SERIES LLC A SAMPLE TRANSACTION. PHILIP D. WELLER DLA Piper LLP (US) 1717 Main Street, Suite 4600 Dallas, TX

Transcription

1 SERIES LLC A SAMPLE TRANSACTION PHILIP D. WELLER DLA Piper LLP (US) 1717 Main Street, Suite 4600 Dallas, TX Texas Land Title Institute December 4-5, 2014 San Antonio, Texas CHAPTER Texas Land Title Institute - Series LLC A Sample Transaction

2 PHILIP D. WELLER DLA Piper LLP (US) 1717 Main Street, Suite 4600 Dallas, Texas FAX: PHILIP D. WELLER is the managing partner of the Dallas office of DLA Piper LLP (US), concentrating on real estate acquisitions, dispositions, finance, development, general finance transactions and private equity transactions. Mr. Weller is the head of the Dallas Real Estate Practice Group. Mr. Weller received a B.S. degree from Bowling Green State University in 1970 and a J.D. degree from the University of Houston Law Center in 1975, each with highest honors. Mr. Weller is listed in The Best Lawyers in America in real estate law, Chambers USA, International Who's Who of Real Estate Law, and Euromoney's Guide to the World's Leading Real Estate Lawyers, the International Who s Who of Real Estate Lawyers and the International Who s Who of Business Lawyers. He is a fellow of The American Bar Foundation, a fellow of the American College of Mortgage Attorneys, and a fellow and past president of the American College of Real Estate Lawyers. He is recognized as the Go-To Lawyer in Real Estate Law in Texas Lawyer's Go-To Guide 2012, is listed in The Best Lawyers in America for real estate and has been named the Best Lawyers 2010 Dallas Real Estate Lawyer of the Year. Mr. Weller has repeatedly been named a Texas Super Lawyer, and Texas Monthly has named him one of the Top 100 Attorneys in Texas. On July 7, 2011, he received the Distinguished Texas Real Estate Attorney Lifetime Achievement Award from the State Bar of Texas Real Estate, Probate and Trust Law Section. Mr. Weller serves on the advisory board of directors of the Texas Community Building with Attorney Resources (Texas C-BAR). Mr. Weller is also a member of the Anglo-American Real Property Institute, the International Council of Shopping Centers, and the Urban Land Institute. He is a frequent author and speaker at legal seminars Texas Land Title Institute - Series LLC A Sample Transaction

3 TABLE OF CONTENTS Page I. INTRODUCTION...1 II. WHAT IS A SERIES LLC?...1 III. A. General Overview...1 B. Statutory Enactments...1 C. Delaware and Texas...1 STATUTORY REQUIREMENTS, ATTRIBUTES, AND POWERS OF SERIES LLCs 1 A. The Delaware Series Provision ( , Delaware Limited Liability Company Act) Requirements Attributes Powers...2 B. Texas Series LLC (Texas Business Organizations Code ) Requirements Attributes Powers Foreign Series Qualifying in Texas...2 C. Potential Cost Savings...3 IV. POTENTIAL SERIES USES...3 A. Property Owning Entities...3 B. Allowing for Division of Promoted or Carried Interests...3 C. Limitation of Liability in Satisfaction of Licensing Requirements...4 V. OTHER ISSUES FACING SERIES...4 A. Recognition of Limitations on Liability...4 B. Treatment for Federal Income Tax Purposes...4 C. Bankruptcy Treatment...4 D. Fiduciary Duties...4 E. General Uncertainty...4 VI. ESTABLISHING A SERIES...5 VII. SUMMARY Texas Land Title Institute - Series LLC A Sample Transaction i

4 TABLE OF CONTENTS (continued) Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Exhibit F Exhibit G Form of Special Warranty Deed (Suggested Form of Series Signature Block) (Certificate Of Formation) (Series Provision for LLC Agreement) (Series Contractual Limitation of Liability Provision) (Form of Agreement Establishing Series Promoted Interest) (Form of Agreement Establishing Series Property Holding) 2014 Texas Land Title Institute - Series LLC A Sample Transaction ii

5 I. INTRODUCTION This paper discusses the use of a relatively new organization tool, the Series LLC in two situations: acquisition of several real estate properties and allocation of promoted interests in a real estate joint venture. The paper will discuss the statutory basis for the Series LLC, outline some potential uses in the real estate industry, point out some significant factors that may adversely impact the use of the Series LLC, and provide drafting tools to establish and maintain series. The author would like to specially thank Timothy G. Hardin of Fidelity National Title Insurance Company who offered views on providing title insurance to Series LLCs, and to my colleague Katherine Raymond who assisted in locating relevant case authority regarding the interpretation of series documentation. II. WHAT IS A SERIES LLC? A. General Overview. For the purposes of this paper, a Series LLC means a limited liability company that is organized under state law that permits it to have one or more separate series of members, managers, limited liability company interests or assets with separate rights, powers, or duties and with respect to which the debts, liabilities and obligations and expenses existing with respect to a particular series may be enforced only against the assets of such series and not against the assets of the limited liability company generally or any other series thereof, and none of the debts, liabilities, obligations and expenses of the limited liability company generally, or any other series thereof, shall be enforceable against the asset of the particular series. Thus, the particular statutes in question, in effect, allow a single limited liability company to create a set of series that are isolated from one another in terms of exposure to liability. See Power Point 1 B. Statutory Enactments. Currently, there are thirteen jurisdictions that permit the establishment of Series LLCs: Delaware, Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah, Wisconsin, Kansas, Puerto Rico, Minnesota, and the District of Columbia. C. Delaware and Texas. Delaware was the first jurisdiction to adopt provisions permitting Series LLCs. The initial impetus for the Delaware enactment (which came in 1996) was with respect to statutory trusts for asset securitizations by insurance companies but, as will be seen below, the statute allows the establishment of Series LLCs for any lawful purpose. The Texas provision was added to the Texas Business Organizations Code in III. STATUTORY REQUIREMENTS, ATTRIBUTES, AND POWERS OF SERIES LLCS A. The Delaware Series Provision ( , Delaware Limited Liability Company Act) 1. Requirements. To establish a Series LLC under the Delaware Act, the following must be provided for ( (b)): a. The limited liability company agreement or operating agreement must provide for establishment of series; b. Records must be maintained accounting for all assets associated with the series and those assets must be accounted for separately from other assets of the limited liability company generally, or other series of such limited liability company, and the limited liability company agreement must so provide; and c. Notification of the limitation of liability must be set forth in the certificate of formation for the limited liability company. Note that under the Delaware statute, a single notice set forth one time in the 2014 Texas Land Title Institute - Series LLC A Sample Transaction 1

6 initial certificate of formation serves to enable the Series LLC to establish as many series as it wishes without further notification or filing, and the notice is valid even if no series exists at the time the certificate of formation is filed. See Exhibit A for a Delaware form certificate of formation, and Exhibit B for a representative provision to include in a limited liability company agreement. 2. Attributes. The most significant attribute of a series formed under the Delaware Act is that its assets and liabilities are effectively isolated from the assets and liabilities of the limited liability company itself or any other series of the limited liability company. ( (b)) Other significant attributes are reduced filing costs, since only a single certificate of formation needs to be filed, and the filing of a single K-1 Partnership return. However, the last attribute may no longer be available, given the proposed Treasury Regulation discussed below. 3. Powers. Under the Delaware Act, a series is given broad powers. Assets may be held in the name of the series ( (b)), the series may carry on any lawful business except banking ( (c)), and the series may, in its own name, contract, hold title to assets (including real, personal and tangible property), grant liens and security interests, and sue and be sued (id.). The series may also establish groups of members or managers ( (e)). B. Texas Series LLC (Texas Business Organizations Code ) 1. Requirements. Pursuant to Section (b), to establish a series under the TBOC, the records maintained by the Series LLC for that particular series must account for the assets associated with that series separately from the other assets of the Series LLC or any other series, and the company agreement must contain a statement to the effect of the limitations on liability provided for in Section (a) (discussed in III.B.2 below). Additionally, the company s certificate of formation must contain a notice of such limitation as well. 2. Attributes. If properly established, the debts, liabilities, obligations and expenses incurred, contracted for, or otherwise existing with respect to a particular series are enforceable only against the assets of that series and are not enforceable against the assets of the limited liability company generally or any other series, and none of the debts, liabilities, obligations and expenses incurred, contracted for, or otherwise existing with respect to the limited liability company generally or any other series shall be enforceable against the assets of a particular series. As can be seen, this tracks the Delaware Act with regard to the attributes of the Series LLC. The lowering of filing costs and the potential benefits of reducing the number of tax returns required to be filed, as discussed above, are also available in Texas. 3. Powers. A series established under the Texas Business Organizations Code has the power and the capacity in the series own name to sue and be sued; contract; hold title to assets of the series including real property, personal property and tangible property; and grant liens and security interest in the assets of the series ( ). One consideration in using a Texas Series LLC is the impact of Section which provides that the entire limited liability company chapter of the TBOC applies to a series and its associated members and managers this provision would seem to elevate each series of a Texas limited liability company to somewhat of an entity status, which is apparently contrary to the effect of the Delaware Act. 4. Foreign Series Qualifying in Texas. Section of the TBOC sets out specific filing requirements for a foreign limited liability company covered by a limited liability company agreement that establishes or provides for designated series of members, managers, membership interests, or assets. Subsection (b) delineates specific requirements which have to be set forth in the application for registration of a foreign limited liability company Texas Land Title Institute - Series LLC A Sample Transaction 2

7 C. Potential Cost Savings One reason that practitioners have been considering the use of Series LLCs is the potential cost savings in filing fees with governmental authorities. The current costs for filing in Delaware and Texas for limited liability companies are: Delaware: State Filing Fees - $ hour Expedition Fee - $50 Annual Report Charge - $300 Texas: State Filing Fees: - $300 Over-the-counter filing fee - $25 Registration of foreign limited liability company - $750 As one can see, forming a separate limited liability company to own each separate piece of property owned by a sponsor involves the costs set forth above while owning those in separate series (subject to the pitfalls discussed below), could effect a substantial savings. IV. POTENTIAL SERIES USES A. Property Owning Entities. See Power Points 2, 3 and 4. One obvious potential use for a series is to hold title to real property. Both the Delaware Act and the Texas Act specifically authorize a series to hold title to real estate ( (c) of the Delaware Act and of the Texas Business Organizations Code). There are, however, some serious issues that must be considered in taking title to real property in a separate series. First, the owner should confirm that title insurance will be available in connection with the transaction. In conversations with a national title company, the author was advised that the title company would require a copy of the limited liability company agreement and certificate of formation of the parent LLC and would look for the statutory prescribed language regarding limitation of liability between the series in that agreement. See Exhibits C and D. The title company would then conduct a search for the names of the parent limited liability company and the series involved in the transaction. Obviously, if express or involuntary liens were found or notices of bankruptcy were found, there would be issues. The title company would also require certification from the manager or members of the parent limited liability company that the records of the series are segregated from records of the Series LLC and any other series. This, again, reflects specific statutory requirements of both the Delaware Act and the Texas Business Organizations Code. Finally, the title company recommends that the name of the series should include the name of the Series LLC followed by some sort of distinctive identifier See Exhibit A, Suggested Form of Special Warranty Deed and Exhibit B, Suggested form of Signature Block. Other potential issues with a series owning real property relate to any required financing. First, the lender providing financing would have to be comfortable with the series structure. If the financing is a securitized real estate financing, the guidelines issued by rating agencies require the use of isolated "special purpose" or "bankruptcy remote" entities and those guidelines simply do not contemplate that a separate series of a limited liability company may be a qualified borrower. These single purpose entity requirements are also imposed by many real estate lenders, even if the financing is not to be securitized, and the covenants typically contained in the loan documentation would preclude the use of a separate series as a borrower Texas Land Title Institute - Series LLC A Sample Transaction 3

8 B. Allowing for Division of Promoted or Carried Interests. See Power Points 5 and 6. A Series offers a very flexible method for the sponsor participants in a real estate venture to participate in so-called promoted or carried interests without having to become a full member of the parent limited liability company. V. OTHER ISSUES FACING SERIES A. Recognition of Limitations on Liability. As can readily be seen, the single-most important feature of a Series LLC is the isolation of each series from one another for liability purposes. Because the concept is novel, dating back only to 1996, and as only thirteen jurisdictions have adopted the concept, there is a valid concern that foreign jurisdictions may not give effect to the provisions of the relevant act so limiting liability. This would not appear to be the case in Texas, since it specifically provides for registration of a foreign Series LLC in Section as discussed above, but many other jurisdictions do not have a similar concept. One potential way to limit liability and give full effect to the applicable series limitations on liabilities (at least for contractual liability), is to add a specific contractual provision limiting liability in all documents executed by the series. An example is attached as Exhibit C. Such a provision is very similar to contractual provisions that were used in the past by entities like Massachusetts Business Trusts to effectively limit contractual law liability in real estate transactions. Of course, the contractual limitation may not have an impact on potential tort liability, where reliance on traditional insurance protection would be the course of action. B. Treatment for Federal Income Tax Purposes. One of the limitations on the use of the Series LLC has been uncertainty as to how they will be treated for federal income tax purposes. It appeared as though that uncertainty had been laid to rest as the Treasury proposed regulations (September 14, 2010) which clarified the intent of the Internal Revenue Service to treat series as separate entities for tax purposes, even if local law does not provide such classification. (75 FR , 26 CFR Part 301, and 2010 WL ). A series would have the same classification options as any other entity under federal law (i.e., corporation or partnership). The definition of a series for federal tax purposes would include a segregated group of assets and liabilities that is established pursuant to a series statute by agreement of the series organization. The proposed regulations include a grandfather clause that allows series formed prior to September 14, 2010 to continue their prior tax treatment. As of the date hereof, the proposed regulations have not been finalized. C. Bankruptcy Treatment. Another significant uncertainty regarding use of series is how they will be treated for the purposes of the Federal Bankruptcy Code. There is no case law currently on point, but the question is similar to that raised (at least prior to the proposed regulations) for tax purposes. The issue is: can a series of a limited liability company file separately for protection under the Bankruptcy Code without involving either the parent limited liability company and some or all of its other series? At this point there is no clear answer. Obviously, if separate series could seek bankruptcy protection it could be very beneficial organizationally, but if the entire limited liability company is required to file for protection if one of its series becomes financially distressed, the separateness concept for formation of series would be undermined. D. Fiduciary Duties. The question of whether members owe fiduciary duties to each other and whether a manager owes fiduciary duties to the members of a limited liability company remain somewhat unsettled under the basic limited liability company statutes currently in effect, and the addition of the series structure simply makes that determination even more murky, as to series members. E. General Uncertainty. Alphonse v. Arch Bay Holding, LLC, 548 F.App'x 979 (5th Cir., Dec. 11, 2013) illustrates the general uncertainty surrounding Series LLC s and their separate series. The case 2014 Texas Land Title Institute - Series LLC A Sample Transaction 4

9 involved an effort to recover damages for an alleged wrongful foreclosure in Louisiana. An issue arose as to whether the parent company of a note holder (a Series LLC) shared identity of interest with the note holder (a separate series). The District Court found that the series was the real party in interest and a separate juridical entity from its parent Series LLC. The Fifth Circuit however was not so sure. The Court noted that while the Delaware Act (the Series LLC was a Delaware limited liability company) provided that a series had the power and capacity to sue and be sued (Section of the Delaware Act), the statutory provision was a matter of internal law and the issues involved in this case, liability to a third party, might constitute an external rather than an internal affair. Because the District Court had failed to consider the external-external affairs conflict of law question under Louisiana law, the Fifth Circuit remanded the case to the District Court for further consideration. In short, the Fifth Circuit was not yet prepared to recognize a series as a separate juridical entity from the parent Series LLC. The case illustrates the risk involved in using a series structure in states that have not by statute or otherwise recognized the series concept. VI. ESTABLISHING A SERIES Forms of Agreement Establishing Series are attached as Exhibits F and G. A suggested Signature Block for a Series is attached as Exhibit F. VII. SUMMARY In summary, the series limited liability company may offer interesting planning techniques to practitioners in the real estate area. The Series LLC can certainly lower filing costs and shield assets and liabilities from other series, provided certain precautionary measures are taken until the use of series becomes more widespread Texas Land Title Institute - Series LLC A Sample Transaction 5

10 Exhibit A NOTICE OF CONFIDENTIALITY RIGHTS: IF YOU ARE A NATURAL PERSON, YOU MAY REMOVE OR STRIKE ANY OR ALL OF THE FOLLOWING INFORMATION FROM ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY BEFORE IT IS FILED FOR RECORD IN THE PUBLIC RECORDS: YOUR SOCIAL SECURITY NUMBER OR YOUR DRIVER S LICENSE NUMBER. SPECIAL WARRANTY DEED STATE OF TEXAS KNOW ALL MEN BY THESE PRESENTS: COUNTY OF, a ( Grantor ), for and in consideration of the sum of $10 and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, has GRANTED, BARGAINED, SOLD, and CONVEYED and by these presents does GRANT, BARGAIN, SELL, AND CONVEY unto XYZ SERIES, A SEPARATE SERIES OF ABC, LLC, A TEXAS LIMITED LIABILITY COMPANY ( Grantee ), the real property in County, Texas, fully described in Exhibit A hereto, together with all rights, titles, and interests appurtenant thereto (collectively, the Property ). This Special Warranty Deed and the conveyance hereinabove set forth is executed by Grantor and accepted by Grantee subject [to the matters described in Exhibit B hereto/to all matters of record] to the extent the same are validly existing and applicable to the Property (collectively, the Permitted Encumbrances ). TO HAVE AND TO HOLD the Property, together with all and singular the rights and appurtenances thereunto in anywise belonging, unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself, its successors and assigns, to WARRANT AND FOREVER DEFEND all and singular the title to the Property unto the said Grantee, its successors and assigns against every person whomsoever lawfully claiming or to claim the same or any part thereof by, through, or under Grantor but not otherwise, subject to the Permitted Encumbrances. Grantee s address is: Texas Land Title Institute - Series LLC A Sample Transaction Exhibit A

11 EXECUTED as of, 201. By: Name: Title: STATE OF COUNTY OF This instrument was acknowledged before me on this day of, 201, by, of, a, on behalf of said. Notary Public, State of 2014 Texas Land Title Institute - Series LLC A Sample Transaction Exhibit A (Cont'd.)

12 EXHIBIT A 2014 Texas Land Title Institute - Series LLC A Sample Transaction Exhibit B

13 Exhibit B Suggested Form of Series Signature Block XYZ Series, a Separate Series of ABC, LLC, A Texas limited liability company By: Name: Title: 2014 Texas Land Title Institute - Series LLC A Sample Transaction Exhibit B

14 Exhibit C CERTIFICATE OF FORMATION OF [DE SERIES] This Certificate of Formation, dated,, has been duly executed pursuant to Section of the Delaware Limited Liability Company Act (the Act ) to form a limited liability company (the Company ) under the Act. 1. The name of the Company is, LLC. 2. The address of the registered office required to be maintained by Section of the Act is: 3. The name and the address of the registered agent for service of process required to be maintained by Section of the Act is: 4. As permitted by Section of the Act, the Company may have one or more series. The debts, liabilities and obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series, whether now existing or hereafter established, shall be enforceable against the assets of that series only, and not against the assets of the Company generally or any other series thereof, and none of the debts, liabilities, or obligations and expenses incurred, contracted for, or otherwise existing with respect to the Company generally or any other series thereof shall be enforceable against the assets of the particular series in question. EXECUTED as of,. Authorized Person 2014 Texas Land Title Institute - Series LLC A Sample Transaction Exhibit C

15 Exhibit D Limited Liability Company Series Provision Series. The Company shall establish separate series, as contemplated by Section of the Act, each of which may have separate members, each of which will own separate assets, each of which will have separate rights and powers, and each of which may have separate investment or business purposes. The debts, liabilities and obligations incurred, contracted for, or otherwise existing from time to time with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of any other series or of the Company generally, and none of the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to the Company or any other series thereof shall be enforceable against the assets of the particular series in question. Separate books and records shall be maintained for each series established by the Company and each such Series s assets Texas Land Title Institute - Series LLC A Sample Transaction Exhibit D

16 Exhibit E Series Contractual Limitation of Liability Provision acknowledges that it has been advised that Series is a separate series of, a Delaware limited liability company (the Company ) and that such Series has been established as provided in Section of the Delaware Limited Liability Company Act ( Act ); accordingly, as provided in such provision of the Act, the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to the Series shall be enforceable only against the assets of the Series in such capacity and not against the assets of the Company or any other series thereof. Notwithstanding anything contained in this Agreement, agrees to such limitation on liability and further agrees that: (i) it shall look solely to the assets of the Series from time to time for the satisfaction of any debt, liability, or obligation arising under or out of the transactions contemplated by this Agreement, (ii) it shall have no recourse to any assets of the Company or any other series established by Company for the satisfaction of any such debts, liabilities, or obligations, and (iii) it hereby waives and relinquishes any right to pursue any assets of Company or any other series established by Company for the satisfaction of any such debts, liabilities, or obligations Texas Land Title Institute - Series LLC A Sample Transaction Exhibit E

17 Exhibit F (Form of Agreement Establishing Series Promoted Interest) Agreement for, LLC Series This Agreement (this Agreement ) is entered into effective as of, 20 by, a Delaware limited liability company ( Company ) and the other signatories hereto to create a separate series (the Series ) under the Limited Liability Company Agreement of, LLC (the LLC Agreement ). Unless otherwise specified herein, all capitalized terms used herein shall have the meanings assigned to them in the LLC Agreement. Company and the other signatories hereto are herein referred to as Series Members. The Series created hereby and the rights and obligations of the Members of such Series shall be governed by the LLC Agreement as supplemented hereby. 1. Name of Series:, LLC Series 2. Purpose: The purpose of this Series is to receive distributions (which may be direct or indirect through other entities) received by in respect of the promoted or carried interest owned by in. 3. Series Members and Series Sharing Ratios: The Series Members and the percentages in which they shall share any distributions in respect of the promoted or carried interest described above (their Series Sharing Ratios ) are as follows: Name: Series Sharing Ratio % Total % The Series Sharing Ratios are subject to dilution if additional Series Members are admitted to the Series as provided in Section 4 below. 4. Additional Series Members; Dilution. No additional Series Members shall be admitted to the Series without Company s prior approval. If Company so approves, additional Series Members may be admitted to the Series and each Series Member s Series Sharing Ratio shall be subject to dilution to reflect the admission of such new Series Member under the terms and conditions approved by Company, provided that no Series Member s Series Sharing Ratio shall be diluted by more than percent ( %) without such Member s approval. Such admission shall be reflected as an amendment to this Amendment which shall be valid if executed by Company and the new Series Members. 5. Distributions: Distributable funds shall be distributed to the Series Members in accordance with their Series Sharing Ratios as set forth in Section 3 (as revised from time to time pursuant to Section 4). Company shall determine what funds received by the Series are available for distribution from time to time, taking into consideration future needs of the Series and its current obligations Texas Land Title Institute - Series LLC A Sample Transaction Exhibit F

18 6. Series Member Vesting Provisions. [Add as agreed upon cover events which lead to a vesting and/or forfeiture of Series interests] 7. Transfers. No Series Member (other than Company) may transfer all or part of his interest in the Series, or collaterally assign, pledge, or grant a security interest in his right to receive distributions from the Series without the prior written consent of Company. 8. Management. Company shall have complete authority to manage all affairs of the Series without the approval, consent or other participation by any other Series Member. Executed effective as of the date set forth above. SERIES MEMBERS: By: Name: Title: 2014 Texas Land Title Institute - Series LLC A Sample Transaction Exhibit F (Cont'd.)

19 Exhibit G (Form of Agreement Establishing Series Property Holding) Agreement for, LLC Series This Agreement (this Agreement ) is entered into effective as of, 20 by, a Delaware limited liability company ( Company ) and the other signatories hereto to create a separate series (the Series ) under the Limited Liability Company Agreement of, LLC (the LLC Agreement ). Unless otherwise specified herein, all capitalized terms used herein shall have the meanings assigned to them in the LLC Agreement. Company and the other signatories hereto are herein referred to as Series Members. The Series created hereby and the rights and obligations of the Members of such Series shall be governed by the LLC Agreement as supplemented hereby. 1. Name of Series:, LLC Series 2. Purpose: The purpose of this Series is to require, own and operate the property ( Property ) described in Exhibit A hereto. 3. Series Members and Series Sharing Ratios: The Series Members and the percentages in which they shall share any distributions in respect of the promoted or carried interest described above (their Series Sharing Ratios ) are as follows: Name: Series Sharing Ratio % Total % The Series Sharing Ratios are subject to dilution if additional Series Members are admitted to the Series as provided in Section 4 below. 4. Additional Series Members; Dilution. No additional Series Members shall be admitted to the Series without Company s prior approval. If Company so approves, additional Series Members may be admitted to the Series and each Series Member s Series Sharing Ratio shall be subject to dilution to reflect the admission of such new Series Member under the terms and conditions approved by Company, provided that no Series Member s Series Sharing Ratio shall be diluted by more than percent ( %) without such Member s approval. Such admission shall be reflected as an amendment to this Amendment which shall be valid if executed by Company and the new Series Members. 5. Distributions: Distributable funds shall be distributed to the Series Members in accordance with their Series Sharing Ratios as set forth in Section 3 (as revised from time to time pursuant to Section 4). Company shall determine what funds received by the Series are available for distribution from time to time, taking into consideration future needs of the Series and its current obligations. 6. Series Member Vesting Provisions. [Add as agreed upon cover events which lead to a vesting and/or forfeiture of Series interests] 2014 Texas Land Title Institute - Series LLC A Sample Transaction Exhibit G

20 7. Transfers. No Series Member (other than Company) may transfer all or part of his interest in the Series, or collaterally assign, pledge, or grant a security interest in his right to receive distributions from the Series without the prior written consent of Company. 8. Management. Company shall have complete authority to manage all affairs of the Series without the approval, consent or other participation by any other Series Member. Executed effective as of the date set forth above. SERIES MEMBERS: By: Name: Title: 2014 Texas Land Title Institute - Series LLC A Sample Transaction Exhibit G (Cont'd.)

21 2014 Texas Land Title Institute - Series LLC A Sample Transaction

22 2014 Texas Land Title Institute - Series LLC A Sample Transaction

23 2014 Texas Land Title Institute - Series LLC A Sample Transaction

24 2014 Texas Land Title Institute - Series LLC A Sample Transaction

25 2014 Texas Land Title Institute - Series LLC A Sample Transaction

26 2014 Texas Land Title Institute - Series LLC A Sample Transaction

27 2014 Texas Land Title Institute - Series LLC A Sample Transaction