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GENERAL PARTNERSHIP AGREEMENT


OF


CAPITAL SOURCE PARTNERS, A REAL ESTATE PARTNERSHIP,


A California General Partnership 2
TABLE OF CONTENTS


Page


SECTION 1


DEFINITIONS ......................................................................... 1
1.1 Affiliate/Entity........................................................ 1
1.2 Bankruptcy .............................................................. 1
1.3 Capital Account ......................................................... 1
1.4 Cash Available For Distribution ......................................... 2
1.5 Code .................................................................... 2
1.6 Distributions ........................................................... 2
1.7 Managing Partner ........................................................ 2
1.8 Net Income and Net Loss ................................................. 2
1.9 Nonrecourse Deductions .................................................. 2
1.10 Partner ................................................................. 2
1.11 Partner Nonrecourse Debt ................................................ 2
1.12 Partnership ............................................................. 2
1.13 Partnership Business .................................................... 2
1.14 Partnership Minimum Gain ................................................ 3
1.15 Partnership Project ..................................................... 3
1.16 Percentage Interest ..................................................... 3
1.17 Treasury Regulations .................................................... 3


SECTION 2


FORMATION ........................................................................... 3
2.2 Purpose ................................................................. 3
2.3 Name .................................................................... 3
2.4 Place of Business ....................................................... 3
2.5 Fictitious Business Name Statement ...................................... 3


SECTION 3


TERM ................................................................................ 4
3.1 Commencement ............................................................ 4
3.2 Dissolution ............................................................. 4


SECTION 4


MANAGEMENT .......................................................................... 5
4.1 Managing Partner and Decision Making .................................... 5
4.2 Remaining Decision Making Power Vested in All Partners .................. 5
4.3 Limitation on Partner's Authority ....................................... 7
4.4 Execution of Documents/Reliance on Acts of Managing Partner ............. 7
4.5 Devotion of Time ........................................................ 7
4.6 Representations and Indemnifications .................................... 8
4.7 Investment Opportunities ................................................ 10


i 3 SECTION 5


CAPITAL CONTRIBUTIONS AND ASSUMPTION OF LIABILITY ................................... 10
5.1 Capital Contributions and Loans ......................................... 10
5.2 Deficit Capital Accounts................................................ 12


SECTION 6


DISTRIBUTIONS AND ALLOCATIONS ....................................................... 13
6.1 Distributions of Cash Available For Distribution ........................ 13
6.2 Allocation of Net Income................................................ 13
6.3 Allocation of Net Loss .................................................. 13
6.4 Special Allocations ..................................................... 14
6.5 Distributions on Dissolution ............................................ 14


SECTION 7


PARTNERSHIP EXPENSES ................................................................ 15
7.1 Reimbursable Expenses and Partnership Expenses .......................... 15


SECTION 8


BOOKS, RECORDS AND ACCOUNTS ......................................................... 15
8.1 Books and Records ....................................................... 15
8.2 Bank Accounts ........................................................... 16
8.3 Tax Returns ............................................................. 16
8.4 Audited Financial Statements ............................................ 16
8.5 Method of Accounting .................................................... 16
8.6 754 Election ............................................................ 16


SECTION 9


ASSIGNMENTS ......................................................................... 17
9.1 Sale of Partnership Interest ............................................ 17
9.2 Rights of First Refusal to Purchase Interest ............................ 17
9.3 Specific Performance .................................................... 18
9.4 Buy Out ................................................................. 18


SECTION 10


MISCELLANEOUS ....................................................................... 19
10.1 Headings ................................................................ 19
10.2 Time of Essence ......................................................... 19
10.3 Entire Agreement ........................................................ 19
10.4 Governing Law ........................................................... 19
10.5 Attorneys' Fees ......................................................... 19
10.6 Arbitration ............................................................. 19
10.7 Severability............................................................ 20


ii 4


10.8 Notices ................................................................. 20
10.9 Gender and Number ....................................................... 20
10.10 Counterpart/Facsimile Signatures ........................................ 20
10.11 Cross-References ........................................................ 21
10.12 Covenant to Sign Documents .............................................. 21
10.13 Bank Accounts ........................................................... 21
10.14 No Representation ....................................................... 21
10.15 Successors in Interest .................................................. 21
10.16 Partition ............................................................... 21
10.17 Waiver .................................................................. 21
10.18 Approvals ............................................................... 21


EXHIBITS


EXHIBIT A Partner Percentage Interests EXHIBIT A-1 Partner Capitalization EXHIBIT B Legal Description of Property EXHIBIT B-1 Site Plan EXHIBIT C Promissory Note SCHEDULE 4.6(a) SCHEDULE 4.6(b)


iii 5
GENERAL PARTNERSHIP AGREEMENT


OF


CAPITAL SOURCE PARTNERS, A REAL ESTATE PARTNERSHIP,


A California General Partnership


This GENERAL PARTNERSHIP AGREEMENT ("Agreement") is made and entered as of 12/17/96, by and between P & S DEVELOPMENT, a California general partnership ("P&S"), and XIT CORPORATION, a New Jersey corporation formerly known as XCEL Corporation ("XIT"). P&S and XIT are sometimes collectively referred to herein as the "Partners."


By this Agreement, the Partners join together to form a general partnership under the California Uniform Partnership Act and agree to all the terms of this Agreement. P&S shall act as the managing partner of the general partnership formed by this Agreement (the "Partnership"), and, in its capacity as managing partner, P&S shall be referred to herein as the "Managing Partner."


SECTION 1


DEFINITIONS


The following terms, when used in this Agreement, shall have the meaning set forth in this section.


1.1 Affiliate/Entity. "Affiliate" means (i) any immediate family member, (ii) any entity in which a Partner (and/or his or her immediate family members if a Partner is a natural person) controls at least 50.1% of the voting interest of such entity, and (iii) any person or entity that is a shareholder, partner or member of a Partner as of the date of this Agreement. "Entity" includes a partnership, corporation, limited liability company, limited liability partnership, association, or other legal entity.


1.2 Bankruptcy. "Bankruptcy" shall mean the institution of any proceedings under federal or state laws for relief of debtors, including filing of a voluntary or involuntary petition in bankruptcy or the adjudication as insolvent or bankrupt, or the assignment of the person's business for the benefit of creditors, or the appointment of a receiver or trustee in bankruptcy of any substantial portion of the person's assets or the seizure by a sheriff, receiver or trustee of any substantial portion of the person's assets, and the failure, in the case of any of these events, to obtain the dismissal of the proceeding or removal of the receiver or trustee within ninety (90) days of the event.


1.3 Capital Account. The "Capital Account" of a Partner means the capital account of that Partner determined from the inception of the Partnership strictly in accordance with the rules set forth in Section 1.704-1(b)(2)(iv) of the Treasury Regulations. 6
1.4 Cash Available For Distribution. "Cash Available For Distribution" shall mean the total cash revenues generated by the business of the Partnership and miscellaneous sources, less cash expenditures (including fees for services to the Managing Partner or any Affiliate of the Managing Partner), debt service and operating expenses, and less amounts set aside for reserves and working capital, as determined by the Managing Partner, in its reasonable discretion.


1.5 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended, or corresponding provisions of subsequent revenue laws.


1.6 Distributions. "Distributions" means any cash or property distributed to Partners arising from their interests in the Partnership, other than payments to Partners for services or as repayment of loans, including, but not limited to, "Shortfall Loans" (as defined in Section 5.1(b)(ii) and the "Security Loan" (as defined in Section 5.1(c)).


1.7 Managing Partner. "Managing Partner" shall refer to P&S or to any other person(s) or entity(ies) who succeed it in that capacity. J. Victor Peloquin ("Peloquin"), a general partner of P&S, is hereby authorized to act on behalf of P&S and in P&S' name.


1.8 Net Income and Net Loss. "Net Income" and "Net Loss" shall mean the net income and net loss, respectively, of the Partnership; however, the following items shall be excluded from the computation of Net Income and Net Loss:


(a) Any gain or income specially allocated under Section 6.4.


(b) Any Nonrecourse Deductions.


(c) Any Partner Nonrecourse Deductions.


For purposes of computing Net Income and Net Loss, the "book" value of an asset shall be substituted for its adjusted tax basis if the two differ, but otherwise Net Income and Net Loss shall be determined in accordance with federal income tax principles.


1.9 Nonrecourse Deductions. "Nonrecourse Deductions" in any fiscal year means the amount of Partnership deductions that are characterized as "nonrecourse deductions" under Section 1.704-2(b)(1) of the Treasury Regulations.


1.10 Partner. Any person who is a partner in this Partnership.


1.11 Partner Nonrecourse Debt. "Partner Nonrecourse Debt" shall mean the liabilities of the Partnership treated as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the Treasury Regulations.


1.12 Partnership. "Partnership" means the general partnership formed by this Agreement.


1.13 Partnership Business. "Partnership Business" means acquiring, improving, maintaining, managing, and holding for investment that certain real property and its related assets designated herein as the Partnership Project.


2 7
1.14 Partnership Minimum Gain. "Partnership Minimum Gain" with respect to any taxable year of the Partnership shall mean the partnership minimum gain of the Partnership computed strictly in accordance with the principles of Section 1.704-2(b)(2) of the Treasury Regulations.


1.15 Partnership Project. The "Partnership Project" consists of that certain real property commonly known as 4290 East Brickell, Ontario, California, and legally described on EXHIBIT B attached hereto and incorporated herein by this reference, along with (i) all buildings and other improvements thereon, all fixtures thereon, all easements and other rights appurtenant thereto, and all personal property located thereon that is used exclusively for the operation and maintenance of the land and improvements, and (ii) all security deposits, prepaid rents, and reserves relating to the foregoing. A site plan for the Partnership Project is attached hereto as EXHIBIT B-1.


1.16 Percentage Interest. "Percentage Interest" means the percentage interest of a Partner as set forth on EXHIBIT A attached hereto and incorporated herein by this reference, as adjusted pursuant to this Agreement.


1.17 Treasury Regulations. "Treasury Regulations" shall mean the regulations, including temporary regulations, of the United States Treasury Department pertaining to the Code, as amended, and any successor provision(s).


SECTION 2


FORMATION


2.1 Statement of Partnership. A Statement of Partnership shall be prepared and signed by the Partners, and recorded in such official records as may be deemed necessary by the Partners.


2.2 Purpose. The purpose of the Partnership will be to engage in the Partnership Business which may include, but not be limited to, entering into leases, option agreements, construction agreements, loan agreements, purchase and sale agreements, and partnership agreements and joint venture agreements with other persons, all as the Partners may jointly deem appropriate.


2.3 Name. The name of the Partnership shall be "CAPITAL SOURCE PARTNERS, A REAL ESTATE PARTNERSHIP".


2.4 Place of Business. The Partnership's principal place of business shall be 4740 E. Bryson, Anaheim, California 92807, or such other location as may be determined from time to time by the Managing Partner.


2.5 Fictitious Business Name Statement. Upon execution of this Agreement, and promptly after any change in the Partnership's membership, the Managing Partner shall cause to be filed and published in the county in which the Partnership has its principal place of business


3 8 appropriate business name statements in accordance with Section 17900-17930 of the California Business and Professions Code.


2.6 Publication Upon Withdrawal of a Partner. If by reason of withdrawal, expulsion, Bankruptcy, removal, or any other reason whatsoever, a Partner shall cease to be a Partner of this Partnership, the remaining or succeeding Partners shall immediately prepare and publish, file, or record, as required by law, all documents, instruments or other items necessary to reflect such withdrawal, expulsion, Bankruptcy, or removal.


SECTION 3


TERM


3.1 Commencement. The Partnership term begins on the date of this Agreement.


3.2 Dissolution. The Partnership shall dissolve upon:


(a) The election by and of all of the Partners to dissolve;


(b) December 31, 2017;


(c) The sale of all or substantially all of the assets of the Partnership, and distribution of the proceeds to the Partners;


(d) The acquisition by one Partner of the Partnership interests of all of the other Partners;


(e) The conviction of any partner of P&S or any executive officer of XIT of a crime punishable as a felony; or


(f) The dissolution or liquidation of either P&S or XIT, or P&S or XIT makes an assignment for the benefit of creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any tribunal for any receiver or trustee, commences any proceeding relating to P&S or XIT under any bankruptcy, reorganization, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, or there is commenced against P&S or XIT any such proceeding which remains undismissed for a period of sixty days, or P&S or XIT by any act indicates its consent to, approval of or acquiescence in any way such proceeding or the appointment of any receiver of or trustee for P&S or XIT or any substantial part of its property, or suffers any such receivership or trusteeship to continue undischarged for a period of thirty days.


Following any such event, the Partnership shall engage in no further business other than that which is necessary to wind up its business affairs and distribute its assets. The Partnership shall continue to allocate Net Income and Net Loss and shall make Distributions as such allocations, Distributions and contributions were made prior to dissolution as set forth herein.


4 9
SECTION 4


MANAGEMENT


4.1 Managing Partner and Decision Making.


(a) Limited Control in Managing Partner. The Managing Partner shall have control over and be responsible for the day-to-day operations of the Partnership Business, including, but not limited to, (i) negotiating, entering into, paying for, and overseeing maintenance and insurance contracts for the Partnership Project, (ii) paying mortgage payments, insurance, property taxes, utilities and other costs associated with the day-to-day ownership and operation of the Property, (iii) enforcing the terms of any and all leases, including, but not limited to, collecting rent and evicting defaulting tenants, (iv) preparing and filing tax returns, (v) preparing income and expense statements and other financial reports, (vi) preparing budgets, which shall require the approval of a majority of the Partners before implementing said budgets, and (vii) the establishment of policy and operating procedures respecting the Partnership Project and the Partnership Business. In exercising the foregoing rights and obligations, the Managing Partner may (i) reimburse the Managing Partner or its Affiliates for direct, out-of-pocket expenses incurred in connection with the Partnership Business in accordance with Section 7 of this Agreement, and (ii) employ at the Partnership's expense such agents, employees, independent contractors, attorneys, and accountants as reasonably necessary to carry out the Partnership Business and the foregoing, including, but not limited to, employing J. Victor Construction, Inc., a California corporation, dba Azlon ("Azlon"), to carry out the rights and obligations of the Managing Partner pursuant to this Agreement. Expenditures of commitments in excess of $10,000 require XIT's prior consent, such consent not to be unreasonably withheld. In consideration of performing the foregoing obligations, the Managing Partner shall be entitled to receive all operating expenses, including property management expenses, advanced by tenants of the Partnership Project as of the date of this Agreement pursuant to lease agreements in effect as of the date of this Agreement.


(b) Decision Making if More than One Managing Partner. Except as otherwise expressly stated in this Agreement, should there ever be more than one Managing Partner, all decisions to be made or acts to be taken by such Managing Partners shall require the approval of a majority of the Managing Partners. Upon execution of this Agreement, there is only one Managing Partner. Appointment of a replacement or additional Managing Partner shall require the vote of a majority of the Partners.


4.2 Remaining Decision Making Power Vested in All Partners.


(a) Except for the rights of the Managing Partner set forth in Section 4.1 above, and except as otherwise expressly provided in this Agreement, the Partners shall collectively make all other decisions relating to the Partnership, the Partnership Project and the Partnership Business. Such decisions shall be made by a majority vote of the Partners based on their Percentage Interests.


(b) Without limiting the generality of Section 4.2(a), the following actions shall be taken only after the vote of approval by a majority of the Partners pursuant to


5 10 Section 4.2(a), and the Managing Partner shall not have the right to take the following actions unless directed to do so by a majority of the Partners after a vote pursuant to Section 4.3(a):


(i) Election to dissolve the Partnership;


(ii) Sale of all or substantially all of the assets of the Partnership in a single transaction or in a series of related transactions;


(iii) Admission of a new Partner;


(iv) The Acquisition of, or the execution of any contract for the acquisition of, any real property;


(v) Consummation of any transaction with an Affiliate of the Managing Partner, unless otherwise specifically provided for in this Agreement or unless the terms and conditions of such transaction are substantially the same as those between unrelated parties for similar transactions;


(vi) Entering into a partnership or joint venture agreement with any third party, including approval of the terms and conditions of such partnership or joint venture agreement;


(vii) Investing Cash Available For Distribution in any asset other than the Partnership Project, except temporarily to establish working capital reserves as reasonably determined by the Managing Partner (such temporary working capital reserves may be invested in obligations that are backed by the United States government or insured by FDIC or FSLIC);


(viii)Improve, develop, lease, sell, convey and dispose of any portion of the Partnership Project or any interest therein;


(ix) Borrow money required from time to time for the Partnership Business or to secure any such loan(s) by pledging or otherwise encumbering all or any part of the Partnership assets;


(x) Cause the Partnership to make or revoke any of the elections which may be made under the Code;


(xi) Adjust, settle or compromise any claim, obligation, debt, demand, suit or judgment against the Partnership;


(xii) Determine the maximum and minimum working capital requirements of the Partnership or the amount of any reserve to be obtained;


(xiii) Determine whether or not Distributions shall be made to the Partners;


(xiv) Implement, change or modify any site plan(s) for the Partnership Project;


6 11
(xv) Select new tenants and users for the Partnership Project;


(xvi) Vary depreciation or accounting methods, changing the fiscal year of the Partnership, making any other decisions with respect to the treatment of various transactions for bookkeeping or tax purposes;


(xvii)Contract for and complete the purchase and sale of any real or personal property, including, but not limited to, the Partnership Project, in the name of the Partnership; and


(xviii) Enter into any contract, commitment or transaction requiring payments or other consideration from the Partnership with a value in excess of $10,000 during any 12 month period.


4.3 Limitation on Partner's Authority. No Partner shall have the authority to:


(a) Do any act in contravention of this Agreement; or


(b) Do any act that would make it impossible to carry on the Partnership Business.


4.4 Execution of Documents/Reliance on Acts of Managing Partner. All of the Partners, on behalf of the Partnership, shall be required to sign any deed, deed of trust, bill of sale, contract of sale or purchase, option, or other instrument purporting to convey or encumber all or any portion of the fee interest in any real or personal property, at any time owned by the Partnership, for such instrument to be binding and enforceable against the Partnership. Only the Managing Partner (by Peloquin only, as general partner of the Managing Partner), on behalf of the Partnership, shall be required to sign any insurance or maintenance contract relating to the Partnership Project; provided, however that without the consent of XIT, the amounts paid pursuant to any maintenance contract shall not exceed the amounts set forth in a budget prepared annually and approved in writing by XIT prior to the year that is the subject of the budget. Partners representing at least 60% in Partnership Interests, on behalf of the Partnership, shall be required to sign all other agreements, documents, and instruments, including, but not limited to, any lease, license, easement, or other instrument purporting to create a leasehold or other right to use any portion of the fee interest in any real or personal property, at any time owned by the Partnership, for such instrument to be binding and enforceable against the Partnership. Except for the number of Partner's signatures required by this Section or as otherwise provided by Section 4.2, no other signatures shall be required for any agreement, document, or instrument to be binding and enforceable against the Partnership. No purchaser, mortgagee, lessee, assignee, optionee, or other party dealing with the Partnership shall be required to ascertain whether the provisions of this Agreement have been met or complied with, or to inquire as to the authority or power of any Partner or be obliged to inquire into the validity of any agreement, document, or instrument executed by a Partner, and any such party shall be exonerated from any and all liability if such party deals with the Partnership on the basis of agreements, documents, and instruments executed on behalf of the Partnership by a Partner as described in this Section .


4.5 Devotion of Time. The Partners are not obligated to devote their full time to the affairs of the Partnership. Any Partner may become involved in other businesses and occupations


7 12 and other partnerships, some of which may be directly competitive with the Partnership Business. The Managing Partner shall d
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