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1.1 Partner 1 and Partner 3. have agreed to form a partnership for the purpose of carrying on
the business set out below (the “Partnership”), and are entering into this Agreement to set out
their respective rights and obligations with respect to the Partnership.
1.2 Partner 2 is the Controlling shareholder of Partner 1.
1.3 Partner 4 is the Controlling shareholder of Partner 3.
THEREFORE, in consideration of the mutual promises set out in this Agreement, the
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows:
2.1 “Act” means the Partnership Act of [insert jurisdiction], as amended from time to time.
2.2 “Agreement” means this Partnership Agreement including all Schedules and any
2.3 “Capital” means, with reference to any Partner, the value of money or other property
contributed by such Partner to the Partnership, and with respect to the Partnership means the
aggregate Capital of the Partnership.
2.4 “Capital Account” means the subledger in the books and records of the Partnership which
records the contribution and withdrawal of Capital by each Partner.
2.5 “Control” of Partner 1 or Partner 3 shall mean ability to direct the voting of more than
51% of the voting shares of the corporation in question and the ability to elect a majority of the
directors of the corporation, with all decisions of the corporation made by simple majority vote
2.6 “Income Account” means the subledger in the books and records of the Partnership
which records the accumulation and withdrawal of profits, losses or income for the credit or
debit of each Partner in accordance with the terms of this Agreement.
2.7 “Partners” shall mean the partners of the Partnership from time to time.
2.8 “Partnership” shall mean the Partnership formed by this Agreement.
2.9 “Partnership Interest” shall mean the ownership interest held by a Partner in and of the
Partnership expressed as a percentage of the whole; the initial Partnership Interests are set out
3 PRIORITY OVER THE ACT
3.1 To the extent permitted, the provisions of this Agreement supersede anything to the
contrary in the Act.
4 FORMATION OF THE PARTNERSHIP, NAME and BUSINESS
4.1 Formation: Partner 1 and Partner 3. hereby agree that they are the founding Partners of
the Partnership. The Partnership shall carry on business from the date set out above until wound
up or terminated in accordance with the terms of this Agreement and the Act.
4.2 Name: The Partnership will carry on business under the firm name and style of
“[Partnership Name”] or such other name or names as the Partners may agree upon by
unanimous resolution. The Partnership shall be registered as required by the legislation of any
jurisdiction in which it carries on business.
4.3 Partner 3 agrees to take such steps as are required to change its name to something which
does not use the term [Partnership Name], as approved by the Partners by unanimous resolution,
should it be determined at any time during currency of this Partnership that Partner 3’s corporate
name [corporate name] causes any confusion in the marketplace with respect to the Partnership
name set out above.
4.4 Business: The Partnership has been formed to carry on the business (“Business”) of:
[describe business of partnership], and to conduct any other business or carry out any other
activity which is incidental, ancillary or related thereto, or any other business activity that may
be unanimously approved by the Partners.
5 PERSONAL COMMITMENT
5.1 Time Commitment:
5.2 Non-Competition: Each Partner agrees that they will not directly or indirectly compete
with or be involved with any business organization that competes with the Business of the
Partnership anywhere within [insert jurisdiction] or any other jurisdictions where the Partnership
has clients or is planning to carrying on business at any time while they are Partners in the
Partnership and for one year thereafter, unless the Partnership is dissolved without one Partner or
the other acquiring all the remaining assets of the Partnership, and except with the prior written
approval of the other Partner.
5.3 The provisions of paragraph 5.2 apply with all necessary changes to Partner 2 (with
respect to Partner 1’s involvement in the Partnership as a Partner) and to Partner 4 (with respect
to Partner 3’s involvement in the Partnership as a Partner).
6 PARTNERSHIP INTERESTS
6.1 Capital Contributions: Upon execution of this Agreement, each of Partner 1 and Partner
3 will contribute a minimum of $###.## to the Capital of the Partnership, to be added to each of
their Capital Accounts.
6.2 Immediately following execution of this Agreement, each of Partner 1 and Partner 3 will
contribute to the Partnership an equal amount of their pre-existing assets related to the Business
as the Partners shall unanimously agree.
6.3 Partnership Interests: It is acknowledged by each of the Partners that their respective
Partnership Interest in the Partnership will be as follows, and may not be amended except by
unanimous resolution of the Partners:
Partner 1 50%
Partner 3. 50%
6.4 Admission of Partners: New Partners may only be admitted to the Partnership with the
unanimous approval of the existing Partners.
7 ACCOUNTS, BANKING and SIGNING AUTHORITY
7.1 Books of Account: The accounts of the Partnership shall be maintained in accordance
with generally accepted accounting principles. The books and records of the partnership shall be
available for inspection to all Partners and their professional representatives during normal
business hours upon reasonable prior notice at the offices of the Partnership or wherever such
books and records may be located.
7.2 Fiscal Year End: The fiscal year end of the Partnership shall be [fiscal year end] in each
year, or such other date as the Partners may agree upon by unanimous resolution. The fiscal year
end of the Partnership shall remain unchanged notwithstanding any permitted withdrawals or
expulsion of a Partner or the addition of a new Partner.
7.3 Financial Statements: Financial statements of the Partnership shall be prepared annually
for each fiscal year of the Partnership by such chartered accountants as may be appointed by the
Partners by unanimous resolution. Copies of such financial statements, including all notes
thereto, shall be furnished to the Partners as soon as they are available.
7.4 Banking: The bankers of the Partnership shall be such banks or trust companies as may
be determined by unanimous resolution. The Partners shall maintain such accounts as may be
reasonably necessary. The Partners shall determine all cheque signing authorities or similar
signing authority by unanimous resolution.
7.5 Signing Authority: Except as set out in the Partnership banking resolutions, all
contracts, agreements or other documents on behalf of the Partnership shall require the signatures
of a representative of each Partner. Each Partner agrees that it will not enter into an agreement,
incur a liability or create any other obligation binding on the Partnership without the prior
approval of all Partners.
7.6 The Partners hereby agree that any document, agreement, warranty, covenant or
instrument executed by both Partner 2 and Partner 4 shall be valid and binding upon the
Partnership, and hereby authorize them to enter into and execute such documents in their
discretion for an on behalf of the Partnership.
8.1 All Decisions Must Be Unanimous: Except as otherwise required by this Agreement or
the Act, all decisions of the Partnership shall be made by unanimous resolution.
8.2 Management Committee: The Business of the Partnership shall be managed by a
management committee appointed by the Partners from time to time. Each Partner shall be
entitled to appoint one committee member. Each committee member shall have votes in any
decision making situation proportionate to its appointing Partner’s Partnership Interest. Partner 1
hereby appoints Partner 2 as its committee member for so long as [he/she] is alive and mentally
competent. Partner 3 hereby appoints Partner 4 as its committee member for so long as [he/she]
is alive and mentally competent.
9 ALLOCATION OF PROFITS AND LOSSES AND DISTRIBUTIONS
9.1 Determination of Profits and Losses: Profits and losses of the Partnership for financial
accounting purposes shall be determined in accordance with generally accepted accounting
principles, shall be allocated to and borne by the Partners in proportion to their respective
Partnership Interests, and shall be added to their respective Income Accounts.
9.2 Allocation of Profits and Losses: The income and losses of the Partnership for income
tax purposes shall be determined in accordance with the rules of the [insert name of applicable
federal legislation governing income tax] and any applicable [state/provincial] income tax
legislation and shall be allocated to and borne by the Partners in proportion to their respective
Partnership Interests or as they may otherwise unanimously agree.
9.3 Drawings and Distributions: Each Partner may draw upon his Income Account or
Capital Account or both in each fiscal year in such amounts and at such times as the Partners
may determined by unanimous resolution.
9.4 Shortfalls: The debts and liabilities of the Partnership in any fiscal year shall in the first
place be paid out of the earnings of the Partnership for that year and if such earnings shall be
insufficient to pay all such debts and liabilities the deficiency shall, unless otherwise agreed by
unanimous resolution, be made up by the Partners in proportion to their respective Partnership
Interest. Any such contributions shall be added to their respective Capital Accounts.
9.5 If any Partner (“Indebted Partner”) is at any time required to pay or becomes liable to pay
more than its proportionate share of the Partnership debts or liabilities as determined hereunder,
9.5.1 To the extent such liability results from one or any other Partners (“Defaulting
Partner”) failing to pay its proportionate share of the debts or liabilities of the
Partnership, or failing to make its required Capital contribution, the Defaulting Partner
shall immediately pay such difference to the Indebted Partner, and the Indebted Partner
shall have a first lien and charge upon the Income Account and Capital Account of the
Defaulting Partner until the liability of the Defaulting Partner has been paid in full; and
9.5.2 All other Partners agree to indemnify the Indebted Partner and save it harmless
from its disproportionate share of the debts and liabilities of the Partnership, and shall
pay to the Indebted Partner their share of such disproportionate liability, and the Indebted
Partner shall have a first lien and charge upon the Income Account and Capital Account
of the such other Partners until their respective liabilities have been adjusted on a
proportionate basis as required hereunder.
9.6 Notwithstanding anything to the contrary in this Agreement, a Partner may not draw upon
or receive a payment of a share of the profits, its Capital Account, its Income Account, or other
compensation by way of income from the assets or the Partnership if the draw or payment would
reduce the assets of the Partnership to an amount insufficient to discharge the liabilities of the
Partnership to persons who are not Partners.
10 ALIENATION OF PARTNERSHIP INTEREST or PARTNERSHIP ASSETS
10.1 General Prohibition: Except as expressly set out in this Agreement, no Partner shall at
any time sell, assign, transfer, lien, mortgage, charge, pledge, encumber, lease, or sublease its
Partnership Interest, or agree to do any such thing, without the prior written approval of the other
Partner, which approval may be arbitrarily withheld. Any transaction completed in contravention
of this provision shall be invalid and unenforceable.
10.2 Except as expressly set out in this Agreement, no Partner shall at any time sell, assign,
transfer, lien, mortgage, charge, pledge, encumber, lease, or sublease any Partnership assets, or
agree to do any such thing, except on unanimous resolution of all Partners. Any transaction
completed in contravention of this provision shall be invalid and unenforceable.
10.3 Sale of Partnership: Notwithstanding anything herein to the contrary, all the assets and
undertaking of the Partnership may be sold at any time by unanimous resolution of the Partners.
The net proceeds of any such sale or disposition, after payment of all Partnership debts and
liabilities, shall be shared by the Partners in accordance with their Partnership Interest, and their
shares will added to their Capital Accounts accordingly.
10.4 Right of First Refusal: Each Partner (the “Remaining Partner”) shall have a right of first
refusal on the sale or transfer of all or any Partnership Interest of the other Partner (the “Selling
Partner”) as set out in this paragraph (the “Right”). If a Selling Partner receives an offer or enters
into an agreement to sell or transfer all or any of its Partnership Interest (the “Offer”), it shall
then immediately provide a copy of the Offer and any and all other necessary documents or
particulars to the Remaining Partner to allow it a reasonable opportunity to assess the Offer and
whether it would be in its best interests to exercise their Right, consent to the transaction, or
refuse to consent to the transaction (“Disclosure”). The Remaining Partner shall have fourteen
days from receipt of the Disclosure to elect in writing to (A) acquire the Partnership Interest of
the Selling Partner set out in the Offer upon the same terms set out in the Offer, or (B) consent to
the Offer and the transfer of the Partnership Interest in accordance with the terms of the Offer, or
(C) refused to consent to the transfer of the Partnership Interest as set out in the offer in
accordance with paragraphs 10.1 and 10.2; provided that if the Remaining Partner does not
respond within the time set out above it will be deemed to have waived their Right with respect
to that Offer and to have provided its consent to the transfer of the Partnership Interest as set out
in the Offer; provided further that any extension of the closing date set out in the Offer, or any
variation in the price, consideration or financing terms in the Offer, or any substantive change to
a material term of the Offer, will be deemed to constitute a new Offer which must be submitted
to the Remaining Partner as set out above.
11 WITHDRAWAL FOR CONVENIENCE
11.1 General Withdrawal: Any Partner may withdraw from the Partnership at any time by
complying with the following requirements:
11.1.1 It shall first provide sixty (60) days prior written notice to the other Partner;
11.1.2 On the last day of the notice period it shall pay to the Partnership any negative
balance in its Capital Account or Income Account as of the effective date of its
withdrawal, as determined by the Partnership accountants in accordance with generally
accepted accounting principals;
11.1.3 Any positive balance in its Capital Accounts or Income Accounts as of the
effective date of withdrawal shall be paid to it by the Partnership without interest and
unsecured in twelve equal monthly payments commencing on the first day of the second
complete month after the effective date of withdrawal and due and payable on the first
day of each and every month thereafter until its Capital Accounts and Income Accounts
have been reduced to zero; and
11.1.4 Its Partnership Interest shall transferred to the remaining Partner pro rata in
accordance with their respective Partnership Interests on the effective date of withdrawal;
provided that no Partner shall issue a notice of withdrawal under this Article prior to [insert
date], except as permitted under paragraph 15.2.
12 SHOTGUN BUY-SELL
12.1 Provided no other sale mechanism is currently in progress, a Partner (the “Offeror”) may
issue a mandatory buy-sell notice (the “Offer”) to the other Partner (the “Offeree”) as follows:
12.1.1 the Offeror shall deliver an unconditional written offer to purchase all the
Offeree’s Partnership Interest for the Purchase Price and Payment Terms set out in the
12.1.2 the Offer shall include:
22.214.171.124 the number of cents on the dollar the Offeror is offering to pay the
Offeree for that part of the Offeree’s Partnership Interest consisting of debts or
liabilities of the Partnership to the Offeree, and
126.96.36.199 the price per percentage point of Partnership Interest the Offeror is
offering to pay the Offeree for that part of the Offeree’s Partnership Interest
(collectively the “Purchase Price”), and
188.8.131.52 the proposed terms of payment of the Purchase Price
(collectively the “Payment Terms”), and
12.1.3 the Offeree shall have fourteen days from receipt of the Offer to elect to either sell
all its Partnership Interest to the Offeror for the Purchase Price and Payment Terms set
out in the Offer, or buy all the Partnership Interest of the Offeror for the Purchase Price
and Payment Terms set out in the Offer, by delivering a written notice of the exercise of
its option in that regard (the “Acceptance”) to the Offeror within the said fourteen days,
in which case the transaction shall be completed upon the terms of the Offer and
12.1.4 if the Offeree does not deliver written notice within the time period set out above,
the Offeree shall be deemed to have agreed to sell all its Partnership Interest to the
Offeror for the Purchase Price and Payment Terms set out in Offer.
12.2 Provided that:
12.2.1 no Partner may exercise this shotgun option prior to [insert date], unless the other
Shareholder is in default of its obligations hereunder;
12.2.2 the Closing of any transaction under paragraph 12.1 shall take place within
fourteen days after expiry of the option period set out in 12.1.3 ; and
12.2.3 on Closing the Partner being bought out and Partner 2 or Partner 4 (as the case
may be), shall provide a Non-Competition Covenant in accordance with the provisions of
paragraphs 5.2 and 5.3.
13 MANDATORY BUYOUT ON DEATH
13.1 Mandatory Buyout on Death: On the death of either Partner 2 or Partner 4, as the case
may be (the “Deceased Principal”), either Partner 1 (if Partner 4 is the Deceased Principal) or
Partner 3 (if Partner 2 is the Deceased Principal) (the “Surviving Partner”) shall be required to
purchase the Partnership Interest of Partner 1 (if Partner 2 is the Deceased Principal) or Partner 3
(if Partner 4 is the Deceased Principal”) (the “Withdrawing Partner”) from the Withdrawing
Partner in accordance with the terms of this Article 13 (the “Buyout”).
13.2 Agreed Value shall be Purchase Price: Once per year, when they meet to review the
annual financial statements for the Partnership, the Partners shall agree upon and shall record the
agreed value of their respective Partnership Interests (“Agreed Value”). If the Partners cannot
agree, the decision of the Partnership accountants in that regard, using a fair marke