Exhibit 10.2

 

Execution Version

 

FIRST AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

 

OF

 

CACTUS WELLHEAD, LLC

 

DATED AS OF JANUARY 29, 2018

 

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THE LIMITED LIABILITY COMPANY INTERESTS IN CACTUS WELLHEAD, LLC HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, THE SECURITIES
LAWS OF ANY STATE, OR ANY OTHER APPLICABLE SECURITIES LAWS, AND HAVE BEEN OR ARE
BEING ISSUED IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND SUCH LAWS.  SUCH INTERESTS MUST BE ACQUIRED FOR
INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE, PLEDGED, HYPOTHECATED, SOLD,
ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN COMPLIANCE WITH (I) THE SECURITIES
ACT, ANY APPLICABLE SECURITIES LAWS OF ANY STATE AND ANY OTHER APPLICABLE
SECURITIES LAWS; (II) THE TERMS AND CONDITIONS OF THIS FIRST AMENDED AND
RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT; AND (III) ANY OTHER
TERMS AND CONDITIONS AGREED TO IN WRITING BETWEEN THE MANAGING MEMBER AND THE
APPLICABLE MEMBER.  THE LIMITED LIABILITY COMPANY INTERESTS MAY NOT BE
TRANSFERRED OF RECORD EXCEPT IN COMPLIANCE WITH SUCH LAWS, THIS FIRST AMENDED
AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT, AND ANY OTHER TERMS
AND CONDITIONS AGREED TO IN WRITING BY THE MANAGING MEMBER AND THE APPLICABLE
MEMBER.  THEREFORE, PURCHASERS AND OTHER TRANSFEREES OF SUCH LIMITED LIABILITY
COMPANY INTERESTS WILL BE REQUIRED TO BEAR THE RISK OF THEIR INVESTMENT OR
ACQUISITION FOR AN INDEFINITE PERIOD OF TIME.

 

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Table of Contents

 

ARTICLE I

DEFINITIONS

2

 

 

 

Section 1.1

Definitions

2

Section 1.2

Interpretive Provisions

14

 

 

 

ARTICLE II

ORGANIZATION OF THE LIMITED LIABILITY COMPANY

14

 

 

 

Section 2.1

Formation

14

Section 2.2

Filing

14

Section 2.3

Name

15

Section 2.4

Registered Office; Registered Agent

15

Section 2.5

Principal Place of Business

15

Section 2.6

Purpose; Powers

15

Section 2.7

Term

15

Section 2.8

Intent

15

 

 

 

ARTICLE III

OWNERSHIP AND CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

15

 

 

 

Section 3.1

Authorized Units; General Provisions With Respect to Units

15

Section 3.2

Voting Rights

18

Section 3.3

Capital Contributions; Unit Ownership

18

Section 3.4

Capital Accounts

19

Section 3.5

Other Matters

19

Section 3.6

Redemption of Units

20

 

 

 

ARTICLE IV

ALLOCATIONS OF PROFITS AND LOSSES

27

 

 

 

Section 4.1

Profits and Losses

27

Section 4.2

Special Allocations

27

Section 4.3

Allocations for Tax Purposes in General

30

Section 4.4

Other Allocation Rules

30

 

 

 

ARTICLE V

DISTRIBUTIONS

31

 

 

 

Section 5.1

Distributions

31

Section 5.2

Tax-Related Distributions

32

Section 5.3

Distribution Upon Withdrawal

32

 

 

 

ARTICLE VI

MANAGEMENT

32

 

 

 

Section 6.1

The Managing Member; Fiduciary Duties

32

Section 6.2

Officers

33

Section 6.3

Warranted Reliance by Officers on Others

34

Section 6.4

Indemnification

34

Section 6.5

Maintenance of Insurance or Other Financial Arrangements

35

Section 6.6

Resignation or Termination of Managing Member

35

Section 6.7

No Inconsistent Obligations

35

Section 6.8

Reclassification Events of PubCo

35

 

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Section 6.9

Certain Costs and Expenses

36

 

 

 

ARTICLE VII

ROLE OF MEMBERS

36

 

 

 

Section 7.1

Rights or Powers

36

Section 7.2

Voting

37

Section 7.3

Various Capacities

37

Section 7.4

Business Opportunities

37

 

 

 

ARTICLE VIII

TRANSFERS OF INTERESTS

38

 

 

 

Section 8.1

Restrictions on Transfer

38

Section 8.2

Notice of Transfer

39

Section 8.3

Transferee Members

39

Section 8.4

Legend

40

 

 

 

ARTICLE IX

ACCOUNTING

40

 

 

 

Section 9.1

Books of Account

40

Section 9.2

Tax Elections

41

Section 9.3

Tax Returns; Information

41

Section 9.4

Tax Matters Member and Company Representative

41

Section 9.5

Withholding Tax Payments and Obligations

42

 

 

 

ARTICLE X

DISSOLUTION AND TERMINATION

43

 

 

 

Section 10.1

Liquidating Events

43

Section 10.2

Bankruptcy

43

Section 10.3

Procedure

44

Section 10.4

Rights of Members

45

Section 10.5

Notices of Dissolution

45

Section 10.6

Reasonable Time for Winding Up

45

Section 10.7

No Deficit Restoration

45

 

 

 

ARTICLE XI

GENERAL

45

 

 

 

Section 11.1

Amendments; Waivers

45

Section 11.2

Further Assurances

46

Section 11.3

Successors and Assigns

46

Section 11.4

Entire Agreement

46

Section 11.5

Rights of Members Independent

46

Section 11.6

Governing Law

46

Section 11.7

Jurisdiction and Venue

46

Section 11.8

Headings

47

Section 11.9

Counterparts

47

Section 11.10

Notices

47

Section 11.11

Representation By Counsel; Interpretation

48

Section 11.12

Severability

48

Section 11.13

Expenses

48

Section 11.14

No Third Party Beneficiaries

48

 

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FIRST AMENDED AND RESTATED

 

LIMITED LIABILITY COMPANY OPERATING AGREEMENT

 

OF

 

CACTUS WELLHEAD, LLC

 

This FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT
(as amended, supplemented or restated from time to time, this “Agreement”),
dated as of January 29, 2018 and effective as of the date of the initial closing
of the IPO (as defined below) (the “Effective Date”), is made and entered into
by and among Cactus Wellhead, LLC, a Delaware limited liability company (the
“Company”), and each other Person who is or at any time becomes a Member in
accordance with the terms of this Agreement and the Act.  Capitalized terms used
herein and not otherwise defined have the respective meanings set forth in
Section 1.1.

 

RECITALS

 

WHEREAS, the Company was formed pursuant to a Certificate of Formation filed in
the office of the Secretary of State of the State of Delaware on July 11, 2011
and is currently governed by the Limited Liability Company Operating Agreement
of the Company dated as of May 31, 2016 (the “Existing LLC Agreement”);

 

WHEREAS, pursuant to the terms of the Closing Agreement, the parties thereto
have agreed to consummate the recapitalization of the Company (the
“Recapitalization”) and to take the other actions contemplated in the Closing
Agreement (together with the Recapitalization, the “Reorganization”);

 

WHEREAS, immediately prior to the consummation of the Recapitalization, the
Members of the Company consist of those Persons listed on Exhibit A hereto;

 

WHEREAS, in connection with the Reorganization, Cactus, Inc., a Delaware
corporation (“PubCo”), will issue shares of Class A Common Stock to the public
in the initial underwritten public offering of shares of its stock (the “IPO”)
in exchange for cash (the “Proceeds”);

 

WHEREAS, PubCo will contribute the net Proceeds to the Company in exchange for a
number of Units such that the total number of Units held by PubCo shall be equal
to the number of shares of Class A Common Stock outstanding after the IPO
(including any shares of Class A Common Stock issued pursuant to the exercise of
the underwriters’ overallotment option);

 

WHEREAS, following the Company’s receipt of the net Proceeds, the Company will
pay off certain Indebtedness and will use a portion of such cash, if any is
available, to redeem Units from some or all of the Members (other than PubCo)
(such redemptions, the “IPO Redemptions”);

 

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WHEREAS, following any IPO Redemptions (and taking into account such IPO
Redemptions), PubCo will issue and contribute a number of shares of its Class B
Common Stock to the Company equal to the number of outstanding Units
collectively held by the Members (other than PubCo), and the Company shall
distribute such shares of Class B Common Stock to the Members (other than PubCo)
in accordance with the number of Units held by such Members;

 

WHEREAS, each Unit (other than any Unit held by PubCo) may be redeemed, at the
election of the holder of such Unit (together with the transfer and surrender by
such holder of one share of Class B Common Stock), for one share of Class A
Common Stock in accordance with the terms and conditions of this Agreement;

 

WHEREAS, the Members of the Company desire that PubCo become the sole managing
Member of the Company (in its capacity as managing Member as well as in any
other capacity, the “Managing Member”);

 

WHEREAS, the Members of the Company desire to amend and restate the Existing LLC
Agreement; and

 

WHEREAS, this Agreement shall supersede the Existing LLC Agreement in its
entirety as of the Effective Date.

 

NOW THEREFORE, in consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, and intending to be legally bound, the parties
hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1                                    Definitions.  As used in this
Agreement and the Schedules and Exhibits attached to this Agreement, the
following definitions shall apply:

 

“A&R HoldCo Agreement” means the Amended and Restated Limited Liability Company
Operating Agreement of the Cactus WH Enterprises, LLC dated as of  January 29,
2018.

 

“Act” means the Delaware Limited Liability Company Act, 6 Del.  C. § 18-101, et
seq., as amended from time to time (or any corresponding provisions of
succeeding law).

 

“Action” means any claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Entity.

 

“Adjusted Basis” has the meaning given such term in Section 1011 of the Code.

 

“Adjusted Capital Account Deficit” means the deficit balance, if any, in such
Member’s Capital Account at the end of any Fiscal Year or other taxable period,
with the following adjustments:

 

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(a)                                 credit to such Capital Account any amount
that such Member is obligated to restore under Treasury Regulations
Section 1.704-1(b)(2)(ii)(c), as well as any addition thereto pursuant to the
next to last sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) after taking into account thereunder any changes during such year
in Company Minimum Gain and Member Minimum Gain; and

 

(b)                                 debit to such Capital Account the items
described in Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

 

This definition of Adjusted Capital Account Deficit is intended to comply with
the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.

 

“Affiliate” means, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by, or is under common control with, such
Person.  For these purposes, “control” means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
such Person, whether through the ownership of voting securities, by contract or
otherwise; provided that, for purposes of this Agreement, (i) no Member shall be
deemed an Affiliate of the Company or any of its Subsidiaries and (ii) none of
the Company or any of its Subsidiaries shall be deemed an Affiliate of any
Member.

 

“Agreement” is defined in the preamble to this Agreement.

 

“All Owned Units” means the sum of (x) all of the Units then held by a Redeeming
Member and (y) all of the Units which such Redeeming Member would then own had
such Redeeming Member then redeemed, pursuant to the A&R HoldCo Agreement, all
of the HoldCo Units then owned, if any, by such Redeeming Member.

 

“beneficially own” and “beneficial owner” shall be as defined in Rule 13d-3 of
the rules promulgated under the Exchange Act.

 

“Bipartisan Budget Act of 2015” means Title XI of the Bipartisan Budget Act of
2015, as may be amended from time to time (or any corresponding provisions of
succeeding law), and any related provisions of law, including court decisions,
regulations and administrative guidance.

 

“Black-Out Period” means any “black-out” or similar period under PubCo’s
policies covering trading in PubCo’s securities to which the applicable
Redeeming Member is subject, during which such Redeeming Member is restricted
from immediately reselling shares of Class A Common Stock to be delivered to
such Redeeming Member in connection with a Redemption or pursuant to PubCo’s
exercise of its Call Right.

 

“Board” means the board of directors of PubCo.

 

“Business Day” means any day that is not a Saturday, a Sunday or other day on
which banks are required or authorized by Law to be closed in the City of New
York.

 

“Business Opportunities Exempt Party” is defined in Section 7.4(a).

 

“Call Election Notice” is defined in Section 3.6(f)(ii).

 

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“Call Purchase” means the purchase of Units by PubCo pursuant to an election by
PubCo to exercise its Call Right set forth in Section 3.6(f).

 

“Call Right” has the meaning set forth in Section 3.6(f)(i).

 

“Capital Account” means, with respect to any Member, the Capital Account
maintained for such Member in accordance with Section 3.4.

 

“Capital Contribution” means, with respect to any Member, the amount of cash and
the initial Gross Asset Value of any property (other than cash) contributed to
the Company by such Member.  Any reference to the Capital Contribution of a
Member will include any Capital Contributions made by a predecessor holder of
such Member’s Units to the extent that such Capital Contribution was made in
respect of Units Transferred to such Member.

 

“Cash Election” is defined in Section 3.6(a)(iv) and shall also include PubCo’s
election to purchase Units for cash pursuant to a Call Purchase.

 

“Cash Election Amount” means with respect to a particular Redemption or Call
Purchase for which a Cash Election has been made, (a) if the cash amount to be
paid has been derived from a sale of shares of Class A Common Stock by PubCo, an
amount of cash equal to the gross proceeds received by PubCo from the sale of
the number of shares of Class A Common Stock that would have been received if a
Cash Election had not been made less any Offering Expenses with respect to such
Redemption, or (b) in any other case, an amount of cash equal to the Fair Market
Value of the number of shares of Class A Common Stock that would have been
received if a Cash Election had not been made.

 

“Change of Control Redemption Date” is defined in Section 3.6(g).

 

“Class A Common Stock” means, as applicable, (a) the Class A Common Stock, par
value $0.01 per share, of PubCo or (b) following any consolidation, merger,
reclassification or other similar event involving PubCo, any shares or other
securities of PubCo or any other Person or cash or other property that become
payable in consideration for the Class A Common Stock or into which the Class A
Common Stock is exchanged or converted as a result of such consolidation,
merger, reclassification or other similar event.

 

“Class B Common Stock” means, as applicable, (a) the Class B Common Stock, par
value $0.01 per share, of PubCo or (b) following any consolidation, merger,
reclassification or other similar event involving PubCo, any shares or other
securities of PubCo or any other Person or cash or other property that become
payable in consideration for the Class B Common Stock or into which the Class B
Common Stock is exchanged or converted as a result of such consolidation,
merger, reclassification or other similar event.

 

“Closing Agreement” means the Closing Steps Agreement dated as of  January 29,
2018, by and among the Company, PubCo and the Persons listed on the signature
pages thereto, as it may be amended, supplemented or restated from time to time.

 

“Closing Date Capital Account Balance” means, with respect to any Member, the
positive Capital Account balance of such Member as of the Effective Date after
giving effect to the

 

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Reorganization, IPO, IPO Redemption and related transactions, the amount or
deemed value of which will be set forth by the Company on Exhibit A within 180
calendar days following the execution of this Agreement.

 

“Code” means the United States Internal Revenue Code of 1986, as amended from
time to time (or any corresponding provisions of succeeding law).

 

“Commission” means the U.S. Securities and Exchange Commission.

 

“Company” is defined in the preamble to this Agreement.

 

“Company Minimum Gain” has the meaning of “partnership minimum gain” set forth
in Treasury Regulations Sections 1.704-2(b)(2) and 1.704-2(d).  It is further
understood that Company Minimum Gain shall be determined in a manner consistent
with the rules of Treasury Regulations Section 1.704-2(b)(2), including the
requirement that if the adjusted Gross Asset Value of property subject to one or
more Nonrecourse Liabilities differs from its adjusted tax basis, Company
Minimum Gain shall be determined with reference to such Gross Asset Value.

 

“Company Representative” has the meaning assigned to the term “partnership
representative” in Section 6223 of the Code and any Treasury Regulations or
other administrative or judicial pronouncements promulgated thereunder.

 

“Contract” means any written agreement, contract, lease, sublease, license,
sublicense, obligation, promise or undertaking.

 

“control” (including the terms “controlled by” and “under common control with”),
with respect to the relationship between or among two or more Persons, means the
possession, directly or indirectly or as trustee, personal representative or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee, personal representative or executor, by contract, credit arrangement or
otherwise.

 

“Debt Securities” means, with respect to PubCo, any and all debt instruments or
debt securities that are not convertible or exchangeable into Equity Securities
of PubCo.

 

“Depreciation” means, for each Fiscal Year or other taxable period, an amount
equal to the depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such Fiscal Year or other taxable period,
except that (a) with respect to any such property the Gross Asset Value of which
differs from its Adjusted Basis for U.S. federal income tax purposes and which
difference is being eliminated by use of the “remedial method” pursuant to
Treasury Regulations Section 1.704-3(d), Depreciation for such Fiscal Year or
other taxable period shall be the amount of book basis recovered for such Fiscal
Year or other taxable period under the rules prescribed by Treasury Regulations
Section 1.704-3(d)(2), and (b) with respect to any other such property the Gross
Asset Value of which differs from its Adjusted Basis for U.S. federal income tax
purposes at the beginning of such Fiscal Year or other taxable period,
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or other
cost recovery deduction for such Fiscal Year or other taxable period bears to
such beginning Adjusted Basis; provided, however, that if the Adjusted Basis for

 

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U.S. federal income tax purposes of an asset at the beginning of such Fiscal
Year or other taxable period is zero, Depreciation with respect to such asset
shall be determined with reference to such beginning Gross Asset Value using any
reasonable method selected by the Tax Matters Member.

 

“DGCL” means the General Corporation Law of the State of Delaware, as amended
from time to time (or any corresponding provisions of succeeding law).

 

“Effective Time” means the time immediately prior to the closing of the IPO on
the date of the initial closing of the IPO.

 

“Equity Securities” means (a) with respect to a partnership, limited liability
company or similar Person, any and all units, interests, rights to purchase,
warrants, options or other equivalents of, or other ownership interests in, any
such Person as well as debt or equity instruments convertible, exchangeable or
exercisable into any such units, interests, rights or other ownership interests
and (b) with respect to a corporation, any and all shares, interests,
participation or other equivalents (however designated) of corporate stock,
including all common stock and preferred stock, or warrants, options or other
rights to acquire any of the foregoing, including any debt instrument
convertible or exchangeable into any of the foregoing.

 

“ERISA” means the Employee Retirement Security Act of 1974, as amended.

 

“Exchange Act” means the Securities Exchange Act of 1934, and the rules and
regulations promulgated thereunder, as the same may be amended from time to time
(or any corresponding provisions of succeeding law).

 

“Existing LLC Agreement” is defined in the recitals to this Agreement.

 

“Fair Market Value” means the fair market value of any property as determined in
good faith by the Managing Member after taking into account such factors as the
Managing Member shall deem appropriate.

 

“Federal Bankruptcy Code” means Title 11 of the United States Code, as amended
from time to time, and all rules and regulations promulgated thereunder.

 

“Fiscal Year” means the fiscal year of the Company, which shall end on
December 31 of each calendar year unless, for U.S. federal income tax purposes,
another fiscal year is required.  The Company shall have the same fiscal year
for U.S. federal income tax purposes and for accounting purposes.

 

“Former A-1 Unitholder” means a Person that, immediately prior to the Effective
Time, was a holder of Class A-1 Units of the Company pursuant to the Existing
LLC Agreement.

 

“GAAP” means U.S. generally acceptable accounting principles at the time.

 

“Good Faith” means a Person having acted in good faith and in a manner such
Person reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to a criminal proceeding, having had no reasonable
cause to believe such Person’s conduct was unlawful.

 

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“Governmental Entity” means any federal, national, supranational, state,
provincial, local, foreign or other government, governmental, stock exchange,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body.

 

“Gross Asset Value” means, with respect to any asset, the asset’s Adjusted Basis
for U.S. federal income tax purposes, except as follows:

 

(a)                                 the initial Gross Asset Value of any asset
contributed by a Member to the Company shall be the gross Fair Market Value of
such asset as of the date of such contribution;

 

(b)                                 the Gross Asset Values of all Company assets
shall be adjusted to equal their respective gross Fair Market Values as of the
following times: (i) the acquisition of an interest (or additional interest) in
the Company by any new or existing Member in exchange for more than a de minimis
Capital Contribution to the Company or in exchange for the performance of more
than a de minimis amount of services to or for the benefit of the Company;
(ii) the distribution by the Company to a Member of more than a de minimis
amount of Company assets as consideration for an interest in the Company;
(iii) the liquidation of the Company within the meaning of Treasury Regulations
Section 1.704-1(b)(2)(ii)(g)(1) (other than pursuant to Code
Section 708(b)(1)(B)), (iv) the acquisition of an interest in the Company by any
new or existing Member upon the exercise of a noncompensatory option in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(s); or (v) any
other event to the extent determined by the Managing Member to be permitted and
necessary or appropriate to properly reflect Gross Asset Values in accordance
with the standards set forth in Treasury Regulations
Section 1.704-1(b)(2)(iv)(q); provided, however, that adjustments pursuant to
clauses (i), (ii) and (iv) above shall be made only if the Managing Member
reasonably determines that such adjustments are necessary or appropriate to
reflect the relative economic interests of the Members in the Company.  If any
noncompensatory options are outstanding upon the occurrence of an event
described in this paragraph (b)(i) through (b)(v), the Company shall adjust the
Gross Asset Values of its properties in accordance with Treasury Regulations
Sections 1.704-1(b)(2)(iv)(f)(1) and 1.704-1(b)(2)(iv)(h)(2);

 

(c)                                  the Gross Asset Value of any Company asset
distributed to any Member shall be adjusted to equal the gross Fair Market Value
of such asset on the date of such distribution;

 

(d)                                 the Gross Asset Values of Company assets
shall be increased (or decreased) to reflect any adjustments to the Adjusted
Basis of such assets pursuant to Code Section 734(b) or Code Section 743(b), but
only to the extent that such adjustments are taken into account in determining
Capital Accounts pursuant to Treasury Regulations
Section 1.704-1(b)(2)(iv)(m) and subsection (f) in the definition of “Profits”
or “Losses” below or Section 4.2(h); provided, however, that the Gross Asset
Value of a Company asset shall not be adjusted pursuant to this subsection to
the extent the Managing Member determines that an adjustment pursuant to
subsection (b) of this definition is necessary or appropriate in connection with
a

 

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transaction that would otherwise result in an adjustment pursuant to this
subsection (d); and

 

(e)                                  if the Gross Asset Value of a Company asset
has been determined or adjusted pursuant to subsections (a), (b) or (d) of this
definition of Gross Asset Value, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits, Losses and other items allocated pursuant to
Article IV.

 

“Holdco” means Cactus WH Enterprises, LLC, a Delaware limited liability company.

 

“Holdco Units” means units representing membership interests in HoldCo.

 

“Indebtedness” means (a) all indebtedness for borrowed money (including
capitalized lease obligations, sale-leaseback transactions or other similar
transactions, however evidenced), (b) any other indebtedness that is evidenced
by a note, bond, debenture, draft or similar instrument, (c) notes payable and
(d) lines of credit and any other agreements relating to the borrowing of money
or extension of credit.

 

“Interest” means the entire interest of a Member in the Company, including the
Units and all of such Member’s rights, powers and privileges under this
Agreement and the Act.

 

“IPO” is defined in the recitals to this Agreement.

 

“IPO Redemptions” is defined in the recitals to this Agreement.

 

“Law” means any federal, national, supranational, state, provincial, local or
similar statute, law, ordinance, regulation, rule, code, order, requirement or
rule of law (including common law).

 

“Legal Action” is defined in Section 11.7.

 

“Liability” means any liability or obligation, whether known or unknown,
asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated
or unliquidated and whether due or to become due, regardless of when asserted.

 

“Liquidating Event” is defined in Section 10.1.

 

“Managing Member” is defined in the recitals to this Agreement.

 

“Member” means any Person that executes this Agreement as a Member, and any
other Person admitted to the Company as an additional or substituted Member,
that has not made a disposition of such Person’s entire Interest.

 

“Member Minimum Gain” has the meaning ascribed to “partner nonrecourse debt
minimum gain” set forth in Treasury Regulations Section 1.704-2(i).  It is
further understood that the determination of Member Minimum Gain and the net
increase or decrease in Member Minimum Gain shall be made in the same manner as
required for such determination of Company Minimum Gain under Treasury
Regulations Sections 1.704-2(d) and 1.704-2(g)(3).

 

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“Member Nonrecourse Debt” has the meaning of “partner nonrecourse debt” set
forth in Treasury Regulations Section 1.704-2(b)(4).

 

“Member Nonrecourse Deductions” has the meaning of “partner nonrecourse
deductions” set forth in Treasury Regulations Sections 1.704-2(i)(1) and
1.704-2(i)(2).

 

“National Securities Exchange” means an exchange registered with the Commission
under the Exchange Act.

 

“Nonrecourse Deductions” has the meaning assigned that term in Treasury
Regulations Section 1.704-2(b).

 

“Nonrecourse Liability” is defined in Treasury Regulations
Section 1.704-2(b)(3).

 

“Offering Expenses” means, with respect to any Redemption, to the extent PubCo
funds the Cash Election Amount to be paid to the Redeeming Member with respect
to such Redemption through any offering of Class A Common Stock or other Equity
Securities on or prior to the Redemption Date, any expenses, fees and
commissions incurred by PubCo or the Company in connection with such offering,
including the amount of any difference between the price at which such Equity
Securities were sold to underwriters or other initial purchasers and the price
at which such Equity Securities are sold to the public or other ultimate
investors in such offering after taking into account underwriters’ discounts or
commissions and brokers’ fees or commissions (including, for the avoidance of
doubt, any deferred discounts or commissions and brokers’ fees or commissions
payable in connection with or as a result of such offering).

 

“Officer” means each Person appointed as an officer of the Company pursuant to
and in accordance with the provisions of Section 6.2.

 

“Person” means any individual, partnership, firm, corporation, limited liability
company, association, trust, unincorporated organization or other entity, as
well as any syndicate or group that would be deemed to be a person under
Section 13(d)(3) of the Exchange Act.

 

“Plan Asset Regulations” means the regulations issued by the U.S. Department of
Labor at Section 2510.3-101 of Part 2510 of Chapter XXV, Title 29 of the Code of
Federal Regulations, or any successor regulations as the same may be amended
from time to time.

 

“President and Chief Executive Officer” is defined in Section 6.2(b).

 

“Prime Rate” means, on any date of determination, a rate per annum equal to the
rate of interest most recently published by The Wall Street Journal as the
“prime rate” at large U.S. money center banks.

 

“Proceeding” is defined in Section 6.4.

 

“Proceeds” is defined in the recitals to this Agreement.

 

“Profits” or “Losses” means, for each Fiscal Year or other taxable period, an
amount equal to the Company’s taxable income or loss for such year or period,
determined in accordance with

 

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Code Section 703(a) (for this purpose, all items of income, gain, loss or
deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments (without duplication):

 

(a)                                 any income or gain of the Company that is
exempt from U.S. federal income tax and not otherwise taken into account in
computing Profits or Losses shall be added to such taxable income or loss;

 

(b)                                 any expenditures of the Company described in
Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise
taken into account in computing Profits or Losses, shall be subtracted from such
taxable income or loss;

 

(c)                                  in the event the Gross Asset Value of any
Company asset is adjusted pursuant to subsection (b) or (c) of the definition of
Gross Asset Value above, the amount of such adjustment shall be treated as an
item of gain (if the adjustment increases the Gross Asset Value of the Company
asset) or an item of loss (if the adjustment decreases the Gross Asset Value of
the Company asset) from the disposition of such asset and shall, except to the
extent allocated pursuant to Section 4.2, be taken into account for purposes of
computing Profits or Losses;

 

(d)                                 gain or loss resulting from any disposition
of Company assets with respect to which gain or loss is recognized for U.S.
federal income tax purposes shall be computed with reference to the Gross Asset
Value of the asset disposed of, notwithstanding that the adjusted tax basis of
such asset differs from its Gross Asset Value;

 

(e)                                  in lieu of the depreciation, amortization
and other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account Depreciation;

 

(f)                                   to the extent an adjustment to the
adjusted tax basis of any asset pursuant to Code Section 734(b) is required,
pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be taken
into account in determining Capital Account balances as a result of a
distribution other than in liquidation of a Member’s interest in the Company,
the amount of such adjustment shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or an item of loss (if the
adjustment decreases such basis) from the disposition of such asset and shall be
taken into account for purposes of computing Profits or Losses; and

 

(g)                                  any items of income, gain, loss or
deduction which are specifically allocated pursuant to the provisions of
Section 4.2 shall not be taken into account in computing Profits or Losses for
any taxable year, but such items available to be specially allocated pursuant to
Section 4.2 will be determined by applying rules analogous to those set forth in
subparagraphs (a) through (f) above.

 

“Property” means all real and personal property owned by the Company from time
to time, including both tangible and intangible property.

 

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“PubCo” is defined in the recitals to this Agreement.

 

A “PubCo Change of Control” means the occurrence of any of the following events
or series of events after the Effective Time:

 

(a)                                 any Person (excluding any Qualifying Owner
or any group of Qualifying Owners acting together which would constitute a
“group” for purposes of Section 13(d) of the Exchange Act, and excluding a
corporation or other entity owned, directly or indirectly, by the stockholders
of PubCo in substantially the same proportions as their ownership of stock of
the PubCo) is or becomes the beneficial owner, directly or indirectly, of
securities of PubCo representing more than 50% of the combined voting power of
PubCo’s then outstanding voting securities; or

 

(b)                                 there is consummated a merger or
consolidation of PubCo with any other corporation or other entity, and,
immediately after the consummation of such merger or consolidation, the voting
securities of PubCo immediately prior to such merger or consolidation do not
continue to represent or are not converted into more than 50% of the combined
voting power of the then-outstanding voting securities of the Person resulting
from such merger or consolidation or, if the surviving company is a Subsidiary,
the ultimate parent thereof; or

 

(c)                                  the stockholders of PubCo approve a plan of
complete liquidation or dissolution of PubCo or there is consummated an
agreement or series of related agreements for the sale or other disposition,
directly or indirectly, by PubCo of all or substantially all of PubCo’s assets,
other than such sale or other disposition by PubCo of all or substantially all
of PubCo’s assets to an entity, at least 50% of the combined voting power of the
voting securities of which are owned by stockholders of PubCo in substantially
the same proportions as their ownership of PubCo immediately prior to such sale.

 

Notwithstanding the foregoing, except with respect to clause (b) above, a “PubCo
Change of Control” shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated transactions immediately
following which the record holders of the shares of PubCo immediately prior to
such transaction or series of transactions continue to have substantially the
same proportionate ownership in, and own substantially all of the shares of, an
entity which owns, either directly or through a Subsidiary, all or substantially
all of the assets of PubCo immediately following such transaction or series of
transactions.

 

“PubCo Common Stock” means all classes and series of common stock of PubCo,
including the Class A Common Stock and the Class B Common Stock.

 

“Qualifying Owners” means (i) Scott Bender, or any company of which he is the
manager, managing member or he otherwise controls, including, but not limited
to, HoldCo, (ii) any wife, lineal descendant, legal guardian or other legal
representative or estate of Scott Bender; (iii) any trust of which at least one
of the trustees is a person described in clause (i) or (ii) above, and
(iv) Cadent Energy Partners II, L.P. and any affiliated funds or investment
vehicles managed by Cadent Energy Partners, LLC.

 

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“Reclassification Event” means any of the following: (a) any reclassification or
recapitalization of PubCo Common Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination or any transaction subject to
Section 3.1(g)), (b) any merger, consolidation or other combination involving
PubCo, or (c) any sale, conveyance, lease, or other disposal of all or
substantially all the properties and assets of PubCo to any other Person, in
each of clauses (a), (b) or (c), as a result of which holders of PubCo Common
Stock shall be entitled to receive cash, securities or other property for their
shares of PubCo Common Stock.

 

“Redeeming Member” is defined in Section 3.6(a)(i).

 

“Redemption” has the meaning set forth in Section 3.6(a)(i).

 

“Redemption Date” means (a) the later of (i) the date that is ten Business Days
after the Redemption Notice Date and (ii) if the Company or PubCo has made a
valid Cash Election with respect to the relevant Redemption, the first Business
Day on which the Company or PubCo has available funds to pay the Cash Election
Amount, which in no event shall be more than fifteen Business Days after the
Redemption Notice Date, or (b) such later date (i) specified in the Redemption
Notice or (ii) on which a contingency described in Section 3.6(a)(ii)(D) that is
specified in the Redemption Notice is satisfied.

 

“Redemption Notice” is defined in Section 3.6(a)(ii).

 

“Redemption Notice Date” is defined in Section 3.6(a)(ii).

 

“Regulatory Allocations” is defined in Section 4.2(i).

 

“Reorganization” is defined in the recitals to this Agreement.

 

“Retraction Condition” means any of the following conditions with respect to a
Redemption by a Redeeming Member: (a) any registration statement pursuant to
which the resale of Class A Common Stock to be registered for such Redeeming
Member at or immediately following the consummation of such Redemption shall
have ceased to be effective pursuant to any action or inaction by the SEC or no
such resale registration statement has yet become effective; (b) PubCo shall
have failed to cause any related prospectus to be supplemented by any required
prospectus supplement necessary to effect the sale of shares of Class A Common
Stock received with respect to such Redemption; (c) PubCo shall have exercised
its right to defer, delay or suspend the filing or effectiveness of a
registration statement and such deferral, delay or suspension shall affect the
ability of such Redeeming Member to have the resale of its Class A Common Stock
registered at or immediately following the consummation of the Redemption;
(d) PubCo or the Company shall have disclosed to such Redeeming Member any
material non-public information concerning PubCo or the Company, the receipt of
which results in such Redeeming Member being prohibited or restricted from
selling Class A Common Stock at or immediately following the Redemption without
disclosure of such information (and PubCo does not permit disclosure); (e) any
stop order relating to the registration statement pursuant to which the Class A
Common Stock was to be registered by such Redeeming Member at or immediately
following the Redemption shall have been issued by the SEC; (f) there shall be
in effect an injunction, a restraining order or a decree of any nature of

 

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any Governmental Entity that restrains or prohibits the Redemption; or (g) the
Redemption Date would occur three Business Days or less prior to, or during, a
Black-Out Period.

 

“Retraction Notice” is defined in Section 3.6(b).

 

“SEC” means the U.S. Securities and Exchange Commission, including any
governmental body or agency succeeding to the functions thereof.

 

“Securities Act” means the Securities Act of 1933, and the rules and regulations
promulgated thereunder, as the same may be amended from time to time (or any
corresponding provisions of succeeding law).

 

“Sponsor” is defined in Section 7.4(a).

 

“Subsidiary” means, with respect to any specified Person, any other Person with
respect to which such specified Person (a) has, directly or indirectly, the
power, through the ownership of securities or otherwise, to elect a majority of
directors or similar managing body or (b) beneficially owns, directly or
indirectly, a majority of such Person’s Equity Securities.

 

“Tax Matters Member” means the “tax matters partner” as defined in Code
Section 6231(a)(7) and as appointed in Section 9.4.

 

“Tax Receivable Agreement” means the Tax Receivable Agreement, dated as of
January 29, 2018, by and among PubCo and the other parties thereto, as may be
amended, supplemented or restated from time to time, and any similar agreement
entered into by PubCo after the Effective Date.

 

“Transfer” means, when used as a noun, any voluntary or involuntary, direct or
indirect (whether through a change of control of the Transferor or any Person
that controls the Transferor, the issuance or transfer of Equity Securities of
the Transferor, by operation of law or otherwise), transfer, sale, pledge or
hypothecation or other disposition and, when used as a verb, voluntarily or
involuntarily, directly or indirectly (whether through a change of control of
the Transferor or any Person that controls the Transferor, the issuance or
transfer of Equity Securities of the Transferor or any Person that controls the
Transferor, by operation of law or otherwise), to transfer, sell, pledge or
hypothecate or otherwise dispose of.  The terms “Transferee,” “Transferor,”
“Transferred,” and other forms of the word “Transfer” shall have the correlative
meanings.

 

“Transfer Agent” is defined in Section 3.6(a)(iii).

 

“Treasury Regulations” means pronouncements, as amended from time to time, or
their successor pronouncements, which clarify, interpret and apply the
provisions of the Code, and which are designated as “Treasury Regulations” by
the United States Department of the Treasury.

 

“Uniform Commercial Code” means the Uniform Commercial Code or any successor
provision thereof as the same may from time to time be in effect in the State of
Delaware.

 

“Units” means the Units issued hereunder and shall also include any equity
security of the Company issued in respect of or in exchange for Units, whether
by way of dividend or other

 

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distribution, split, recapitalization, merger, rollup transaction,
consolidation, conversion or reorganization.

 

“Winding-Up Member” is defined in Section 10.3(a).

 

Section 1.2                                    Interpretive Provisions.  For all
purposes of this Agreement, except as otherwise expressly provided or unless the
context otherwise requires:

 

(a)                                 the terms defined in Section 1.1 are
applicable to the singular as well as the plural forms of such terms;

 

(b)                                 all accounting terms not otherwise defined
herein have the meanings assigned under GAAP;

 

(c)                                  all references to currency, monetary values
and dollars set forth herein shall mean United States (U.S.) dollars and all
payments hereunder shall be made in United States dollars;

 

(d)                                 when a reference is made in this Agreement
to an Article, Section, Exhibit or Schedule, such reference is to an Article or
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated;

 

(e)                                  whenever the words “include”, “includes” or
“including” are used in this Agreement, they shall be deemed to be followed by
the words “without limitation”;

 

(f)                                   “or” is not exclusive;

 

(g)                                  pronouns of either gender or neuter shall
include, as appropriate, the other pronoun forms; and

 

(h)                                 the words “hereof”, “herein” and “hereunder”
and words of similar import, when used in this Agreement, refer to this
Agreement as a whole and not to any particular provision of this Agreement.

 

ARTICLE II

 

ORGANIZATION OF THE LIMITED LIABILITY COMPANY

 

Section 2.1                                    Formation.  The Company has been
formed as a limited liability company subject to the provisions of the Act upon
the terms, provisions and conditions set forth in this Agreement.

 

Section 2.2                                    Filing.  The Company’s
Certificate of Formation has been filed with the Secretary of State of the State
of Delaware in accordance with the Act.  The Members shall execute such further
documents (including amendments to such Certificate of Formation) and take such
further action as is appropriate to comply with the requirements of Law for the
formation or operation of a limited liability company in Delaware and in all
states and counties where the Company may conduct its business.

 

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Section 2.3                                    Name.  The name of the Company is
“Cactus Wellhead, LLC” and all business of the Company shall be conducted in
such name or, in the discretion of the Managing Member, under any other name.

 

Section 2.4                                    Registered Office; Registered
Agent.  The location of the registered office of the Company in the State of
Delaware is 1209 Orange Street, Wilmington, Delaware 19801, or at such other
place as the Managing Member from time to time may select.  The name and address
for service of process on the Company in the State of Delaware are The
Corporation Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, or
such other qualified Person as the Managing Member may designate from time to
time and its business address.

 

Section 2.5                                    Principal Place of Business.  The
principal place of business of the Company shall be located in such place as is
determined by the Managing Member from time to time.

 

Section 2.6                                    Purpose; Powers.  The nature of
the business or purposes to be conducted or promoted by the Company is to engage
in any lawful act or activity for which limited liability companies may be
formed under the Act.  The Company shall have the power and authority to take
any and all actions and engage in any and all activities necessary, appropriate,
desirable, advisable, ancillary or incidental to the accomplishment of the
foregoing purpose.

 

Section 2.7                                    Term.  The term of the Company
commenced on the date of filing of the Certificate of Formation of the Company
with the office of the Secretary of State of the State of Delaware in accordance
with the Act and shall continue indefinitely.  The Company may be dissolved and
its affairs wound up only in accordance with Article X.

 

Section 2.8                                    Intent.  It is the intent of the
Members that the Company be operated in a manner consistent with its treatment
as a “partnership” for U.S. federal and applicable state income tax purposes. 
It is also the intent of the Members that the Company not be operated or treated
as a “partnership” for purposes of Section 303 of the Federal Bankruptcy Code. 
Neither the Company nor any Member shall take any action inconsistent with the
express intent of the parties hereto as set forth in this Section 2.8.

 

ARTICLE III

 

OWNERSHIP AND CAPITAL CONTRIBUTIONS; CAPITAL ACCOUNTS

 

Section 3.1                                    Authorized Units; General
Provisions With Respect to Units.

 

(a)                                 Subject to the provisions of this Agreement,
the Company shall be authorized to issue from time to time such number of Units
and such other Equity Securities as the Managing Member shall determine in
accordance with Section 3.3.  Each authorized Unit may be issued pursuant to
such agreements as the Managing Member shall approve, including pursuant to
options and warrants.  The Company may reissue any Units that have been
repurchased or acquired by the Company.

 

(b)                                 Each outstanding Unit shall be identical
(except as provided in Section 3.1(e) or Section 3.3).

 

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(c)                                  Initially, none of the Units will be
represented by certificates.  If the Managing Member determines that it is in
the interest of the Company to issue certificates representing the Units,
certificates will be issued and the Units will be represented by those
certificates, and this Agreement shall be amended as the Managing Member shall
determine necessary or desirable to reflect the issuance of certificated Units
for purposes of the Uniform Commercial Code.  Nothing contained in this
Section 3.1(c) shall be deemed to authorize or permit any Member to Transfer its
Units except as otherwise permitted under this Agreement.

 

(d)                                 The total number of Units issued and
outstanding and held by the Members is set forth on Exhibit A (as amended from
time to time in accordance with the terms of this Agreement) as of the date set
forth therein.

 

(e)                                  If, at any time after the Effective Time,
PubCo issues a share of its Class A Common Stock or any other Equity Security of
PubCo (other than shares of Class B Common Stock), (i) the Company shall
concurrently issue to PubCo one Unit (if PubCo issues a share of Class A Common
Stock), or such other Equity Security of the Company (if PubCo issues Equity
Securities other than Class A Common Stock) corresponding to the Equity
Securities issued by PubCo, and with substantially the same rights to dividends
and distributions (including distributions upon liquidation) and other economic
rights as those of such Equity Securities of PubCo to be issued and (ii) PubCo
shall concurrently contribute to the Company the net proceeds or other property
received by PubCo for such share of Class A Common Stock or other Equity
Security; provided, however, that if PubCo issues any shares of Class A Common
Stock in order to acquire or fund the acquisition from a Member of a number of
Units (and shares of Class B Common Stock) equal to the number of shares of
Class A Common Stock so issued, then the Company shall not issue any new Units
in connection therewith and, where such shares of Class A Common Stock have been
issued for cash to fund an acquisition, PubCo shall not be required to transfer
such net proceeds to the Company, and such net proceeds shall instead be
transferred to such Member as consideration for such acquisition. 
Notwithstanding the foregoing, this Section 3.1(e) shall not apply to the
issuance and distribution to holders of shares of PubCo Common Stock of rights
to purchase Equity Securities of PubCo under a “poison pill” or similar
shareholders rights plan (and upon any redemption of Units for Class A Common
Stock, such Class A Common Stock will be issued together with a corresponding
right under such plan), or to the issuance under PubCo’s employee benefit plans
of any warrants, options, other rights to acquire Equity Securities of PubCo or
rights or property that may be converted into or settled in Equity Securities of
PubCo, but shall in each of the foregoing cases apply to the issuance of Equity
Securities of PubCo in connection with the exercise or settlement of such
rights, warrants, options or other rights or property.  Except pursuant to
Section 3.6, (x) the Company may not issue any additional Units to PubCo or any
of its Subsidiaries unless substantially simultaneously therewith PubCo or such
Subsidiary issues or sells an equal number of newly-issued shares of PubCo’s
Class A Common Stock to another Person, and (y) the Company may not issue any
other Equity Securities of the Company to PubCo or any of its Subsidiaries
unless substantially simultaneously PubCo or such Subsidiary issues or sells, to

 

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another Person, an equal number of newly-issued shares of a new class or series
of Equity Securities of PubCo or such Subsidiary with substantially the same
rights to dividends and distributions (including distributions upon liquidation)
and other economic rights as those of such Equity Securities of the Company.  If
at any time PubCo or any of its Subsidiaries (other than the Company and its
Subsidiaries) issues Debt Securities, PubCo or such Subsidiary shall transfer to
the Company (in a manner to be determined by the Managing Member in its
reasonable discretion) the proceeds received by PubCo or such Subsidiary in
exchange for such Debt Securities in a manner that directly or indirectly
burdens the Company with the repayment of the Debt Securities. In the event any
Equity Security outstanding at PubCo is exercised or otherwise converted and, as
a result, any shares of Class A Common Stock or other Equity Securities of PubCo
are issued, the corresponding Equity Security outstanding at the Company shall
be similarly exercised or otherwise converted, as applicable, and an equivalent
number of Units or other Equity Securities of the Company shall be issued to
PubCo as contemplated by the first sentence of this Section 3.1(e).

 

(f)                                   PubCo or any of its Subsidiaries may not
redeem, repurchase or otherwise acquire (i) any shares of Class A Common Stock
(including upon forfeiture of any unvested shares of Class A Common Stock)
unless substantially simultaneously the Company redeems, repurchases or
otherwise acquires from PubCo or such Subsidiary an equal number of Units for
the same price per security or (ii) any other Equity Securities of PubCo, unless
substantially simultaneously the Company redeems, repurchases or otherwise
acquires from PubCo or such Subsidiary an equal number of Equity Securities of
the Company of a corresponding class or series with substantially the same
rights to dividends and distributions (including distributions upon liquidation)
and other economic rights as those of such Equity Securities of PubCo for the
same price per security.  The Company may not redeem, repurchase or otherwise
acquire (x) except pursuant to Section 3.6, any Units from PubCo or any of its
Subsidiaries unless substantially simultaneously PubCo or such Subsidiary
redeems, repurchases or otherwise acquires an equal number of shares of Class A
Common Stock for the same price per security from holders thereof, or (y) any
other Equity Securities of the Company from PubCo or any of its Subsidiaries
unless substantially simultaneously PubCo or such Subsidiary redeems,
repurchases or otherwise acquires for the same price per security an equal
number of Equity Securities of PubCo of a corresponding class or series with
substantially the same rights to dividends and distributions (including
distribution upon liquidation) and other economic rights as those of such Equity
Securities of PubCo. Notwithstanding the foregoing, to the extent that any
consideration payable by PubCo in connection with the redemption or repurchase
of any shares of Class A Common Stock or other Equity Securities of PubCo or any
of its Subsidiaries consists (in whole or in part) of shares of Class A Common
Stock or such other Equity Securities (including, for the avoidance of doubt, in
connection with the cashless exercise of an option or warrant), then the
redemption or repurchase of the corresponding Units or other Equity Securities
of the Company shall be effectuated in an equivalent manner.

 

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(g)                                  The Company shall not in any manner effect
any subdivision (by any equity split, equity distribution, reclassification,
recapitalization or otherwise) or combination (by reverse equity split,
reclassification, recapitalization or otherwise) of the outstanding Units unless
accompanied by an identical subdivision or combination, as applicable, of the
outstanding PubCo Common Stock, with corresponding changes made with respect to
any other exchangeable or convertible securities.  PubCo shall not in any manner
effect any subdivision (by any equity split, equity distribution,
reclassification, recapitalization or otherwise) or combination (by reverse
equity split, reclassification, recapitalization or otherwise) of the
outstanding PubCo Common Stock unless accompanied by an identical subdivision or
combination, as applicable, of the outstanding Units, with corresponding changes
made with respect to any other exchangeable or convertible securities.

 

(h)                                 Notwithstanding any other provision of this
Agreement (including Section 3.1(e)), if PubCo holds any excess cash amount,
PubCo may, in its sole discretion, contribute such excess cash amount to the
Company in exchange for a number of Units or other Equity Securities of the
Company determined in its sole discretion, and distribute to the holders of
Class A Common Stock shares of Class A Common Stock (if the Company issues Units
to PubCo) or such other Equity Security of PubCo (if the Company issues Equity
Securities of the Company other than Units) corresponding to the Equity
Securities issued by the Company and with substantially the same rights to
dividends and distributions (including distributions upon liquidation) and other
economic rights as those of such Equity Securities of the Company issued.

 

Section 3.2                                    Voting Rights.  No Member has any
voting right except with respect to those matters specifically reserved for a
Member vote under the Act and for matters expressly requiring the approval of
Members under this Agreement.  Except as otherwise required by the Act, each
Unit will entitle the holder thereof to one vote on all matters to be voted on
by the Members.  Except as otherwise expressly provided in this Agreement, the
holders of Units having voting rights will vote together as a single class on
all matters to be approved by the Members.

 

Section 3.3                                    Capital Contributions; Unit
Ownership.

 

(a)                                 Capital Contributions.  Except as otherwise
set forth in Section 3.1(e), no Member shall be required to make additional
Capital Contributions.

 

(b)                                 Issuance of Additional Units or Interests. 
Except as otherwise expressly provided in this Agreement, the Managing Member
shall have the right to authorize and cause the Company to issue on such terms
(including price) as may be determined by the Managing Member (i) subject to the
limitations of Section 3.1, additional Units or other Equity Securities in the
Company (including creating preferred interests or other classes or series of
interests having such rights, preferences and privileges as determined by the
Managing Member, which rights, preferences and privileges may be senior to the
Units), and (ii) obligations, evidences of Indebtedness or other securities or
interests convertible or exchangeable for Units or other Equity Securities in
the Company; provided that, at any time following the Effective Date, in each
case the Company shall not issue Equity Securities in the Company to any

 

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Person unless such Person shall have executed a counterpart to this Agreement
and all other documents, agreements or instruments deemed necessary or desirable
in the discretion of the Managing Member.  Upon such issuance and execution,
such Person shall be admitted as a Member of the Company.  In that event, the
Managing Member shall amend Exhibit A to reflect such additional issuances. 
Subject to Section 11.1, the Managing Member is hereby authorized to amend this
Agreement to set forth the designations, preferences, rights, powers and duties
of such additional Units or other Equity Securities in the Company, or such
other amendments that the Managing Member determines to be otherwise necessary
or appropriate in connection with the creation, authorization or issuance of,
any class or series of Units or other Equity Securities in the Company pursuant
to this Section 3.3(b); provided that, notwithstanding the foregoing, the
Managing Member shall have the right to amend this Agreement as set forth in
this sentence without the approval of any other Person (including any Member)
and notwithstanding any other provision of this Agreement (including
Section 11.1) if such amendment is necessary in order to consummate any offering
of shares of PubCo Common Stock or other Equity Securities of PubCo provided
that the designations, preferences, rights, powers and duties of any such
additional Units or other Equity Securities of the Company as set forth in such
amendment are substantially similar to those applicable to such shares of PubCo
Common Stock or other Equity Securities of PubCo.

 

Section 3.4                                    Capital Accounts.  A Capital
Account shall be maintained for each Member in accordance with the provisions of
Treasury Regulations Section 1.704-1(b)(2)(iv) and, to the extent consistent
with such regulations, the other provisions of this Agreement.  Each Member’s
Capital Account balance as of the Effective Date shall be equal to the amount of
its respective Closing Date Capital Account Balance set forth opposite such
Member’s name on Exhibit A.  Thereafter, each Member’s Capital Account shall be
(a) increased by (i) allocations to such Member of Profits pursuant to
Section 4.1 and any other items of income or gain allocated to such Member
pursuant to Section 4.2, (ii) the amount of additional cash or the initial Gross
Asset Value of any asset (net of any Liabilities assumed by the Member and any
Liabilities to which the asset is subject) contributed to the Company by such
Member, and (iii) any other increases allowed or required by Treasury
Regulations Section 1.704-1(b)(2)(iv), and (b) decreased by (i) allocations to
such Member of Losses pursuant to Section 4.1 and any other items of deduction
or loss allocated to such Member pursuant to the provisions of Section 4.2,
(ii) the amount of any cash or the Gross Asset Value of any asset (net of any
Liabilities assumed by the Member and any Liabilities to which the asset is
subject) distributed to such Member, and (iii) any other decreases allowed or
required by Treasury Regulations Section 1.704-1(b)(2)(iv).  In the event of a
Transfer of Units made in accordance with this Agreement (including a deemed
Transfer for U.S. federal income tax purposes as described in
Section 3.6(a)(iv)), the Capital Account of the Transferor that is attributable
to the Transferred Units shall carry over to the Transferee Member in accordance
with the provisions of Treasury Regulations Section 1.704-1(b)(2)(iv)(l).

 

Section 3.5                                    Other Matters.

 

(a)                                 No Member shall demand or receive a return
on or of its Capital Contributions or withdraw from the Company without the
consent of the Managing Member.  Under

 

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circumstances requiring a return of any Capital Contributions, no Member has the
right to receive property other than cash.

 

(b)                                 No Member shall receive any interest,
salary, compensation, draw or reimbursement with respect to its Capital
Contributions or its Capital Account, or for services rendered or expenses
incurred on behalf of the Company or otherwise in its capacity as a Member,
except as otherwise provided in Section 6.9 or as otherwise contemplated by this
Agreement.

 

(c)                                  The Liability of each Member shall be
limited as set forth in the Act and other applicable Law and, except as
expressly set forth in this Agreement or required by Law, no Member (or any of
its Affiliates) shall be personally liable, whether to the Company, any of the
other Members, the creditors of the Company, or any other third party, for any
debt or Liability of the Company, whether arising in contract, tort or
otherwise, solely by reason of being a Member of the Company.

 

(d)                                 Except as otherwise required by the Act, a
Member shall not be required to restore a deficit balance in such Member’s
Capital Account, to lend any funds to the Company or, except as otherwise set
forth herein, to make any additional contributions or payments to the Company.

 

(e)                                  The Company shall not be obligated to repay
any Capital Contributions of any Member.

 

Section 3.6                                    Redemption of Units.

 

(a)                                 (i) Upon the terms and subject to the
conditions set forth in this Section 3.6, each of the Members (other than PubCo
and its wholly-owned Subsidiaries) (the “Redeeming Member”) shall be entitled to
cause the Company to redeem all or a portion of such Member’s Units (together
with the transfer and surrender of the same number of shares of Class B Common
Stock) for an equivalent number of shares of Class A Common Stock (a
“Redemption”) or, at the Company’s election made in accordance with
Section 3.6(a)(iv), cash equal to the Cash Election Amount calculated with
respect to such Redemption.  A Redeeming Member shall be permitted to effect a
Redemption of Units no more frequently than once per calendar quarter. The
Managing Member may, in its discretion, adopt a policy to limit quarterly
exchanges to a particular period during each quarter.  With respect to each
Redemption, a Redeeming Member shall be required to redeem at least a number of
Units equal to the lesser of (A) 2,500 Units and (B) All Owned Units (excluding,
for this purpose only, HoldCo Units not eligible for redemption pursuant to the
terms of the A&R HoldCo Agreement at the time of the relevant Redemption).  
Notwithstanding the preceding clause (A) of this Section 3.6(a)(i), with respect
to each Redemption, if the Redeeming Member is any of Bender Investment Company,
Scott Bender, Joel Bender, Steven Bender, Cadent Energy Partners II, L.P. (or
any affiliated funds or investment vehicles managed by Cadent Energy Partners,
LLC) or Lee Boquet, such Redeeming Member  shall be required to redeem at least
a number of Units equal to the lesser of 10,000 Units and All Owned Units, and
if the

 

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Redeeming Member is a Former A-1 Unitholder, such Redeeming Member  shall be
required to redeem at least a number of Units equal to the lesser of 1,000 Units
and All Owned Units (excluding, for this purpose only, HoldCo Units not eligible
for redemption pursuant to the terms of the A&R HoldCo Agreement at the time of
the relevant Redemption).  Notwithstanding the foregoing, subject to
Section 3.6(j) and Section 3.6(k), a Redeeming Member may exercise its
redemption right with respect to All Owned Units of such Member or at least
1,000,000 Units at any time. Upon the Redemption of all of a Member’s Units,
such Member shall, for the avoidance of doubt, cease to be a Member of the
Company.

 

(ii)                                  In order to exercise the redemption right
under Section 3.6(a)(i), the Redeeming Member shall provide written notice (the
“Redemption Notice”) to the Company, with a copy to PubCo (the date of delivery
of such Redemption Notice, the “Redemption Notice Date”), stating:

 

(A)                               the number of Units (together with the
transfer and surrender of an equal number of shares of Class B Common Stock) the
Redeeming Member elects to have the Company redeem;

 

(B)                               if the shares of Class A Common Stock to be
received are to be issued other than in the name of the Redeeming Member, the
name(s) of the Person(s) in whose name or on whose order the shares of Class A
Common Stock are to be issued;

 

(C)                               if the shares of Class A Common Stock are then
publicly traded, whether the exercise of the redemption right is contingent upon
the price of a share of Class A Common Stock at the close of business on the
last trading day prior to the Redemption Date (as reported by Bloomberg, L.P. or
its successor) being equal to a specified price, and, if so, such price;

 

(D)                               whether the exercise of the redemption right
is to be contingent (including as to timing) upon the closing of an underwritten
offering of the shares of Class A Common Stock for which the Units will be
redeemed or the closing of an announced merger, consolidation or other
transaction or event to which PubCo is a party in which the shares of Class A
Common Stock would be exchanged or converted or become exchangeable for or
convertible into cash or other securities or property; and

 

(E)                                if the Redeeming Member requires the
Redemption to take place on a specific Business Day, such Business Day, provided
that, any such specified Business Day not be earlier than the date that would
otherwise apply pursuant to clause (a) of the definition of Redemption Date.

 

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(iii)                               If the Units to be redeemed (or the shares
of Class B Common Stock to be transferred and surrendered) by the Redeeming
Member are represented by a certificate or certificates, prior to the Redemption
Date, the Redeeming Member shall also present and surrender such certificate or
certificates representing such Units (or shares of Class B Common Stock) during
normal business hours at the principal executive offices of the Company, or if
any agent for the registration or transfer of Class A Common Stock is then duly
appointed and acting (the “Transfer Agent”), at the office of the Transfer
Agent.  If required by the Managing Member, any certificate for Units and any
certificate for shares of Class B Common Stock (in each case, if certificated)
surrendered to the Company hereunder shall be accompanied by instruments of
transfer, in forms reasonably satisfactory to the Managing Member and the
Transfer Agent, duly executed by the Redeeming Member or the Redeeming Member’s
duly authorized representative.

 

(iv)                              Upon receipt of a Redemption Notice, the
Company shall be entitled to elect (a “Cash Election”) to settle the Redemption
by delivering to the Redeeming Member, in lieu of the applicable number of
shares of Class A Common Stock that would be received in such Redemption, an
amount of cash equal to the Cash Election Amount for such Redemption.  In order
to make a Cash Election with respect to a Redemption, the Company must provide
written notice of such election to the Redeeming Member (with a copy to PubCo)
prior to 1:00 p.m., Houston time, on the seventh Business Day after the
Redemption Notice Date.  If the Company fails to provide such written notice
prior to such time, it shall not be entitled to make a Cash Election with
respect to such Redemption.

 

(v)                                 For U.S. federal income (and applicable
state and local) tax purposes, each of the Redeeming Member, the Company and
PubCo, as the case may be, agree to treat each Redemption and, in the event
PubCo exercises its Call Right, each Call Purchase, as a sale of the Redeeming
Member’s Units (together with the same number of shares of Class B Common Stock)
to PubCo in exchange for shares of Class A Common Stock or cash, as applicable.

 

(b)                                                                                
(i) Subject to the satisfaction of any contingency described in
Section 3.6(a)(ii)(C) or (D) that is specified in the relevant Redemption
Notice, the Redemption shall be completed on the Redemption Date; provided, that
if a valid Cash Election has not been made and a Retraction Condition occurs,
the Redeeming Member may, at any time prior to the Redemption Date, revoke its
Redemption Notice or delay the consummation of a Redemption by giving written
notice (the “Retraction Notice”) to the Company (with a copy to PubCo); provided
that in no event shall the Redeeming Member seeking to revoke or delay the
consummation of such Redemption and relying on any of the matters contemplated
in the definition of Retraction Condition have controlled or intentionally
materially influenced any facts, circumstances, or Persons in connection
therewith (except in the good faith performance of his or her duties as an
officer or director of PubCo) in order

 

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to provide such Redeeming Member with a basis for such revocation or delay.  The
timely delivery of a Retraction Notice that revokes a Redemption Notice shall
terminate all of the Redeeming Member’s, the Company’s and PubCo’s rights and
obligations arising from the retracted Redemption Notice.  If a Redeeming Member
delays the consummation of a Redemption pursuant to a Retraction Notice,
(A) unless the Redeeming Member delivers a Retraction Notice in accordance with
Section 3.6(b)(i)(B), the Redemption Date shall occur on the first Business Day
following the date on which the conditions giving rise to such delay cease to
exist (or such earlier day as PubCo, the Company and such Redeeming Member may
agree in writing) and (B) the Redeeming Member may retract its Redemption Notice
by giving a Retraction Notice to the Company (with a copy to PubCo) at any time
prior to the date on which the conditions giving rise to such delay cease to
exist.

 

(ii)                                  Unless the Redeeming Member has timely
delivered a Retraction Notice revoking a Redemption Notice as provided in
Section 3.6(b)(i) or PubCo has elected its Call Right pursuant to
Section 3.6(f), on the Redemption Date (to be effective immediately prior to the
close of business on the Redemption Date) (A) the Redeeming Member shall
transfer and surrender the Units to be redeemed (and a corresponding number of
shares of Class B Common Stock) to the Company, in each case free and clear of
all liens and encumbrances, (B) PubCo shall contribute to the Company the
consideration the Redeeming Member is entitled to receive under
Section 3.6(a)(i) or Section 3.6(a)(iv) and, as described in Section 3.1(e), the
Company shall issue to PubCo a number of Units or other Equity Securities of the
Company as consideration for such contribution, (C) the Company shall (x) cancel
the redeemed Units, (y) transfer to the Redeeming Member the consideration the
Redeeming Member is entitled to receive under Section 3.6(a)(i) or
Section 3.6(a)(iv), and (z) if the Units are certificated, issue to the
Redeeming Member a certificate for a number of Units equal to the difference (if
any) between the number of Units evidenced by the certificate surrendered by the
Redeeming Member pursuant to clause (ii)(A) of this Section 3.6(b) and the
number of redeemed Units, and (D) PubCo shall cancel the surrendered shares of
Class B Common Stock.

 

(c)                                  If (i) there is any reclassification,
reorganization, recapitalization or other similar transaction pursuant to which
the shares of Class A Common Stock are converted or changed into another
security, securities or other property (other than as a result of a subdivision
or combination or any transaction subject to Section 3.1(g)), or (ii) PubCo, by
dividend or otherwise, distributes to all holders of the shares of Class A
Common Stock evidences of its Indebtedness or assets, including securities
(including shares of Class A Common Stock and any rights, options or warrants to
all holders of the shares of Class A Common Stock to subscribe for or to
purchase or to otherwise acquire shares of Class A Common Stock, or other
securities or rights convertible into, exchangeable for or exercisable for
shares of Class A Common Stock) but excluding any cash dividend or distribution
as well as any such distribution of Indebtedness or assets received by PubCo
from the Company in

 

23

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respect of the Units, then upon any subsequent Redemption, in addition to the
shares of Class A Common Stock or the Cash Election Amount, as applicable, each
Member shall be entitled to receive the amount of such security, securities or
other property that such Member would have received if such Redemption had
occurred immediately prior to the effective date of such reclassification,
reorganization, recapitalization, other similar transaction, dividend or other
distribution, taking into account any adjustment as a result of any subdivision
(by any split, distribution or dividend, reclassification, reorganization,
recapitalization or otherwise) or combination (by reverse split,
reclassification, recapitalization or otherwise) of such security, securities or
other property that occurs after the effective time of such reclassification,
reorganization, recapitalization or other similar transaction.  For the
avoidance of doubt, if there is any reclassification, reorganization,
recapitalization or other similar transaction in which the shares of Class A
Common Stock are converted or changed into another security, securities or other
property, or any dividend or distribution (other than an excluded dividend or
distribution, as described above), this Section 3.6 shall continue to be
applicable, mutatis mutandis, with respect to such security or other property.
This Agreement shall apply to the Units held by the Members as of the Effective
Date, as well as any Units hereafter acquired by a Member, including Members who
receive their Units pursuant to Section 8.3 of the A&R HoldCo Agreement.

 

(d)                                 PubCo shall at all times keep available,
solely for the purpose of issuance upon a Redemption, out of its authorized but
unissued shares of Class A Common Stock or other Equity Securities, such number
of shares of Class A Common Stock that shall be issuable upon the Redemption of
all outstanding Units (other than those Units held by PubCo or any Subsidiary of
PubCo); provided, that nothing contained herein shall be construed to preclude
PubCo from satisfying its obligations with respect to a Redemption by delivery
of cash pursuant to a Cash Election or shares of Class A Common Stock or other
Equity Securities that are held in the treasury of PubCo. PubCo covenants that
all shares of Class A Common Stock and other Equity Securities that shall be
issued upon a Redemption shall, upon issuance thereof, be validly issued, fully
paid and non-assessable.  In addition, for so long as the shares of Class A
Common Stock or other Equity Securities are listed on a National Securities
Exchange, PubCo shall use its reasonable best efforts to cause all shares of
Class A Common Stock and such other Equity Securities issued upon a Redemption
to be listed on such National Securities Exchange at the time of such issuance.

 

(e)                                  The issuance of shares of Class A Common
Stock or other Equity Securities upon a Redemption shall be made without charge
to the Redeeming Member for any stamp or other similar tax in respect of such
issuance; provided, however, that if any such shares of Class A Common Stock or
other Equity Securities are to be issued in a name other than that of the
Redeeming Member, then the Person or Persons in whose name the shares are to be
issued shall pay to PubCo the amount of any tax that may be payable in respect
of any transfer involved in such issuance or shall establish to the satisfaction
of PubCo that such tax has been paid or is not payable.

 

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(f)                                   (i) Notwithstanding anything to the
contrary in this Section 3.6, but subject to Section 3.6(g), a Redeeming Member
shall be deemed to have offered to sell its Units as described in the Redemption
Notice to PubCo, and PubCo may, in its sole discretion, by means of delivery of
a Call Election Notice in accordance with, and subject to the terms of, this
Section 3.6(f), elect to purchase directly and acquire such Units (together with
the transfer and surrender of the same number of shares of Class B Common Stock)
on the Redemption Date by paying to the Redeeming Member (or, on the Redeeming
Member’s written order and subject to Section 3.6(e), its designee) that number
of shares of Class A Common Stock the Redeeming Member (or its designee) would
otherwise receive pursuant to Section 3.6(a)(i) or, at PubCo’s election, an
amount of cash equal to the Cash Election Amount of such shares of Class A
Common Stock (the “Call Right”), whereupon PubCo shall acquire the Units offered
for redemption by the Redeeming Member (together with the transfer and surrender
of the same number of shares of Class B Common Stock to PubCo for
cancellation).  PubCo shall be treated for all purposes of this Agreement as the
owner of such Units; provided that if PubCo funds the Cash Election Amount other
than through the issuance of shares of Class A Common Stock, such Units will be
reclassified into another Equity Security of the Company if the Managing Member
determines such reclassification is necessary.

 

(ii)                                  PubCo may, at any time prior to the
Redemption Date, in its sole discretion deliver written notice (a “Call Election
Notice”) to the Company and the Redeeming Member setting forth its election to
exercise its Call Right.  A Call Election Notice may be revoked by PubCo at any
time; provided that any such revocation does not prejudice the ability of the
parties to consummate a Redemption on the Redemption Date.  Except as otherwise
provided by this Section 3.6(f), an exercise of the Call Right shall be
consummated pursuant to the same timeframe and in the same manner as the
relevant Redemption would have been consummated if PubCo had not delivered a
Call Election Notice.

 

(g)                                  In connection with a PubCo Change of
Control, PubCo shall have the right, in its sole discretion, to require each
Member (other than PubCo and its wholly-owned Subsidiaries) to effect a
Redemption of some or all of such Member’s Units (together with the transfer and
surrender of the same number of shares of Class B Common Stock); provided that a
Cash Election shall not be permitted pursuant to such a Redemption under this
Section 3.6(g).  Any Redemption pursuant to this Section 3.6(g) shall be
effective immediately prior to the consummation of the PubCo Change of Control
(and, for the avoidance of doubt, shall not be effective if such PubCo Change of
Control is not consummated) (the “Change of Control Redemption Date”).  From and
after the Change of Control Redemption Date, (i) the Units and shares of Class B
Common Stock subject to such Redemption shall be deemed to be transferred to
PubCo on the Change of Control Redemption Date and (ii) such Member shall cease
to have any rights with respect to the Units and shares of Class B Common Stock
subject to such Redemption (other than the right to receive shares of Class A
Common Stock pursuant to such Redemption).  PubCo shall provide written notice
of an expected PubCo Change of Control to all Members

 

25

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within the earlier of (x) five (5) Business Days following the execution of the
agreement with respect to such PubCo Change of Control and (y) ten (10) Business
Days before the proposed date upon which the contemplated PubCo Change of
Control is to be effected, indicating in such notice such information as may
reasonably describe the PubCo Change of Control transaction, subject to
applicable law, including the date of execution of such agreement or such
proposed effective date, as applicable, the amount and types of consideration to
be paid for shares of Class A Common Stock in the PubCo Change of Control, any
election with respect to types of consideration that a holder of shares of
Class A Common Stock, as applicable, shall be entitled to make in connection
with such PubCo Change of Control, and the number of Units (and corresponding
shares of Class B Common Stock) held by such Member that PubCo intends to
require to be subject to such Redemption.  Following delivery of such notice and
on or prior to the Change of Control Redemption Date, the Members shall take all
actions reasonably requested by PubCo to effect such Redemption, including
taking any action and delivering any document required pursuant to the remainder
of this Section 3.6 to effect a Redemption.

 

(h)                                 No Redemption shall impair the right of the
Redeeming Member to receive any distributions payable on the Units redeemed
pursuant to such Redemption in respect of a record date that occurs prior to the
Redemption Date for such Redemption.  For the avoidance of doubt, no Redeeming
Member, or a Person designated by a Redeeming Member to receive shares of
Class A Common Stock, shall be entitled to receive, with respect to such record
date, distributions or dividends both on Units redeemed by the Company from such
Redeeming Member and on shares of Class A Common Stock received by such
Redeeming Member, or other Person so designated, if applicable, in such
Redemption.

 

(i)                                     Any Units acquired by the Company under
this Section 3.6 and transferred by the Company to PubCo shall remain
outstanding and shall not be cancelled as a result of their acquisition by the
Company.  Notwithstanding any other provision of this Agreement, PubCo shall be
automatically admitted as a Member of the Company with respect to any Units or
other Equity Securities in the Company it receives under this Agreement
(including under this Section 3.6 in connection with any Redemption).

 

(j)                                    Notwithstanding any other provision of
this Section 3.6, the Managing Member may, by written notice to the Members,
suspend the redemption rights of the Members as set forth in this Section 3.6
for an aggregate period of up to 90 days in any calendar year.  For the
avoidance of doubt, following the delivery of a Redemption Notice by any
Redeeming Member, if the Managing Member suspends the redemption rights of the
Members, such Redeeming Member may deliver a Retraction Notice and revoke its
Redemption Notice at any time prior to the later of (x) the applicable
Redemption Date or (y) the date of the consummation of the applicable
Redemption.

 

(k)                                 The Managing Member may impose additional
limitations and restrictions on Redemptions (including limiting Redemptions or
creating priority procedures for

 

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Redemptions), to the extent it determines, in its sole discretion, such
limitations and restrictions to be necessary or appropriate to avoid undue risk
that the Company may be classified as a “publicly traded partnership” within the
meaning of Section 7704 of the Code.  Furthermore, the Managing Member may
require any Member or group of Members to redeem all of their Units to the
extent it determines, in its sole discretion, that such Redemption is necessary
or appropriate to avoid undue risk that the Company may be classified as a
“publicly traded partnership” within the meaning of Section 7704 of the Code. 
Upon delivery of any notice by the Managing Member to such Member or group of
Members requiring such Redemption, such Member or group of Members shall
exchange, subject to exercise by PubCo of its Call Right pursuant to
Section 3.6(f)(i), all of their Units effective as of the date specified in such
notice (and such date shall be deemed to be a Redemption Date for purposes of
this Agreement) in accordance with this Section 3.6 and otherwise in accordance
with the requirements set forth in such notice.

 

ARTICLE IV

 

ALLOCATIONS OF PROFITS AND LOSSES

 

Section 4.1                                    Profits and Losses.  After giving
effect to the allocations under Section 4.2 and subject to Section 4.4, Profits
and Losses (and, to the extent determined by the Managing Member to be necessary
and appropriate to achieve the resulting Capital Account balances described
below, any allocable items of income, gain, loss, deduction or credit includable
in the computation of Profits and Losses) for each Fiscal Year or other taxable
period shall be allocated among the Members during such Fiscal Year or other
taxable period in a manner such that, after giving effect to the special
allocations set forth in Section 4.2 and all distributions through the end of
such Fiscal Year or other taxable period, the Capital Account balance of each
Member, immediately after making such allocation, is, as nearly as possible,
equal to (i) the amount such Member would receive pursuant to Section 10.3(b) if
all assets of the Company on hand at the end of such Fiscal Year or other
taxable period were sold for cash equal to their Gross Asset Values, all
liabilities of the Company were satisfied in cash in accordance with their terms
(limited with respect to each nonrecourse liability to the Gross Asset Value of
the assets securing such liability), and all remaining or resulting cash was
distributed, in accordance with Section 10.3(b), to the Members immediately
after making such allocation, minus (ii) such Member’s share of Company Minimum
Gain and Member Minimum Gain, computed immediately prior to the hypothetical
sale of assets, and the amount any such Member is treated as obligated to
contribute to the Company, computed immediately after the hypothetical sale of
assets.

 

Section 4.2                                    Special Allocations.

 

(a)                                 Nonrecourse Deductions for any Fiscal Year
or other taxable period shall be specially allocated to the Members under any
method determined by the Managing Member to be appropriate and in accordance
with the applicable Treasury Regulations. The amount of Nonrecourse Deductions
for a Fiscal Year or other taxable period shall equal the excess, if any, of the
net increase, if any, in the amount of Company Minimum Gain during that Fiscal
Year or other taxable period over the

 

27

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aggregate amount of any distributions during that Fiscal Year or other taxable
period of proceeds of a Nonrecourse Liability that are allocable to an increase
in Company Minimum Gain, determined in accordance with the provisions of
Treasury Regulations Section 1.704-2(d).

 

(b)                                 Any Member Nonrecourse Deductions for any
Fiscal Year or other taxable period shall be specially allocated to the Member
who bears economic risk of loss with respect to the Member Nonrecourse Debt to
which such Member Nonrecourse Deductions are attributable in accordance with
Treasury Regulations Section 1.704-2(i).  If more than one Member bears the
economic risk of loss for such Member Nonrecourse Debt, the Member Nonrecourse
Deductions attributable to such Member Nonrecourse Debt shall be allocated among
the Members according to the ratio in which they bear the economic risk of
loss.  This Section 4.2(b) is intended to comply with the provisions of Treasury
Regulations Section 1.704-2(i) and shall be interpreted consistently therewith.

 

(c)                                  Notwithstanding any other provision of this
Agreement to the contrary, if there is a net decrease in Company Minimum Gain
during any Fiscal Year or other taxable period (or if there was a net decrease
in Company Minimum Gain for a prior Fiscal Year or other taxable period and the
Company did not have sufficient amounts of income and gain during prior periods
to allocate among the Members under this Section 4.2(c)), each Member shall be
specially allocated items of Company income and gain for such Fiscal Year or
other taxable period in an amount equal to such Member’s share of the net
decrease in Company Minimum Gain during such year (as determined pursuant to
Treasury Regulations Section 1.704-2(g)(2)).  This section is intended to
constitute a minimum gain chargeback under Treasury Regulations
Section 1.704-2(f) and shall be interpreted consistently therewith.

 

(d)                                 Notwithstanding any other provision of this
Agreement except Section 4.2(c), if there is a net decrease in Member Minimum
Gain during any Fiscal Year or other taxable period (or if there was a net
decrease in Member Minimum Gain for a prior Fiscal Year or other taxable period
and the Company did not have sufficient amounts of income and gain during prior
periods to allocate among the Members under this Section 4.2(d)), each Member
shall be specially allocated items of Company income and gain for such year in
an amount equal to such Member’s share of the net decrease in Member Minimum
Gain (as determined pursuant to Treasury Regulations Section 1.704-2(i)(4)). 
This section is intended to constitute a partner nonrecourse debt minimum gain
chargeback under Treasury Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.

 

(e)                                  Notwithstanding any provision hereof to the
contrary except Section 4.2(a) and Section 4.2(b), no Losses or other items of
loss or expense shall be allocated to any Member to the extent that such
allocation would cause such Member to have an Adjusted Capital Account Deficit
(or increase any existing Adjusted Capital Account Deficit) at the end of such
Fiscal Year or other taxable period.  All Losses and other items of loss and
expense in excess of the limitation set forth in this Section 4.2(e) shall be
allocated to the Members who do not have an Adjusted Capital Account

 

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Deficit in proportion to their relative positive Capital Accounts but only to
the extent that such Losses and other items of loss and expense do not cause any
such Member to have an Adjusted Capital Account Deficit.

 

(f)                                   Notwithstanding any provision hereof to
the contrary except Section 4.2(c) and Section 4.2(d), in the event any Member
unexpectedly receives any adjustment, allocation or distribution described in
paragraph (4), (5) or (6) of Treasury Regulations Section 1.704-1(b)(2)(ii)(d),
items of income and gain (consisting of a pro rata portion of each item of
income, including gross income, and gain for the Fiscal Year or other taxable
period) shall be specially allocated to such Member in an amount and manner
sufficient to eliminate any Adjusted Capital Account Deficit of that Member as
quickly as possible; provided that an allocation pursuant to this
Section 4.2(f) shall be made only if and to the extent that such Member would
have an Adjusted Capital Account Deficit after all other allocations provided
for in this Article IV have been tentatively made as if this Section 4.2(f) were
not in this Agreement.  This Section 4.2(f) is intended to constitute a
qualified income offset under Treasury Regulations
Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

 

(g)                                  If any Member has a deficit balance in its
Capital Account at the end of any Fiscal Year or other taxable period that is in
excess of the sum of (i) the amount that such Member is obligated to restore and
(ii) the amount that the Member is deemed to be obligated to restore pursuant to
the penultimate sentence of Treasury Regulations Sections 1.704-2(g)(1) and
(i)(5), that Member shall be specially allocated items of Company income and
gain in the amount of such excess as quickly as possible, provided that an
allocation pursuant to this Section 4.2(g) shall be made only if and to the
extent that such Member would have a deficit balance in its Capital Account in
excess of such sum after all other allocations provided for in this Article IV
have been made as if Section 4.2(f) and this Section 4.2(g) were not in this
Agreement.

 

(h)                                 To the extent an adjustment to the adjusted
tax basis of any Company asset pursuant to Code Sections 734(b) or 743(b) is
required, pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as a result of a distribution to any Member in complete liquidation of
such Member’s Interest in the Company, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis) and such item of gain or loss shall be allocated to the Members in
accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(m)(2) if such
section applies or to the Member to whom such distribution was made if Treasury
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

 

(i)                                     The allocations set forth in Sections
4.2(a) through 4.2(h) (the “Regulatory Allocations”) are intended to comply with
certain requirements of Treasury Regulations Sections 1.704-1(b) and 1.704-2. 
Notwithstanding any other provision of this Article IV (other than the
Regulatory Allocations), the Regulatory Allocations (and anticipated future
Regulatory Allocations) shall be taken into account in

 

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allocating other items of income, gain, loss and deduction among the Members so
that, to the extent possible, the net amount of such allocation of other items
and the Regulatory Allocations to each Member should be equal to the net amount
that would have been allocated to each such Member if the Regulatory Allocations
had not occurred.  This Section 4.2(i) is intended to minimize to the extent
possible and to the extent necessary any economic distortions which may result
from application of the Regulatory Allocations and shall be interpreted in a
manner consistent therewith.

 

Section 4.3                                    Allocations for Tax Purposes in
General.

 

(a)                                 Except as otherwise provided in this
Section 4.3, each item of income, gain, loss and deduction of the Company for
U.S. federal income tax purposes shall be allocated among the Members in the
same manner as such item is allocated under Sections 4.1 and 4.2.

 

(b)                                 In accordance with Code Section 704(c) and
the Treasury Regulations thereunder (including the Treasury Regulations applying
the principles of Code Section 704(c) to changes in Gross Asset Values), items
of income, gain, loss and deduction with respect to any Company property having
a Gross Asset Value that differs from such property’s adjusted U.S. federal
income tax basis shall, solely for U.S. federal income tax purposes, be
allocated among the Members to account for any such difference using the
“traditional method with curative allocations,” with the curative allocations
applied only to sale gain, under Treasury Regulations Section 1.704-3(c) or such
other method or methods determined by the Managing Member to be appropriate and
in accordance with the applicable Treasury Regulations.

 

(c)                                  Any (i) recapture of depreciation or any
other item of deduction shall be allocated, in accordance with Treasury
Regulations Sections 1.1245-1(e) and 1.1254-5, to the Members who received the
benefit of such deductions, and (ii) recapture of grants credits shall be
allocated to the Members in accordance with applicable law.

 

(d)                                 Allocations pursuant to this Section 4.3 are
solely for purposes of U.S. federal, state and local taxes and shall not affect
or in any way be taken into account in computing any Member’s Capital Account or
share of Profits, Losses, other items or distributions pursuant to any provision
of this Agreement.

 

(e)                                  If, as a result of an exercise of a
noncompensatory option to acquire an interest in the Company, a Capital Account
reallocation is required under Treasury Regulations
Section 1.704-1(b)(2)(iv)(s)(3), the Company shall make corrective allocations
pursuant to Treasury Regulations Section 1.704-1(b)(4)(x).

 

Section 4.4                                    Other Allocation Rules.

 

(a)                                 The Members are aware of the income tax
consequences of the allocations made by this Article IV and the economic impact
of the allocations on the amounts receivable by them under this Agreement.  The
Members hereby agree to be bound by the

 

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provisions of this Article IV in reporting their share of Company income and
loss for income tax purposes.

 

(b)                                 The provisions regarding the establishment
and maintenance for each Member of a Capital Account as provided by Section 3.4
and the allocations set forth in Sections 4.1, 4.2 and 4.3 are intended to
comply with the Treasury Regulations and to reflect the intended economic
entitlement of the Members.  If the Managing Member determines, in its sole
discretion, that the application of the provisions in Sections 3.4, 4.1, 4.2 or
4.3 would result in non-compliance with the Treasury Regulations or would be
inconsistent with the intended economic entitlement of the Members, the Managing
Member is authorized to make any appropriate adjustments to such provisions.

 

(c)                                  All items of income, gain, loss, deduction
and credit allocable to an interest in the Company that may have been
Transferred shall be allocated between the Transferor and the Transferee based
on the portion of the Fiscal Year or other taxable period during which each was
recognized as the owner of such interest, in accordance with a method determined
by the Managing Member and permissible under Code Section 706 and the Treasury
Regulations thereunder.

 

(d)                                 The Members’ proportionate shares of the
“excess nonrecourse liabilities” of the Company, within the meaning of Treasury
Regulations Section 1.752-3(a)(3), shall be allocated to the Members in any
manner determined by the Managing Member and permissible under the Treasury
Regulations.

 

ARTICLE V

 

DISTRIBUTIONS

 

Section 5.1                                    Distributions.

 

(a)                                 Distributions.  To the extent permitted by
applicable Law and hereunder, and except as otherwise provided in Section 10.3,
distributions to Members may be declared by the Managing Member out of funds
legally available therefor in such amounts and on such terms (including the
payment dates of such distributions) as the Managing Member shall determine
using such record date as the Managing Member may designate; any such
distribution shall be made to the Members as of the close of business on such
record date on a pro rata basis (except that, for the avoidance of doubt,
repurchases or redemptions made in accordance with Section 3.1 or payments made
in accordance with Sections 6.4 or 6.9 need not be on a pro rata basis), in
accordance with the number of Units owned by each Member as of the close of
business on such record date; provided, however, that the Managing Member shall
have the obligation to make distributions as set forth in Sections 5.2 and
10.3(b)(iii); and provided, further, that, notwithstanding any other provision
herein to the contrary, no distributions shall be made to any Member to the
extent such distribution would render the Company insolvent or violate the Act. 
For purposes of the foregoing sentence, insolvency means the inability of the
Company to meet its

 

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payment obligations when due.  Promptly following the designation of a record
date and the declaration of a distribution pursuant to this Section 5.1, the
Managing Member shall give notice to each Member of the record date, the amount
and the terms of the distribution and the payment date thereof.

 

(b)                                 Successors.  For purposes of determining the
amount of distributions, each Member shall be treated as having made the Capital
Contributions and as having received the distributions made to or received by
its predecessors in respect of any of such Member’s Units.

 

(c)                                  Distributions In-Kind.  Except as otherwise
provided in this Agreement, any distributions may be made in cash or in kind, or
partly in cash and partly in kind, as determined by the Managing Member.  To the
extent that the Company distributes property in-kind to the Members, the Company
shall be treated as making a distribution equal to the Fair Market Value of such
property for purposes of Section 5.1(a) and such property shall be treated as if
it were sold for an amount equal to its Fair Market Value.  Any resulting gain
or loss shall be allocated to the Member’s Capital Accounts in accordance with
Section 4.1 and Section 4.2.

 

Section 5.2                                    Tax-Related Distributions.  The
Company shall, subject to any restrictions contained in any commercial agreement
entered into in the ordinary course with a third party to which the Company is
bound, make distributions out of legally available funds (and taking into
account any cash reserves to pay costs, fees, operating expenses and other
expenses of the Company which the Managing Member reasonably deems necessary) to
all Members on a pro rata basis, in accordance with the number of Units owned by
each Member, at such times and in such amounts as the Managing Member reasonably
determines is necessary to enable PubCo to (i) timely satisfy all of its U.S.
federal, state and local and non-U.S. tax liabilities and (ii) timely meet its
obligations pursuant to any and all Tax Receivable Agreements.

 

Section 5.3                                    Distribution Upon Withdrawal.  No
withdrawing Member shall be entitled to receive any distribution or the value of
such Member’s Interest in the Company as a result of withdrawal from the Company
prior to the liquidation of the Company, except as specifically provided in this
Agreement.

 

ARTICLE VI

 

MANAGEMENT

 

Section 6.1                                    The Managing Member; Fiduciary
Duties.

 

(a)                                 PubCo shall be the sole Managing Member of
the Company.  Except as otherwise required by Law, (i) the Managing Member shall
have full and complete charge of all affairs of the Company, (ii) the management
and control of the Company’s business activities and operations shall rest
exclusively with the Managing Member, and the Managing Member shall make all
decisions regarding the business, activities and operations of the Company
(including the incurrence of costs and expenses) in its sole discretion without
the consent of any other Member and (iii) the Members

 

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other than the Managing Member (in their capacity as such) shall not participate
in the control, management, direction or operation of the activities or affairs
of the Company and shall have no power to act for or bind the Company.

 

(b)                                 In connection with the performance of its
duties as the Managing Member of the Company, except as otherwise set forth
herein, the Managing Member acknowledges that it will owe to the Members the
same fiduciary duties as it would owe to the stockholders of a Delaware
corporation if it were a member of the board of directors of such a corporation
and the Members were stockholders of such corporation.  The Members acknowledge
that the Managing Member will take action through its board of directors, and
that the members of the Managing Member’s board of directors will owe comparable
fiduciary duties to the stockholders of the Managing Member.  The provisions of
this Agreement, to the extent that they restrict or eliminate the duties
(including fiduciary duties) and liabilities of the Managing Member otherwise
existing at law or in equity, are agreed by the Members to replace, to the
fullest extent permitted by applicable Law, such other duties and liabilities of
the Managing Member.

 

Section 6.2                                    Officers.

 

(a)                                 The Managing Member may appoint, employ or
otherwise contract with any Person for the transaction of the business of the
Company or the performance of services for or on behalf of the Company, and the
Managing Member may delegate to any such Persons such authority to act on behalf
of the Company as the Managing Member may from time to time deem appropriate.

 

(b)                                 The initial president and chief executive
officer of the Company (the “President and Chief Executive Officer”) will be
Scott Bender.

 

(c)                                  Except as otherwise set forth herein, the
President and Chief Executive Officer will be responsible for the general and
active management of the business of the Company and its Subsidiaries and will
see that all orders of the Managing Member are carried into effect.  The
President and Chief Executive Officer will report to the Managing Member and
have the general powers and duties of management usually vested in the office of
president and chief executive officer of a corporation organized under the DGCL,
subject to the terms of this Agreement, and will have such other powers and
duties as may be prescribed by the Managing Member or this Agreement.  The
President and Chief Executive Officer will have the power to execute bonds,
mortgages and other contracts requiring a seal, under the seal of the Company,
except where required or permitted by Law to be otherwise signed and executed,
and except where the signing and execution thereof will be expressly delegated
by the Managing Member to some other Officer or agent of the Company.

 

(d)                                 Except as set forth herein, the Managing
Member may appoint Officers at any time, and the Officers may include one or
more vice presidents, a secretary, one or more assistant secretaries, a chief
financial officer, a general counsel, a treasurer, one or more assistant
treasurers, a chief operating officer, an executive chairman, and any

 

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other officers that the Managing Member deems appropriate.  Except as set forth
herein, the Officers will serve at the pleasure of the Managing Member, subject
to all rights, if any, of such Officer under any contract of employment.  Any
individual may hold any number of offices, and an Officer may, but need not, be
a Member of the Company.  The Officers will exercise such powers and perform
such duties as specified in this Agreement or as determined from time to time by
the Managing Member.

 

(e)                                  Subject to this Agreement and to the
rights, if any, of an Officer under a contract of employment, any Officer may be
removed, either with or without cause, by the Managing Member.  Any Officer may
resign at any time by giving written notice to the Managing Member.  Any
resignation will take effect at the date of the receipt of that notice or at any
later time specified in that notice; and, unless otherwise specified in that
notice, the acceptance of the resignation will not be necessary to make it
effective.  Any resignation is without prejudice to the rights, if any, of the
Company under any contract to which the Officer is a party.  A vacancy in any
office because of death, resignation, removal, disqualification or any other
cause will be filled in the manner prescribed in this Agreement for regular
appointments to that office.

 

Section 6.3                                    Warranted Reliance by Officers on
Others.  In exercising their authority and performing their duties under this
Agreement, the Officers shall be entitled to rely on information, opinions,
reports, or statements of the following Persons or groups unless they have
actual knowledge concerning the matter in question that would cause such
reliance to be unwarranted:

 

(a)                                 one or more employees or other agents of the
Company or subordinates whom the Officer reasonably believes to be reliable and
competent in the matters presented; and

 

(b)                                 any attorney, public accountant, or other
Person as to matters which the Officer reasonably believes to be within such
Person’s professional or expert competence.

 

Section 6.4                                    Indemnification.  Subject to the
limitations and conditions provided in this Section 6.4, each Person who was or
is made a party or is threatened to be made a party to or is involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or arbitrative (each, a “Proceeding”), or any appeal in
such a Proceeding or any inquiry or investigation that could lead to such a
Proceeding, by reason of the fact he, she or it, or a Person of which he, she or
it is the legal representative, is or was a Member, an Officer, or acting as
the, Managing Member, Tax Matters Member or Company Representative of the
Company, in each case, shall be indemnified by the Company to the fullest extent
permitted by applicable Law, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights than such Law
permitted the Company to provide prior to such amendment) against all judgment,
penalties (including excise and similar taxes and punitive damages), fines,
settlement and reasonable expenses (including reasonable attorneys’ fees and
expenses) actually incurred by such Person in connection with such Proceeding,
appeal, inquiry or investigation, if such Person acted in

 

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Good Faith.  Reasonable expenses incurred by a Person of the type entitled to be
indemnified under this Section 6.4 who was, is or is threatened to be made a
named defendant or respondent in a Proceeding shall be paid by the Company in
advance of the final disposition of the Proceeding upon receipt of an
undertaking by or on behalf of such Person to repay such amount if it shall
ultimately be determined that he, she or it is not entitled to be indemnified by
the Company.  Indemnification under this Section 6.4 shall continue as to a
Person who has ceased to serve in the capacity which initially entitled such
Person to indemnity hereunder.  The rights granted pursuant to this Section 6.4
shall be deemed contract rights, and no amendment, modification or repeal of
this Section 6.4 shall have the effect of limiting or denying any such rights
with respect to actions taken or Proceedings, appeals, inquiries or
investigations arising prior to any amendment, modification or repeal.  It is
expressly acknowledged that the indemnification provided in this Section 6.4
could involve indemnification for negligence or under theories of strict
liability.

 

Section 6.5                                    Maintenance of Insurance or Other
Financial Arrangements.  In compliance with applicable Law, the Company (with
the approval of the Managing Member) may purchase and maintain insurance or make
other financial arrangements on behalf of any Person who is or was a Member,
employee or agent of the Company, or at the request of the Company is or was
serving as a manager, director, officer, employee or agent of another limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, for any Liability asserted against such Person and Liability and
expenses incurred by such Person in such Person’s capacity as such, or arising
out of such Person’s status as such, whether or not the Company has the
authority to indemnify such Person against such Liability and expenses.

 

Section 6.6                                    Resignation or Termination of
Managing Member.  PubCo shall not, by any means, resign as, cease to be or be
replaced as Managing Member except in compliance with this Section 6.6.  No
termination or replacement of PubCo as Managing Member shall be effective unless
proper provision is made, in compliance with this Agreement, so that the
obligations of PubCo, its successor (if applicable) and any new Managing Member
and the rights of all Members under this Agreement and applicable Law remain in
full force and effect.  No appointment of a Person other than PubCo (or its
successor, as applicable) as Managing Member shall be effective unless PubCo (or
its successor, as applicable) and the new Managing Member (as applicable)
provide all other Members with contractual rights, directly enforceable by such
other Members against PubCo (or its successor, as applicable) and the new
Managing Member (as applicable), to cause (a) PubCo to comply with all PubCo’s
obligations under this Agreement (including its obligations under Section 3.6)
other than those that must necessarily be taken in its capacity as Managing
Member and (b) the new Managing Member to comply with all the Managing Member’s
obligations under this Agreement.

 

Section 6.7                                    No Inconsistent Obligations.  The
Managing Member represents that it does not have any contracts, other
agreements, duties or obligations that are inconsistent with its duties and
obligations (whether or not in its capacity as Managing Member) under this
Agreement and covenants that, except as permitted by Section 6.1, it will not
enter into any contracts or other agreements or undertake or acquire any other
duties or obligations that are inconsistent with such duties and obligations.

 

Section 6.8                                    Reclassification Events of
PubCo.  If a Reclassification Event occurs, the Managing Member or its
successor, as the case may be, shall, as and to the extent necessary, amend

 

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this Agreement in compliance with Section 11.1, and enter into any necessary
supplementary or additional agreements, to ensure that, following the effective
date of the Reclassification Event: (i) the redemption rights of holders of
Units set forth in Section 3.6 provide that each Unit (together with the
transfer and surrender of one share of Class B Stock) is redeemable for the same
amount and same type of property, securities or cash (or combination thereof)
that one share of Class A Common Stock becomes exchangeable for or converted
into as a result of the Reclassification Event and (ii) PubCo or the successor
to PubCo, as applicable, is obligated to deliver such property, securities or
cash upon such redemption.  PubCo shall not consummate or agree to consummate
any Reclassification Event unless the successor Person, if any, becomes
obligated to comply with the obligations of PubCo (in whatever capacity) under
this Agreement.

 

Section 6.9                                    Certain Costs and Expenses.  The
Company shall (i) pay, or cause to be paid, all costs, fees, operating expenses
and other expenses of the Company (including the costs, fees and expenses of
attorneys, accountants or other professionals and the compensation of all
personnel providing services to the Company) incurred in pursuing and
conducting, or otherwise related to, the activities of the Company, and (ii) in
the sole discretion of the Managing Member, reimburse the Managing Member for
any costs, fees or expenses incurred by it in connection with serving as the
Managing Member.  To the extent that the Managing Member determines in its sole
discretion that such expenses are related to the business and affairs of the
Managing Member that are conducted through the Company and/or its Subsidiaries
(including expenses that relate to the business and affairs of the Company
and/or its Subsidiaries and that also relate to other activities of the Managing
Member), the Managing Member shall cause the Company to pay or bear all expenses
of the Managing Member, including, without limitation, costs of securities
offerings not borne directly by Members, board of directors compensation and
meeting costs, costs of periodic reports to its stockholders, litigation costs
and damages arising from litigation, accounting and legal costs; provided that
the Company shall not pay or bear any income tax obligations of the Managing
Member or bear the cost of payments under the Tax Receivable Agreement.  For the
avoidance of doubt, any payments made to or on behalf of the Managing Member
pursuant to this Section 6.9 shall not be treated as a distribution pursuant to
Section 5.1(a) but shall instead be treated as a cost or an expense of the
Company.

 

ARTICLE VII

 

ROLE OF MEMBERS

 

Section 7.1                                    Rights or Powers.  Other than the
Managing Member, the Members, acting in their capacity as Members, shall not
have any right or power to take part in the management or control of the Company
or its business and affairs or to act for or bind the Company in any way. 
Notwithstanding the foregoing, the Members have all the rights and powers
specifically set forth in this Agreement and, to the extent not inconsistent
with this Agreement, in the Act.  A Member, any Affiliate thereof or an
employee, stockholder, agent, director or officer of a Member or any Affiliate
thereof, may also be an employee or be retained as an agent of the Company.  The
existence of these relationships and acting in such capacities will not result
in the Member (other than the Managing Member) being deemed to be participating
in the control of the business of the Company or otherwise affect the limited
liability of the Member.  Except as specifically provided herein, a Member
(other than the Managing Member) shall not, in its capacity as a Member, take

 

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part in the operation, management or control of the Company’s business, transact
any business in the Company’s name or have the power to sign documents for or
otherwise bind the Company

 

Section 7.2                                    Voting.

 

(a)                                 Meetings of the Members may be called upon
the written request of Members holding at least 50% of the outstanding Units. 
Such request shall state the location of the meeting and the nature of the
business to be transacted at the meeting.  Written notice of any such meeting
shall be given to all Members not less than two Business Days and not more than
30 days prior to the date of such meeting.  Members may vote in person, by proxy
or by telephone at any meeting of the Members and may waive advance notice of
such meeting.  Whenever the vote or consent of Members is permitted or required
under this Agreement, such vote or consent may be given at a meeting of the
Members or may be given in accordance with the procedure prescribed in this
Section 7.2.  Except as otherwise expressly provided in this Agreement, the
affirmative vote of the Members holding a majority of the outstanding Units
shall constitute the act of the Members.

 

(b)                                 Each Member may authorize any Person or
Persons to act for it by proxy on all matters in which such Member is entitled
to participate, including waiving notice of any meeting, or voting or
participating at a meeting.  Every proxy must be signed by such Member or its
attorney-in-fact.  No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy.  Every proxy shall
be revocable at the pleasure of the Member executing it.

 

(c)                                  Each meeting of Members shall be conducted
by an Officer designated by the Managing Member or such other individual Person
as the Managing Member deems appropriate.

 

(d)                                 Any action required or permitted to be taken
by the Members may be taken without a meeting if the requisite Members whose
approval is necessary consent thereto in writing.

 

Section 7.3                                    Various Capacities.  The Members
acknowledge and agree that the Members or their Affiliates will from time to
time act in various capacities, including as a Member and as the Tax Matters
Member or Company Representative.

 

Section 7.4                                    Business Opportunities.

 

(a)                                 To the fullest extent permitted by Law, the
Company, on behalf of itself and its Subsidiaries, renounces any interest or
expectancy of the Company and its Subsidiaries in, or in being offered an
opportunity to participate in, any business opportunities that are from time to
time presented to Cadent Energy Partners II, L.P. and its Affiliates (the
“Sponsor”) or any of their respective Affiliates or any of their respective
agents, shareholders, members, partners, directors, officers, employees,
Affiliates or Subsidiaries (other than the Company and its Subsidiaries),
including any officer of the Company who is also an agent, shareholder, member,
partner, director, officer, employee, Affiliate or Subsidiary of the Sponsor
(each, a “Business

 

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Opportunities Exempt Party”), even if the business opportunity is one that the
Company or its Subsidiaries might reasonably be deemed to have pursued or had
the ability or desire to pursue if granted the opportunity to do so, and no
Business Opportunities Exempt Party shall have any duty to communicate or offer
any such business opportunity to the Company or be liable to the Company or any
of its Subsidiaries or any Members, including for breach of any fiduciary or
other duty, as an officer or Member or otherwise, and the Company shall
indemnify each Business Opportunities Exempt Party against any claim that such
Person is liable to the Company or the Members for breach of any fiduciary duty,
by reason of the fact that such Person (i) participates in, pursues or acquires
any such business opportunity, (ii) directs any such business opportunity to
another Person or (iii) fails to present any such business opportunity, or
information regarding any such business opportunity, to the Company or its
Subsidiaries, unless, in the case of a Person who is an officer of the Company,
such business opportunity is expressly offered to such officer in writing solely
in his capacity as an officer of the Company.

 

(b)                                 To the fullest extent permitted by Law, no
Business Opportunity Exempt Party shall have any duty to refrain from directly
or indirectly (i) engaging in the same or similar business activities or lines
of business in which the Company or any of its Affiliates now engages or
proposes to engage or (ii) otherwise competing with the Company or any of its
Affiliates, and, to the fullest extent permitted by Law, no Business Opportunity
Exempt Party shall be liable to the Company or the Members or to any Affiliate
of the Company for breach of any fiduciary duty solely by reason of the fact
that such Business Opportunity Exempt Party engages in any such activities.

 

ARTICLE VIII

 

TRANSFERS OF INTERESTS

 

Section 8.1                                    Restrictions on Transfer.

 

(a)                                 Except as provided in Section 3.6 and except
for Transfers by HoldCo to its members pursuant to Section 8.3 of the A&R Holdco
Agreement, no Member shall Transfer all or any portion of its Interest without
the Managing Member’s prior written consent, which consent shall be granted or
withheld in the Managing Member’s reasonable discretion.  If, notwithstanding
the provisions of this Section 8.1(a), all or any portion of a Member’s
Interests are Transferred in violation of this Section 8.1(a), involuntarily, by
operation of law or otherwise, then without limiting any other rights and
remedies available to the other parties under this Agreement or otherwise, the
Transferee of such Interest (or portion thereof) shall not be admitted to the
Company as a Member or be entitled to any rights as a Member hereunder, and the
Transferor will continue to be bound by all obligations hereunder, unless and
until the Managing Member consents in writing to such admission, which consent
shall be granted or withheld in the Managing Member’s sole discretion.  Any
attempted or purported Transfer of all or a portion of a Member’s Interests in
violation of this Section 8.1(a) shall be null and void and of no force or
effect

 

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whatsoever.  For the avoidance of doubt, the restrictions on Transfer contained
in this Article VIII shall not apply to the Transfer of any capital stock of the
Managing Member; provided that no shares of Class B Common Stock may be
Transferred unless a corresponding number of Units are Transferred therewith in
accordance with this Agreement.

 

(b)           In addition to any other restrictions on Transfer contained
herein, including the provisions of this Article VIII, in no event may any
Transfer or assignment of Interests by any Member be made (i) to any Person who
lacks the legal right, power or capacity to own Interests; (ii) unless, if
requested by the Company, the Transferor has received a written opinion in form
and substance that is reasonably acceptable to the Company from legal counsel or
a qualified tax advisor (in either case who is reasonably acceptable to the
Company) to the effect that such Transfer (A) will not be considered to be
effected on or through an “established securities market” or a “secondary market
or the substantial equivalent thereof,” as such terms are used in Treasury
Regulations Section 1.7704-1, (B) will not result in the Company having more
than one hundred (100) partners, within the meaning of Treasury Regulations
Section 1.7704-1(h)(1) (determined taking into account the rules of Treasury
Regulations Section 1.7704-1(h)(3)), and (C) will not cause the Company to be
treated as a “publicly traded partnership” within the meaning of Section 7704 of
the Code or a successor provision or to be taxed as a corporation pursuant to
the Code or successor of the Code; (iii) if such Transfer would cause the
Company to become, with respect to any employee benefit plan subject to Title I
of ERISA, a “party-in-interest” (as defined in Section 3 (14) of ERISA) or a
“disqualified person” (as defined in Section 4975(e)(2) of the Code); (iv) if
such Transfer would, in the opinion of counsel to the Company, cause any portion
of the assets of the Company to constitute assets of any employee benefit plan
pursuant to the Plan Asset Regulations or otherwise cause the Company to be
subject to regulation under ERISA; (v) if such Transfer requires the
registration of such Interests or any Equity Securities issued upon any exchange
of such Interests, pursuant to any applicable U.S. federal or state securities
Laws; or (vi) if such Transfer subjects the Company to regulation under the
Investment Company Act or the Investment Advisors Act of 1940, each as amended
(or any succeeding law). Any Transfer purported to be made in violation of this
Section 8.1(b) shall be void ab initio.

 

Section 8.2                                    Notice of Transfer.  Other than
in connection with Transfers made pursuant to Section 3.6, each Member shall,
after complying with the provisions of this Agreement, but in any event no later
than three Business Days following any Transfer of Interests, give written
notice to the Company of such Transfer.  Each such notice shall describe the
manner and circumstances of the Transfer.

 

Section 8.3                                    Transferee Members.  A Transferee
of Interests pursuant to this Article VIII shall have the right to become a
Member only if (i) the requirements of this Article VIII are met, (ii) such
Transferee executes an instrument reasonably satisfactory to the Managing Member
agreeing to be bound by the terms and provisions of this Agreement and assuming
all of the Transferor’s then existing and future Liabilities arising under or
relating to this Agreement, (iii) such Transferee represents that the Transfer
was made in accordance with all applicable securities Laws, (iv) the

 

39

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Transferor or Transferee shall have reimbursed the Company for all reasonable
expenses (including attorneys’ fees and expenses) of any Transfer or proposed
Transfer of a Member’s Interest, whether or not consummated and (v) if such
Transferee or his or her spouse is a resident of a community property
jurisdiction, then such Transferee’s spouse shall also execute an instrument
reasonably satisfactory to the Managing Member agreeing to be bound by the terms
and provisions of this Agreement to the extent of his or her community property
or quasi-community property interest, if any, in such Member’s Interest.  Unless
agreed to in writing by the Managing Member, the admission of a Member shall not
result in the release of the Transferor from any Liability that the Transferor
may have to each remaining Member or to the Company under this Agreement or any
other Contract between the Managing Member, the Company or any of its
Subsidiaries, on the one hand, and such Transferor or any of its Affiliates, on
the other hand.  Written notice of the admission of a Member shall be sent
promptly by the Company to each remaining Member.  Notwithstanding anything to
the contrary in this Section 8.3, and except as otherwise provided in this
Agreement, following a Transfer of Units by HoldCo to any of its members
pursuant to Section 8.3 of the A&R HoldCo Agreement, such transferee shall
succeed to all of the rights of HoldCo with respect to such Units under this
Agreement.

 

Section 8.4                                    Legend.  Each certificate
representing a Unit, if any, will be stamped or otherwise imprinted with a
legend in substantially the following form:

 

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

 

THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT.

 

THE TRANSFER AND VOTING OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING
AGREEMENT OF CACTUS WELLHEAD, LLC DATED AS OF JANUARY 29, 2018 AMONG THE MEMBERS
LISTED THEREIN, AS IT MAY BE AMENDED, SUPPLEMENTED AND/OR RESTATED FROM TIME TO
TIME, AND NO TRANSFER OF THESE SECURITIES WILL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED.  COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE ISSUER OF SUCH SECURITIES.”

 

ARTICLE IX

 

ACCOUNTING

 

Section 9.1                                    Books of Account.  The Company
shall, and shall cause each Subsidiary to, maintain true books and records of
account in which full and correct entries shall be made of all its business
transactions pursuant to a system of accounting established and administered in

 

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accordance with GAAP, and shall set aside on its books all such proper accruals
and reserves as shall be required under GAAP.

 

Section 9.2                                    Tax Elections.

 

(a)                                 The Company and any eligible Subsidiary
shall make an election (or continue a previously made election) pursuant to
Section 754 of the Code for the taxable year of the Company that includes the
Effective Date, shall not thereafter revoke such election and shall make a new
election pursuant to Section 754 of the Code to the extent necessary following
any “termination” of the Company or the Subsidiary, as applicable, under
Section 708 of the Code.  In addition, the Company shall make the following
elections on the appropriate forms or tax returns:

 

i.                                          to adopt the calendar year as the
Company’s Fiscal Year, if permitted under the Code;

 

ii.                                       to adopt the accrual method of
accounting for U.S. federal income tax purposes;

 

iii.                                    to elect to amortize the organizational
expenses of the Company as permitted by Section 709(b) of the Code; and

 

iv.                                   any other election the Managing Member may
deem appropriate and in the best interests of the Company.

 

(b)                                 Upon request of the Managing Member, each
Member shall cooperate in good faith with the Company in connection with the
Company’s efforts to elect out of the application of the company-level audit and
adjustment rules of the Bipartisan Budget Act of 2015, if applicable.  None of
the Managing Member, the Members, or the Company shall make any election under
Section 1101(g)(4) of the Bipartisan Budget Act of 2015 to have the provisions
of the Bipartisan Budget Act of 2015 governing “Subchapter C — Treatment of
Partnerships” apply to any tax return of the Company filed for a taxable year
beginning prior to January 1, 2018.

 

Section 9.3                                    Tax Returns; Information.  The
Tax Matters Member or Company Representative (as applicable) shall arrange for
the preparation and timely filing of all income and other tax and informational
returns of the Company.  The Tax Matters Member or Company Representative (as
applicable) shall furnish to each Member a copy of each approved return and
statement, together with any schedules or other information which each Member
may require in connection with such Member’s own tax affairs as soon as
practicable (but in no event more than 60 days after the end of each Fiscal
Year).  The Members agree to take all actions reasonably requested by the
Company or the Company Representative to comply with the Bipartisan Budget Act
of 2015, including where applicable, filing amended returns as provided in
Sections 6225 or 6226 of the Code and providing confirmation thereof to the
Company Representative.

 

Section 9.4                                    Tax Matters Member and Company
Representative.  The Managing Member is specially authorized and appointed to
act as the Tax Matters Member and as the Company Representative (as applicable)
and in any similar capacity under state or local Law.  The

 

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Tax Matters Member or Company Representative (as applicable) may retain, at the
Company’s expense, such outside counsel, accountants and other professional
consultants as it may reasonably deem necessary in the course of fulfilling its
obligations as Tax Matters Member or Company Representative (as applicable).

 

Section 9.5                                    Withholding Tax Payments and
Obligations.

 

(a)                                 The Company and its Subsidiaries may
withhold from distributions, allocations or portions thereof if it is required
to do so by any applicable rule, regulation or law, and each Member hereby
authorizes the Company and its Subsidiaries to withhold or pay on behalf of or
with respect to such Member any amount of taxes that the Managing Member
determines, in good faith, that the Company or any of its Subsidiaries is
required to withhold or pay with respect to any amount distributable or
allocable to such Member pursuant to this Agreement.

 

(b)                                 To the extent that any tax is paid by (or
withheld from amounts payable to) the Company or any of its Subsidiaries and the
Managing Member determines, in good faith, that such tax relates to one or more
specific Members (including any tax payable by the Company or any of its
Subsidiaries pursuant to Section 6225 of the Code with respect to items of
income, gain, loss deduction or credit allocable or attributable to such
Member), such tax shall be treated as an amount of taxes withheld or paid with
respect to such Member pursuant to this Section 9.5.

 

(c)                                  For all purposes under this Agreement, any
amounts withheld or paid with respect to a Member pursuant to this Section 9.5
shall be treated as if distributed to such Member at the time such withholding
or payment is made.  Further, to the extent that the cumulative amount of such
withholding or payment for any period exceeds the distributions to which such
Member is entitled for such period, the amount of such excess shall be
considered a loan from the Company to such Member, with interest accruing at the
Prime Rate in effect from time to time, compounded annually.  The Managing
Member may, in its discretion, either demand payment of the principal and
accrued interest on such demand loan at any time (which payment shall not be
deemed a Capital Contribution for purposes of this Agreement), and enforce
payment thereof by legal process, or may withhold from one or more distributions
to a Member amounts sufficient to satisfy such Member’s obligations under any
such demand loan.

 

(d)                                 Neither the Company nor the Managing Member
shall be liable for any excess taxes withheld in respect of any Member, and, in
the event of overwithholding, a Member’s sole recourse shall be to apply for a
refund from the appropriate Governmental Entity.

 

(e)                                  Notwithstanding any other provision of this
Agreement, (i) any Person who ceases to be a Member shall be treated as a Member
for purposes of this Section 9.5 and (ii) the obligations of a Member pursuant
to this Section 9.5 shall survive indefinitely with respect to any taxes
withheld or paid by the Company that relate to the period

 

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during which such Person was actually a Member, regardless of whether such taxes
are assessed, withheld or otherwise paid during such period.

 

ARTICLE X

 

DISSOLUTION AND TERMINATION

 

Section 10.1                             Liquidating Events.  The Company shall
dissolve and commence winding up and liquidating upon the first to occur of the
following (each, a “Liquidating Event”):

 

(a)                                 The sale of all or substantially all of the
assets of the Company; and

 

(b)                                 The determination of the Managing Member to
dissolve, wind up, and liquidate the Company.

 

The Members hereby agree that the Company shall not dissolve prior to the
occurrence of a Liquidating Event and that no Member shall seek a dissolution of
the Company, under Section 18-802 of the Act or otherwise, other than based on
the matters set forth in subsections (a) and (b) above.  If it is determined by
a court of competent jurisdiction that the Company has dissolved prior to the
occurrence of a Liquidating Event, the Members hereby agree to continue the
business of the Company without a winding up or liquidation.  In the event of a
dissolution pursuant to Section 10.1(b), the relative economic rights of each
class of Units immediately prior to such dissolution shall be preserved to the
greatest extent practicable with respect to distributions made to Members
pursuant to Section 10.3 in connection with such dissolution, taking into
consideration tax and other legal constraints that may adversely affect one or
more parties to such dissolution and subject to compliance with applicable laws
and regulations, unless, with respect to any class of Units, holders of a
majority of the Units of such class consent in writing to a treatment other than
as described above.

 

Section 10.2                             Bankruptcy.  For purposes of this
Agreement, the “bankruptcy” of a Member shall mean the occurrence of any of the
following: (a) any Governmental Entity shall take possession of any substantial
part of the property of that Member or shall assume control over the affairs or
operations thereof, or a receiver or trustee shall be appointed, or a writ,
order, attachment or garnishment shall be issued with respect to any substantial
part thereof, and such possession, assumption of control, appointment, writ or
order shall continue for a period of 90 consecutive days; or (b) a Member shall
admit in writing of its inability to pay its debts when due, or make an
assignment for the benefit of creditors; or apply for or consent to the
appointment of any receiver, trustee or similar officer or for all or any
substantial part of its property; or shall institute (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debts, dissolution, liquidation, or similar
proceeding under the Laws of any jurisdiction; or (c) a receiver, trustee or
similar officer shall be appointed for such Member or with respect to all or any
substantial part of its property without the application or consent of that
Member, and such appointment shall continue undischarged or unstayed for a
period of 90 consecutive days or any bankruptcy, insolvency, reorganization,
arrangements, readjustment of debt, dissolution, liquidation or similar
proceedings shall be instituted (by petition, application or otherwise) against
that Member and shall remain undismissed for a period of 90 consecutive days.

 

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Section 10.3                             Procedure.

 

(a)                                 In the event of the dissolution of the
Company for any reason, the Members shall commence to wind up the affairs of the
Company and to liquidate the Company’s investments; provided that if a Member is
in bankruptcy or dissolved, another Member, who shall be the Managing Member
(“Winding-Up Member”) shall commence to wind up the affairs of the Company and,
subject to Section 10.4(a), such Winding-Up Member shall have full right and
unlimited discretion to determine in good faith the time, manner and terms of
any sale or sales of the Property or other assets pursuant to such liquidation,
having due regard to the activity and condition of the relevant market and
general financial and economic conditions.  The Members shall continue to share
profits, losses and distributions during the period of liquidation in the same
manner and proportion as though the Company had not dissolved.  The Company
shall engage in no further business except as may be necessary, in the
reasonable discretion of the Managing Member or the Winding-Up Member, as
applicable, to preserve the value of the Company’s assets during the period of
dissolution and liquidation.

 

(b)                                 Following the payment of all expenses of
liquidation and the allocation of all Profits and Losses as provided in
Article IV, the proceeds of the liquidation and any other funds of the Company
shall be distributed in the following order of priority:

 

(i)                                     First, to the payment and discharge of
all of the Company’s debts and Liabilities to creditors (whether third parties
or Members), in the order of priority as provided by Law, except any obligations
to the Members in respect of their Capital Accounts;

 

(ii)                                  Second, to set up such cash reserves which
the Managing Member reasonably deems necessary for contingent or unforeseen
Liabilities or future payments described in Section 10.3(b)(i) (which reserves
when they become unnecessary shall be distributed in accordance with the
provisions of subsection (iii), below); and

 

(iii)                               Third, the balance to the Members, pro rata
in accordance with the number of Units owned by each Member.

 

(c)                                  Except as provided in Section 10.4(a), no
Member shall have any right to demand or receive property other than cash upon
dissolution and termination of the Company.

 

(d)                                 Upon the completion of the liquidation of
the Company and the distribution of all Company funds, the Company shall
terminate and the Managing Member or the Winding-Up Member, as the case may be,
shall have the authority to execute and record a certificate of cancellation of
the Company, as well as any and all other documents required to effectuate the
dissolution and termination of the Company.

 

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Section 10.4                             Rights of Members.

 

(a)                                 Each Member irrevocably waives any right
that it may have to maintain an action for partition with respect to the
property of the Company.

 

(b)                                 Except as otherwise provided in this
Agreement, (i) each Member shall look solely to the assets of the Company for
the return of its Capital Contributions, and (ii) no Member shall have priority
over any other Member as to the return of its Capital Contributions,
distributions or allocations.

 

Section 10.5                             Notices of Dissolution.  In the event a
Liquidating Event occurs or an event occurs that would, but for the provisions
of Section 10.1, result in a dissolution of the Company, the Company shall,
within 30 days thereafter, (a) provide written notice thereof to each of the
Members and to all other parties with whom the Company regularly conducts
business (as determined in the discretion of the Managing Member), and
(b) comply, in a timely manner, with all filing and notice requirements under
the Act or any other applicable Law.

 

Section 10.6                             Reasonable Time for Winding Up.  A
reasonable time shall be allowed for the orderly winding up of the business and
affairs of the Company and the liquidation of its assets in order to minimize
any losses that might otherwise result from such winding up.

 

Section 10.7                             No Deficit Restoration.  No Member
shall be personally liable for a deficit Capital Account balance of that Member,
it being expressly understood that the distribution of liquidation proceeds
shall be made solely from existing Company assets.

 

ARTICLE XI

 

GENERAL

 

Section 11.1                             Amendments; Waivers.

 

(a)                                 The terms and provisions of this Agreement
may be waived, modified or amended (including by means of merger, consolidation
or other business combination to which the Company is a party) only with the
approval of the Managing Member and the consent of the holders of a majority of
outstanding Units; provided, however, that no amendment to this Agreement may:

 

i.                                          modify the limited liability of any
Member, or increase the liabilities or obligations of any Member, in each case,
without the consent of each such affected Member; or

 

ii.                                       materially alter or change any rights,
preferences or privileges of any Interests in a manner that is different or
prejudicial relative to any other Interests, without the approval of a majority
in interest of the Members holding the Interests affected in such a different or
prejudicial manner.

 

(b)                                 Notwithstanding the foregoing subsection
(a), the Managing Member, acting alone, may amend this Agreement, including
Exhibit A, (i) to reflect the admission of new Members, Transfers of Interests,
the issuance of additional Units or Equity Securities, as provided by the terms
of this Agreement, and, subject to Section

 

45

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11.1(a), subdivisions or combinations of Units made in compliance with
Section 3.1(g), (ii) to the minimum extent necessary to (A) comply with the
provisions of the Bipartisan Budget Act of 2015 and any Treasury Regulations or
other administrative pronouncements promulgated thereunder and (B) to administer
the effects of such provisions in an equitable manner and (iii) as necessary to
avoid the Company being classified as a “publicly traded partnership” within the
meaning of Section 7704(b) of the Code.

 

Section 11.2                             Further Assurances.  Each party agrees
that it will from time to time, upon the reasonable request of another party,
execute such documents and instruments and take such further action as may be
required to accomplish the purposes of this Agreement.

 

Section 11.3                             Successors and Assigns.  All of the
terms and provisions of this Agreement shall be binding upon the parties and
their respective successors and assigns, but shall inure to the benefit of and
be enforceable by the successors and assigns of any Member only to the extent
that they are permitted successors and assigns pursuant to the terms hereof.  No
party may assign its rights hereunder except as herein expressly permitted.

 

Section 11.4                             Entire Agreement.  This Agreement,
together with all Exhibits and Schedules hereto and all other agreements
referenced therein and herein, constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersede all prior
and contemporaneous agreements, understandings, negotiations and discussions,
whether oral or written, of the parties and there are no warranties,
representations or other agreements between the parties in connection with the
subject matter hereof except as specifically set forth herein and therein.

 

Section 11.5                             Rights of Members Independent.  The
rights available to the Members under this Agreement and at Law shall be deemed
to be several and not dependent on each other and each such right accordingly
shall be construed as complete in itself and not by reference to any other such
right.  Any one or more and/or any combination of such rights may be exercised
by a Member and/or the Company from time to time and no such exercise shall
exhaust the rights or preclude another Member from exercising any one or more of
such rights or combination thereof from time to time thereafter or
simultaneously.

 

Section 11.6                             Governing Law.  This Agreement, the
legal relations between the parties and any Action, whether contractual or
non-contractual, instituted by any party with respect to matters arising under
or growing out of or in connection with or in respect of this Agreement shall be
governed by and construed in accordance with the Laws of the State of Delaware
applicable to contracts made and performed in such State and without regard to
conflicts of law doctrines.

 

Section 11.7                             Jurisdiction and Venue.  The parties
hereto hereby agree and consent to be subject to the jurisdiction of any federal
court of the District of Delaware or the Delaware Court of Chancery over any
action, suit or proceeding (a “Legal Action”) arising out of or in connection
with this Agreement.  The parties hereto irrevocably waive the defense of an
inconvenient forum to the maintenance of any such Legal Action.  Each of the
parties hereto further irrevocably consents to the service of process out of any
of the aforementioned courts in any such Legal Action by the mailing of copies
thereof by registered mail, postage prepaid, to such party at its address set
forth in

 

46

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this Agreement, such service of process to be effective upon acknowledgment of
receipt of such registered mail.  Nothing in this Section 11.7 shall affect the
right of any party hereto to serve legal process in any other manner permitted
by law.

 

Section 11.8                             Headings.  The descriptive headings of
the Articles, Sections and subsections of this Agreement are for convenience
only and do not constitute a part of this Agreement.

 

Section 11.9                             Counterparts.  This Agreement and any
amendment hereto or any other agreement (or document) delivered pursuant hereto
may be executed in one or more counterparts and by different parties in separate
counterparts.  All of such counterparts shall constitute one and the same
agreement (or other document) and shall become effective (unless otherwise
provided therein) when one or more counterparts have been signed by each party
and delivered to the other party.

 

Section 11.10                      Notices.  Any notice or other communication
hereunder must be given in writing and (a) delivered in person, (b) transmitted
by facsimile, electronic mail or telecommunications mechanism, provided that any
notice so given is also mailed as provided in clause (c), or (c) mailed by
certified or registered mail, postage prepaid, receipt requested as follows:

 

If to the Company or the Managing Member, addressed to it at:

 

Cactus, Inc.
Cobalt Center
920 Memorial City Way, Suite 300
Houston, TX 77024
Attention: Scott Bender

Telephone: (713) 626-8800
Facsimile: (713) 626-8800
Email: scott.bender@cactuswellhead.com

 

With copies (which shall not constitute notice) to:

 

Vinson & Elkins L.L.P.
666 Fifth Avenue, 26th Floor
New York, NY 10103
Telephone: (212) 237-0036
Facsimile: (212) 237-0100
Email: avelazquez@velaw.com

 

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or to such other address or to such other Person as either party shall have last
designated by such notice to the other parties.  Each such notice or other
communication shall be effective (i) if given by telecommunication or
electronically, when transmitted to the applicable number or electronic email
address so specified in (or pursuant to) this Section 11.10 and an appropriate
answerback is received or, if transmitted after 4:00 p.m.  local time on a
Business Day in the jurisdiction to which such notice is sent or at any time on
a day that is not a Business Day in the jurisdiction to which such notice is
sent, then on the immediately following Business Day, (ii) if given by mail, on
the first Business Day in the jurisdiction to which such notice is sent
following the date three days after such communication is deposited in the mails
with first class postage prepaid, addressed as aforesaid or (iii) if given by
any other means, on the Business Day when actually received at such address or,
if not received on a Business Day, on the Business Day immediately following
such actual receipt.

 

Section 11.11                      Representation By Counsel; Interpretation. 
The parties acknowledge that each party to this Agreement has been represented
by counsel in connection with this Agreement and the transactions contemplated
by this Agreement.  Accordingly, any rule of Law, or any legal decision that
would require interpretation of any claimed ambiguities in this Agreement
against the party that drafted it has no application and is expressly waived.

 

Section 11.12                      Severability.  If any provision of this
Agreement is determined to be invalid, illegal or unenforceable by any
Governmental Entity, the remaining provisions of this Agreement, to the extent
permitted by Law shall remain in full force and effect, provided that the
essential terms and conditions of this Agreement for all parties remain valid,
binding and enforceable.

 

Section 11.13                      Expenses.  Except as otherwise provided in
this Agreement or in the Closing Agreement, each party shall bear its own
expenses in connection with the transactions contemplated by this Agreement.

 

Section 11.14                      No Third Party Beneficiaries.  Except as
expressly provided in Sections 6.4 and 9.2, nothing in this Agreement, express
or implied, is intended to confer upon any party, other than the parties hereto
and their respective successors and permitted assigns, any rights or remedies
under this Agreement or otherwise create any third party beneficiary hereto.

 

[Signatures on Next Page]

 

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IN WITNESS WHEREOF, each of the parties hereto has caused this First Amended and
Restated Limited Liability Company Operating Agreement to be executed as of the
day and year first above written and effective as of the Effective Date.

 

 

COMPANY:

 

 

 

CACTUS WELLHEAD, LLC

 

 

 

 

By:

/s/ Scott Bender

 

Name:

Scott Bender

 

Title:

President

 

SIGNATURE PAGE TO

FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF

CACTUS WELLHEAD, LLC

 

--------------------------------------------------------------------------------

 

 

MEMBERS:

 

 

 

CADENT ENERGY PARTNERS II, L.P.

 

 

 

By: Cadent Energy Partners II GP, L.P., its general partner

 

 

 

By: CEPII-GP, LLC, its general partner

 

 

 

 

By:

/s/ Bruce Rothstein

 

Name:

Bruce Rothstein

 

Title:

Managing Member

 

 

 

 

 

 

 

CACTUS WH ENTERPRISES, LLC

 

 

 

 

By:

/s/ Scott Bender

 

Name:

Scott Bender

 

Title:

President

 

 

 

 

 

 

 

LEE BOQUET

 

 

 

 

/s/ Lee Boquet

 

 

 

 

 

 

 

CACTUS, INC.

 

 

 

 

By:

/s/ Scott Bender

 

Name:

Scott Bender

 

Title:

President, CEO and director

 

 

 

 

 

 

 

MANAGING MEMBER:

 

 

 

CACTUS, INC.

 

 

 

 

By:

/s/ Scott Bender

 

Name:

Scott Bender

 

Title:

President, CEO and director

 

SIGNATURE PAGE TO

FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING AGREEMENT OF

CACTUS WELLHEAD, LLC

 

--------------------------------------------------------------------------------

 

EXHIBIT A

 

Members of Cactus Wellhead, LLC Prior to Recapitalization

 

Member

 

Cadent Energy Partners II, L.P.

 

Cactus WH Enterprises, LLC

 

Lee Boquet

 

51

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