The Membership Interest Redemption Agreement is a crucial document used when an LLC wishes to buy back the ownership interests of a departing member. This agreement, governed by U.S. federal and state laws, is commonly employed during member exits, succession planning, or dispute resolutions. It addresses essential elements including valuation methods, payment structures, tax implications, and necessary regulatory compliance. The document protects both the company's and the departing member's interests while ensuring a smooth transition of ownership.
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1. Parties: Identifies the LLC and the member(s) whose interests are being redeemed
2. Background/Recitals: States the context, including current ownership and reason for redemption
3. Definitions: Defines key terms used throughout the agreement
4. Redemption Terms: Details of the interests being redeemed, including quantity and class
5. Purchase Price: Specifies the redemption price and valuation method used
6. Payment Terms: Details of how and when payment will be made
7. Closing: Specifics about the closing process and requirements
8. Representations and Warranties: Standard assurances from both parties
9. General Provisions: Standard boilerplate provisions including governing law
1. Non-Competition: Restrictions on departing member's future activities when protecting company interests from competition
2. Tax Matters: Special tax treatment or allocations when specific tax considerations need to be addressed
3. Earn-out Provisions: Additional future payments based on performance when part of purchase price is contingent on future events
4. Release of Claims: Mutual release of claims between parties when clean break is desired
1. Schedule A - Description of Membership Interests: Detailed description of interests being redeemed
2. Schedule B - Calculation of Purchase Price: Detailed calculation methodology and figures
3. Schedule C - Payment Schedule: If payments are to be made in installments
4. Exhibit A - Resolution Authorizing Redemption: Company authorization for the transaction
5. Exhibit B - Assignment of Membership Interest: Form of assignment document
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