EXHIBIT C

TRANSFER OF A MEMBERSHIP INTEREST (FOR AN LLC)

 

This Exhibit C is a part of that certain Operating Agreement of __________________ ________________________, LLC made the ________ day of _______________, (year)_______ and is incorporated therein by reference as if fully set forth therein.

 

No Membership Interest shall be transferred voluntarily or involuntarily by sale, assignment, gift, pledge, exchange or other disposition, except as provided herein below.

 

1.  Permitted Transfers to Related Parties:

 

Each Member's Membership Interest may be transferred during the Member's lifetime or by testamentary or intestate transfer to any related party of the Member, provided, however, that no further transfer of such Membership Interests shall be made by such transferee except back to the Member who originally owned it or to a related party of such Member who originally owned it, or except in accordance with the provisions made herein below; and provided further that whenever the Company shall have an option or a duty to repurchase the Membership Interest of any Member, such option or duty shall include all Membership Interests transferred by any such Member to a related party.  A related party shall mean a spouse, issue, spouse's issue, or ancestor of the Member, except that any spouse living separate and apart from the other spouse, with the intention by either to cease their matrimonial relationship, is not a related party, and provided further, that a trust for the sole benefit of one or more persons who is a related party shall be treated as a related party. 

 

Upon the death or incapacity of a Member, the legal representative of such Member shall have the right to become a Member upon written notice to the Company within ninety (90) days after the appointment of such Member's legal representative, but not later than one hundred eighty (180) days after the death or certified incapacity of such Member, and upon such successor executing this Operating Agreement or an amendment hereto and such other documents as the Managers may request.  If such right is not exercised, the legal representative of the deceased or incapacitated Member shall have the same rights, subject to the same limitations, as such Member would have had to assign or transfer his interest pursuant to this Exhibit C.

 

2.  Voluntary Transfers to Non-Related Parties:

 

No Membership Interest shall be transferred voluntarily by sale, assignment, gift, pledge, exchange or other disposition, except as provided in Paragraph 1 of this Exhibit C, or with the prior written approval of the Managers.  The Members acknowledge that any transfer of a Membership Interest may involve considerations of laws and regulations, including, but not limited to, laws and regulations governing limited liability companies as business organizations, taxation of the Company as a partnership, and treatment of Membership Interests and transfers of such interests as securities, the effect of which on the Company and its Members may vary depending on the circumstances, all of which cannot be anticipated at this time.  Therefore, the Members agree that the Managers may approve or disapprove, or set conditions on approval, of the transfer of any Membership Interest as the Managers, in their sole and complete discretion, may decide, provided, however, that the Managers may not approve any transfer that will violate any Federal or applicable state securities law or that would adversely affect the Company from being taxed as a partnership for Federal income tax purposes.  Any attempted transfer without the Managers' express written approval shall be void. 

 

3.         Involuntary Transfers to Related and Non-Related Parties:

 

If the Membership Interest of any Member is purported to be transferred involuntarily, including, without limitation, any purported transfer by or pursuant to bankruptcy, receivership, attachment, divorce, equitable distribution, inheritance or operation of law; then, and in that event, the Company shall purchase the Membership Interest purportedly transferred at its Purchase Value as determined as provided in Paragraph 4 herein below.

 

4.  Method of Determining Purchase Value:

 

Purchase Value as used herein shall mean the Purchase Value of the Membership Interests of the Company established by a Certificate of Agreed Value signed by each Member and filed with the Company.  If, at any time when it becomes necessary to determine Purchase Value of the Membership Interests of the Company, a Certificate of Agreed Value is in existence and such certificate of agreed value is dated less than two (2) years before the date as of which the Purchase Value is to be determined, then the agreed value set forth in such certificate shall be conclusive as to the Purchase Value and shall be accepted as the Purchase Value as of the date on which Purchase Value is to be determined, and no accountant's determination of book value shall be required or made.  In no event shall a Certificate of Agreed Value be effective unless signed by all the Members.  The Members may at any time execute a new Certificate of Agreed Value which shall automatically replace all prior Certificates of Agreed Value and in no event shall any but the last Certificate of Agreed Value be effective, if at all, for the purpose herein specified.

 

In the event there is no Certificate of Agreed Value or in the event the same is more than two (2) years old, then the Purchase Value of a Membership Interest for the purposes of this Exhibit C shall be the amount that would be received by the owner of such Membership Interest if all the assets of the Company were sold for cash equal to their fair market value, the Company paid all of its liabilities including reasonable costs of liquidation, and liquidated in accordance with this Agreement, all as of the last day of the calendar month immediately prior to the occurrence of the event triggering the Company's obligation to purchase the Member's Membership Interest.  The determination of the fair market value of a Membership Interest by the accountant shall be binding on all parties.

 

In the event there is no Certificate of Agreed Value or in the event the same is more than two (2) years old, then, and in that event, Purchase Value shall mean book value of the Membership Interests of the Company.

 

Book value of the Membership Interests of the Company shall mean the value as determined by the accountant or accounting firm then servicing the Company, and such determination, when made, certified, and delivered to the Company, shall be binding upon the Company and upon all parties bound by the terms of this Agreement.  Such determination shall be made in accordance with sound accounting practices and the following shall be observed:

 

(i)  No allowance of any kind shall be made for goodwill, trade name, or any similar intangible asset.

 

(ii)  All accounts payable shall be taken at the face amount, less discounts deductible therefrom, and all accounts receivable shall be taken at the face amount thereof, less discounts to the customers and a reasonable reserve for bad debts.

 

(iii)  All machinery, fixtures, and equipment shall be taken at the valuation appearing on the books of the Company.

 

(iv)  Inventory of merchandise and supplies shall be computed at cost or market value, whichever is lower.

 

(v)       All unpaid and accrued taxes shall be deducted as liabilities.

 

The Purchase Value to be paid for any Membership Interests offered pursuant to the provisions of this Agreement shall mean the value determined by appraisal as follows:  Within fourteen (14) days after the event giving rise to an option or duty of redemption, such Member and the Company (acting pursuant to resolutions adopted by the holders of a majority of the outstanding Membership Interests of the Company exclusive of the share held by the offering Member) shall each appoint a disinterested appraiser and those two appraisers shall, within ten (10) days after their appointment, agree upon and appoint a third disinterested appraiser; provided, however, that if the first two appraisers are unable to agree upon a third appraiser, such third appraiser shall be appointed by the Clerk of Superior Court of ________________________________ County, ___________________ (state).  The three appraisers thus appointed shall, within thirty (30) days after the last appointment, appraise the value of the Membership Interests of the Company and deliver their appraisal(s) to the directors and Members of the Company. 

 

5.  Payment of Purchase Value:

 

5.1  Whenever under this Agreement the Company or the Members exercise any option or right to redeem or purchase Membership Interests of any Member, the Purchase Value shall be paid  immediately upon the receipt by the Company of the proceeds of any insurance on the life of a deceased Member owned by and payable to the Company, to the extent of such proceeds. 

 

Whenever under this Agreement the Company exercises any option or right to redeem or purchase Membership Interests of any Member, the Purchase Value shall be paid to the Member whose Membership Interests have been redeemed or purchased in cash within thirty (30) days after notice to the affected Member. 

 

Whenever under this Agreement the Company or the Members exercise any option or right to redeem or purchase Membership Interests of any Member, the Purchase Value shall be paid to the Member in cash, __________ percent (____%) within thirty (30) days of the exercise of any such right or option and the balance in installments as follows: 

 

6.  Admission of New Members:

 

Unless and until admitted as a Member of the Company, the transferee of a Membership Interest shall not be entitled to any of the rights, powers, or privileges of a Member, except that the transferee shall be entitled to receive the distributions and allocations to which the Member would be entitled but for the transfer of his Membership Interest.

 

1In the case of a person acquiring a Membership Interest after the admission of  Initial Members, the person shall only be admitted to Membership in the sole and exclusive discretion of the Managers and upon compliance with all the terms specified by the Managers, including but not limited to such additional Member's execution of and becoming a party to this Agreement.