Judgment, and denied Appellants’ motions for reconsideration.

C.R. 1794–98, 1962. Shortly afterward, Appellants sued the law firm and attorney

who had drafted the Company Agreement, alleging that they committed

malpractice. C.R. 1942–52. Appellants further alleged that they had already

satisfied the Judgment—though they had not and have not done so. See C.R. 1950

5 Per the Company Agreement, the Arbitrator awarded attorneys’ fees to Dr. Bentz because he was a substantially prevailing party. See C.R. 131 at § 9.03 (“In the event a proceeding under this Article 9 is commenced…the party who prevails or substantially prevails in such proceeding shall be entitled to recover . . . all costs, expenses and reasonable attorneys’ fees incurred in connection with the proceeding and on appeal.”); C.R. 1491 (“…Claimant substantially prevailed in his claims and is entitled to recover his costs, expenses and reasonable attorney fees.”).

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(characterizing the award of distributions and attorneys’ fees to Dr. Bentz as

“pecuniary losses” that “Plaintiffs sustained. . . .”); C.R. 1947 (stating that a sum

mentioned earlier in the petition “does not include any portion of the $532,064

paid to Bentz to buy-out his membership share . . . .”) (emphasis added). This

appeal follows.

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SUMMARY OF THE ARGUMENT

At the crux of this appeal is Appellants’ refusal to recognize that, under

Section 9.02 of the Company Agreement, they agreed to arbitrate “any Dispute

under [the Company Agreement] which [was] not otherwise resolved pursuant to

other procedures under Section 9.01,” which is exactly what happened when the

parties submitted their dispute to the Arbitrator. In contrast, Section 9.01 provided

mechanisms for the narrow determinations of: (1) who would serve as the party-

appointed appraiser for a purchase of a membership interest, (2) who would serve

as the common appraiser, and (3) which party-appointed appraiser’s opinion would

be the controlling opinion on the Fair Market Value of a membership interest.

None of these issues were decided in the Section 9.02 arbitration. Rather, after a

five-day hearing and over a month of deliberation, the Arbitrator properly

determined, amongst other things, that: (1) Dr. Bentz was entitled to recover

damages from the Company for its failure to buy Dr. Bentz’s membership interest

after electing to exercise its option to do so; (2) Dr. Bentz was entitled to recover

damages from the Individual Appellants for their wrongful appropriation of his pro

rata share of membership distributions; and (3) Dr. Bentz was entitled to recover

attorneys’ fees per the Company Agreement because he substantially prevailed in

the arbitration.

54069386.3 -8-

Appellants would have the Court believe that this dispute was actually about

one thing: the propriety of Dr. Bentz’s expulsion from the Company. Although the

parties did dispute the propriety of Dr. Bentz’s expulsion, the parties also disputed

what happened to Dr. Bentz’s membership interest if he had been properly

expelled, and resolving this dispute required interpretation of the Company

Agreement—an issue for arbitration under Section 9.02. Under the Company

Agreement, a member’s expulsion triggered the Company’s and the other

members’ right—but not obligation—to buy the member’s membership interest at

the Fair Market Value.

Here, upon Dr. Bentz’s expulsion, the Company elected to exercise their

option to purchase Dr. Bentz’s membership interests but then refused to complete

the purchase by paying Dr. Bentz the Fair Market Value. And, even though no one

had paid Dr. Bentz for his membership interest, Appellants claimed that

Dr. Bentz’s membership interest had disappeared and that he was no longer

entitled to his share of membership distributions. On the other hand, Dr. Bentz

argued that because his membership interest was his personal property, he

continued to own the interest and its attendant membership distribution rights until

he transferred it. See TEX. BUS. ORGS. CODE § 101.106 (West 2015) (“A

membership interest in a limited liability company is personal property.”) This is

the same merits-based dispute that is at issue in this appeal.

54069386.3 -9-

The Arbitrator has already decided this dispute, and he agreed with

Dr. Bentz’s interpretation of the Company Agreement and Texas law. The

Arbitrator therefore awarded Dr. Bentz the damages he was entitled to: payment

for his membership interest, his unpaid share of the membership distributions,

attorneys’ fees, prejudgment interest, and costs.

Because Appellants do not like the Arbitrator’s decision, they now wish to

retry the merits of the dispute. Knowing that courts defer to arbitrators to

determine the merits, however, Appellants have recast their claims in the form of

jurisdictional arguments. Appellants claim first that the Arbitrator exceeded his

authority because the parties did not agree to grant the Arbitrator the authority to

award Dr. Bentz the recoveries contained in the Award. This argument, however,

ignores the fact that, by assenting to the Company Agreement, the Appellants

agreed to resolve these disputes under the broad ambit of Section 9.02, and the trial

court properly rejected it.

Appellants also claim that the Award includes a double recovery and that

Texas’s common law policy against double recoveries is so extraordinary and

fundamental that its violation requires vacatur here. Appellants’ argument fails

because, as two other courts of appeals have held, the award of a double recovery

does not warrant vacatur. Appellants’ argument also fails because common law

grounds for vacatur—such as vacating an arbitration award because it violates

54069386.3 - 10 -

public policy—are not grounds for vacatur under the Federal Arbitration Act,

which applies here. In any event, the Award does not include a double recovery

because its different components compensate Dr. Bentz for different injuries.

Finally, Appellants request to modify the Award so that the Award would:

(1) maintain the only aspect of the Award favorable to Appellants (the Arbitrator’s

determination that Dr. Bentz was expelled using the proper procedures); (2)

include a determination the Arbitrator never made (that Appellants did not breach

the Company Agreement); and (3) delete the other components of the Award

(which were unfavorable to Appellants). These requested modifications are

impermissible because Appellants did not preserve this argument for appeal, they

would give Appellants relief they did not request, and they would improperly

segregate intertwined issues.

The Arbitrator properly interpreted Texas law and the Company Agreement,

and he acted within his authority in doing so. The trial court accordingly showed

due deference to the Arbitrator’s well-reasoned decision. This Court should not

disturb the trial court’s decision, because doing so would not only upset Texas’s

strong presumption in favor of arbitration awards; it would undo a just Award

rendered with full authority. It has been nearly four years since the Individual

Appellants voted to expel Dr. Bentz, and Dr. Bentz has yet to receive any

54069386.3 - 11 -

compensation for the harm Appellants inflicted upon him. The Court should reject

Appellants’ latest stalling tactic6 and affirm the Judgment.

6 There is a real risk that Appellants’ stalling tactics may prevent Dr. Bentz from obtaining satisfaction of the Award and Judgment. See C.R. 1608 (“The Hospital Contract was the [Company’s] sole source of revenue, and the [Company] held little in the way of additional assets. On October 31, 2013, during the pendency of the underlying arbitration proceedings, the Hospital Contract terminated when the Hospital elected not to renew it. The [Company] has earned no additional revenues since that time (though trailing collections continued to trickle in over the next several months). Other than these proceedings, the [Company] has no ongoing business and intends to wind down once they reach a final conclusion.”)

54069386.3 - 12 -

ARGUMENT AND AUTHORITIES

I. Standard of Review

Appellants urge the Court to undertake a sweeping review of the Arbitrator’s

reasoning and set aside portions of the Award despite the fact that review of an

arbitration award is “extraordinarily narrow.” GJR Mgmt. Holdings, L.P. v. Jack

Raus, Ltd., 126 S.W.3d 257, 262 (Tex. App.—San Antonio 2003, pet. denied).

Upon a party’s application, the court “shall confirm [an] award . . . [u]nless

grounds are offered for vacating, modifying, or correcting [it].” TEX. CIV. PRAC. &

REM. CODE § 171.087 (West 2015) (emphasis added); see also 9 U.S.C. § 9

(“…the court must grant [an order confirming the award] unless the award is

vacated, modified, or corrected….”). “A mere mistake of fact or law alone is

insufficient to set aside an arbitration award.” Anzilotti v. Gene D. Liggin, Inc.,

899 S.W.2d 264, 266 (Tex. App.—Houston [14th Dist.] 1995, no writ).

Furthermore, when reviewing an arbitration award, courts are “not limited to the

arbitrator’s explanation for his award.” Xtria L.L.C. v. Int’l Ins. Alliance, Inc., 286

S.W.3d 583, 591 (Tex. App.—Texarkana 2009, pet. denied) (citing JJ-CC, Ltd. v.

Transwestern Pipeline Co., No. 14-96-1103-CV, 1998 WL 788804, at *4 (Tex.

App.—Houston [14th Dist.] Nov. 12, 1998, no pet.)).

Courts “must indulge every reasonable presumption to uphold arbitration

awards.” Anzilotti, 899 S.W.2d at 266. When “a non-prevailing party seeks to

54069386.3 - 13 -

modify or vacate an arbitrator’s award, he bears the burden to bring forth a

complete record that establishes his basis for relief.” Id. at 267 (citing Kline v.

O’Quinn, 874 S.W.2d 776, 790 (Tex. App.—Houston [14th Dist.] 1994, writ

denied) (op. on reh’g)). And where, as here, the non-prevailing party alleges that

the Arbitrator exceeded his power, the non-prevailing party’s burden is a heavy

one. IQ Holdings, Inc. v. Villa D’Este Condominium Owners’ Ass’n Inc.,

__ S.W.3d. __, No. 01-11-00914-CV, 2014 WL 982844, at *3 (Tex. App.—

Houston [14th Dist.] Mar. 13, 2014, no pet.).

II. Applying Texas law: the Award must be upheld.

Appellants raise two main issues on appeal. Appellants’ Joint Brief at xiv.

First, Appellants claim that the trial court erred in confirming the Award because

the Arbitrator exceeded his authority under the Company Agreement. Id. at 23–31.

Appellants also sprinkle this first issue with various evidentiary challenges to the

Award. Id. at 15–31. Second, Appellants claim that the trial court erred in

confirming the Award because the Award violated an extraordinary, fundamental

public policy by awarding a double recovery. Id. at 31–42. As a remedy for these

supposed deficiencies, Appellants ask the Court to modify the Award so that the

Award declares that Dr. Bentz was properly expelled and that Appellants did not

breach the Company Agreement. Appellants’ Joint Brief at 42–47.

54069386.3 - 14 -

As described more fully below, Appellants’ claims fail because: (A) without

a complete record of the arbitration proceedings, Appellants cannot overcome the

strong presumption in favor of upholding the Award; (B) the Arbitrator properly

exercised his Section 9.02 authority to decide all disputes related to the Company

Agreement other than those disputes decided under Section 9.01; (C) the Arbitrator

did not award a double recovery, but regardless, awarding a double recovery does

not warrant vacatur; and (D) even if the Court questions the trial court’s

confirmation of the Award, it cannot order the modification that Appellants

request.

A. Without a complete record of the arbitration proceedings, Appellants cannot overcome the presumption in favor of upholding the Award.

When “a non-prevailing party seeks to modify or vacate an arbitrator’s

award, he bears the burden to bring forth a complete record that establishes his

basis for relief.” Anzilotti, 899 S.W.2d at 267 (emphasis added) (citing Kline, 874

S.W.2d at 790). “A court must have a sufficient record of the arbitral proceedings,

and complaints must have been preserved, all as if the award were a court

judgment on appeal.” Nafta Traders Inc. v. Quinn, 339 S.W.3d 84, 101 (Tex.

2011). In order to be a complete record, the record must include a full transcript of

the arbitration hearing. Statewide Remodeling, Inc. v. Williams, 244 S.W.3d 564,

569 (Tex. App.—Dallas 2008, no pet.) (where party claimed arbitrator committed a

54069386.3 - 15 -

gross mistake and awarded a measure of damages not requested, appellate court

held that it “[could not] conclude the trial court erred in holding [the party] to the

burden of bringing forth a complete record of the arbitration proceedings,

including a transcript of the arbitration hearing.”). Absent a transcript of the

arbitration, “[n]either the attorneys’ recollection of what testimony was or was not

before the arbitrator nor the attachments to the motion to vacate provide a complete

record of the arbitration proceedings.” Statewide Remodeling, 244 S.W.3d at 569.

Where, as here, the non-prevailing party fails to provide the court with a

complete record, the court must presume that the evidence supports the arbitration

award and uphold that award. See Nafta Traders, 339 S.W.3d at 102 (“If error

cannot be demonstrated, an award must be presumed correct.”); Goldman v.

Buchanan, No. 05-12-00050-CV, 2013 WL 1281744, at *3 (Tex. App.—Dallas

Mar. 21, 2013, no pet.) (where party sought vacatur award on basis that arbitrators

exceeded their powers but “failed to introduce a record of the arbitration

proceedings before the district court,” appellate court had to “presume the evidence

supported the award” and therefore affirmed award’s confirmation); Schuster v.

Wild, No. 13-13-00474-CV, 2015 WL 251564, at *5 (Tex. App.—Corpus Christi

Mar. 5, 2015, pet. denied) (op. on reh’g) (reversing the trial court’s vacatur of

arbitration award based on the arbitrator exceeding his authority because “without

a transcript of the arbitration proceedings, [the court is] required to presume that

54069386.3 - 16 -

the evidence adequately supported [the award]”). The informal nature of arbitration

does not release a party from its burden to bring forward a complete record,

because “[w]ithout a record,” a court “cannot conclusively determine the basis for

the arbitrator’s award. . . .” 7 Vorwerk v. Williamson County Grain, No. 03-10-

00549-CV, 2012 WL 593481, at *6 (Tex. App.—Austin Feb. 23, 2012, pet.

denied) (citing GJR Mgmt., 126 S.W.3d at 263 and Statewide Remodeling, 244

S.W.3d at 569–70). Appellants claim that a complete record of the arbitration

proceedings is not required for this Court to determine that the Arbitrator exceeded

his authority. Appellants’ Joint Brief at 15. That is incorrect, and Appellants have

cited no cases in which an appellate court ruled that an arbitrator exceeded his

authority while relying on an incomplete record. Instead, Appellants cite

Centex/Vestal v. Friendship West Baptist Church, which does not support their

argument. 314 S.W.3d 677 (Tex. App.—Dallas 2010, pet. denied).

In Centex/Vestal, the non-prevailing party brought forth no record at all as to

one claim the arbitrator decided. Id. at 687. Accordingly, the court concluded that

the “failure to bring forth a complete record of the arbitration proceeding [was]

7 The Supreme Court aptly described the public policy supporting the requirement that a party bring forth a complete record on appeal: “For efficiency’s sake, arbitration proceedings are often informal; procedural rules are relaxed, rules of evidence are not followed, and no record is made. These aspects of arbitration, which are key to reducing costs and delay in resolving disputes, must fall casualty to the requirements for full judicial review. The parties can decide for themselves whether the benefits are worth the additional cost and delay, but the only review to which they can agree is the kind of review courts conduct.” Nafta Traders, 339 S.W.3d at 101– 02.

54069386.3 - 17 -

fatal” to the claim for vacatur. Id. As to other claims the arbitrator decided, the

court considered the limited record provided to it and determined that the arbitrator

acted within his authority on those claims. Id. at 685–86. In deciding that the

arbitrator did not exceed his authority, the court considered the partial record, but

“presume[d] any remaining evidence support[ed] the Award.” Id. at 685. And in

the end, the court found that the arbitrator did not exceed his authority in deciding

those claims. Id. at 686. This Court is presented with a similar situation;

Appellants provided only a limited record, so the Court must “presume any

remaining evidence supports the Award.” Id. at 685. As explained more fully

below, this presumption defeats Appellants’ claim for vacatur.

1. The issues decided by the Arbitrator were submitted in the arbitration, and without a complete record, the trial court had to presume that they were submitted.

Appellants claim that the Arbitrator issued an Award on issues not submitted

to him. Appellants’ Joint Brief at 23–27. However, the Arbitrator did not rule on

any issues not submitted to him, and, moreover, the Court must reject Appellants’

claim to the contrary because the Court “do[es] not have a record of the arbitration

and [is] unable to determine what claims were submitted or what evidence was

offered before the arbitrator[].” Kline, 874 S.W.2d at 783. Without a record of the

hearing, the court “ha[s] no way of knowing whether a fact issue was raised, or for

that matter, whether certain issues were tried by consent.” Brockman v. Tyson, No.

54069386.3 - 18 -

01-03-01335-CV, 2005 WL 2850128, at *4 (Tex. App.—Houston [1st Dist.] Oct.

27, 2005, pet. denied). Accordingly, “[w]ithout a transcription of the arbitration

proceedings, [the court] must presume adequate evidence to support the award.”

Kline, 874 S.W.2d at 783 (citing House Grain Co. v. Obst, 659 S.W.2d 903, 906

(Tex. App.—Corpus Christi 1983, writ ref’d n.r.e.)).

2. The evidence supported the damages awarded, and without a complete record, the trial court had to presume that it did.

Appellants next claim that the Award failed the “essence” test because it is

not “rationally inferable” from the agreement. Appellants’ Joint Brief at 28. They

also argue that the Award constitutes an impermissible double recovery. Id. at 31–

34. The validity of these arguments implicates factual and legal questions, both of

which were fully briefed and argued to the Arbitrator, but most of those briefings

and arguments are not part of the record before this Court.

As more thoroughly explained to the Arbitrator through briefing, oral

argument, and expert testimony, awarding Dr. Bentz the Fair Market Value of his

interest and his share of distributions compensates Dr. Bentz for two different

injuries. First, awarding Dr. Bentz the Fair Market Value of his interest

compensates Dr. Bentz for the Company’s failure to purchase Dr. Bentz’s 20%

membership interest after it elected to do so. C.R. 1489. Second, awarding

Dr. Bentz damages equal to the distributions the Individual Appellants wrongfully

appropriated compensates Dr. Bentz for the membership distributions he should

54069386.3 - 19 -

have received while he remained a member of the Company. C.R. 1490. Thus,

Dr. Bentz was awarded separate damages for the violation of two separate

contractual rights—his right to the purchase price of his membership interest and

his right to distributions while he remained a member.

At the arbitration hearing, Appellants’ own damages expert conceded that

awarding Dr. Bentz the Fair Market Value and his share of distributions would not

be a double recovery if Dr. Bentz were found to still be a member of the Company

after expulsion—which is, in fact, what the Arbitrator found. C.R. 1489. This

testimony is not included in the appellate record because Appellants failed to

provide the trial court with a complete record. But, without a complete record of

the hearing, Appellants cannot rebut the presumption that the evidence supported

the award of Fair Market Value and distributions—and, in fact, it did.

In an instructive case, CC Williams Construction Co., Inc. v. Rico, the non-

prevailing party sought vacatur on the basis that the arbitrator exceeded his

authority and granted a double recovery to the prevailing party, but the non-

prevailing party failed to provide a transcript of the hearing. No. 09-10-00472-CV,

2011 WL 2135074, at *2–3 (Tex. App.—Beaumont May 19, 2011, no pet.). This

failure was fatal to the claim for vacatur. Id. The court held:

The record does not indicate that the [non-prevailing party] provided the trial court with a complete record, i.e., a transcript of the arbitration proceedings. See Williams, 244 S.W.3d at 569 (Finding that the trial court did not err by requiring non-prevailing party to

54069386.3 - 20 -

provide a transcript of arbitration proceedings, even when no such transcript was made and the party provided affidavits, exhibits, and an attorney’s testimony regarding what occurred at the arbitration proceeding). The [non-prevailing party’s] grounds for vacatur all depend on the evidence offered and considered by the arbitrator and the manner in which the arbitrator conducted the proceedings, none of which the record contains. . . . We, therefore, presume that the arbitration evidence supported the award. . . .

Under these circumstances, we conclude that the trial court erred by refusing to confirm the arbitration award and by setting aside and vacating the award.

Id. at *3.

Recently, the Fourteenth Circuit Court of Appeals issued another instructive

opinion in Mega Builders, Inc. v. Paramount Stores, Inc. No. 14-14-00744-CV,

2015 WL 3429060 (Tex. App.—Houston [14th Dist.] May 28, 2015, no pet. h.). In

Mega Builders, the appellant argued that the arbitrator “double count[ed]” a sum

awarded to the appellee. Id. at *2. As in CC Williams Construction, however, the

appellant’s failure to provide a record of the arbitration proceedings proved fatal to

its claim for vacatur. Id. at *3. The court explained:

[B]ecause we have no record of the arbitration proceedings, we cannot determine whether the two entries constitute a double counting, as [the appellant] alleges, or whether the two entries were intentionally included in the calculation of the award based on the evidence submitted to the arbitrator, as [the appellee] argues. Absent a record, we must presume that the record supports the arbitrator’s determination of the proper amount of the award.

Id.

54069386.3 - 21 -

Here, as in CC Williams Construction and Mega Builders, Appellants have

not met their burden to provide a complete record. Accordingly, the Court must

presume that the record that it lacks supports the Award.

3. Appellants conceded the value of Dr. Bentz’s membership interest, and without a complete record, the trial court could not find otherwise.

The lack of a complete record requires the Court to reject Appellants’

argument that the Arbitrator exceeded his powers by deciding a dispute as to the

Fair Market Value of Dr. Bentz’s interest. In support of their argument, Appellants

cite seven pages of an unofficial transcript from the opening presentations during

the first day of the hearing. Appellants’ Brief at 21 (citing C.R. 1787–93). But

even this unofficial transcript demonstrates the Individual Appellants’ willingness

for the Arbitrator to award Dr. Bentz the Fair Market Value of his interest as long

as it was within the range decided in the Section 9.01 proceeding:

Mr. Mussalli: What I think would help us is, you know, if there’s an agreement that, you know, if say let’s allow Mr. Wood to determine – there’s the word determine again – let’s allow Mr. Wood to choose, so to speak, as long as you don’t exceed the higher number.

C.R. 1790 at 74:11–16.

Appellants’ reliance on arguments presented at the hearing underscores the

very reason that Texas law imposes a burden upon the non-prevailing party to

bring forth a complete record of the arbitration: the Court cannot review the

propriety of the Arbitrator’s exercise of his powers without a record of what

54069386.3 - 22 -

happened. Here, the lack of a complete record prevents the Court from reviewing

the testimony and arguments from the rest of the hearing. And what happened at

the rest of the hearing is important.

Over the course of the hearing, Appellants did not argue that $526,796 was

not the Fair Market Value. Rather, as the Arbitrator stated in the Award, “[a]ll

Parties [] acknowledged. . . that the appropriate Fair Market Value of Dr. Bentz’s

Membership Interests [was] $526,796.” C.R. 1489. The Court must presume the

truthfulness of the Arbitrator’s statement. See Turner v. Package Exp., L.P., No.

14-12-00241-CV, 2013 WL 2149786, at *6 n.8 (Tex. App.—Houston [14th Dist.]

May 16, 2013, no pet.) (because the arbitrator’s award stated that the non-

prevailing party “stated in his Closing Brief that he did not want to pursue any

claims against [the prevailing party],” and the Closing Brief was not included in

the appellate record, the court presumed that the Closing Brief supported the

arbitrator’s decision). Therefore, although Appellants now claim that the

Arbitrator improperly decided a dispute as to the Fair Market Value of Dr. Bentz’s

interest, the Award reflects that, by the close of the hearing (at the latest), there

was no longer a dispute as to the Fair Market Value. Had a full record of the

hearing been made, it would show that the Arbitrator did not exceed his powers.

But without a complete record, the Court must abide by the presumption in favor

of upholding the Award.

54069386.3 - 23 -

B. The Arbitrator properly exercised his broad authority under Section 9.02 to decide all disputes other than those decided under Section 9.01.

Appellants claim that the Arbitrator exceeded his authority in issuing the

Award. Appellants’ Joint Brief at xiv. When deciding whether an arbitrator acted

within his jurisdiction, the “appropriate inquiry is not whether the arbitrator

decided an issue correctly, but instead whether he had the authority to decide the

issue at all.” Forest Oil Corp. v. El Rucio Land and Cattle Co., Inc., 446 S.W.3d

58, 81 (Tex. App.—Houston [1st Dist.] July 24, 2014, pet. filed) (citing D.R.

Horton—Texas, Ltd. v. Bernhard, 423 S.W.3d 532, 534 (Tex. App.—Houston

[14th Dist.] 2014, pet. denied)). Further, “there is a presumption that the

arbitrator’s actions were within his authority, and [the Court] [must] resolve all

doubts in favor of the award.” Barton v. Fashion Glass and Mirror, Ltd., 321

S.W.3d 641, 646 (Tex. App.—Houston [14th Dist.] 2010, no pet.); Prudential Sec.

Inc. v. Marshall, 909 S.W.2d 896, 899 (Tex. 1995). The burden is therefore “on

the party challenging the award to prove the arbitrator acted outside his authority.”

Id. “[W]hen, as here, there is a broad arbitration clause, arbitration of a particular

claim should not be denied unless it can be said ‘with positive assurance that the

arbitration clause is not susceptible of an interpretation that covers the dispute.’”

Centex/Vestal, 314 S.W.3d at 685–86 (quoting Kline, 874 S.W.2d at 782).

54069386.3 - 24 -

In support of their claim that the Arbitrator exceeded his authority,

Appellants make several faulty arguments. They argue that the Arbitrator did not

have authority to award Dr. Bentz the Fair Market Value of his interest and

distributions because those remedies were barred by Section 9.01. Appellants’

Joint Brief at 21–23. They also argue that there was no agreement to award

Dr. Bentz a “buyout.” Id. at 22–27. Finally, they argue that the Award fails the

“essence” test because it was not “rationally inferable” from the agreement. Id. at

28.

These arguments fail for several reasons: (1) Section 9.02 of the Company

Agreement gave the Arbitrator the authority to decide all disputes related to the

Company Agreement other than disputes resolved pursuant to Section 9.01, and

none of the disputes the Arbitrator decided were, or even could have been, decided

under Section 9.01; (2) the Arbitrator had authority to decide the appropriate

remedies for the disputes submitted to him under Section 9.02; and (3) the Award

was rationally inferable from the Agreement, as shown by the Arbitrator’s well-

reasoned discussion in the Award.

54069386.3 - 25 -

1. Section 9.02 gave the Arbitrator authority to decide all disputes related to the Company Agreement other than disputes resolved pursuant to Section 9.01, and none of the disputes the Arbitrator decided were, or could have been, decided under Section 9.01.

Appellants have not met their burden to prove the arbitrator acted outside his

authority. Section 9.02 gave the Arbitrator authority to “any dispute under [the

Company Agreement] which is not otherwise resolved pursuant to other

procedures under Section 9.01….” C.R. 128–29 at § 9.02; see also Jack B. Anglin

Co., Inc. v. Tipps, 842 S.W.2d 266, 267–71 (Tex. 1992) (reading a provision

allowing for disputes “under the Contract [to] be submitted to arbitration…”

broadly and, accordingly, holding arbitration of DTPA claims proper because

DTPA claims were “intertwined” with contract claims) (emphasis added). And

Section 9.01 provided procedures for deciding only three types of disputes: (1)

who would serve as the party-appointed appraiser for purchasers of a membership

interest; (2) who would serve as the common appraiser; and (3) which party-

appointed appraiser’s opinion on the Fair Market Value of a membership interest

would be controlling. C.R. 127 at § 9.01. Thus, Section 9.02 granted the

Arbitrator authority to decide all other disputes related to the Company

Agreement.

The controlling opinion on Fair Market Value had been determined under

Section 9.01 prior to the Section 9.02 arbitration that resulted in the Award. See

54069386.3 - 26 -

C.R. 128–29 at § 9.02 (establishing the Arbitrator’s broad authority); Appellants’

Joint Brief at 26 (“The Section 9.01 proceeding was concluded on January 3,

2014.”) The Arbitrator then relied on the controlling opinion in issuing the Award.

The Arbitrator awarded Dr. Bentz the Fair Market Value of his interest, which

Appellants conceded was $526,796—a valuation taken directly from the

controlling Fair Market Value opinion. C.R. 1489. In other words, rather than

invading the Section 9.01 proceeding, as Appellants erroneously allege, the

Arbitrator properly relied on the result of the Section 9.01 proceeding. See id.

Appellants also argue that the Arbitrator awarded a “buyout,” which they allege

was a Section 9.01 matter. Appellants’ Joint Brief at 23. Appellants are incorrect

on this point in two respects. First, Appellants claim the award included a buyout

“similar to the old shareholder oppression cases. . . .” Appellants’ Joint Brief at

27. But the Arbitrator did not award a “buyout” as a remedy in tort; rather, the

Arbitrator enforced the Company Agreement. Because the Company breached the

option to purchase Dr. Bentz’s interest, the Arbitrator enforced the option by

ordering the Company to pay Dr. Bentz the purchase price for his interest, and by

requiring Dr. Bentz to relinquish that interest. C.R. 1489.

Second, regardless of whether enforcing the option constitutes a “buyout,”

the fashioning of remedies is not a Section 9.01 matter. There is no provision in

Section 9.01 for ruling on a party’s cause of action or awarding a party any type of

54069386.3 - 27 -

damages—those disputes are left to the broad arbitration authority of Section 9.02.

Compare C.R. 128—29 at §9.02 (establishing Section 9.02’s broad arbitration

authority) with C.R. 127–28 at § 9.01 (carving out from Section 9.02’s broad

arbitration authority narrow issues for determination under Section 9.01). Thus,

whether enforcing the option (or even awarding a supposed “buyout”) was a proper

remedy was a determination to be made in the Section 9.02 proceeding.

Here, the Arbitrator awarded Dr. Bentz the purchase price for his

membership interest because the Company breached the Company Agreement

when it elected to exercise its option to purchase Dr. Bentz’s membership interest

but then failed to hold a closing and make the payment by the contractually-

mandated deadline. C.R. 1489. Whether the Company breached the Company

Agreement and what the remedy for that breach would be were both issues that

could not be resolved by the limited procedures of Section 9.01 but instead fell

squarely within the broad arbitration authority of Section 9.02 that Appellants

agreed to by entering into the Company Agreement.

2. The Arbitrator had authority to decide the appropriate remedies for the disputes submitted to him under Section 9.02.

Appellants claim that the Arbitrator exceeded his authority because there

was “no agreement to award a buyout. . . .” Appellants’ Joint Brief at 23

(capitalization removed). In supposed support, Appellants claim that Dr. Bentz did

54069386.3 - 28 -

not plead or submit a request for a “buyout” if he was properly expelled. Id. at 26.

To begin with, this argument is off-base because the Arbitrator did not award a

“buyout”; he enforced the Company Agreement and awarded Dr. Bentz damages

for the Company’s breach thereof. C.R. 1489. Further, this argument misses the

mark because: (a) there was no requirement that the parties agree to the remedies

selected by the Arbitrator, and (b) Dr. Bentz did seek to recover the Fair Market

Value of his interest, but regardless, that was an issue for the Arbitrator to decide.

a. There was no requirement that the parties agree to the remedies selected by the Arbitrator.

Appellants argue that awarding Dr. Bentz the Fair Market Value of his

interest was a “buyout,” and that the Arbitrator could not award this “buyout”

unless the parties agreed to it. Appellants’ Joint Brief at 23. As noted above, the

Arbitrator did not award a “buyout”; he simply enforced the Company Agreement

and awarded Dr. Bentz damages for the Company’s breach thereof. Appellants’

argument fails regardless because the parties agreed to arbitrate any dispute related

to the Company Agreement (other than a dispute resolved under Section 9.01), and

in doing so, they agreed to subject themselves to Texas arbitration law, which

gives arbitrators “broad discretion in fashioning a remedy appropriate to the case.”

Roe v. Ladymon, 318 S.W.3d 502, 523 (Tex. App.—Dallas 2010, no pet.). Indeed,

“[t]he fact that the relief granted by the arbitrator[] could not or would not be

granted by a court of law or equity is not a ground for vacating or refusing to

54069386.3 - 29 -

confirm the award.” TEX. CIV. PRAC. & REM. CODE § 171.090 (West 2015). Thus,

Texas law does not require parties to an arbitration agreement to agree on what

remedies may be granted.

In supposed support of their argument, Appellants cite Fortune v. Killebrew,

Gulf Oil Corp. v. Guidry, and Burlington Resources Oil & Gas Co., LP v. San Juan

Basin Royalty Trust. Appellants’ Joint Brief at 24–26. None of these cases are

analogous to this dispute.

In Fortune, the arbitration agreement only called for arbitration to

“determine the amount received by each legatee, and the amount that each was

entitled to out of the estate. . . .” 23 S.W. 172, 176 (Tex. 1893). The court held

that the arbitrators exceeded their authority by awarding transfer of land to the

executor, rather than just determining the amount that the executor should have

received. Id. at 176–77. In that case, the award of land clearly did not fall under

the narrow arbitration provision. Id. Here, on the other hand, Section 9.02 is a

broad arbitration provision under which the Appellants agreed that the Arbitrator

would decide all disputes related to the Company Agreement that were not

resolved under Section 9.01. See C.R. 128–29 at § 9.02 (providing that “any

Dispute under [the Company Agreement] which [was] not otherwise resolved

pursuant to other procedures under Section 9.01” would be decided by arbitration

under Section 9.02).

54069386.3 - 30 -

In Gulf Oil Corp. v. Guidry, the arbitrators were given very limited

authority; they were only tasked with determining whether or not an employee was

discharged for cause. 327 S.W.2d 406 (Tex. 1959). Instead of limiting their

decision to only that issue, the arbitrators determined that “the discharge was

discriminatory; it would be set aside, the employee would be demoted, and would

receive back pay.” Appellants’ Joint Brief at 25 (citing Guidry, 327 S.W.3d at

141–42). Like the Fortune arbitrators, the Guidry arbitrators received limited

authority under the arbitration agreement, and their award clearly exceeded that

authority. But like Fortune, Guidry is not analogous to the dispute before this

Court because the Company Agreement here gave the Arbitrator broad authority,

which he properly exercised.

Finally, Burlington Resources is also distinguishable. 249 S.W.3d 34 (Tex.

App.—Houston [14th Dist.] 2007, pet. denied). In Burlington Resources, the

arbitration agreement at issue applied only to certain existing disputes which were

listed in an exhibit to the agreement. Id. at 37–38. The court vacated a portion of

the award because that portion was based on a dispute that was “not mentioned” in

the agreement. Id. at 45. Here, unlike in Burlington Resources, the arbitration

agreement did not limit arbitration to any specific, then-exiting disputes.

C.R. 128–29 at § 9.02. Thus, none of the cases relied upon by Appellants support

their theory.

54069386.3 - 31 -

b. Dr. Bentz did seek to recover the Fair Market Value of his interest, but regardless, this was an issue for the Arbitrator to decide.

Appellants attempt to support their argument that there was no agreement to

award Dr. Bentz the Fair Market Value of his membership interest by claiming that

Dr. Bentz did not plead or submit a request for a “buyout” in the event the

Arbitrator found that Dr. Bentz was properly expelled. Appellants’ Joint Brief at

25–28. However, whether Dr. Bentz pled a claim for breach of contract and sought

damages in the amount of the already-determined Fair Market Value of his

membership interest is inapposite, because arbitrations do not follow the same

procedural rules as court cases. Instead, “the enforcement of pleading

requirements before the arbitrator is a procedural matter for the arbitrator.” Kline,

874 S.W.2d at 782 (citing USX Corp. v. West, 781 S.W.2d 453, 456 (Tex. App.—

Houston [1st Dist.] 1989, no writ)) (where respondent claimed arbitrators erred in

awarding punitive damages even though claimant had not plead punitive damages,

the court “defer[red] to the arbitrators with regard to procedural matters such as the

sufficiency of [respondent’s] pleadings”).

Furthermore, the Arbitrator did in fact rule only on the issues before him,

and the Court must reject Appellants’ claim to the contrary because the Court

“do[es] not have a record of the arbitration and is unable to determine what claims

54069386.3 - 32 -

were submitted or what evidence was offered before the arbitrator[].”8 Id. at 783.

Without a complete record of the hearing, the Court has “no way of knowing

whether a fact issue was raised, or for that matter, whether certain issues were tried

by consent.” Brockman, 2005 WL 2850128, at *4. The Court must therefore

reject Appellants’ argument on this point.

3. The Award was rationally inferable from the Agreement, as shown by the Arbitrator’s well-reasoned discussion in the Award.

Appellants claim that the Award failed the “essence” test because, they

claim, the Award does not “‘have a basis that is at least rationally inferable, if not

obviously drawn from the letter and purpose of the contract.’” Appellants’ Joint

Brief at 28; Executone Info Sys., Inc. v. Davis, 26 F.3d 1314, 1325 (5th Cir. 1994).

In support of this argument, Appellants assert that the Arbitrator incorrectly

determined that Dr. Bentz was a member of the Company after his expulsion. Id.

at 28. Appellants’ position is untenable because: (a) the essence test does not

allow the non-prevailing party to retry the dispute, and, in any event, (b) the

8 In fact, Appellants’ claim that Dr. Bentz did not submit this issue in the arbitration is directly contradicted by a document they did not put into the record. One Section of Dr. Bentz’s prehearing brief was entitled, “Even if the Respondents properly expelled Dr. Bentz, they have still breached the Company Agreement[] by failing to pay him Fair Market Value of his Membership Interest.” See Appendix 11, Excerpts from Dr. Bentz’s Prehearing Brief at 39 (emphasis in original). This brief is not in the appellate record because Appellants failed to provide a complete record to the trial court, but Appellants should not be allowed to benefit from that failure—this is the very reason appellants are required to bring forward complete records of arbitration proceedings in the first place.

54069386.3 - 33 -

Arbitrator correctly determined that Dr. Bentz was still a member after expulsion

and prior to the sale of his membership interest.

a. The essence test does not allow the non-prevailing party to retry the dispute.

Appellants’ essence test argument is yet another attempt to recast their

arguments on the merits as jurisdictional arguments. But, as the Executone case

cited by Appellants makes clear, the essence test does not permit courts to retry the

merits of an arbitration. Rather, in applying the essence test, “[t]he Court looks

only to the result reached.” Id. (quoting Anderman/Smith Operating Co. v.

Tennessee Gas Pipeline Co., 918 F.2d 1215, 1219 n.3 (5th Cir. 1990)). A “remedy

lies beyond the arbitrator’s jurisdiction only if ‘there is no rational way to explain

the remedy handed down by the arbitrator as a logical means of furthering the aims

of the contract.’” Id. (quoting Brotherhood of R.R. Trainmen v. Central of Ga. Ry.,

415 F.2d 403, 412 (5th Cir. 1969), cert. denied, 396 U.S. 1008 (1970)). In

applying the essence test, the Court is not “limited to the arbitrator’s explanations

for his award. . . .” Id. (quoting Anderman/Smith, 918 F.2d at 1219 n.3.).

In Ancor Holdings, L.L.C. v. Peterson, Goldman & Villani, Inc., another

case Appellants rely upon, the court further explains the essence test as follows:

Our inquiry here is not one of contract interpretation. Rather, we look to whether the arbitrator’s award “was so unfounded in reason and fact, so unconnected with the wording and purpose of the [contract] as to ‘manifest an

54069386.3 - 34 -

infidelity to the obligation of the arbitrator’” such that the arbitrator failed to interpret the [contract] at all. . . .

294 S.W.3d 818, 830–31 (Tex. App.—Dallas 2009, no pet.) (emphasis added).

Thus, under the essence test, “[e]ven if the arbitrator made a mistake in the

application of the law. . . such a mistake is not a ground for vacating an arbitrator’s

award.” Id. at 833.

Here, as in Ancor Holdings, the Award does not “manifest an infidelity” to

the Arbitrator’s obligations. Like the arbitrator in Ancor Holdings, “it is clear from

the [A]rbitrator’s. . . final award that [he] went through the process of interpreting

the [contract] and that [he] considered the wealth of evidence presented to [him].”

Id. at 831. Indeed, the Award shows that the Arbitrator issued the Award after

“having read the pleadings, heard the testimony, reviewed the relevant documents,

listened to argument of counsel, read and considered the briefs and the post-

hearing submissions, after full consideration of the record upon due deliberation,

construing the contracts and applying Texas law. . . .” C.R. 1492. For these

reasons, the Award passes the essence test.

b. The Arbitrator correctly determined that Dr. Bentz was still a member after expulsion.

Even if the essence test allowed a court to review the merits of the

Arbitrator’s decision—which it does not—the Award would pass the test because

the Arbitrator correctly determined that Dr. Bentz was still a member after

54069386.3 - 35 -

expulsion and prior to the sale of his membership interest. Dr. Bentz’s

membership interest was his personal property, and Appellants have pointed to no

evidence that Dr. Bentz had transferred his interest to anyone. See TEX. BUS.

ORGS. CODE § 101.106 (West 2015) (“A membership interest in a limited liability

company is personal property.”) Further, nothing in the Company Agreement

suggests that a member stops being a member upon expulsion or that his

membership interest gets “absorbed.” To the contrary, the Company Agreement

suggests that a member continues to be a member until his interest is transferred—

which, here, did not happen before the arbitration hearing.

Under the Company Agreement, upon expulsion “the Company and the

other Members shall have an option (but not an obligation) to purchase all of the

Membership Interest owned by such. . . expelled Member. . . at the Fair Market

Value determined as of the last day of the calendar month preceding the date of

the. . . expulsion of such Member.” C.R. 114 at § 2.05. If the Company or other

Members exercise this option, they must do so within “180 days following the

expulsion of [the] Member. . . .” Id. The party exercising the option must pay for

the Membership Interest “at a closing, held on a business day not more than 30

days after the time for electing to purchase the interest lapses, all in cash or by

cashier’s check. . . .” C.R. 115 at § 2.08. If there is a dispute over the Fair Market

Value, the deadline for closing is stayed until “the determination has been made by

54069386.3 - 36 -

the common appraiser as to which opinion is the controlling opinion. . . .”

C.R. 115, 127–28. “At the closing, the selling party shall deliver instruments of

conveyance and assignment of the appropriate amount of the Membership Interest.

. .” and “the purchasers shall pay the purchase price. . .” C.R. at 115 at § 2.08.

“Upon transfer of any membership interest in the Company. . . the items of income

and loss attributable to the Company Rights shall be apportioned between the

assignor and the assignee as of the last day of the month preceding the transfer (the

deemed transfer date) based on the results of Company operations through that

deemed transfer date.” C.R. 119 at § 4.03.

Based on the foregoing provisions, Appellants had a choice regarding

whether to purchase Dr. Bentz’s membership interest upon expulsion. If they

chose to purchase it, they had to exchange the purchase price for documents

conveying the membership interest at a closing. The Company would continue to

allocate profits and losses to Dr. Bentz until the deemed transfer date. If

Appellants did not choose to purchase Dr. Bentz’s membership interest, then no

transfer would occur, and the Dr. Bentz would remain a Member. Under this

scheme, if an expelled member lost his interest immediately upon expulsion (as

Appellants allege), there would be no reason for the Company Agreement to

provide an option to purchase an expelled member’s interest at all.

The Arbitrator agreed with this analysis of the Company Agreement:

54069386.3 - 37 -

If a Texas limited liability company chooses to alter, in its company agreement, the statutory rule that a Member may not be expelled, it must make very clear all of the consequences of expulsion. In construing such an agreement no rights or consequences that are not specifically provided for should be assumed. . . . The Agreements do not say that a Member’s Interest is terminated, forfeited or lost upon expulsion. Or that he shall, from that point, cease to be a Member and his Sharing Ratio be reduced to zero. Instead Section 2.05 of the Agreements demonstrates that an expelled Member retains his Membership Interest. The Company and the other Members have an option to purchase all of the Membership Interest owned by the expelled Member. . . . The existence of the option itself recognizes that the Membership Interest survives expulsion. . . .

Common sense, logic and a careful reading of the Agreements compel that, until paid for his Interest, a Member, even an expelled Member, is entitled to his share of distributions made by the Company.

C.R. 1490.

Now, for the first time on appeal, Appellants complain that this

interpretation of the Company Agreement treated Dr. Bentz “as if he was a

Member rather than a Disputed Membership Interest.” Appellants’ Joint Brief at

28–31. To be clear, Dr. Bentz was not a disputed membership interest—he owned

one. Under the Company Agreement, a “disputed membership interest” is a

membership interest, the Fair Market Value of which is in dispute. See C.R. 1461

at § 9.01(a). Dr. Bentz was therefore not a disputed membership interest—he was

an expelled member who owned a membership interest the Fair Market Value of

54069386.3 - 38 -

which was in dispute. An expelled member is still a member and a disputed

membership interest is still a membership interest. There is nothing in the

Company Agreement that suggests a member stops being a member when the Fair

Market Value of his membership interest is in dispute. Dr. Bentz therefore

remained a member after expulsion and prior to the transfer of his membership

interest, and the Arbitrator properly decided this issue.

C. The Arbitrator did not award a double recovery, but even if he had, it would not be grounds for vacatur.

In their second issue, Appellants claim that the Arbitrator violated public

policy by awarding Dr. Bentz the Fair Market Value of his membership interest

and his pro rata share of the distributions made while he was still a member.

Appellants’ Joint Brief at 42. Appellants assert that this award violates Texas’s

prohibition on double recoveries. Id. Appellants’ argument fails for two reasons:

(1) double recoveries do not warrant vacatur; and (2) the Arbitrator did not award a

double recovery.

1. Double recoveries do not warrant vacatur.

Regardless of whether the award granted a double recovery, double

recoveries do not warrant vacatur because: (a) prohibiting double recoveries is not

so fundamental a policy that it would outweigh public policy in favor of upholding

arbitration awards, and, in any event, (b) violating public policy is not a ground for

vacatur.

54069386.3 - 39 -

a. Prohibiting double recoveries is not so fundamental a policy that it would outweigh public policy in favor of upholding arbitration awards.

Appellants state that “[i]n order for an award to be vacated as a violation of

public policy, the policy at issue must be a carefully articulated fundamental public

policy.” Appellants’ Joint Brief at 34 (citing CVN Group, Inc. v. Delgado, 95

S.W.3d 234, 239 (Tex. 2002)). The policy against double recoveries, however, is

not the kind of carefully articulated, fundamental policy that could outweigh the

public policy in favor of upholding arbitration awards.

Although Texas’s prohibition against double recoveries reflects public

policy—as all law does—Appellants did not and cannot cite any Texas cases

supporting their claim that the policy against double recoveries is the kind of

fundamental policy for which a violation justifies vacatur. Instead, Appellants

skirt the issue by citing a number of cases reaffirming the notion that double

recoveries are against Texas public policy. See Appellants’ Joint Brief at 37–39

(citing cases for the proposition that “[t]he policy against double recovery is firmly

rooted in Texas jurisprudence”). But Appellants miss their mark. The question is

not whether Texas has a firmly-rooted policy against double recoveries, but is

instead whether the public policy is so fundamental as to require courts to upset the

strong presumption in favor of arbitration awards. The answer to the latter

question is “no.”

54069386.3 - 40 -

At least two courts of appeals have held that awarding a double recovery in

arbitration is not grounds for vacatur. In Black v. Shor, the Corpus Christi Court of

Appeals rejected a non-prevailing party’s bid to vacate an arbitration award on the

basis that is violated the one satisfaction rule. 443 S.W.3d 154 (Tex. App.—

Corpus Christi 2013, pet. denied) The Black court held that “[a] trial court should

not overturn an arbitration award rendered after honest consideration given to

claims and defenses presented to it, no matter how erroneous.” Id. at 168–69 (Tex.

App.—Corpus Christi 2013, pet. denied) (citing Xtria L.L.C., 286 S.W.3d at 598);

Werline v. E. Tex. Salt Water Disposal Co., 209 S.W.3d 888, 898 (Tex. App.—

Texarkana 2006); aff’d 307 S.W.3d 267, 268 (Tex. 2010)). Similarly, in Roe v.

Ladymon, the Dallas Court of Appeals rejected Appellants’ argument that an

“award should be modified to eliminate a double recovery of damages,” justifying

its holding on the arbitrator’s “broad discretion in fashioning a remedy appropriate

to the case.” 318 S.W.3d at 523.

Although Appellants cite several cases analyzing arbitration awards in light

of public policy, these cases do not support Appellants’ argument. In one of the

cases cited by Appellants, CVN Group, Inc., the Supreme Court of Texas rejected a

public policy attack on an arbitration award, reasoning that the “arbitrator’s mere

disagreement with a judge does not violate public policy [and] [n]othing in the

arbitration proceeding indicate[d] that the arbitrator completely disregarded the

54069386.3 - 41 -

[law].”). 95 S.W.3d at 239. Furthermore, in none of the cases cited by Appellants

did the court vacate an award on the basis that it granted a double recovery; rather,

those cases vacated awards that violated the Constitution, were unconscionable,

encouraged criminality, or violated a statute that prohibited unconscionable

conduct. See Lee v. El Paso County, 965 S.W.2d 668 (Tex. App.—El Paso 1998,

pet. denied) (affirming vacatur of award that violated Texas Constitution’s

prohibition on “freely giving away [of] public moneys for services previously

rendered…”); Lee v. Daniels & Daniels, 264 S.W.3d 273 (Tex. App.—San

Antonio 2008, pet. denied) (vacating award that granted lawyer recovery against

client for fees lawyer incurred in representing himself in securing withdrawal from

ongoing litigation because it was unconscionable for a client to pay a lawyer’s fee

for service performed for the lawyer’s benefit); Smith v. Gladney, 98 S.W.2d 351,

352 (Tex. 1936) (vacating award that enforced gambling agreement); Goodyear

Tire & Rubber Co. v. Sanford, 540 S.W.2d 478, 483–84 (Tex. Civ. App.—Houston

[14th Dist.] 1976, no writ) (vacating award that found employer’s action proper in

terminating employee for filing criminal charges against supervisor prior to

exhausting grievance process, because award discouraged disclosure of criminal

activity and delayed justice); Rapid Settlements, 234 S.W.3d at 793 (affirming

injunction against confirmation of award that violated statute requiring court

54069386.3 - 42 -

approval of structured settlement in order to prevent abuses of power against

unsophisticated tort claimants).

Unlike the public policies addressed in the cases cited by Appellants, the

policy against double recoveries is not the kind of fundamental policy for which a

violation warrants vacatur, as the Roe v. Ladymon and Black v. Shor courts

recognized. For the above reasons, the trial court properly honored the public

policy in favor of upholding arbitration awards, and this Court should do the same.

b. Violating public policy is not a ground for vacatur under the Federal Arbitration Act.

Regardless of whether the Award includes a double recovery, the Award

should not be vacated because the common law ground for vacatur Appellants

assert is no longer a bar to confirmation.

Appellants note that the “[t]he United States Supreme Court has determined

that Sections 10 and 11 of the FAA are exclusive of the common law grounds to

vacate an award.” Id. at n. 17. Indeed, the United States Supreme Court has made

clear that common law grounds for vacatur no longer bar confirmation of

arbitration awards because the grounds for vacatur under the FAA displace and

preempt common law grounds for vacatur. Hall St. Assocs., L.L.C. v. Mattel, Inc.,

522 U.S. 576, 584–89 (2008). Since that decision, this Court held in Royce

Homes, L.P. v. Bates that, where the FAA applies, state common law grounds for

vacatur (like an award violating public policy) do not apply. 315 S.W.3d 77, 90

54069386.3 - 43 -

(Tex. App.—Houston [1st Dist.] 2010, no pet.) (“We have already held that the

FAA applies to this case. We conclude that Hall Street forecloses any common-

law grounds for vacatur of an arbitration award such as manifest disregard of the

law and gross mistake.”); see also Petroleum Analyzer Co. LP v. Olstowski, No.

01-09-00076-CV, 2010 WL 2789016 (Tex. App.—Houston [1st Dist.] 2010, no

pet.) (“. . . statements that the arbitration panel ‘exceeded its power’ in granting an

award against public policy. . . are statements couched in common law arguments

that do not provide valid grounds for vacatur of the arbitrators’ award.”) (citations

omitted).

As Appellants admit, both Federal Arbitration Act (“FAA”) and Texas

Arbitration Act (“TAA”) apply here. Appellants’ Joint Brief at 13 (“. . . the FAA

and TAA apply concurrently.”). They admit further that “the FAA supplies the

substantive rules of the [confirmation] decision.” Id. at 14. Because the FAA

forecloses common law grounds for vacatur like an award violating public policy,

Appellants’ public policy challenge to the Award must fail. Furthermore, the cases

Appellants cite do not change this analysis because they predated this Court’s

controlling decision in Royce Homes. Compare Royce Homes, 315 S.W.3d 77

(2010), with CVN Group, 95 S.W.3d 234 (2002), Smith v. Gladney, 98 S.W.2d

352 (1936), Goodyear Tire & Rubber, 540 S.W.2d 478 (1976), Lee v. El Paso

54069386.3 - 44 -

County, 965 S.W.2d 668 (1998), Rapid Settlements, 234 S.W.3d 788 (2007), and

Lee v. Daniels & Daniels, 264 S.W.3d 273 (2008).

2. The Award compensates Dr. Bentz for separate injuries and therefore does not grant a double recovery.

Appellants claim that the Award granted Dr. Bentz a double recovery, but a

double recovery only occurs “when a plaintiff obtains more than one recovery for

the same injury.” Waite Hill Services, Inc. v. World Class Metal Works, Inc., 959

S.W.2d 182, 184 (Tex. 1996) (citing Stewart Title Guar. Co. v. Sterling, 822

S.W.2d 1, 7 (Tex. 1991)). The damages recovered by Dr. Bentz are not duplicative

because they compensate Dr. Bentz for separate injuries: the Company’s failure to

pay Dr. Bentz for his membership interest after electing to purchase it and the

Individual Appellants’ wrongful appropriation of Dr. Bentz’s pro rata share of

distributions while Dr. Bentz was still a member of the Company.

Appellants’ argument that Dr. Bentz was awarded distributions twice

ignores the fact that the “Fair Market Value” is the required purchase price for

Dr. Bentz’s membership interest— not a reflection of damages sustained by

Dr. Bentz before the purchase of his membership interest. The purchase price

would be the same whether the Company distributed $0 or $3.6 million between

the expulsion and purchase, because that is what the parties agreed to. See

C.R. 118 at § 4.01 (“At such time as determined by the Executive Committee, Net

Cash Flow…shall be distributed to the Members in proportion to their Sharing

54069386.3 - 45 -

Ratios.”) (emphasis added); see also C.R. 136 (establishing equal sharing ratios of

20.0% per member).

In creating the Company Agreement, the Company and the members had a

number of options to determine what price would be paid to an expelled member

on the date of transfer. They could have agreed that the purchase price would be a

sum certain. They could have agreed that the purchase price would be a multiple

of the profits the Company received in the calendar month preceding the transfer.

They even could have agreed that there would be no purchase price, and that an

expelled member’s interest would simply revert to the Company. But they did not.

Instead, they agreed that the purchase price would be the Fair Market Value as

determined on the last day of the calendar month preceding the month of the

expulsion. C.R. 114 at § 2.05.

By defining the Fair Market Value based on a date preceding expulsion, the

Appellants assumed the risk that the value could increase or decrease dramatically

between the date of expulsion and the date of purchase—or even between the date

of valuation and the date of expulsion. And by allowing a member to remain a

member until the transfer of his membership interest, they agreed that the member

would receive distributions regardless of the extent to which the purchase price

(that is, Fair Market Value) would have been based on an estimate of those

distributions.

54069386.3 - 46 -

Thus, it was not a double recovery for the Arbitrator to award Dr. Bentz the

contractually-mandated purchase price (Fair Market Value) as damages for the

Company’s breach of contract in addition to his contractually-mandated share of

the membership distributions.

D. Even if the Court were to vacate the Award, it could not order the modification that Appellants request.

For the first time on appeal, Appellants request to “vacate” the entire Award,

except for the Arbitrator’s findings that “Dr. Bentz was properly expelled and there

was no breach of the [Company] Agreement by the Appellants.” Appellants’ Joint

Brief at 42. There are three problems with this argument. First, the Arbitrator did

not find that “there was no breach of the [Company] Agreement by the

Appellants.” Id. The Arbitrator instead explicitly found that the Company’s

failure to hold a closing and pay Dr. Bentz by the deadline was a breach of the

Company Agreement. C.R. 1489.

Second, Appellants request—for the first time on appeal—to modify the

Award in a manner that differs from the modification that they requested the trial

court make. See C.R. 1413–44, 1591–94, 1605–23, 1776–80, 1801–07, and 1953–

61. Because Appellants did not present this argument to the trial court, they

waived this argument on appeal. See, e.g., Kline, 874 S.W.2d at 790–91.

Third, Appellants request modification of the Award—not total vacatur—

and the requested modification is impermissible under Texas law.

54069386.3 - 47 -

Section 171.091(a)(2) of the Texas Civil Practice and Remedies Code provides that

“the court shall modify or correct an award if…the arbitrators have made an award

with respect to a matter not submitted to them and the award may be corrected

without affecting the merits of the decision made with respect to the issues that

were submitted….” As previously explained, the Arbitrator only decided matters

submitted to him. This alone renders the requested modification impermissible

under Section 171.091(a)(2).

Additionally, Appellants’ requested modifications to the Award are

impermissible under Section 171.091(a)(2) because modifying the Award would

affect the merits of the Arbitrator’s decision. If a court determines that any portion

of an award is invalid, and the “invalid portion is not severable and distinct so that

the remaining valid part of the award truly expresses the arbitrator’s judgment,”

then “the entire award is void.” City of Waco v. Kelly, 309 S.W.3d 536, 551 (Tex.

2010) (citing Guidry, 327 S.W.2d at 409). If a portion of an award is rejected and

any part of the award is to be maintained, “it is indispensable that the part thus

allowed to stand should appear to be in no way affected by the departure from the

submission.” Guidry, 327 S.W.2d at 409 (quoting McCormick v. Gray, 54 U.S. 26

(1851)).

Here, no portion of the Award was invalid, but if the Court were to decide

otherwise, it would have to vacate the entire Award because the issues determined

54069386.3 - 48 -

by the Arbitrator were not severable or distinct. Dr. Bentz’s expulsion triggered

Appellants’ option to purchase Dr. Bentz’s membership interest and formed the

basis of Appellants’ claim that Dr. Bentz was no longer entitled to distributions, so

these issues are factually and legally intertwined. Thus, the Court’s decision here

is all or nothing; it may vacate the entire Award or let the Award stand. And the

Court should do the latter.

CONCLUSION

For these reasons, Dr. Bentz respectfully requests that the Court deny the

Appellants’ attempt to re-litigate this case, deny the Appellants’ request for

improper modifications to the Award, and affirm the Judgment confirming the

Award.

54069386.3 - 49 -

Dated: July 8, 2015

__/s/ Andrew Price____________ Andrew Price State Bar No. 24002791 andrew.price@nortonrosefulbright.com Rachel Roosth State Bar No. 24074322 rachel.roosth@nortonrosefulbright.com James Hartle State Bar No. 24082164 jim.hartle@nortonrosefulbright.com 1301 McKinney, Suite 5100 Houston, TX 77010-3095 Telephone: (713) 651-5151 Facsimile: (713) 651-5246

Counsel for Appellee Alan Bentz, M.D.

54069386.3 - 50 -

CERTIFICATE OF SERVICE

I hereby certify that this instrument was served upon all counsel of record—

whose information follows—in compliance with Rule 9.5 of the Texas Rules of

Appellate Procedure on July 8, 2015.

Robert A. Plessala Adam M. Looney Andrews Myers, P.C. The Strong Firm, P.C. 3900 Essex, Suite 800 Waterway Plaza One Houston, Texas 77027 1720 Hughes Landing Blvd, Suite 200 The Woodlands, Texas 77380

AND Counsel for Northwest Houston Emergency Specialist Group, PLLC; ESG MD, PLLC; and ESG MLP, LLC Matthew J. Mussalli Law Office of Matthew J. Mussalli, P.C. 2441 High Timbers Drive, Suite 220 The Woodlands, Texas 77380

Counsel for George Davis, MD; Anteneh Roba, MD; Levon Vartanian, MD; and Woodrow Dolino, MD

____/s/ Andrew Price______ Andrew Price

54069386.3 - 51 -

CERTIFICATE OF COMPLIANCE

I hereby certify that this brief complies with the type-volume limitation of

Texas Rule of Appellate Procedure 9.4(i)(2)(D). Appellee’s Brief contains 12,413

words excluding the parts of the brief exempted by Texas Rule of Appellate

Procedure 9.4(i)(1)). This brief was prepared with, and the word count generated

by, Microsoft Word 2010. This brief complies with the typeface requirements of

Texas Rule of Appellate Procedure 9.4(e) and the type style requirements of Texas

Rule of Appellate Procedure 9.4(e) because it uses a proportionally-spaced

typeface using Microsoft word in 14-point Times New Roman font.

________/s/ Andrew Price____ Andrew Price

54069386.3 - 52 -

APPENDIX 1

CO-..PANY AGREEMENT of NORllfWeST HOUSTON EMERGENCY SPECIAUSTS GROUP, P.LLC

A Texas Profuslonal Umitod Unblllty Company

Tht6 COMPANY AGqEEMENT of NORTHVVEST HOVS fON EMERGENCY SPECIALISTS GROUP P L L C (this •Agroem011r), dated as of JutJ 5. 200e (lho '["(fc>Qtvo O~o). 1$ (a) utlopl ·d by tho ~nagors (as d fined In SectiOn 5 01) and (b) executed and agtGed to for QOOO 81\d va!uob!o ooosideraoon, by the t,tembera (as del'ned 10 Section 2 01 )

Artkle 1 Org;,nizat.ion

I 01 ForrrwtiOfl NORTHWEST HOUSTON EMERGENCY SPECW.ISTS GROUP, P L t. C. (the "Company") h&a boen organ~Zod as a Texas profess10nnl hmtl&d llablhty company by tho hllng of a Cortlflcote of r ormotlon (the "Certificate") under and pursuant to the ToxHt' But~irlc~s OfgMizntlons Code (as omondod from 1lm~ to tin1tt. too "TBOC1 and lhe lr.suance of a cort1ficntc of flllnu 1(>1' U.u CompAny by lh& Sooreli!ry of State of Texas.

1 02 Name. lhe name of the Company i:o NORTHWST H OUSTON E.MERGENCY SPECIALISTS GROUP P . L C ond all Company buw-ess mu:;t bo conducted ,.. that nJme or $uCh olher n:Jmes that may be seloctod by the Exewtrve Comm neo (as dehnOd 1n St'ICI<>n ~ 0 1l and that comply 'Mth ppl bfit law.

1 03. Rt.tgr$ttNGd O.'f;w: RogiSl6f'8d A{llt:nl. Off/CO$ The regtslorec Olftee and rogtslorctd agent of tho Company in tho Stlal of Teli.aS sha l oe as 5pocafiod '" lho eert.r.cate or .tsde~hld by thu E)r.OQihve Commltzeo in tho manner provided by apphcabte law. Tho off!Oe$ of the Ccmp;.,my 61\811 bo at 5uch plaoc:t es the E~UKutwe Coi'JUTI4tt9e may dostgnalu. nhlch need not be W'l tho Stato Of TOdS

1 04. Purpose TI1~ purposes ol the Ccmpany are to provtdo und rMnnge ph~lclon and modteal $OMces and all other purpo$0$ under the Cetltf.ea:e or the TBOC forwh1ch profo"sionotl ltmttcd hatX ty ocmposl'• may be fonned.

t OS. FOfe'9Jl OualtfJcst1011 Pr.or to tnc Comp:~ny's conducttng buSII\eSs in anyJurisdiCiion othor tnao Toxas. lht: Exc:culive Comm:.nee shall cauu tho Comp:my to comply With all ntqu~r\ln~nts necessary to qua tfy lho Comp:lt'y ~ a foretgn kmtted habillty company '" th,Jl JUN;dtction 1.06 Term Tho Company oommencod on tho dote tho Secretaty of Stale of Texas ts.suod a oortiflcalo of flh~ for ll•u Company a.nd shall conooue in oxestonoo ror tho periO<.I nxoo hl tho Corttficote for the duration of tho Comp;my, or l'luch eartlf:.r tmo as lhls Agroomonl rm1y specify.

1.07 No StOUJ•LIJw Portnarshlp. The Members lntond thot tho Co:np<lrlY no1 tJo o partnership (Including o llmttod po~r1ncrshlp) or ioint venture, and that no Mombcror M<Jn<tgor bo 1'1 partn~r or JO nt venturer of anyolhef Member or tvlanager, for <.~ny purposes other than applicable tax laws ond tnrs Aorc<:ment""' 'I rot be construe<:! to suggest othe!Wt$0

0 11 QO I ~1·3 f.'XIlln iT .\

113

Attlole 2 Memborsh p Dispositions of lnterost5

2 01 M mi>Of'3' Srnmng RliiJOS: Vot,ng Rlgfll$

r

(a) MombVr$ Thu ntCmbt:rs of ll"'c Company AfctmOcrs1 ate the incWIOuats ex.oeutmg liU 1\gr~~• 88 ot ltle dato hereof aa momoors and each perGOn thnt , horc3ner oom noo to tho Comp· ny o "' mcmoer .n a(OO(danoe With thl! Agreemenl, proVIded that. In accordonco with aecuon 30' 004 o' tho TBOC. each Member adrr?.tcd hc~r und herc~fler Is o ph)'5i=n ltwo t:d oo dUly quahlieO to p(()Yide medK:SI seMc:es l'ltho Sta~ of Texas and an aulhonzod penon, as such term" t.~d soc;t,;on 301 0~ o' :he TBOC (•AulhMZed PersM•) If a Member $IW" have mode e Of!poslbiOn of ell or any portJon of 1ts MGmborsh•P lnl~t but shoal! IIU rotalnucJ a.ryy ~hts th0fC111, then sol· wtlh respeet te ~ Membei'SI\9 lnt•raat (or poruon lt1efoof) ao d sposed, ell remrenoos 10 W.ombor" that appear ir1 Mete 4 ones Soct()C\ 8 O?{b) h 11 be d...~ ad to refer lo l'ho l:>!ll!'Jr'ICo of suCh Menlbctshjp Interest The Members collectJY-orl shaH bo roforrod to s the 'Croup •

(b) Shoring RollO$ Tho Slwdng Hnllo Qf eacl\ tnlllsl Mombar (eoch a 'FOt1nd11,9 Mom/Jar'

and ~«lv~Uy U'a " rOI.III.fiJJ?O Members'} 6s set fonh Of\ Exhibit A.

(c) Votl..rtg Highr~ fho Founding Members shall oach (I) 1>0 unt1tl<:d 10 v<>!o And (IIJ 11:1\00 o voting lntoro:;t oqvul to tho rQtrO ot such Member's Sh8rfl9 RatiO to olllho t\1 mbcrr.' onllllcd &o vote Sllonng Rai.IOS ("Votmg ShOnn,g Ro110s1 All olhc; Member!$ e<ttMied to ~ C-ouo shall De nonvohng M umb(:r:. nd st-a not be en:;Ued to YOte Of1MY mat peru.~ to Ulc: Con'():)lty, rndutl•r.g v. hOUlllmstaUon, those ~Nitcra rctettno to fund~mertsl bo!irleSs transacuens afld amondmonts to lho Ccrl.i ate, as speor.eo il'l&eet.on 101 356(c)ard {d) or the IBOC . ur1bl such Memb!!r I& glveo me nghlto voto by tho unnrumous oon!:ent of lhE Execullve Convr11ttoo

2 02 O:~PO.<t.rltotJ~ ot Monibersh.'P Jntei6Sls. A Wombor may no• Ol:lKC n sale. esslgnm fll, uan..ler, conveyance. gift. ox change orotl\el cf.sposwon (tr'OLnarily, tnvo~unt.ariy. or b)' ~bon or roi IIJYI) pt)SfllfJtt•) O( II 01 ony poruoo oj its ng.ht.s or iriiCf(.ljl lht.: Com:>Jn~ ("M9mlJurSI11D lnt9ro.s!"'l. ex~1 1n acoord~neu \YIIh the proviSO'IS 01 ttvs Agroomonl

2.03 Ol$po$!tton by • Milmber. In tne event a "-to~r ,h,,n 0 po~ of rry ul such MemDer's lntere$1. fOf On) roawn whaltoevd' toeny pert...on or ont.ty Who rs not alroed)l a l,lombcr 1the ltmo of 1~ 06poSlliOn, then (a) tNt tJansferoe or such "''~'e" h<:a be al' sstgnt!d ol such terest '" o~nco With lt·o TBOC, provided !hat s...ch ass'ljln a an AUlh~nl:Cd Pci'!>On •n ecorcsance tth sectJoo 301 009 of lho TBOC. but sh nnot be .. Murnbet un;ess a"'d until &J~Pro~~,., adlll!ltod to lh(: Coml)llny s Ot~ided $n Sec:~on 2.10 of lrl&S Ag'Mment: Md (b) he ComP~JnY uud lhe t,tembofs sha hove tho f19111$ Ond opllol'l$ ~r~aded rOt In lhl' AttlcM 2

2 04 VolmH<lry ~'os•tffJtl At any time followmg tho th1rd anl'\lvcrGary dato of o M~smbur bulng admitted ~ the Compnny or upon thu tcrfiPII\IlU04'1 or ces,atlon or 8 Mombor's right to practlco mediCine ac tho Houston Nonhwest l\4edica.l Center hospital In l k>u&ton I t1xttS (lht' · I IO.'IJ)trfl{ ) o Mom bar muy llan10fUt' hi~ rmmb()nshlp lnlhrest upon the U11Gnmoua W01l0fl consent o#lho l?lCoovthro Comrmuoe and '" accordanco wtlh this Article 2 In ltiu e"Yent ooy t.tambor tine • rransfomn-:J h~mbct ) dusrtes to O.sposo of a.ny of such Merrber'sl\t.arnbcrshlp h\ICte ,,., (C()tcJ.mco v.tth Ill& prooodulg &OntGf\00, Jueh Mornbet shal. by wtttten notliCe llhe ·offonng Notn:o•) gr..,.n o lt1e Company and to each othef Membor oncr cxdU$rveJy "'d lnt:vocably to ~II aD lha Member~ lnlcrt;:.l $,Jeh Membef des1rea to Dispose of to U\8 Company and tho ottlor Mcmoors Thti notict: ahaM1tato (a) a de~plion of lhC r.tembeP..h•P ~e~ des..re<J to be 01Spo&ed of. ancllhe amount of

114

the Stwmg RollO bcrng ol'"''"d fOC' S3k1 (b) the~ (lhe 'Otr&ll){} Pri.."8') and O"'-."f terms uPOn ~Nhlch that Membe• d~rrcs\0 DISpose of lll9 M6m.bef&hp ntotal (PfO~JidCd l · 111 thOro 110 or only nomln I eorn;idun;tiOn lor tne O~on 11\e Off~ng Price deemeo \o be tho Fair I.lor...at Va"'- (as hmMr.aftor def ned) of the Mem~hio lnlt:r\:."1 tlutctm•ned In llcx:ct040C'e ttl S«t!On 2 09 ht:h!ln) (c) the amoUf'll&nd natt.e of MIY IJens or encumtnnc:a:; oaa rm!Nt nlOfUI. (d) ~!hot tho I Mcmbor .a n dcfaiAt I.W'Oer any ()'O'<IrsJon llll AgrtNmenl, and so, LM nalutu of the def3ull.to)tn!! eddrouat "~ 110\loecan begwefl, snd (0 II n~lf ~lUlu~ ol U.., '>U'~ olher lt't<ln Member¥ to Y.'N>m Che '·' rr.betsh'P L'l!~l v.'ill be sold n the ev.1t ne~ther tho Company nor the IAembefs elect to buy 11 Tha Coml)3ny a~ the "''ctt'.Oetl h. Ill•" 1 •o, urrd• r ttl Soct101l2 04 II at a \\ hln U lime and 10 trl2 manner pro~ •n Sot!1001 2.07 throun 2 09 herern fall tho ~'P lniOI0$1 ~Ito be O.:sl'()Sed of l.ttlder tills Sccben 2 04 (Of' unaer Section 2 08 bt:IO\\) ts not so pord\ased b'J tne COf!Wfli' or the olho1 ~~be~. tho Tronsfarnng r.tombot may 0i:..pQS4J or &he Mt:·nb<tt'Shlp ~rest so offered f0111!le heroul'l(fer (but notlaA INn all) to any person named In 1118 Offonng No!leo gn1en itI tho ~arnu pnco and upon 1t1e terms o• ' luted In U'CJ Olh.:u11g Notee upon Ole unsrunous \\ntten consent or lt'8 E.\oc:ut ivo Comm. :t uv.tueh may be wtthhold 1n tho solo di$Clction ollhc E.xi)(:IUIJ'Ie Cornrll' Uce, provldod that 1 otthor (t) tho Metflbeltll p lniOfOSI has not been OnaJiy SO diSposed()( \\1thrn 45 dtl)'l otlur lht dota 1)0 \ hlch IM opllonr. horoundor Ol<prrcd. ond lMI pm1y sun desires to O•apo!IO of any or tho Momoornhlp lrt4orosl. or (11)\ltol partywfshoa tu Dtaposo of an)' of tho Mum~rohlp 1ntorost at a IJfloe to~er than. endloron torm't dtfroront lhtm, Ultdlor too person different than, that slatod In lito Oflarfno Nolkh~ fhunh• .1ny •uch o~;·ent , tho l mnr.fooin9 Mombor mu~l Clr111 offer lhe Members hlp fntcroat to the Componv clfltf thu Mcnnburt. " \hO manner provided tn tt'..s ArtiCle 2

2 05 ~th fK E•puiSJOfl of o r..~mtJcr rn a.,~ u~nl ot lho oatil 01 u Memocr or 1no oxpt.dsroo of OJ M<:tnbCJr from the Group I)".J.rsuam 10 See11on 2 1!I or lh~ Agroomuot dU1'1ng " puriotJ of t80 day. (unle&atho time period is 'US'Pended ~ pr()VIdud 1'\ Sec:tion 2.09 hC0111oln) roUo~w~ng ttlc quahr~C<~bon of the P'-"'oMI r-:QJ.antawe ol su~ decca$od '.1crnbcr an lt'.o as ...o o! lhe death of o Member or 180 days rof!Oo,.rng ll u o~pu1$10n of a P.,'.embef, the Compeny aod tho o r Members h:ln havct nn OC'bOn (but not an obligation) to ~~o not lno Merr.be.rlhk> tntenm o.med bt such decca od Of c_l(pcll•d Mombur at the tim!! of such Msrnbola do..-alh Of expo· ~n ftllh r:a-7 1.1. rto:etValuo delorm•nod uof li'olcntd;;ayof trt.:ealendarmon:h pll!CI!!Cngthedalo ollhoC®Ihor expu!s.Of' ol $Uch Mu·niJcr. l ho Company and :he o:h6r Mcmbtt's ~II elUlrOISe lhetr opl under UIIS Section 2 05. I at al Wl' lhu IOtt:QOII'IQ 18tklay periOd n ltiC rno.nncr ~ided 10 SoetQns .2 07 1111uugl\ 2 OlJ I'W!te•n

2 06 EnaJf71bnlnce,lmiolunl;.ty Olspa!.A/JOII AA'f lMJ)OSilJotl of a Mambefsh p lnlCJV$1 (u)

pu,UI'Iolt.o n plt:dga, mortg8ge, or other encunbf'a"'CC of 1 Mt:r'Obenlh p lrterl!sl granted by a Member to liocure ad~bl at O:hor obhgauon 'b) purs-~ot to a bankruotcy Of Jn~l~ :KY oto~lftO or u Mombe.r. (c) pursuant lo i'u<fc:iol crcJar I~ I P~!. ~>'<;CUlton or ouechtne.l't or ~a) any ot.hCr •nvotuntary OtliP<)!lllll:lll not OlhOM't!le provided for nere•n shall bo sub)oc11o lho r u:stncllon:. a.utlor1h In ll'lls Agroomonl. and In orty such o~lll~ party demanding tho OaSI'IO&tllon sho'l bo rGQUIIOd to olftJCt !luoh Otsposlllon In 1.1coordanoa With tho proviPOn; of Sot1iou 2.04 ~!l II !uch party wore a 1 ra nsfomng MomiJcr (wilh lhu otrorlng Prv.:e to oe the Fslr Ma~ol Valuo ollho Mcmbon~h•JIInlurust datorrrunoCJ In aacordanco w.tl1 Soo6on 2 09 herem); nnd lo sucn caRo tho Oftedng Nollw t~llHII 'PUOiry nn ttd<!rclf. u l INI pnny demanding lt1e Disposition lor nolx:c, md othur tonlr1'11111IC:liiOt•!l he~undor

2 07 OpliOfl¥ to Company snCI Membei'S. The Co!Tioany•holl c,cetc~ o ·I~ OP\i011la umJe1 th•~> Article 2, II et•ll by nr.omg wniiM notice (s ~Response Noltce•) to tho Trans'errlng Mombor or other tnu\storor v.ittun the 30 oaya after I'CC£fPI otii'JC Oflt:finO Nollot; os to wt\el! r too Comp9ny OKIOCOQ to pun:tw· u -'~ Or any part ot tile Mem!M:!I1>tlop lntQreS1 &Ough~ 1o be dispcnee of, I lllu

115

ComP3ny does 001eled 10 purmase 811 of such Membership lnteroat. the Company 5hallgt'io to ad\ of he other Member$ oopy of 11 .e Ofterir.g NotiCe and Its Rtss.POnse Notice, arld each of the olhef Merr.bers &hall, WIIIM 30 day5 after tne ~;pt of l."'e RespotlSO No1100 rrom 1t1o C«t1rnany, gn.c a R..:~pOil$e 1\'0hoe 10 the Compsny as !0 "ht:!her sl.l1:t\Membef utoc::a 10 purttl3SO any ot suCil •,4ambership lnte'95! not to be purc:Msod by CI1U Compaoy The Comp~tny eMil g:v~: ,, cop~ otlh:ll Respot~e NotiCe to l.ha 1ransferrlng Member or other transferor ond each otharMor'I\DOr ...,flo a~ gYve an C~ffiru ~CtiJ''V Rc~f,lu u:.o NUll~ I' n!Qfe th~n on~ t.l\lrrlllur tftldt> to purct<i~•: sou o11ht: Offered Memb3rst'1) lntorest 111h be atlocatt>j among lt'O ~Mbcrs v-ho dcslfo to ou•ch3:~rt 11 t the "Purclln$.!/lp McmbcrY') rn such proporoons a they msy agree u~ or in th9 absence of suet~ agrooroont, pro rata occ:oro~ to tho rctatJvc Sh~ Ra·~s then llUid btlho Pun:hurng M ~

2 08 P.ymcnt ol Pvre/l..'l$fl Price· D¢!.1very Df lns.!n.unents of Conveyancil. The MambeBt\p ln:erest \lftliCh ~ected to be pun:tlased uodor this M id<S 2 :oholol oo oard ror I ~ . held on ::a ~:nun day not m<Ye trsn 3-) asys after lhe me f« o'oet~ng 10 purchale the Interest lapses all in cash Of by ca~(s chocl: or on thO other I •rT'flt $1J11Dd ltl UWl Oltunng No liCe AI t~o elo.,mg too solttng party !h3J delt\ler Instruments of oonvoyanco and ass•gnmont of 0 " appropriate amount of 1M Mombonohtp fnlt.lrest po.Jrdla~ed by the Company and/or tha Purcha~ "9 MOll\bur!. anCI In proper 1orm for transfer orall such lntorost froo D~ ~~~r or all .;;ocUIIIY lrlletn!lftl, lions, clnima, onavtn i.Jr~mcu~ ond ~Xru tleg ()f every kl lld ()Iher Ihem lho mortt)a~O tnne tl tnunon-; encumbertng the Company's proporly; and the puroM~r~ sholl phy tho pUi ch3se prtce aoo oolil!ur nny notr::• ond OO<:Urfty agreements reqw ed un.der the olfor Tho sclhn~ p<Jrty ::;hnll p,ty nil expenses and chargu of lhc tro~for or the .nterest. except thollhe parties shall pay rf1o own uttorr'\Uy$' tees Alty r.temborahlp loterest DISJ)O!!ed of under thts At•rc'o '2 ..har1 f\."tnlltn SUU",A:CI to a · the PIOVIStOns of this Agrccm~:l\1

:rho Coml)tloy ouUiOrtzud 10 deduct. or have deductea end Wilhhcld rrcm tho nrTJOOO' d Jfl the selljng psrty at tho cJos ng lho amount or :ny dt:bt 01 olhef ob ~gabOn (plus any inte;w;t dv lltoroon) llltlll o~ honl the ~ peny.

2 09. Prtee of Momb!Jrsh;p ln.1CITJst The pnce of a M6rnbersh p &Net est ui"''Jet SectiOn 2 04 shall bo tho Otrenno Pr1Co s lnted oc determtneo in acc::oroanco Vllln SOction 2 04. Fot ul olttef Oisposllons, lhe pnco of a Motnbon>htp lnl~r&st tor pw~X>'BS o l tMt An tela 2 ShaD DO ll'lo ~.air mnr..r.t vtJiuc llhu •Ftu M.wStet Vs.'u~n of such Memt>erEJ-W.p nt~l. <lS follows

(a) Fa!r M<not Vatuo or any Mcmbelst:ip ~nle-c:St tno pnce on lhe data spec?.iod In the oppheoblo section or INs Aft ida 2 on which tnal ~IT'barohtD lnlcrosl whictl is being oiTuruO by ltM: ~~ wou\d ctlango hoods berv. en a ,nrng b~o.yer anc: a wrll.ng seller, ne !her bemg undor ony oompu IOf\ 10 i!XIy or co set and b«h haWlg rsasonablc k,on«odgu of reitw..Lnt r~~s. Including Ytithout ~mllalioo, lhtJI me:mberahlp ·~ reslnCXed ~ ~od Persons

(b) E.Koepl lor a Otspostllon under Saellen 2 04 heratn when vndur ony 1)(0\li~lon of ~ Arbela 2 an Offoring Notloo lt; ruqutKod, aha party StJbmatllllg anal Offoring Nolloo &hOII sl<llo ••n oplt1101l as to tile Fa., Markol VeiLJo of the Mombttnship lnlfJrot t being to offered. tll,hero Is any dl&puto 03 to lllo r:atr Markel Value of any Membership tnterust , thul dh;pulu l:lltu lH.1 ~~;~Qivu(l pureuont to the dlsputa rtJGOitHIIOn ptOc:OOurE: s 11s set forth In Arllclo 9 hereor. Upon tho glvlo9 of noltoo by ally pany 10 a I other par1tos lo 1t1e Oisposllton ol 11\0 Mombt'M::t'kp lrtluruttt o~o to me OXI'llonco of lhOJt dt$ptJI~, Ihe l m" ltmlt9 speonao 'or Response Nol•tcfi, Closings. and olhur rool101.1:1 requ red tn th1s Agroomor\1. sholl be <IIU$f)(llld~ W\llo lh31 d·~Pulu rctol~ed under l.he procod .1101 outlined 1n Attlcle 9

(e) Not\\ lhstandeflJ an~h,ng ~ co the eonuary, Fer 1ar1let Va!U'l ol ooy

116

Mt:rr.betat p lnu:resl te de1ermned on It"~ basts that 1'0 "ldMdua or t'l'\llty O"'f\11\9 that M ~P tniOte$1 Nls \~ ' 'Dhlto Yi••hdr.;.v ·~ Mc::mbe4hiP lr, a:te• I from the Mc:mbt!r:hl) o: cause me Membor5hip 10 temMale and q.Ddate be"ore the end of tho tenn or tho Corrpany Tllflt :ort: f1lO r- lr f,1&1(t!t Voloe cf My fl~mbelsnlp fntc:·esl &hal be de!ermin~ UNSer 1 a"u:np\IOn thnl Ch only dl$1iibuliOOS lh91 " be made 10 lht; owner olll1ill t.tumbt·rShiJ) lnto•t ~ WIU be tnat M&mbetahtp lntero,l'l proportJoos:e Share of lne cash d&s:n<i\ltiOns of tha Merobel'5hip "-tl•tn •uu dllib lbi.JI~ bJ II • Mu ~tbullli ''""" tu11u lo l••f'll::~ ll'rc1tMI:Jr~u;.t~ lnltttuSt'S ptOJ)IXIIt)!l;J' st..ar of tho pro~~ of tho Mot"''bonhp whml ltle Company lom!lnatOI

2.10 Pn:oroquiMos to 8ccorJ'JIIlg 11n AssigtiCO or • Subst.~vtCid l,',.rr.Jx;s. No pet on not :lre::ldye ~4ert·bc!r 5h:lll become 1 subst.fut.ed Me;nbE1'w lho'"t the Pf\O"UNlntmoU3 \ltntlon consent or tho Elowt \'C Comm t:co ~tidl rn;ay be ..,. •llh~JW '" the sole d~c:lion ot the e~ceuu·.u Co""-nttee. bOt lne lonna of 1M At"Jdo! 2 snail S!)J)It 10 en ass.gnoo tho ssaigl'tle o o a Mombor. No ~po~•IIOt\ o tul or tilly p:ut of a ..,embt:rshr? lnk:re:.t snu be: ~11-&eirw. or llha,fl9 upon tr.e Mombets unc i UlO Momben. have raOBived wntten nottce ll'lorool and oii!Jlo prov~Sr~ of this Agrocruonl nnv~: bf:en sat I~ II lhe transfer Is to a person other than a person who Is a Mombor boforo tho tronsfor, thon, os o conditien lo rocogn ting tho tm"ttfmoc ~tun 1\ slun,•ct, lhu Members snail nave toe ngtll to require mat any or.all of the f~ owing roqutromonls be 11<11lsf1od. (a) Cho prowlion ol o'll lfJar~.<:u thut Ulet Dlc po~llloo w111 r.o t be or ra&tdl In a 'lfolotlor' or any federoJ. !lllfte or olhorgovammentolllrH or rogv lion·, (b) ttv:t execution and doltvory to lho Momhor$ by Ihe• llfllllng porly oM ~~~ lron$fflttle of olllr~tl\.me n ts which lhe Members deom raosonobly ~sao~uy, 111 fom1 solt5 4act0f)l to tho Mombors. (o) tho i)aymcnt"' r>tfvcaoce to U~ Compuny or uny cot>I& or t::lt~Mt~ .. conrltt!'C!Mi v.1:n tie a.o;algnmont or otner d~posttioo Of assuroncos from the P'Jrtha•or of such nloro:.t lhol t•X)Su ·•·nounts will btJ p od .aI Utt~ 1.1na t'le sate ctos.ecS.: (d) ottutanee that tho person to whom tho assign'non' Ot olhor dispos lian Is lobe wade It Wllling no ublo to ~rlofm fill ol 1111: 5Cll•nQ l'l}r'!y's ol1••uu or'' Uti«Je.r lh.:s AgreerrenliS an .A1Jt:"o'1zad Pee-son o•"' ,.. not ~noo tcnl Notwithstanding the aatl5feetlon of the foregoJng requlremonta. :.ny Di•poaiUon of :1 Membel'lhlp lnteraat ehall be offoctive only to give the 4.SSfgnea U\O fight to teeei~Ht the share of profita to whk:.h tn. assignor would otherwise be entitled end ahall not raflovo s uch oulgfl1)( from any llabUny or obllgatJon under any provisioM or thl1 Agrnmont or gtvo •uc:h assignee the rtght to becom. a svb81itutcd Morobor. vnlo . .s and until such assignee m expreuly •dmitted to lhe Company by the Exeeutlve Committee as provided above . Tho b'--cu\lv~ Comrr .r.ee may grant or ~Mhold such adm~•on ., th ;.e,lo o Clc' ot or 1 [ ' t:CU!IVO Con•m•ttco EOeh Momt:et undcrs!Jinds and agrees ·nat 1M reqwomentsand ~:n:tJcns c:ont..Mlod In this A.rt)Qo 2 an! I'Ba$0N)blo end oboolulott cS5Ctlti<ll VI order co w:-.: I the porpose fcx 't'tfllch lh Contp ll)' ~s lormad shnll be csmed out and to assura lhal no Pt~rJOn ot);)ln iP'I Iottrrmt in thiJ COiflporr, .... hcne mo-!•ili: • met •ions or obJect.ves are lncon.sGtent w11h lhos& of th oog•M Members

2 , 1 Clwlion or Addt1iont'll ft.4<.-m/){,.~ fMit/(lsts Addr~OMI M~ltnbel'll'".p ante~ mot bO Cfd:tled and lbsued to emtJng Members o; to other parsons pro·m~od thut :such I)CtrtOfl 15 o .AulhOrltod Pur~n. 1111d wch o ttl~ Persons ma~ be sdmlt1ed to the Company o& Mombt>rs upon tho unanimous written oonscnl of lito B<ocutivo Comroltteo, en 1NOI1 Iorn1t~ llf\d cottdlh~, ut1d with :1u<:h Soorng Ra11os, as Jhe E'l<ocuU\'e Committee maydetonnino attho Ume ofedmisu!oo provided Htal or. tl con<lfllon pnJC<X.IUnl to Jt)o lldmis.~l01'1 o1 s new Memoor lo the Company, such now Member mual o>eocuto o Jo-ndo• ogrcamont (tn a form pcomulgtttod I.Jy tltu F..xoCtJII•m COmmllluuJ 10 lhl':l AgreE>tncnt agrllelng to bo bound by the terms and conditions of 11\11 Agrcc-nonl Tho E;4 utvo Commtttoo may rufl<·~ the odn-u:.!>IQI'I of any ne\Y '-'embet1l etlhe c.:testiCJf\ ol any tl::.v ~~ ot group of Merrbcrs m an omeodmant to Uti$ Agroorr.cot lh<Jt ~ be eAecu!Od onty bv 11\e Ext:CtiiM: C()mm•ll!.-e Each adm t'Eid Membef shall be reqwreo 10 s.gn a coon:orpan 10 this Agrocm,nt or a jorndCH OV80fft!!nl d lo•m~nod br lho Exca.1ivc:Comrn•:t~. 3:.> o Ctlnd :.on to ldN II neo AS A

117

CONDmON TO ADMIITANCE, EACH ADMrrTED MEMBER, EXCEPT FOR THE FOUNDING MEMBERS, HEREBY AOR£ES THAT SUCH AOMfTTED MEMBER SHALL BE A NON·VOn NG MEMBER WfTH NO VOTING RIGHTS HEREltf OR PURSUANT TO THE TBOC. AHD SUCH ADMilTEO MEMBER HEREBY WAIVES THE PROVISIONS OF THE TBOC THAT WOULD OTHERWISE GRANT SUCH MEMBER VOTlHG RIGHTS IN TliE COMPANY, INCLUDING, WlT HOUT LIMITATION, THOSE PROVISIONS IN SECTlON 101 356 OF ntE TBOC

2. 12 WdhM""JW rt Su~ 10 ~ h.i~ ne eoocf ~.on: or Sect.on 2 04 • *-!ember do<!5 not have the ng"t or PO'"' r to ,..,,tn:Jfllw from the Company until ortor tho !Nrd arrr.ivvi"Mry of 5Uch M<l~r diTIIIbnce it\to tne Contpony.

2.13 lnformat,on In ndd.uon co the olhet rtghts "SpeetfiCally sat fortn In thts .Agreement, aach Mombcr onc:t uach 1 11JOOO is Ul'llitled 11:1 ~1 -mem'\alco to v.ntcn lhal Member() Assignee es enuUed o have accoss pursua~~1 to secboos 3 153 and 101 SOl of lno TBOC under tha cucu~N;l3~~ ul'd $ub{cello u~ conditions Uleretn stated

?..14 I J(JtJtt.ty to rflitTJ Psrtlas. No Memoer or Manager snoll be habo for tho debts ob tgobons or llnbllillut: ol thv Comp;_lny lri<:ludlng und~:~r u •l)l)gtftlffll deC:h!o Of old or ol a COIJI\

2,15 Et1Jult~·lol1 1\ r oundtng ~mber may nol be expellod from the Company, oxoop1 for Couse (u horelneflar dofined) as unan•mously dOotormrllcd by lho F.xac::ulNo Cor'l1!'nllluu (uAciUdiiiiJ th-: Moltlober ~~ eomld<t'ed for expt.JtSion). For purposes of this Agt'Mmont 1hc toon CoU$o' moons (i) ttw gros.s ne019'nco ex Wlltf~ mi~conel.ld of a •AU~ o~ \tO:uwnouS:)• detemwtod by tho ~xecuu~u Coml1l!ttee (ex.c:lud.ng the Member being constdored for expul:olon), (ii) t1 bro11ctt by n Member of 11ny of lho CIO\IOntl'\tS set fuM .n SeCtiOn 2 16 or Artide 10 o• this Agreement as un:m,mousty determined by tho EAec:ub¥'8 Co.-mn1!98 [exclud•no \N Membur bci~ oonJidered fot oxpvts oo) ~~~ that s10eh Mamoor has been Q.\'en \\'"ttef'l rotJco aoec f~1ng In~ dot:> 11'\e natt.ra of the bf'8Kh and fn·l5 to o,;~ wch orc:act• ~<·'fl•n ttl\ny (30) da)-s o4 tec..efp1 ol suo:h nuiJc (rl) n the event such Member's medical tiocnse w.lh 11\c $~11! or TclCfiS •voked $U$poodod, turmmntlld lapsed restricted or relnqutS.Iled 0' sudl Momber •s ~ISO no to r dUii C:O hfeel to prollid mMGI "''JMCOS 1111.M ~"ale of Texa. , (IV) •I'll~ 6v I U MernDO(S 11ghJ It: pmclicu n~oe au !he llosp!Ullb ~~d or revoked, or tv) ifl me cwonl Mornbcr COil'i'ic:l of a felony or • cntntnill oil~; rtt. h:d 10 h~t·., t.3fc or OU~'i'fll~ All other .1embets may be expelled from lhe Company Will\ ar _..,thou; Cause as dolcnnincd by 1.1 ·mtl'" en!.:Jt;d to ~~ o.,n•l'g ~~ perco•1 (60~) or more or the Voilng ShsMg Rat~:Js .

2.16. Conlid ntUIJ•tyoftnformstiOn Escll Mem:lens ontlllod to I fetm loon undo# lllo tircumarancos and SubJO<OI lo lllo oondr~ ~:!=dIn It'-s Agreemef'lt&r'ld the TBOC The Membef5 ogrce ho.,evcr. that the ExocutJ..'e Commiltoo may dolomuno. tJue to COI'Itruclual Obtg !Ions buslno:n oon~m~. or olhtJr COMida:iillons,lh.at certain lnfonnet10n rogarutng Ina bu4moss. eflolf'lo property. and ftnanoal coodrllon of tho Company shall bo kep' oof)(ldcnt!a.l ond not provided to t.ome o r 1111 o•.hcJr nono~tolf(l9 Mcmbarr. and that it fs notjU:StO( reasonst>'o for thoGo now.'O!i11q Mombctt. or OGIIISJnOOU or ropruu<mtollvtl.:. 10 c.txo~ or OOfYY 1na1lntom1ahoo Econ Mom~racknowledgos that ho may rocohto llllomwllan rugortling tho Company in tho noturo or tfOOtt utre1s 0 1 thm othtlrwt~ 1:. oo"rldonl'-''· th~ reti:a!le nr y,t\ch cnay be damagJng to the C001pony or persons wllh v.hh;h II doos bu&lnosl Each Mombor ''"'" hold in $tr1ct ooor.oenoo ~ny intorm:lllon It fecuNOS ff:gBidlng IN! Company t'l!ti.S ldontlfled os bctng oonfideottal (and if that~nformnt1on :s prov1dcd ~" w11t~ 11\ot '" sam r od)und nnt~ not d :desu It lo anyper!I.Onct'ler:hananothcr Membc!t. OXCClPI fordlsdosuro& (a) ooi'T\PG'IIod by lOIN Ibut the Mombel must notify llle Exfieuhv6 COfrtm•ll prootpll)lof eny roqu1.1~ rof lhallnrormallon bl.lloro 04ckls.ng •t.. If prac'.x:able). (b) to advil011i or roprc.; !alive$ or lho ~.~ 01 oo:Slg'na(.-s of UlG Mem • bo..l only •f ~ley have agreed to bo botnd by the pro·.. ons of

118

lt\13 soction. or (c) of lnformat on lNl Member ~'$0 has receNed from a source Independent of tho Co-npcny INti the Aember reasonably be&eves cb:arned that IOf1TI3tJOn wl!hovt br ch of any obl•galion of conftdcnt1ot ty The P\1 mbetS ae)(nc-.-Jedge :hat breach of ltlo prooa10ns olln&S soc tort nuy cau!e parable iriu!Y tc tho Con,pany for which mcntl;)ry d m.'lgH arc 1 d lu. dtt1tcult to compu • or both Accordingly tne \1ell'.bers agree that the proviSions of tht$ 1oclion may b • en'oroed by &pcdfc porfcxmo~ a~ bY the expulsiOn of such Aember from the Company

2 17. Moml>Or Rt;qiWOmeniS. EaCh Member Sl\:81 be teqwred to pt'O\ide medical SOMCOS at the Hospital for a minunum of 4Mflhl (8) sh10s per eet::t ~,month 01 as otherwl$1) dOtertn~lled by tho E.Jti'ICUlfllu Com '' (lhe "IA•n•mum Monthly Comm.tmonr) If • Mcmbor rs unnblc to moot the t.' um Month yCom!1\Mler'IL then the E.xecutiv~ Cotr •mtlc-e shall have the nghtiO odJustaoo pro-rule ~'UGh Member's ~the Otnef Memoer'sShaong Ra·o n 'hom oncr cf larm,nOd by the ~OCUIJYO Commtlloe

Article 3 Capital Contributions

3 0I lrrlti:JI Conlrlbull'ons. Contem porar.eou~with thu OMIWiiOn t>y such 1\'ember of U"44S 1\groomonL oooh Mombor ~tlol1 rn:lk(l lha contnbullone to tho capitol of tho Company ("C•tP#Iill Contribv/10n~) do:son bod lor !hal Member 1n Exh[blt A.

3 0~. Sub..'feqUftlll Contllbutlons No member sht~ll b4: required to contnbu&a odd tJonal capital to the Company

3 03. Rutum o1 COflflll)ufJOI)$. A Metnber IS not ont1tlcd to the rerum or ani' p n ol ts C.p•Utl Contnboltons or to be poid intet~st 1'1 respect of e.ther 115 capita eccor.mt Of tt .. C&P•Lll Conlribulion'\ An unrepaid CaPital Con\ributon IS no· a h.\bU ty or~ C()mpanforor any .1omtcf A Murr.bef " not required lO c:ontnbute Of to lend any cash or propc:1y 10 the Con panyiO cn:J~ the Corn;>l'ny to ret..-n any Membet'$ Cas;. tal Ccn~tJOM

3 04. Advanoos by Milmt>Q4 If the Ccmp3J'y does not ha~to &ufficiene e: ~ to p.1y IIll obigatiOOS, uny Member{a) L'lal may agree to do so with tne consent of the Execu:ilto Com111t1t. . may advance all or part or lho n~:e&:d funds to a on behalf or the Corr.p:)ny, :tt such tnlafc: 1nne uno ~ sYCh other term& as such Member ~rd the Execu:JVe Corrm UQO may~.. An odva~ acscnbod 1n th' Sect~ 3 0~ cons :utes a loar from Ito l.lcmhl-r to the Company and not a Capital Contnbuoon.

Article 4 OlstribuUons and AJI~tlons

4 01 Dlstnbullont AI suet. lime as determine<l by tho Exccuwo Commlttoo Not Cash Flow (as dolinod in thlt> Suction 4.Qt) fOf' each fiscal year (or such liJ'IOrlot l)(lriOd ror whiCh the dlatrlbullon Is maclo) shell be dl&lrlbutcd to UlO M'-mbers In ptoporuon to tholr Shanng Rollo& Tho torm 'Not Cosh Flow· t.llOII meBn off cash funds derived by tM Compony (InCluding lntaroat rocoi'X!<l on rasorvos, borro\~VlQ~>. and C<lpitrll cronsactlons), \\ilhout reduction tor ony OOIH~t'l h ctt:J(g~. but lo ~ ~sh 1unds used to pay current opornting o~cs (lnc:t~. wtlt!out lmltauon, sa Iarios ond/or olllOr guaruntcod C>Uytnt:tll$) debt payments. ca;Jital improi/Olncnt:.- tOplt-tct:me.nts and t:Stabllsh rca&anoblo l'e$ON05 for futuro Ol(pCtl$e$ elld costs as deteml•ned by tho E.xocutivc Comm ltuu utiIll> solo d~SCieliOn .

4 02 lftstnbOlions f01tnoome Taxt4 No!\\rth.Sta."'d;ng tho PfOV s10ns of Soction .s 01 , tho

I

119

E>ct...c:utrvu Comrn•ttee shall d•stttbute sufficient cash CK ol.hor hqutd sse.:Is annu:illy to UY.: r.wnbers to enabto 5uch Mc~rs 10 p y nny and ail lllClOI'C'..e taXes ncurrad by ""ch Mombors tnat ••o attnbul$ble to the Ohn«ship of Mernbef'5hip 11\iClesiS in the Con p ny, except fcw thos ta•a IOd 10 o Mcmbet's so ry Ot' olhel oon'pensa~

4 03 Affocat10,. of Profits ond Lassos

(a) Genera.uy Except as otnerwis.e PfO~ in UliS MciO 4 , each item of Company lnoomo, gatn, los... cktdue1ron encs Credt: (ltlcludng nontaxable losses dosetlbGd •n acct.on 705 of lhts Un•lod Sutos lntemat Revenuo Code ol 1986 as amended. (!he ·coctc)*J) shsdl be &Doc:a~ among the ~ bet1ln soc:ctdance w•tn the r rospacu\19 Sharing RaiJ<){. 1\'otwrlh$ ndtngl • fort.'g()hg, to tne eX1en: o!lowod 01 required by thO Code the Treasury Regulation&, or by generally acoeptod ocouotJog prnctple5 the Exec:uuve ComM tee Ma)' a~ •o tletn~ of Co~ny Income, gatn, los11, doduchon. and c:tcd 1 •n uny m:mner c:ons•s~ With the roquaremonts of tNl Code, lrc..~ury RegulatJons, ano genorolly acocptod ~unrtng prinCiples 1 alocation of parucular uon1a of Income, q<J'Il, to..,, tlOductJon and credit are Intended by lhe Mombon. 1o havu sub:Ww• eoonomtc effect In oonformltywtlh tho Tfousury Regulatlorut Any proviSion of th•• Agreement wh•ch connicls with or falls of thatlntenoon r.hall bo roe011ciled or ampli'lcd to tho ()xtent ne~sary to errect such lnlont.

(b) Tox AffoctJtloll!' Code SectiOn 704(c). The above notw11hSI.1rlt.lhtg tnoc>.mo gain loss, and doducbon with roapott to. ny pto~t1y contf'lbuted to tne CO:l' tot of tho Company sh<JII sok-ty lot IDA purpo~s. be a .lOCated among the Mombo~ so M to toku oc:ount of any vartsuon botwoon tho adjusted baSI$ or such p~y W) the Company for fuderal tncomo wx purpo:.. s m~ 1&:. fs•r market v01tue as reou red ~naccon:tance ~ th Code§ 704'e}and the TreasuryRegulatons reat•ng thom\0 In lho ovont l)tty deelS'ons. &Jioc8t10ns or eiec6ons arc reQutred 01 ust:lo~ 101 lhe Ccmpany 10 comply .,,,:1\ :he pro.. srons of Codo § 704{c) ord the Tre3sury RegulatiOns rotating thcrciO. the F:•ewt \1 Commrtte~: Shall haw. 1M nghl to mako 5Uch ~tOn$ nloeat!Ons or e!ect.oos '" ltlCI sol ano abaotuto dt$tr"etioo

4 04 S;x•ei;rl A(f()('JJtloiJ.-. of P1oMs snd Losses.

(o) Mm::num Gu.v. Ch.Kgeback The Company sha I comply v.ith tM mll'lrmum ga1n c.hsrgebec:k roqultem4tfll.n Trol~'>uty Regu 3trons ~ecr..on 1 704-21()

(b) Cht1fVObolcJc of MU\ln~Um Ga.n Atlribul3bt'8 to l.fomoor {l,\onroo(;IJ('$JC Dc.'bl. Tho Comp!lny $h!lll 001,pty ~,:h L"'e mtmmvm g~.n chOJ~ requ.arement l rea~ Regulations soc:;tJon 1 704· 2(iX4)

(c) Qutiflfied Income Off~ Tho Comp3tl)' sl'l8'1OOtnOfY 'httn the qust•ned lnooiT'e of'SOC ~1510n$ tn Trco¥ury Rogui:~Uons &eC1Jons 1.704-1(bX2XIiXdX4), (5), Md (6)

(d) llt.'OCaMns Upon Tmnsfor. Upon transfer of \loy rnt~nlbef!lhlp 11\torest tn the Company, unless egrocd olhor\\\:10 by the trorrsreror and iransferee with tho wrlllon consor1t Ollhu F ~<ocutrvo Comm.ltee, the tlems of lncomo ond ~s <.tllribul3~ to the Company R.ghts 5hafl be apportioned ~rwoon tho allslg•\01 und the as5lg'neeas of the astor day or thu n"'nth pre<:edln~ the traMiet (Ulo deemed transfer dato) bU$0d Of\ tne results of Company opornhons through lhi11 ocorn(.ld lrM$IOt <t te

120

Attic~ 5 Management

5.0 ~ . Managomem by Managers .

(a) Subjocllo 1h1J f)'OVtS.Ons oC Socllon 5.02, the pQ\YCrs of lhe Company shall bo ex.ortcSod by or under lhe 3Uthonty ot, and the busmess anc affatrs of tho Company shall b9 mnnogod under tho dtrocuon or. monagers or tho Comp3t'ly \A4:~C;II8." the Managers collectavely may also bo referred 10 as the "EJt9CIJ/rvo Commlftoe") inolucing. w'thout J•m•tauon. the followtng

(t) To pay, and to posfonn c: mJnl$ten~l'*c:l$ und dutse¥ rel3hng 10 the general ma~gemt:nt and operatiOn of the day-\0-day bus•no5s of tho Com!X)ny, irn; ld•ng MlhO\II lim.taoon tho PIJymcnt of lltnoebted~ 13xes and assessments :

(ii) To collect &11 montes due to tM Con..,any from tho Members or olhcr pen;ons and 10 disburso Company funds to those per$0ns enlllled to tece.va them

(Iii) To ostobtlsh. m<>lntoln nnd superv1se the depostta end withdrawals orfund' or thu Company In bank occoonts for the ordlnarJ purpose~ of 1ho Company:

(iv)To ostn~h and set all salaries and componsouon formulas for Members empiO)'COS and agents of the Company:

(") To at~end to a I star errolofOO matters, .ndud•ng Wllhoutlmltat•on, lhe hlring and firing or 5talf employeot,

(vi) To employ attorneys to pnride legal c:oun5ol to tho Comp:)ny. tnclud,ng but notlimtted 10 those logal oxpcn:;e$ '" QOnnee1JOo w lh lotmaiJOn. OC'gantlai!OO. and opcr-..~n of the: Company and aIllegal expenses in oonnechon ' lh the Compsny's agreement and arrongomonts dtrectly or tndtroctty related 10 the H06pttal, and to ~mpiO'/ accountant" to ptcpore 1ncome tax returns. finane~aJ $Wletn!'.J\l! and reports which shall be fumtshod to tho Members.

(w) To purchase any and all insur.lncc dccmod ooceuary by tho Exocubve Commrtteo for any ond all Company purposes. tnclud•ng. wlthout l•m1l.ilti0n, guncrotl ab~ ty tnsuranoe. profe6S10nal ma.practJc:e 11lSvrance, and to pro"ide protectiOn wtth rospoct &o tno Company and claims of thlfd parbes and to pay the pte~n~um$ from the funds or the Company;

(vii1) To conduct tho admlntsttatlve aftauo of tho Company. tnclud ng wrthou llmilatton the laktng of oct1on nccess~ry to C3rry out ony vote, decisions made and oct1on token by thO Mon.t>ors horeunder;

(lx) Upon tho approval of the Mombc.m! cntltlod l<> vote own1ng seventy five percent (7S%) or tiiC>fe of the Voting Sharing Ratlos. to sell. osslgri, triln~fcr, convuy, encumber. plodgo. loa&o, rent. or othetvv.se d•.spose of. and to negotiato with rospoe1 thoro to. the e!sets of tha Company: and

(x} To perform all ol.hcr du~es and obhgaiJOns, and to exerct5e au olhor powors and (.ghts. pro•licSed ewhere to be perfonned and exere•$0d by tl\6 M.,nager.s

121

'" llddihon ro rne managemen1 of tfl8 Company. the ExecutiVe Comm1t;oo sn. havo ti'I.J purpoae of oromollng tho cohesion oonvntm ~ sv.;tess, •rnl pto:c:ctron ol lhil fntcro..t£ of 110 G~

(b) In manag1ng the buslnos.s aM affai"S of LI'O Co11'pany :Jnd o:.;ure:sfng ~~ . It Exueut •m eomm.ucu sh:.ll.tC1 (I) 00116Ciwety ·~h resol\;!1001 aoop!OO at moollllg5 and '"""" Oil consents pt~rsuantro SoctJons 5 04 ancf 5 oa ilOO( ) m~ commntees one ~.a rv•duaJ lanogers 1o \\ !eh outt.onues ~duties have been d~egab:!d pursuantlo Soct.oo5 OS No r&-agor hilslhu righL power, or authex ty to act for or on bt:Mf ollhe Cofl'Y.)Illly, to ao S!IY oct thai wou•d te bincmg O.''l 1M Company, or to tna~r any ax.pernhureon beha f of lno CO'nP'SftY, except in ~rdar~~ lh lho 1mmod toly prfJoodrng ae11tence ~...40f\S or ad!OnS IS'(on by he Ex.ecot'Yo Corrmrttoo '" L:COrdance w th this AQroomC01 (lndod.ng thcs ScCIJOI'I 50' Ond Secllon 5.02) sN oonstrlu!ll doO$tOn•. o.r l"libM iYy the Company and shall bsl:!li'ljollQ Qrl eacn Maoag r Mcmbor Off.cur (11$ defrnod In SociJon 5 001. llfld Cfl'C)Ioycf: of U-e COnt;)My

5.02 M•Jml#'~ RlgM 10 Bmd, DecJ.stoos Reqtl.ftng Memb« Conront No Mt1mbor rn \s CIJpat~ty as o Mcmborhas the nght power, or autMnt,.ro 3CI ro1 or on IJoll>!lf or lhu Com00t1y 10ao uny u<:t lhrlt woLIId be bind~ on ll\e Company. or to Incur any oxpcnddurc un b<lha11 of th~ C(lfrlpilnY Notwilh3loodlng tmy p<mcr or ;Mhor1~ granted lhe Mansgora undor the f BOC the C()rtlflO'ltu or till!! Agraemonl. the Manager5 maynol rna~o uny ducl~lori <>" la~c My tlcllon tor which tho consent of tho t;ltJrl'lbbr$ t:nlillud 10 vo~ l9 reqU"fed t>y the Cor lncnto or this Agroomonl "'thnu• first $UCh oblalnltlg such CQn&onl. Each Member oniiiiCd ~ vote may v.l~tl rospec1 to any 1010 conacrtt or uwrovJI tMllt Is enlltsed to grant pursuant to this ~mvnt !Jf'.tnt or wrlt\!lOid '!IUCh vote, consent. or ap.Provs in II$ 5olu dr~IIOn

5 03 Sotoction of M.~n~'CJIS TN: n....'Ylbef" or Manager~ or tho Comp;aoy wt cq~1 ha numbot of I ound ng Merroet5 who remain Mcml::cr$ or 'h-: COmJ)CJ)y, Of as otherwrw a~d upon by a VO!O of lhc Mcrnbcr• trUed !D vote holdlng at least se.,cnty.rrvtt percent (75V.) o mu Voltog Sr ;,rrng Ra~~Cs TtMt taal t&nagc~ ol the Coospeny snal De lhe Managcm; named '" lttu Cort.freulu, "ho lilhtlll b6 tho • Autltorlzed ft!.a~ k> att for I he Company un• li r Cuc:conotS 3re etccfod tr,· the Mombor; Mt1 gers rrust DS Membe~ or I.M Componv ~ Mannyt:r ( tthtt1hcr n •tl::lt Of a aucccuoc Manager) sha I ec<\se to be a Manager upon u-.e earhoat&o occur Of t.ho o '-'l'ling ~I ' (U) such P, !\ager sha~ engage In gro6S noghgcnto Ot 'I• lui mt$COf'ldUCI H'! the peOCfTT'IBnoe of h1s Of her du as ll tv~n®er and. as a re~tlneroof, &hall bo removed~ lho unammou \10'6 01 the 'en'C>el!> en tied to .-o~e (excfudin~ tho Mornber aoaned ol engag og '"

rou neghgonco ol \\ fu m1 eot"ductl b) SUCh Manager shill ro•lgo us :a M n<~gut. bV g '\9 ~~uce of such ros'gnattOn to tho Members. (c) :uch r.tan:~ger ShaU dlo Of become pet'ITlanonUy dubled: or (dJ uch Mnnagt:r shS no longer be a \tambur olll'to Comp. nv Arr1 v.Jcoocy in ony t.1~n&Oer pos-tion not othoM1SO r. lod ;,s prQ\Iided sbo\le may be fJIIed by o wle of a m.,rooty inlomst (by numbiJr) o• tr.e remotntng Manager& at a meeting of ll'c ExecuhiiO Commrllee caiJad lor Ihat purpo5o

6.04 , Moo(lt>fJ.'t of tho Exocut1ve ~lao. Rogutar rnoollno~ of IM E;x.c:eutJWJ Corf'IIT11noo may bo hold on ,uoh d<•ln" und 01 t~ uCil 11me9 a& shaU oe aece~nod bylllo EJ<oCUtivu Cornmluo<: w11llllOt~ets of the estobllshmenl or wch ~r me~ting s.clledvlu be<"g gl•ten to cJcJl Manager 1)181 -'"Uti not pn.)t.;unr at lhU meermg et whlctr 11 was adoptod Spe<:iol moollt~og:l ot lh(t E.xuc:uth·& Commrttoo moy bo callod by ony M nnger by n:>uce thereof (spoofrno ltle ploco and tuno or 'uch m601•ng) tnat Is do tvorod to each oltler r.tal\il9Cf alkk'\.SI 24 hou~ pt!Of to wch mee:ttng Not:her tho busrl'len lO bu trasm.. ctod or not ltle purpose of such spec>-. I m~ting neod bo ~ir1ud rn the notJce (or ~~or of notice) ~ttcroor Unl~ othe~W~Se E:Jepressty provided 1n thra ~rucmont AI any n'IOU!i:ng ol tho Executive Commttlae a ma:QI'i!y (by numb¢r) o1 U1e E.xecu·,~~ Comn hall

122

eon..titUI& a quorum lor the t.nlnsactton of busmess and an act of a tnltfonry (by numbet) of tho Exocu•...,o Co~Tm~llw Yo~ho are pro:ocnt ~• $uc;h a mee-tulg u! ~hieh a quorum •it pte~nl ~n t: rhtl act of tno E.xecutl'io Comm ttee. Tne Pf'OVtStons of !htS Secbon 5 0-4 Sha bo II'IBPPI CDblo alany uno Cf);)l U•··•t> 0(\ty 01\•J a.tntn\gttt,

5 05. Commilee ol ExeculJve Commlt<:e, DelegeJioo of Aulhollly to lndl'lidual M nu-gc.rs TI1uE.(uc;ut,~ Cumul !1~ flhiY d g,,_,:~ ~ Ul' mu1~ W40UIIIlw•, ~ uf wludl •"·•" llu composed of ono Of mofe of tne Managers. and maydestgnale ono Of more of lhe MaflOtlcr. es an ·m3to rrwm rs ol any commt•ce E.tc~ ro.- rnat:.c1s lfl£11 ro Imposed on Marulgurs uy w ~auanllo the TBOC and cannol to delagamd to such a oommiUao, ny $ueh corr.rnlllao, 1o 'hv ext nt !!>'O..idtld Ill· r olu:Jon ~t:J!Ai5hlt\g •.. gha'l hs-.e and msy oxercse oil o'lhc outooo:y !Nil may be exor<;~Hd by the EJ!ccutiVc Comrmttec Rcgua.r DOd ;c;JOCi;tl ~hngs o4 such comm•l$0u sh91 oe he.ld n the manne-r ces.':Qnated by lhe 8ceaM'8 Commlltee or, not so dosignalod, b)' &UCh coo•m.ltoc: rhct S:.Xuc:utrvv Comm.ll m4)' c~lvt: 3ny comrMIO& ul ony ~.ne In aUdtUOO me E.llecuwe Corrvnlttoo moy do.'ognto to one or more r.1af1a9eni &uch DtJinon~y and C:llliO!'! n"<l O!>'lt!Jn lo lhrJm sucll 1•11~. ~ lhu EAucullve Commttlee may deem 3(tytSOblo Any such deloga!IOn m&y be revo6<od at any limo by lh Exocohvo Commilloe.

In) Dkvclor 1m11 As.!ltS40nt D.vt.>ctcr. The exeeutl~ Commltteutharr appoint o Ohuctor .ond en Asslstanl Dlroc1ot , oach of who must also be a Mono~. ond '-mosnull roporl lo tlt1: Exoc:ul t~ Con\ITllUts~ 4nd , ..no sru!h be responsible lor tne cJay-t()o<fay management of tho Company and havo oil otrer rospon~~llos O!; tho E.xceuli\'c Commrlleu :slt.tlU dok:gltt(;. fht.l Ouuclur 011d As.slstJnt o.re~;.tor shall servo tor a one ( 1) ye:sr term and st1 bo annu.atly rcv.ov.od by tho EXOQJIIV'O Comm•lleo. Tho OitectOf .)n<$ AUI$!3nl o.rector aro n~ eulholtlcd to act 01 malce dec.tW1!1 on beha'f of the Executiro CornmlUae vltfhoul tho pnor w lion npp:ovnt ur tho E • t!~~·ve Comm•ltoo n II o ulo'Onl Uwt eiUler lhe Otrec!Of or the Assus1.1n1 Oiruaor (or bcltt} a~ or ma"o a csecl!.lon n contravonuon of tho E.xecuhw Corrm•tlee il'cn $UC.h u • oo lw I bt: nUll vo•d or unvr.fo~nblu

(b • &xlget The Execu:r,o Committs<J shc:Jil cstabl $1"1 o •OftOdor :~p· bUdget lor uw !ly the Ch~octor, of \'\tlkh 50% s.MII be ot.ocated for use by lhe Assis1ant Otroclct. Eoc11 of lho ~r end AutScant Dtroc:tor 6hall bo require<~ to U$C a;lm!'JlCr01)1y rt:asonablt:! t ffMs to matnt.aln such bi.ldgcl 10 uactt on expense• and expeno.tums. and 10 ropon 10 the E>.ocuti\-o Comm 1 II O>.troofd~nary Ol(pCrui41 Or OxpotldtiUte$ The E.xeet~tM~ Cotmltttoo Sha'l ha~a Uie nght &0 1'0\'!GW Bf'ld djU'Sl such bud~t &I ant Wile, from l no 10 time for lhc bencr.t and in!ere t of 1t1e Col• ny

5 .00 Compon$Cifl()(l T"o MOlM{Jei'S, Oire<:tOf. U"'d A. •~IJrU Otrt:CICY." r • such r~tl onabM compensai,,n, I' ony. fOf thetr setVIoes as ma-y be dosignntod by the Ullommous wuttcn or consent lhc Exoc:u11ve Commlttt:u In lld<lwoo. the Ms~rs sna be eohtled to be rotmbursect tor out-of1)0Cket costs ond oxponsosln<:urrod •n tne coo.-so of their sorv1co llorcu:idef, in<:IU:Itny ~1 nol ·mttod to lhO$u a~orvlcoa r&ndered under Section ~.01 .

5.07 MofJ'IJ'ngs of Mo.rnbors. An annual meeting of tho Momboro for lho irnntlottlon of u~h bu~Hnn$a nG moy propot1y come oe(are the meebi)g shall be held on such data eoo al sucn t.mo as the Ex<ttulrvo Commltloo &hu I sp<K:ify in the notiec: ollhu ~11ng , wfl,cl\ eMil bo !lullv~rud to \!Odt Mell'bE:r at least 20 days preor to such meeting. Special meetings of tho Mornbors may bo c.J coby tho ~cc:utl\lc CQrnmlllt.-6 Of by Members havtng among them at leasltun percent ol tho St~anng RatJOs o' all Mombor&. Arvy wch moo•Jt19 $11~111 t~ he~ on su~h c:htiiJ and at :~uch tm-.e u~ thu PtJ•son calling ::ouct\ me&t•ng ahallloealy n tho nouoe :>f lha moot.ng. \\hiCI\ sh<l'l t)O dohv~c:d ao o.1<:h Men-.buf 1 &c,astlt:n dnys pclof 10 wttl mee~. Onty but1nt!!S wtthin the purcose 01 ourp;,sos describod •n tho not~o (or waivcf UtcrcoO ro- such mec:t~ng ~ bt: conduete<l at such mct:l()9

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Un'c:; Olhc:Mi c~eprchly pro•.idod in lh•5 Agresrrer.l at any meeting of the Momoers Mombe~ enlitlod to vote hold ng among them at least a truljO(\ty ot aiJ Voting Sharing RJ'IOS (a 'MIJ/Otlly tnt ruSij. 11:pn~scntoc.t c thcr en pe~ or by ~oy,y ;hi)II oonshtulo • quorum fQ( tho ltDnsac=tion of ~smcu. o.:ld n oct of a Majonty ln:orest shall be t'l9 act or the Membe,..,ll be1ng undetStooo that MetnbeB, tnclucMg non- oUog M&mbo;:rs may :~tterd all rt~hng1 of lhu r.tembt:llr

!I 08 PmvisfoM AppliCable to AJJ Meebngs In connecton w11h ny m.., tlog ol lht:

E.xoeuL"e Comfn,lfet!, Mc:mbel1, 01 any commttcc of It Exueu~~vo Commlltoo, ltlo loUO"o-.: ~ions. sha" apply.

(a) PlluXt of Mccllf)g Any suc:h mccliog sho I bo ,_4 a\tho PMCIP I ~to of M1nCU of tho Company, unloss the noiiCS of such mee11ng (or rese>UIJO(I of lhe &ecu e Commtttae or comm:ltoo, as nppliC3bt ) f.POCI'•C$ o d•flerent p<:Jce wl\dt nc~d not tM. In lhel Sl 10 or Toxn$

(b) WBwer ol NotiCe Through Attendance. Ar.enonrtee of a P~~::rsoo a1 such llltlCtll'l9 (lndud•nv pursuant to Socllon 5 08(o)) shall constitute a wtJivor ol nollco of wch mooting excopl where such PerEOn attoodll.he meebng for lhe express puq>ose ol object ng co tno l rans.actlon ol ww bu~~~ oo tho grouncl lh~11 lhu mce,itl{] 1$ r.otltfwfully Cl..t ~Of oonV(Ifloe)(i.

(c) PnWO$ 1\ Porsoo may vote at such mealfng by o written proxy oxocutod by th.:ll Person ond de lvorod to anolhor Managor. Membe~. Of rnembor of tho oomnllltoo. a1 opphcoblo A proxy sholl be ro·..ocable unless 11Is stated to be lrre•IOC8bCe

(d) AcJ/00 by WnJten Consent.lvry 81:tion required or porrniuod to be !.&ICon ol audl a moeling rn..y b<: l~kc:m Vtr1tt1ou· :. Meet.ng w•l'le>Ut pnor nolloe. and wttt»ut o vote I a conson1 or c:omona In ,•,nllng, 5otting forth the actiOn so ~k9n. JS ~ ~ the t.l;m.;1ge!l0 M mbCr1 or rnembef's or the COfM'I•IIee. as apPlicable, haw-g not ~e.wr than lhe mlntmum number of Vot•ng Shaung RatiOs Of vot that would bo ncec:uary to ta~c: ttl& ActJon ot a me+:ung a1 Which Membera, Managet&. ot members of lhe c:omritae, as appticnblo entrlcd 10 vo on the nctioo V.'Of'O prdenlllnd voted

(u) A~llngs by T~ne. Manager; Wambers. or mcmbo~ or the comm·t o, as opphct•blo, m~JY ~r1iCipfllO In tJ.nd llOW such rneet;ng by me30S of cou!t:renoo tufeonofJO, ,. deotonfercnce. O! s mrlar communtcabO.'lS aq~n' by rr..oans of v.hrO, all Pcrs.on.s PG~t~Qpo In the meollng can heet each othef.

5 09. Oft~ecrs I ho Executwe Commtee may designate one or more ~.tombort&) lo be offiCOr$ of 11\o Comvnny rOffi'CcrS"), proVIded such OfltCer rerro r~ o f.k!n1bot ~ I he COnlparry and a professionslind vidual auuch tonn t&derinEld ~~" 3n1 .003(5)of tho TBOC. ond <my OfTICO~ :so dC#Igr);JIOd !.hnll hO't'Cl such lllfe authotitJes. d ulleS and sataoes as 1ha E>.cevu~oe Cofl"rnrttaa moy dologolo to I hom Any Officor may bo rcmvvcd ~s such ~ lhnr "''th or w.lhoul cuu~: by 111<1 executive Commmeo.

5 10. LltrlitullomHm Llub.Wly of MciHJYfJIS. n~ ~dbili ly ollho Mo•~\lllj lu ltiU Cor11putty uno llw Mernbora shall be .mlted \0 the oldent.lf any. se1for1h tn lhe Cer11fk:ato and as provided by tha TBOC

5 11 Conn•cts of lnto.rosr Subject to the other express pro.. rSroos of lhts A.g·eemenl, ¥&Ch p, ~bcr p,(J~r. Oll•cor, or "" lo lhoroot may cng~go •n and po~$ lntor·.~ts In other bu&lnau vonturos o' any and ovory type and o~ptlOn. tndopendontty Of 'Mth othor&, except fOf' one! In compet.tiOn wtrn the Compenyorones W\COflf"<E!CCOn w th the precuoe ot mea;ono, ,,rut no

•2

124

obllg:liJOn tooffer.eo the Company or anyolhefMember, Manager or OffiCer the nghl to po11.1c•pata lhcHein Too Compgny may ~c,;t b.."$100$$ •.~o~•lh al'f'J Member Man ger, Oft cer. or All~ a:e the!f!Of. provided the tenns of th05e transac:.Dns a."e no less fo•JOnablo than lhoso thu Col'!' ·;ny cou1d obi<M fro<n unruln:ed •nll'd partes .

5 J2. frldemndM;IffiOn

(e) Each Mt'!mber shall tndemn·ry. defend. protect und ~ h;awtl .. , tho Compnny, ar1eJ oOJc:h cxhcr Mernber hom r.d tgatnst 81 sdlo'ls sutts or PtoceeoiOQ&, erA ell other d arns, demand&, losses, damaga5, I bi •l.ICS . ~rr:ents. a~rd~. pcnattiu , fii\CS ..etUeroenlS, eosts and t!xpuns,os {ileiU<Sng court C08t! ar)d res:sonab$e attorneys' fee&), Oll$tng out or or rolalod to tho profo51f00a' ma (N$GflCO or m;) l)n)C:b<:e or $UCh Member.

(b} Tho COmP'lny shtill ~~n.ly defend. protect and holes harmloros eacn Managor from and against aU aciJons &uits 01 proceedings. and all cAAor elr•lms, de"l''rtnd IOS.SC$, damages. h.ab •Ito~. tVdgrncnts, uwnrds, penall.les, fines. settlements cost& and o ponGC$ (mc:tudlng court costa and reasonoblo altornoys' roos•. or!s·ng ou! ot the management of tha Company or such Manager's scrviCIJ (I( ~la lv. oa a Monoger THIS INDEMNITY SHALL APPLY TO MATIERS Ti l AT ARISE OUT OF THE NEGLIGENCE, STRICT LIABILITY OR OTIIER FAULT OR RESPONSIBILITY BY SUCH MANAGER ; PROVIDED, HOWEVER, THAT THIS INDEMNITY SHALL NOT APPLY TO MATIERS ARISING OUT OF THE GROSS NEGLIGENCE. WILLFUL MISCONDUCT OR BREACH OF THIS AGREEMENT BY SUCH MANAGER. Tho Company, by adopt;on of o resolution or tho Exocullve COmrnlltee. may lndennfy an Ofhccr employee or ugont ot tho Comp:tny ro !hot: same e11:1ent and subject to the sane COO<Stllons under YtNch umay lndammfy ',ianagers unacr tho ~od!ng :sc:n•ance. The Compan)' may pur~o ;:md t'Tm ntu\ ·n~rc.e 10 pro~ l~etf nd a-,y •.tanager, Officer. cmptoyoc Of :.g~ I of !he Company

Artkle 6 T.ucs 6.01 . fa• R&tum.'l Tho C'..omp.'lny !!hal pcepare and moly r,lo a trodorol :;ta10, ano loQ'IIIt•.c rotuma ,..qut~ 10 be fll~ by the Company Each Member ~~ furnish 10 lhe Company a perJnent~nfom~abon 1r1 ts pos:;euicn ro'st.og to lhe Compel'ly'& oporai.ION lhat " neco ry 10 en."lbbe lhe Comt>any's taX rowms to bo Indy prtp<lrcd nd fi ed. l he Company &hall aehver a copy or each uch return 10 lho J.\ombers on or before ten deya pnof to ltlg dul! ~h! or ny SUCh return. logethor Wllh such additioo~hnfonn;)l:l()tt ~ may be requ!red by the .1omoera n order k.lr lhc Mt:mbc:rs 10 Iii& lh t odMdu I rorums reflec:i119 the Company's opcnauoru: The Company shall bear the C05t& of 'ho prcparulton ~ fthng of •Is retums.

6 02. TO>t f:'ltJCIIOM The Company shaU mal<e tne follOINttiQ oi\ICUOII!. <XI \1 t: UIJPIOIJII810 tax relums:

(n) to ooopt the c:ntendar yoor as the Company& Oacul yoot, (b) lo adopl the ca&h or accrual molh:>d of acoounllng o <JeLcm•lnod by tho Monoger.

and lo lo.oop tho Con'S): ny's b~s and reooros on the rncomc-1ax mothod,

(C) I a dlsltlbo!lon of tho Cofl!pany'S ptOl)Otiy a; OC$CIIbCd in Code SEC!Jon /34 OCwrl or upon a tr«~r. rcr or t.te~mbtltshlp l "leresi.S a!?.descnbed rn Code &ectJon /4113 occurs ex t :avn 1by nollco from any Member, to olocl, pvrsuanc eo COde sectiOn 754, lo &dJu5t llle baib o• Coi11P8ny's propu

125

(d) ro ee<:t 10 deduct And amortiZe tne organiZt:llional e~~:punsea ol the Company as permrtted by COdo ~GCtJon 70{) ond

( ) tiny other ~10n the E.xecvwe Comnullee r~y deem pproPfr:Jie tul&J "' cne oost rn&ereala of the Mombors

So long as lho ComPi)ny h s two (2) or more Member.o. nei:tler Ulo Compony nor ony M.lnagtJr o.· Member may ma~ an electiOn for lhe Company to oe excluded from tho appl.cat.on o' ~ provisiOns of subchtlplcr K or c:hopler 1 of subtlfle A of 0'0 Codct or ny ~nn.br pruv !10M or pphcable 51.31e law and no promron of 11\'s Agreement (nc:Judong Soc:tion 1 07) sha be oonstrued to sonction or appro·.-o suet\"" cl()ctoon 6 03 Tme M..tt 1"$ McmiNN. 'The Execut.1e Commrttee aha' doslgnaro one Manager !hall$ a Mombor to bo !Pe ·•tax mall ra J)3rtnof"of lho Comp~ny pursuant &o C'..odost"<!llon6231(D)(7) (Uou • I nx Malter! MambCij fhe sole Member tS hereby desrgnated aalho Init at Tax Matter$ ll',.mbor Tho Tolt M Uurll Mumbor ~~~~ take such action as may be nec:.essary to cause to the elttent posslblo each other Member to become a •notioe partner'' within tho movnlnQ or COO~ $0Ctl0rl E)?.23 Thu To~ Mrruurs l\1embcr shall Inform each other Member of all significant mattef's that may como to 11s altenllon tn Its copaaty as Tax Mallon; Mom bet by giV'IOg f'lOijCO lhoruor Or"J Or bulut\) 1hu flllh bull•~s day after becoming aware thereof and. WJihrn thai timo. sholl rorword lo o<rch olhor Mombor c:optoli of oil &ignlr·c.Jnl written comnrunieabOM It may receive In that cspaclly f ho lax t.lslters Member shalt u~e no acllon without the authorizatiOn or D MUJOt•IY lntOt'esl, othur lhon such ac:lon rn- y be: t(.'Qurrud by oppheable lsw. Any cost or expen60 Incurred by t'lo Tax t.~lton; Member 1n connccLon wrti'l ts dulles, rnclud•ng the preP')~':.' bon ror or pursu~noe ot aamtnt&trauve or Judr~l (lroccud.ngs !hall be paleS by (he Company

Atticle 7 Books Roc:ord&, iUld Bank Acc;ounls

7 01 . Books.ndRCCOtTJ:s. The EJ(e~lr.e Commtltee shal keep Ot cause to be l..eptal tile pnne~pal uff.cd ol the Company oo~e and accurato books ond roeon:>s of lhe Company, SuppofV\g documenl;olion uf Ita lro0$$C'b0n.s -NIU\ respect tO thO COOCIUC.: of tNt Company's business, and IT!rnuiM of tho prooeedtngs of rts f:)co<:ulrw Corntnl1tfi(J, Member:~ , end &SCh oommrl\oe ol tho Exc.-cu o Commi'tee The books and records shalt be ma·n~od wrlh respect lo a~tmg mat:of$'" accord a nco'' lh sound 3oeounllng proct.ces, ~'ld all book.lend racoroa ahal be available at the Company's pnnapal o t 100 for exarrunatJon by any~ mbet Of l!lo Mc:rnbcr's ouly authonzod ropro;cn\Ativu at nny Ofld at reason~ limes du--rg nonnal bu5mosro t1ou11

7 0:7.. Roporls Within seventy-five days after lhe end of oac:h taxable your ttlo Exocutrvo Commttloo &hall CGuse to bo $01\l lo coch Member at the end of the IBxabta year a comptoto accounting of the financial arfatr& of tho Company for tho ltlX..blu yeur lhCtl ondud

7 03. Acoounts Tho E>cocuUvo CommHtee !Jh~ e~t~bllsh ono or more sepnmte bank and lnvut~!rnent accounts and arrangements for (he Company, whoch uhatl bo rMintnlnc<.l in thu Compony'$ Ol)lllO with r.nuncl"l rtl!lJIUUOn!l and firms th.al lhe Exewllv. Commrllao dotormlnos

126

Article 8 Windi ng Up :and TermlnaUon

8 01 Ei.'MIS ROQCia'/ng Wllldong Up atK1 TenJ111)9fiO(),

(a) Subject to Secllon 8 01(b}. ltle Co~nyshall wind up 1:& affairs on tho flrstlo «cur of thu lollo111ng $\/OflU.

(•) the elep"J~ of lh& penod hxed fOf the duraoon ollho Company in the Cort·fato:

(11) the con:.ent of all or the Wefnbers and

(ffi) entry of a d0Cf80 of JUdlctallBmlinatJOn or tho Company uncsec- seccon 11,301 olthe TBOC.

No othur o~~nl (including, W!thoutllmilatton. any event that tanmno~ tho oonlinued membership ot the last roma1nlng mombor or tho limited liobihty company) will caui>G the Company to bo wound up omltom)iMtcd

(b) If an evonl doacribod in subparagraph (il ol Section 8 01(a) shall occur and IMre shall bo ol loastonu Member tem:llfMg, the Company shall not bo wound up 01 tO*mlnatud, MiJ 1h& bu!lnass of the Company &hall bo conUnucd, if 3 MeJonty Interest so agroos w1th1n 90 days or tho occurrence or such event If such eleclJOn 1s made •ottowing the oc~rrollCC! or <.~n e.vcnt de .Cflbcd In subparagraph (i) of Section 8 01(t1), the Executive Comm1ttoe ~>hall promptly omond the Ccrtrf&.cot in the m3nner descnbed 1n section 3 0.51 of the TBOC

8.02 Windtng Up ond T«mM<JtiOn

(a) On the oc:cuncnoe or an e'-ent descnbed tn Section 8 01(o). un~s ~n ef\j(hoo 1s rm~do ~ oonlJI\ue the bus1nou of tho Comp\lny pursuant to SectiOn 8.0,(b). tho Eltccut.vo Commlltoo 1Sh<J'I oct a!l hqud310f or may appomt one or moro Member a ns liquidator. The liquidator 'hall proceed d1Ugantty to w1nd up the Off~ of !he Company as providod In the TBOC U4l1J fonal d~Stnbuhon. the liquidator shall contmue to opera:<: the Compttny proportle.s With all of the power a!"CI authonty of tho ~trve Commlnee The coEts o' w nding up sh a bo borne as a Company expo.~

(b) My nsol5 of tho Company rensAng atlhe conclusion of lho Wlndng·up proce s shall bo d•~tr.Wted among the Members 1"1 accordance With the rShanng Rauos. All dislnb1Jbons ll'l kmd to tho Membo~ shtJII be tM<Ju subJect to UE bab1hty of each deatnbutoo for co ls f:xpense.s, und h3blhlles theretofore 1ncu"od or for wt11<:h l.,c Comp!!ny h3s committed pnor to tho dnto or lerm~nation Tho dlsttibutron ol cosh andlor property to a Mombor "' tcoordance w1th the prov1s10ns ol lhls Section 8 02(b) constltutos o complete return to the Member or Its Capitol Conltlbut1on:. ur1d .- oornpleto dh;:.ll'ltlLJ!Ion to nte Mombar of its Membership tnturu 1rrnct s~l lt1o Company's proporty ond oonstltvtos o cOfll'lpromii.IO to WhiCh oil Members have oon11oolod within lhu lflvonlnu or ll\NI1on 10 1 IM o f the rsoc.

(c) On complotron or such final drstnbullon, the Exoouh't'O Comm11tce :sh II fllu u QJrt..f•cale o' Termlnauon Wlth the Secretary oA Swte or rox.as. ca~ any othor filtngs mado purtiu:lnl lo S~IJOn 1,OS, end take such oU'ler acbons as IT!4SY be noces::.uy 10 leon t'l3te the ex1stonco o! the Comoony

127

& OJ No RO~Ot111i0n 01 0«101 ClJp•raJ l'tcf;O..Jnls. No Member shall be required :o pay 10 the Company 1o an:~ otner 11 ber orto any ltlird pa1y ar.y dcfiol b8Qnce lhJI muy 41.~taslfrum tln.o to tune an ~ny c=pltst or sa r account m3tnta."led foe sucn Memner for any purpose

Attic~ 9 Dlaputa Resolution

The p,tambf!f5 hlrvo entered in:O this A~<ccmcnt in VQOd fiJtl nd It\ l bclir•f lh.:sl mutually edvnnt89&0us to them II" w.U'I that same splm of c:oopecation that thoy peGgo 10 o::orr4)( 10 ro'-Oiiie any C:.pulo emgbly ,.,;lllOU' the nc~ty ot tig3hOtl Acc:cwdingl)l, l"aey agr e II any dis~lll ati$CS bUCWe8o them relating 10 ll'lls Agrooi"'W\1 (tho 'l)spu\9"1 ttaey w. fl~t ul o lho proc:odure. IPeOflod m th1$ MiGo 9 (the "Pmeedure·)

{b) A purchaser wi5hlng to sUbmit the m~lter o1 determining the P"fChBSor5 appraiser to arbltrollon os porm.ttod by pnrttgreph (a} shall do so by ~ing wall(uh c'IOIIL.O li-~ f).lbalrlttlun to tn-.> uti .r purct\asOf'S and shall a so ~hnVIIOMousty flle duollcate coptes of tho notlco of orbalrallon w th tt~ rugaonat ottlee of the Amoncon Alt>•lroltOn Associ;tliOr1 rAM") fOr H~ston r elf.B!, loge thor wllh U e oppropnoHo fcc o:. provided In the AAA's admini&aBtiva fee schcdulo 1\ CQnamunlc:Jllora~:> .-w1U1 the AAA ft!9Brd•ng thJ orbilt' t•oo proeetl<l~r~V$ ~n be d•rected to such reg•onal offco unto~& tho AM dlructs otherw sa 1he nouco of thot dotomuoation sNJU con~ u tmet cJut!"I•PbOO ol the nature of ll'l4t 015J)Utu ~~~the te«1ody or rosotuuon sought bytne purchaaGf nli<~Cing ~ procoduto Each of tNt other purchasers ~II. walhin 20 d·t)'S Item the date of ma of that no!Jce, file Wllh lho

128

P'-'fChasors and lho AAA a rosponso wtltch ~tcs $UCh purch<\$Cr'~ V'.I!IW 1 ~ t OO;p\tu ~nO ltta de&.red remedy or raso utiOn As soon as :r.u:tical aftes lhe oxpwa\IOn of ttle 20-day oenoa begir.nlng upon lhe diiiCJ of m.t!lltlg of fh:sl no c:t: the AAA J~ ll COtl\Pl\0 u I ol vat lncJ 1/idu:Jt:; or entJ!.I4n ~flo coua serve os an eppra~r. equa •o the nambef of puxhaaerl ptLG ooo, Cl()lnpotcr:• :tn.j qu;Mled to b& an apprwser s d~cnte<J fllhe no~10e of aft)ltrouon and UlU r&.Spons truneto Tho AAA shallll$0. l lha me me rank i.ho aporatscr5•nc~tdcr fil'lSt Uuu"ffh IJ\a' number oqu;d to lM number of porc:t"\asen plu5 one and stu ttl~ fontl• h b'ansmll tho~~ !i~Nhanewsty to I c pusct~cu·• iJnd tn(orm \I'Mlm cr LhO order io \\hd'l they havo ~en ronkO<I U~cn t:no pu:chaaers &hall beforehand agree 10 a d••,'ferent lime Of pisco, or bolh, they 1ha I moot at lho pl".t~tp;ll offle\.: or the Corro~>~ny t 10 00 am Hot.r.ltoo Texas 11me on th& seventh vee day (Saturday. Sunday nd ho6days acclucU3d) after he dale of mo:ling of tha AAA's 1of o~ors no notce of nlM ns. AI such lime !he ~rchssera shall e.ach. 1n accordance Y~ th 1t1e ran~-:.og <~••orminod by tho AM stnko ono ( 1)Mrnc from lh<l rl$t$ubmitf':C1bynttJAAA 1'hft t•ohu• 'r..t n:J ndMdu3l «entity wh060 nomo rema•ns on tra \'Sl uoon complatoo of such stniUng 5Nl bo tho oppr !sur ror thu pu!d\uae-r~ If the appr:JI~ so 3electe<l ~c:L.Oes or lor nny reason r~ 19 co atitltc?, lhts procedum r.hall bo ropoated until an appraGer who I$ willlr19 ond ol»u to oMt "'' bnen 11l1Cctt!'d It ooy purc:h,Jser utany 00101fatls to participate ~n lhe procedure llerolnsbove esbbl~hrd to solocl owm.sarr., tho AAA ;h£111 rorUv!iith ~lontc a ttomo rrom thv 11~1 of nppw l$orb flu lht: purwaaor not so partlciPf'I.IOg.

(c) An apprn.sor y.,:;hlng lo subrn.l INJ matter of dolorrwnlnQ Lho common oppral!lor or.

pcllntllcd by pm::~gru~ (o)ol thl!l Section 9 01 sh.s!l do so by giving wrtttofl nottCO or a rollrotton to tho othor oppmi;...,r ond &l'lah !,o ••mv kmcou~yi'Jo d~~lu cop · uf lltt. toOtu:u of Ulb<lft• un wtl, the regtOnnl offtee of the AAA for Hous:on Texas. toge:.hor With tno upproonate !eo o& prov~ '" lho AAA s odmnGolluiNu fuu ~chbdulu . All COt"\mUOIC3tore ,,Mlthu AM regarotng Uli! p:oceoo ogr; stm be d•roctad to such rog10na officG unlsss lho AAA dirocl$ olhc.'tVt1$e The note• ot l 1 dotCf1Tl•ll4licm .$h conttltn o bnet descf"!P!iOO o• lhe nawre of tne O!Sputo al1d tho remody cu rnoJu~ sought t1y tho ppnuaor m!Miing lh!S procedure The ('I!her nppra;ser !t · wUhln 20 ~)'!' lrom 11'18 ~:e of mall1ng of ltlatootlco, ftl9 With the OfltJ";abng appra110r and t'4t AAA a rc~P<>f'~ ...,hlch Gt:JIU5 suc;tt \1ppt1l~S wew rcg3rcitt'9 the 0!3pute and the dell:lred rell'Udy or rusotulion As soon as pract•ca a1tor tho e~Cptra~on o• tho 204ay period bog:nnlng 1pan lhO do·~ ol rtl11•lir'SI or lhe not.ieU nf ut>ttrotiOn, the AAA !'.I II comp e a lslclt.h.ree a~blo tndrviduals or of\l.llius c.ompotont and QU3 tod to be a common a~ a. di:$C(:be<J -n the l"()llte or wb•llohon tJ.M t.tJ ~pon~s U\c:reto T AAA ahall also. at 11\8 same broo. rani(. 1ho$C tnoividual.5 or en las'" order. f~t fllrourJh lhlrU nCI sh-.dl UlOtoupon IOrth..,ttrl trarWThl the l StmUit.oneo\Ny to the appre SOfl 000 Inform lhem of lho c~ 111 which thoy havt:J been ranked Ur*s:. htJ upp ·~r. sh, II beJon;hnn~ gre • to tJtffc:ro"''''' ~ or place. 01 both, !hey stwr meet at the onoc pal oHICO of L"to Company at 10,00 am., Ho\;5ton. Tc a •me, on lhc ~lh h~kday (Sotutdoy, Sunday rid holi\13Y'J Clxcludcd) aher tt)e date of I""'O• it:9 or tho M.A's lis1 of indtv!Ciuals nod enutioa Ytho could servo;,; a common .1pprllt~ ·'~ no lieu ol runt<tng At sUCh lime. the appra~tcrs shall eact', L"' eceo«Sanco Y11th tho ranlong dotcnnlnod by tho AM. strike a namtt from ll'tO >:~I IUbmllllltl ht lhu AM Th ' higt1e11 ronklng hldovlduat 01 en tty whose name remams oolhe Usl upon complotlon of such t~llikJilg &hull bo lho comrnor' oppr ti!:Ur lff.h() conl(J'lofl appralser !!o eclect~:d tleclln13' or tor any r~uson fal111o sorve, thts procoduro slmll be repcn~lvo unUian mdloouul ur em lily IY4tu Is wlllh 'll vrl<.l uok: l<> :1~~0 n' A common nppral~~t:r hoi oeen saatted tr sny appra•sor a1 any point fa• Is to partlclpoto "' the procoduru 11Qr<,lnnbovu usto l)ll~~ to s61ecl ltle common OPf)fn•'le thu AM t~hor :;ubmllll""' tnd,vduata or eoltttoa who could aof\113 as tho common &PPftl ser for tho apprul&CJ who tr. ptllt-<:lp:.ttuly lo choosu hom

129

""· thu lollo·.-.mg procedure $.,., I epply:

(a) Tho M&mber seeking to iOIUSte tte Prooeduru (lhe •twti31111Q MembW') Ntll g1v1!

written notioo to lho othor t,(cmbcrs. oescribing n gcncml tcfm:; the notuto o{ tr.e DISpUte. tho lnrt:at~ng 1'1 mbef"a dalm Of relle! and ldent.:f)-ng O'le or more Individuals Wt!h eutllont1 1o 1Mtl'Je ltte O•~o oo u~h M •mbc(:; boN The Merrbef(s) rc:coiv.ng uch nolicu (11\0 "'Ro$1)0(1diflg Mombef:) whether one or mora) 1hd ~ave frve (5) business days w•lhin wtUch to t1e1lgnate. by wnlten nooce to the tru ling Member, ~or more tnd•· 'dualswtthau~ ty ~ Ulf: O.spu!eon wen Mombor't bohalf lh4t •no!VIdua:s so ~ted snan bo tr.nQ\\"!"1 a \ho "Autttonzfld lndNIOuil • Tho Rospond~ Member may sut'lORZe hlmseU as an AuthoriZed tndMdual Tne lmU lmg Mumbur ond tho RO:$porxN'9 Morrbel tMII ~iy ~ tcl&rr~d uw U\1~ •Of.VJufiii!J Mef'fll)MS" or indMdualy ·o~pullr'lfl Mombw •

(b) Tho Authoriud tnchvidu9 s ShaHbecntitlod lo ma«o wch ~ lr!J:liJOo ortncOispUtc as lheydeom appropnate bUI&Q1'98 to promptly. :md tn no event lef' than 30 days from tho dote ol tho ln-tJnl!t'g Mumbor'•• wrillan nouce meet 10 discuss resolution or the; 0 · putu Tho iwthoule<i lndtvlduala shall meet at such ~mes and pfaces and w11h such fraqueocy as lhoy may ogroo If 1t1o0 Dispute h3$ nol been rosQivod '~thin 30 day$ !rom •ho de l~ olll'e t lrtttlal m ulllt!J, lho Ot~pui ""!:J Mernbars sha1 censA direct no(J01fa ltOM and shall submit thn I) 'lputo 10 mtHitntlon In ilf.OOtrll)nr;o wllh lhu rollth'fll'l(J ~ro<:,,duru:

( 1) fhe Au1horiZed lndMduats will have five (5) bu&.noa5 day• from the ~lo they C:\:t~W d•ruct negoll:lhons to agree In wrlttng 0t1 a mutually eccopt.able modiruor. f thoy fa1lto so agroo then wthin an addttlonul five (5) bu"""5 d~y~ . thay w• submil 10 eact- olhef a wnrten list of acceptable qualtfl8d attomeymod •alorv not •ffihakx:l \\llh uny of l:'le Members, ron'<ed ~ nu~l ord of prC:feren<:e If one at more namer. are on ')olh lists, the highestm n~ng porson GhlJII be d05lgM!Od • the medi810(. It no rr.ec.ator has been &eleeU)d under thi.S proceduro, the D•sputmg Morrbers 89f08toi"UY 10 rcqu~ e SIO.Ito Of Fodc:t 0~~ Jud~ of tneit chOOSing (Of 1f they ca:vY.ltsgree. the Local AdiT\Inistrnt Judgo for lhe oounty In \ hlc:h lh pMCI~I offiCe ~• Ule Co"'!''p ny iS located) ao supply ., ' 10 bUsineSs <Slt~ a ItS! of pa'.ential Gualifed atto1ney-modiCl'IOra Wtlhin frvc (5) bU$11lC$S ~ ot recu•pt of lhe list \he Asth0t'r2ed lnd viduals Shalag ra lhe propoUIO mecha:Of5 •n numcncal order of P"C'CI'Of'C(: oneS t •til '" bncoutly oxehtmgo wc:h &St and ~hall ~ s:s lhe medi&IOr the andtvidual reco•vang tho highc$1 comb•ned mnk•"G If suc:h m~acor IS not svaltsbtc to seNe . CJ.et shall proceed to cont.:J<:t tr.e me<J.I3tor who was next hJghest tn m nlung until lhcy am ~blo to !lolcct a rood~o'JIOt.

(?) If\ consul;auon wtth tile medialor selecteo, lhe Au\t'«<zed lnd:\ltduats $h<Jr prompUy d~•gllOllu o mutual'>' convenient tlmt: and p~aee tor me modl~atlon ond unless ctrcurnstanoes rtiQU•l'G otherwise. such bme to oe not =\tor thnn 45 doys aflor sci<!Cit()(\ ol tho roodiBtor.

(3) In In& tWonl any 0\sputing Member lo this Agreement ha1 &IJbslnntkll noo~ for lnrormot~n In t.no pos.se~ or soothet Otspullng Merooer to th11 Agroomonl in ordor to proparo for tha mc<iiatroo aJ Dcspotmg Me•~ oholl411lt:tnpl tn gooo fa•ltl to ag"'e to procedures for the expodi!IOUS oxch ngo of such mfoonnlie>n, \\'llh thO hutp or the medtar.or tl req..ured.

(·1) At least ""oo (7) days poor to the first 5<:hod'-'ed 'oaston of tho

130

mediatiOn, each l>spuiing 'Aember snail deliver to the medl8tor and to tho other O~pu'tng Mombun• • ~u wrilr.en W~'rmory olcb v•&.vt Of) thu manur m O•spvlo ond such oUlor malton> roquwoo b)' the me<Slator Tho med~tor may lao roquo51 that 1 confidcnlcal essue psper be SU!>fl'•tted by each Oisput.ng Mefl\bef 10 him

I~) In the medcatloO. each Ozspo..1Ulg Merr.cet may be tefX'Hf'.t'lted bV en AUU!Oflt6d JndNid\J41 lid tnay be ~esented by CCXin In add I caseh OisiJ'It•ng Mombor may, \\ lh penniSSJC"l or the med•ator. Dnng such &MliOnal person IS netdud to respond toquesbors.c::orunbute 'Oml3110n,llnd p.;1r. fn the negoliuhon$

(6) The tnedlntOf s.t\a'.l detemlf)t: the rormat tOt Cht: mectir. , cJ nctf to osi4M1t thet both the med~alot and the A.utllorized lnoNrdualS ha'le on ~unity to hour n onat pr«J:.t~nt.allon of uach D•sputtng 'Aerrbet's w.:. on lhu nt.~tlt tllllllput~ ond thot lho au!honzod partieS attemp: to nogotiato o 1'0$0luuon of tho mottor 10 dlsputa, with orwttooutthe assistance or counselor otners bot '"'h tho an.s~nce ol the me<'~lOI . To this 4\lld, the mcdi<Jlot c:; uvthOf'izud to conduct txllh totnl meol#\ga and separate privata caucuses with tho diSputing Mombora. Tho fnndlrtiJOn ~U!'l"ion ~ holl be private. The mediator will koep 001\ltdenihll nil ln'ormDtlon teD rood in privalu coucus wHh any Oispul.tn!) ~tmtburuntou' :IP<JC!riCIIIIY aulhorlled by 'uch Olspubng Member to make dl&closure or the tnformatJon to 1ne olhur D•:.putlng Member 1~ Ols.pubng Members gree 10 itgn o docvmeru ag'oe ng lhat lhe med~alOf shall be go'l'emed by tha provcSlon$ o' ChoJpCcr 154 of tho Tcx Cllf Pr3c & R<:rl' Code and such oller ru:es as lhe medcst011ha preacnbo Tho Oi$put.ng .lombors commtt to parbcipale in tho proooo<SinSJ$ "'good fllilh y,,t thu tunt.on of reso1Wl9 tne Otspute •f at all oosstble

(7) The Orspuung Membefs agree to participate n tho mod•a\IOn !l>'occdU:e 10 Its COfteW tOn. fhe med.atr.>n shsU be temunated (1) by the eli.OeutiOn of a so:lloment agreen-oot by tho 0Gpu2ng Mombcfs (ii) by ; duci&IDt oo of moo tOt that the medta:.on s &ennanst!!d or (~1) oy a 'hn!ten dedarouon of • 015PUiing Member to lho ofl'Od lh3t the ~::~~:on~ ~tud t tho c:ooc:lusb'l of ooe full oay's medialion session. Evon if tne medta 10n aa !Qfmlna\Gd wrtl\0\lllJ rusoiUI.Ol'\ of the O•sput.e , !he Dsou:.ng Members agree OOl to lemltn8':8 negoti<JtiOn$ rid noc lo oommonco any aodiliol'l() J;)"'CCec.ngs P"'f 10 tho exprraiJon ol frve (5) days follcM!ng the medtabO.-.. Notwtths:anding tho f01ego1ng any Dt$9Ubng Mufl'lbec may commence GckNIOoal proceedings wl!l\tf• uch fc~oe (S)d.ly penod litho DtSputo could be barTed by a" app."'cnbfo 'lntulo of lim•t<Jhons

(&) lhe Ioct end c..cpcnses ot the IN:d~~r shtlll ~ shmt:d <:quatly by thCI Otspu1Jn9 Members. The medalor shall be dtSQualifiod as a" tnos~ . oonsvtant. <txpc.111 0 1 "ou"'ot lor ony Ot!pollng Member VMh respect 10 the Dispute oM any rofolod m9ttors

(9) Mu®llon ·~ n comprom.se negot.alioo for purposes of f.ederot end Stoto Ruin ol Evrdenoe aod CO'"..sbtute:; pnvilogod oommunic<.~'IOn undo¥ Tuxo• .tw The entire mec:llabon process IS oonfidertial, and no stenograpl'ltc. vcwal or audio re<:erd '""u be rnad<:. All conduct. sl3tements, promtse...offers. vic"'" encs o-,iolons. whotner orul Of wntt.on. made in the course or the modiabon by any D•~opullng Member, the& agents, empoyees. reQfSSE!fltawes or other tn tao. and by tho modl:uor oro CotlfldunMI el"d Mil. in 8d~ib0n and ~~e 8pptoprntt • ~ duumod

131

ptlvj;tgod Such conduct st. l~cn\$, prc:m1Se.:. olf~rs. 'VICW$ nd Oj)G\()M Sfl¥A not bo d•SOO\'cra or admtr.stC!o f()( any pmposo, in:I!Jdtng lmPQDcnmi'Jnt, tn any lUlgalloo or other ptooeocllng in11olvtng tne pgr11es, eno wll 001 be d•~osod o anyone ocx <m gont, o~. expert Y.'l!nos$, Ot ropfC$cn wo of ~ of lho Members: provided however. that ev~ otn!IM se d•SCO\Ierob\o or admlS5 bill IS nat ~xclu•ft:d I rom dt~covc.-ry or &dml3~ 1l$ .s r~:.ull ol•ts uso tn lhO mea liOn (c.) lithe IX~ puling ~umbers 3fe !lOt suocastulln resol'l1ng the DLpult! throog lhtl modcaiiOn, L'l8n the Disputmg Member$ agf'GO that lhe DISpute shall bo ~tUod by atbtl:aUon s te>kwfs

Any pacy rr. y sutlfn.& the Q.eputa lo aroi:ra1Jon and shall dO &o by gi l'lng wntten notoco of &rtltlt uon to tM other pa.: I•Ol> co me o.~pute sod sh311 alSo Slfllultan~:ously Me duph 1e c~ ol th"J r'()tioo of Ott•lmliOn wrth tho reg10oal off<:c or AM fat t-lou:.;lon, TOlC.a$, togclhof W1th tt,o apptopn31e ft:e as provided lrt tho AAA's admints1ra~ve fee s.cfled.,lfi A comNrucstlons Vlllttlh" AAA ~rd•nA lho urbttralaOO pt<XX:udings St\311bt diNett:d 10 $Uch ru~)'Clfl,l ON IOU vni<:S$ thu MJ\ dtrocls othol'\\tse l'he r~olloo of artlitralion shaJ contain a boof dos<:rfptlon of lho natura or ll'le Cft$putu 10 ~ urt>llrttlucJ tmu lito rumecJy or re$0h,llion ~ouyhl by lhtt porty lni~Ung erburtJh<>n. tiJch of lho 0\:sputlng Mombers ~holl. wllhln 20 days from the doll) nt mulfino nr t~ml11ollr~ elf m'b.lrnhnq l•"t- wllh tho pai!IC!J and 1M f\AA a respons.e which 9tales !!IJCh patty's re'Viaw rogordlllQ Ulal 0.11puto to bo nrblltolr:ld aod lho d~lrod rc:mudy or ruso1u11on IV. !I()On liC Pft't.'llctlbiO oiCw lhit' u.11plnt\tOtl or 1M 20 dsy ponod beginning upon the date of mailing cr tnill notico of orbllrotion tho AM~~~ c:omp41'0 o '"' ~ _.vu•l.•b'u .tft>llr3tors ecual to the 1\U'llbdt or Olsput.fl9 Mem~ olus one: oompo1ont and quallf10d 10 be on afb,trntor a$ doscoood n thO rtoiiM or rbtlmhon ond thO rcspon~!« thureiO The AM~~ also. at the ss.-ne tune. ram the arbltntlora 1n on)er fnt tnrovgn tnal ~bor OQU-ll to th numbot of part~es subfee1to Qlt, Oispul& plul one end UlehHJ;x>o fOrtti'N•th lransmll the l:st SlmultaO:WOU&Iy lO the partieS and •nform ~ITI Of lho Older tn \\tli(;hlhe)• havo boen ron~od Unl4ss tho p r1ieS ~ha: befO"ehsnd d!J'~ toad I orcnt kne or place , or both lhilf rrmct at lho pnnapal offa of the CoolJ;any at 10 00 a rn , HC«n1on. T4W)$ tim.:. 01'1 \ho '..ovo.tllh wtckdfey (Sti!.A'da}l. Suod..ty and holds~ exctuded) af!Br tho dalo or mathng of tho AM c. l•st or arb•tmtora ond no~ of mnkmg At $ueh lime, each p~uty 10 L e Otspwu 'ns I each •n :tecotdance 'llftth tne renl\tng de~ennined by the AAA stnke ono ( 1) tlilmo lrom ln& I &t !iut>m.IIC4 by lho AAA Tho highest mnkmg ndN•dual Q( enlltywr~se M'lle tems on lhe IISIIJPOO complo~n oC &UCl1 str"Ung shall bo the ol'bdtalOt for tho parties. If tNt arb•~ lOt o ;clcclcd dechn 01 IOf ~my rco:;on I<~ 10 SC:Nu, lh•S Pfooedure sna be re~.st!!'d un an arb•lrai.Of Y.ho •s illing and aolo :o servo ha$ beoo sc!octOd If tsny PiJrty to lho ()irspt.;:; 1eny po;nl ~•ISIO pa"oparu In U'le proc:ecsuru n~o nsbo~oe esusb tshed fD sded arbitrstors. :he MA shall fo11nwttn el•mtl\alo a narno from tho l•sl of arb•lr.1tors f01 tho party noc !JO rwrti<:ip:J~Jng

9 03 AftlJJM!Ot1 GonerBNy Any arbltm:lon under thtr. Attlde 9 shall bo hold 10 HousiOt\ Toxa!l Ol a locution dulurm•nod by lhe AAA ex~pl ~$ Ol.heiWtSO :.p(:(lr~C:~ y PfO\'Ided ~f( In nil arbilraton procaodlngs 0/ldet thra Article 9 shall be(;OO(J\Jctecl In acoordonco w1lh tho Commorciol Atbftrnllon Rul<:$ ol th~ M A, os lh~n amended and In effect. and sucl'l n/Es shall be tnlerpretod ond opp&~ mru quo::~IIQ.('H ruyur\Jirrg 0 ~ uriJiti<JliQfJ pro~s nu\ rvw l~ u(l(.!~• ~uclh •v'Vs sh.1tl lm de~orm-oed In accordance wllh lexas law. Exoept as mited ebovo. 11• portlei agroe ll\&1 any d<Mrmt\lllloo under 1111.1 PtoOOduru ollh•s Arllde 9 may be enfQfccd or presetVod by any cou11 ol compotont jurlsdlcllon In tho uvcnl o protcec.~ under UttG Arllclu 9 :, conununcod 01 o(}-..,., lcgnl proceed ng Is commenced 10 enloroe or preserve tt.e nghts awnrcled. lho pofl}t who p~cwnas or •ub· ~lrlhllll)' pru\'Otl$ on sud1 procoedong shaJ be en\J~ to recoYf!l rrom the other pany or panJe:lln such pro::cod•ng all co~. exponsos and ~able oallornc:~$· uos 1ncunud 111 oeoneeloon" h It '' proceedJ'lg end on appeal

132

Article 10 Non-CompetitJoo; Non-Soltclbtfon

10 01 . Covonunt Ncl fo Compclt: Each Member recognt10$ IMI (IJ ll'ct olh ' t.lumbtit~'

eoter1ng Wllo rh1s Agreemontla Induced pnmarily because of the covenant& ano assurances m<Jao b) =-u~h Mumuur h(lttMIIJt:r, <•J ~uch l1~bers uwr:nant rot co compote Is nec.e~ury to cn!.ure ttJ conl.l.-,oalon of tre Company: and ( ) irropara.ofe haf1'1' and onrn;,go w111 bo done to lt'o Comp.111y Md tho othur ~lber.ltn the 8\'ent that suet> Member competes With the Company" Ulln l"'e e.r~a or roas spoofed in tnis Art·clo 10 Thc::rctorc ~con::,dur"'tiOn of 1 t: preft!1ses, lhe pli)YI•Cnt by lho Company for any compenYIJon or d•stribubcn In aocon:fanco Wilh Lh's Agreement. end 85 an loducamcnt for lho other Mombcts lo entc:t .-to ctus Agteement and oon!Wnmate the 1tansacuons contefl'.C) :00 herein, each Member horoby aiJrees lhat ' &uch Mombor 1$ ;a ,.., mbor ol Ul\: Con pany ~nd lor oa p••OCS of 1111uu (3) re3/s foll~tng the cute thai a Member ceases 10 boa Member (for any reason 'Nhatsoevor o~ ttg, w1hout ~uso) (thO ·Ru!lrlc1111U Pc.wod') such Mumbor" tlt~l. duccUy or tnd ,ecuy. •n any capacity, OWTl. manage, operato contro . parttt•poto In tho monogemont or oonli'O' ot bo omplo~-cd f1'/. eon~ull w lh leod euc.h Memllet's name ro reCtli\IO ''"Y rertNnerallon trom, or matnlaln or continue ahy mlerost wllotso<NtJr , Uf'\V tlosplwl, $1)eC(,II''Y hosp1tol. or Jny olhor hovlllluoru pro•M&r oc In any medical praclleo (however organlzod) (lhn "RostriCIQd Ac.h'VMy"), which Ia k>calod Within a ( ) rn-1<1 ruOI\J$ o1 lh., I l~fJil~ (11m ·Roslnclocf Atvu·). prcwldod, how'evor ths t nollwlg contaood tn this Attlr:Jo tO shall prohibll sv<:h Member from provtdlng contmurng caro and trecttment to a $pijc:atrc pat-Mt or paLents during tho CO'.J1$ct or :u~ :~cute tllness eVt: after such ~Aember's Pl1e<11~h.p lntcro&t tn lho Compnny h. s wnntnalod. if such pelionl osks such Member tn oonlnu6 ~uch care and treatment lhtoogh tho course ot their acute lne&a. Th15 1s to conlillll that ltto forcoe>.nQ r~s~j()t'l wtU P{evt:nt sUdl Member rrom hoving no ofi!W .n tho Res1tlcted Area ounng the RutnctJVo Punod Olhet lholn '" OI!ICd prowidea by tne Company,

10 02 MOOIC<JI RO<:Utt/3 Nothing tn Ull~ Atbcle 10 5!'18 PfOYCfll Of lim•I or be C:OOSlt ued (0 pr ·:\-.:nt Of 11mt, a f\'ember a rvasooabkJ accoss to the tned•... I rdCOI'<JS oflhu ~a\lef'lts sudl Member VNtod at tt1c lto~pita 1 • to lho c:lClent requtted by and in aocoroancew1lh appu;ubf~ Sblt.n.,ttO lul.lurof tows end the Hosi)IIDI's pollcooa. tmd lho ComP3ny andior Hospttal aha'l, upon the wn·tton roqucsl o! tno JXSIIUnt, pro de u~ t.reabng Membef v.'11h copies or aodl rncd .c;JI re~ds for t.o motu lhsn lho Charges aot forth by lho To>- • St. lu Bo:!rd or Madi<:111 E.xsm•ners

10 03 &J.'rCJl,J!ioff of Cmp.toyees Eact: Mem!:lel further recognizos &ret (1) COJdl other f.llemoets' en:emg n~ lJ\15 A(Jr< mMt ·~ tnOvC:ed ptlmMty !)&C8use of the covenants nd ouvnsriOl:. n~! by ~3th o:her M&rrber nereuoder ( ) tho OOIIONinf b)· caeh .tombur otto <;IJI!o.t emplo)'881 rota led to U•c Con~ptu~y ~ mc:d•ce1 Clf'9Cl;Ce 1s necessary tn tho o..'ef\llhat sud1 Mom~r G no longer &mployed by tha Company pursuant to this Agru«Jrrnml 10 en~uft'l the cont•n..-slton of the Company' buSint:$$ 111 •utpuct ot Its med1caJ pmell<:e, and (in) •rropornblo h.1rm and dumi•~ w 1 bv dOt'Ht to the Company's bus1no~s with r~poct to il.s tnechcal pmcttce rn the aventthot such t.lembor computEt$ wllh Ihe Company tn the sollcltabon of ampfoyeoo. Thoruloro. 111 oo":c."C!~talt()f\ of thfttc promlsos, thoct pcyymom t>y thO corn pony tor any compensation or dtstrHJulion rn acooroan~Je wHh \l1r!l Agroemel't, and as 011 lnducomonl for tho olhor MtJmt>om' 10 e01et mto this Agreemonl and COII ..UtT'IllOtt: the tronsact1oos comempl9ted hsrein. aactl Mombcr l l!)roos thul ror duliug tho qe51tf<:tivo Poriod such Morr,oc,r 'Mil oOI d reeUy or lndtreclly In any a~pacity aohcst for em~IO'/fncnt CY .-nploy ny person wtro hos oocn an omplo~ of l.he Company. The r.:.xuc:uiJ\N Cotrnlllluo •nits GOiu dltcrl!liOn. rna~ wn rte any or all of Ch9 pr<MSIO'ls of In'$ Art)clo 10

2'

133

00'\iensntsdesc:nbed .n thisAr11Cie 10 are ancutarytoanotne~W~se enfon:eat>le egreement.lt\31 the duru110n ~pu ncJ lJo)()gri~phre atu oppl:!eable to the (X)V1)f\Onl dcscribod rn th• Artclc 10oru '""• ruasonable. ond noco&sary. that odoquato compensatiOn Is to be re<:o1ved t1y 'UCII Member n :loc:otOS~ wrV\ thrs Agreement lOt such obligs110ns lhat these obhgat•on do rtel 1)1uve.nl such r ombor from m•n9 a lrve rhood, ond tnat on'Ofoement of 'he COI,'Of\aflls doscnbod if\~ A,-tld9 10 is necllSsal)'lio grevent rrepamble hL':'ll SN:t jamsge &o cne CorTlPitlya ~ ne!S ln add ~n eh M~nb r hef•by ~no\ ua 1"CS 8gibe$ ~tlhtS Alec 10 rio "'bJ cliO T ,. • Ou$mess and Comm rce Codo §15 SO. and each ~/ef""'!>er agf88s ~~ ttns Artie:fQ 10 tisfi8S the r~qu:rte.'liCIIb ot ueh st. tut& II, howe11er, lor "ltty r~son any coun ot compel 1 iSd!CUOC'I de:«mtnes lhot tho roa~tiOn$•n th1i Article 10 are not roasoNtblo. th t tho COOSJCtcrolion IS lono~uatc.lhal auch M&rnDbr ttas been preven~ from eaming a livelihood or tl'\:11 t1 Mid'e 10 does not m~l h~ •oqu men I• ofToAAs 8U$incu and CommetCU Codu § 15 50 •uc!l rl)ltne1ron shall be Interpreted, mocur.oo. or tewnttE!fllio rdude as muc'l of ltle durab.otl, seooe, ond geograchrc mea idonhf•~ 111 this Arlldc 10 as._..,, ltl'ltler such r~lr¢ll0ns '411d uf'd c:r forcel'lblu

10 0'5 Buy Out Commenc10g upoo tne date that a MemberCilases to ou e tlcmbor(tor .3")1 roo son wnal6oa..'Or) nnd unlrllho end or tho Rcstr<..1Jvc Pcn<XS, such W:mllor w. M110 UN oplron to p3y the Company the amount of $ (the •Buy Or1t Amount) to buy oul ouch l\'9tnbor s coveMnt nnt t() <:OfTIPU'IJ wllh t11r11 Company contained In this flrbale 10 L ach Member N!reby exproe.sry ogi'OOI thot tilo Buy Out Amount is reasonoblo un<:or lhQ ci~um!ICtll11)1;1l nnd o11pte:.. ly wt11~ lhu rl!:JhiiO h,wo lhre Buy Out Amount de1ermmed by an atb.lrotor.

10.08 Romodrt1S for Covononl nolto Compete Sol•cJJ. Each •.lombcr eckno\\1f:dgl:l nncJ agteos thnt s~h M(lf'l'lbot' COVCI\Jnts set fonh •n th:s Ar~le 10 are ~asanlyof a specl81, uniQue, Od elC1tOOrd•fWY nature a'ld that tne bss ari&r.g from o ~c.3¢h thereof ~Mol te#~tOt .J:>I)I tilld adoqoatuty bu com~n~ted by money damsgeg as such breaCh""" causo tho Com'*'Y to 5uffcr rreparable harm. Aceord1ngfy, upon such Member'$ ftsilurc 10 ooml)ly .-,ur, till: k1tr1s n4 oo'W:SIIJons or IN$ Artldo 10 et eny toma the Company or any o~ i:S succos5CHS Ot ou.gna ' :ttl be untlllud to njuncwe or otnor e treon:ftnory t ·hot, $uc:h ~e 01 otl"..er extreon:Lmuy re t ~ bO a,mUiatrvo lo, bul not n llm•taiiOn oi. any olhef romefftes lh' mat~ a'fi1 :aolct, If~ Nithoull m:!3Ucm, e)(pul$100 il$ * Mcmt • ol lhct eotnpe~ ptJ~..am to Secoon 2.15 of this Agfecmont Eadl Membefs ~·OM 50llor1h '" Vl.s Andc 10 Sl'l t ~ ..'U Chf: •-rrn.natloo ot St.~ terr.ber's tfl0tnbet$h•P 11 I!JI' t itl l1'e Cotr>pany lf01 any reason v.hatsoever).

At1ide 11 General Provls&onr.

11.0 • Off. 01 Whene•teflllO Company IS to pa)canvsum loilny ~.~bitt, •nywnuur ~ Umt t.lr.mbur <:IJ! ., tho ComJXtny may be deoucted froot that sum beforo po)""'lonl

11.02 1\'<Jrteos All no~A:es. roQuests, or COOS4tnl5 undor I r A!)IUCmun1 h,lll btl {u) 'I wrlMu. (b) do \IOrud to thu ruclplent ' person, by courier or ma•l Ot by faca m lo, lotogrom, totox. ceb~ram . CH: slmllor trunsf'l'llssion. (c) 1r to a McrnbCf, dellv~ r cd 10 uch Meunber ollhc 8f'P11cnbae odtlross 0t1 Exhibit A or wen olhef o<!dress a~ that Member may speclly by notloe to Che othor Members, (d) If to tho Monc19or~ 01 lho Company. dollvtJrou to the M:.lt\."\f.IO ' ~ 1 lhe foii01'M9 uddref.s t.1 an lnlllal manager n the CertJfiC8te, to the address provided for such Manager In lho CerllfJCOio olhllrwiS to the nddre$~ of the CompM(s principal place or bu~~nt:ts, d (e) e1fect•~e only upon ~ual rooo1pt by &uc:n Person WhOI'IG'o'C' any no•ico reQI.i.t<:d to be gr~t:n by upplctlbib lthv ll'Jd Cen1t to, or thiS Agreftlllenl. a wnlten warver tnereof, &~gnod by tho Po"on onh11cd to not<O wt'l1ll.t\Or b fore or ;i~' lh~ ,,,~ ..lul~tS lbefem Sl\aR be deemed eQ a1en1 to IM: Qlll'rl"'g or such notca

01<1 001 ~1.)

134

11 03 EntlfO A{P'8emont Supersedure This Agreement coosll:Ulos tho entlll agreement o4 the Mombers r~:l ~ng to tho Company and SL~ all pnor oonlttets 01 rcon- na w h respect to tho Company, Ythother oral or wnlien.

11 04 Effecl of VlaNel or Consent A Wilr\'el or c:on:sent, uprus Of plied, to or or any btoach Of dofau I by 80)' Pet$00 In tfle perfonnance by :hat Person of 1ts obligat.oos with respect to lhe CompMy i 00( a eot'ISI:fll o· w#Net to or of ~ottle-- bt~ch or dolaullut the: PtrforlmJtlCO by that Penon of the Amo Of any olhor obligalions of that Parson wtltt respect 10 tho Company

\ l 05 Amendments of c.rtrr~C<Jte and Agreement The Certrfteato and th11 Agroemont may De amended Of resl.lted onty w lh the wrrtten app"OVal of 'liembera entitled to vo'e owning seventy ••vo pcfecnt (75%) or moru or the Votv'lg SM,ng ~1•0$ 11 06 81ndi()Q E:.flocr Subject to the restnchoos on o.sposloons $Ot forth 1n rn;., Agreement.

lhi · Agrccmontls blndlf'Q on ond ~nures to the benefit of the Membar$ and their rospe<:t1vo heirs legal represontotrvos, &uccossors and assigns.

11 07 Govomlng l t)W,' Scwor~IJmty THIS AGREEMENT IS GOVrRIIIfO BY AND SHALL BL CONS I I~U80 IN ACCORDANCE WITH ·rHELAWS OF I HE S1 A I'E: or H:XAS (I:XClUI.JING ITS CONFLICT ·OF LAWS RULES). If any provision of this Agreement or the uppllc~Hon thoroor to sny Person or Clfcumstnnce Is held invalid or ur,enforceable lo any oxtent, lho romolnder of lht9 AsJrecmonl ond tho ;,ppllcubon or lhul provi~ton to olher P<:•son$ or circunmtttn~;C.~U •• nol !jftuctutl thereby and that provtslon shall be enforced to the greatost extent pormlttod by oppltcablo low

11.0&. Constrva10n. Unt055 lhoc:ontoxt roquire.s oltletwt$e (u) thogend r (oriOlck of gwXicr)

of all words used tn thas Agreement includes Che masculine. femtntne, and noutor, (b) atnglo nouns and pronouna rn~ludo the plur I and \"ICe versa. (c) the viOtd •rnciudrng• means "rnCluding, wrthout I.IT\ItatiOtl": (d) references to Atticlo(s} and Sedion(s) rofcr to ArticiU(s) nd Scctioo(s) of lfu:s Agrc •mc:nt. nd (e) reterunc s 10 Eltt\lb ts s.re tot.~ bh!DI:S stuched 10 thrs Agroemtnl. eactt ol wt\Jch 11 made • part hereof for pUrpo$0$

11 09 Fllt'thor Ass.m l'tCC$ In COMediOn Wlth Chis Agroemont and UIC tntn etrOre eot\templatod hoNby, each Mamber shaD execute and de~cr any add :IOf'l I documcn:s rmd lt trumenr. nd perform any add:tJon&lacts that msy be necessary or approprtate 10 effectuate and perform tho proVISIOn$ or lh15 Agreement and !.hose lron$:JC:licm

11 10 Courrlt!lp.trf:r TMl Ag.•eement may be exe<:uled •n any number ol countefJ)Oru, 81l of wh•c:h aha• oonstlluto tho same tnstromenL ... . .

IRF\IAIN OER OF PAGE INTEM l ONAU.Y LE FT 6 1 ANK ;

SIGtiAT\JRE PAGE IMMEOIAlELY FOL LOWS)

23

ou 001 t:IOG1o3

135

IN WITNESS WHEREOF, the Members have executed this Agreement aa of the date first set forth above.

MEMBERS:

George M. Davis, M.D.

136

EXHIBIT A

lnltJal Members {Foundi ng Members)

Alan E . Bentz, M .D.

Address : P 0 Box 111 Houston Texas 77056

lntt•al Capital Contnbutlon. propeny having a value not less than $200.00 Sharing RatiO 200% VoUng Shanng Rat•o. 20.0%

Woodro w V. Do llno, M.D.

Address: 16407 Augusta Court Spnng. Texas 77379

Initial Capllol Con tribution: property having a value not less thon $200.00 Shwlng Ratio; 20.0% Voting Shoring Ratio: 20.0%

lavo n Vartanian, M .D.

Address: 9403 Swansea Bay Drive Spnng , Texas 77379

IM1al Cap1tal Conlnbution: property havrng a value not less than $200.00 Shanng Rai•O 20.0% Votmg Shanng RatiO: 20.0%

Roba T. Antenah , M.D.

Address· 223 Westhe1mer Road Houston Texas 77006

ln1t1al Cap1tal Contnbution. property having a value not less than $200.00 Shanng Rollo 20.0% Voting Sha11ng Raho: 20.0%

Goorgo M . Davia, M.D.

Address. 27 Pebble Cove Drive The W oodlands, Texas 77381

lnltlol Capital Contribution: property having a value not less than $200.00 Shoring Roll o' 20.0% Voting Shonng Rallo: 20.0%

APPENDIX 2

1488

American Arbitration Association Alan lkotz, M.D. ll George M. Davi:s, M.D., ~w V. Oolino. M.D., Anreaeb T, Rob11, M.O.• U\"<>tt Var111ltinn, M.D., Houston Northwest Emc~ency Specialis~ P.L.L.C.. Northwest HOU$tntl Ecm:tg-c:CIC)· Speciali:sts Group, P.L.L.C., ESO MD, P.L.L.C., llt'ld ESO MLP. l.L.C.

Caae ~ 70 193 Y 000688 12

Purswnl to the Commercinl Arbitration Rules of the Amcricsn Arbitration A9Socr.atloo (AAA) and the ~rms of con.trocts between the parties. an evidentiary h~aring wu held at the o~ Q( l"ulbtigtn and JawOI$li:i, L.L.P., 130! McKinney, S'uitb SJOO, tloushm Texas 011 At4gust 19·22 Wld Augltst 29, 2014. before Arbitrator Robert E. Wood. Appoaring at the hearing wt:re Andll!W Pri~ and Rachel Roostb for Claimant; Adrun Looney fOt Respondents HNESO, NHES. ESG MD, IUid F.SG MLP; and Mtlttbew Mu~l\lli .t11d Shtmnon Rrown for tbc: Individual ~spondcrus TI1c part1es had a full opportunity to ~~~ evidon.oc by te.~t imony .s~td dQCument$. cer111in .stip\lllltions were entered by tbc piU'tjes, aod counsel for each party ably ru:gucd thei r pos,1tions. Po.tr~hCIU'Ing submissi(lns were rocciWld .Oft September 19. 2ill4lllnd Scptctnbor 29, 201<11md the J1earin~ was. a11irat time declared ct<y.;ed.

This case lcvolvc:s the brt8kup of a ~oop of doeto«S operating through various pt'Of~nal limited liability COCilps!l~ IIDd It lim:ted liability comp11ny ta ~~CNice the- Emcrgellcy Mlldioine IXpartmcnr ofRooston NMhwest ModiCill Ct~'ter.

Tile cn.ti(its II'IVOI\'Cd irt (Jtls 11\a.Uer lU\1 H()U!llOn N<1rthwtm Emergency Speeiali$1,~ P..L.L.C. ("tiNES"), N<>t1b'i>'C81 Hous.tOf.l Emergency Sptcilldblll Qroup. P.L.L.C. ("NIIES<3''), ESC MD, P.L.LC. (''ESG MD''). and ESG Ml.P, L.L.C. ("RSO MLP") (O()!Iootivdy ..the! Ent'ily RC$p0nclenlll"). AD wen! owned in equal share~ by the indiv1du•l~ ddailcd b¢1ow exoept HNES "'bich was wh!ol)y owned~>' NHESG. TI\e terms of the Company Agrccrnents or NH:ESO. SSO MD UYJ ESG MLP ate identical ellc~:Jpt for thC~ names ·o f the entities. The a ) tit* wet(! opuatod in c:oocen. "'tire t:ntTISI)IIrenlll$ r.o tMes • oll income flow i11g to ctlc individual owll.Cf); - 11nd \\'CJ'C n:fem:d to .as the '"Groop.'"

1'be lndM dusl.s lvvolvcd include Alan Bmlit. M.D. t'Claimant''), George M. D:svis. M.D., \\\»!row V. Oolino, MD,. Anlcoelt T. Ro~ M.D., anJ Levon VMI.Ilnian. M.D. (eech a Rer;pondmt lllXI c.ollocm«<:ly the ..lndividg&J Rcspondenrs.")

By Article !> of the relevant co1upauy .'\grcamoots. the Cunnn~r-cul Arbilrntion Ruler. of the American Arbitration Association and tho law of the StAte cfTeX'D$, I n;m nuthori~ to decide the arbitnibility of tmd to t8$0l\r'e any di,;tntte nll4tillg to tl'\c ~ree:ments.

1489

Limi(C(J liabilit)' companies. lncJuciing profess.io!W timited ll:tbil~ CC)q)pW~ ~ cumusl)' hybrid buxi~ cntldcs.. Tbay m csscnli&lly inoorpo,_.cd p:utner$hjps. Jilt stlltutc:.y sdlmc provides c:i)l'pOriltc slw'eboldur-like timit.ulons on tile: Uallil~ o( the: ()\•men (Mcmbc~) and pc:nflits t~~ion an.d govem.1~"e with flaibility similar to a po.nnenllip, inchrding the rlg.ht to lksign such i'OV~e :md 0~~1 b) ~mCflll ~'ell \\bCTC il COdlttadlt~ th.c: WlfiJ\Or)' ~ne (will! some oon-WDivlll*! srat'ltto.ry ~iQn$). Moreover rht tC:dcNtl lnllOcn~ cu allows these enti1ies to reoeh~ portncrsbip tax treatmen\ i.e. no mx 11 the entity ltvcl.

The Tc:xas Du3i~sa ~intion Code provides trr.; o mcmbtr ()( 3 lirnim:l llabili!Y oomprul)'

may not bo expelled. TBOC §101.101. T'be relt!lf1Ul.l COI'llp:s.n)' Agr~ntenls C>f the f.nrity Respcndcof.1 ( ••AgtftmcotS"'). &$ they 1'WC reMitted tc> dD. ocm.Uy fK.'111llltcd cxpolsioo of a Member. Claim:mt nod :tll lle'ipoodentS.. both crtlity aod iodividu:al we:rc bound by 11\e Agm:sm:n4i wim re~ to tho m:Jnner m wni..-11 !hey dealt w i1h cxpultlc>tl. On Scopt.cmber 19. 2011, tbe IJ:ldividual kesponoclen~s. acting ~ 11-..e 1::¥-ccnt.i~e Committee cxe<:uted "Titlcn cont~;~JU expel lin.& Ctt.ln:uutr Crom N'Jil;SO,. ESO MD ~d £S<3 MLP, effective September 30. 20 II. The .Jt;tioo \'\'aS Ud!li:mous nnd cbed !Ill Couse ··g~t n~Lige~or '>'itffitlmisl:onduct'" all >pe¢itied in Sectian l.l S of dle A~atts, Clairufln( ~ dtaLI!Ie only c:.i~ iflcidcnb dtd 11ot rise tu lbe ~'CI.I of '"pofll ~qhg.enco or '>'i llM cnistOoduc:t." Rcspondi!OU d~ 30d w:;, llrguod that Ill!.! A~mcnl.$ gave the E:tcclltr.•e ComCJl itt~ absotfuto disami.on1o dccld11. D~itc tltc ~al 01\mi')' ur.d 111\SitCfllty I:O!Ic!uct of SOICC or tht duet~)('$, I do not rmd 1M die 'ndividlal R~s filii~ to follow the Ag,tm~en4' provisioc for c=ox:pttlsion

FollowiJ'Ig the expulsion. R~pondcrn$ N'HESO. ESG MD 41ld BSG MLP ex_cn:®d tltei:r ~.SptJCth'e options co purchssc Dt. 6elm's Mctn'bi!NfUp ln1 c~ as provided in So;tion 2.0S of the rc3peetive ~Mctltli... »o-.....va:r, w dlh d&t<: the pa.rmatr r..-qutn;.d umkr S«tlon 2.08 !las no: lllicn made m~d M cortlle)~t:e or cl06iOA hlli taken ~· All Portics have at:koowlcdgc:d and I hordly fiDel tlw dtc ajl1n0pristr Falr Market Vtttuc: of Or. ~~·~ Mcmt'~Cr&ltlp Ln~$t$ is $526,196. '(be 1\~mcnu provide that tflc plltl\!bMe prioe be poid within 210 dii}"S of the c:<l(}IIJbicm (Sectio<ns 2.05 3Ud Z.Oi). In tlth C:M(I that WOq,fJd hn~-c b«u April 27, 2'012 bl:lfu: a toUin8 pt(Wi$:ion in Section '1.00 (b). C~uently tho cfc:adlmc for c.losing ~ ~)Ytltc.t W1S$. AU5USC 2. 2014. .Ftlhsrc t.o do so ita b~ of the Agi'Cm'lem. Secnusc of !heir iiUibility tel lili.J'Oe on a price, tlloe Ponies wen: fan:.ecl to utilize the unwieldy voiWIII<ln ptovi,ion~ of dle Agrumenl. Tite Ol)lion price or Fai1 Mllli<.C( V~lue w~ noc dc~tm"~bed uril JllflUBI')' l. 20 14 lJnwiold)', Ct:m~~ mogiC!lll, ~ unfair, ~ "''eJ'O the cootnu:wal terms rhe Mernhcl"$ ~ptcd When they cxe<11Ced the Aptncnt Thus I AWARD tllal Claimunt shall ha¥e and I'&C9'>'« fi'OO\ mrnsG. £SG MLP end ESG MO lhe !SUITI of $j26,7% plru prc:jud~etK iu~rt at tho Sl.al\1101)' me of {i\'~ JICR:Iellt (S%), in the omount <>fS5268.

1490

lhTexas limited linbilil)' QJrttpall)' c~ tC)4L!CU", in rucumpl!JY)' ~cot.ll'lc!t.all:ltlll)' rule chst 01 Member may noc be ~pclled, it must m~~ "ery olenr nil of lbo cotlSeq'IIC n~~ me; iflllldon. ln OOO'Sll\lin& 1Uah an agJC.., ncnt no rigbrs or eon~uco::es 1hat an: not spceHi~ly providl'<f r~ should be nssumcd. The P~ "-0 all deoted wh~o they crcascd ami ii.gM"d lhc "-Jlfttmtn~ that a Mdlbo;r cook! be axpe.H~ H11Wt\'t:r the J\grwnlrnt$ ate S¢fior.aly ctellciem In ~lle;ifying th.: ~uence$ of \"~pat; ion. This iJ es:peaiAIIy true lo the ~<e of .s FOliJl<lini MU~Jber who f.< a11 ()WliCI' or~ QOfiiJW'I)' aod c:ntilled to ~ dhin'bl•tiom ur prufrts The Agtcemen~ do 1101 ~)' 11181 1\ Mem~·~ lnl\'lrcst i11 t~tnlli.:.S, (Ot'foicod 01 1->Jl upon W~pdl$10fl. ()r LMII~e s'Jlllll, from tllbl PQitt£. cease to ~ ~ M~bcr ~ bi~: Shorill~ RAtio be reduced to ~Jt~ro. I~ Sccuoo 2-0S oftlu: A{!ntmen~ demon5m~tl:'~ dw ~ toxpdlod Menlbct m.airu hill Mcm~')l\ip lmert:St. ·n,t Compl\0) aAd tbe other M¢1llhmi ho~-e on opdOCI t<> fl'..Jfdlll.fC 811 1 or tho Ml!mbcrsbJ;l lnl~~ own4.'d by tile expelled Mcmb«. What happen.~ if til~ dtdine Ill C?((KlSlt! that q~rion? 1bc e:<ift«KKt' of ~~ opcion il't-Cif recogn·iz~ chat we M Q•nbcn.llip tn~t 5\IJ\'I~"CJ.> ~xp•ddon Tl~e optlou JlrWi~ the Comp;uty .nd tbc ollu:r '-1C111~ a mec;h!Ulil:ln for a:qu.irins the ~'"JlCUcd Mcmbef's Manbcrtbip fll(erest. Jtdle Mcm~ip 1~ :and its ti~t to ~i•~ clistribldion af profits .rimpt)' wcm away ltJKltl expulsSon w~· "'<''u)(llh~ Comvnny or M~n,borl c:1v COJt~~ thcir <1ption? If the opcloo mech3nism dtd not exi,;~, lhe Metoberdlip (nt(tCSt. h)' SUitlir: B pro~)' m!C'f'I:SC, 'i\'OukJ concinue untit fl wa.~ dis!'<'U:d of trl ztllCOrd:tnce with tt. tmns oflbe ;\ 8re<!matll!..

The ~tet'l\S funhcr provitll!. that no disposiliOG\ c>f a Memher'$liip lnte1C$T ~1311 be effective until AIJ provasions of tbc ~l.f bllvc bcm Sall~f.ed a.ncl that a f\kmbtrship httCR."' '"oko:tcd to be purolussed.. . shaiJ bo paid for 8A a closing L:tee()cQpo.oiod] b) instlllm~nrs ofcWlve)'Z"nct: nnd ~"nrocnt. '' lioth of tbcsc {!ClWisions: -wty to !be ditpo~itioll boy n~ing the ri,sht 10 porch~ 11n ~eUecJ :\icmber's ~mbcm:tlip l11tCifC:31

CM\mon ~~. lor,io and a ca~ful reediJls of t!K ~mts cOfllpcl that. un.tiJ paid fof' his Interest, AMember. c~ on expc;:llcd Mamber, it c:flf\llclj to his 11hm: Of1111Y di:ltributions nt3dc by thll Comp(U))'. lJea.u;ue or or the d!iVCiute iJnd lh¢ tax Cl'tWmenr tbt C<.unpanics. tl~ lodf\lidual Rospond&nt5 wm: tile reapDcrltll ond tbc ant)' lir~~JDCial t>Mefiei~ oi ltte faiii.R to providcdisa 'lbvuoll8 10 tlterr ~How (atthough c:xp¢lltd') Mcmbc:r, Or. B~1L 1ltt-reJcirc, wtw.thao b)· sdt; imcrcsted autmgemenr. « co pteveot the urijuSI n•fit:bment of n.aney ~ ar.d ~:om'«::iDn, ~O!t\-ed, C laimM\ 1ball tun-e And n:CO\oer fmm ei!Ch lndivtdl&1.1 Respondem the :sum of S22.8,44S.S0 plu:~ pre-jud~~t in~ in the Olt'IOWII of ~1),764.~ (\lf II 1D1nl of $2.49.210. Ihes\la~lUd:s nrc ooljoim Md lle\'C1a.i. bur a~ indwidulll

The ~ndc~rwdn~ .tnd 11arivirics of R~d~ io «q~ellirrg Clailllnm did M l c011Sriru1e a b~a..:ll of tbc A~eJtts. Ho~'C\'tlr, a.~ b.o was u""~ paid for his Mecnbcrttlip lotcrcn, Ciliroant rmuincd a Member <>f NHESG, ESO MD acd £SG MLP \mcil Lhl· tntry of this AWARD, by wbkh hit Membctship Interest is ccmun3led and extin«ui.1hed.

1491

Section ·9.03 provides that the perly wbo pre-vaiJs or !iubJb)ntially ptevllil~ in o proceeding under Aruclo 9 ~shalt be ~:ntctlcd to recover... all cosn, cxpenS(IS aod reasonnhlc .anomey ftles incurred in .. the proce!ldiog.," AoCQrdit~& ta the plet~dJng:~ this matter involves on~ claimant. eight respondcmu And 16 counts, coostltuti.ng 6? $Cl)IU'ate clr~im~. In addidoo h involved and includes anotlu~r in~xtricably intetTclated Article 9 proceeding under Section 9.01 of the Agrecmetlts ro determine tbe fair marlcec v•hle ofClaim!llll's Membefship Tnterest. .Respondents ~vailed in the St®oJ\ 9.01 pmeeedin g. Moreover, HNBS prevailed on Hll claims J~gnm~ it and is entitled to rocover irs costs, expenses a11d reasonable attorney lees. While severol claims were not pursued lllld seve~! denied, it is fair to say 1hat Clnimant s11bsto,.tially pre'Vailcd in his el&ims Md i$ entitled to reoover his costs, expcn!!Cs and reasonable attorney fees.

Since eooh party is a prevailing party, J ltereby rule a11d AWARD th:a1all fees and expc:n5cs paid or payable to MA for this llfbitnrtion be borne by tlte party paytng or having paid thtm,

I bcrrcby AWARD that Claimam have IUld recover the su•n of $614,488.18 as ~ovcry for co~u. cx.ponses and ~llSOtlable attomey fees. This portion of the award is ~ainst NHESG, 'SSG MD, .6SG MLP. Goorge M. Davis, Woodrow v. Oolino, Antcneh T. Roba and Levon Vru1Mian, jointt}' nnd scver.tlly.

Respondent HNBS is ~ t prevailing PllllY· I hereby AWARD that tiNES bav~ aod recover from Cfa itnant. the amount of $50,SZ4.91 for its. co~s. e.l(pl.'1!3es. and reasoaable anomoy fees. If llll parties~. in writf~ this sum can be credited against the attorney feefc061 award in favor of Claimant.

J have oonsidered cnch and ~l:rY count. cau:;e of action, olaim, tJ1eory, measure of damages and prayer hrougtlt by e4ch POJ'IY. I have entertained testimolly, exmnincd exhibits, stirmlatlom, dep;o$ition exeerpu; and post-heruing submissions. I have read carefully lflld construed tbe relevant 11gn:ements- I have utilized and lll'Plied Texas law as I understand It A$ o result. any ~lief not expressly granted in the following AWARD is denied,

(Remfti.oder or this: pa~e intCI'ItionoJiy left blnnk FINAL AWARD lollows)

1492

Ji'JNJ.\LAWARD

I, tbe undersigned ARBITAATOR, haviog been designated in accordance with the Arbitration Ayecment entered into by the above-named Parties,. and having !>eon duly sworn and havU'Ig read tbe pleadinjp, heard the te~timony, tcVicwed the relevQnt docwt1enr.s. listened to argument of oouosel. read and consjdered the hriefs and the post-hearing &ubnussio.ns. after full considenttion of 'lllc record upon due deliberation, consttuing lhe contraCts a.nd applying Texas luw. do hereby ORDERaodAWARD that

Claimant shall have and l"e()ovcr from Respond•mt5 aa follows: 1. From NHESO. ESG MI.P and ESG MD joirttly and sevcllllly in the amount of $532.064.

2. f rom George M. Davis in the amount of $2.49,2 I0. 3 From Woodrow V. Dolino in the amount of $249, 210. 4. From Antcmch T. RobB .in the amouot of $249,210. S. From Lcvon Var!llnian in the amount of $249,210.

Additionally a11d separate from tbe 11bove, Claimant shall have and recover

6. From NHESG. ESG MLP and fiSG MD. George M. D11.vis, Woodrow V. Dol !no, Antench T. Roba and Levon Vartanian, jojntJy and ~verally the am<ntOl of$614.48&. 18 as costs, expenses and llttomty fees under Section9.03 oftb(J Agreements.

~espondent HNBS shall h~tve and rc:<:ovcr from Alllo Bentz !he sum of $50,824.91 as c.osts. expenses and attorney feQs,

The Administrative fees and expenses ofthe AAA totaling $15,700.00 are to be borne as incurred. The Compensation ADd expenses of Arbitrators totaling $31,975.93 11.re to be borne ns incumd. Any remaindet fn exi!ting deposits after payment of all fees and expenses will be ~ed to the Parties pro rata.

This AWARD shall cnnstlrute full ~elution of all c:.laims. legal or cquirabJe, lhat wt~re or could h.ave bem brou_ght in this matter, AII,Y claim or prayer for relief not expressly granted is hereby dtmied .

Dated: October IS, 20[4 Arbitrator's Sig11arurc

APPENDIX 3

1794

. ,.. ·' 10/28/2014 10:48:58 AM Chris Daniel • District Cleric Harris County Envelope .No: 2976481 By: CHAMBERS, WANDA R

CAUSE NO. 2012-44569

ALAN BENTZ, M.D., § IN THE DISTRJCT COURT OF Applicant, § § v, § .HARRJS COUNTY, TEXAS § GEORGE DAVIS, M.D., ce al., § Rc;pondents. § I 90th JUDICIAL DISTRICT

FINAL J UDGMENT 1>.z.~ . ., On N!}vunl:ler .J., 2014, the Court heard Applicont Alan Bentz, M.D.'s ("Dr. Bentz'')

Application to Confinn an Arbitration Award (the "Application"). The Respondents to said

Application are George M. Davis, M.D. ("Dr. Davis"), Woodrow V. Dolino, M.D.

("Dr. Dolino"), Anteneh T Roba, M.D. (UDr. Roba"), Levon Vart<tnian, M.D. ("Dr, Vartanian"),

Houston Northwest Emergency Speciahsts, PLL.C ("HNES"), Northwest Houston Emergency

Specialists Group, P.L.L.C. ("NHESG''), ESG MD, P.LLC. ("ESG MD"), and ESG MLP,

L.L.C. ("ESG MLP"), and attorneys for all Respondents appeared. After considering the

Application, all additional bnefing filed by thte Parties, the Court's file, and the Partie-s'

arguments, the Court signed an ord~r confirming Lhe arbitration award aud calling for entry of a

final judgmen1 in conformity with the award. The Court accordingly enters this Judgment in

confonnity with the ;•rbitrotlOn ioiWard and the order oonflnning it.

IT IS THEREfORE DECREED by the Coun that it has jurisdiction over Dr. Bent:z; and

the Respondents, who collectively const-itute all Patties in this proceeding; and

JT IS ORDERED that Dr. Bentz shall have a.nd recover from the Respondents as follows:

• f'rom NHESG, ESG MLP, and ESG MD. jointly i!nd several.l y, in the amou-nt of

$532,064

• From Dr. Davis in t!Je arnount of$249,210

• From Or. Dolino in tl1e amount of ~)249,210

RECOADEit'S MEMORANDUM Thla Instrument is of poor quality at the time or imaging

1795

, •

• From Dr. Roba in the amount of$249,210

• From Dr. Vartanian in the amount ·of$249,210

IT IS ADDITIONALLY AND SEPARATELY ORDERED that Dr. Bentz shall have and

recover from NHESG, ESG MLP, ESG MD, Dr. Davis, Dr. Dolino, Dr. Roba; and Dr.

Vartanian, jointly and severally, the sum of $6 I 4,488. I 8.

IT IS ADDITIONALLY ORDERED that HNES shall have and recover from Dr. Bentz

the sum of$50,824.91.

Execution shall issue for this Judgment. .Dr. Bentz is allowed those writs and processes

as may be necessary in the enforcement and collection of this Judgment. Additionally, this

Judgment disposes of all claims by all parties, atnd it is a final and appealable judgment. Any

claim or prayer for relief not expressly granted is lhereby denied.

Signed this :!..._ day of De. c-

APPENDIX 4

1796

10/28/2014 10:48:58 AM Chris Daniel - District Clerk Harris County Envelope No: 2976481 By: CHAMBERS, WANDA R

CAUSE NO. :20 12-44569

ALAN BENTZ, M.D., § fN THE DISTRICT COURT OF Applicant, § § v. § HARRIS COUNTY, TEXAS § GEORGE DAVIS, M.D., et al., § Respondents. § I90th JUDlClAL DISTRICT

ORDER CON.FlRMlNG AN ARBITRATION AWARD

On ~(/ ~mbeT _L 2014, the Court heard Applicant Alan Bent2, M.D.'s ("Dr. Bentz")

Application to Confirm an Arbitration Award (the "Application"). Af\er considering the

Application. all additional briefing filed by the Parties, the Court's fi le, and the Pl!lrties'

arguments, the Court hns determined lhrlt Dr. Bentz's Application should be and is hereby

GRANTED IN ITS ENTI RETY.

IT IS THEREFORE ORDERED that the Award dated October 15, 2014, which is

attached hereto and which was issued by Arbitrator Roben E, Wood in the arb1trat1on proceeding

between Dr. Bentz and Respondents George M. Davis, M.D., Woodrow V. Dolino, M.D.,

Anteneh T. Roba, M.D., Levon Vartanian, M..CI., Houston Northwest Emergency Speci~tlists,

PLLC, Northwest Houston Emergency Speciali:>ts Group, P L.L.C.. ESG MD, P.L.LC., and

ESG MLP. L..L.C., American ArbitTation Association Case No. 70-193-Y-000608-12

(the ''Award"), is hereby CONFfRMED.

IT IS FURTHER ORDERED thu.t a ftnnl judj,>ment sball be sig11ed and entered 10

conformity with the Award.

SigJled rh1s !1_ day of ~ ,20 14. () -

14:£/L Tl EHONORA

RECORDER' S MEMORANDUM This Instrument Is of poo~ quality at the time of imaging

APPENDIX 5

1797

12J1/20i4 10 45 38 AM Chns Daniel • D1str1ot Clerk Hams County Envelope No 3324789 By CAROL WiLLIAMS F•led 1211/2014 10 45 38 AM

CAUSE NO. 2:012-44569

ALAN BENTZ, M.D .. § IN THE DISTRICT COURT OF Appticant, § § v. § HARRiS COUNTY, TEXAS § GEORGE DAVIS, M.D., et at, § Respondents. I 90th JUDlClAL DISTRICT §

ORDER DENYlNG APl>LlCA TION FOR PARTIAL VACATUR OR MODIFICATION OF ARBITRA Til ON AWARD

On this _l day of bet:_... , 2014, the Court heard the Entity Respondents'

1

Application for Partial Vacatur or Modification of Arbitration Award (the " Application"). After

considering the Entity Respondents' Appli.cation, all additional briefing filed by the parties, the

Court's file, and the parties' arguments, the Court has determined that the Entities' Application

should be and hereby is DENIED.

Signed this q day of kc__

'

'

1The "Entity Respondents" refers to Northwest Houston Emergency Spec111ilsts, P L L C., Houston Northwest Emergency Spec1ahsts Group, PLLC, ESG MD. P.L.L.C .• and ESG MLP·, L.L.C, collectively.

ft£CORDER'S MEMORANDUM lhl&Instrument is of poor quality at the time of Imaging

APPENDIX 6

1798

1211/:?014104538AM Chns Oan1el • 01stne1 Clerk Hams County e nvelope No. 3324 789 By CAROL WILLIAMS F1led 1211/2014 10 45 36 AM

ALAN BENTZ, M.D., CAUSE NO. 2:012-44569

§ IN THE DISTRICT COURT OF p\ Applicant, § § ~pjuy v. § HARRIS COUNTY, TEXAS GEORGE DAVIS. M .D.; et al., § § rnodiy Respondents. § 190tb JUDICIAL DISTRICT

ORDER DENYlNG INDIVIDUALLY NAMED RESPONDENTS' MOTION TO PARTIALLY VACATE OR VACATE ARBITRATION AWARDORINTHE ALTERNATIVE. MOTION TO MODIFY AWARD

On this J- day of l).e.k , 20 L4, the Court heard the [ndividually Named

Respondents, Motion to Partially Vacate or Va1;ate Arbitration Award or in the Alternative.

Motion to Modify Award.' After considering the motion, all additional briefing filed by the

parties, the Court's file, and the parties' arguments, the Court has determined tbat the

Individually Named Respondents' Marion to Partially Vacate or Vacate Arbitration Award or in

the Alternative, Motion to Modify Award should be and hereby is DENJED.

Signed thls q day of_'J>< ..J-<!!~ 0~. 2014.

TH~HONORABLEJUDOEKERRlGAN

1"fnd1V1dual Named Respondents" referS to GeMgc DnVIS.. MD. Ltlvon Vartaman, M.D.• Anicnch Roba, M 0 , and Woodrow Doli no, M.D., collectively.

RECORDER'S MEMORANDUM Thle instrument is or poor quality at the time of Imaging

APPENDIX 7 § 101.106. Nature of Membership Interest, TX BUS ORG § 101.106

Vernon's Texas Statutes and Codes Annotated Business Organizations Code (Refs & Annos)

Title 3. Limited Liability Companies (Refs & Annos)

Chapter 101. Limited Liability Companies (Refs & Annos)

Subchapter C. Membership

V.T.C.A., Business Organizations Code § 101.106

§ 101.106. Nature of Membership Interest

Effective: September 1, 2011 Currentness

(a) A membership interest in a limited liability company is personal property.

(a-1) A membership interest may be community property under applicable law.

(a-2) A member's right to participate in the management and conduct of the business of the limited liability company is not community property.

(b) A member of a limited liability company or an assignee of a membership interest in a limited liability company does not have an interest in any specific property of the company.

(c) Sections 9.406 and 9.408, Business & Commerce Code, do not apply to a membership interest in a limited liability company, including the rights, powers, and interests arising under the company's certificate of formation or company agreement or under this code. To the extent of any conflict between this subsection and Section 9.406 or 9.408, Business & Commerce Code, this subsection controls. It is the express intent of this subsection to permit the enforcement, as a contract among the members of a limited liability company, of any provision of a company agreement that would otherwise be ineffective under Section 9.406 or 9.408, Business & Commerce Code.

Credits Acts 2003, 78th Leg., ch. 182, § 1, eff. Jan. 1, 2006. Amended by Acts 2009, 81st Leg., ch. 84, § 39, eff. Sept. 1, 2009; Acts 2011, 82nd Leg., ch. 139 (S.B. 748), § 35, eff. Sept. 1, 2011.

Notes of Decisions (6)

V. T. C. A., Business Organizations Code § 101.106, TX BUS ORG § 101.106 Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

APPENDIX 8 § 171.087. Confirmation of Award, TX CIV PRAC & REM § 171.087

Vernon's Texas Statutes and Codes Annotated Civil Practice and Remedies Code (Refs & Annos)

Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)

Chapter 171. General Arbitration (Refs & Annos)

Subchapter D. Court Proceedings (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 171.087

§ 171.087. Confirmation of Award

Currentness

Unless grounds are offered for vacating, modifying, or correcting an award under Section 171.088 or 171.091, the court, on application of a party, shall confirm the award.

Credits Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.

Notes of Decisions (27)

V. T. C. A., Civil Practice & Remedies Code § 171.087, TX CIV PRAC & REM § 171.087 Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

APPENDIX 9 § 171.090. Type of Relief Not Factor, TX CIV PRAC & REM § 171.090

Vernon's Texas Statutes and Codes Annotated Civil Practice and Remedies Code (Refs & Annos)

Title 7. Alternate Methods of Dispute Resolution (Refs & Annos)

Chapter 171. General Arbitration (Refs & Annos)

Subchapter D. Court Proceedings (Refs & Annos)

V.T.C.A., Civil Practice & Remedies Code § 171.090

§ 171.090. Type of Relief Not Factor

Currentness

The fact that the relief granted by the arbitrators could not or would not be granted by a court of law or equity is not a ground for vacating or refusing to confirm the award.

Credits Added by Acts 1997, 75th Leg., ch. 165, § 5.01, eff. Sept. 1, 1997.

Notes of Decisions (2)

V. T. C. A., Civil Practice & Remedies Code § 171.090, TX CIV PRAC & REM § 171.090 Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

APPENDIX 10 § 9. Award of arbitrators; confirmation; jurisdiction; procedure, 9 USCA § 9

United States Code Annotated Title 9. Arbitration (Refs & Annos)

Chapter 1. General Provisions (Refs & Annos)

9 U.S.C.A. § 9

§ 9. Award of arbitrators; confirmation; jurisdiction; procedure

Currentness

If the parties in their agreement have agreed that a judgment of the court shall be entered upon the award made pursuant to the arbitration, and shall specify the court, then at any time within one year after the award is made any party to the arbitration may apply to the court so specified for an order confirming the award, and thereupon the court must grant such an order unless the award is vacated, modified, or corrected as prescribed in sections 10 and 11 of this title. If no court is specified in the agreement of the parties, then such application may be made to the United States court in and for the district within which such award was made. Notice of the application shall be served upon the adverse party, and thereupon the court shall have jurisdiction of such party as though he had appeared generally in the proceeding. If the adverse party is a resident of the district within which the award was made, such service shall be made upon the adverse party or his attorney as prescribed by law for service of notice of motion in an action in the same court. If the adverse party shall be a nonresident, then the notice of the application shall be served by the marshal of any district within which the adverse party may be found in like manner as other process of the court.

CREDIT(S) (July 30, 1947, c. 392, 61 Stat. 672.)

Notes of Decisions (439)

9 U.S.C.A. § 9, 9 USCA § 9 Current through P.L. 114-25 (excluding P.L. 114-18) approved 6-15-2015

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

APPENDIX 11

CASE NUMBER 70-193-000608-12

ALAN BENTZ, M.D., § BEFORE THE AMERICAN § ARBITRATION ASSOCIATION Claimant, § § v. § § GEORGE M. DAVIS, M.D., WOODROW § V. DOLINO, M.D., ANTENEH T. ROBA, § M.D., LEVON VARTANIAN, M.D., § HOUSTON NORTHWEST EMERGENCY § SPECIALISTS PLLC, NORTHWEST § HOUSTON EMERGENCY SPECIALISTS § GROUP, P.L.L.C., ESG MD, P.L.L.C., and § ESG MLP, L.L.C., § § Respondents. § MR. ROBERT WOOD, ARBITRATOR

CLAIMANT DR. ALAN BENTZ’S PREHEARING BRIEF

FULBRIGHT & JAWORSKI L.L.P. Andrew Price State Bar No.: 24002791 Rachel Roosth State Bar. No.: 24074322 Fulbright Tower 1301 McKinney, Suite 5100 Houston, Texas 77010-3095 Telephone: (713) 651-5151 Facsimile: (713) 651-5246

-i-

“unjustifiable and likely to cause serious harm.” It is difficult to see how Dr. Bentz’s offer could

meet that standard when Mr. Nguyen did not have authority to change the schedule without the

permission of other doctors, and when Mr. Nguyen often received bonuses from the Entities for

facilitating schedule changes.

Because Dr. Bentz was not expelled for proper reasons, Dr. Bentz’s expulsion violated

the Company Agreements. NHESG, ESG MD, ESG MLP, and the Individual Respondents are

bound to the Company Agreements. Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962)

(signatories to valid contracts are bound by those contracts); Tex. Bus. Org. Code §

101.052(a)(1)(“. . . the company agreement of a limited liability company governs . . . the

relations among members, managers . . ., and the company itself.”); see also Seven Hills

Commercial, LLC v. Mirabal Custom Homes, Inc., No. 05-13-01306-CV, 2014 WL 3867837 at

*10 (Tex. App.—Dallas Aug. 7, 2014, no pet. h.) (LLCs are bound by their company

agreements). The respective Entities should be required to purchase Dr. Bentz’s interest, and

they are liable for the damages caused by their breaches, including for payment of the damages

which are set forth below in Sections III.C, III.D, III.E, and III.F. See In re White, 429 B.R. at

211, 216–19 (holding that the terminated employee was entitled to post-termination distributions

and either a buyout per the terms of the shareholders’ agreement or an injunction requiring,

among other things, that the company pay the terminated employee his pro rata share of any

future distributions).

C. Even if the Respondents properly expelled Dr. Bentz, they have still breached the Company Agreements by failing to pay him Fair Market Value of his Membership Interest.

Even if Respondents did properly expel Dr. Bentz (which they did not), they have

breached the Company Agreements by failing to fulfill their post-expulsion procedural

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