Barry E. Moore and Deborah E. Moore - Page 48




                                       - 48 -                                         
          operating agreement is consistent with a general requirement that           
          interim distributions to members of the LLC be proportionate to             
          their membership interests.  The operative language provides as             
          follows:                                                                    
               Members * * * may make Distributions to the Members in                 
               accordance with their Membership Interests.  Such                      
               distributions shall be in cash or Property (which need                 
               not be distributed proportionately) or partly in both,                 
               as determined by the Manager.                                          
          A straightforward reading of the foregoing language leads to the            
          conclusion that the parenthetical clause modifies the word                  
          “Property”, not the word “distributions”.  Finally, accepting for           
          the sake of argument petitioners’ logic for disproportionate                
          distributions among the members of the LLC, they have failed to             
          show us how they arrived at an approximately 68-20-12 split that,           


               13(...continued)                                                       
          petitioners, rather than by “the past and future administrative             
          services of McKernan and Moore on behalf of the * * * [LLC]”, as            
          stated in the assignment and assumption agreement, it makes more            
          sense from an economic self-interest standpoint for Dr. McKernan            
          and Ms. Moore to have demanded increased membership interests               
          rather than so-called disproportionate distributions from the LLC           
          because the latter were likely to result in a return of capital             
          and, possibly, a negative capital account for either or both.               
          The resulting potential economic detriment of such an arrangement           
          is, in fact, illustrated by the 2000 sale of membership interests           
          in the LLC to Surgicoe.  Sec. 3.5 of the Surgicoe purchase                  
          agreement specifically requires that “the Sellers’ interests * *            
          * [be] fully paid and assessable”, which, in effect, supersedes             
          sec. 7.6 of the LLC operating agreement to the extent that it               
          provides that that agreement “shall not be construed as creating            
          a [capital account] deficit restoration obligation”.  See also              
          sec. 12.3 of the LLC operating agreement, which limits the                  
          distribution of assets, on the dissolution of the LLC, “to                  
          Members in accordance with positive Capital Account balances”.              





Page:  Previous  40  41  42  43  44  45  46  47  48  49  50  51  52  53  54  Next 

Last modified: November 10, 2007