Membership Interest Purchase Agreement — Seller-Protective Extended Form

For Informational Purposes Only

Seller-side LLC interest purchase agreement with capped indemnity, RWI provisions, anti-sandbagging protections, and founder-protective transaction mechanics. Form ID FMA-005 · Version 1.1.0

Download Template (.docx)

Matter Completion Sheet — Not Part of the Agreement

Complete every row before releasing an execution copy. Enter the selected term, document name, date, amount, or responsible person in the final column. Do not leave a row blank. If an item does not apply, enter “N/A” and the reason. A checked drafting box means only that the drafting input is complete; it is not legal approval.

A. Parties, ownership, and timing

Status	Required completion	Matter-specific input, owner, or approval
☐	Confirm Company, Buyer, each Seller, and Seller Representative legal name, entity type, jurisdiction, good standing, authority, and signatory capacity; identify any guarantor or financing source.	[COMPLETE]
☐	Reconcile the LLC Agreement, interest ledger, capitalization table, capital accounts, classes, profits interests, options, warrants, SAFEs, notes, phantom rights, transfer restrictions, and distribution waterfall.	[COMPLETE]
☐	State the exact interests and fully diluted percentage sold, rollover or retained interests, post-Closing ownership, admission mechanics, resignations, and agreed LLC Agreement actions.	[COMPLETE]
☐	Select simultaneous or deferred Closing; complete consents, drag and waiver mechanics, regulatory efforts, limited interim covenants, access protocol, Outside Date, and termination consequences.	[COMPLETE]

B. Economics and founder proceeds

Status	Required completion	Matter-specific input, owner, or approval
☐	Approve enterprise value, Cash, Debt, Transaction Expenses, Target Working Capital, Closing payment, escrows, representative fund, holder-level allocation, and no-double-count funds flow.	[COMPLETE]
☐	Attach seller-protective accounting principles, line items, worked example, review rights, deadline consequences, expert limits, post-Closing conduct rule, and sole-source adjustment recovery.	[COMPLETE]
☐	Complete earnout, rollover, seller note, employment, consulting, retention, restrictive covenant, release, and D&O terms; state whether any compensation or rollover obligation may be set off.	[COMPLETE]
☐	Approve Tax classification, partnership allocation, Section 754 election, Section 751 hot-asset treatment, withholding, 280G, 409A, Section 1202, and any Section 338 or 336(e) election.	[TAX COUNSEL / DATE]

C. Diligence, schedules, and closing record

Status	Required completion	Matter-specific input, owner, or approval
☐	Complete Disclosure Schedules; reconcile them to the data room, cap table, LLC records, and each representation; decide whether later updates supplement disclosure or cure a breach.	[COMPLETE]
☐	Complete capitalization cleanup, holder approvals, consent, drag, waiver, appraisal or dissenter, release, power-of-attorney, payoff, and proceeds-allocation workstreams.	[COMPLETE]
☐	Complete IP, PIIA, open-source, AI, data, privacy, cybersecurity, employment, benefits, trade-control, permit, real-property, environmental, product, and regulatory diligence.	[COMPLETE]
☐	Finalize the Closing checklist, assignments, consents, certificates, resignations, amended LLC Agreement, final consideration schedule, data-room index and archive, funds flow, and verified wires.	[COMPLETE]

D. Seller risk architecture

Status	Required completion	Matter-specific input, owner, or approval
☐	Select RWI/no-seller-indemnity, capped indemnity, or hybrid treatment; complete retention, exclusions, subrogation, underwriting cooperation, escrow, recovery order, and no-double-recovery rules.	[COMPLETE]
☐	Complete survival, basket, cap, several liability, special indemnities, materiality scrape, loss exclusions, mitigation, anti-sandbagging, setoff limits, and narrowly defined Fraud.	[COMPLETE]
☐	Complete Seller Representative authority, fund, reliance, replacement, conflict, liability, information, and allocation mechanics without expanding any Seller’s several liability.	[COMPLETE]
☐	Confirm Knowledge Persons and inquiry limits, Material Adverse Effect, bring-down thresholds, privilege treatment, D&O protection, governing law, forum, jury waiver, notices, and assignment.	[COMPLETE]

E. Review and release control

Status	Required completion	Matter-specific input, owner, or approval
☐	Corporate lead completed the bracket, election, defined-term, cross-reference, capitalization, waterfall, schedule, exhibit, signature, funds-flow, and internal-consistency checks.	[LAWYER / DATE]
☐	Required specialists approved their sections: Tax; benefits; employment; antitrust; CFIUS; IP; privacy; cyber; environmental; real estate; industry regulation.	[LAWYER(S) / DATE OR N/A—REASON]
☐	Buyer-position review completed; each seller protection is necessary, market-defensible, specific, and unlikely to create an avoidable closing obstacle.	[LAWYER / DATE]
☐	Execution copy released only after all open items are resolved or listed in a written release memorandum approved by the responsible lawyer.	[RELEASED BY / DATE / VERSION]

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement (this “Agreement”) is entered into as of [DATE] by and among the sellers listed on Schedule I (each, a “Seller”), [BUYER] (“Buyer”), [COMPANY], a [JURISDICTION] limited liability company (the “Company”), and [SELLER REPRESENTATIVE], solely in that capacity (“Seller Representative”).

Recitals

Sellers own the membership interests shown on Schedule I (the “Purchased Interests”), constituting [all / ___%] of the outstanding interests of the Company. Buyer desires to acquire those interests, and Sellers desire to sell them, on the terms below.

1. Defined Terms and Construction

“Accounting Principles” means the specific rules, classifications, line items, reserve policies, and worked example in Exhibit A, which control over general accounting references.

“Closing Working Capital” means included current assets minus included current liabilities using Exhibit A, excluding Cash, Debt, Transaction Expenses, deferred Taxes, and duplicate items.

“Company Securities” means all membership interests, units, profits interests, options, warrants, phantom rights, appreciation rights, SAFEs, convertible notes, and other rights measured by or convertible into Company equity.

“Debt” and “Transaction Expenses” mean only the items specifically included in Exhibit A. Operating leases, ordinary-course payables included in Working Capital, undrawn letters of credit, deferred revenue included in Working Capital, and duplicate items are excluded.

“Fraud” means actual and intentional common-law fraud under the governing law by the specific Person against whom the claim is asserted concerning that Person’s express representation. It excludes constructive fraud, equitable fraud, negligent or reckless misrepresentation, and imputation. No Seller is liable for Fraud of the Company, another Seller, a founder, or another representative unless that Seller personally committed it.

“Knowledge of the Company” means the actual current knowledge, without imputation, of the persons listed on Schedule 1 after reasonable inquiry of direct reports with primary responsibility. It does not require a professional search, freedom-to-operate review, penetration test, code audit, or other investigation not ordinarily conducted by the Company.

“Material Adverse Effect” means an effect materially adverse to the Company and Subsidiaries, taken as a whole, but excludes effects from general economic, financial, political, industry, legal, public-health, climate, cyber, war, or disaster conditions; changes in accounting standards; failure to meet forecasts; transaction announcement or Buyer identity; and action required by this Agreement or requested by Buyer, except for materially disproportionate impact.

“Seller Pro Rata Share” means the percentage allocated to a Seller in the final Closing Consideration Schedule after applying the LLC Agreement’s distribution waterfall and the agreed treatment of Company Securities.

The Disclosure Schedules qualify each representation to which the disclosure’s relevance is reasonably apparent. A disclosure is not an admission of materiality or liability. Information in the data room does not supplement a representation unless included in a Disclosure Schedule. “Including” is nonexclusive, “or” is inclusive, and no presumption against a drafter applies.

2. Sale of Purchased Interests

2.1 Transfer

At Closing, each Seller will transfer to Buyer the Purchased Interests stated opposite that Seller’s name on Schedule I, free of liens and transfer restrictions other than applicable securities-law restrictions and those Buyer expressly assumes. Buyer will pay the consideration under Article 3.

2.2 Several obligations

Each Seller’s obligations and liability are several and not joint. No Seller makes a representation about another Seller’s ownership, authority, payment information, or conduct and no Seller guarantees another Seller’s performance. The Company’s representations are subject to the separate recovery limits in Article 10.

2.3 Company Securities and residual rights

Schedule 2.3 lists Company Securities and the treatment of each at Closing. Except for expressly documented rollover equity or retained interests, no Seller or other holder will retain a Company economic, voting, information, capital-account, distribution, or conversion right after Closing. The Company will cancel or settle instruments only as authorized by the LLC Agreement, award documents, approvals, and applicable law.

2.4 LLC Agreement actions

At Closing, the Company and Sellers will deliver the consents and waivers expressly required to approve the transfer and admit Buyer, amend or terminate the existing LLC Agreement as agreed, update the interest ledger, and cause specified managers and officers to resign. No Seller is required to waive a right unrelated to the transaction or enter a personal covenant not attached as an exhibit at signing.

3. Purchase Price; Allocation Among Sellers

3.1 Price bridge

The Purchase Price equals $[ENTERPRISE VALUE], plus Closing Cash, minus Closing Debt, minus Transaction Expenses, plus or minus the difference between Closing Working Capital and Target Working Capital, minus escrows, the Seller Representative Fund, and agreed holdbacks, plus any separate amount stated on Schedule 3.1. The bridge must not double count any item.

3.2 Estimated closing statement

The Company and Seller Representative will deliver a good-faith estimate at least [five] Business Days before Closing. Buyer may comment but may not unreasonably delay Closing over an estimated amount subject to adjustment. Seller Representative’s final estimate controls Closing payments unless it contains manifest error.

3.3 Closing Consideration Schedule and reliance

Seller Representative will deliver a schedule stating each Company Security, Seller Pro Rata Share, gross consideration, escrow and representative-fund contribution, withholding, rollover, option or profits-interest payment, and net payment. Buyer and the Company after Closing may rely conclusively on it absent manifest error and have no duty to resolve disputes among Sellers. Payment to the designated paying agent or payee discharges Buyer. Sellers resolve allocation disputes among themselves without recourse to Buyer or the Company, except for Buyer’s failure to follow the schedule.

3.4 Adjustment

Within [90] days after Closing, Buyer will deliver a proposed final statement and reasonable supporting workpapers. If Buyer misses the deadline, Seller Representative’s estimate is final. Seller Representative has [45] days to object and may inspect relevant books, records, personnel, and adviser workpapers subject to confidentiality. Unobjected items are final. The Parties will negotiate for [30] days; unresolved accounting items go to [ACCOUNTING FIRM] as an expert, limited to the asserted range and Exhibit A. Buyer bears fees in proportion to the amount by which its position is not sustained. Buyer’s sole source for an adjustment amount is the Adjustment Escrow, except for manifest error or Seller Representative Fraud.

3.5 Accounting protections

The adjustment is prepared as if the Company continued as a going concern, consistently with the historical practices used in the reference statement and the specific Exhibit A rules. It excludes purchase accounting, Buyer’s integration or financing, post-Closing events not evidencing a Closing fact, new reserves, hindsight changes, changes in classification, and liabilities caused by Buyer. The worked example controls over a general accounting principle.

3.6 Earnout and operating covenant

If an earnout applies, Buyer will operate in good faith and not take action with the primary purpose of avoiding the earnout. The earnout exhibit must address operational discretion, resource allocation, customer and opportunity attribution, intercompany pricing, shared costs, accounting consistency, acquisitions, dispositions, product discontinuation, reporting, inspection, disputes, acceleration, successor assumption, and worked examples. A founder’s employment termination affects earnout only if the exhibit clearly states a lawful consequence; earned wages and vested compensation are not subject to setoff.

3.7 Rollover and founder arrangements

Each rollover, seller note, employment, consulting, retention, restrictive covenant, and release arrangement is a separate agreement and does not alter the Purchase Price, Seller Pro Rata Shares, or remedies unless it expressly amends this Agreement. Rollover documents must state the securities-law basis, valuation, governance, liquidity, transfer, drag/tag, information, repurchase, forfeiture, tax, and priority terms. No cross-default applies to rollover equity or compensation unless expressly negotiated in that instrument.

3.8 Withholding and Tax forms

Buyer may withhold only as required by law. At least [five] Business Days before withholding, where practicable, Buyer will notify Seller Representative of the legal basis and amount and cooperate with valid exemption or reduction documentation. Amounts properly withheld and remitted are treated as paid. Buyer is responsible for penalties caused by its failure to remit withheld amounts.

4. Closing

Closing occurs remotely on [DATE] or the [third] Business Day after conditions are satisfied or waived. Sellers and the Company will deliver interest assignments, approvals, required LLC Agreement actions, ledger updates, resignations, payoff and lien-release evidence, equity-cancellation instruments, good-standing and authority certificates, FIRPTA or other Tax documentation, escrow and paying-agent documents, completed Disclosure Schedules, and Schedule 4 items. Buyer will deliver payment, approvals, certificates, and executed transaction documents. Deliveries are deemed simultaneous.

5. Company Representations

Except as disclosed, the Company represents as of signing and Closing:

5.1 Organization; authority; subsidiaries

The Company and each Subsidiary are duly organized, validly existing, and in good standing where applicable, have power to own assets and operate the business, and have authorized the transaction. This Agreement is enforceable against the Company subject to bankruptcy and equitable-remedy limitations. Schedule 5.1 lists jurisdictions, Subsidiaries, assumed names, predecessors, and equity interests in other Persons.

5.2 No conflict; consents

The transaction does not violate organizational documents, materially violate applicable law, or materially breach a Material Contract, except as disclosed. Schedule 5.2 lists approvals and consents the Company has identified as required.

5.3 Capitalization and LLC matters

Schedule 5.3 accurately lists outstanding Company Securities and holders based on the Company’s books and records, including classes, vesting, exercise or conversion price, and closing treatment. Company Securities were authorized and issued in material compliance with organizational documents and applicable securities law. No undisclosed written commitment to issue a Company Security exists. Schedule 5.3 identifies voting agreements, proxies, transfer rights, capital calls, redemption obligations, Tax distributions, and capital-account information maintained by the Company.

5.4 Financial statements; liabilities

The scheduled financial statements were prepared from the books and records, follow the stated basis consistently, and fairly present in all material respects the periods shown, subject for interim statements to normal year-end adjustments and omitted footnotes. The Company has no liabilities required to be recorded under that basis except those shown, incurred in the ordinary course after the balance-sheet date, or disclosed.

5.5 Absence of changes

Since [DATE], no Material Adverse Effect has occurred, and the Company has operated in the ordinary course in all material respects, except for transaction preparation and disclosed actions.

5.6 Assets, property, and sufficiency

The Company owns or has valid leasehold or license rights in material assets used in the business, free of liens other than Permitted Liens. Schedule 5.6 lists owned or leased real property and material equipment. Tangible assets are in operating condition for their present use, ordinary wear and disclosed maintenance excepted. The assets are sufficient in all material respects to operate the business as conducted at Closing, together with services expressly addressed in transition arrangements.

5.7 Material Contracts; customers and suppliers

Schedule 5.7 lists Contracts meeting objective thresholds, including material revenue, vendor, debt, lease, IP, cloud, data, AI, employment, benefits, related-party, exclusivity, MFN, change-of-control, partnership, and government agreements. Each is in effect; the Company is not in material default; and, to Company Knowledge, no counterparty is in material default. The Company has not received an unresolved written termination or default notice. No representation guarantees renewal or future customer or supplier activity.

5.8 Intellectual property; AI; open source

Schedule 5.8 lists registered Company IP, material proprietary software, material licenses, source-code escrow, open-source components, and material AI systems and third-party model providers. The Company owns or has valid rights to use Company IP as currently used. To Company Knowledge, operation of the business does not materially infringe another Person’s IP, and no unresolved written claim is pending. The Company has obtained confidentiality and invention-assignment agreements from personnel using forms generally applied by the Company, subject to disclosed exceptions, and has used reasonable measures to protect trade secrets.

The Company maintains policies reasonably designed for open-source compliance and identifies known license obligations that require disclosure or licensing of proprietary source code. Schedule 5.8 describes material AI systems, training or retrieval data categories, provider terms, and known written claims. The Company does not represent that AI output is copyrightable, error-free, or noninfringing absent an express customer-specific commitment.

5.9 Privacy and cybersecurity

The Company has materially complied with privacy and cybersecurity law applicable to the business, its published notices, and material contractual obligations. It maintains safeguards reasonably appropriate to its size, systems, and data. Schedule 5.9 lists material incidents during [three] years requiring notice or causing material interruption, and unresolved written investigations or claims. The Company has not received a written notice of a material violation that remains unresolved. Buyer is responsible for confirming its post-Closing data uses and integrations.

5.10 Personnel; benefits; 280G and 409A

Schedule 5.10 lists employees and material individual contractors, work location, compensation, status, accrued leave, and material benefit plans and transaction arrangements. The Company materially complies with employment, wage, classification, discrimination, harassment, retaliation, leave, immigration, labor, and benefit laws. The schedule identifies payments reasonably expected to implicate Sections 280G or 409A and the equityholder approval data used by the Company. The schedule also identifies each written or, to Company Knowledge, substantiated allegation during the prior [five] years that a founder, manager, director, executive officer, or senior employee engaged in sexual harassment, sexual assault, or material workplace misconduct, together with the disposition and any related settlement, confidentiality, or separation obligation. Buyer’s post-Closing employment decisions are not Company responsibility.

5.11 Taxes and tax classification

The Company and Subsidiaries have timely filed material Tax returns and paid material Taxes due, except contested amounts adequately reserved; materially complied with withholding, payroll, sales, use, and information reporting; and are not subject to undisclosed written assessments, audits, or Tax liens. Schedule 5.11 states each entity’s Tax classification for relevant periods, elections, partnership representative, known capital-account method, and material prior conversions or reorganizations. No representation is made concerning Buyer’s post-Closing tax basis or a Seller’s Section 1202, capital-gain, rollover, or other personal Tax treatment except in a separate express certificate.

5.12 Compliance; permits; trade controls

The Company materially complies with applicable law and holds material permits. Schedule 5.12 lists unresolved written violation notices, investigations, settlements, and transfer or change-of-control approvals. The Company has policies reasonably designed for anti-corruption, sanctions, export controls, and other regulations applicable to its operations and has not knowingly made a prohibited payment or dealt with a sanctioned Person.

5.13 Litigation; insurance; product; environmental

Schedule 5.13 lists pending or, to Company Knowledge, threatened proceedings, material orders, product or service claims, recalls, environmental matters, and material insurance policies and claims. No proceeding is pending that would reasonably be expected to prevent Closing. The Company has not received an unresolved written allegation of material personal injury, product defect, environmental release, or uninsured loss except as disclosed.

5.14 Related-party matters; brokers

Schedule 5.14 lists material Contracts, loans, distributions, compensation, IP, property, services, and arrangements with a Seller, founder, manager, officer, employee, family member, or Affiliate that will continue after Closing. No broker engaged by Sellers or the Company creates liability for Buyer or the Company after Closing except as included in Transaction Expenses.

5.15 No other representations

The Company makes only the express representations in this Agreement and specified transaction documents and disclaims all others, including as to projections, budgets, market data, data-room materials, management presentations, quality-of-earnings work, and future performance. Assumptions supplied with projections were prepared in good faith when supplied, but actual results may differ. Nothing limits Fraud as narrowly defined.

6. Seller Representations

Each Seller severally represents only that: the Seller has capacity and authority; this Agreement is enforceable against that Seller subject to customary limits; that Seller owns and can transfer the Purchased Interests shown for that Seller, free of encumbrances other than securities-law restrictions; the Seller has not granted an undisclosed proxy, option, or transfer right; the transaction does not violate a binding agreement or order applicable to that Seller; no broker engaged by that Seller creates liability for Buyer or the Company; and the Seller’s payment and Tax documentation is accurate. No Seller makes a representation concerning the Company’s business except through the Company Representations and agreed allocation of liability.

7. Buyer Representations

Buyer represents that it is duly organized and validly existing, has power and approval, and this Agreement is enforceable against it subject to customary limitations. Its execution and performance do not violate organizational documents, law, or a binding agreement. Buyer has and at Closing will have sufficient immediately available funds and no financing condition. Buyer has conducted the review it considers appropriate, is sophisticated, and is relying only on express representations in the transaction documents. Buyer’s rollover issuances and acquisition structure comply with applicable securities-law exemptions. No broker engaged by Buyer creates liability for Sellers.

8. Covenants

8.1 Access and contacts

Before Closing, Buyer may conduct reasonable diligence during normal hours without unreasonable disruption. The Company may protect privilege, personal data, trade secrets, competitively sensitive information, and third-party restrictions through redaction, aggregation, or clean-team arrangements. Buyer may not contact nonexecutive employees, customers, suppliers, landlords, or regulators without Company consent.

8.2 Ordinary-course covenant

The Company will operate in the ordinary course in all material respects and use commercially reasonable efforts to preserve the business. It will obtain Buyer consent, not unreasonably withheld, conditioned, or delayed, before the fundamental and material actions listed on Schedule 8.2. Buyer will respond within [three] Business Days. The Company may act to comply with law or address an emergency after notice when practicable.

8.3 Regulatory efforts

Each party will use commercially reasonable efforts to close. Buyer will lead filings after consultation and bear filing fees [except as stated]. Buyer is not required to divest assets, litigate, accept a conduct restriction, or agree to a material remedy unless Schedule 8.3 states otherwise. Sellers are not required to make an admission or concession unrelated to closing.

8.4 Founder and employee arrangements

Buyer is responsible for its post-Closing employment offers, compensation, benefit decisions, and workforce actions. No founder is required to sign an employment, rollover, restrictive-covenant, release, or other personal agreement unless its substantially final form was attached at signing and identified as a closing condition. Separate agreements do not amend this Agreement without express reference. The Parties will coordinate 280G, 409A, payroll, benefits, equity, worker communications, and required notices.

8.5 D&O and releases

[Buyer / Company] will obtain the agreed [six]-year D&O tail for pre-Closing acts and preserve existing indemnification and advancement rights of former managers and officers to the extent stated on Schedule 8.5. Any founder release must be mutual or otherwise state its scope, preserve rights under transaction documents and D&O insurance, and exclude claims that law does not permit to be released.

8.6 Confidentiality; publicity; records

The existing NDA continues under its terms. Announcements require mutual approval except for legally required disclosure after consultation. Buyer will preserve Company records for [seven] years and provide Sellers reasonable access for Tax, insurance, retained-claim, and legal purposes. At Closing, the Company will deliver a fixed, indexed archive of the final electronic data room, with access logs and a certification of the last date on which materials could be added or altered. Sellers may retain copies needed for those purposes subject to confidentiality and data minimization.

8.7 Exclusivity; acquisition proposals

[Include only for a deferred Closing.] Until Closing or termination, the Company and Sellers will not solicit or enter an agreement concerning a competing acquisition. They may respond to an unsolicited proposal only to the minimum extent required by a nonwaivable fiduciary duty and only under the information, notice, matching-right, expense, and termination procedure in Schedule 8.7. No obligation requires a Seller to make an unrelated concession, disclose privileged material, or keep this Agreement in effect after Buyer fails to satisfy an agreed matching, financing, or regulatory condition.

8.8 Disclosure Schedule updates

The Company will notify Buyer promptly of a fact arising after signing that makes a Company Representation inaccurate or would require a new disclosure. An update supplements the Disclosure Schedules only for the Closing bring-down and does not admit breach, create a new representation, or cure a signing-date breach unless Buyer rejects the update within [five] Business Days after receiving reasonable detail. Buyer’s failure to object is not a waiver of a claim that could not reasonably be identified from the update.

8.9 Transaction communications and privilege

Schedule 8.9 allocates control of privilege after Closing over communications concerning negotiation, documentation, and consummation of the transaction; identifies joint representations and conflict waivers; and states which files transfer or may be retained. Buyer will not use or seek production of retained transaction communications against a Seller or founder except to resolve a dispute over privileged status or as nonwaivable law requires. Ordinary-course advice concerning the Company transfers only to the extent Schedule 8.9 states.

9. Conditions and Termination

Buyer’s closing conditions are limited to the negotiated representation standard, covenant performance, no Material Adverse Effect, required legal approvals and specified material consents, no injunction, delivery of closing instruments, and RWI binding if RWI is the agreed seller-liability structure. Seller conditions include Buyer representation accuracy, covenant performance, no injunction, payment, and Buyer deliverables. A condition is waived only in a signed writing by the beneficiary, and neither party may rely on a failure caused primarily by its material breach.

This Agreement may terminate by mutual consent, outside-date failure not caused by the terminating party, final legal prohibition, or an uncured material breach causing a condition failure. A curable breach receives [ten] Business Days’ notice and cure. Termination preserves confidentiality, publicity, expenses, governing law, and liability for willful material breach or Fraud. [Add a termination or reverse-termination fee only after transaction-specific analysis.]

10. Exclusive Remedies; Indemnification

10.1 RWI / no-seller-indemnity election

If Schedule 10.1 selects a no-seller-indemnity structure, Buyer’s sole recourse for a Company Representation breach is the RWI Policy, except for Seller-funded retention expressly stated, specific indemnities, covenant breaches, title to Purchased Interests, purchase-price adjustment, and Fraud of the Person from whom recovery is sought. Buyer will not amend, waive, or replace the policy in a manner that expands recourse against Sellers; will preserve the insurer’s waiver of subrogation against each Seller except for that Seller’s actual common-law Fraud to the extent finally determined; and will request only reasonable underwriting and claims cooperation that does not require privileged or unrelated information. A policy exclusion does not create Seller liability unless Schedule 10.2 says so.

10.2 Capped indemnity alternative

If selected, Sellers severally indemnify Buyer for Company Representation breaches, specified pre-Closing Taxes, and special matters according to Seller Pro Rata Shares. Each Seller separately indemnifies only for that Seller’s Seller Representation, covenant, title, payment instructions, and Fraud. General claims survive [12–18] months, are subject to a deductible basket of $[AMOUNT], and are capped at $[AMOUNT OR %]. Fundamental, Tax, capitalization, title, and special matters have the periods and caps in Schedule 10.2. No Seller’s liability exceeds proceeds actually received by that Seller, except for that Seller’s Fraud or express separate covenant.

10.3 Loss limitations

Losses exclude punitive, exemplary, special, consequential, multiple-of-earnings, diminution-in-value, and lost-profit damages except amounts paid to a third party or reasonably foreseeable direct damages under governing law. Losses are reduced by insurance and Tax benefits actually realized, recovery costs, and reserves included in the final price calculation. No duplicate recovery is permitted. The indemnified party will mitigate as required by law.

10.4 Claims and defense

A claim notice must state the basis and a good-faith estimate. Delay reduces recovery only to the extent of material prejudice. Seller Representative may control a third-party defense if coverage is acknowledged, counsel is qualified, the claim seeks money within limits, and no conflict, admission, criminal exposure, injunctive relief, or material business relationship is at risk. Settlement must include a full release and may not impose an admission or nonmonetary obligation on Buyer without consent.

10.5 Anti-sandbagging; setoff; exclusive remedy

Buyer may not recover for a breach actually known before Closing by the individuals on Schedule 10.5 and expressly accepted in a signed waiver. Except for Fraud, equitable relief, price adjustment, and claims under another transaction document, this Article is the exclusive monetary remedy. No setoff applies against rollover equity, wages, vested compensation, or earnout except for a finally determined amount and only as expressly permitted by the applicable instrument.

10.6 Seller Representative and fund

Each Seller appoints Seller Representative through the Seller Joinder to handle notices, adjustment disputes, escrow instructions, claims, and settlements within stated authority. Seller Representative may rely on counsel, use the representative fund, and is liable only for its own fraud, gross negligence, or willful misconduct. It may not increase a Seller’s cap, admit that Seller’s Fraud, change that Seller’s consideration, or amend that Seller’s personal covenant without consent.

11. Tax Matters

Schedule 11 must state the Company’s Tax classification and the intended transaction treatment. It must address year closing, income and loss allocations, partnership representative, Tax distributions, Sections 704, 705, 751, and 754 where applicable, debt allocation, built-in gain, withholding, transfer Taxes, audits, amended returns, refunds, elections, and records. Buyer will not amend a pre-Closing return, make a retroactive election, voluntarily approach a Tax authority, or settle a pre-Closing audit in a way disproportionately adverse to Sellers without Seller Representative consent, not unreasonably withheld. If an asset-sale election under Sections 338 or 336(e), or deemed asset treatment, is contemplated, the Parties must replace this Article with a conformed specialist module and agree on allocation and gross-up consequences.

No representation guarantees a Seller’s eligibility for Section 1202, capital-gain, installment-sale, rollover, or another personal Tax result. 280G, 409A, FIRPTA, state pass-through-entity Taxes, and non-U.S. withholding require separate analysis.

12. Miscellaneous

Notices must be written and delivered to Schedule 12. Each party bears its expenses except as stated. Sellers may not assign; Buyer may assign to an Affiliate or financing source but remains liable and no assignment may impair Sellers’ rights. Indemnified persons and protected former managers and officers are beneficiaries only of named provisions. This Agreement and specified transaction documents are the entire agreement. Amendments and waivers require signed writings. Invalid provisions are narrowed or severed only as law permits.

This Agreement is governed by [STATE] law without conflicts rules. The parties submit to exclusive jurisdiction in [COUNTY, STATE]. EACH PARTY KNOWINGLY WAIVES JURY TRIAL TO THE MAXIMUM EXTENT LAWFUL. Specific performance is available subject to equitable defenses and negotiated limits. Counterparts and electronic signatures are effective.

Signature Page

BUYER — [LEGAL NAME] By: ______________________________ Name / Title: [COMPLETE]	COMPANY — [LEGAL NAME] By: ______________________________ Name / Title: [COMPLETE]
SELLER REPRESENTATIVE, solely in that capacity By: ______________________________ Name / Title: [COMPLETE]	EACH SELLER signs a counterpart or the Seller Joinder attached as Exhibit B.

Schedules and Exhibits

• Schedule I — Sellers, Company Securities, Purchased Interests, Capital Accounts, Seller Pro Rata Shares, and Payments

• Schedule 1 — Defined Terms, Knowledge Parties, and Permitted Liens

• Schedules 2.3–2.4 — Company Securities Treatment and LLC Agreement Actions

• Schedules 3.1–3.8 — Price, Funds Flow, Adjustment, Earnout, Rollover, and Withholding

• Schedule 4 — Closing Deliverables

• Schedules 5.1–5.15 — Company Disclosure Schedules

• Schedules 8.2–8.9 — Conduct, Regulatory, Founder, Employment, D&O, Exclusivity, Disclosure Updates, and Transaction Privilege

• Schedules 10.1–10.5 — RWI Election, Special Indemnities, Caps, Survival, and Knowledge Parties

• Schedule 11 — Tax Matters

• Schedule 12 — Notices

• Exhibit A — Accounting Principles and Worked Adjustment

• Exhibit B — Interest Assignment and Seller Joinder

• Exhibit C — LLC Agreement Amendment, Restatement, or Termination

• Exhibit D — Escrow Agreement

• Exhibit E — Officer and Secretary Certificates

• Exhibit F — Earnout, Rollover, or Seller Note, if applicable

• Exhibit G — Founder Employment, Restrictive Covenant, and Release Forms, if applicable

Website Posting README — Not Part of the Agreement

Purpose. This seller-protective form supports the sale of LLC membership interests while limiting cross-seller liability, controlling post-closing adjustment disputes, and separating sale proceeds from founder employment, earnout, and rollover arrangements.

Use when. Use for a negotiated sale of all or a controlling block of a private LLC where the sellers require objective accounting, express non-reliance, RWI or calibrated indemnity, several liability, and clear representative authority.

Do not use when. Do not relabel a corporate stock form. Confirm the LLC agreement, applicable LLC statute, transfer and admission requirements, capitalization and profits interests, tax classification, capital accounts, debt allocations, elections, and consent rights. Do not use for a merger or asset sale without reconstruction.

Founder-critical decisions. Make the proceeds waterfall auditable; separate consideration for interests from wages, restrictive covenants, earnout, and rollover; prevent one seller’s breach from creating joint liability; protect D&O and release rights; and coordinate equity cleanup, 280G, 409A, Section 1202, IP/AI/data, setoff, and Tax reporting.

Customization checklist. Complete all schedules and the fully diluted capitalization table; conform the LLC Agreement and state law; select RWI or indemnity; attach the accounting hierarchy and worked example; define Fraud, knowledge, and Seller Representative authority; add specialist modules; and remove the control sheet, banner, alternatives, and this README before execution.

Public-use disclaimer. This practitioner master is for educational and drafting-reference purposes. It is not legal advice, does not create an attorney-client relationship, and requires transaction and specialist review for the particular parties, transaction, jurisdictions, and current law.

Need help customizing this template for your business? Contact Montague Law to schedule a consultation and get this document reviewed by our team.

This template is provided by Montague Law for informational and educational purposes only and does not constitute legal advice. Consult a qualified attorney licensed in your jurisdiction before using any legal document.