course materials (bus. orgs)

7/31/2019 Course Materials (Bus. Orgs)

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GET YOUR ACT TOGETHER!

Practice Tips, Precautions and Pitfalls of ProperlyOrganizing the Emerging Band or DIY Artist

BUCK McKINNEY, AustinLaw Office of Buck McKinney, P.C.

KEN PAJAK, AustinThe Bannerot Law Firm, P.C.

State Bar of Texas21 st ANNUAL ENTERTAINMENT LAW INSTITUTE

October 20-21, 2011Austin

CHAPTER 2


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BUCK M C K INNEY - B IOGRAPHY

As an entertainment lawyer, professor, concert promoter and professional musician, Buck McKinney has over twenty- five years experience in the music business. McKinneys current lawpractice focuses on entertainment matters and litigation with an emphasis on the music industry.His clients include recording artists, independent labels, publishers, concert promoters, filmproducers and authors.

Before establishing his law practice, McKinney served as Staff Counsel in the Business and LegalAffairs department of A&M Records , a division of PolyGram International . In that capacity,McKinney maintained responsibility for the negotiation of recording, licensing and relatedagreements for A&M Records and its affiliated labels Polydor Records , 1500 Records , Rocket

Records , DV8 Records and Perspective Records .

Prior to serving as Staff Counsel at A&M, McKinney co-owned and operated Houston live musicvenue and concert production company Rockefeller s. During his tenure at Rockefeller's,McKinney and his business partners produced over 340 concerts by artists including Dave

Matthews , Dixie Chicks , Pat Metheny , Buddy Guy and Joe Sartriani , winning numerfomrouscritical accolades and awards, including Best Live Venue in Houston, Texas .

Prior to operating Rockefellers, McKinney was an associate attorney at Houston firm Bell & Murphy , concentrating in the areas of maritime law, commercial litigation and insurance defense.

A frequent lecturer, McKinney has spoken on copyright law and related issues at conventions andseminars around the country, and written several published articles on copyright law. McKinneyalso serves as adjunct professor of music law at Austin Community College.

McKinney began his career in the music industry as a professional musician, performing withregional acts including The Argyles (Austin, Texas) and Commercial Art (Houston, Texas).While performing full-time, McKinney obtained both his B.A. and his Juris Doctor degrees fromthe University of Texas. As an undergraduate, McKinney was awarded special honors in Historyand graduated magna cum laude .

McKinney is a former board member of the Entertainment and Sports Law Section of the TexasState Bar , a voting member of NARAS (National Academy of Recording Arts & Sciences) and isa published songwriter with BMI (Broadcast Music Inc.). In addition, McKinney continues toperform and record as a guitarist with soul/funk outfit Flyjack , and critically acclaimed alternative

jazz group Gnappy (Bean Pie Records). G nappys most recent album, Unloaded, spent 8

weeks on the CMJ Top 40 Jazz Radio Charts in the summer of 2006, peaking at #20.

SELECTED M ATTERS

Negotiation of one of the first reality show contracts with VH -1 Negotiation of hundreds of recording agreements, management agreements, publishing

agreements and related agreements


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SELECTED M ATTERS (CONT .)

Prosecution of over 75 copyright infringement claims on behalf of various music

publishers/composers Prosecution and trial of civil rights lawsuit against municipality and city officials for wrongful

shut-down of a 3-day outdoor rock concert Prosecution of breach of contract/breach of fiduciary duty/fraud claims against platinum

recording artist Prosecution and settlement of various disputes involving band break-ups and other

entertainment-related partnerships

ARTICLES

Guardrail to Guardrail: Statutory Damages Awards in Copyright Infringement Litigation May/June 2010 Landslide (ABA Journal of Intellectual Property Law)

Navigating the DMCA Safe Harbor: Lessons from Viacom v. Google and Other Cases - 2010Entertainment Law Institute

Sign Here: Reading the Fine Print in Music Business Contracts 2009 Austin Music FoundationSeminar

Personal Management Agreements 2008 Entertainment Law InstituteStumbling Into Partnerships: How Bands, Business Owners and Strategic Allies Find Themselves

in Inadvertent Partnerships (w/ John Ale) 2008 Partnerships ConferenceThe Big Picture: A Birds Eye View of the Music Industry 2007 Entertainment Law Institute

Breaking Up Is Hard To Do: Partnership Conflicts in the Entertainment Industry (w/ John Ale) 2007 Entertainment Law Institute

Anatomy of a Copyright Infringement Case 2006 Entertainment Law InstitutePersonal Management Agreements 2006 Music Law Sessions

Copyright Law for Music Educators - published in the Southwestern Musician 1999 and 2001;reprinted in The National Federation of State High School Associations Journal, 2002; utilized by

special request of the Music Publishers Association of America.

P UBLIC S PEAKING E NGAGEMENTS

2010 Entertainment Law Institute (Speaker and Committee Member)2008 Entertainment Law Institute (Speaker and Committee Member)2008 Partnerships Conference (Sponsored by the University of Texas)

2007 Entertainment Law Institute (Speaker, Committee Member and Co-Organizer)2006 Entertainment Law Institute (Speaker and Committee Member)

2006 Annual State Bar Meeting Entertainment and Sports Law Section2006 Music Law Sessions

2004 and 2005 Austin Music Foundation2002 University of Texas School of Law

2001 ASCAP Copyright Seminar2001 Austin Songwriters Group/Nashville Songwriters Association Intl Conference

2000 Bands of America Summer Symposium, Iowa State University2000 SXSW/Canadian Consulate Generals Office S eminar

1999 and 2000 Texas Music Educators Conference


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Kenneth W. Pajak Managing Shareholder

The Bannerot Law Firm, P.C.

2705 Bee Caves Road, Suite 230Austin, Texas 78746

512.327.8930 Phone

Scan for my V-Card [email protected]

Ken Pajak protects the interests of businesses and individuals in Austin, Texas. He also serves asan adjunct professor of entertainment and intellectual property law at Austin Community Collegeand is a former Chairman of TESLAW, the Entertainment & Sports Law Section of the State Bar of Texas. In addition to mediating disputes, Ken provides advice and counsel to individual artists,

bands, investors, record labels, publishing companies, and other intellectual property owners.Over the years, Ken has developed a practice focused on representing Texas-based artists withtheir estate planning needs, representing heirs and creditors in probate, and administering theprobate estates of entertainers.

EDUCATION

Juris Doctor, 1998 - South Texas College of Law, Houston, Texas Bachelor of Science in Political Science, 1992 - Lamar University, Beaumont, Texas

FACULTY POSITIONS

Adjunct Professor, Austin Community College Commercial Music Management, Legal Aspects of the Entertainment Industry , 2007 - Present

Adjunct Professor, Austin Community College Paralegal Studies, Intellectual Property Law ,Spring 2008 and Spring 2010

RECENT LEGAL PRESENTATIONS

Protecting An Artist's Legacy Through Estate Planning, Probate and Post-Death Administration of Artist Rights , 20th Annual Entertainment Law Institute: Legal Aspects of Film, Music, and DigitalEntertainment, Austin, Texas - October 7-8, 2010; Dallas Bar Association, May 25, 2011

The Boys in the Band: Who Gets a Cut? , How to Make Money in Music, Dallas Bar Association,

October 24, 2008

Getting Organized: What Bands Need to Know to Launch a Successful Career , 18th AnnualEntertainment Law Institute: Legal Aspects of Film, Music, and Digital Entertainment, Austin, Texas -October 2-3, 2008

Protecting Your Art Film Industry Professionals , Austin Bar Association Peoples Law School,February 24, 2007

Intersection of Estate Issues and Copyright Law: A Long and Winding Road , 16th AnnualEntertainment Law Institute: Legal Aspects of Film, Music, and Digital Entertainment, Austin, Texas -October 20-21, 2006


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Get Your Act Together! Chapter 2

i

TABLE OF CONTENTS

FEE AGREEMENT & WAIVER ................................................................................................................................... 1

BAND OPERATING AGREEMENT 1 ......................................................................................................................... 5

BAND OPERATING AGREEMENT 2 ....................................................................................................................... 25

ASSIGNMENT OF IP TO LLC ................................................................................................................................... 56


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LAW FIRM[Address]

[City, State, Zip][Phone]

[Fax]

[email]

[Month, Day, 20__]

Bandc/o _______________[Address][City, State, Zip]

Re: [Band Name] / LLC Agreement

Dear _____, _____, _____ & _____:

From my discussions with you, it is my understanding that each of you hasrequested this law firm to represent you in the formation of a Texas Limited LiabilityCompany ( LLC ), and other related matters. At the outset, let me say that it is mypleasure and privilege to undertake your representation.

This letter will serve as our fee agreement, and as your written consent for thisfirm to proceed in this matter.

As you know, the formation of an LLC involves the joining together of two or

more individuals for a common purpose. Because you are asking me to represent each of you in connection with this matter, it is incumbent upon me to make you aware of severalspecific rules applicable thereto, and to obtain your written consent to the jointrepresentation.

As an initial matter, my representation of clients is governed by the Texas Rulesof Professional Conduct ( TDRPC ), promulgated by the State Bar of Texas and adoptedby the Supreme Court of Texas. The TRDPC requires a lawyer to exercise independentprofessional judgment on behalf of each client. If a lawyer is requested to representmultiple clients in the same matter, he can do so only if he believes he can impartiallyfulfill his duties for each client, and if he obtains the consent of each client after

explaining the possible risks involved in such a multiple representation. Thereafter, if during the representation of multiple clients in the same transaction it is determined that alawyer can no longer represent each client impartially because of differing interestsbetween the clients, then the lawyer must withdraw from representing all clients.

Simultaneous representation of each of you and the LLC is permitted if, as setforth in Rule 1.06(c) of the TDRCP:


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[Band Name][Month, Day, 20__]Page 2

(1) the lawyer reasonably believes the representation of each client will not bematerially affected; and (2) each affected or potentially affected client consents to suchrepresentation after full disclosure of the existence, nature, implications, and possibleadverse consequences of the common representation and the advantages involved, if any.

In connection with the representation of an entity such as an LLC, Rule 1.12 of the TDRPC provides, in part, as follows:

A lawyer employed or retained by an organization represents the entity. Whilethe lawyer in the ordinary course of working relationships may report to, and acceptdirection from an entity's duly authorized constituents . . . the lawyer shall proceed asreasonably necessary in the best interest of the organization.

In determining whether you should consent to my representation of each of you in

the formation of the LLC, and of the LLC following its formation, you should carefullyconsider the following matters.

First, in serving as legal counsel to an entity, I will respond to the instructions of the representatives authorized and empowered to act on behalf of the entity. Forexample, any of the managers will be considered to have the authority and power to dealwith me.

The second matter involves the attorney-client privilege and the duty of confidentiality. Although the law is not settled in this area, it is reasonably clear that therepresentation of several individuals in the formation of an LLC, and the representation

of the LLC thereafter, affects the issue of confidentiality. After formation of the LLC,my duties will be towards [Band Name] rather than any of you individually. As such,any information disclosed to me by any of you individually during the course of myrepresentation of the LLC will not be protected by the attorney-client privilege or theduty of confidentiality (from being disclosed to the other members, as distinguished fromdisclosing to other third parties). Similarly, information disclosed to me by any of youprior to the formation of the LLC may not be protected by the attorney-client privilege orthe duty of confidentiality. Accordingly, I cannot effectively represent [Band Name], orany of you with respect to its formation, if you request that I keep information inconfidence from the other members.

Of course, there are advantages to my joint representation of you in the formationof the LLC. Having one attorney familiar with the transactional work on a matter oftensaves legal expenses. Additionally, I may be able to help you conclude this matter morequickly than if other attorneys were also involved. In connection, it is my understandingthat none of you considers this matter to be adversarial. In fact, it is my understandingthat the savings in legal fees and the desired quick resolution of this matter are reasonsthat each of you has retained this firm to represent all of the parties. Finally, under thepresent circumstances, I do not believe that my multiple representation will materially


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affect the representation of any of you, individually or collectively, or the representationof the LLC.

Notwithstanding the forgoing, you should understand that the formation of anyentity involves potential conflicts because it is the joining together of individuals or otherentities with differing needs, for what is initially perceived to be a common objective. Itis impossible to enumerate all of the possible effects this may have upon an attorney'srepresentation of an LLC, but each of you should understand that, when there is a disputeamong jointly represented individuals, or any other material adversity of interest, thelawyer for the LLC cannot provide legal representation for the individual members.Moreover, as a general matter (and as discussed above), discussions between the lawyerand the individual members are not privileged insofar as those individuals areconcerned. Accordingly, in the event of any discord, I would advise each of you to hireyour own counsel.

As a final matter, before signing the attached consent and conflict waiver, you should know that you have the right to consult with independent counsel who can advise you with regard to any potential conflicts which could arise in my joint representation of you in this matter. In fact, I would encourage you to do so, as attorneys often differ in their analyses of such issues.

With respect to my fees and disbursements, please note that my hourly rate is$____.00 per hour, and I will require a retainer of $_____.00 in order to get started. Inaddition, I may bill you for reasonable expenses incurred by me in the performance of mywork, such as travel expenses, delivery expenses, long-distance telephone charges, courtcosts, deposition costs, filing fees, printing and reproduction costs and similar

expenditures, if any.

From time to time (usually on a monthly basis), I will bill you for legal servicesrendered and expenses incurred by me in handling the subject matter during the periodcovered by the invoice. You agree to pay all invoices on a current basis within thirty (30)days following the date of each invoice.

By signing below, each of the undersigned hereby confirms that he or she has been informed of the existence of present and potential conflicts in connection with this firm's representation of each of you in connection with the formation of the LLC and of the LLC with respect to other matters, and have nonetheless requested and

agreed that I represent each of you in the formation of the LLC, and the LLC in connection with other matters from time to time. Each of the undersigned understands that, by his or her assent to my engagement in the matters described herein, each of theundersigned has waived any and all past, present and future conflicts of interest

arising from such joint representation.

If you consent to my representation of each of you in the formation of the LLCand the LLC after its formation, based on the disclosures and conditions listed above,


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please so indicate by your signature in the applicable space provided in the attachedconsent form, and return one copy of this letter to me.

I appreciate the opportunity to be of service to you. If you have any questionswith regard to the matters in this letter, please do not hesitate to call me.

Very truly yours,

[Attorney Name]FIRM NAME

AGREED AND ACCEPTED:

______________________________[Band Member]

______________________________[Band Member]

______________________________[Band Member]

______________________________[Band Member]

RBM/lo/[band]/FeeAgmt&Wvr


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-1- ____________________ / Operating Agreement ________, 2011

COMPANY AGREEMENT FOR

____________________, LLC(A Texas Limited Liability Company)

Address: PO Box 42136

Austin, TX 78704

This AGREEMENT is entered into and effective as of ________________, 2011, by ________________, (______),________________ (______), ________________ (______) and ________________ (______) (each a Member and together, theMembers).

WITNESSETH:

WHEREAS the Members desire to form a Texas Limited Liability Company(hereinafter the Company); and

WHEREAS the Members hereto desire to adopt this Agreement;

NOW, THEREFORE, in consideration of the premises hereof and for other goodand valuable consideration, the receipt and sufficiency of which is hereby acknowledged,the parties hereto agree as follows, effective as of the date first written above.

ARTICLE I.ORGANIZATION

1.01. Formation. The Company has been organized as a Texas limited liability

company by the filing of a Certificate of Formation (the Certificate) under and pursuantto the Texas Business Organizations Code (the TBOC).

1.02. Name. The name of the Company is ____________________, LLC, and allCompany business shall be conducted in that name or such other names that may beselected by the Managers and that comply with applicable law.

1.03. Registered Office; Registered Agent. The registered office and registered agentof the Company in the State of Texas shall be as specified in the Certificate or asdesignated by the Managers in the manner provided by applicable law. The offices of theCompany shall be at such places as the Managers may designate, which need not be inthe State of Texas.

1.04. Purposes. The purposes of the Company will be to conduct activities inconnection with the musical group professionally known as ____________________(sometimes hereinafter referred to as the Group or the Group Name), including thecreation and exploitation of musical recordings, live performances and touring,merchandising and other activities in the entertainment industry; to do all acts necessary,appropriate and incidental in connection therewith; and to engage in any other business


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activity that a limited liability company organized under the Act may lawfully do whichis approved by all of the Members.

1.05. Term. The Company commenced on the date the Secretary of State of Texasissued a certificate of formation for the Company and shall continue in existence for the

period fixed in the certificate for the duration of the Company, or such earlier time as thisAgreement may specify.

1.06. No State-Law Partnership. The Members intend that the Company not be a partnership (including a limited partnership) or joint venture, and that no Member or Manager be a partner or joint venturer of any other Member or Manager, for any

purposes other than applicable tax laws, and this Operating Agreement may not beconstrued to suggest otherwise.

ARTICLE II.

(INTENTIONALLY DELETED) ARTICLE III.

CONTRIBUTIONS AND INTERESTS

3.01. Initial Capital Contribution. Contemporaneously with the execution by suchMember of this Agreement, each Member shall make the contributions to the capital of the Company (Capital Contributions) described for that Member in Exhibit A.

3.02. Percentage Interests. Each Member will have a percentage interest in theCompany equal to the percentage described for that Member in Exhibit A.

3.03. Capital Accounts. The Company will determine and maintain CapitalAccounts for each Member throughout the full term of the Company in accordance withSection 704(b) of the Internal Revenue Code (the Code) and the Treasury Regulationsthereunder including, without limitation, the provisions of section 1.704-1(b)(2)(iv) of theCode, as the regulation may be amended from time to time.

3.04. Return of Contributions. A Member is not entitled to the return of any part of itsCapital Contributions or to be paid interest in respect of either its capital account or itsCapital Contributions. An un-repaid Capital Contribution is not a liability of theCompany or of any Member. A Member is not required to contribute or to lend any cashor property to the Company to enable the Company to return any Member's CapitalContributions.

3.05. Advances by Members. If the Company does not have sufficient cash to pay itsobligations, any Member(s) that may agree to do so with the consent of the Managersmay advance all or part of the needed funds to or on behalf of the Company, at suchinterest rate and on such other terms as such Member and Managers may agree. An


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advance described in this Section 3.05 constitutes a loan from the Member to theCompany and is not a Capital Contribution.

3.06. Other Contributions. Each Member shall render the following services andhereby grants the following rights, titles and interests to the Company, all of which shall

be deemed to be contributions to the Company, and all of which, along with the resultsand proceeds of which shall be deemed to be Company Property.

(a) Master Recordings. Each Member shall render his non-exclusive producing and recording services to the Company in connection with the master recordings and videos recorded by the Group. Each master recording and video made byor furnished to the Group by any or all of the Members under this Agreement or duringthe Term (collectively referred to as Masters), from the inception of recording, shall beconsidered a work made for hire for the Company. If any such Master is determined notto be a work made for hire for the Company, it shall be deemed transferred to theCompany by this Agreement, together with all rights in it, throughout the universe

(Territory). All such Masters shall be deemed recorded by the Member(s) on theCompanys behalf. All Masters or other duplications in whatever form now or hereafter known, manufactured therefrom, together with the performances embodied therein, shall,from the inception of recording, be the property of the Company, in perpetuity,throughout the Territory, free from any claims by any Member or any other person. TheCompany shall have the exclusive right to copyright all Masters in the Companys nameas the author and owner of same, and to secure any and all renewals and extensions of copyright throughout the Territory.

(b) Musical Compositions/Publishing. For avoidance of doubt, nothingcontained in this Agreement shall be construed so as to convey any rights in any musical

compositions written by any Member, and each such musical composition shall remainthe property of the author(s) thereof.

(c) Name and Likeness. Each Member hereby grants to the Company thenon-exclusive right to use his name and/or likeness, in perpetuity, in connection with theexploitation of any Masters embodying such Members performances. Moreover, so longas a Member shall perform with the Group, he grants to the Company the following: (i)the non-exclusive right to use his name and/or likeness for marketing and promotional

purposes (Publicity Rights), and in connection with any and all merchandise sold to the public bearing the name of the Group, including, without limitation, T-shirts, posters, etc.(hereinafter Merchandise), and (ii) the non-exclusive right to use his or her name,likeness and/or signature in connection with the endorsement of any product or service(Endorsement). In the event that a Shareholder becomes a Terminated Shareholder (asdefined below) and thereby ceases to perform with the Group, the Publicity Rights andEndorsement rights granted in this subparagraph shall nonetheless continue for a period(hereinafter referred to as the Post-Termination Grant of Rights Period) ending on thedate that is six (6) months following the Termination Date (as defined below).

Notwithstanding the foregoing, in connection with any contract entered into by theCompany prior to the Termination Date, the Post-Termination Grant of Rights Period


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shall be extended (with respect to the rights granted in that contract only) for a periodending on the natural expiry of such contract. For avoidance of doubt, during the Post-Termination Grant of Rights Period (and any extension thereof which are authorizedhereunder), the Company shall continue to account and pay to the TerminatedShareholder his or her share of revenues therefor, as set forth in paragraph 5.02 below.

3.07. Assignment. Each Member hereby grants to the Company the right to administer any or all of the rights granted to the Company in paragraph 3.06 above, including,without limitation, the right to license, transfer and/or assign to any third party, in theCompanys sole discretion, the Companys administration and ownership rights in and tothe Masters, Publicity Rights, Merchandise and Endorsements, and all rights relatedthereto, including, without limitation, copyrights, trademarks, service marks, etc.

3.08. Group Name. The Members acknowledge that the Company owns the Group Name, and all rights, title, interests, trademarks and/or service marks associatedtherewith. To the extent that any Member has any claim or interest in the Group Name,

such Member hereby transfers such interest to the Company. In connection therewith,the Members hereby acknowledge and affirm that no Member has or shall have any rightsor interests in the Group Name. The Company has the exclusive right to use the Group

Name, including any trademark, service mark or logo embodying all or any portion of theGroup Name.

3.09. Equipment. All equipment purchased by the Company (Equipment) shall bedeemed Company Property. Any equipment presently owned by or subsequentlyacquired by any individual Member, unless transferred to the Company, shall not bedeemed Company Property and shall remain the sole property of each Member.

ARTICLE IVPOWERS, RIGHTS, DUTIES AND RESTRICTIONS

4.01. General Powers. The powers of the Company shall be exercised by or under theauthority of, and the business and affairs of the Company shall be managed under thedirection of, its Managers, who may exercise all of the powers of the Company and do allsuch lawful acts and things, as are not by the TBOC, the Certificate of Formation, or thisAgreement directed or required to be exercised or done by the Members.

4.02. Initial Designation of Managers. The Members hereby designate ______, ______, ______and ______ as the Managers of the Company, who shall serve in suchcapacity unless and until new Managers are designated by majority vote of the Members.

4.03. Actions Affecting the Company. The following matters shall be determined by amajority of the Managers of the Company on the date the vote was taken:

(a) Masters and Videos. Any action or decision affecting any Master (including any videos), including, but not limited to, the sale or license thereof;


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(b) Publicity Rights. Any action or decisions affecting any Publicity Rights,including, but not limited to, the use or license thereof;

(c) Merchandise. Any action or decision affecting Merchandise, including, but not limited to, the design of any item of Merchandise;

(d) Endorsements. The decision to grant any Endorsement, or any other actionaffecting any Endorsement;

(e) Appearances. The decision to schedule and make any personalappearances, tours, etc; and

(f) Other Matters. Any other matter not specifically set forth in sections4.01(a) through (e).

4.04. Restrictions.

(a) Except as expressly set forth to the contrary herein, the individualManagers and Members shall not have the authority with respect to the Company and thisAgreement to:

(i) Do any act in violation of this Agreement;

(ii) Do any act that would make it impossible to carry on the businessof the Company; or

(iii) Possess Company Property or assign the right of the Company or

its Members in specific Company Property, except as otherwise provided in thisAgreement;

(b) No Member or Manager of the Company shall, without the consent of amajority of the Members, do any of the following:

(i) Borrow money in the Companys name or create any liability for the Company or any personal liability for any other Member other than that personalliability to which any Member may have agreed in writing;

(ii) Make, execute or deliver for the Company any bond, mortgage,deed of trust, guarantee, indemnity bond, surety bond or accommodation paper or endorsement; or

(iii) Sell, transfer or assign, pledge, mortgage, hypothecate or in anyway dispose of, encumber, or alienate all or any part of a Members interest in theCompany (Members Interest), whether directly or indirectly, voluntarily or byoperation of law, or by gift or otherwise, to any person, firm, or corporation, without the

prior written consent of the Company. Any purported or attempted transfer or


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encumbrance of a Members Interest, without so complying, shall be null and void andineffectual, shall not operate to transfer any interest or title in such Members interest tothe purported transferee, shall not be recognized as a transfer by the Company on its

books and shall give the Company an option to purchase such Members Interest in themanner and on the terms and conditions provided in this Agreement.

4.05 Disputes. Disputes arising out of or relating to this Agreement (and the matterscontemplated hereunder), to the Company (including its operation and/or dissolution), toany brands or assets owned or managed by the Company, or between any parties to thisAgreement shall be resolved through a process of negotiation, mediation and bindingarbitration under the Federal Arbitration Act (9 U.S.C. 1, et seq.) as described herein.

(a) Dispute Resolution; Mediation. For any dispute arising out of or related tothis Agreement, the applicable procedure shall be as follows: (1) the aggrieved party shallnotify the other party in writing of the nature and circumstances of the dispute; (2) withintwo weeks of the date by which such notice has been delivered, the principals of each

party shall engage in person-to-person discussions to attempt to resolve the dispute; (3) if no resolution is reached within thirty (30) days of commencement of the discussions setforth in (2) above, the parties shall mediate the dispute within two (2) months before anagreed upon mediator, or if no agreement on a mediator can be reached, before amediator appointed by a reputable dispute resolution service. The purpose of this

provision is to reduce the burden and expense that may result from more conventionalmethods of dispute resolution and to encourage reasonable and prompt resolution of anydisputes. Accordingly, the parties expressly agree that: (a) compliance with this

procedure is a mandatory prerequisite to the filing of any proceeding concerning anydispute; and (b) unless the responding party fails to participate, failure of an aggrieved

party to follow these procedures before initiating a judicial or administrative proceeding

constitutes a waiver of all accrued monetary damages for all claims arising out of thatdispute.

(b) Binding Arbitration Procedure. The parties agree that any dispute,controversy or claim arising hereunder or in any way related to this Agreement, itsinterpretation, enforceability, or applicability, or relating to the parties obligationshereunder, or the termination thereof, that cannot be resolved by mutual agreement or mediation of the parties as set forth above, shall be submitted to binding arbitration inaccordance with the Federal Arbitration Act. The parties agree that arbitration is the

parties only recourse for such claims and hereby waive the right to pursue such claims inany other forum, unless otherwise provided by law. Any court action involving a disputewhich is not subject to arbitration shall be stayed pending arbitration of arbitrabledisputes. The parties agree that the arbitrator shall have the authority to issue provisionalrelief. The parties further agree that each has the right to apply to a court for a

provisional remedy in connection with an arbitrable dispute only to the extent necessaryto prevent the arbitration from being rendered ineffective. Any demand for arbitrationshall be in writing and must be communicated to the other parties prior to the expirationof the applicable statute of limitations. The arbitration shall be conducted pursuant to the

procedural rules stated in the Commercial Rules of the American Arbitration Association


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("AAA"). The arbitration shall be conducted in Austin, Texas by an arbitrator with atleast ten (10) years experience in commercial related disputes, who shall have the power to hear motions, control discovery, conduct hearings and otherwise do all that isnecessary to resolve the matter. The parties must mutually agree on the arbitrator. If the

parties cannot agree on the arbitrator after their best efforts, an arbitrator from the

American Arbitration Association will be selected pursuant to the American ArbitrationAssociation National Rules for Resolution of Commercial/Business Disputes. Thearbitrators fee shall be allocated evenly between the parties to the dispute. Thearbitration will be decided upon a written decision of the arbitrator stating the essentialfindings and conclusions upon which the award is based. The arbitrator shall have theauthority to award damages, if any, to the extent that they are available under applicablelaw(s). The arbitration award shall be final and binding, and may be entered as a

judgment in any court having competent jurisdiction. It is expressly understood that the parties have chosen arbitration to avoid the burdens, costs and publicity of a court proceeding, and the arbitrator is expected to handle all aspects of the matter, includingdiscovery and any hearings, in such a way as to minimize the expense, time, burden and

publicity of the process, while assuring a fair and just result. In particular, the partiesexpect that the arbitrator will limit discovery by controlling the amount of discovery thatmay be taken (e.g., the number of depositions or interrogatories) and by restricting thescope of discovery only to those matters clearly relevant to the dispute. However, at aminimum, each party will be entitled to at least one deposition of any other party andshall have access to essential documents and witnesses as determined by the arbitrator.The prevailing party shall be entitled to an award by the arbitrator of reasonableattorneys fees and other costs reasonably incurred in connection with the arbitration.The provisions of this Section shall survive the termination of this Agreement and shall

be binding upon the parties. The undersigned have read this Section and irrevocablyagree to arbitrate any dispute identified above.

4.06. Indemnification. The Company will indemnify and hold harmless each of theMembers from and against any loss or damage incurred by any of them (includingreasonable attorneys fees and costs) by reason of any acts performed or omitted by anyof them for or on behalf of the Company unless they committed such acts in bad faith or the acts were the results of active and deliberate dishonesty and were material to thecause of action so adjudicated, or the Member will have personally gained in fact afinancial profit or other advantage to which he, she or it was not legally entitled. THISINDEMNITY SHALL APPLY REGARDLESS OF WHETHER SUCH ACT OR OMISSION CONSTITUTED THE SOLE, PARTIAL OR CONCURRENT

NEGLIGENCE (WHETHER ACTIVE OR PASSIVE) OF THE MEMBER.

ARTICLE V.ALLOCATIONS AND DISTRIBUTIONS

5.01. Net Income and Net Losses. Allocations to the Members of all items of netincome, gain, revenue and credit shall be allocated to each Member in accordance withthe terms hereof. Allocation to the Members of net losses and deductions shall be prorata among all Members.


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5.02. Cash Distributions. Distributions of cash available for distribution may be madeonly if, in the judgment of a majority of the Managers, they will not in any way

jeopardize or limit the business activities of the Company, including the payment of anyExpense (as defined in paragraph 5.03 below). Cash available for distribution shall mean

such cash on hand and in the banks as in the discretion of a majority of the Managers isthen available for distribution to the Members after all current debts and obligations of the Company, including Expenses, have been paid or provision therefor has been madeand a reserve has been established which, in the discretion of a majority of the Managersis adequate for operating expenses and normal working capital. Distribution to anyformer Member or the estate of any former Member as described in this Paragraph shall

be made at the same time as the applicable distribution is distributed to the then currentMembers and shall remain subject to the same reserve percentage and pro rata share of applicable Expenses. Such allocations shall be made in the following manner:

(a) Master/Videos. All cash sums available for distribution and received by

the Company from the exploitation of Masters shall be allocated as follows:(i) All such revenue shall be allocated pro rata among all Members (and

Terminated Members, if applicable under subparagraph 5.02(a)(ii) below) who renderedrecording services on the applicable Master; and

(ii) A Terminated Member or the heirs or estate of a Terminated Member shall be entitled to receive such Members pro rata share of cash sums received from theexploitation of Masters regardless of when such sums are received by the Company,

provided such Member rendered recording services on the applicable Master(s).

(b) Merchandise. All cash sums (including advances) available for distribution and received by the Company from the exploitation of Merchandise shall beallocated pro rata among all Members who are Members as of the date of receipt of suchsums, except that any cash sums available for distribution from Merchandise bearing thename and likeness of any Terminated Member shall be allocated pro-rata among all theMembers and the Terminated Member.

(c) Endorsements. All cash sums available for distribution and received bythe Company from Endorsements shall be allocated in the following manner.

(i) If an Endorsement involves all of the Members, all of such sumsshall be allocated pro rata among all Members who are Members on the date such sumsare actually received by the Company.

(ii) If an Endorsement features less than all of the Members butnevertheless features the Group Name, then 50% of such sums are to be allocated prorata among all of the Members, and the remaining 50% shall be allocated pro rata amongall of the Members whose name(s) and likeness(es) are used in the Endorsement.


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(iii) A Terminated Member or his heirs or estate shall be entitled toreceive the Terminated Members pro rata share of the payments referenced inParagraphs 5.02(c)(i) and (ii) so long as such Terminated Members image and likeness isused in the Endorsement.

(d) Other Revenue. Any other cash sums available for distribution shall beallocated pro rata among the Members who are Members on the date such sums arereceived by the Company.

5.03. Expenses. Expenses shall mean all expenses of whatever kind or nature, paid or incurred by or on behalf of the Company including, but not limited to, (a) miscellaneousday-to-day operating expenses such as postage, courier, telephone and telefax charges inconnection with the Companys activities; (b) travel and related costs incurred directly inconnection with the Companys activities; (c) business expenses or payments to any

personal manager, business manager, accountant, attorney or consultant; (d) recordingand production costs including producer and engineer payments; (e) payments related to

acquisition, creation, production, manufacture, sale or distribution of Masters or Merchandise; and (f) any other expense directly related to the operation of the Companyand its activities. All cash distributions, whether paid during the Term or after Termination of a Member shall be subject to reimbursement of a pro rata share of theCompanys expenses, in perpetuity.

ARTICLE VIADMISSION AND WITHDRAWAL

6.01. Admission. A person or entity may become a Member only with the writtenconsent of all of the Members, and such agreement shall serve to amend this Agreement

to include any such additional Members. All Members regardless of when they becomeMembers shall be bound by this Agreement.

6.02. Withdrawal. A Member may not withdraw from the Company without thewritten consent of the Managers, calculated without reference to the withdrawingMember; provided however, a Member shall have the power to withdraw at any time inviolation of this Section 6.02. If a Member exercises such power in violation of thisSection 6.02, then such withdrawing Member shall be liable to the Company and other Members for all monetary damages suffered by them as a result of such withdrawal. Inno event shall the Company or any Member have the right, through specific performanceor otherwise, to prevent a Member from withdrawing in violation of this Section 6.02.

6.03. Termination. Except as otherwise set forth herein, a Member may be terminatedfrom the Company and his interest in the Company terminated only with the writtenconsent of all Members other than the Member sought to be terminated and subject to theterms herein. A Member may be terminated for any reason, with or without cause or for no reason, whatsoever, at the sole discretion of the remaining Members. Upon a vote of termination, the Members may terminate such Members shares by serving written noticeof such termination upon such Member, which shall be effective as of the date of service.


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The termination of a Member shall not cause the dissolution of the Company and theCompany shall continue to do business as a Company after such removal.

6.04. Disability. Disability shall be defined as mental, physical or other disability or condition as shall materially interfere with any Members performance of his or her

duties as a Member for a consecutive period of thirty (30) days or an aggregate period of sixty (60) days during any calendar year. At any time thereafter, the disabled Member and his interests may be terminated by consent of all Members other than the disabledMember and by serving written notice of such termination upon such Member effectiveupon the date of service. The disability of a Member shall not cause the dissolution of the Company and the Company shall continue to do business as a Company after suchdisability.

6.05. Bankruptcy, Conservatorship or Charging Order. By service of a writtennotice on both (a) the Member; and (b) the trustee in bankruptcy of such Member, theconservator of such Member, or the judgment creditor of such Member who has obtained

a charging order against his Interest, the remaining Members may terminate the Member and buy out his interests by serving written notice of such termination upon such Member effective upon the date of service. The application for bankruptcy protection by or insolvency of a Member shall not cause the dissolution of the Company and the Companyshall continue to do business as a Company after the insolvency of bankruptcy filing of aMember.

6.06. Death. Upon the death of a Member, the deceased Member and his Interest shall be deemed to be terminated as of the date of death. The Death of a Member shall notcause the dissolution of the Company and the Company shall continue to do business as aCompany after the death of a Member.

6.07. Divorce. Upon the divorce of a Member, the Members interest shall not transfer or pass to the Members spouse. To the extent that there is a determination otherwise or the possibility thereof, that divorcing Members interest shall be deemed to be terminatedas of the date of divorce.

6.08 Notice and Transfer of Interest. In the event of any withdrawal or terminationof a Member or his interest as described in Paragraphs 6.02 through 6.07 above, theMember shall become a Terminated Member. Within 30 days of the occurrence of anyevent described in Paragraphs 6.02 through 6.07, the Company shall give notice of termination to the Terminated Member (Notice of Termination), which shall beeffective as of the dates set out above. Within thirty (30) days of the Notice of Termination, the Company shall effectuate the Buy-Out of the Terminated MembersInterest as provided hereafter. Upon tender by the Company to the Terminated Member or his heirs of any applicable Letters of Direction executed by the Company and thePurchase Price in the form of cash payment or the Note executed by the Company and asdescribed hereafter, the Terminated Member (or his duly authorized representative) shall,within five (5) days of the Companys request therefor, execute all documents necessaryto transfer his interests to the Company.


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ARTICLE VIIRIGHTS UPON TERMINATION OF A MEMBER

7.01 Rights in Company Property. A Terminated Member and any purportedsuccessor, heir, licensee and/or assign of such Terminated Member, shall only have such

rights in the Company and the Company Property, and/or any income derived by theCompany or from the Company Property, as are expressly set forth in this Agreement for a Terminated Member. All Members hereby waive any claims, on behalf of themselvesand their successors, heirs, licensees and assigns, against the Company and/or anyMember with respect to any other rights in or to the Company and the CompanyProperty, and/or any income derived by the Company or from the Company Property,except for those rights set out in this Article VII of this Agreement. In no event shall anysuch successors, heirs, licensees or assigns be admitted or substituted as a Member in theCompany, or have any powers, duties or other rights with respect to the business of theCompany, or ownership interest in any Company Property, without the Companyswritten consent.

7.02. Buy Out and Continuing Royalty Interest upon Termination. UponTermination, the Company shall pay or cause to be paid to the Terminated Member thefollowing:

(a) Buy-Out. A pro rata share of the fair market value of all CompanyProperty at the time of Terminated Members Termination, except that the Group Nameand all good will, shall be valued at $100 for the purposes of this Buy-Out only, and allcontracts, licenses, copyrights, intellectual property rights, publicity rights, administrativerights, and all rights to continue to use the Terminated Members name and likeness andrecorded performances after Termination, and all rights associated therewith, and all

future revenue earned by the Company after the Terminated Members Termination, shall be valued at $100 for the purposes of the Buy-Out only. The Terminated Members prorata share of the fair market value of the Company Property computed as set out hereinshall be referred to as the Purchase Price.

(b) Continuing Royalty Interest. With respect to any income received by theCompany related to any Master(s), merchandise and/or Endorsement(s), the Companyshall pay the Terminated Member his or her share of revenues related thereto inaccordance with the applicable provisions of Article V. Such revenues shall hereinafter

be referred to as the Terminated Members Continuing Royalty Interest.

7.03. Payment of Purchase Price. The total amount of the Purchase Price to be paidfor any Terminated Members interest shall be upon the following terms:

(a) If the Purchase Price is $______ or less, the Purchase Price shall be paidin one lump sum, within thirty (30) days of termination.

(b) If the Purchase Price exceeds $______ then the Company shall pay theTerminated Member 10% of the Purchase price within thirty (30) days of Termination,


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with the balance payable pursuant to a promissory note, in equal monthly installments,over five (5) years, plus interest at the rate of 6% per annum, with no prepayment penalty(Note).

(c) Upon the tender of the Purchase Price in cash and/or the Note, as

applicable, the Terminated Member or his heirs shall be deemed to have duly transferred,assigned and delivered to the Company the Terminated Members interest in theCompany. All Members hereby agree to execute whatever documents are necessary toeffectuate and enforce the terms of this Agreement, within five (5) days of presentationfor signature.

7.04. Right of Offset. The Company and Members shall have the right to offset againstthe Purchase Price, or any other amount payable by it or him or her hereunder (including,without limitation, the Continuing Royalty Interest), the amount of any obligations of thetransferring Member to the Company or the purchasing Member, respectively. Likewise,the Purchase Price shall be increased by the amount of any obligation of the Company

payable to the transferring Member other than Members personal guaranty of indebtedness of the Company. Upon the transfer of all of his Members interest in theCompany, the Company shall make a good faith reasonable effort to obtain the removalof such Member as a guarantor of any Company indebtedness.

7.05. Waivers and Release of all Claims. Except as otherwise set forth herein, theMembers hereby waive all rights, titles and interests in any and all contracts, licenses,copyrights, intellectual property rights, and administrative rights to all product releasedunder the Group Name prior to Termination and any future earnings generated from all

products released under the Group Name after Termination, all of which shall remain the property of the Company, including all rights to the Group Name. The Terminated

Member shall have no rights to any compensation, remedies or damages as a result of Termination, except as specifically provided in this Article 7.

ARTICLE VIII.TAXES

8.01. Tax Returns. The Company shall prepare and timely file all federal, state, andlocal tax returns required to be filed by the Company. Each Member shall furnish to theCompany all pertinent information in its possession relating to the Companys operationsthat is necessary to enable the Companys tax returns to be timely prepared and filed.The Company shall deliver a copy of each such return to the Members on or before ten(10) days prior to the due date of any such return, together with such additionalinformation as may be required by the Members in order for the Members to file their individual returns reflecting the Companys operations. The Company shall bear thecosts of the preparation and filing of its returns.

8.02. Tax Elections. The Company shall make the following elections on theappropriate tax returns:


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(a) To adopt the calendar year as the Companys fiscal year;

(b) To adopt the accounting method that best matches revenues and expenses,or any method approved or required by the Internal Revenue Code;

(c) Any other election the Managers may deem appropriate and in the bestinterests of the Members.

Neither the Company nor any Manager or Member may make an election for theCompany to be excluded from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code, or any similar provisions of applicable state law, andno provision of this Operating Agreement shall be construed to sanction or approve suchan election.

8.03. Tax Matters Partner. ____________________ is hereby designated as the taxmatters partner of the Company pursuant to Code Section 6231(a)(7) (the Tax Matters

Member). The Tax Matters Member shall take such action as may be necessary to causeto the extent possible each other Member to become a notice partner within themeaning of Code Section 6223. The Tax Matters Member shall inform each other Member of all significant matters that may come to its attention in its capacity as TaxMatters Member by giving notice thereof on or before the fifth business day after

becoming aware thereof and, within that time, shall forward to each other Member copiesof all significant written communications it may receive in that capacity. Any cost or expense incurred by the Tax Matters Member in connection with its duties, including the

preparation for or pursuance of administrative or judicial proceedings, shall be paid bythe Company.

ARTICLE IXBOOKS, RECORDS, AND BANK ACCOUNTS

9.01. Maintenance of Books. The Managers shall keep or cause to be kept at the principal office of the Company complete and accurate books and records of theCompany, supporting documentation of the transactions with respect to the conduct of the Companys business, and minutes of the proceedings of its Managers, Members, andeach committee of the Managers. The books and records shall be maintained withrespect to accounting matters in accordance with sound accounting practices, and all

books and records shall be available at the Companys principal office for examination by any Member or the Members duly authorized representative at any and all reasonabletimes during normal business hours.

9.02. Accounts. The Managers shall establish one or more separate bank andinvestment accounts and arrangements for the Company, which shall be maintained in theCompanys name with financial institutions and firms that the Managers determine. TheManagers may not commingle the Companys funds with the funds of any Manager or Member.


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ARTICLE XTERMINATION, DISSOLUTION AND LIQUIDATION.

10.01. Termination. The Company shall terminate and be dissolved upon theoccurrence of any of the following events:

(a) The unanimous written consent of all of the Members at the time the voteis taken;

(b) Any event which makes it unlawful to conduct the business of theCompany;

(c) Upon the disability, death or withdrawal of a Member when such death or withdrawal results in less than one (1) of the original Members remaining active in theCompany;

(d) Entry of a decree of judicial dissolution of the Company under the TBOC.10.02. Liquidation. Upon the occurrence of any of the events set forth in Section 10.01,the Members shall determine the manner in which the affairs of the Company shall bewound up and liquidated, to the extent not otherwise set forth in this Agreement. Amajority of the Members shall agree upon the manner of distribution of any CompanyProperty other than the Masters, Merchandise and Group Name which shall be assignedto and controlled by the Administrator as set forth in Paragraph 10.04 below. Withrespect to any Company Property upon which the Members cannot come to an agreedvalue, the Members shall each select an appraiser to determine same. Within thirty (30)days from the dissolution of the Company, a final statement of assets and liabilities shall

be prepared by the Members or appraisers (if applicable).10.03. Proceeds. From and after the dissolution of the Company, the proceeds from theliquidation of any Company Property and from the operation of the Companys business,shall be applied and distributed in the following order:

(a) Expenses. The expenses of liquidation and the debts of the Company,including any outstanding Expenses, shall be paid in the order of priority provided bylaw, except the claims of secured creditors whose obligations will be assumed andotherwise transferred upon the liquidation or distribution of the Company Property.

(b) Services. The appraisers responsible for winding up, if any, shall be paidthe compensation to which they are entitled for their services in winding up the affairs of the Company.

(c) Remaining Cash/Property. To the extent of any excess, such sums shall be prorated among the Members. Assets may be distributed in kind to the Members if theMembers or appraisers, if applicable, agree that it would be commercially prudent to doso.


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(d) Group Name. No Member shall have any rights in, or right to receive anyincome from the exploitation of the Group Name except as expressly set forth in thisAgreement.

10.04. Administrator. Upon the dissolution of the Company, ________________ shall be deemed to be the administrator of all remaining company assets (the Administrator).In accordance, the Company shall be deemed to have assigned to the Administrator allright, title and interest, including the copyright, trademarks and/or servicemarks, in theMasters, Merchandise and Group Name (the Assets). The Administrator shall thenhave the right to control the Assets, which shall include the right to sell, license, assign or otherwise exploit all or any rights therein as the Administrator shall determine in theAdministrators sole discretion. Additionally, the Administrator shall administer therights in existing licenses and other agreements and receive royalties or other payments

pursuant to any agreement entered into prior to the dissolution of the Company (theContract Rights). The Administrator shall distribute to the Members all sums received

by him with respect to the Contract Rights or the Assets in accordance with the termshereof, after deduction of Expenses.

10.05. Certificate of Termination. On completion of the final distribution, theManagers shall file a Certificate of Termination with the Secretary of State of Texas, andtake such other actions as may be necessary to terminate the existence of the Company.Upon the filing of the Certificate of Termination with the Secretary of State of Texas, theexistence of the Company shall cease, except as may be otherwise provided by the TBOCor other applicable Law.

ARTICLE XI

SPOUSAL INTEREST INCORPORATED11.01. Spousal Interest. Any shares owned by a Members spouse (including his or her community interest, if any) shall for all purposes be included in, deemed part of, and

bound by the same terms hereof as the Members Interest owned by the Member, and anyaction taken, offer made, or option exercised hereunder with reference to the MembersInterest shall be applicable to any spousal interest in such Members Interest. The spouseof each Member has or will forthwith provide in his or her respective will that any and allof his or her interest in the Members Interest owned by his or her respective spouse andto which he or she or his or her estate and the legal representative of his or her estate shall

be entitled upon his or her death are bequeathed to his or her respective spouse. Alsoupon divorce, each spouse of a Member agrees to transfer to such Member all of his or her right, title, and interest in the Members Interest of such Member. If a spouse of aMember makes a voluntary assignment for the benefit of creditors, or files, or has filedagainst him or her, a petition in bankruptcy, or has a receiver or trustee appointed for hisor her assets, or seeks or has sought against him or her any other right or remedy under any bankruptcy law or insolvency act, then the Member so affected shall acquire any andall of his or her spouses interest in his or her Members Interest, if any.


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11.02. Option to Purchase Un-Acquired Interest. If a Member fails to obtain or acquire any and all of his or her spouses interest in his or her Members Interest upon hisor her death, upon divorce, or upon his or her bankruptcy, then such Member, theCompany or the other Members (in that order) shall have the option to purchase suchspouses interest in such Members Interest, and such spouse or the legal representative

of his or her estate shall be obligated to sell such spouses interest in the MembersInterest to such Member, the Company or the other Members upon exercise of thisoption. Such option shall be exercised within a period of ninety (90) days after the dateof death of such spouse, or within a period of thirty (30) days after the date such Member failed to obtain his/her spouses interest in such Members Interest upon his or her

bankruptcy or upon divorce, as the case may be. This option shall be exercised by givingwritten notice of such exercise to such spouse or the legal representative of his/her estate,and the sale and purchase of his/her interest shall be closed within thirty (30) daysthereafter. The Purchase Price shall be equal to the so-called book value price withrespect to the Members Interest to be acquired as provided hereunder.

11.03. Spousal Consent. Any Member who marries or remarries after the execution of this Agreement agrees to obtain the agreement of his or her new spouse to the terms of this Agreement and shall obtain such spouses signature on the acknowledgementattached hereto as Schedule B and signed by the spouses of the other Members hereto.

ARTICLE XIISPECIFIC PERFORMANCE

12.01 Specific Performance. The Company, Members and Members spousesacknowledge and agree that it would be impossible to measure in money the damageswhich would accrue to the Company by reason of a Members or such Members

spouses or heirs or executors or administrators failure to perform any of theobligations under this Agreement. Therefore, if the Company shall commence any actionor seek injunctive relief against any Member, or his spouse, heirs, administrators or executors, any such person against whom such action or proceeding is brought herebywaives the claim or defense therein that the Company has an adequate remedy at law, andsuch person shall not urge in any such action or proceeding that such remedy at lawexists.

ARTICLE XIIIGENERAL PROVISIONS

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

13.02. Notices. All notices required or desired to be sent to the Members shall be inwriting and shall be sent by certified mail, return receipt requested, with a copy to theCompany at the address set forth in the introductory Paragraph of this Agreement or anyother address provided in writing from time to time. All notices shall be deemed to have

been given as of the date such notice is deposited in the U.S. mail.


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13.03. Effect/Severability/Amendment/Waiver. This Agreement shall be binding onand insure to the benefit of the Members and their respective successors, permittedassigns, executors, heirs and beneficiaries. If any term, provision, covenant or conditionof this Agreement is held by a court of competent jurisdiction to be invalid, void or

unenforceable, the remainder of this Agreement shall remain in full force and effect.This Agreement may only be amended or modified in writing executed by all of theMembers. No waiver by any party to this Agreement of any term or provision of thisAgreement, or of any default hereunder, shall affect such partys rights thereafter toenforce such term or provision or to exercise any right or remedy in the event of anyother default.

13.04. Choice of Law. This Agreement has been entered into in the State of Texas andits validity, construction, interpretation and legal effect shall be governed by the laws of the State of Texas applicable to contracts to be entered into and performed entirely withinthe State of Texas. In connection therewith, the Members hereby consent to the exclusive

jurisdiction of the state of federal courts located within such State in connection with anyclaim or controversy arising out of or connection with this Agreement.

13.05. Binding Effect. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, legal representatives, estates, and permitted successors assigns. Each Member, and the spouse of each Member, shallinclude a provision in his or her will directing his or her executor to perform all acts andto execute all documents necessary to effectuate the purpose of this Agreement. Thefailure to include such a provision in the will of a Member or his spouse shall not affectthe rights of any Member or the spouse of any Member, or the obligations of the estate of any Member or his spouse, as provided hereunder.

13.06. Gender. Wherever the context shall so require, all words herein in any gender shall be deemed to include the masculine, the feminine, or neuter gender, and all singular words shall include the plural, and all plural words shall include the singular.

13.07. Further Assurances. The parties agree to perform any further acts and to executeand deliver any further documents which may be necessary to carry out the provisions of this Agreement within five (5) days of notice or demand by the Company, including,without limitation, all licenses, transfers, copyright certificates, assignments of copyrights, etc.

13.08. Survivability. Upon Termination, the Terminated Member, his heirs, and assignsshall continue to be bound by the applicable terms of this Agreement. Upon Termination,the Company shall have all the rights and privileges granted herein by the TerminatedMember; however, its only obligation(s) to the Terminated Member which survive thatMembers Termination shall be those set out in Article VII. Upon Termination, theTerminated Member releases the Company from all liability to Member except for anyliability for non-payment of the Purchase Price and the Continuing Royalty Interest.


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13.09. Entire Agreement. This Agreement constitutes and contains the entireunderstanding and sole and complete agreement and supersedes any and all other prior agreements, statements, warranties, representations, negotiations, promises, inducements,terms, conditions, and understandings, either oral or in writing, between and among theMembers or the parties hereto with respect to the subject matter hereof. No agreement,

statement, warranty, representation, negotiation, promise, inducement, term, condition, or understanding relating to the subject matter of this Agreement which is not containedherein shall be valid or binding.

13.10. Counterparts. This Agreement may be executed in any number of counterparts,all of which shall constitute the same instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement to beeffective as of the date first written above.

MEMBERS:

Name: _________________________

Date of Execution: ________________

Name: _________________________


Name: _________________________


Name: _________________________



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EXHIBIT AINITIAL CAPITAL CONTRIBUTIONS / INTEREST

Initial Members:

Name:[address] _______________________ Austin, Texas 787___

Tel (___) _______________

Initial Capital Contribution: $ 100Interest: 25%

Name:[address] _______________________ Austin, Texas 787___

Tel (___) _______________


Name:[address] _______________________

Austin, Texas 787___ Tel (___) _______________


Name:[address] _______________________

Austin, Texas 787___

Tel (___) _______________



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EXHIBIT BSPOUSAL CONSENT

______________________ spouse of _________________, who as a Member executedthe foregoing Operating Agreement for ____________________, LLC by his or her

execution hereof, hereby acknowledges that he or she has read the foregoing Agreementand the provisions thereof shall inure to his or her benefit and understands and agrees tothe terms and provisions thereof, and hereby specifically agrees and consents that he or she and his or her community interest, if any, in the interest of his or her spouse is bound

by all of the provisions of the Operating Agreement and is subject to disposition astherein set forth.

ACKNOWLEDGED AND AGREED:

_________________________________


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COMPANY AGREEMENTOF

[BANDNAME], LLC

This COMPANY AGREEMENT is initially made and entered into as of , 2011, by and among the Initial Members (as defined below).

FORMATION OF COMPANY; DEFINITIONS

1.1 Formation . [BANDNAME], LLC (the "Company") was formed as a professional

limited liability company under and pursuant to the Texas Business Organizations Code (the "TBOC")and other relevant laws of the State of Texas by the filing of a certificate of formation with the Secretaryof State of the State of Texas effective , 2011.

1.2 Name . The name of the Company shall be [BANDNAME], LLC . The Company shallconduct business under that name or such other names complying with applicable law as the Managersmay determine from time to time.

1.3 Duration . The Company commenced upon the filing of the certificate of formation of the Company as provided in Section 3.005 of the TBOC and shall continue until its business and affairsare wound up as provided in Article 8.

1.4

Purpose . The purpose of the Company shall be to transact any and all lawful businessfor which a limited liability company may be formed under the TBOC. Without limiting the generality of the foregoing, a primary business purpose of the Company shall be: (a) recording and commerciallyexploiting master recordings, phonograph records and audio-visual productions embodying performancesof the musical group known as " " (the " Band ") and (b) exploiting, manufacturing, advertising,merchandising, distributing and selling the name, symbols, emblems, designs, likenesses, visualrepresentations, service marks and/or trademarks and biographical materials of the Band and BandMembers, and live performance activities by the Band under the terms and conditions of this CompanyAgreement.

1.5 Principal Place of Business . The Company's principal place of business shall be, Austin, Texas 787__ or such other place as the Managers may

determine from time to time.

1.6 Registered Office and Registered Agent . The initial address of the registered office of the Company in the State of Texas shall be , Austin, Texas 787__ and the name of the Company's initial registered agent at that address shall be . The Managersmay change the registered office and the registered agent of the Company from time to time. TheManagers may cause the Company to qualify to do business as a limited liability company (or other entityin which the Members have limited liability) in any other jurisdiction and to designate any registeredoffice or registered agent in any such jurisdiction.


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[BANDNAME], LLC Company Agreement 2

1.7 Company Property . All real and personal property owned by the Company shall bedeemed owned by the Company as an entity and held in its name. No Member shall have any ownershipinterest in any such property.

1.8 Merger and Conversion . The Company may merge with, or convert into, another entityonly in accordance with a plan of merger or conversion approved by the Required Members.

1.9 Definitions and Construction .

(a) As used in this Agreement, the following terms have the following meanings:

"Agreement" means this Company Agreement as it may be amended from time to time as provided herein.

"Capital Account" has the meaning specified in Section 3.2.

"CEO" has the meaning specified in Section 5.1.

"Claim" has the meaning specified in Section 9.2.

"Company" has the meaning specified in Section 1.1.

"Covered Person" has the meaning specified in Section 9.2.

"Initial Member" has the meaning specified in Section 2.1.

"IRC" means the Internal Revenue Code of 1986, as amended.

"Liquidating Agent" has the meaning specified in Section 8.2(b).

"Manager" means any Person named as an initial manager in the Company's certificate of formation and any other Person appointed as Manager as provided in this Agreement but excludesany such Person that has ceased to be a Manager as provided in this Agreement or the TBOC.

"Member" and Band Member means any Person admitted to the Company as a member as provided in this Agreement but excludes any such Person that has ceased to be a member as

provided in this Agreement or the TBOC.

"Membership Interest" means, with respect to any Member at any time, that Member'sentire beneficial ownership interest in the Company at such time, including that Member's CapitalAccount, voting rights, and right to share in profits, losses, cash distributions and all other

benefits of the Company as specified in this Agreement, together with that Member's obligationsto comply with all of the terms of this Agreement.

"Percentage" for any Member means the Percentage for that Member in accordance withSections 2.1 and 2.3 and other applicable provisions of this Agreement.

"Person" means any individual, corporation, partnership, limited liability company, business trust or other entity, government or governmental agency or instrumentality.


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"Required Members" means Members owning at least a majority of the Percentages of allMembers.

"TBOC" has the meaning specified in Section 1.1.

"Transfer" has the meaning specified in Section 7.1.

"Treasury Regulations" means all temporary or final Treasury Regulations promulgatedin respect of the IRC.

(b) In this Agreement:

(i) Terms defined in the singular have the corresponding meaning in the plural andvice versa.

(ii)

Reference to one gender includes the others.(iii) The word "include" and its derivatives means "include without limitation."

(iv) References to Articles, Sections and Exhibits are to the specified Articles andSections of, and Exhibits to, this Agreement unless the context otherwise requires. Each Exhibitto this Agreement is made a part of this Agreement for all purposes.

(v) References to statutes or regulations are to those statutes or regulations ascurrently amended and to the corresponding provisions as they may be amended or superseded inthe future.

MEMBERS AND MEMBERSHIP INTERESTS

2.1 Initial Members . In connection with the formation of the Company, each of the Personsexecuting this Agreement as of the date of this Agreement (each an "Initial Member") is admitted to theCompany as a Member effective as of the commencement of the Company as provided in Section 1.3.The Percentage of each Initial Member as of the commencement of the Company is set forth next to thatInitial Member's name on Exhibit A .

2.2 Representations and Warranties. Each Member hereby represents and warrants to theCompany and each other Member that (a) the Member has duly executed and delivered this Agreement;and (b) the Member's authorization, execution, delivery, and performance of this Agreement do notconflict with any other agreement or arrangement to which that Member is a party or by which it is

bound.

2.3 New Band Members . A new Band Member may be admitted to the Company but onlywith the unanimous consent of all of the Band Members. A new Band Member shall be admitted only if he or she executes an agreement with the Company under the terms of which such Band Member andspouse, if applicable, agrees to be bound by all of the provisions of this Agreement and any other


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agreement between the Members of the Company, as if a signatory hereto. Unless expressly agreed upon by a unanimous consent of the Band Members, such new Band Member shall have no interest whatsoever in the Band Name apart from the limited right to be known as a member of the Band. Such new Band

Member's capital contribution and Shares of Income of Band Income, if any, shall be determined by aunanimous vote of the Band Members.

2.4 Authority . No Member shall have the authority or power to:

(a) withdraw any part of its contributions to the Company or its Capital Account except as aresult of the winding up of the Company as provided in Article 8 or as otherwise provided bynonwaivable provisions of law;

(b) bring an action for partition of Company property;

(c) cause the winding up of the Company, except as set forth in this Agreement;

(d) demand or receive (i) interest on its contributions to the Company or its Capital Accountor (ii) any cash or other property from the Company except as provided in Section 3.3; or

(e) act for or on behalf of the Company, do any act that would be binding on the Company,or incur any expenditures, obligations or indebtedness of any nature on behalf of the Company, except as

provided in this Agreement.

2.5 Liability to Third Parties . Except as provided in the TBOC, no Member shall be personally liable for the debts, obligations or liabilities of the Company, whether that debt, obligation or liability arises in contract, tort or otherwise, including under a judgment decree or order of a court.

2.6

Priority and Return of Capital . Except as may be provided in this Agreement, noMember shall have priority over any other Member, either as to the return of capital contributions or as to profits, losses or distributions; provided, that this Section shall not apply to loans (as distinguished fromcapital contributions) that a Member has made to the Company.

2.7 Annual Meeting . At the election of the CEO (or if no CEO has been elected and isserving, the senior officer of the Company) or the Managers or the Required Members, an annual meetingof the Members for the transaction of all business as may properly come before the meeting may be heldon such date and at such time as the Person or Persons calling the meeting shall fix and set forth in thenotice of the meeting.

2.8 Special Meetings . Special meetings of the Members may be called at the request of the

CEO (or if no CEO has been elected and is serving, the senior officer of the Company) or the Managersor Members holding at least twenty-five percent (25%) of the Percentages of all Members.

2.9 Notice . Notice stating the place, day and hour of the meeting and, in case of a specialmeeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10)nor more than sixty (60) days before the date of the meeting by or at the direction of the Managers or

person calling the meeting, to each Member entitled to vote at the meeting, provided that such notice may be waived as provided in the TBOC.


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2.10 Place and Manner of Meeting . All meetings of the Members shall be held at such timeand place, within or without the State of Texas, as shall be stated in the notice of the meeting or in a dulyexecuted waiver of notice thereof. Members may participate in such meetings by means of conferencetelephone or similar communications equipment by means of which all persons participating in themeeting can hear each other, and participation in a meeting as provided herein shall constitute presence in

person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

2.11 Conduct of Meetings . The chairman of any meeting of Members shall determine theorder of business and the procedure at the meeting, including the regulation of the manner of voting andthe conduct of discussion.

2.12 Quorum of Members; Majority Vote . The holders of a majority of the Percentagesentitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of Members.The vote of the holders of a majority of the Percentages entitled to vote for each class, if more than oneclass, and thus represented at a meeting at which a quorum is present shall be the act of the Members'meeting, unless the vote of a greater number is required by law, the certificate of formation or thisAgreement.

2.13 Voting of Membership Interest . Each Member shall be entitled to one vote or afraction of one vote per one percent of, or fraction of, the Percentage owned by the Member on eachmatter submitted to a vote at a meeting of Members. A Member may vote either in person or by proxyexecuted in writing by the Member or by its duly authorized attorney in fact. No proxy shall be validafter eleven (11) months from the date of its execution unless otherwise provided in the proxy. Each

proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest.

2.14 Action by Written Consent . Any action that may be taken at a meeting of the Membersmay be taken without a meeting if a consent in writing, setting forth the action to be taken, shall be signed

by the Members having not fewer than the minimum number of votes that would be necessary to take theaction at a meeting at which all Members entitled to vote on the action were present and voted, and suchconsent shall have the same force and effect as a vote of the Members. No notice shall be required inconnection with the use of a written consent pursuant to this Section 2.14.

FINANCIAL MATTERS

3.1 Capital and Other Contributions .

(a) Initial Contribution. On the commencement of the Company, each Initial Member shallmake an initial contribution to the Company as set forth next to his or her name on Exhibit A .

(b) Exclusive Services. In addition to the initial contributions identified on Exhibit A, theCompany hereby engages each Band Member, and each Band Member hereby accepts such engagement,to render his or her services as a recording and performing artist to the Company for as long as he or sheis a Member of the Company. Each Band Member agrees to render all services required hereunder


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diligently, to the best of his or her ability, and in a first-class, professional manner. Each Band Member'sservice

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