This excerpt taken from the GIS 10-Q filed Jan 6, 2005.
8.3 Covenant Regarding Tax Matters.
(a) Character of Company Items. The Managing Member hereby covenants to the Limited Members that, for U.S. federal, state, and local income tax purposes, the Companys items of income, gain, deduction, and loss will consist solely of (i) ordinary income from the sale of goods manufactured by the Company, (ii) interest income, (iii) dividends paid by any Subsidiary of the Company, (iv) rent received with respect to any Permitted PP&E Licenses, (v) royalties received with respect to Permitted Intellectual Property Licenses, (vi) Code Section 162 ordinary and necessary expenses paid or incurred in connection with carrying on the trade or business of the Company, (vii) Code Section 1231 gain or loss from the disposition of property used in the trade or business of the Company, (viii) depreciation and amortization deductions under Code Sections 167, 168, and 197, and (ix) capital gain or loss from the sale of A-Rated Securities, the Pet Stock, or the General Mills Missouri Stock, and will not include expenditures described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i).
(b) Cash and Taxable Income of Limited Members. The Managing Member hereby covenants to the Limited Members that, for U.S. federal, state, and local income tax purposes, the net taxable income includible by each such Limited Member with respect to its Limited Membership Interests (excluding, for the avoidance of doubt, any such income solely attributable to a sale or disposition of such Limited Membership Interests) will not exceed the amount of Cash distributed to such Limited Member with respect to such Allocation Year (disregarding for this purpose any allocations of (x) loss pursuant to Section 3.3 and (y) Profits pursuant to Sections 3.1(h) and 3.1(i); provided that, the covenant set forth herein shall not apply to a Class B Limited Member to the extent the net taxable income described in this Section 8.3(b) is attributable to gain (including income arising from remedial allocations associated with such gain) allocated to the Capital Account of a Member pursuant to Sections 7.1(e)(iii) or 7.2(b)(iii) in connection with a successful Class B Mandatory Remarketing and such Member failed to sell its Class B Limited Membership Interests in such Class B Mandatory Remarketing. The product of (i) any excess described in the previous sentence times (ii) the Applicable Tax Rate shall be the Limited Members Indemnified Taxes.
(c) Indemnification. The Company and the Managing Member, jointly and severally, shall indemnify each Limited Member who held a Limited Membership Interest during any Allocation Year for any breach or falsity of the covenant set forth in this Section 8.3 on the basis that (i) such Limited Member is subject to tax on its net income at the highest marginal federal income tax rate, the highest generally applicable state and local rates in the jurisdiction where such Limited Member has its primary place of business, and any actually applicable foreign tax rates, and (ii) such Limited Member has no available items of loss, capital gain, or other tax attributes not attributable to its investment in the Company, and any charitable contribution deductions or expenses of the Company are nondeductible expenses for U.S. federal income tax purposes.
(d) Automatic Indemnification Payment. In the event that there occurs a breach of the covenant set forth in Section 8.3(b) with respect to any Allocation Year, the Company shall, no later than 180 days after such Allocation Year, pay to each Limited Member an amount equal to the quotient of (i) Indemnified Taxes, divided by (ii) 100% minus the Applicable Tax Rate.