Partnership Agreement Page 1 of 22
Partnership Agreement for Development of Real Property
Agreement made the day of , 20 , between
, of ,
(Name of Partner One) (Street Address, City, County, State, Zip Code)
referred to herein as Partner One, and , of
(Name of Partner Two)
, referred to herein as Partner Two, said Partner
(Street Address, City, County, State, Zip Code)
One and Partner Two being jointly called the Partners ;
The Partners, in consideration of the mutual covenants and benefits in this Agreement, agree to
form a general partnership (the Partnership) pursuant to the
(Name of State)
provisions of the ,
(Name of State) (Citation of Partnership Statute)
upon the terms set forth below.
I. Definitions. As used in this Agreement, the following terms shall have the following
meanings:
A. Act shall mean the , as amended from
(Citation of Partnership Statute)
time to time.
B. Affiliate shall mean, with respect to any Partner, (1) any person that directly, or
indirectly through any other person or persons, controls or is controlled by or is under
common control with such Partner; or (2) any person that is an officer of, partner in or
trustee of, or serves in a similar capacity with respect to such Partner, or with respect to
which such Partner serves in such a capacity. For purposes of this Paragraph B, the term
control shall mean, with respect to any non-individual person, the direct or indirect
ownership of 50% or more of the voting stock or other voting interests of or in such
person. C. Agreement shall mean this Partnership Agreement as originally executed and as
amended, modified, supplemented or restated from time to time, as the context requires.D. Code shall mean the Internal Revenue Code of 1986, as amended from time to
time unless otherwise indicated.
E. Fiscal Year shall mean the calendar year or such other fiscal year of the
Partnership as may be determined by the Partners for federal income tax reporting
purposes. Such term shall also refer to any short taxable year of the Partnership.
Partnership Agreement Page 2 of 22
F.Gain from a Disposition shall mean any net gain included in the Partnership's net
profit or net loss for any fiscal year resulting from (1) the sale, foreclosure, exchange or
other disposition of all or a substantial portion of the Property and (2) the condemnation
or taking of or casualty to all or a substantial portion of the Property.
G. Interest shall mean the entire ownership interest of a Partner in the
Partnership at any particular time, including the right of such Partner to any and all
benefits to which he or she may be entitled as provided in this Agreement, together with
the obligations of such Partner to comply with all the terms and provisions of this
Agreement.
H. Loss from a Disposition shall mean any net loss included in the Partnership's net
profit or net loss for any fiscal year resulting from (1) the sale, foreclosure, exchange or
other disposition of all or a substantial portion of the Property, and (2) the condemnation
or taking of or casualty to all or a substantial portion of the Property.
I. shall mean Partner One
(Name of Partner One)
in capacity as a Partner of the Partnership, unless otherwise indicated by the
(his/her)
context. J. Net Cash Flow shall mean, with respect to any fiscal period, the sum of all cash
receipts of the Partnership from rents, lease payments, payments on account of other
Agreements for use and occupancy of the Property, and any and all other sources
(excluding, however, capital contributions and transactions the proceeds from which are
included for purposes of determining net proceeds of any sale or net proceeds of
financings) less the sum of the following expenditures paid out of such cash receipts:
1.Payments of ground rental, insurance, real estate taxes, legal expenses,
commissions, management expenses, utilities, repairs and maintenance,
accounting and bookkeeping services, equipment, supplies, salaries, advertising
and promotion, and any and all other items which are customarily considered to
be operating expenses ;
2. Payments of interest, principal and other charges with respect to any and
all loans or other indebtedness of the Partnership, including but not limited to any
and all loans incurred in connection with the acquisition of the Property, and
mortgages, liens, security interests, or other encumbrances on the Property or any
other property of the Partnership, and loans or other indebtedness of the
Partnership to any Partner incurred in accordance with the provisions of this
Agreement; 3. Payments made to acquire or in connection with the acquisition or
disposition of the Property or any other property of the Partnership;
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4.Payments made for capital improvements or for construction, demolition,
reconstruction, alteration, renovation or rehabilitation of the Property or any other
property of the Partnership; 5. Payments made in connection with the organization of the Partnership;
6. Payments of any and all amounts of compensation to Partners and
affiliates as and to the extent provided in Section VI, Paragraph D of this
Agreement (to the extent any such amounts are not otherwise referred to above);
and 7. Any and all other cash expenditures of the Partnership, except
distributions to Partners pursuant to Sections V, IX or X; and less
8. Amounts set aside as additions to reasonable reserves established by the
Partners for working capital, contingent liabilities or for any of the expenditures
described in Subparagraphs 1, 2, 3, 4 and 5 above, or as otherwise deemed by
the Partners as reasonably necessary to meet the current and anticipated future
liabilities, obligations and operating and capital expenditures of the Partnership.
K. Net Loss shall mean, with respect to any fiscal year, the net book loss, so-called,
of the Partnership, if any, for such year as determined for federal income tax accounting
purposes consistent with the requirements of Section 704(b) of the Code and applicable
regulations.
L. Net Proceeds of Any Sale shall mean the gross proceeds arising from a sale,
exchange, or other disposition of all or a substantial portion of the Property, or from any
other transaction giving rise to gain from a disposition or loss from a disposition less the
sum of:
1. The amount of funds disbursed or to be disbursed (including amounts
deducted for adjustments) in connection with or as an expense of such sale,
including but not limited to all broker's fees and attorneys' fees; 2. The amount necessary for the payment of all debts and obligations of the
Partnership arising from or otherwise related to such sale or to which the Property
is subject and which are then to be paid; and
3. Any amounts set aside by the Partners for the reserves described in
Subparagraph J(8) of this Section I.
M. Net Proceeds of Financing shall mean the gross proceeds of any borrowings by
the Partnership, less the sum of:
Partnership Agreement Page 4 of 22
1. Any amounts used to repay then existing indebtedness of the Partnership
or to pay or provide for any and all liabilities and obligations of the Partnership
then due; 2. All expenses of such borrowings including, but not limited to, all
commitment fees, broker's commissions and attorneys' fees;3. Any amounts paid to acquire or in connection with the acquisition of the
Property or any other real or personal property of the Partnership;4. Any amounts paid for any of the purposes described in Subparagraph
J(4) of this Section I ;
5. Any amounts used for any purpose in order to satisfy conditions to or
established in connection with such borrowings; and
6. Any amounts set aside by the Partners for the reserves described in
Subparagraph J(8) of this Section I.
N. Net Profit shall mean, with respect to any fiscal year, the net “book” income, so-
called, of the Partnership, if any, for such year as determined for federal income tax
accounting purposes consistent with the requirements of Section 704(b) of the Code and
applicable regulations.
O. Partners shall mean Partner One and Partner Two in each of their capacities as
a Partner of the Partnership and such term in the singular shall mean any one of the
Partners.
P. Partnership shall mean the Partnership formed pursuant to the terms of his
Agreement and the provisions of the Act, as such Partnership may from time to time be
constituted.
Q. Person shall mean an individual, corporation, partnership, joint venture, trust,
estate or unincorporated business association or organization or other legal entity.R. Project Completion Date shall mean the earlier of (1) the date on which the
Partnership shall have completed rehabilitation of the Property and placed the entire
Property in service within the meaning of Code Section 46(c) and Regulations under that
Section, or (2) .
(Date of Completion)
S. Property shall mean the land with the buildings on it located at or adjacent to
, and further described in the attached
(Street Address, City, County, State, Zip Code)
Exhibit A.
Partnership Agreement Page 5 of 22
T. shall mean Partner Two in
(Name of Partner Two)
capacity as a Partner of the Partnership, unless otherwise indicated by the
(his/her)
context.
II. General Provisions. A. Name of the Partnership. The name of the Partnership shall be
, or such other name as the Partners may
(Name of Partnership)
from time to time determine. The Partners shall cause to be filed on behalf of the
Partnership such partnership or assumed or fictitious name certificate or certificates as
may from time to time be required by law.
B. Purposes of the Partnership.
1. Business. The business of the Partnership to the extent permitted by law
shall be (a) to acquire and to finance the acquisition of the Property; (b) to own,
rehabilitate, renovate, improve, finance, refinance, lease, operate and sell or
otherwise deal with the Property under the terms and conditions set forth below;
(c) to have and exercise all the powers necessary or convenient in connection with
its business and purposes; and (d) to engage in any lawful business, whether or
not related or incidental to any of the foregoing activities or any related activities.
The Partnership may directly carry on any such activities or may do so as a joint
venturer or partner with any other person or persons.
2. Authorized Activities. In carrying out the purposes of the Partnership, but
subject to all other provisions of this Agreement, and without limitation, the
Partnership is authorized to:
a. Acquire, hold, rent, lease and otherwise operate, construct,
reconstruct, improve, renovate, rehabilitate, maintain, finance, sell,
transfer, convey, exchange, assign, mortgage or otherwise deal with or
dispose of the Property or interests in the same and any other real or
personal property that may be necessary, convenient, or incidental to the
accomplishment of the purposes of the Partnership; b. Borrow money and issue evidences of indebtedness in furtherance
of any or all of the purposes of the Partnership, and to extend, repay, and
renegotiate the terms of any such indebtedness, and to secure the same by
mortgage, assignment, pledge, or grant of other security interest on the
Property, or any other assets of the Partnership;
c. Enter into, perform, and carry out contracts and Agreements of any
kind, including contracts with the Partners or either of them or any of their
Partnership Agreement Page 6 of 22
affiliates, necessary or convenient or incidental to the accomplishment of
the purposes of the Partnership; d. Bring and defend actions at law or in equity;
e. Make prudent interim investments, including, but not limited to,
obligations of federal, state, and local governments or their agencies,
mutual funds, commercial paper, money-market funds, and bank
certificates of deposit; and f. Engage in any kind of lawful activity, and perform and carry out
contracts of any kind and execute, acknowledge, and deliver instruments
of any kind that are necessary or convenient and permitted by the Act in
connection with the accomplishment of the purposes of the Partnership.
3. Assumption of Liabilities . Prior to the execution of this Agreement by
the Partners, Partner One, on behalf of the Partnership, incurred certain costs,
expenses, obligations and liabilities (collectively the Liabilities) with respect to
the Property and the organization and purposes of the Partnership. A description
of the Liabilities is set forth on Exhibit B attached to and incorporated in this
Agreement by this reference. The Partnership assumes and agrees to immediately
pay the Liabilities.
C. Agent for Service of Process. shall
(Name of Agent)
be the Partnership's agent for service of process within
(Name of State)
and for such purpose the address of shall
(Name of Agent)
be .
(Street Address, City, County, State, Zip Code)
D. Place of Business of the Partnership. The principal place of business of the
Partnership shall be located at . The Partners
(Street Address, City, County, State, Zip Code)
may, at any time and from time to time, change the location of the Partnership's principal
place of business, and may establish such additional place or places of business of the
Partnership as they may from time to time determine.
E. Duration of the Partnership. The Partnership shall commence upon the date of
this Agreement, and shall continue for a term expiring , unless sooner
(Date)
terminated in accordance with Section X of this Agreement, or as otherwise provided by
law.
F. Partners' Names and Addresses. The names and addresses of the Partners are
set forth on the attached Exhibit C.
Partnership Agreement Page 7 of 22
G. Title to Partnership Property. All property owned by the Partnership, whether
real or personal, tangible or intangible, shall be deemed to be owned by the Partnership as
an entity, and no Partner, individually, shall have any ownership of such property. The
Partnership may hold any of its assets in its own name or in the name of a nominee,
which nominee may be one or more individuals, partnerships, corporations, trusts and
other entities.
H. Relationship of Partners. Except as otherwise provided in or as authorized
pursuant to this Agreement, (1) nothing contained in this Agreement shall render any
Partner liable for any debts or obligations incurred by the other Partners; (2) no Partner
shall be constituted an agent of the other Partners; (3) nothing in this Agreement shall
create any interest on the part of any Partner in the business or other assets of the other
Partners; (4) nothing contained in this Agreement shall be deemed to restrict or limit in
any way the carrying on of separate businesses or activities by any Partner now or in the
future; and (5) no Partner shall have any authority to act for, or to assume any obligation
on behalf of, the other Partners.
III. Capital Contributions; Partner Loans; Capital Accounts.
A. Capital Contributions. The Partners have made or shall make contributions to
the capital of the Partnership of cash and property in the amounts, at the agreed values
and at the times set forth opposite their respective names on Exhibit D attached to and
incorporated in this Agreement by reference. No interest shall accrue on any
contributions to the capital of the Partnership, and no Partner shall have the right to
withdraw or to be repaid any capital contributed by him or her, except as specifically
provided in this Agreement. No Partner shall be required to make any additional
contributions to the capital of the Partnership except as set forth in Paragraphs A and B
of this Section III; in Section IX, Paragraph D; or in Section X, Subparagraph
B(1)(f) of this Agreement.
B. Additional Capital Contributions. If the Partners determine that the
Partnership's funds are insufficient to meet its costs, expenses, obligations, liabilities and
charges, or to make any expenditure authorized by this Agreement, and additional funds
are not available from third parties on terms acceptable to the Partners, then, subject to
the provisions set forth below, such funds shall be contributed by the Partners within
days of the determination by the Partners that any such additional funds are
(Number)
required for any of such purposes. The Partners shall make such contributions in equal
percentages.
C. Partners' Capital Accounts. The Partnership shall maintain a separate capital
account for each Partner. Each Partner's initial capital account balance shall equal his or
her initial contribution to the capital of the Partnership as provided in Paragraph A of
this Section III. Each Partner's capital account shall be increased (1) by any cash or the
fair market value of any property subsequently contributed by such Partner (net of
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liabilities assumed by the Partnership and liabilities to which such contributed property is
subject), (2) by the amount of any Partnership liabilities that are assumed by such Partner
(excluding liabilities described in clause (4) of the sentence next following), and (3) by
such Partner's distributive share of the Partnership's income and gain (or items of the
same). Each Partner's capital account shall be decreased (1) by such Partner's distributive
share of the Partnership's loss and deductions (or items of the same) [except items
described in clause (3) below], (2) by the amount of such Partner's individual liabilities
that are assumed by the Partnership (excluding liabilities described in clause (1) of the
next preceding sentence, except to the extent, if at all, that such liabilities exceed the fa ir
market value of the property contributed), (3) by such Partner's share of expenditures of
the Partnership described in Section 705(a)(2)(B) of the Code, and (4) by the amount of
cash or the fair market value of any property distributed by the Partnership to such
Partner (net of liabilities assumed by such Partner and liabilities to which such distributed
property is subject). Other appropriate adjustments to each Partner's capital account shall
also be made from time to time, in accordance with the rules set forth in Regulation
Section 1.704-1(b)(2)(iv) under Section 704 of the Code or the requirements of any other
applicable proposed, final or temporary regulations. It is the intent of the Partners that the
capital accounts shall be determined and maintained in accordance with the Code Section
and the regulations, and this Paragraph C shall be construed in a manner consistent with
the same. A Partner who has more than one interest in the Partnership shall have a single
capital account that reflects all such interests. No Partner shall be entitled to interest on
his or her capital account.
IV. Allocations of Profits and Losses. A. Allocation of General Profits and Losses. Except as otherwise provided in
Paragraphs B or C of this Section IV, and subject to the provisions of Section IX,
Paragraph C, the net profit or net loss, as the case may be, as of the end of any fiscal
year shall be allocated among the Partners as follows:
1. For the Partnership's first fiscal year, and for each subsequent fiscal year
through and including the fiscal year which contains the project completion date,
such net profit or net loss shall be allocated (a) % to Partner One and
(b) % to Partner Two.
2. For the Partnership's fiscal year next following the fiscal year which
contains the project completion date, and for each subsequent fiscal year through
and including the fiscal year containing the date which is
(number of months)
months after the project completion date, such net profit or net loss shall be
allocated (a) % to Partner One and (b) % to Partner Two.
3. In subsequent fiscal years, such net profit or net loss shall be allocated (a)
% to Partner One and (b) % to Partner Two.
Partnership Agreement Page 9 of 22
B. Allocation of Gains from Dispositions. Subject to the provisions of Section IX,
Paragraph C of this Agreement, any gain from a disposition shall be allocated among
the Partners as follows:
1. First there shall be allocated to either Partner an amount of such gain
sufficient to equalize the capital accounts of the Partners. For this purpose the
capital accounts of the Partners shall be adjusted, as provided in Section III,
Paragraph C, (a) for all distributions through and including the last day of the
fiscal year, and (b) for the amount of cash or the fair market value of any property
held for distribution by the Partnership at the end of the fiscal year. 2. Such gain next shall be allocated to the Partners in the same proportions
as, and to the extent of the amount of any distributions of cash pursuant to Section
V, Paragraph B constituting net proceeds of any sale with respect to the
transaction giving rise to such gain, made to the Partners on or prior to the last
day of the fiscal year in which such gain arises. 3. Such gain next shall be allocated to the Partners in the same proportions as
and to the extent of the amount of any cash constituting net proceeds of any sale
with respect to the transaction giving rise to such gain and held by the Partnership
on the last day of the fiscal year in which such gain arises and available for
distribution to the Partners pursuant to Section V, Paragraph B.
4. The balance, if any, of such gain shall be allocated in the following
percentages: (a) 50% to Partner One; and (b) 50% to Partner Two.
C. Allocation of Losses from Dispositions. Subject to the provisions of Section IX,
Paragraph C of this Agreement, any loss from a disposition shall be allocated as
follows:
1. First there shall be allocated to either Partner an amount of such loss
sufficient to equalize the capital accounts of the Partners. For this purpose the
capital accounts of the Partners shall be adjusted, as provided in Section III,
Paragraph C, (a) for all distributions through and including the last day of the
fiscal year, and (b) for the amount of cash or the fair market value of any property
held for distribution by the Partnership at the end of the fiscal year. 2. The balance, if any, of such loss shall be allocated in the following
percentages: (a) 50% to Partner One; and (b) 50% to Partner Two.
V. Distributions. A. Distribution of Net Cash Flow. The Partners shall cause distribution to be made
not less frequently than annually of net cash flow, to the extent available, subject to
payment of all Partnership expenses, fees and other obligations as they become due. Such
Partnership Agreement Page 10 of 22
distribution shall be made within days of the end of the fiscal year in which
(Number)
such net cash flow arose. Distribution of net cash flow shall be allocated to and divided
among the Partners in the following percentages: (a) 50% to Partner One; and (b) 50%
to Partner Two.
B. Distribution of Net Proceeds of Sales and Financings. The net proceeds of
any sale or the net proceeds of financing ( Net Proceeds of Any Sale or Financing) shall be
distributed to and allocated to and divided among the Partners as follows:
1. Until Partner One has received, from the current distribution of net proceeds of
any sale or financing pursuant to this Paragraph B and from all prior distributions of net
proceeds of any sale or financing an amount equal in the aggregate to $ , net
proceeds of any sale or financing shall be allocated in the following percentages:
(a) % to Partner One; and (b) % to Partner Two.
2. Subsequently, net proceeds of any sale or financing shall be allocated in the
following percentages: (a) 50% to Partner One; and (b) 50% to Partner Two.
VI. Management. A. Management of the Partnership. The overall management and control of the
business and affairs of the Partnership shall be vested in the Partners, collectively. Except
to the extent that authority may be otherwise granted pursuant to Paragraph B of this
Section VI, to one or more of the Partners effectively designated and acting as Managing
Partner, all decisions shall be made and action taken and discretion exercised by the
Partners jointly.
B. Designation of and Authority of the Managing Partner.
1. The Managing Partner of the Partnership, if there is a Managing Partner
or, if no Managing Partner has been designated by the Partners, the Partners
jointly, shall have and exercise the powers and authority described in
Subparagraph 2 of this Paragraph B, subject to Subparagraph 7 below.
2. Except as otherwise provided in this Agreement, all decisions respecting
any matter set forth in this Agreement or otherwise affecting or arising out of the
conduct of the business of the Partnership, shall be made by the Managing
Partner, if there is a Managing Partner; and the Managing Partner or, if there is no
Managing Partner, the Partners jointly, shall have the right and full authority to
manage, conduct and operate the Partnership business, and generally to exercise
the rights and powers specified in this Agreement. Specifically, but not by way of
limitation, the Managing Partner or the Partners jointly, as the case may be, shall
be authorized:
Partnership Agreement Page 11 of 22
a. to cause to be paid on or before the due date all amounts due and
payable by the Partnership to any person; b. to employ such agents, employees, managers, architects,
contractors, subcontractors, accountants, attorneys, consultants and other
persons, including the Managing Partner, any other Partner or affiliate,
necessary or appropriate to carry out the business and affairs of the
Partnership, and to pay such fees, expenses, salaries, wages and other
compensation to such persons as he, she or they shall in his, her or their
sole discretion determine;
c. to pay any and all fees and to make an and all expenditures which
he, she or they, in his, her or their sole discretion, deem necessary or
appropriate in connection with the organization of the Partnership, the
management of the affairs of the Partnership and the carrying out of his,
her or their obligations and responsibilities under this Agreement; d. to cause the Property to be maintained and operated in a manner
which satisfies in all respects the obligations imposed with respect to such
maintenance and operation by any mortgages encumbering the Property
from time to time and by any lease or rental Agreement pertaining to the
Property;
e. to cause all rentals, payments under Agreement for use and
occupancy and other income of the Partnership which become due with
respect to the Property to be collected; f. to cause the Property to be inspected at regular intervals;
g. to cause necessary and proper repairs to be made and supplies
necessary for the proper operating maintenance and repair of the Property
to be purchased; h. to cause to be obtained and continued in force all policies of
insurance required by any mortgage, lease or other Agreement relating to
the Property or any part of it, and such additional insurance as he, she or
they shall in his, her or their sole discretion determine;
i. to cause to be paid any and all taxes, charges and assessments that
may be levied, assessed or imposed upon any of the assets of the
Partnership, unless the same are contested by the Partnership; j. to enter into Agreements and engage in transactions with affiliates
of the Managing Partner or any other Partner; and
Partnership Agreement Page 12 of 22
k. to cause the Property to be so renovated, rehabilitated, constructed
and reconstructed as he, she or they may, in his, her or their sole
discretion, deem necessary or appropriate in connection with the carrying
out of the purposes of the Partnership.
3. With respect to all of his or her obligations, powers and responsibilities
under this Agreement, the Managing Partner, if there is a Managing Partner, is
authorized to execute and deliver, for and on behalf of the Partnership, such
contracts, Agreements, assignments, deeds, and leases as he or she deems proper,
all on such terms and conditions as he or she deems proper. 4. The Managing Partner (if there is a Managing Partner) shall not be liable,
responsible or accountable in damages or otherwise to the Partnership or any of
the Partners for any act or omission performed or omitted by him or her in good
faith on behalf of the Partnership and in a manner reasonably believed by him or
her to be within the scope of the authority granted to him or her by this
Agreement and to be in the best interests of the Partnership; but this exculpation
shall not apply in the case of negligence or willful misconduct. 5. The Partners, or either of them, shall be indemnified by the Partnership for
any act performed by them within the scope of the authority conferred upon him
or her by this Agreement; provided, however, such indemnity shall be payable
only if the Partner (a) acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the Partnership and the
Partners, and (b) had no reasonable grounds to believe that his or her conduct was
negligent or unlawful. No indemnification may be made with respect to any act or
omission of a Partner for which he or she shall have been adjudged to be liable for
negligence or willful misconduct in the performance of his or her duty to the
Partnership unless, and only to the extent that the court in which such action or
suit was brought determines that in view of all the circumstances of the case,
despite the adjudication of liability for negligence or willful misconduct, the
Partner is fairly and reasonably entitled to indemnity for those expenses which the
court deems proper. To the extent not covered by insurance maintained by the
Partnership, any indemnity under this paragraph shall be paid from, and only to
the extent of, Partnership assets, and no other Partner shall have any personal
liability to indemnify the Partner or the Partnership on account of the same. 6. Any person not a party to this Agreement dealing with the Partnership
shall be entitled to rely conclusively upon the power and authority of the person,
if any, from time to time acting as Managing Partner to bind the Partnership to
execute Agreements, instruments and other writings on behalf of and in the name
of the Partnership and to take any and all other action on behalf of and in the
name of the Partnership, and shall be entitled to rely upon a certificate executed
by both Partners as to the identity of the Managing Partner.
Partnership Agreement Page 13 of 22
7. Notwithstanding any other provision of this Agreement, the consent of
both Partner One and Partner Two shall be required:
a. for a sale of the Property or of any substantial portion of or interest
in the Property; b. to borrow money or, as security, to mortgage, pledge or otherwise
encumber the assets of the Partnership;
c. to pay, extend, renew, modify, adjust, submit to arbitration,
prosecute, defend or compromise, upon such terms as he or she may
determine and upon such evidence as he or she may deem sufficient, any
obligation, suit, liability, cause of action or claim, including taxes, either
in favor of or against the Partnership; d. to pay or incur capital expenditures in excess of $ ; to
establish, add to or subtract from reserves; to authorize distributions to
Partners; or to guarantee third party debts; and
e. for all other matters that this Agreement provides will be decided
by the Partners jointly.
8. Notwithstanding any other provision of this Agreement, any Partner may
appoint a manager for the Property who is not a Partner or an affiliate of a
Partner. The manager shall be subject to the control of the Partners, and may be
paid reasonable compensation.
C. Services of Partners. During the existence of the Partnership, the Partners shall
devote such time and effort to the Partnership business as may be necessary to promote
adequately the interests of the Partnership and the mutual interests of the Partners;
however, the Partners shall not be required to devote full time to Partnership business and
may at any time and from time to time engage in and possess interests in other business
ventures of any and every type and description, including, but not limited to, the
ownership, operation, financing, and management of real estate, independently or with
others, and neither the Partnership nor any Partner shall by virtue of this Agreement have
any right, title or interest in or to such independent ventures.
D. Compensation to Partners and Affiliates.
1. Limit on Compensation. The Partners and their affiliates shall receive
compensation from the Partnership only as provided in this Agreement; provided,
however, that nothing in this Agreement shall be construed as prohibiting or
limiting (a) the reimbursement by the Partnership of a Partner for any and all
amounts expended by such Partner out of his or her own funds in payment of
properly incurred Partnership obligations, and any Partner making any such
expenditures shall be entitled to prompt reimbursement by the Partnership; or (b)
Partnership Agreement Page 14 of 22
the assumption and payment by the Partnership of the Liabilities, as provided in
Section II, Subparagraph B(3) of this Agreement, or of any liabilities to which
the Property is subject.
2. Architect's Fees. shall be
(Name of architect)
entitled to receive from the Partnership fees for architectural, design, and
professional planning services as compensation for any such services rendered to
the Partnership from time to time (whether before or after the execution of this
Partnership Agreement) by or any
(Name of Architect)
affiliate in connection with the construction, reconstruction, rehabilitation and
renovation of the Property, or otherwise in furtherance of the purposes of the
Partnership. The amount of such fees shall be based upon the standard hourly
rates charged by or such affiliate.
(Name of Architect)
Such fees shall be payable upon receipt from time to time of any related invoice;
provided, however, that and the
(Name of Architect)
Partnership agree that the amount of such fees for services performed prior to
execution of this Agreement is as set forth on Exhibit D attached to and
incorporated in this Agreement by reference. It is intended that all such fees shall
be considered as occurring between the Partnership and one who is not a Partner,
within the meaning of Section 707(a) of the Code.
VII. Books, Records and Bank Accounts. A. Books and Records. The Partners shall keep at the Partnership's principal place
of business just and true books of account with respect to the operation of the Partnership.
All Partners, and their authorized representatives, shall at all reasonable times have
access to such books. The books of the Partnership shall be kept on the accrual basis of
accounting, or on such other basis of accounting as the Partners may determine, and
otherwise in accordance with accounting methods employed for federal income tax
reporting purposes, and shall be closed and balanced at the end of each fiscal year of the
Partnership and at such other times as the Partners may determine is appropriate.
B. Fiscal Year. The fiscal year of the Partnership (the Fiscal Year) shall be the
calendar year.
C. Bank Accounts. The Partners shall be responsible for causing one or more
accounts to be maintained in a bank (or banks), which accounts shall be used for the
payment of the expenditures incurred in connection with the business of the Partnership,
and in which shall be deposited any and all cash receipts. All such amounts shall be and
remain the property of the Partnership, and shall be received, held and disbursed by the
Managing Partner or the Partners for the purposes specified in this Agreement. There
Partnership Agreement Page 15 of 22
shall not be deposited in any of the accounts any funds other than funds belonging to the
Partnership, and no other funds shall be commingled in any way with such funds.
VIII. Tax Returns, Elections, and Allocations. A. Partnership Tax Returns. The Partners shall arrange for the preparation and
filing of all necessary tax returns of the Partnership.
B. Tax Elections; Accounting.
1. The Partners may elect, pursuant to Section 754 of the Code (or
corresponding provisions of succeeding law), to adjust the basis of the
Partnership's property, in the event of a distribution of Partnership property as
described in Section 734 of the Code or a transfer by any Partner of his or her
interest in the Partnership as described in Section 743 of the Code. Appropriate
adjustments shall be made in the allocations to Partners under Paragraph C of
this Section VIII in order to reflect adjustments in the basis of Partnership
property permitted pursuant to any election under Section 754 of the Code.
2. The Partners shall, from time to time, make such other tax elections as
they deem necessary or desirable in their sole discretion to carry out the business
of the Partnership or the purposes of this Agreement. 3. The Partnership's United States Partnership Return of Income shall be
prepared on the accrual basis of accounting, or on such other permissible basis of
accounting as the Partners may determine. The Partners shall select the methods
of calculating cost recovery and any other permissible methods of accounting for
purposes of preparing such return. The Partnership's taxable year shall be the
calendar year.
C. Tax Allocations. For federal income tax purposes, each Partner's distributive
share of income, gain, loss, deduction, credit or tax preference (or item of the same) for
any taxable year of the Partnership shall be allocated in the same proportion that the
Partnership's net profit or net loss (or item of the same) for such year to which it
corresponds, under applicable federal income tax accounting rules (including, in the case
of depreciation, depletion, amortization and gain or loss with respect to property properly
reflected in the Partners' capital accounts at a book value that differs from the adjusted
tax basis of such property, the rules set forth in Regulation Section 1.704-1(b)(4)(i)
under Section 704 of the Code and in Section 704(c) of the Code and related
regulations), is allocated pursuant to Section Four of this Agreement (and, if applicable,
Section IX, Paragraph C ). To the extent not inconsistent with such rules:
1. Income, gain, loss and deduction with respect to property contributed to
the Partnership by a Partner shall be shared among Partners so as to take account
of the variation between the basis of the property to the Partnership and its fair
market value at the time of contribution, as required by Section 704(c) of the
Partnership Agreement Page 16 of 22
Code and regulations promulgated under that Section. Without limiting the
foregoing, the parties agree that taxable income or gain shall be allocated
exclusively to Partner One, in an aggregate amount equal to the difference
between the adjusted tax basis of the Property on the date of its contribution by Partner One to the Partnership ($ ) and its fair market value on
such date ($ ), or $ (the Built-In Gain). The Built-In Gain (or
a pro rata portion of it in the event of a disposition of less than all of the Property)
shall, upon sale or other taxable disposition, be allocated to Partner One
exclusively, and the balance of taxable gain or loss on such sale shall be allocated
among the Partners in the same proportion in which the corresponding gain from
a disposition is allocated. 2. If any gain realized with respect to any Partnership asset shall be treated as
ordinary income under the depreciation recapture provisions of the Code, then the
full amount of such ordinary income shall be allocated among the Partners in the
proportions that the Partnership deductions from the depreciation giving rise to
such recapture actually were allocated. 3. The Partners shall bear any recapture of tax credits in the proportions in
which such credits were claimed.
D. Tax Matters Partner. The Partners agree that Partner One shall serve as the Tax
Matters Partner. Nothing in this Agreement shall be construed to restrict the Partnership
from engaging accountants or other professionals to assist the Tax Matters Partner in
discharging duties under this Agreement.
(his/her)
IX. Assignability of Partner’s Interest.
A. No Transfer without Consent. Except as otherwise specifically set forth in this
Agreement, each Partner agrees that he or she shall not, without the prior written consent
of the other Partner, sell, assign, transfer, pledge or otherwise dispose of or encumber,
directly or indirectly, the whole or any part of his or her interest in the Partnership. Any
sale, assignment, transfer, pledge, disposition or encumbrance by any Partner in
contravention of this paragraph shall be void and of no effect and shall not bind or be
effective as to the Partnership or the other Partner.
B. Substituted Partner. If a Partner transfers his or her interest in accordance with
the above Paragraph A, and the transferee executes and delivers such instruments as are
reasonably necessary to effect such substitution and to confirm the Agreement of the
transferee to be bound by all of the terms and provisions of this Agreement, including,
but not limited to, an amendment to this Agreement, the transferee subsequently shall be
a substituted Partner vested with the powers and duties of a Partner to the same extent as
though originally named, and the Partnership shall continue. To the extent that the
interest is transferred (including as the result of the death of a Partner) to more than one
person, the percentages applicable to the interest shall be prorated accordingly.
Partnership Agreement Page 17 of 22
C. Allocations Subsequent to Transfer. In the event of the admission or withdrawal
of a Partner, or if all or any part of an interest is validly transferred under the terms of this
Section IX, the net profits or net losses allocated under Section IV (and each item of net
profits or losses), and the cash distributions allocated under Section V, shall be further
allocated based upon the ownership or deemed ownership of the respective interests prior
to and following the effective date of such admission, withdrawal or transfer in a manner
determined by the Partners to be consistent with the requirements of Section 706 of the
Code and any final, proposed or temporary regulations under that section.
D. Liquidation of a Partner's Interest.
1. If there is a liquidation of any Partner's interest for purposes of
Paragraphs (b)(2)(ii)(b) and (b)(2)(ii)(g) of Regulation Section 1.704-1 under
Code Section 704 (prior to dissolution or liquidation of the Partnership as
provided in Section X), then liquidating distributions, if any, shall be made to
such Partner in the ratio that the positive balance, if any, in such Partner's capital
account, after taking into account all capital account adjustments provided for in
Section III, Paragraph C (other than those made as a result of any such
liquidating distributions), bears to the aggregate positive capital account balances
(as so adjusted) of all Partners. Such liquidating distributions shall be made no
later than the end of the taxable year during which such liquidation takes place or,
if later, within days after the date of such liquidation.
(Number)
2. If a Partner has a deficit balance in his or her capital account following
such a liquidation, as determined after taking into account all capital account
adjustments for the taxable year during which such liquidation occurs (other than
those made as a result of the application of this Subparagraph 2), such Partner
shall pay to the Partnership in cash or equivalent an amount equal to the deficit
balance in his or her capital account by the end of such taxable year (or, if later,
within days after the date of such liquidation), which amount shall be
(Number)
paid, upon liquidation of the Partnership, to creditors of the Partnership or
distributed to other Partners in accordance with their positive capital account
balances in accordance with Section X, Subparagraph B(1)(e), of this
Agreement. 3. Notwithstanding the above provisions, this paragraph D shall not apply if
all or part of the interest of one or more Partners is purchased (other than in
connection with the liquidation of the Partnership) by the Partnership or by one or
more Partners (or one or more persons related, within the meaning of Code
Section 267(b ) without modification by Code Section 267(e)(1) or Code Section
707(b)(1)), to a Partner) pursuant to an Agreement negotiated at arm's length by
persons who at the time such Agreement is entered into have materially adverse
interests and if a principal purpose of such purchase and sale is not to avoid the
principles of the second sentence of paragraph (b)(2)(ii)(a) of Regulation Section
1.704-1 under Code Section 704.
Partnership Agreement Page 18 of 22
X. Dissolution.
A. Dissolution. The Partnership shall be dissolved upon the earliest to occur of the
following:
1. The expiration of its term, unless such term is extended by the unanimous
written consent of all the Partners; 2. The consent to dissolution of the Partners;
3. The ceasing of the Partnership to be a going concern;
4. The cessation of the carrying on by the Partnership of any and all business,
financial operations, and ventures of the Partnership;5. The entry of a decree or order by a court of competent jurisdiction
adjudging the Partnership a bankrupt or insolvent; or the institution by the
Partnership of any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, liquidation or similar proceeding under the law of any
jurisdiction; or the institution of any such proceedings against the Partnership
which shall remain undismissed for a period of days; or the
(Number)
application for or consent to the appointment of any receiver, trustee, custodian or
similar officer for the Partnership, or for all or any substantial part of its property;
or the appointment of any such receiver, trustee, custodian or any similar officer
without the application or consent of the Partnership, as the case may be, and such
appointment shall continue undischarged for a period of days;
(Number)
6. The death of either of the Partners; or
7. The happening of any other event resulting in dissolution under the Act or
any other applicable law of .
(Name of State)
B. Distribution upon Dissolution. 1. Upon the dissolution of the Partnership, its affairs shall be wound up and it
shall be liquidated and the proceeds of such liquidation and the Partnership's other
assets shall be distributed as follows:
a. All of the Partnership's ascertained debts and liabilities to creditors
shall be promptly paid and discharged in the order provided by applicable
law. b. A reserve shall be set aside in an amount reasonably required to
provide for contingent or other liabilities.
Partnership Agreement Page 19 of 22
c. The Partnership's net profit or net loss (including but not limited to
any gain from a disposition or loss from a disposition resulting from any
sales or other dispositions of Partnership property in connection with the
liquidation of the Partnership) shall be computed and shall be allocated to
the Partners in accordance with Section IV of this Agreement, and the
Partners' capital accounts shall be adjusted in accordance with Section III,
Paragraph C. d. Distribution shall be made to the Partners in accordance with
Section V, Paragraph A, of any and all net cash flow, and distribution
shall be made to the Partners in accordance with Section V, Paragraph B,
of any and all net proceeds of sales and financings, and the Partners'
capital accounts shall be adjusted in accordance with Section III,
Paragraph C.
e. The remainder of the Partnership's assets shall be distributed, in
liquidation of the interests of all the Partners, to those Partners with
positive capital account balances, after taking into account all capital
account adjustments provided for in Section III, Paragraph C (other than
those made as a result of any such liquidating distributions) in the ratios of
such positive capital account balances, as so adjusted. Each partner shall
receive his or her share of such remaining assets in cash or in kind, or
both, and the portion of such share that is received in cash may vary from
Partner to Partner, all as the Partners may determine. Notwithstanding the
foregoing, if any assets of the Partnership are to be distributed in kind,
such assets shall be distributed on the basis of the fair market value of the
assets and any Partner entitled to any interest in such assets shall receive
such interest as a tenant-in-common with all other Partners so entitled. If
any asset is to be distributed in kind, the Partners' capital accounts shall be
adjusted as provided for in Section III, Paragraph C (consistent with the
requirements of Regulation Section 1.704-1(b)(2)(iv) under Section 704
of the Code) before any such distribution is made to reflect the increases
or decreases to the capital accounts which would have occurred if such
asset to be distributed in kind had been sold for its fair market value by the
Partnership immediately prior to such distribution. All such liquidating
distributions shall be made by the end of the taxable year of the
Partnership in which there is a liquidation of the Partnership for purposes of Paragraphs (b)(2)(ii)(b) and (b)(2)(ii)(g) of Regulation Section
1.704-1 under Code Section 704 or, if later, within days after
(Number)
the date of such liquidation. Notwithstanding the foregoing, the Partners
may, in their discretion, withhold from such distribution any or all
installment obligations owed to the Partnership, so long as such withheld
amounts are so distributed as soon as practicable and in the ratios of such
positive capital account balances, as so adjusted.
Partnership Agreement Page 20 of 22
f. If a Partner has a deficit balance in his or her capital account
following the liquidation of the Partnership or of such Partner's interest in
the Partnership (within the meaning of Regulation Sections
1.704(1)(b)(2)(ii)(b) and 1.704-1(b)(2)(ii)(g) under Section 704 of the
Code, as determined after taking into account all capital account
adjustments for the taxable year during which such liquidation occurs
(other than those made as a result of the application of this Subparagraph
2 ), such Partner shall pay to the Partnership in cash or equivalent an
amount equal to the deficit balance in his or her capital account by the end
of such taxable year [or, if later, within days after the date of
(Number)
such liquidation], which amount shall be paid, upon liquidation of the
Partnership, to creditors of the Partnership or distributed to other Partners
in accordance with their positive capital account balances in accordance
with subparagraph e above. g. As soon as practicable, the remaining balance, if any, of the
reserve established in accordance with Subparagraph b above shall be
distributed in the manner set forth in Subparagraph e above.
2
. Distribution of cash or property to the Partners in accordance with the
provisions of Subparagraph 1 above shall constitute a complete return to the
Partners of their respective interests in the Partnership assets. 3. The winding up of the Partnership's affairs and the liquidation and
distribution of its assets shall be conducted, subject to the provisions of the Act,
by the Partners, which are authorized to do any and all acts authorized by law for
these purposes, or by an authorized liquidator.
C. Liquidation for Tax Purposes. Notwithstanding any other provision of this
Agreement, if there is a liquidation of the Partnership for purposes of Paragraphs
(b)(2)(ii)(b ) and (b)(2)(ii)(g) of Regulation Section 1.704-1 under Code Section 704
(regardless of whether or not there is a dissolution of the Partnership as provided above),
then liquidating distributions, within the meaning of Paragraph (b)(2)(ii)(b), shall in all
cases be made in accordance with the positive capital account balances of the Partners,
taking into account all capital account adjustments for the taxable year of the Partnership
during which such liquidation occurs (other than adjustments made pursuant to this
Paragraph C ), by the end of such taxable year or, if later, within days after
(Number)
the date of such liquidation. Such distributions otherwise shall be made in the manner and
in accordance with the provisions of Subparagraph B(1)(e) of this Section X . Neither
the occurrence of such a liquidation nor the making of such liquidating distributions shall
be treated, however, as the occurrence of any event described in Subparagraphs c or d
of Paragraph A of this Section X, or shall otherwise result in dissolution of the
Partnership for purposes of this Section X. If such liquidation occurs at a time when there
is not also such a dissolution by reason of the independent occurrence of an event
Partnership Agreement Page 21 of 22
described in Paragraph A of this Section X, then (1) the Partnership shall not be
dissolved, (2) the Partners shall, immediately upon receiving such liquidating
distributions, contribute all cash and properties so received to the Partnership, (3) the
capital accounts of the Partners shall be adjusted as provided in Section III, Paragraph
C, and (4) the business and affairs of the Partnership shall be continued without
interruption. Prior to distribution of any property pursuant to this Paragraph C, the
Partners' capital accounts shall be adjusted as provided for in Paragraph C of Section
III (consistent with the requirements of Regulation Section 1.704-1(b)(2)(iv) under
Code Section 704) to reflect the increases or decreases to the capital accounts which
would have occurred if such property had been sold for its fair market value by the
Partnership immediately prior to such distribution.
XI. Miscellaneous. A. Notices. Any and all notices, elections or demands permitted or required to be
made under this Agreement shall be in writing, signed by the Partner giving such notice,
election or demand, and shall be delivered personally, or sent by registered or certified
mail, return receipt requested, to the other Partner or Partners, at his, her or their address
set forth in the Partnership's records, or at such other address as may be supplied by
written notice given in conformity with the terms of this paragraph. The date of personal
delivery or the date of mailing, as the case may be, shall be the date of such notice.
B. Successors and Assigns. Subject to the restrictions on transfer set forth in it, this
Agreement, and each provision of it, shall be binding upon and shall inure to the benefit
of the Partners, their respective successors, successors-in-title, heirs and assigns, and each
successor-in-interest by way of gift, purchase, foreclosure, or by any other method, shall
hold such interest subject to all of the terms and provisions of this Agreement.
C. Amendment of Partnership Agreement. No amendment shall become effective
unless it has been approved in writing, executed by all the Partners.
D. Partition. No Partner nor any successor-in-interest to any Partner, shall have the
right, while this Agreement remains in effect, to have the property of the Partnership
partitioned, or to file a complaint or institute any proceeding at law or in equity to have
the property of the Partnership partitioned, and each Partner, on behalf of himself or
herself, his or her successors, representatives, heirs, and assigns, waives any such right.
E. No Waiver. The failure of any Partner to insist upon strict performance of a
covenant or any obligation under this Agreement, irrespective of the length of time for
which such failure continues, shall not be a waiver of such Partner's right to demand strict
compliance in the future. No consent or waiver, express or implied, to or of any breach or
default in the performance of any obligation under this Agreement, shall constitute a
consent to or waiver of any other breach or default in the performance of the same or any
other obligation under this Agreement.
Partnership Agreement Page 22 of 22
F. Entire Agreement. This Agreement constitutes the full and complete Agreement
of the parties with respect to the subject matter of this Agreement.
G. Captions. Titles or captions of Sections, paragraphs or subparagraphs contained
in this Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Agreement or the intent of any
provision.
H. Gender. The use of the masculine personal pronoun shall be deemed to mean the
appropriate pronoun applicable to the number or gender of the person to whom or which
it refers, as the context may require.
I. Counterparts. This Agreement may be executed in a number of counterparts, all
of which together shall for all purposes constitute one Agreement.
J. Applicable Law. This Agreement and the rights and obligations of the parties
under this Agreement shall be governed by and interpreted, construed and enforced in
accordance with the laws of .
(Name of State)
K. Execution of Deed on Account of Termination of Partnership Interest. If a
Partner shall sell or be deemed to have sold his or her interest or shall otherwise
relinquish or terminate his or her interest, he or she shall join in the execution of a deed to
convey the Partnership property to the continuing Partnership. If a Partner shall die, and
his or her interest is sold or deemed sold, the representative(s) of his or her estate shall
join in the execution of such deed. If the Partner or representative shall fail to execute a
deed within days of a request from the remaining Partner, then the remaining
(Number)
Partner shall be authorized in the name of such Partner to execute the deed. The
remaining Partner shall, at the time he or she executes the deed, furnish an affidavit in
recordable form, reciting the date the request was made and that the deed was executed
by the remaining Partner in accordance with this Section. The execution of the deed and
the affidavit by the remaining Partner will be conclusive evidence to any third party that
such action was authorized.
WITNESS our signatures as of the day and date first above stated.
By: By:
(Signature of Partner One) (Signature of Partner Two)
(Printed Name of Partner One) (Printed Name of Partner Two)
Exhibits
