LLC Agreement (Common and Preferred Units, Board-Managed)

by Practical Law Corporate & Securities

A Standard Document that is a long-form limited liability company (LLC) agreement to be used for a Delaware LLC with multiple members and two classes of membership interests: preferred and common units. This Standard Document is structured for a board-managed LLC, where both preferred and common members may have rights to designate managers. It establishes a detailed framework for governance, member rights, and complex economic arrangements, including a distribution waterfall that provides preferred unitholders with a liquidation preference and a preferred yield before distributions are made to common unitholders. Key provisions address capital accounts, tax allocations, and tax distributions. This Standard Document also contains critical transfer restrictions, such as a right of first refusal (ROFR), drag-along rights, and tag-along rights, alongside preemptive rights that offer members protection from dilution on new equity issuances. It addresses the liability of managers and members, establishing contractual standards of conduct, exculpation, and indemnification, and includes a waiver of default fiduciary duties.