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The Llama Incident
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It started out simple enough.

The Llama Incident is an adventure that Milo and Melissa experienced before meeting Zack. It is referred to in The Undergrounders, Rooting for the Enemy, The Note, Murphy's Lard, We're Going to the Zoo, Battle of the Bands and is the subject of the episode The Llama Incident. Part of it briefly appears in Missing Milo.

Background

In the year 2000 Edward Garner, a man from Boston, inherited the herd of llamas from his uncle's llama farm. He then bought a 99-seat theater and produced plays with the llamas as the actors. Fifteen years later he had a whole line of theaters with his llamas as the actors.

Synopsis

While Milo and Melissa were watching a production of Llamlet, the llama playing Laertes wandered of-stage and pulled a rope with his mouth allowing the sandbag counter weights to fall and startle the llamas on stage. In the resulting llama stampede, Milo's backpack gets caught around the neck of a llama. The two chase the llamas out of the theater and into the street.
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The stampede runs through a series of locations as follows: A production of Swan Llama where more llamas to join the stampede; A 2016 graduation ceremony, where one llama ate a girl's diploma; and a salon where they all got their fur styled and hooves painted.

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They finally end up on a cargo ship. Milo and Melissa nearly miss the boat but manage to board via the ship's anchor chain. The chase continues on the boat until it arrives at a conveniently elevated ice berg that allows the llamas to debark. Milo finds his backpack at the feet of a polar bear and gets out a tee-shirt cannon filled with knock-out gas projectiles to render the polar bear unconscious. Using the bear like a puppet, they frighten the llamas the other way. Then they used a llama-pulled dog sled, an airplane, and public buses to get back to Swamp City.

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When they get back to town, Milo decides to get the llamas to their respective theaters by luring them with a serving-sized bag of pistachios from his backpack. Then a woodpecker makes a Lard World sign fall onto Balthazar Cavendish's and Dakota's barrel of pistachio gelatin who's contents falls on Melissa, resulting in the llamas chasing her. She runs right into a Geckos vs. Tigers football game with the llamas hot on her tail. Milo runs in paying admission for the two. The llamas chase Melissa around the stadium for hours. After a member of the Geckos' band obtains a giant spool of wire, one of the llamas rolls it down the stairs, off the bleachers, across the field, up the stairs on the other and over the back of those bleachers and into a truck parked below. The truck pulls away with the spool pulling the trailing wire straight and high above the field.

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Milo takes two seatbelts out of his backpack, uses one to strap himself to a llama while riding it to get high enough to tie the other to the wire. Melissa grabs the suspended belt and the wire swings her up causing the gelatin to remain on the field and her to land standing on the wire like a tightrope. The llamas stop and begin to eat the gelatin. Then Milo tells Diogee (in Spanish) to lead the llamas under Melissa so that she can jump onto them and land softly. When she does, she comments how soft they are.
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Post Llama incident

Milo and Melissa mention it  to Zack in multiple episodes.

In the episode of the same name, Milo and Melissa tell Zack the story while they are hanging from a tree branch on a cliff near the end of the woodpecker incident.

In Missing Milo, while trying to lose the pistachions Milo tells Balthazar and Vinnie to go the to the day of the incident across the stampede's trail to the football stadium.

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