LIMITED LIABILITY COMPANY AGREEMENT

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[FCNAME], LLC

 

Date: [filing date]

 

 

THE MEMBERSHIP INTERESTS DESCRIBED AND REPRESENTED BY THIS LIMITED LIABILITY COMPANY LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT" OR ANY APPLICABLE STATE SECURITIES LAWS ("STATE ACTS") AND ARE RESTRICTED SECURITIES AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR QUALIFICATION UNDER THE ACT AND APPLICABLE STATE ACTS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND APPLICABLE STATE ACTS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY.

 

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THIS OFFERING INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. 1

 

 

LIMITED LIABILITY COMPANY AGREEMENT

 

OF

 

[FCNAME], LLC

 

(Member-Run)

             This Limited Liability Company Agreement (the "LLC Agreement") is entered into as of the date indicated below, by and among the signatories hereto.

 

Explanatory Statement

 

             The Members formed the Company pursuant to the provisions of the Maine Limited Liability Company Act, 31 M.R.S.A. § 1501 et. seq. (the "Act").

 

             The parties have agreed to organize and operate a limited liability company in accordance with the terms and subject to the conditions set forth in this LLC Agreement.

 

             NOW, THEREFORE, for good and valuable consideration, the parties, intending legally to be bound, agree as follows:

 

ARTICLE I

 

Definitions

 

1.1             In addition to the terms otherwise defined in this LLC Agreement, the following terms shall have the following respective meanings:

 

             "Certificate of Formation" means the Certificate of Formation of the Company as filed with the Secretary of State as the same may be amended from time to time by Consent of the Members.

 

             "Consent of the Members" means the written consent or approval of the Members whose combined aggregate Membership Interests represent at least [spell it out] percent ([numerically]%) of the total Membership Interests of all Members eligible to vote.2

 

             "Consent of the Non-Defaulting Member(s)" has the meaning set forth in Section 4.3(f).

 

             "Family Entity" means, for any Person, a corporation, limited liability company, partnership, limited partnership, or other entity which is majority owned by Family Members of that Person.

 

             "Family Member" means, for any Person, any spouse, ancestor, or descendant (by consanguinity or adoption) of that Person at the time in question.

 

             "Family Trust" means, for any Person, a trust, the primary beneficiaries of which are that Person and/or one or more Family Members of that Person.

 

             "Fiscal Year" means the Company's fiscal year which shall be the calendar year.

 

             "Interest" means a Person's share of the Profits and Losses of, and the right to receive distributions from, the Company.

 

             "Interest Holder" means any Person who holds an Interest, whether as a Member or as an unadmitted assignee of a Member.

 

             "Majority in Interest" means greater than 50% of the aggregate of all Membership Interests of the Members.3

 

             "Member" means the signatories to this LLC Agreement (other than the Company), provided that each has taken all actions required by this LLC Agreement to become and remain a Member, together with all additional Persons who subsequently become a Member as provided by this LLC Agreement.

 

             "Membership Interest" means the Membership Units, as further described herein below.

 

             "Original Member" means [Original Member's Name(s)], as joint tenants with rights of survivorship[if applicable].4

 

             "Permitted Transferee" means, with respect to any Member who is an individual, (A) any Family Member of such Member, (B) any Family Trust of such Member, and (C) any Family Entity of such Member.

 

             "Person" shall mean any individual or entity, and the heirs, executors, administrators, legal representatives, successors, and assigns of such "Person" where the context so permits.

 

             "Secretary of State" means the Secretary of State of the State of Maine.

 

             "Transfer" means to transfer or otherwise dispose of (including every possible technique or method of conveyance, including but not limited to sale, assignment, conveyance, gift, devise, mortgage, pledge, foreclosure, attachment, seizure, judicial order or process, bankruptcy, or otherwise, whether voluntary or involuntary) all or any interest in the Company, including, but not limited to, Membership Interests.

 

 

ARTICLE II

 

Formation, Name, Purpose, Location, Registered Office

 

2.1             Name. The name of the Company shall be as indicated in the Certificate of Formation of the Company.

 

2.2             Purpose. The purpose of the Company is own and maintain the agricultural potential of land located in [city/town], Maine (the "Real Property"), including related assets and activities, and to engage in any lawful business permitted by the Act or the laws of any jurisdiction in which the Company may do business. The Company shall have the authority to take any and all actions necessary, incidental or convenient to such purpose.

 

2.3             Place of Business. The principal office of the Company shall be located at such locations as may be determined by the Members from time to time.

 

2.4             Registered Office and Registered Agent. The address of the Company's initial registered office shall be [agent organization and address]. The name and address of the Company's initial registered agent shall be [agent name] at the same address. The registered office and registered agent may be changed from time to time as the Members deem advisable by filing notice of such changes with the Secretary of State in accordance with the Act.5

 

 

ARTICLE III

 

Term; Members; & Membership Units

 

3.1             Term. The term of the Company shall commence on the date of filing of the Certificate of Formation with the Secretary of State, and continue until the Company is dissolved in accordance with either the provisions of this LLC Agreement or the Act.

 

3.2              Members.

 

(a) Initial Members. The Initial Members of the Company are those persons identified as Members in Schedule A.6

 

(b) Admission and Disassociation of Members.The Company may admit or allow the disassociation of Members only upon Consent of the Members and on such terms and conditions as determined by the Consent of the Members. As a condition of admission, a new Member shall sign a copy of attached Schedule B, agreeing to be bound by this LLC Agreement. The Members may amend and update Schedule A hereto, or maintain other records, to reflect any admission or disassociation of Members.

 

3.3             Membership Units.

 

(a) Membership Units and Members. There is hereby established one class of Membership Units: Common Units. The rights and obligations associated with the Common Units shall be as provided in this LLC Agreement. The Company may create and issue new classes and series of Membership Units with such rights and preferences as determined by Consent of the Members7

 

(b) Issuance of Additional Membership Units. The Members may issue additional Membership Units, up to the total number authorized, on such terms and conditions as determined by Consent of the Members.8

 

(c) Transfer of Membership Units. The transfer of Membership Units is restricted or prohibited as further provided by this LLC Agreement.

 

(d) Certification of Units. The Company's Membership Units may, at the option of the Members, be represented by certificates. In the event that certificates representing Membership Units are issued, such certificates shall bear a legend indicating the restrictions on transferability set forth in this LLC Agreement including the following legend, or one substantially similar thereto:

 

The securities represented hereby have not been registered under the Securities Act of 1933 (the "Act") or any applicable state securities laws ("State Acts"). These securities may not be offered for sale, sold, or otherwise transferred except pursuant to an effective registration statement or qualification under the Act and applicable State Acts or pursuant to an exemption from registration under the Act and applicable State Acts, the availability of which must be established to the satisfaction of the Company. Furthermore, transfer of these securities is restricted under the LLC Agreement of the Company and any attempt to transfer these securities in violation of that Agreement shall be null and void.

 

ARTICLE IV

 

Allocations; Profits and Losses; Capital Accounts; Distributions, Generally

 

4.1             Allocation of Profits and Losses.9

 

(a) Allocations to Members. Except as may be required to comply with the special allocation provisions of this Company's Tax Rules as set forth in Schedule C and subsection 4.1(b) or as may be directed by the Members, all Profits and Losses shall be allocated to the Members in accordance with their Membership Interests, provided, however, that upon dissolution of the Company, all allocations shall be made in accordance with the provisions of Article X.

 

(b) Limit on Losses Allocated/Reallocation. The Losses allocated pursuant to Section 4.1(a) hereof shall not exceed the maximum amount of Losses that can be so allocated without causing any Member to have a Deficit Capital Account at the end of any fiscal year. If some but not all of the Members would have a Deficit Capital Account as a consequence of an allocation of Losses pursuant to Section 4.1(a), the limitation set forth in this Section 4.1(b) shall be applied on a Member by Member basis so as to allocate the maximum permissible Loss to each Member under Treasury Regulation §1.704-1(b)(2)(ii)(d). All Losses in excess of the limitation set forth in this Section 4.1(b) shall be allocated to the other Members to the extent consistent with this Section 4.1.

 

4.2             Regulatory Allocations. All Regulatory Allocations shall be calculated and applied in accordance with this LLC Agreement, including the Company's Tax Rules in attached Schedule C.

 

4.3             Capital and Capital Accounts.

 

(a) Maintenance of Capital Accounts. The Company shall maintain the Members' Capital Accounts in accordance with the Company's Tax Rules attached as Schedule C and all Treasury Regulations.

 

(b) Interest on Capital; Loans by or to Members. No interest or other compensation shall be allowed to any Member with respect to such Member's Capital Account, except his or her share of the profits, losses and distributions of the Company as hereinafter provided. The Company shall not make loans to, or borrow from, any Member without the consent of all the Members.

 

(c) Withdrawal of Capital. Except as may be specifically provided in this LLC Agreement or with the Consent of the Members, no Member shall have the right to disassociate from the Company all or any part of his or her Capital Contribution nor shall he or she have any right to demand and receive property or cash of the Company in return of such Members' Capital Contribution.

 

(d) Liability of Members for Repayment of Capital. No Member shall have any personal liability for the repayment of any Capital Contribution of any other Member.

 

(e) Additional Contributions. The Members shall make additional Capital Contributions, pro rata in accordance with their Membership Units, to the extent the Company's cash is insufficient to cover the taxes, expenses, and other obligations of the Company, including without limitation the maintenance the Real Property and Sub-assets (as such term is defined in Schedule D attached hereto).

 

(f) Enforcement of Obligation to Make Capital Contribution10. If a Member (the "Defaulting Member") defaults in making any required Capital Contribution when it becomes due, any other Member may give the Defaulting Member a written notice of such default. If the Defaulting Member fails to make the required Capital Contribution and reimburse all costs, including attorneys' fees, incurred by the Company or the other Members as a result of such default as specified in the default notice, within ten (10) business days after the giving of the default notice, the other Member(s), by the consent of such other Member(s) holding a majority of the Units (other than the Defaulting Member's Units) in the Company (the "Consent of the Non-Defaulting Member(s)"), may authorize and direct the Company to take any action permitted by the Act, including, but not limited to:

 

             (1) exercising the rights of a secured party under Article 9 of the Maine Uniform Commercial Code, with the total required Capital Contribution of such Defaulting Member, including amounts already paid, being the debt, and the Member's Membership Units being the collateral, provided that (i) the total deficiency resulting from the exercise of such rights shall not be greater than the unpaid Capital Contribution plus any costs or attorneys' fees allowed, and (ii) any proposed sale of the Defaulting Member's Membership Units has the Consent of the Non-Defaulting Member(s);

 

             (2) declaring a forfeiture of the Defaulting Member's Membership Units (in which case such Membership Units shall be deemed to have been sold by the Defaulting Member to the Company for the amount of any unpaid Capital Contribution with respect thereto); or

 

             (3) enforcing the obligation of the Defaulting Member in any Court of the State of Maine.

 

Each Member expressly consents to the jurisdiction of the courts of the State of Maine for the limited purpose of any action to enforce such Member's obligation to make any required Capital Contribution. If the required Capital Contribution is in a form other than cash, the Company, acting pursuant to the Consent of the Non-Defaulting Member(s), may require the Defaulting Member to contribute cash equal to that portion of the value of the required Capital Contribution that has not been made. If the Company, acting pursuant to the Consent of the Non-Defaulting Member(s), elects to allow the non-defaulting Member(s) to contribute on behalf of the Defaulting Member the amount of such Defaulting Member's unpaid Capital Contribution, such contributions shall be made in proportion to the non-defaulting Member's(s') Membership Units and shall be treated as loan(s) from the non-defaulting Member(s) to the Defaulting Member. The loan(s) shall bear interest at a rate equal to the lesser of (A) the legal rate, or (B) the prime rate as published in the Wall Street Journal plus three percent (3%), and shall be secured by the Defaulting Member's Membership Units. Each Member hereby grants to the Company a security interest in such Member's Membership Units to secure the timely and full payment and/or performance of his Capital Contribution and irrevocably appoints the Company his attorney in fact for the purpose of executing in his name and filing with the Secretary of State and any other filing office a financing statement evidencing such security interest. Until the loan(s) are fully repaid, the non-defaulting Members who contribute in the Defaulting Member's place shall be entitled to all distributions on account of the Defaulting Member's Membership Units, which shall be applied first costs and expenses of collection, then to accrued interest, and then to principal on the outstanding balances of the loan(s).

 

4.4 Distributions, Generally.

 

(a) Cash Distributions. All cash shall be distributed to the Members in accordance with their Membership Interests.11

 

(b) Tax Distributions. For each of the Company's taxable years, the Company shall, to the extent of available cash and except to the extent precluded by law, make distributions in an amount such that each Member may receive an amount sufficient to pay such Member's federal and state income tax liability on Net Profits allocated by the Company to such Member in said year. Unless a Member can demonstrate that the amount so determined is insufficient, the amount of such distributions may, at the option of the Company, be calculated on the assumption that all Members are subject to tax at the highest marginal tax rate, both state and federal, but able to utilize fully the deduction for state income taxes provided in Section 164 of the Code. The Company's determination of the distributions pursuant to this paragraph shall be binding and conclusive on all of the Members.

 

It is anticipated that such distributions will be made at such times as will coincide with the Members' obligations to make estimated tax payments. Any overpayment made pursuant to this paragraph during any fiscal year of the Company based upon an overestimate of the projected earnings of the Company shall, at the Company's option, be applied against distributions required to be made by the Company under this paragraph in subsequent fiscal years.

 

(c) Priority & Timing. No Member shall have priority over any other Member with regard to allocations of profits or losses or distributions from the Company. All distributions of Company funds to the Members shall be determined by Consent of the Members.

 

4.5             General.

 

(a) Withholding. All amounts required to be withheld pursuant to Code Section 1446 or any other provision of federal, state or local tax law shall be treated as amounts actually distributed to the affected Interest Holders for all purposes under this LLC Agreement.

 

(b) All Profit and Loss shall be allocated, and all distributions shall be made to the Persons shown on the records of the Company to have been Members as of the last day of the taxable year for which the allocation or distribution is to be made. Notwithstanding the foregoing, unless the Company's taxable year is separated into segments, if there is a Transfer or an Involuntary Disassociation during the taxable year, the Profit and Loss shall be allocated between the original Member and the successor on the basis of the number of days each was an Member during the taxable year; provided, however, the Company's taxable year shall be segregated into two or more segments in order to account for Profit, Loss or proceeds attributable to any extraordinary non-recurring items of the Company.

 

(c) The Members are hereby authorized, upon the advice of the Company's tax counsel, to amend this Article IV to comply with the Code and the Regulations promulgated under Code Section 704(b).

 

ARTICLE V

 

Management

 

5.1             Management Authority. The Members shall have the authority to manage the business of the Company. Such authority shall include, without limitation, the authority to purchase, sell, mortgage, lease, and otherwise dispose of property, both real and personal, to hire employees, to contract with third parties for services and to borrow money and otherwise pledge the credit of the Company. All such decisions shall be made by the Consent of the Members; provided, however, that except as expressly provided herein any amendment to this LLC Agreement shall be governed by Article XI hereof, and further provided that the Company shall comply with the minimum standards set forth in Schedule D hereof. The Members may, by Consent of the Members, delegate responsibility for the performance of a special act or acts to a designated Member, provided such delegation is not prohibited by the Act, in which event the signature of any one Member alone shall be sufficient to bind the Company and every document executed by a Member so authorized shall be conclusive evidence in favor of every person relying in good faith thereon or claiming thereunder that at the time of the delivery thereof (i) this Company was in existence, (ii) this Operating Agreement had not been amended in any manner so as to restrict such authority and (iii) the execution and delivery of such documents were duly authorized under this Article.12

 

5.2              Delegation and Management Committee. The Members may appoint an agent or a management committee to manage the Company's business, to whom or which the Members may delegate such rights, duties, and responsibilities as they shall determine from time to time. Such delegation shall not relieve the Members of their responsibility for managing the business of the Company or affect their ability to bind the Company in dealings with third parties.

 

5.3             Committees. The Members may, from time to time, designate from among its members one or more committees. Each committee shall include at least two Members. Any committee shall exercise the powers as provided by Consent of the Members. Committees shall keep regular minutes of their proceedings and report the same to Members. Members of the committees may be removed from office, with or without cause, by resolution adopted by the Consent of the Members. So far as practicable, the provisions of this LLC Agreement relating to the calling, noticing and conduct of meetings of the Members shall govern the calling, noticing and conduct of meetings of the committees.

 

ARTICLE VI

 

Reserved

 

ARTICLE VII

 

Rights and Obligations of Members

 

7.1             Limitation of Liability. Each Member's liability shall be limited as set forth in this LLC Agreement, the Act and other applicable law.

 

7.2             List of Members. Upon written request of any Member, the Company shall provide a list showing the names, addresses and Membership Interests of all Members.

 

7.3             Meetings of Members; Quorum; Voting. The Members may meet at any time and from time to time upon two (2) days written notice by one or more Members to all of the other Members, which notice shall set forth the purpose or purposes of such meeting. Attendance by at least seventy five percent (75%) of the Membership Interests shall be a quorum for the conduct of Company business. Such meetings can be held for any purpose allowed under this LLC Agreement or the Act. The Consent of the Members is required to approve any action or resolution of the Members, unless another quantum of votes is required by this Agreement or the Act. Members may cast votes in person or by proxy.

 

7.4             Proxies. At all meetings of the Members a Member may vote in person or by proxy executed in writing by the Member or by a duly authorized attorney-in-fact. Proxies must be filed with the Company at or before the time of each meeting. A Member may designate any person, who need not be a Member, to act as proxy. The designation of any such proxy shall be made in writing, signed by the Member and shall be revocable at any time by written notice to the Company by the Member designating the proxy.

 

7.5              Action by Members Without a Meeting; Meetings by Audio/Visual Conference. Notwithstanding any other provision contained herein, all actions of the Members provided for herein may be taken by written consent without a meeting, or any meeting thereof may be held by means of a telephonic or other audio/visual conference. Any action that may be taken by the Members without a meeting shall be effective only if the written consent or consents are in writing, set forth the action so taken, and are signed by the holder or holders of Membership Interests constituting not less than the minimum amount of Membership Interests necessary to take the action at a meeting at which the holders of all Members entitled to vote on the action were present and voted.13

 

7.6             Waiver of Notice. When any notice is required to be given to any Member, a waiver thereof in writing signed by the person entitled to such notice, whether before, or after the time stated therein, shall be equivalent to the giving of such notice.

 

7.7             Power of Attorney.

 

(a)               Grant of Power. Each Member constitutes and appoints the Company, or its designee, as the Member's true and lawful attorney-in-fact ("Attorney-in-Fact") with the power of substitution, for all purposes relating to the signing, executing, swearing to, acknowledging and filing of documents necessary or appropriate, in the opinion of the Attorney-in-Fact, to evidence any event or action which has already occurred or which has already been taken in accordance with and pursuant to the terms of this Agreement. This power of attorney shall include the power, in the Member's name, place and stead, to make, execute, sign, acknowledge and file:

 

(1)              one or more certificates of formation;

(2)              all documents (including amendments to certificate of formation) which the Attorney-in-Fact deems appropriate to reflect any amendment, change or modification of this Agreement or which are necessary to the operations of the Company in the ordinary course of business;

(3)              any and all other certificates or other instruments required to be filed by the Company under the laws of the state of organization or of any other state or jurisdiction, including, without limitation, any certificate or other instruments necessary in order for the Company to continue to qualify as a limited liability company under the Act;

(4)               one or more fictitious or assumed name certificates; and

(5)               all documents which may be required to dissolve and terminate the Company and to cancel its certificate of formation.

 

(b)              Irrevocability. The foregoing power of attorney is irrevocable and is coupled with an interest, and, to the extent permitted by applicable law, shall survive the death or disability of a Member. It also shall survive the Transfer of an Interest, except that if the transferee is admitted as a Member, this power of attorney shall survive the delivery of the assignment for the sole purpose of enabling the Attorney-in-Fact to execute, acknowledge and file any documents needed to effectuate the substitution. Each Member shall be bound by any representations made by the Attorney-in-Fact acting in good faith pursuant to this power of attorney, and each Member hereby waives any and all defenses which may be available to contest, negate or disaffirm the action of the Attorney-in-Fact taken in good faith under this power of attorney.

 

ARTICLE VIII

 

Disassociation; Indemnification; Fiduciary Duties14

 

8.1             Involuntary Disassociation. At the option of the Company, a person shall cease to be a Member of the Company upon the occurrence of death, adjudication of incompetency, bankruptcy or insolvency, or dissolution of a Member ("Involuntary Disassociation"). No Member shall have the power to disassociate by voluntary act from the Company except upon a sale of such Member's entire Membership Interest in accordance with this Agreement, including without limitation the provisions of Article IX.

 

8.2             Liquidation of Disassociating Member. Following the Involuntary Disassociation of a Member, the Company, in the first instance, or the remaining Members pro rata, in the alternative, may, at their option, purchase and thereby liquidate the Membership Interest of such disassociating Member in accordance with this Article VIII.

 

8.3             Valuation of Company Interest. Upon the Involuntary Disassociation of a Member, if the Company or other Members elect to purchase the disassociating Member's Membership Interest, then Negotiations shall be undertaken between (a) the remaining Members and (b) disassociating Member or the agent or personal representative of the disassociating Member to establish the value of the disassociating Member's Membership Interest. If the parties are not able to reach agreement as to the value of the disassociating Member's Membership Interest, then the value of such Membership Interest shall be determined as hereinafter provided. The remaining Members, as a group, and the disassociating Member (or such Member's representative), shall forthwith each appoint an appraiser who, in turn, shall jointly appoint an arbitrator. Appraisers shall submit to the arbitrator their separate appraised values of the disassociating Member's Membership Interest based upon whatever methods of valuation each appraiser considers most appropriate to reflect the fair market value. The arbitrator, in his or her sole discretion, shall choose one of the appraised values as the value of the disassociating Member's Membership Interest. Such determination shall be binding upon all parties.

 

8.4             Payments; Hold Harmless. Within sixty (60) days after the value of the disassociating Member's Membership Interest is determined, the Company or the purchasing Members, as the case may be, shall pay to the disassociating Member or the estate of the disassociating Member (as applicable) an amount equal to twenty five (25%) percent of the value of the disassociating Member's Membership Interest and shall deliver to such disassociating Member or its estate a promissory note of the Company in an amount equal to the unpaid value of the disassociating Member's Membership Interest. Such promissory note shall provide for equal annual payments over a period of five (5) years from the date of delivery and shall bear interest at a rate equal to (i) the prime rate of interest set forth in the Money Rates section of the Wall Street Journal, Eastern Edition, as of the date of the promissory note, plus (ii) two (2%) percent per annum. Additionally, the Company and the remaining Members shall indemnify and hold the disassociating Member's estate harmless from any and all liabilities of the Company guaranteed by the disassociating Member.

 

8.5             Transfer of Membership Interest. Upon receipt of the cash portion of the purchase price, the disassociating Member or the Personal Representative shall execute and deliver to the Company such instruments as necessary to transfer full and complete title of the disassociating Member's Membership Interest to the Company or other Members, as the case may be.

 

8.6             Indemnification of Members. The Company shall indemnify its Members, employees and other agents and make advances for expenses (including reasonable attorney fees) to the fullest extent permitted by law, provided that such indemnification in any given situation is first approved by the Members. The right to indemnification under this Section shall be fully vested with respect to any matter occurring while this Section was in effect. No amendment of this Section shall have any retroactive effect except as to enhance such right for the benefit of the indemnitee. Any indemnity under this Section shall be provided out of and to the extent of Company assets only and no Member shall have any personal liability on account thereof.

 

8.7             Fiduciary Duties. Each Member and Officer is a fiduciary to each of the Members and the Company and shall exercise his or her powers and discharge his or her duties in good faith with a view to the interests of the Company and its Members with that degree of diligence, care and skill that ordinarily prudent persons would exercise under similar circumstances in like positions.

 

ARTICLE IX

 

Restrictions on Transfer of Membership Interest; Allowed Transfers15

 

9.1             Restrictions on Transfers of Membership Interests. Notwithstanding any other provision of this Agreement, no Member may Transfer in any manner whatsoever all or any part of that Member's Membership Interest unless (i) either (A) such Transfer is to a Permitted Transferee or (B) such Transfer has been approved by the Consent of the Members and such Member has fully complied with the provisions of this Article IX for the Transfer, (ii) after giving effect thereto, such Transfer would not otherwise terminate the Company for the purposes of Code Section 708 or cause the Company to be classified as other than a partnership for U.S. federal income tax purposes, and (iii) such Transfer would not result in a violation of applicable law, including U.S. federal or state securities laws, or any term or condition of this Agreement. Any purported Transfer by a Member or any assignee that is not in compliance with this Agreement is hereby declared to be null and void and of no force or effect whatsoever.

 

9.2             Rights of First Refusal.

(a)               No Member shall Transfer any of the Membership Interests owned by him or her to any third party except (i) following receipt of a bona fide offer from such third party (the "Third Party Offer"), and (ii) unless such Member desiring to make the Transfer (hereinafter referred to as the "Transferor") shall have first extended offers to sell such Membership Interests to the Company and then to the Members on substantially equivalent terms as the Third Party Offer as contemplated by this Section 9.2, and neither the Company nor another Member shall have accepted such offers (the "Right of First Refusal").

(b)               Offer by Transferor. Copies of the Third Party Offer shall be given to the Company and the other Members ("Non-Transferring Members") and shall constitute an offer to sell to the Company or, failing its election to purchase, then to the Non‑Transferring Members, all of the Membership Interests then proposed to be transferred by the Transferor (the "Subject Membership Interests") pursuant to the Third Party Offer, and to which shall be attached a statement of intention to Transfer to such third party and the name and address of such third party.

(c)               Exercise of Right to Purchase

(1)              Within twenty (20) days after the receipt of the offer described in Section 9.2(b), the Company may, at its option, elect to purchase all, but not less than all, of the Subject Membership Interests. The Company shall exercise such option by giving notice thereof to the Transferor and to each Non-transferring Member within such 20-day period.

(2)               In the event that the Company does not exercise its option to purchase the Subject Membership Interests within such 20-day period, one or more of the Non-Transferring Members may purchase all, but not less than all, of the Subject Membership Interests by giving notice thereof to the Transferor and to the Company within twenty (20) days after receipt of notice from the Transferor in accordance with Section 9.2 to the effect that the Company did not exercise its option to purchase. The Non-Transferring Members electing to purchase (the "Purchasing Members") shall purchase the Subject Membership Interests pro rata among themselves (based on the Membership Interests owned by each Purchasing Member pursuant to the Purchase Agreement) or as they shall otherwise agree upon among themselves.

(3)              In either event, the notice required to be given by the Company or the Purchasing Members, as the case may be (the "Purchaser") shall specify a date for the closing of the purchase which shall not be more than thirty (30) days after the date of the giving of such notice.

(d)              Purchase Price. Subject to subsection 9.2(e), the purchase price for the Subject Membership Interests shall be the price contained in the Third Party Offer, which price shall be paid in cash or, if so provided in the Third Party Offer, cash plus deferred payments of cash in the same proportions, and with the same terms of deferred payment as therein set forth.

(e)               Consideration Other Than Cash. If the offer of Subject Membership Interests under this Section 9.2 is for consideration other than cash or cash plus deferred payments of cash, the Purchaser shall pay the cash equivalent of such other consideration. If the Transferor and the Purchaser cannot agree on the amount of such cash equivalent within ten (10) days after the beginning of the 20-day period under Section 9.2(c)(1), any of such parties may, by three (3) days' written notice to the other, initiate appraisal proceedings under Section 9.2(f) for determination of the cash equivalent. The Purchaser may give written notice to the Transferor revoking an election to purchase the Subject Membership Interests within ten (10) days after determination of the appraised value, if it chooses not to purchase the Subject Membership Interests.

(f)               Appraisal Procedure. If any party shall initiate an appraisal procedure to determine the amount of the cash equivalent of any consideration for Subject Membership Interests under Section 9.2(e), then the Transferor, on the one hand, and the Purchaser, on the other hand, shall each promptly appoint as a qualified business appraiser. Each appraiser shall, within twenty (20) days of appointment, separately investigate the value of the consideration for the Subject Membership Interests as of the proposed transfer date and shall submit a notice of an appraisal of that value to each party. Each appraiser shall be instructed to determine such value without regard to income tax consequences to the Transferor as a result of receiving cash rather than other consideration. If the appraised values of such consideration (the "Earlier Appraisals") vary by less than ten percent (10%), the average of the two appraisals shall be controlling as the amount of the cash equivalent. If the appraised values vary by more than ten percent (10%), the appraisers, within five (5) days of the submission of the last appraisal, shall appoint a third qualified business appraiser. The third appraiser shall, within twenty (20) days of his appointment, appraise the value of the consideration for the Subject Membership Interests (without regard to the income tax consequences to the Transferor as a result of receiving cash rather than other consideration) as of the proposed transfer date and submit notice of his appraisal to each party. The value determined by the third appraiser shall be controlling as the amount of the cash equivalent unless the value is greater than the two Earlier Appraisals, in which case the higher of the two Earlier Appraisals will control, and unless that value is lower than the two Earlier Appraisals, in which case the lower of the two Earlier Appraisals will control. If any party fails to appoint an appraiser or if one of the two initial appraisers fails after appointment to submit his appraisal within the required period, the appraisal submitted by the remaining appraiser shall be controlling. The Transferor and the Purchaser shall each bear the cost of its respective appointed appraiser. The cost of the third appraisal shall be shared one-half by the Transferor and one-half by the Purchaser.

(g)              Closing of Purchase. The closing of the purchase shall take place at the office of the Company or such other location as shall be mutually agreeable and the purchase price, to the extent comprised of cash, shall be paid at the closing, and cash equivalents and documents evidencing any deferred payments of cash permitted pursuant to Section 9.2(d) above shall be delivered at the closing. At the closing, the Transferor shall deliver to the Purchaser such instruments of transfer evidencing the conveyance of the Subject Membership Interests as Purchaser may require.

(h)              Release from Restriction; Termination of Rights. If the offer to sell is neither accepted by the Company nor by any Member, the Transferor may make a bona fide Transfer to the prospective transferee named in the statement attached to the offer in accordance with the Third Party Offer, subject to the provisions of Section 9.3, provided that (i) such Transfer shall be made only in strict accordance with the terms stated in the Third Party Offer and (ii) the transferee agrees, in writing, to be bound by the provisions of this Agreement. If the Transferor shall fail to make such Transfer within sixty (60) days following the expiration of all Right of First Refusal rights set forth in Section 9.2, such Membership Interests shall again become subject to all the restrictions of this Section 9.2.

(i)                Limitations. The provisions of this Section 9.2 shall not apply to Transfers pursuant to Article VIII, provided that such transferee agrees to be bound by the provisions of this Agreement as if such transferee were an original Member.

(j)                Compliance with Securities Act. Notwithstanding anything contained in this Section 9.2, no Transfer shall be permitted except as may be allowed, in the sole judgment of the Members, pursuant an existing registration under the Securities Act or an exemption to such registration pursuant to Regulation D under the Securities Act (or any successor regulation), and pursuant to similar exemptions from registration under any applicable state or other securities laws.

 

9.3              Substitute Member. No assignee shall have the right to become a substitute Member (a "Substitute Member") upon Transfer of any Units to it unless all the following conditions are satisfied:

 

(a) The Member and the assignee shall have executed and acknowledged such other instruments and taken such other action as the Members shall deem reasonably necessary or desirable to effect such substitution, including, without limitation, the execution by the assignee of an appropriate amendment to this Agreement;

(b) The conditions set forth in thisArticle IX shall have been satisfied, and, if requested by the Company, the Member or the assignee shall have obtained an opinion of counsel satisfactory to the Company; and

(c) The Member or the assignee shall have paid to the Company such amount of money as is sufficient to cover all expenses incurred by or on behalf of the Company in connection with such substitution.

 

9.4              Assignee's Rights.

 

(a) Unless an assignee becomes a Substitute Member in accordance with the provisions of Section 9.3 and other relevant provisions of this Agreement, it shall not be entitled to any of the rights (including voting rights) granted to a Member hereunder or under the Act, other than the right to receive the share of distributions and any other items attributable to a Member's Units to which its assignor would otherwise be entitled.

(b) Any Member that Transfers all of its Units shall cease to be a Member.

 

9.5              Tax Matters. On the transfer of all or part of any Units, at the request of the assignee of the Units, the Members may cause the Company to elect, pursuant to Code Section 754 to adjust the tax basis of the properties of the Company as provided by Code Sections 734 and 743.

 

9.6               Injunctive Relief. The Company and the Members hereby declare that it is impossible to measure in money the damages which will accrue to the parties hereto by reason of the failure of any Member to perform any of its obligations set forth in this Article. Therefore, the Company and the Members shall have the right to specific performance of such obligations, and if any party hereto shall institute any action or proceeding to enforce the provisions hereof, each of the Company and the Members hereby waives the claim or defense that the party instituting such action or proceeding has an adequate remedy at law.

 

ARTICLE X

 

Dissolution and Winding Up16

 

10.1              Dissolution. The Company shall be dissolved upon the occurrence of any of the following events:

 

(a) with the consent of all of the Members; or

(b) as ordered by a court of competent jurisdiction.

If there is an event of dissolution, the Company shall cease to carry on its business, except insofar as may be necessary for the winding up of its business, but its separate existence shall continue until a Certificate of Cancellation has been filed with the Secretary of State or until a decree dissolving the Company has been entered by a court of competent jurisdiction.

 

10.2              Winding Up, Liquidation and Distribution of Assets.

 

(a) Appointment of Liquidator. Upon dissolution, the Members shall immediately proceed to wind up the affairs of the Company in accordance with the requirements of the Act and other applicable law. In furtherance of the winding up of the Company, the Members shall appoint a liquidator, who may but need not be a Member. The liquidator shall wind up and liquidate the Company in an orderly, prudent and expeditious manner in accordance with the following provisions of this Section.

(b) Duties and Authority of Liquidator. The liquidator shall make adequate provision for the discharge of all of the Company's debts, obligations and liabilities. The liquidator may sell, encumber or retain for distribution in kind any of the Company's assets. With respect to any asset the liquidator determines to retain for distribution in kind, the liquidator shall allocate to the Members' Capital Accounts the amount of gain or loss that would have been recognized had the asset been sold at its fair market value.

(c) Final Distribution. Consistent with Schedule C, the liquidator shall distribute any assets remaining, after the discharge or accommodation of the Company's debts, obligations and liabilities, first, in accordance with the positive Capital Account balances of the Members, as determined after taking into account all Capital Account adjustments for the Company's taxable year during which the liquidation occurs, then, to the holders of Common Units in accordance with Membership Interests. The liquidator shall distribute any assets distributable in kind to the Members in undivided interests as tenants in common. A Member whose Capital Account is negative shall have no liability to the Company, the Company's creditors or any other Member with respect to the negative balance.

(d) Required Filings. Upon the completion of the distribution of the Company's assets to the Members, the liquidator shall file with the Maine Secretary of State such instruments and take such other actions as are necessary or appropriate to effectuate the cessation of the Company's existence.

 

10.3              Certificate of Cancellation. Upon completion of the winding up, liquidation and distribution of the assets, the Company shall be deemed terminated and the Members shall forthwith file with the Secretary of State a Certificate of Cancellation. Thereafter, the Members, as liquidating trustees, shall have authority to distribute any Company property discovered after termination, convey real estate and take such other action as may be necessary on behalf of and in the name of the Company.

 

10.4              Return of Capital Contribution - Nonrecourse. Except as provided by law or as expressly provided in this LLC Agreement, upon dissolution, each Member shall look solely to the assets of the Company for the return of his or her Capital Contribution. If the Company property remaining after the payment or discharge of the debts and liabilities of the Company is insufficient to return the Capital Contribution of a Member, such Member shall have no recourse against any other Member.

 

ARTICLE XI

 

Amendment

 

11.1              This LLC Agreement may be amended at any time with the Consent of the Members.17

 

ARTICLE XII

 

Miscellaneous

 

12.1              Assurances. Each Member shall execute all such certificates and other documents and shall do all such filing, recording, publishing and other acts as the Members deem appropriate to comply with the requirements of law for the formation and operation of the Company and to comply with any laws, rules and regulations relating to the acquisition, operation or holding of the property of the Company.

 

12.2              Notifications. Unless otherwise provided herein, any notice, demand, consent, election, offer, approval, request or other communication (collectively a "notice") required or permitted under this LLC Agreement must be given in compliance with this section. Such notice must be in writing and either delivered personally or sent by certified or registered mail, postage prepaid, return receipt requested, or overnight carrier. A notice to a Member may be addressed to the Member's last known address on the records of the Company. A notice to the Company must be addressed to the Company's principal office. A notice delivered personally will be deemed given only when acknowledged in writing by the person to whom it is delivered. A notice that is sent by mail will be deemed given three (3) business days after it is mailed. Any party may designate, by notice to all of the others, substitute addresses or addressees for notices; and, thereafter, notices are to be directed to those substitute addresses or addressees.

 

12.3              Specific Performance. The parties recognize that irreparable injury will result from a breach of any provision of this LLC Agreement and that money damages will be inadequate to fully remedy the injury. Subject to Section 12.8, in the event of a breach or threatened breach of one or more of the provisions of this LLC Agreement, any party who may be injured (in addition to any other remedies which may be available to that party) shall be entitled to one or more preliminary or permanent orders (i) restraining and enjoining any act which would constitute a breach or (ii) compelling the performance of any obligation which, if not performed, would constitute a breach.

 

12.4              Complete Agreement. This LLC Agreement constitutes the complete and exclusive statement of the agreement among the Members. It supersedes all prior written and oral statements, including any prior representation, statement, condition or warranty.

 

12.5              Applicable Law. All questions concerning the construction, validity and interpretation of this LLC Agreement and the performance of the obligations imposed by this LLC Agreement shall be governed by the internal law, not the law of conflicts, of the State of Maine.

 

12.6              Section Titles. The headings herein are inserted as a matter of convenience only and do not define, limit or describe the scope of this LLC Agreement or the intent of the provisions hereof.

 

12.7              Binding Provisions. This LLC Agreement is binding upon, and inures to the benefit of, the parties hereto and their respective heirs, executors, administrators, personal and legal representatives, successors and permitted assigns.

 

12.8              Disputes: Mediation, Arbitration. In the event any dispute arises between any parties to this LLC Agreement with respect to this LLC Agreement or the Company, then upon written request of one party served on the other party, the matter shall be submitted promptly to mediation. The parties shall cooperate in good faith to agree upon a mediator and proceed in accordance with any rules or requests of the mediator. The reasonable cost of such mediation shall be split equally among the parties. In the event that mediation is unsuccessful, the dispute shall be submitted for Arbitration in accordance with the rules of the American Arbitration Association then obtaining unless the parties mutually agree otherwise. The parties shall cooperate in good faith to agree upon an arbitrator or arbitrators and shall proceed in accordance with any rules or requests of the arbitrator(s). The reasonable cost of such arbitration shall be split equally among the parties. Because of the unique relationship of the parties and the unique value of the Member's interests in the Company, this provision for mediation and arbitration shall not prevent any party from applying for and obtaining injunctive relief from a competent Court in the United States of America where, in the absence thereof, the rights of such party cannot be adequately protected by mediation or an arbitrator's award.

 

12.9              Jurisdiction and Venue. Any suit involving any dispute or matter arising under this LLC Agreement may only be brought in the United States District Court for the District of Maine or any Maine State Court having jurisdiction over the subject matter of the dispute or matter. All Members hereby consent to that venue and to the exercise of personal jurisdiction by any such court with respect to any such proceeding.

 

12.10              Terms. Common nouns and pronouns shall be deemed to refer to the masculine, feminine, neuter, singular and plural, as the identity of the Person may in the context require.

 

12.11              Provisions Separable. Each provision of this LLC Agreement shall be considered separable; and if, for any reason, any provision or provisions herein are determined to be invalid and contrary to any existing or future law, such invalidity shall not impair the operation of or affect those portions of this LLC Agreement which are valid.

 

12.12              Counterparts. This LLC Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original and all of which, when taken together, constitute one and the same document. The signature of any party to any counterpart shall be deemed a signature to, and may be appended to, any other counterpart.

 

12.13              Estoppel Certificate. Each Member shall, within ten (10) days after written request by any Member, deliver to the requesting Person a certificate stating, to the Member's knowledge, that:

(a)              this LLC Agreement is in full force and effect;

(b)              this LLC Agreement has not been modified except by any instrument or instruments identified in the certificate; and

(c)              there is no default hereunder by the requesting Person, or if there is a default, the nature and extent thereof. If the certificate is not received within that ten (10)-day period, the Member may execute and deliver the certificate on behalf of the requested Member, without qualification, pursuant to the power of attorney granted herein.

 

 

 

[Signatures follow.]

 

WHEREFORE, the undersigned, duly authorized by Consent of the Members, has executed this LLC Agreement, under seal, as of the [filing date].

 

 

 

 

[FCNAME], LLC

 

 

 

 

By:_________________________________________

 

Its duly authorized Member

 

 

 

 

 

 

 

____________________________________________

 

 

 

 

[Joint Member Name -- if applicable], JTWROS, Member

 

____________________________________________

 

[Joint Member Name -- if applicable], JTWROS, Member

 

 

 

 

 

 

 

[Section Break]

 

SCHEDULE A

 

 

[FCNAME], LLC

 

List of Members and Membership Units

Dated as of: _________________

 

Name, Address

and Taxpayer

I.D. Number

 

 

Common Membership Units

[Member Name]

 

SSNs:

[share number]

TOTALS:

[share number]

 

 

[Section Break]

 

SCHEDULE B

 

to

LIMITED LIABILITY COMPANY AGREEMENT

of

[FCNAME], LLC

 

 

 

CONSENT OF NEW MEMBER

 

[active date]

 

 

 

Pursuant to Section 3.2 of the Limited Liability Company Agreement, as that Agreement may be amended from time to time (collectively the "LLC Agreement"), the undersigned, who seeks to become a Member of [FCNAME], LLC, hereby agrees to become a party to and to be bound by the provisions of the LLC Agreement as if the undersigned had been an original signatory thereto.

 

 

 

 

Name of New Member: _______________________

 

 

Date: __________________

 

 

By: _______________________________________

 

Its: ___________________

 

 

 

SSN or EIN: _________________________

 

 

Address: __________________________________

__________________________________

__________________________________

 

 

 

 

 

[Section Break]

 

SCHEDULE C

 

 

Company's Tax Rules

 

 

The Company's Tax Rules shall be as set forth in the following definitions:

 

(a) "Capital Account" means, as of any given date, the Capital Contribution to the Company by a Member as adjusted up to the date in question pursuant to Article IV.

 

             (i) A separate Capital Account will be maintained for each Member. Each Member's Capital Account will be increased by (1) the amount of money contributed by such Member to the Company; (2) the fair market value of property contributed by such Member to the Company (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under §752 of the Code); (3) allocations to such Member of Profits; (4) any items in the nature of income and gain which are specially allocated to the Member pursuant to Schedule C; and (5) allocations to such Member of income described in §705(a)(1)(B) of the Code. Each Member's Capital Account will be decreased by (1) the amount of money distributed to such Member by the Company; (2) the fair market value of property distributed to such Member by the Company (net of liabilities secured by such distributed property that such Member is considered to assume or take subject to under §752 of the Code); (3)allocations to such Member of expenditures described in §705(a)(2)(B) of the Code; (4) any items in the nature of deduction and loss that are specially allocated to the Member pursuant to Schedule C; and (5) allocations to such Member of Losses.

 

             (ii) In the event of a permitted sale or exchange of a Membership Interest in the Company, the Capital Account of the transferor shall become the Capital Account of the transferee to the extent it relates to the transferred Membership Interest in accordance with § 1.704-1(b)(2)(iv) of the Treasury Regulations.

 

             (iii) The manner in which Capital Accounts are to be maintained pursuant to this provision is intended to comply with the requirements of §704(b) of the Code and the Treasury Regulations promulgated thereunder. If in the opinion of the Company's accountants the manner in which Capital Accounts are to be maintained pursuant to the preceding provisions should be modified in order to comply with §704(b) of the Code and the Treasury Regulations thereunder, then notwithstanding anything to the contrary contained in Article IV, the method in which Capital Accounts are maintained shall be so modified; provided, however, that any change in the manner of maintaining Capital Accounts shall not materially alter the economic agreement between or among the Members.

 

             (iv) Upon liquidation of the Company (or any Member's Membership Interest), liquidating distributions will be made in accordance with the positive Capital Account balances of the Members, as determined after taking into account all Capital Account adjustments for the Company's taxable year during which the liquidation occurs. Liquidation proceeds will be paid in accordance with Article X. The Company may offset damages for breach of this LLC Agreement by a Member whose interest is liquidated (either upon the disassociation of the Member or the liquidation of the Company) against the amount otherwise distributable to such Member.

 

             (v) Except as otherwise required in the Act or as otherwise provided in this LLC Agreement, no Member shall have any liability to restore all or any portion of a deficit balance in such Member's Capital Account.

 

(b) "Capital Contributions" means the total amount of cash, tangible or intangible property, or services which a Member or his or her predecessor in interest has contributed or has agreed to contribute to the Company net of liabilities secured thereby that Company is considered to assume or to be subject to under §752 of the Code.

 

(c) "Code" means the Internal Revenue Code of 1986, as amended.

 

(d) "Deficit Capital Account" means, with respect to any Member, the deficit balance, if any, in such Member's Capital Account as of the end of the taxable year, after giving effect to the following adjustments:

 

             (i) credit to such Capital Account any amount which such Member is obligated to restore under §1.704-1(b)(2)(ii)(c) of the Treasury Regulations, as well as any addition thereto pursuant to the next to last sentence of §§1.704-2(g)(1) and (i)(5) of the Treasury Regulations, after taking into account thereunder any changes during such year in partnership minimum gain attributable to any partner nonrecourse debt (as determined under §1.704-2(i)(3) of the Treasury Regulations); and

 

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

 

This definition of Deficit Capital Account is intended to comply with the provisions of Treasury Regulations §1.704-1(b)(2)(ii)(d) and §1.704-2, and will be interpreted consistently with those provisions.

 

(e) "Gross Asset Value" means, with respect to any asset, the asset's adjusted basis for federal income tax purposes, except as follows:

 

             (i) 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 determined by Consent of the Members;

 

             (ii) The Gross Asset Value of all Company assets shall be adjusted to equal their respective gross fair market values, as determined by the Members as of the following times: (a) the acquisition of an additional interest by any new or existing Member in exchange for more than a de minimis contribution of property (including cash); (b) the distribution by the Company to a Member of more than a de minimis amount of property as consideration for a Membership Interest; and (c) the liquidation of the Company within the meaning of Regulations §1.704-1(b)(2)(ii)(g); provided, however, that adjustments pursuant to clauses (a) and (b) above shall be made only if the Members reasonably determine) that such adjustments are necessary or appropriate to reflect the relative Membership Interests of the Members in the Company;

 

             (iii) 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 distribution as determined by the distributee; and

 

             (iv) The Gross Asset Value of Company assets shall be increased (or decreased) to reflect any adjustments to the adjusted basis of such assets pursuant to Code §734(b) or Code §743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Regulation §1.704-1(b)(2)(iv)(m) and subparagraph (iv) under the definition of Profits and Losses; provided, however, that Gross Asset Value shall not be adjusted pursuant to this definition to the extent the Members determine that an adjustment pursuant to subparagraph (ii) of this definition is necessary or appropriate in connection with a transaction that would otherwise result in an adjustment pursuant to this subparagraph (iv).

 

              If the Gross Asset Value of an asset has been determined or adjusted pursuant to subparagraph (i), (ii) or (iv) of this definition, then such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Profits and Losses.

 

(f) "Profits" and "Losses" mean for each taxable year of the Company an amount equal to the Company's net taxable income or loss for such year as determined for federal income tax purposes (including separately stated items) in accordance with the accounting method and rules used by the Company and in accordance with §703 of the Code with the following adjustments:

 

             (i) any items of income, gain, loss and deduction allocated to Members pursuant to Article IV or other relevant provisions shall not be taken into account in computing Profits or Losses for purposes of this LLC Agreement;

 

             (ii) any income of the Company that is exempt from federal income tax and not otherwise taken into account in computing Profits and Losses (pursuant to this definition) shall be added to such taxable income or loss;

 

             (iii) any expenditure of the Company described in §705(a)(2)(B) of the Code and not otherwise taken into account in computing Profits and Losses (pursuant to this definition) shall be subtracted from such taxable income or loss; and

 

             (iv) in the event the Gross Asset Value of any Company asset is adjusted pursuant to clause (ii) or (iii) of the definition of Gross Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Profits and Losses;

 

             (vi) gain or loss resulting from any disposition of any Company asset with respect to which gain or loss is recognized for 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;

 

             (vii) 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 for such Fiscal Year; and

 

             (viii) to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to §734(b) of the Code or §743(b) of the Code is required pursuant to §1.704-1(b)(2)(iv)(m)(4) of the Treasury Regulations to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Membership Interest, the amount of such adjustment shall be treated as an item of gain (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Profits or Losses.

 

(g) Special Allocations.

 

             (i) Special Allocations -- Qualified Income Offset. Except as provided in subsection (iii) below dealing with the Minimum gain chargeback, if any Member unexpectedly receives an adjustment, allocation, or distribution described in Treasury Regulation §l.704-l(b)(2)(ii)(d)(4), (5) or (6), each such Member shall be specially allocated items of income and gain (consisting of a pro rata portion of each item of Company income, including gross income and gain for such year) in an amount and manner sufficient to eliminate, to the extent required by such Treasury Regulations, the Deficit Capital Account of each such Member as quickly as possible. It is the intent that this subsection be interpreted to comply with the alternate test for economic effect set forth in Treasury Regulation §1.704-1(b)(2)(ii)(d).

 

             (ii) Special Allocations -- Prophylactic Allocation. Except as provided in subsection (iii) below dealing with the Minimum gain chargeback, if any Member has a Deficit Capital Account at the end of any Company fiscal year which is in excess of the sum of (i) the amount such Member is obligated to restore (pursuant to the terms of such Member's promissory note or otherwise), and (ii) the amount such Member is deemed to be obligated to restore pursuant to the penultimate sentence of Treasury Regulation §§1.704-1(g)(1) and 1.704-2(i)(5), each such Member shall be specially allocated items of Company income and gain in the amount of such excess as quickly as possible.

 

             (iii) Special Allocations -- Minimum gain Chargeback. If in any year there is a net decrease in the Company's minimum gain as defined in Treasury Regulation §1.704‑2(b)(2)(a), then each Member shall be allocated items of Company Profits and Losses for such year (and, if necessary, subsequent years) in proportion to, and to the extent of, an amount equal to the greater of (i) the portion of such Member's share of the net decrease in the Company's minimum gain during such year (determined pursuant to Treasury Regulation §1.704-2(g)(2) that is allocable to the disposition of Company property subject to one or more nonrecourse liabilities of the Company; or (ii) the deficit balance in such Member's Capital Account at the end of such year (determined before any allocation of Company income, gain, loss, deduction, or §705(a)(2)(B) expenditure for such year and excluding from such deficit Capital Account balance any amount that such Member is obligated to restore under Treasury Regulation §1.704-1(b)(2)(ii)(c), as well as any addition thereto pursuant to the penultimate sentence of Treasury Regulation §§1.704-2(g)(1) and 1.704-2(i)(5) (after taking into account thereunder any changes during such year in the Company's minimum gain and in the Minimum gain attributable to any Member nonrecourse debt). For purposes of this subparagraph, the Members' Capital Accounts shall be reduced by the items described in Treasury Regulation §1.704‑1(b)(2)(ii)(d)(4), (5) and (6). The computations required by this paragraph shall be made in a manner consistent with the provisions of Treasury Regulation §1.704-2(f) or any successor provision.

 

             (iv) Special Allocations -- Minimum Gain from Member Nonrecourse Loans. If in any year there is a net decrease in the Company's minimum gain attributable to Member nonrecourse debt (as defined in Treasury Regulation §1.704-2(b)(4) or successor provision), then any Member with a share of the Minimum gain attributable to such debt at the beginning of such year (determined pursuant to Treasury Regulation §1.704-2(i)(5) or successor provision) shall be allocated items of Company Profits for such year (and, if necessary, subsequent years) in proportion to, and to the extent of, an amount equal to the greater of (i) the portion of such Member's share of the net decrease in the Company's Minimum gain attributable to such Member nonrecourse debt during such year (determined pursuant to Treasury Regulation §1.704-2(i)(5)) that is allocable to the disposition of Company property subject to such debt; or (ii) the deficit balance in such Member's Capital Account at the end of such year (determined before any allocation of Company income, gain, loss, deduction, or §705(a)(2)(B) expenditure for such year and excluding from such Deficit Capital Account balance any amount that such Member is obligated to restore under Treasury Regulation §1.704-1(b)(2)(ii)(c), as well as any addition thereto pursuant to the next to the last sentence of Treasury Regulation §§1.704‑2(g)(1) and 1.704-2(i)(5) after taking into account thereunder any changes during such year in the Company's Minimum gain and in the Minimum gain attributable to any Member nonrecourse debt). For purposes of this subparagraph, the Members' Capital Accounts shall be reduced by the items described in Treasury Regulation §§1.704-1(b)(2)(ii)(d)(4), (5) and (6). The computations required by this paragraph shall be made in a manner consistent with the provisions of Treasury Regulation §1.704-2(i)(4) or any successor provision.

 

             (v) Special Allocations -- Member Nonrecourse Debt. Pursuant to Treasury Regulation §1.704-1(b)(4)(iv), any item of Company loss, deduction, or §705(a)(2)(B) expenditure that is attributable to a Member nonrecourse debt must be allocated to the Member that bears the economic risk of loss for such debt. If more than one Member bears the economic risk of loss for a Member nonrecourse debt, any Member nonrecourse deduction attributable to such debt must be allocated among such Members in accordance with the ratios in which the Members share the economic risk of loss for such Member nonrecourse debt.

 

             (vi) Special Allocations -- Section 734, etc. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code §732(d), Code §734(b) or Code §743(b) is required, pursuant to Treasury Regulations §l.704-l(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, 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 gain or loss shall be specially allocated to the Members in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such section of the Treasury Regulations.

 

             (vii) Curative Allocations. The allocations set forth in subsection (g) of this Schedule C -- Qualified Income Offset; (2) Prophylactic Allocation; (3) Minimum gain chargeback, (4) Partner Nonrecourse Debt, and (6) §734 allocations (the "Regulatory Allocations") are intended to comply with certain requirements of Treasury Regulations §1.704-1 and 1.704-2. Notwithstanding any other provisions of this LLC Agreement (other than the Regulatory Allocations), the Regulatory Allocations shall be taken into account in allocating other Profits, Losses and items of income, gain, loss and deduction among the Members so that, to the extent possible, the net amount of all allocations of Profits, Losses and other items of income, gain, loss and deduction and the Regulatory Allocations to each Member shall be equal to the net amount of Profits and Losses and other items of income, gain, loss and deduction that would have been allocated to each such Member if the Regulatory Allocations had not occurred.

 

             (viii) Allocations for Tax Purposes. Except as otherwise provided in this LLC Agreement, all items of Company income, gain, loss, deduction and any other allocations not otherwise provided for shall be divided among the Members in the same proportions as they share Profits, Losses and Cash Distributions, as the case may be, for the year in question.

 

(h) "Treasury Regulations" shall include proposed, temporary and final regulations promulgated under the Code in effect as of the date of filing the Certificate of Formation and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations.

 

 

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SCHEDULE D

 

 

Farmstead Operations

 

[Section Break]

 

SCHEDULE D.1

 

SUB-ASSETS OF THE COMPANY

 

 

The Real Property and other assets of the Company comprise the following "Sub-assets":

 

[Following is a *simplified* example of a *fictional* farm property and capital equipment that might be owned and managed by a Farmstead Cooperative LLC]

 

[Section Break]

 

SCHEDULE D.2

 

MINIMUM MAINTENANCE REQUIREMENTS BY SUB-ASSET

 

[Following is a fictional example of prescribed maintenance of sub-assets that is the Members responsibility in order to maintain the agricultural potential of the property incorporated into the Farmstead Cooperative]

* as defined by the Analytical Laboratory and Maine Soil Testing Service (http://anlab.umesci.maine.edu/)19

 

[Section Break]

 

SCHEDULE D.3

 

 

REQUIRED AND PROHIBITED PRACTICES BY SUB-ASSET

[Following is a fictional example of allowed and prohibited practices using sub-assets]

 

Unless otherwise noted, all Sub-assets shall be maintained and used for agricultural use only.

 

 

[Section Break]

 

SCHEDULE D.4

 

USE OF SUB-ASSETS

 

The use of Sub-assets by Members or third parties shall be pursuant to a separate lease with the Company, which shall be subject to the following guidelines. For clarity, no Member shall have a right to use anySub-asset except pursuant to such a lease:

 

»              Lease agreements for Sub-assets should provide for sufficient rental payments to theCompany to cover the annual maintenance costs for such Sub-asset, except to the extent such maintenance is delegated to the tenant pursuant to such lease.

 

»              The Members shall meet annually to determine, by Consent of the Members, the rental rates and other lease terms for all Sub-assets. Such meeting shall be held at [time] on [day number] of each [month name] at [a known location], or at such other time and location as the Members may unanimously agree from time to time (the "Annual Meeting").

 

»              A budget for the annual maintenance costs for each Sub-asset will be set byConsent of the Members at the Annual Meeting. Costs in excess of budget shall be approved by the Consent of the Members prior to being incurred. Costs incurred by a Member without such approval shall be at such Member's sole cost and expense, and shall be treated as a required Additional Capital Contribution pursuant to Article IV.

 

 

 

 

 

 

 

 

[Section Break]

 

NOTES