Common use of Entity Classification Clause in Contracts

Entity Classification. Neither the Company nor any Member shall file or cause to be filed any election, the effect of which would be to cause the Company to be classified as other than a partnership for Federal income tax purposes, without the prior written consent of all Members. Authorized Units Authorized Profits Interest Units Total Authorized Units On date 1, Founder A contributes $5,000 to LLC for 00 Xxxxxx Xxxxx, Xxxxxxx X contributes $5,000 to LLC for 40 Common Units, XXXX enters into a license for 10 Common Units, and 10 Profit Interest Units are issued to Service Provider. The initial Capital Account balances of the Members are as follows: Founder A: $4,500 40 Common Units Founder B: $4,500 40 Common Units XXXX: $1,000 10 Common Units Service Provider: $0 10 Profits Interest Units On date 2, a Triggering Event occurs. As a result of the Triggering Event, XXXX is entitled to receive an additional 10 Common Units under the XXXX License (the “Additional Issuance”). The fair market value of LLC immediately prior to the Additional Issuance is $100,000. The Capital Accounts of the Members are adjusted immediately before the Additional Issuance to $100,000 in accordance with Section 2.02 of Appendix A. After this adjustment (without taking into account additional Units issued to XXXX pursuant to the Additional Issuance) the Capital Account balances of the Members are: Founder A: $40,500 40 Common Units Founder B: $40,500 40 Common Units XXXX: $10,000 10 Common Units Service Provider: $9,000 10 Profit Interest Units Pursuant to Section 7.3 of this Agreement, upon the Additional Issuance to XXXX of 10 Common Units, XXXX’x aggregate Capital Account must equal 18.1818% of the aggregate Capital Account balances of all of the Members (i.e., 18.1818% x $100,000 = $18,181.82). Therefore, $8,181.82 of capital must be attributed to the new Common Units issued to XXXX. As a result, after the issuances and adjustments described above, the Capital Account balances and Units of the Members are: Founder A: $36,863.64 40 Common Units Founder B: $36,863.64 40 Common Units XXXX: $18,181.82 20 Common Units Service Provider: $8,090.91 10 Profit Interest Units $100,000 110 Units 1 Consideration will need to be given to Section 4.1 to make certain that it is properly coordinated with respect to particular Convertible Preferred Unit terms. In particular, this provision has been prepared with the expectation that the preferred member will not be entitled to roll over accrued preferred return into common equity.

Entity Classification. Neither the Company nor any Member shall file or cause to be filed any election, the effect of which would be to cause the Company to be classified as other than a partnership for Federal income tax purposes, without the prior written consent of all Members. Authorized Common Units Authorized Profits Interest Units Total Authorized Units On date 1, Founder A contributes $5,000 to LLC for 00 Xxxxxx Xxxxx, Xxxxxxx X contributes $5,000 to LLC for 40 Common Units, XXXX enters into a license for 10 Common Units, and 10 Profit Interest Units are issued to Service Provider. The initial Capital Account balances of the Members are as follows: Founder A: $4,500 40 Common Units Founder B: $4,500 40 Common Units XXXX: $1,000 10 Common Units Service Provider: $0 10 Profits Interest Units On date 2, a Triggering Event occurs. As a result of the Triggering Event, XXXX is entitled to receive an additional 10 Common Units under the XXXX License (the “Additional Issuance”). The fair market value of LLC immediately prior to the Additional Issuance is $100,000. The Capital Accounts of the Members are adjusted immediately before the Additional Issuance to $100,000 in accordance with Section 2.02 of Appendix A. After this adjustment (without taking into account additional Units issued to XXXX pursuant to the Additional Issuance) the Capital Account balances of the Members are: Founder A: $40,500 40 Common Units Founder B: $40,500 40 Common Units XXXX: $10,000 10 Common Units Service Provider: $9,000 10 Profit Interest Units Pursuant to Section 7.3 of this Agreement, upon the Additional Issuance to XXXX of 10 Common Units, XXXX’x aggregate Capital Account must equal 18.1818% of the aggregate Capital Account balances of all of the Members (i.e., 18.1818% x $100,000 = $18,181.82). Therefore, $8,181.82 of capital must be attributed to the new Common Units issued to XXXX. As a result, after the issuances and adjustments described above, the Capital Account balances and Units of the Members are: Founder A: $36,863.64 40 Common Units Founder B: $36,863.64 40 Common Units XXXX: $18,181.82 20 Common Units Service Provider: $8,090.91 10 Profit Interest Units $100,000 110 Units 1 Consideration will need to be given to Section 4.1 to make certain that it is properly coordinated with respect to particular Convertible Preferred Unit terms. In particular, this provision has been prepared with the expectation that the preferred member will not be entitled to roll over accrued preferred return into common equity.