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Sample Risk Factor Statement

Sample Risk Factor Statement

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

STATEMENT OF RISK FACTORS

THIS STATEMENT OF RISK FACTORS (the “Risk Factors”) is provided on this ___________, 20__, by and between XYZ Corporation, an <State> corporation (the “Company”), and _______________________ (the “Investor”).

RECITALS:

The Investor and the Company have entered into a Convertible Note Purchase Agreement of event date herewith. The Company has identified certain risks which the Investor should be apprised of which it desires to disclose to the Investor as a part of the note purchase transaction.

– STATEMENT OF RISK FACTORS –

Investing in the Securities involves a high degree of risk. The risk factors and all other information disclosed in the Convertible Promissory Note transaction must be carefully considered before making an investment decision regarding the Securities. One or more of these risk factors could cause a loss of part or all funds invested in the Securities.

The Company may not be able to create the products or produce the inventory is estimates it will need to launch the business with Seed Capital to prove its business concept.

The Company may not be able to create the products or produce the inventory necessary to prove its business concept and in turn to make its Series A offering. In such a case, the expected conversion of the Investors’ debt into an equity security would not take place and the anticipated benefit of equity ownership would not occur.

The Company may not raise sufficient funds to close the Series A offering and the investor may not be able to convert its debt to equity.

The Company may not raise funds sufficient to close the Series A Round. If sufficient funds are not raised to close the Series A Round, the Investors’ only recourse may be to secure the repayment of the principal and interest of their loans from the Company.

The Company is recently formed and has not operating history and no revenues.

The Company was only recently formed and has no operating history and has generated no revenues. There is no assurance that the Company can generate revenues or sell any of its products in the marketplace, and even if revenues are generated there is no assurance that the Company can earn a profit, in which case the Investors’ notes may not be repaid

Estimated expenses may exceed the projected Seed Capital needs.

The Company has estimated the cost of certain expenses required to fund its seed capital needs which will allow it to conduct its Series A offering. If expenses exceed those projected, the Series A offering may be delayed or cancelled which would negatively impact the conversion of the Investors’ notes into equity.

The Company is thinly capitalized and may default on the Convertible Notes.

The Company’s working capital will consist of the funds secured from the sale of the Convertible Notes. If expenses and anticipated uses of these funds exceed those anticipated by the Company there may be insufficient funds to pay back the Investors’ loans.

In the event of default on the notes, the assets of the Company pledged as collateral in the Security Agreement would not be sufficient to repay all of the Investors’ loans.

The Company has provided a Security Agreement for each Convertible Note which encumbers all of the assets of the Company. If the assets were liquidated pursuant to a default and foreclosure, there would not be sufficient cash generated to pay off the principal or interest due on the Convertible Promissory Notes.

THE COMPANY IS OFFERING THE SECURITIES PURSUANT TO AVAILABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS. IF THE INVESTORS’ PROMISSORY NOTES ARE CONVERTED, ADDITIONAL RISKS WILL BE DISCLOSED ACCORDING TO A PRIVATE PLACEMENT MEMORANDUM AT THE TIME OF THE CONVERSION. THESE SECURITIES WHEN ISSUED WILL BE RESTRICTED SECURITIES AND GENERALY MUST BE HELD INDEFINATELY. THEY MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE EXEMPTION FROM REGISTRATION WITH AN OPINION FROM LEGAL COUNSEL TO THAT EFFECT SATISFACTORY TO THE COMPANY. THE COMPANY IS UNDER NO OBLIGATION AND HAS NO INTENTION, TO REGISTER THE SECURITIES AND IS UNDER NO OBLIGATION TO ATTEMPT TO SECURE AN EXEMPTION FOR ANY SUBSEQUENT SALE.

Additional disclosures may have been required if this Note Purchase Agreement and related documents had been reviewed by federal or state securities regulators.

Because this transaction is a private offering and not registered under the U.S. Securities Act of 1933 or state securities laws, it has not been reviewed by the Securities and Exchange Commission or the state securities regulators. Review may have resulted in additional disclosures by the Company.

Investment in the Securities involves complex tax consequences; no tax opinion has been secured.

The tax consequences related to an investment in the Convertible Notes is complex and may involve the application of United States, state and local taxes. There has been no tax opinion secured related to the taxation of the Limited Partnership Units or any other advice or counsel for the investors. INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OR TO SECURE THEIR OWN TAX OPINIONS.

Conclusion.

GENERALLY, IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS INVESTMENT, POTENTIAL INVESTORS SHOULD KEEP IN MIND OTHER POSSIBLE RISKS THAT COULD BE IMPORTANT.

THE INVESTORS CONSIDERING THESE CONVERTIBLE PROMISSORY NOTE SECURITIES ARE ADVISED TO SEEK LEGAL, TAX AND FINANCIAL COUNSEL PRIOR TO PARTICIPATING IN THE INVESTMENT POGRAM.

IN WITNESS WHEREOF, this document is executed on the day and year first above written.

COMPANY: XYZ CORPORATION, AN <STATE> CORPORATION
By: __________________________________

The Aforementioned Risks are Acknowledged and Understood:

INVESTOR: __________________________

Name: ______________________________
Title: _______________________________

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Promissory Note

Sample Promissory Note

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Below you will find a Sample Convertible Promissory Note

Convertible Promissory Note

THE SECURITIES REPRESENTED HEREBY AND THE SHARES ISSUABLE UPON CONVERSION OF SUCH SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING OFFERED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM, HOLDERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

$____________.00
EFFECTIVE DATE: __________, 20__
PLACE OF EXECUTION: __________________________

FOR VALUE RECEIVED, XYZ Corporation, an <State> corporation (“Company”), promises to pay to the order of ___________________________________, (“Holder”), in lawful money of the United States of America, the sum of __________________ and 00/100 Dollars ($___________.00) (the “Principal Sum”), plus simple interest, accrued on the unpaid Principal Sum from the Effective Date through the Maturity Date, payable as herein provided.

1. Interest Rate; Payment of Interest. During the period commencing on the date of this Note and ending on the Maturity Date, Interest shall accrue on the Principal Sum at a simple rate equal to __ (__%) per annum.

2. Maturity Date. The entire unpaid Principal Sum evidenced by this Note, together with accrued and unpaid interest, shall be due and payable in full on or before ______________ (the “Maturity Date”).

3. Prepayment. The Company may prepay any portion of this Note and accrued interest prior to the Maturity Date without the prior consent of the Holder.

4. Payment of Accrued Interest Upon Conversion. If the Company elects to prepay all or a portion of the Principal Sum, then at the time of such payment any accrued and unpaid interest due as of the date calculated on the amount of the payment shall also be paid to the Holder. If, according to Section 5 below the Company converts this Note, then all or the unpaid balance of the Principal Sum of the Note due and all accrued interest due as of the date of the conversion shall be considered the amount to be converted (the “Conversion Amount”).

5. Mandatory Conversion.

a. Automatic Conversion in a Qualified Financing. If the Company issues equity securities (“Equity Securities”) in a transaction or series of related transactions resulting in aggregate gross proceeds to the Company of at least $__________, including conversion of the Notes and any other indebtedness (a “Qualified Financing”), then the Note, and any accrued but unpaid interest thereon, will automatically convert into the equity securities issued pursuant to the Qualified Financing at a conversion price equal to _______ (__%) percent of the per share price paid by the purchasers of such Equity Securities in the Qualified Financing. The Equity Securities issuable upon conversion of this Note shall be of the same type as the Equity Securities issued in the Qualified Equity Financing and shall otherwise be issued on substantially the same terms and conditions applicable to the Qualified Equity Financing. Upon any such conversion in connection with a Qualified Equity Financing, the Holder of this Note agrees to execute and deliver the same documents in the Qualified Equity Financing, if applicable, as are executed and delivered by the investors in such Qualified Equity Financing, as applicable, if any, that are not converting a promissory note.
b. Conversion Procedure. If this Note is being converted into Equity Securities in connection with a Qualified Equity Financing, the Holder shall surrender the Note at the office of the Company for the applicable Equity Securities. Thereupon, there shall be issued and delivered to such Holder the applicable Equity Securities into which the Note surrendered was convertible on the date of the closing of the Qualified Equity Financing. The Company shall not be obligated to issue the Equity Securities issuable upon such conversion unless the Note being converted is either delivered to the Company or the Holder notifies the Company or any such transfer agent that such certificate has been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred by Company in connection therewith. In lieu of the Company issuing any fractional shares to the Holder upon the conversion of this Note, the Company shall have the option to pay the Holder the unconverted amount of the Note, such payment to be in the form of cash or a Company’s check payable to the Holder. Upon conversion of this Note in full and the payment of the amounts specified in this Section 5, the Company shall be forever released from all its obligations and liabilities under this Note and such Note shall be deemed to be cancelled as of such time.

6. Events of Default; Holder’s Rights on Default.

a. Events of Default. This Note shall be immediately due and payable on the Maturity Date as to the Principal Sum and all accrued and unpaid interest. An Event of Default shall occur upon any of the following: the failure of the Company to pay this Note in full on the Maturity Date or upon any of the following occurrences of the Company: (i) applying for or consenting to the appointment of a receiver, trustee, liquidator or custodian of itself or of all or a substantial part of its property, (ii) being unable, or admitting in writing its inability, to pay its debts generally as they mature, (iii) making a general assignment for the benefit of its or any of its creditors, (iv) being dissolved or liquidated, (v) becoming insolvent (as such term may be defined or interpreted under any applicable statute), (vi)commencing a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or consenting to any such relief or to the appointment of or taking possession of its property by any official in an involuntary case or other proceeding commenced against it, or (vii) taking any action for the purpose of effecting any of the foregoing.
b. Rights of Holder. On the occurrence or existence of any Event of Default, the Holder may declare the Principal Sum and all accrued interest under this Note to be immediately due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived) and (1) the Principal Sum shall bear interest at the Default Rate of Interest (as defined below), (2) the Holder may immediately initiate legal action for the collection of this Note, (3) the Holder may immediately pursue the other remedies under applicable law that Holder deems appropriate. In the event of any default in the payment of this Note, or if suit is brought hereon, the Holder hereof shall be entitled to collect all reasonable costs and expenses of attorney’s fees, and the Company agrees to pay same in the event of such default.
c. Security Agreement. This Note is secured by a Security Agreement dated of even date herewith between the Holder and the Company. Upon default on this obligation, the Holder may foreclose upon the security provided for in the Security Agreement and pursue any and all other rights provided by law.
d. Shareholders. Officers and Directors Not Liable. In no event shall any shareholder, officer or director of the Company be liable for any amounts due or payable pursuant to this Note.

7. Default Rate of Interest. From and after the Maturity Date, the Principal Sum remaining unpaid shall accrue interest in an amount equal to (__%) per annum (the “Default Rate of Interest”).

8. Waivers. The Company waives demand, presentment for payment, protest, notice of protest and notice of nonpayment. Any discharge or release of any party who is or may be liable to Holder for the indebtedness represented by this Note will not have the effect of releasing any other party or parties, which will remain liable to Holder. Holder’s acceptance of payment other than in accordance with the terms of this Note, or Holder’s subsequent agreement to extend or modify the repayment terms, or Holder’s failure or delay in exercising any rights or remedies granted to Holder, will likewise not have the effect of releasing Company or any other party or parties from their respective obligations to Holder. In addition, any failure or delay on the part of Holder to exercise any of the rights and remedies granted to Holder shall not have the effect of waiving any of Holder’s rights and remedies under this Note. Any partial exercise of any rights and/or remedies granted to Holder shall furthermore not be construed as a waiver of any other rights and remedies, it being Company’s intent and agreement that Holder’s rights and remedies shall be cumulative in nature. Should any default event occur or exist under this Note, any waiver or forbearance on the part of Holder to pursue the rights and remedies available to Holder will bind Holder only to the extent that Holder agrees in writing to the waiver or forbearance.

9. Caption Headings. Caption headings of the sections of this Note are for convenience purposes only and are not to be used to interpret or to define their provisions. In this Note, whenever the context so requires, the singular includes the plural and the plural also includes the singular.

10. Notices. Any notice or other communication hereunder must be given in writing and either (i) delivered in person, (ii) transmitted by telefacsimile, provided that any notice so given is also mailed as provided in clause (iii), or (iii) mailed, postage prepaid, or by an overnight delivery service, as follows:

If to Company, addressed to:

XYZ Corporation

Address:

Phone:

Attention:

Email:

If to Holder, addressed to:
_________________________

Attention: _________________

Address: __________________
_________________________
_________________________

Email: ___________________

Phone No.: __________________

Fax No.: ________________

SSN or EIN #: _________________________

or to such other address or to such other person as any party shall have last designated such notice to the other parties. Each such notice or other communication shall be effective (i) if given by mail, three days after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, (ii) if given by tele-facsimile, when transmitted to the applicable number so specified in (or pursuant to) this Section 10 provided that appropriate confirmation of receipt is generated by the tele-facsimile and a duplicate copy is mailed, postage prepaid, or (iii) if given by any other means, when actually delivered at such address.

11. General. The wavier by Holder of any breach of any provision of this Note or warranty or representation herein set forth will not be construed as a waiver of any subsequent breach. The failure to exercise any right hereunder by Holder will not operate as a waiver of such night. All rights and remedies herein provided are cumulative. Company may not assign its nights or delegate its duties hereunder without Holder’s written consent. This Note may not be altered or amended except by a writing signed by all the parties hereto. This Note will be governed by and construed and interpreted in accordance with the laws of the State of Delaware. Any provision hereof found to be invalid will not invalidate the remainder. All words used herein will be construed to be of such gender and number as the circumstances require. This Note Agreement binds Company, its successors and assigns, and inures to the benefit of Holder, its successors and assigns.

12. Legend. The Holder acknowledges that the Shares or other securities acquired upon the conversion of this Note may have restrictions upon their resale imposed by state and federal securities laws. The Shares (unless registered under the Act) or other securities shall be stamped or imprinted with a legend in substantially the following form:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS. COPIES OF THE OPERATING AGREEMENT COVERING THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.”

IN WITNESS WHEREOF, the Parties to this Agreement have executed the same on the date first written above.

HOLDER: ______________________________.

By: _________________________________

THE COMPANY: XYZ CORPORATION, an <State> corporation

By:
Name:
Title:

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Private Placement Memorandum (PPM)

Sample Private Placement Memorandum (PPM)

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Contents

Confidential Private Placement Memorandum

CONFIDENTIAL
PRIVATE PLACEMENT MEMORANDUM

<COMPANY CONTACT INFORMATION>

[Date of PPM]

Partnership Unit Offered Offering Price Underwriting Discount and Commissions Net Proceeds to the Company*
Minimum Offering [][Class_] Units $[],000 per Unit [Class_] Unit None $[],000
Maximum Offering [][Class_] Units $[],000 per Unit [Class_] Unit None $[??],000

*The expenses of the Offering are expected to be less than $[],000 and paid from operating revenues

OFFER TO SELL SECURITIES

[ ] Class [ ] Limited Partnership Units

Beginning on the date hereof, [Name of Issuer], LP, a [State of Domicile] limited partnership (the “Company” or the “Partnership”), is offering to sell [Class _ ] Limited Partnership Units to investors for [$??],000 for _____ (_) ownership unit (the “[Class _ ] Units,” the “Units” or the “Securities”). Each ownership Unit represents one-half of one percent of the equity of the Company. The maximum offering is ________ Units for an aggregate offering of [$??],000,000 (the “Maximum Offering”) or twenty ([??]%0) percent of the equity of the Company. The minimum offering is [_] Units for an aggregate offering of $[??],000 (the “Minimum Offering”) or __ (_%) percent of the equity of the Company. The minimum investment amount is [$??],000, provided however the General Partner may, in its discretion, accept a subscription in a lesser amount. The investor subscribing for a [Class _ ] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) for __________________ of the investment period in an amount up to but not exceeding __ (??%) percent per annum calculated on the amount of their capital account as of the date of the quarterly payment. The return shall be calculated as of the date the original investment, based on the beginning balance of the Limited Partner’s capital account and shall be adjusted in the event that the Limited Partner’s capital account is reduced as a result of a return of equity. The General Partner and the Class [ ] Limited Partners will be allocated the balance of the earnings in proportion their respective ownership interests. Additionally, in the event of a sale of all of the assets, the ______________ preferred annual return for __________________will be prorated on a calendar year basis calculated on the balance of the Limited Partner’s capital account as of the date of the closing of the sale. A [Class _ ] Limited Partnership Interest owner shall also have _____________ as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.

THE SECURITIES OFFERED HEREIN ARE HIGHLY SPECULATIVE, INVOLVE A HIGH DEGREE OF RISK AND IMMEDIATE DILUTION, AND SHOULD BE PURCHASED ONLY BY
[NAME OF ISSUER], LP – PRIVATE PLACEMENT MEMORANDUM (DATE) PERSONS WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT (SEE “INVESTOR SUITABILITY STANDARDS”). SEE “RISK FACTORS” FOR SPECIAL RISKS CONCERNING THE COMPANY.

THE SECURITIES OFFERED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY STATE. THEY ARE BEING OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTIONS FROM FEDERAL REGISTRATION REQUIREMENTS PROVIDED FOR UNDER SECTION 4(2) OF THE ACT, AND REGULATION D THEREUNDER RELATING TO CERTAIN LIMITED OR PRIVATE OFFERINGS, AND COMPARABLE STATE LAW PROVISIONS. THESE SECURITIES CANNOT BE RESOLD WITHOUT REGISTRATION UNDER THE ACT OR PURSUANT TO AN EXEMPTION THEREFROM.

THERE WILL BE NO ESCROW OF FUNDS, AND UPON SECURING SUBCRIPTIONS FOR THE MINIMUM OFFERING ALL SUBSCRIPTION MONEYS WILL BE IMMEDIATELY AVAILABLE TO THE COMPANY FOR ITS OPERATING EXPENSES. ALL SECURITIES ARE OFFERED ON A “BEST EFFORTS, ANY OR ALL” BASIS. THIS OFFERING WILL TERMINATE ON JUNE 30, 2012, BUT MAY BE EXTENDED LONGER OR TERMINATED EARLIER WITHOUT NOTICE TO INVESTORS. THE COMPANY RESERVES THE RIGHT TO UPDATE THIS MEMORANDUM AT ANY TIME. SEE “TERMS OF THE OFFERING”, “USE OF PROCEEDS” AND “PLAN OF DISTRIBUTION.”

* The General Partner anticipates selling all of the Units involved herein, and no commissions will be due on any sale thereof. The Company does not believe that there will be any situation in which the Company could legally pay incentive compensation (a true “finder’s fee”) to a financial consultant, and that there will not be any licensed Broker/Dealer that would underwrite or otherwise agree to sell the Company’s Units.
The proceeds to the Company are calculated after deducting direct offering expenses estimated at [$??]0,000 payable by the Company, including selling costs, legal and accounting expenses, printing, state filing fees, transportation, and other related expense which will be paid from operating revenues.

[NAME OF ISSUER], LP – PRIVATE PLACEMENT MEMORANDUM (DATE)

You should rely only on the information contained in this Memorandum. We have not authorized anyone to provide you with additional or different information. We are offering to sell, and seeking offers to buy, Units of our [Class _ ] Preferred Units only in jurisdictions where offers and sales are permitted. The information in this Memorandum is accurate only as of its date, regardless of its time of delivery or of any sale of Units of our Preferred Stock. Our business, financial condition, results of operations and prospects may have changed since that date.

– GENERAL INFORMATION AND SECURITIES LAW NOTICES –

INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE “RISK FACTORS” BELOW THAT MANAGEMENT BELIEVES PRESENT THE MOST SUBSTANTIAL RISKS TO AN INVESTOR IN THIS OFFERING.

IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE PRIVATE PLACEMENT, INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH, OR APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION OR BY THE SECURITIES REGULATORY AUTHORITY OF ANY STATE. NO SUCH COMMISSION OR AUTHORITY HAS PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM, NOR IS IT INTENDED THAT THEY WILL AND ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THIS PRIVATE PLACEMENT OF SECURITIES (THE “OFFERING”) IS BEING MADE IN THE UNITED STATES OF AMERICA IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION
[NAME OF ISSUER], LP – PRIVATE PLACEMENT MEMORANDUM (DATE) UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND ANALOGOUS PROVISIONS UNDER STATE SECURITIES LAWS FOR AN OFFER AND SALE OF SECURITIES THAT DOES NOT INVOLVE A PUBLIC OFFERING. THERE IS NO PUBLIC MARKET FOR THE UNITS AND NO MARKET IS LIKELY TO DEVELOP. THE COMPANY HAS NO OBLIGATION TO REGISTER THE UNITS IN ORDER TO FACILITATE TRADING. THESE SECURITIES ARE “RESTRICTED SECURITIES” UNDER AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

SALES OF THE UNITS WILL BE MADE ONLY TO INVESTORS WHO QUALIFY AS “ACCREDITED INVESTORS” UNDER RULE 501(A) UNDER REGULATION D PROMULGATED UNDER THE SECURITIES ACT, AND TO INVESTORS WHO ARE RESIDENTS OF CAILFORNIA ACCORDING TO RULE 1001 AND CAIFORNIA CODE SECTION 25102. THE COMPANY RESERVES THE RIGHT TO DETERMINE IN ITS SOLE DISCRETION WHETHER AN INVESTOR MEETS THE SOPHISTICATION REQUIREMENTS.

THE DISTRIBUTION OF THIS MEMORANDUM AND THE OFFER AND SALE OF THE UNITS MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. PERSONS INTO WHOSE POSSESSION THIS MEMORANDUM OR ANY OF THE UNITS COME MUST INFORM THEMSELVES ABOUT, AND OBSERVE, ANY SUCH RESTRICTIONS. THE COMPANY IS NOT MAKING ANY REPRESENTATION TO THE POTENTIAL INVESTOR OR PURCHASER OF THE UNITS REGARDING THE LEGALITY OF ANY INVESTMENT THEREIN BY THE POTENTIAL INVESTOR OR PURCHASER UNDER APPLICABLE LEGAL INVESTMENT OR SIMILAR LAWS.

THIS MEMORANDUM CONSTITUTES AN OFFER ONLY TO THE INVESTOR WHOSE NAME APPEARS IN THE APPROPRIATE SPACE ON THE COVER PAGE HEREOF AND TO WHOM THIS MEMORANDUM IS INITIALLY DISTRIBUTED AND DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANYONE IN ANY STATE OR IN ANY OTHER JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.

THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION AND FOR ANY REASON WHATSOEVER, TO MODIFY, AMEND AND/OR WITHDRAW ALL OR A PORTION OF THIS OFFERING AND/OR TO ACCEPT OR REJECT IN WHOLE OR IN PART ANY PROSPECTIVE INVESTMENT IN THE UNITS OR TO ALLOT TO ANY PROSPECTIVE INVESTOR LESS THAN THE AMOUNT OF UNITS SUCH INVESTOR DESIRES TO PURCHASE; THE COMPANY SHALL HAVE NO LIABILITY WHATSOEVER TO ANY INVESTOR AND/OR PURCHASER IN THE EVENT THAT ANY OF THE FOREGOING SHALL OCCUR. THE COMPANY, IN ITS SOLE DISCRETION, MAY WAIVE THE MINIMUM INVESTMENT REQUIREMENT.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION WITH RESPECT TO THE OFFER OR SALE OF THE UNITS IN THIS OFFERING, WHICH IS NOT CONTAINED IN THIS OFFERING MEMORANDUM, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. ANY PREDICTIONS, REPRESENTATIONS, AND/OR ANY INFORMATION, WRITTEN OR ORAL, WHICH DO NOT CONFORM TO THOSE CONTAINED IN THE OFFERING MEMORANDUM ARE NOT PERMITTED AND MUST NOT BE RELIED UPON BY ANY PROSPECTIVE INVESTOR.

THIS MEMORANDUM DOES NOT PURPORT TO BE ALL-INCLUSIVE OR CONTAIN ALL INFORMATION THAT A PROSPECTIVE INVESTOR MAY DESIRE IN INVESTIGATING THE COMPANY. EACH INVESTOR MUST RELY ON HIS OR HER OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THIS MEMORANDUM, INCLUDING THE MERITS AND RISKS INVOLVED IN MAKING AN INVESTMENT DECISION WITH RESPECT TO THE SECURITIES. PRIOR TO MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES, A PROSPECTIVE INVESTOR SHOULD CONSULT HIS OR HER OWN COUNSEL, ACCOUNTANTS, INVESTMENT AND TAX CONSULTANTS, AND OTHER ADVISORS, AS TO ALL MATTERS CONCERNING THIS INVESTMENT, AND TO CAREFULLY REVIEW AND CONSIDER THIS ENTIRE MEMORANDUM.

THIS MEMORANDUM HAS BEEN PREPARED FOR INFORMATIONAL PURPOSES IN ORDER TO ASSIST PROSPECTIVE INVESTORS IN UNDERSTANDING THE COMPANY AND SPEAKS AS OF THE DATE HEREOF. BY ACCEPTING DELIVERY OF ANY PRIVATE PLACEMENT MATERIAL, THE PROSPECTIVE INVESTOR AGREES: (1) TO KEEP THE CONTENTS CONFIDENTIAL AND NOT TO DISCLOSE THE SAME TO ANY THIRD PARTY OR OTHERWISE USE THE SAME FOR ANY PURPOSE OTHER THAN EVALUATION BY SUCH INVESTOR OF A POTENTIAL PRIVATE INVESTMENT IN THE COMPANY AND (2) AGREES TO RETURN THE SAME TO THE COMPANY, IF (A) THE INVESTOR DOES NOT AGREE TO PURCHASE ANY UNITS, (B) THE INVESTOR’S PURCHASE AGREEMENT IS NOT ACCEPTED BY THE COMPANY, OR (C) THE OFFERING IS TERMINATED OR WITHDRAWN BY THE COMPANY.

NASAA Information.

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING INCLUDING THE MERITS AND RISKS INVOLVED. NO FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY HAS RECOMMENDED THESE SECURITIES. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THESE SECURITIES MAY BE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE UNDER APPLICABLE UNITED STATES LAWS AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER FEDERAL AND STATE SECURITIES LAWS.

INVESTORS SHOULD BE AWARE THAT THEY MIGHT BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

Retirement Plan Information.

THE FIDUCIARY OF THE ERISA PLAN REPRESENTS THAT HE/SHE/IT HAS BEEN INFORMED OF AND UNDERSTANDS THE COMPANY’S INVESTMENT OBJECTIVES, POLICIES AND STRATEGIES, AND THAT THE DECISION TO INVEST PLAN ASSETS (AS SUCH TERM IS DEFINED IN ERISA) IN THE COMPANY IS CONSISTENT WITH THE PROVISIONS OF ERISA THAT REQUIRE DIVERSIFICATION OF PLAN ASSETS AND IMPOSE OTHER FIDUCIARY RESPONSIBILITIES. THE PURCHASER FIDUCIARY OR PLAN (A) IS RESPONSIBLE FOR THE DECISION TO INVEST IN THE COMPANY, (B) IS INDEPENDENT OF THE COMPANY MANAGER OR ANY OF ITS AFFILIATES, (C) IS QUALIFIED TO MAKE SUCH INVESTMENT DECISION, AND (D) IN MAKING SUCH DECISION, THE PURCHASER FIDUCIARY OR PLAN HAS NOT RELIED PRIMARILY ON THE ADVICE OR RECOMMENDATION OF THE COMPANY OR ANY OF ITS AFFILIATES.

State Information.

This Memorandum will not be distributed to, nor will an offer, solicitation or sale be made to, any person unless the Company has reasonable grounds to believe, and does believe, immediately prior to making the offer, solicitation or sale, that such person is either an Accredited Investor, or a Non-Accredited Investor able to understand this Memorandum and bear the entire economic risk of this investment. The [Class _ ] Preferred Units (the “Units”) offered hereby may not be resold or otherwise transferred by the purchaser in the absence of qualification under any applicable state securities laws, or an opinion of counsel, which opinion of counsel must be acceptable to the Company, to the effect that such qualification is not required.

Except as otherwise provided by certain state laws, once a subscriber has tendered his/her subscription amount, he/she will have no right to the return of such funds.

Other Information.

Offerees are entitled and encouraged to ask questions of the Company or its representatives concerning the business and financial condition of the Company and the terms and conditions of this Offering, and to request such data as may be necessary to enable them to make an informed investment decision. Therefore, the Company will make available, prior to consummation of any sale, to each prospective investor and/or such investor’s representatives and advisors, if any, the opportunity to ask questions and receive answers concerning the terms and conditions of this private placement and to obtain any additional information which the Company may possess or can obtain without unreasonable effort or expense that is necessary to verify the accuracy of the information furnished to each prospective investor. Any such questions should be directed to the Managers of the General Partner, ________________________, who can be contacted at the address on the cover page of this Memorandum.

Neither the delivery of this Memorandum nor any sale made in connection with this Memorandum shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this Memorandum. You should not assume that the information appearing in this Memorandum is accurate as of any date other than the date on the front cover of this Memorandum, regardless of the time of delivery of this Memorandum or any sale of a security. Our business, financial condition, results of operations and prospects may have changed since those dates.

SUITABILITY REQUIREMENTS

Investor Representations. The potential investor represents that, he/she or it:

1. Are acquiring the Securities for investment purposes only and not with a view to resale or distribution;
2. Are able to bear the economic risk of losing the entire amount of their investment in the Securities;
3. Have an overall commitment to investments that are not readily marketable and which are not disproportionate to their net worth, and the investment in the Securities will not cause such overall commitment to become excessive;
4. Have adequate means of providing for current needs and personal contingencies and have no need for liquidity in the investment in the Securities;
5. Have substantial experience in making investment decisions of this type or are relying on their own professional representative in making this investment decision; and
6. Their own investment goals are compatible with the objectives of an investment in the Securities.

The suitability standards referred to above and below represent minimum suitability requirements for prospective investors, and the satisfaction of such standards by a prospective investor does not necessarily mean that the Securities are a suitable investment for a prospective investor. The Company reserves the right to reject the subscription of any prospective investor the Company believes, in its sole discretion, does not meet the standards for investment in the Securities. In addition, the Company reserves the right to waive the suitability standards in certain cases. In the Subscription Agreement provided in conjunction herewith, (the “Subscription Agreement”), potential investors must represent that they satisfy the suitability standards provide for herein.

Investor Suitability Standards.

The Company makes this offer for investment in the Units (the “Offering”) only to those individuals who meet certain investor suitability standards regarding both their financial ability to absorb loss of their investment and their investment sophistication. Rule 504 of Regulation D provides that the Company may offer the securities solely for investment purposes to investors who meet certain suitability standards established either by the Company or, in certain circumstances, by the laws of the investors’ domicile. Rule 1001 allows an additional exemption in [State of Domicile] according to Section 25102 (n)(2)(E). Therefore, unless the requirements of a particular state demand a higher amount, the suitability standards established by the Company for non-[State of Domicile] residents will be those of an “Accredited Investors” according to Rule 501.

The most common ways to meet the definition of an Accredited Investor are as follows:

1. Any natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds [$??],000,000;
2. Any natural person who had an individual income in excess of $__,000 in each of the two most recent years or joint income with that person’s spouse in excess of $____,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year;
3. Any trust, with total assets in excess of $_______,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment; or
4. An entity in which all of the equity owners are Accredited Investors.

For [State of Domicile] residents the prospective investor must, during the year in which the investment is being made, have an estimated annual gross income of at least One Hundred Thousand U.S. Dollars ([$??]00,000) and a net worth, exclusive of personal residence, furnishings and automobiles, of at least ______________ U.S. Dollars ([$??]0,000) or, in the alternative, have a net worth of at least ____________________U.S. Dollars ($??],000).

The Company is offering the securities pursuant to available exemptions from registration under federal and state securities laws. The securities will be restricted securities and must be held indefinitely according to their terms. They may not be transferred unless pursuant to an effective registration statement or an available exemption from registration with an opinion from legal counsel to that effect, satisfactory to the company. The company is under no obligation, and has no intention, to register the securities and is under no obligation to attempt to secure an exemption for any subsequent sale.

FORWARD-LOOKING STATEMENTS

Some of the statements under “Executive Summary,” “Risk Factors,” “Use of Proceeds,” “Financial Information,” and elsewhere in this Private Placement Memorandum constitute forward-looking statements. These statements involve risks, uncertainties and other factors that may cause the actual results, levels of activity, performance or achievements of the Company to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, potential investors can identify forward-looking statements by terms, such as “may,” “intends,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “continue,” or the negative of these terms.

Since these Securities are not subject to the reporting requirements under the Securities Exchange Act of 1934, as amended, we currently are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended.

Although forward-looking statements in this Memorandum reflect the good faith judgment of management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Memorandum. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Memorandum, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us herein, especially in the section titled Risk Factors, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation, and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.

Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include but are not limited to:

  • Internet sales depend on a commitment to internet marketing which is expensive and sales do not always correlate to the volume of marketing performed.
  • Competitor’s response in the market.
  • Due to the absence of any operating history, the Company may have overlooked other trends and conditions that could affect its business.
  • Ability to control costs in general.
  • The ability to market unique nutritional supplements according to the Company’s business strategy.
  • General economic conditions in the United States and other parts of the world.
  • Lower levels of consumer confidence, consumer spending and purchases of discretionary items, including nutritional supplements.
  • Continued restrictions in the credit and capital markets, which would impair our ability to access additional sources of liquidity, if needed.
  • Changes in the availability and cost of raw materials which could impact prices of our products.
  • Our ability to anticipate and respond to constantly changing consumer demands.
  • Our ability to attract and retain talented, highly qualified executives and employees.
  • Our ability to adequately establish, defend and protect our proprietary rights.
  • Our ability to successfully develop or acquire new product lines or enter new markets or product categories, and risks related to such new lines, markets or categories.
  • The ability of our principal unit-holders to exercise significant influence over the Company.

The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless so required by applicable law. Because of these risks, uncertainties and assumptions, the forward-looking events discussed in this Private Placement Memorandum might not occur. To the extent that the Company uses market data and industry standards in this Private Placement Memorandum, such information shall have been obtained from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information they have provided has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed.

We caution you that actual results or business conditions may differ materially from those projected or suggested in forward-looking statements as a result of various factors including, but not limited to, those described above and in the Risk Factors section of this Memorandum. We cannot assure you that we have identified all the factors that create uncertainties. Moreover, new risks emerge from time to time and it is not possible for us to predict all risks, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. You should not place undue reliance on forward-looking statements. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events

RISK FACTORS

INVESTING IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK. THE RISK FACTORS AND ALL OTHER INFORMATION DISCLOSED IN THIS MEMORANDUM MUST BE CAREFULLY CONSIDERED BEFORE MAKING AN INVESTMENT DECISION REGARDING THE SECURITIES. ONE OR MORE OF THESE RISK FACTORS COULD CAUSE A LOSS OF PART OR ALL FUNDS INVESTED IN THE SECURITIES.

The purchase of the Units offered hereby involves a high degree of risk and is suitable only for persons with the financial capability of making and holding long-term investments not readily reducible to cash. Prospective investors must, therefore, have adequate means of providing for their current needs and personal contingencies. Only those investors who can bear the risk of loss of their entire investment should participate in this Offering. In addition to the general risks described in this Memorandum and the related Exhibits, prospective investors should consider the risks set forth below. Investors should recognize that the risk factors set forth below are those that, at the date of this Memorandum, seem to the Company the most likely to be significant. Prospective purchasers must realize, however, that factors other than those set forth below may ultimately affect the investment offered pursuant to this Memorandum in a manner and to a degree that cannot be foreseen at this time. The order in which the following risks are presented is not intended to represent the magnitude of the risks described.

Financial Risks

New entity; no prior operations; no cash flow from operations.
[Copy]

Projections may not be relied upon by Investors.
[Copy]

The Offering proceeds provide limited operating capital which could adversely affect the Company’s ability to achieve its business plan; leverage with borrowed funds.
[Copy]

Business Risks

Costs of Products and materials.
[Copy]

Competition.
[Copy]

Inability to gain market acceptance for products or establish a market presence.
[Copy]

Inability to implement business strategy; impact on earnings.
[Copy]

Limited control and dependence upon individuals as management.
[Copy]

Retaining a qualified and competent management team.
[Copy]

Defending proprietary rights.
[Copy]

Regulatory issues.
[Copy]

General economic conditions in the United States.
[Copy]

Offering Risks

Illiquidity and restrictions on Limited Partnership Units.
[Copy]

The pricing, terms and conditions of the Securities were arbitrarily determined by the Company.
[Copy]

The Company may not raise sufficient funds to close the Minimum Offering and the investor may miss other investment opportunities while his, her or its funds are held by the Company.
[Copy]

The offering without an underwriter; all Units may not be sold.
[Copy]

Dilution in the book value of investment.
[Copy]

Financial projections.
[Copy]

Management has the discretion to use the proceeds from the offering.
[Copy]

No established exit strategy.
[Copy]

THE COMPANY IS OFFERING THE SECURITIES PURSUANT TO AVAILABLE EXEMPTIONS FROM REGISTRATION UNDER FEDERAL AND STATE SECURITIES LAWS. THE SECURITIES WILL BE RESTRICTED SECURITIES AND GENERALY MUST BE HELD INDEFINATELY. THEY MAY NOT BE TRANSFERRED UNLESS PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR AN AVAILABLE EXEMPTION FROM REGISTRATION WITH AN OPINION FROM LEGAL COUNSEL TO THAT EFFECT SATISFACTORY TO THE COMPANY. THE COMPANY IS UNDER NO OBLIGATION AND HAS NO INTENTION, TO REGISTER THE SECURITIES AND IS UNDER NO OBLIGATION TO ATTEMPT TO SECURE AN EXEMPTION FOR ANY SUBSEQUENT SALE.’

Additional disclosures may have been required if this Agreement had been reviewed by federal or state securities regulators.
[Copy]

No independent review.
[Copy]

No separate legal representation.
[Copy]

ERISA
[Copy]

Investment in the Securities involves complex tax consequences; no tax opinion has been secured.
[Copy]

INVESTORS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS CONCERNING THE TAX CONSEQUENCES OR TO SECURE THEIR OWN TAX OPINIONS.

Conclusion.

GENERALLY, IN ADDITION TO THE ABOVE RISKS, BUSINESSES ARE OFTEN SUBJECT TO RISKS NOT FORESEEN OR FULLY APPRECIATED BY MANAGEMENT. IN REVIEWING THIS INVESTMENT, POTENTIAL INVESTORS SHOULD KEEP IN MIND OTHER POSSIBLE RISKS THAT COULD BE IMPORTANT.

EXECUTIVE SUMMARY

Beginning on the date hereof, [Name of Issuer], LP, a [State of Domicile] limited partnership (the “Company” or the “Partnership”), is offering to sell [Class _ ] Limited Partnership Units to investors for [$??],000 for _____ (_) ownership unit (the “[Class _ ] Units,” the “Units” or the “Securities”). Each ownership Unit represents one-half of one percent of the equity of the Company. The maximum offering is ________ Units for an aggregate offering of [$??],000,000 (the “Maximum Offering”) or twenty ([??]%0) percent of the equity of the Company. The minimum offering is [_] Units for an aggregate offering of $[??],000 (the “Minimum Offering”) or __ (_%) percent of the equity of the Company. The minimum investment amount is [$??],000, provided however the General Partner may, in its discretion, accept a subscription in a lesser amount. The investor subscribing for a [Class _ ] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) for _______________of the investment period in an amount up to but not exceeding __ (??%) percent per annum calculated on the amount of their capital account as of the date of the quarterly payment. The return shall be calculated as of the date the original investment, based on the beginning balance of the Limited Partner’s capital account and shall be adjusted in the event that the Limited Partner’s capital account is reduced as a result of a return of equity. The General Partner and the Class [ ] Limited Partners will be allocated the balance of the earnings in proportion their respective ownership interests. Additionally, in the event of a sale of all of the assets, the ______________ preferred annual return for __________________will be prorated on a calendar year basis calculated on the balance of the Limited Partner’s capital account as of the date of the closing of the sale. A [Class _ ] Limited Partnership Interest owner shall also have _____________ as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.

BUSINESS DESCRIPTION

Background and Industry.
[Copy]

The [Company] Business and Products.
[Copy]

MARKET ANALYSIS

[Copy]

MARKETING STRATEGY

[Copy]

OPERATIONS

[Copy]

MANAGEMENT SUMMARY

[Copy]

FINANCIAL INFORMATION

Note: the information provided herewith includes Management’s estimates and projections; they are not calculated according to generally accepted accounting principles.
[Copy]

DESCRIPTION OF THE OFFERING

Beginning on the date hereof, [Name of Issuer], LP, a [State of Domicile] limited partnership (the “Company” or the “Partnership”), is offering to sell [Class _ ] Limited Partnership Units to investors for [$??],000 for _____ (_) ownership unit (the “[Class _ ] Units,” the “Units” or the “Securities”). Each ownership Unit represents one-half of one percent of the equity of the Company. The maximum offering is ________ Units for an aggregate offering of [$??],000,000 (the “Maximum Offering”) or twenty ([??]%0) percent of the equity of the Company. The minimum offering is [_] Units for an aggregate offering of $[??],000 (the “Minimum Offering”) or __ (_%) percent of the equity of the Company. The minimum investment amount is [$??],000, provided however the General Partner may, in its discretion, accept a subscription in a lesser amount. The investor subscribing for a [Class _ ] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) for ______________of the investment period in an amount up to but not exceeding __ (??%) percent per annum calculated on the amount of their capital account as of the date of the quarterly payment. The return shall be calculated as of the date the original investment, based on the beginning balance of the Limited Partner’s capital account and shall be adjusted in the event that the Limited Partner’s capital account is reduced as a result of a return of equity. The General Partner and the Class [ ] Limited Partners will be allocated the balance of the earnings in proportion their respective ownership interests. Additionally, in the event of a sale of all of the assets, the ______________ preferred annual return for __________________will be prorated on a calendar year basis calculated on the balance of the Limited Partner’s capital account as of the date of the closing of the sale. A [Class _ ] Limited Partnership Interest owner shall also have _____________ as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.

All proceeds raised from the Offering will be held by the Company in a segregated bank account but not with an independent escrow agent until the “minimum offering” has been subscribe to at which time the Company may draw out the investment funds to use according to the uses described herein. Investors must complete and forward to the Company a Subscription Agreement and signature page to the Limited Partnership Agreement, as well as wire transfer the subscription price for the [Class _ ] Units to the Company in accordance with the instructions set forth in the Subscription Agreement. The Company has the right in its sole and absolute discretion to reject or accept subscriptions. Any questions regarding the Offering should be directed to ___________________.

USE OF PROCEEDS

THE AMOUNTS SET FORTH BELOW ARE ESTIMATES. THERE MAY BE DIFFERENCES BETWEEN THE ESTIMATED USES AND THE ACTUAL USES OF THE PROCEEDS. THE COMPANY DOES NOT EXPECT THE DIFFERENCES TO BE OF A MATERIAL NATURE.

The Company estimates using the proceeds from the Offering as follows:

Partnership Unit Offered Offering Price Underwriting Discount and Commissions Net Proceeds to the Company
Minimum Offering [$??],000 per Unit [Class_] Units None [Class_] Units $[??],000
Maximum Offering 40 Class B Units [$??],000 per Unit [Class_] Units None $[??],000

Use of Funds
Funding according to Business Plan (see also Schedule below) $[??],000
_______________________________________________________________________________________

Assuming that all [Class _ ] Preferred Units offered by the Company are sold, of which there is no assurance, the net proceeds to the Company will be approximately $______________, after deduction for expenses of approximately [$??]0,000 for this Offering. The Company, for this purpose, is assuming that all sales of the Units will be made by the Company’s General Partner, who will receive no commission or fee from such sales, and that no placement fees will be paid.

The investment proceeds will be used for the creation and acquisition of product inventory sold by the Company, operating expenses, and marketing costs for a period of one year from the date of closing of the offering. See Use of Funds schedule below. If the Minimum Offering is fully subscribed, management does not anticipate that additional equity or other sources of financing will be required to operate the Company. If the lesser amount of subscription is received from the offering, then the marketing strategy and execution will be impaired in proportion to the amount of money raised. Any costs or expenses in creating the Offering including legal and registration fees will be paid by the Company from operating revenues. The Company is not currently in breach or default of any note, loan, lease or other indebtedness. The Company has no judgments, liens or settlement obligations.

After reviewing the use of funds allocation a potential investor should consider whether the remaining portion of his/her/its investment is adequate to fund the future development of the business and operations of the Company. The following represents management’s current best estimate of the manner in which net proceeds from the Offering would be utilized:

Description of Use of Funds Amount Estimated Date
[Copy]

Note: The uses, amounts and dates of use above are speculative and estimates only. Management reserves the right to change any use, amount and date of use in is sole and unfettered discretion.

CAPITALIZATION

The following chart sets forth the capitalization of the Company as of ___________ and the capitalization of the Company assuming it receives the full Offering Amount.

Capitalization
Upon Funding of the Offering
Total Debt $0 $0
Equity [$?],000 [$?],000
Retained Earnings $0 $0
Total Capitalization [$?],000 [$?],000

DESCRIPTION OF THE SECURITIES

Operating Distributions.
[Copy]

[Class _ ] Preferred Distributions.
[Copy]

Dilution.

As a result of the arbitrary decision by the Company to sell the [Class _ ] Units at an effective price of _______________ in in the Company, the value of the investors’ [Class _ ] Units are in effect diluted on a price per percentage ownership, in relation to the book value of Company. The __________ Units outstanding prior to this Offering were acquired at a substantially lower price than the offering price. The book value of the Company will increase after the offering, and the value of the [Class _ ] Unit-holder percentage will be diluted while the value of the ________________. Under Generally Accepted Accounting Principles (“GAAP”), the current assets of the company, except for inventory, equipment, cash and receivables, are, not considered to be tangible assets. They are intangible assets such as intellectual property rights, good will, and the time and effort put into developing business. For accounting purposes therefore, the book value of the Company is effectively zero prior to the Offering.

Restrictions on Transfer.
[Copy]

ADDITIONAL INFORMATION

Subscription Process.

In order to subscribe to this Offering please follow the process below:

1. Carefully review and complete the Information and Document Package.
2. Sign the Receipt for this Memorandum.
3. Complete and sign the Investor Suitability Questionnaire.
4. Sign the Non-Solicitation Declaration.
5. Sign the signature page of the Subscription Agreement.
6. Sign the signature page of the Limited Partnership Agreement.
7. Wire funds or provide a check or money order for the subscription amount of your investment.

The Company reserves the right to accept or reject any subscription for Units for any reason whatsoever. If a subscription is rejected by the Company all funds tendered for the investment will be returned to the subscriber, without interest or deduction.

Documents and Questions.

Copies of all documentation which is material to the Company and this offering are available for inspection by qualified investors at the offices of the Company upon request. In addition, the Company will make available to qualified investors any other information concerning the Company that an investor requests to evaluate the investment. Representatives of the Company are available to answer any questions or inquiries from qualified investors concerning the Company and the investment.

Inquiries may be directed to:

A list of available Partnership documents include:

1. Articles of Limited Partnership.
2. Form of Limited Partnership Agreement.
3. Form of Subscription Agreement.
4. Investor Suitability Questionnaire.
5. Declaration of Non-Solicitation.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Patent

Sample Patent

From USPTO.gov: “During the November 2007 Trilateral Conference, the United States Patent and Trademark Office (USPTO), the European Patent Office (EPO), and the Japan Patent Office (JPO) agreed on a common application format. This format, which was developed in consultation with users from the three regions, will simplify and streamline application filing requirements in each Office to allow applicants to prepare a single application in the common application format for acceptance in each of the three Offices.”

Basic Principles of the Common Application Format available here

Common Application Format available here.

Visit the Trilateral site for more information.

Sample Partnership Agreement

Sample Partnership Agreement

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

Contents

Partnership Agreement

Parties, Date, and Recitals

This Partnership agreement (“Agreement”) is entered into and effective as of _ _[date]_ _, by _ _[names]_ _ (“Partners”).

The Partners desire to form a General Partnership under the laws of the State of California for the purposes and on the terms and conditions stated in this Agreement.

Basic Operative Clause

Formation. By this Agreement, the Partners form a General Partnership (“Partnership”) under the laws of the State of California, on the following terms and conditions.

Firm Name

Name. The name of the Partnership is _ _[name]_ _.

Chief Executive Office

Chief Executive Office. The Partnership’s chief executive office and place of business shall be located at _ _[street address]_ _, in _ _ _ _ _ _ County, California. The chief executive office may be changed from time to time, and other offices may be established by the Partners, in accordance with the terms and conditions of this Agreement.

Term of Patnership

Add one of the following alternatives
Alternative 1: Definite Term

Term. The Partnership shall begin on the date of this Agreement and shall continue until _ _[date]_ _, unless it is terminated earlier as provided in this Agreement. On the expiration of its term, the Partnership shall be dissolved and its affairs shall be wound up.

Alternative 2: Indefinite Term

The Partnership shall begin on the date of this Agreement and shall continue until dissolved and terminated by mutual agreement of Partners holding at least _ _[number]_ _ percent of the Partnership interests, or as otherwise provided for in this Agreement.

Alternative 3: Indefinite term subject to election to dissolve

The Partnership shall begin on the date of this Agreement and shall continue until one or more of the Partners shall, after _ _[date]_ _, give written notice to the Partnership and to the other Partners of an election to dissolve the Partnership. On the last day of the calendar month first occurring _ _[e.g., 60]_ _ days after such notice is given, the Partnership shall dissolve and its affairs shall be wound up, unless it is terminated earlier as provided in this Agreement.

Alternative 4: Year-to-Year continuation]

The Partnership shall begin on the date of this Agreement and shall continue for _ _[number]_ _ years. At the end of that period, the Partnership shall continue from year to year unless one or more of the Partners shall give the Partnership and the other Partners at least _ _[number]_ _ days written notice of an election to dissolve the Partnership as of the next anniversary of the Partnership’s date of beginning. If such notice is given, the Partnership shall dissolve on that anniversary and its affairs shall be wound up, unless it is terminated earlier as provided in this Agreement.

Purposes Clause

Add one of the following alternatives
Alternative 1: General purposes clause

Purposes. The purposes of the Partnership are to engage in the business of _ _[specify]_ _ and to do all things reasonably incidental to or in furtherance of that business.

Alternative 2: Specific purposes clause for acquisition and development of real property

Purposes. The purposes of the Partnership are to acquire that real property located in _ _[name of city]_ _, _ _[state]_ _, whose legal description is _ _[provide description]_ _; to construct, furnish and operate a multi-tenant commercial office building consisting of _ _[e.g., 10 floors]_ _ with related facilities; to borrow money and issue evidences of indebtedness in connection with that project; to secure the payment of that indebtedness; and to do all things incidental to or in furtherance of these enumerated purposes.

Powers

Partnership’s Powers. The Partnership is empowered to do any and all things necessary, appropriate, or convenient for the furtherance and accomplishment of its purposes and for the protection and benefit of the Partnership and its properties, including but not limited to the following:

(1) Entering into and performing contracts of any kind;
(2) Acquiring, constructing, operating, maintaining, owning, transferring, renting, or leasing any property, real, personal, or mixed;
(3) Borrowing money and issuing evidences of indebtedness, and securing any such indebtedness by mortgage, deed of trust, pledge, lien, or other security interest in or on any Partnership properties;
(4) Applying for and obtaining governmental authorizations and approvals;
(5) Bringing and defending actions at law or equity; and
(6) Subject to the express provisions of this Agreement, purchasing the interest of any Partner.

Statutory Filings

Filings. The Partners, or any one of them, on the Partnership’s behalf, shall sign and cause to be filed and published an appropriate fictitious business name statement under the California Fictitious Business Name Act within 40 days after the Partnership begins doing business, within 40 days after any subsequent change in its membership, and before the expiration of any previously filed statement. Each Partner appoints _ _[name]_ _ as his or her agent and attorney-in-fact to execute on his or her behalf any fictitious business name statement relating to this Partnership.

If applicable, add the following about the filing of a statement of partnership authority

Promptly after the date the Partnership begins and after the date of any subsequent change in its membership, the Partners shall sign, acknowledge, and verify a statement of Partnership authority as provided in Corporations Code §§16105 and 16303, and cause it to be recorded in each county in California in which the Partnership owns or contemplates owning real property or any interest in real property. That statement shall include a statement that any conveyance, encumbrance, or transfer of an interest in the Partnership’s real property must be signed on behalf of the Partnership by _ _[e.g., at least two of the Partners, who must include either John Doe or Jane Roe]_ _.

Capital

Contributions in Money or Property

Add one of the following alternatives’
Alternative 1: Cash; partners contribute equally

Initial Contributions. Each Partner shall initially contribute to the Partnership’s capital $_ _[amount]_ _ in cash. Each Partner’s contribution shall be paid in full within _ _[number]_ _ days after the date of this Agreement.

Alternative 2: Cash; partners contribute unequally

Initial Contributions. The Partnership’s initial capital shall consist of cash to be contributed by the Partners in the following amounts: _ _[Specify]_ _. Each Partner’s contribution shall be paid in full within _ _[number]_ _ days after the date of this Agreement.

Alternative 3: Property

Initial Contributions. The Partnership’s initial capital shall consist of the properties shown in Exhibit _ _[specify number or letter]_ _ to this Agreement, which exhibit sets forth the market values of the respective items of property and identifies the Partners who will contribute the respective items of property to the Partnership. The market values are the amounts of the initial capital contributions of the Partners contributing the respective properties. Each Partner’s contribution to the Partnership shall be conveyed within _ _[number]_ _ days after the date of this Agreement.

Alternative 4: Cash and property

Initial Contributions. The Partnership’s initial capital shall consist of cash and the properties shown in Exhibit _ _[specify number or letter]_ _ to this Agreement, which exhibit sets forth the capital contributions to be made by the respective Partners, the nature and quality of their respective contributions, and for contributions consisting of property, the market values of the respective items. Each Partner’s contribution to the Partnership shall be paid in full or conveyed within _ _[number]_ _ days after the date of this Agreement.

Contributions of Services

Contributions of Services. Partner _ _[name]_ _ has rendered services in the formation and organization of the Partnership and in making the arrangements necessary for the acquisition of its properties, the financing of those acquisitions, and the commencement of its business operations. _ _[He/She]_ _ shall contribute those services to the Partnership in consideration for the interest _ _[he/she]_ _ is to have in the Partnership as described in this Agreement.

Contributed Property; Special Tax Allocations Because of Carryover Basis

Special Tax Allocations. For certain items of property to be contributed to the Partnership’s capital, Exhibit _ _[specify number or letter]_ _ to this Agreement shows the basis of those items for federal income tax purposes in the hands of the respective Partners who are to contribute them and the amounts that the Partners agree are the market values of the respective items. Notwithstanding any other provisions of this Agreement, income, gain, loss, and deductions with respect to the contributed property shall be allocated among the Partners to reflect the difference between the basis of the property contributed for tax purposes and its fair market value, in accordance with Internal Revenue Code §704(c) and the regulations under it.

Failure to Make Initial Contribution

Add one of the following alternatives
Alternative 1: Partnership dissolves

Failure to Contribute. If any Partner fails to pay or convey his or her initial contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement, the Partnership shall immediately dissolve and each Partner who has paid or conveyed all or any portion of his or her initial contribution to the Partnership’s capital shall be entitled to a return of the funds and properties that he or she contributed. If the Partners shall have entered into a written agreement requiring an alternative procedure for continuing the Partnership, however, that alternative procedure shall be followed.

Alternative 2: Partnership continues without additional contributions

Failure to Contribute. If any Partner fails to pay or convey his or her initial contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement _ _[and the amounts in default are _ _[number]_ _ percent or less of all initial capital contributions required by this Agreement]_ _, the Partnership shall not dissolve or terminate, but it shall continue as a Partnership of only the Partners who have made their initial capital contributions as required. The share in the Partnership’s profits and losses allocated under this Agreement to any Partner who has failed to make his or her initial contribution shall be reallocated to the remaining Partners in proportion to their respective shares of Partnership profits and losses as specified in this Agreement.

If the failure to pay initial capital contributions required under this Agreement relates to more than the above-specified percentage of all required initial capital contributions, the Partnership shall immediately dissolve. Each Partner who has paid all or any portion of his or her initial or any additional capital contribution shall then be entitled to a return of the funds and properties he or she contributed.

Alternative 3: Additional contributions required for continuation

Failure to Contribute; Additional Contributions. If any Partner fails to pay his or her initial contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement _ _[and the amounts in default are _ _[number]_ _ percent or less of all initial capital contributions required under this Agreement]_ _, the Partnership shall not dissolve or terminate, but it shall continue as a Partnership of only the Partners who have made their initial capital contributions, but only if those Partners pay the initial capital contribution that was to have been made by each noncontributing Partner, as follows:

(1) The Partnership shall promptly give written notice of the failure to all Partners who have not failed to make their initial capital contributions, specifying the amount not paid.
(2) Within _ _[number]_ _ days after the notice is given, the remaining Partners shall pay the amount of the defaulted contribution in proportion to the respective amounts that they are required to contribute to the Partnership’s capital under this Agreement.
(3) Each noncontributing Partner’s share in the Partnership’s profits and losses shall be reallocated to the remaining Partners in proportion to their respective shares of Partnership profits and losses under this Agreement.

If the failure to pay initial capital contributions required under this Agreement relates to more than the above-specified percentage of all required initial capital contributions, the Partnership shall immediately dissolve. Each Partner who has paid all or any portion of his or her initial or any additional capital contribution shall then be entitled to a return of the funds and properties he or she contributed.

Alternative 4: Partners or outsiders may purchase defaulted share

Failure to Contribute; Purchase of Defaulted Shares. If any Partner fails to pay any contribution to the Partnership’s capital at the time and in the form and amount required by this Agreement _ _[and the amounts in default are _ _[number]_ _ percent or less of all initial capital contributions required under this Agreement]_ _, the Partnership shall not dissolve or terminate, but it shall continue as a Partnership of only the Partners who have made their capital contributions and any purchaser of the interest of any Partner who shall have failed to do so, but only if the defaulting Partner’s interest in the Partnership is acquired as follows:

(1) The Partnership shall promptly give written notice of the failure to make payment, specifying the amount not paid, to all Partners who have not failed to make their required capital contributions. Any or all of the remaining Partners shall be entitled to elect to acquire the Partnership interest of the Partner who has failed to make the required contribution by giving written notice of election to the Partnership within _ _[number]_ _ days after the Partnership gives notice of the default.
(2) Within _ _[number]_ _ days after the Partnership gives notice of default, the electing Partners shall pay to the Partnership the amount of the defaulted contribution and shall pay to the defaulting Partner any credit balance then in his or her capital account.
(3) If only one Partner elects to acquire the interest, that Partner shall make the entire payment and acquire the entire interest. If more than one Partner elects to acquire the interest, each shall share in the payments and in the interest acquired in the same proportion that the amount required to be paid to the Partnership’s capital by that Partner under this Agreement bears to the aggregate amounts required to be paid to the Partnership’s capital by all participating Partners under this Agreement.
(4) If no Partner elects to acquire the interest of a defaulting Partner, that interest may be offered to other parties, subject to the approval of a majority in capital interest of the Partners who have not defaulted, at a price equal to the sum of (a) the unpaid contribution of the defaulting Partner, which shall be payable to the Partnership, plus (b) any credit balance then in the defaulting Partner’s capital account, which shall be payable to the defaulting Partner.
(5) On a purchase of a defaulting Partner’s interest, the purchaser’s capital account shall be credited with the amount of the defaulting Partner’s unpaid contribution paid to the Partnership by that purchaser plus any credit balance in the defaulting Partner’s capital account that has not been paid to the defaulting Partner.

Deferred Contributions

Deferred Contributions. _ _[Name]_ _ shall be a Partner, but shall not make any contribution in cash or property to the Partnership’s initial capital, and no amount shall be credited initially to _ _[his/her]_ _ capital account. _ _[He/She]_ _ shall subsequently contribute to the Partnership capital, and _ _[his/her]_ _ capital account shall be credited, as follows:

Add one of the following alternatives
Alternative 1: Monthly installments

_ _[Name]_ _ shall contribute $_ _[amount]_ _ to the Partnership capital on or before the first day of each month, beginning on _ _[date]_ _ and continuing until _ _[he/she]_ _ shall have contributed the aggregate sum of $_ _[amount]_ _.

Alternative 2: Contributions from profits

_ _[Name]_ _ shall contribute to the Partnership the lesser of $_ _[amount]_ _ or _ _[number]_ _ percent of _ _[his/her]_ _ distributive share of the Partnership’s profits for each fiscal year, beginning with the year ending _ _[date]_ _ and continuing until _ _[he/she]_ _ shall have contributed the aggregate sum of $_ _[amount]_ _. These contributions shall be made on or before the date on which the respective year’s distributive shares of profits are distributed in full and may be made by not withdrawing the specified portion or amount of Partnership profits.

Additional Capital

Additional Capital. Each Partner shall annually contribute to the Partnership’s capital, for a period of _ _[number]_ _ years, the lesser of $_ _[amount]_ _ or _ _[number]_ _ percent of that Partner’s share of each year’s profits by not withdrawing the specified portion or amount of Partnership profits.

Whenever it is determined by the written agreement of Partners holding _ _[e.g., a majority]_ _ in capital interest of the Partnership that its capital is or is presently likely to become insufficient for the conduct of its business, those Partners may, by written notice to all Partners, call for additional contributions to capital. These contributions shall be payable in cash no later than the date specified in the notice and no sooner than _ _[number]_ _ days after the notice is given. Each Partner shall be liable to the Partnership for that Partner’s share of the aggregate contributions duly called for under this section. Each Partner’s share shall be in proportion to his or her share of the Partnership’s profits, but no Partner shall be required to contribute more than $_ _[amount]_ _.

No Partner may make any voluntary contribution of capital to the Partnership without the consent of all the Partners.

Withdrawals of Capital

No Withdrawal of Capital. No Partner may withdraw capital from the Partnership without the consent of all the Partners.

No Interest on Capital Contributions

No Interest on Contributions. No Partner shall be entitled to receive any interest on his or her capital contribution, except that, if a Partner is entitled to repayment of his or her contribution, the Partner shall be entitled to interest on the contribution not repaid at the rate of _ _[number]_ _ percent per annum from the date when repayment should have been made.

Loans to Partnership

Loans to Partnership. No Partner shall lend or advance money to or for the Partnership’s benefit without the approval of _ _[all/a majority in capital interest of the]_ _ Partners. If any Partner, with the requisite consent of the other Partners, lends any money to the Partnership in addition to his or her contribution to its capital, the loan shall be a debt of the Partnership to that Partner and shall bear interest at the rate of _ _[number]_ _ percent per annum. This liability shall not be regarded as an increase in the lending Partner’s capital and shall not entitle the lending Partner to any increased share of the Partnership’s profits.

Any loan by a Partner to the Partnership shall be evidenced by a promissory note delivered to the lending Partner and executed in the name of the Partnership by the managing Partner.

Division of Profits and Losses

Alternative 1: Division based on initial capital contribution of profit and losses

Division of Profits and Losses. The Partnership’s profits and losses shall be allocated among the Partners in the same proportions that their initial capital accounts bear to each other. No additional share of profits or losses shall inure to any Partner because of fluctuations in the Partners’ capital accounts.

Alternative 2: Division based on average capital account balance

Division of Profits and Losses. The Partnership’s profits and losses shall be allocated among the Partners in the same proportions that their average capital account balances during the fiscal year bear to each other. No Partner shall make contributions or withdrawals from his or her capital account without unanimous written approval of all Partners.

Distribution of Profits

Add one of the following alternatives
Alternative 1: Distributions in proportion to initial capital contributions

Distribution of Profits. The Partnership may distribute to the Partners any cash in excess of amounts reasonably necessary to the conduct of the business of the Partnership. Except as provided in section _ _[specify number or letter]_ _, distributions shall be made to the Partners in proportion to their initial capital contributions.

Alternative 2: Distributions based on profit

Distribution of Profits. Within _ _[number]_ _ days after the end of each fiscal year of the Partnership, the Partnership shall distribute in cash to the Partners, in proportion to their respective shares in the Partnership’s profits, an amount equal to the Partnership’s profit for that fiscal year as computed under this Agreement.

Alternative 3: Distributions based on cash flow

Distribution of Profits. Within _ _[number]_ _ days after the end of each fiscal year of the Partnership, the Partnership shall distribute in cash to the Partners, in proportion to their respective shares in the Partnership’s profits, an amount equal to:

(1) The Partnership’s profit for that fiscal year as computed under this Agreement,
(2) Increased by the amounts deducted for that fiscal year as depreciation or cost recovery, depletion, or amortization on the Partnership’s federal income tax return,
(3) Increased by the amount of any payments received, and reduced by the amount of any payments made, by the Partnership during that fiscal year on account of the principal of all debt obligations, other than obligations for which provision was made in computing profit,
(4) Reduced by a reserve reasonably retained for the operating and capital requirements of the Partnership’s business.

Distributions of Proceeds From Sale of Capital Assets

Distributions From Sale of Capital Assets. If _ _[description or other identification of asset]_ _ is sold, simultaneously with the distribution of the Partnership’s profits for each fiscal year during which the Partnership is paid all or any part of the proceeds of that sale, the Partnership shall also distribute in cash to the Partners an amount equal to the cash proceeds realized by the Partnership during that year on the sale, including payments on account of the principal of any purchase money obligation received by the Partnership in the sale but excluding interest on that obligation. Such proceeds shall be allocated for distribution to the Partners in a manner that will result in the distribution to the Partners of the Partnership’s gain or loss from the sale being proportionate to their respective shares in the gain or loss from the sale reportable by them for federal income tax purposes, except as otherwise expressly provided in this Agreement. Each Partner’s share of the distributions of proceeds from any sale of capital assets shall be charged to his or her capital account.

Limit on Distributions

Add one of the following alternatives
Alternative 1: General limitation

Limit on Distributions. Notwithstanding anything in this Agreement to the contrary, the aggregate amounts distributed to the Partners from the Partnership’s profits shall not exceed the amount of cash available for distribution, taking into account the Partnership’s reasonable working capital needs as determined by a majority in capital interest of the Partners.

Alternative 2: Specific limitation

Limit on Distributions. Notwithstanding anything in this Agreement to the contrary, the aggregate amounts distributed to the Partners from the Partnership’s profits during any fiscal year of the Partnership shall not exceed $_ _[amount/_ _[number]_ _ percent of the aggregate positive balances of all capital accounts]_ _ as of the close of the Partnership’s immediately preceding fiscal year.

Accounting

Fiscal Year of Partnership

Add one of the following alternatives
Alternative 1: Fiscal year is calendar year

Fiscal Year. The fiscal year of the Partnership shall be the calendar year.

Alternative 2: Fiscal year is noncalendar year

Fiscal Year. The fiscal year of the Partnership shall end on _ _[month and day]_ _ of each year.

Accounting Method

Accounting Method. The Partnership books shall be kept on the _ _[e.g., accrual/cash]_ _ basis.

Capital Accounts – Initial Contributions

Maintenance of Capital Accounts. An individual capital account shall be maintained for each Partner and the Partner’s initial capital contribution in cash or property shall be credited to that account. Capital accounts shall be maintained in accordance with Treas Reg §1.704-1(b)(2)(iv). No additional share of profits or losses shall inure to any Partner because of changes or fluctuations in the Partner’s capital account.

Adjustment of Capital Accounts

Adjustment of Capital Accounts. The capital account for each Partner shall be credited with or increased by the following:

(1) Any additional capital contributions made by the Partner from time to time as authorized by this Agreement;
(2) The Partner’s share under this Agreement of the Partnership’s profits; and
(3) On the Partnership’s dissolution and in its winding up, the credits authorized by the provisions of this Agreement that relate to adjustments of capital accounts in connection with liquidation.

The capital account for each Partner shall be debited with or reduced by the following:

(1) Distributions to the Partner of cash or property, which property shall be valued for this purpose at its fair market value;
(2) The Partner’s share under this Agreement of the Partnership’s losses and of any items then required under applicable tax laws, rules, and regulations to be debited to capital accounts of Partners, to the extent and in the manner so required; and
(3) On the Partnership’s dissolution and in its winding up, the debits authorized by the provisions of this Agreement that relate to adjustments of capital accounts in connection with liquidation.

In connection with the actual liquidation of the Partnership’s properties on its dissolution and winding up, the capital account for each Partner shall be adjusted to reflect the following:

(1) The results of operations for the fiscal period then ended;
(2) The results of transactions in connection with the liquidation;
(3) Unrealized gain or loss on Partnership property that is to be or has been transferred to creditors on account of their claims or distributed to Partners on account of their interests in the Partnership. The amount of such unrealized gain or loss shall be computed by comparing the fair market value of any such property to its adjusted basis for federal income tax purposes. The unrealized gain or loss shall be allocated to the Partners’ capital accounts in the same manner as the gain or loss from the actual sale of such property would have been allocated; and
(4) The distribution of cash or property to Partners made on the liquidation.

If there is a deficit in any Partner’s capital account after the capital accounts have been adjusted in connection with the liquidation of the Partnership properties, that Partner (and not any predecessor) shall contribute the amount of such deficit to the Partnership before the end of the taxable year of the liquidation or by such earlier date as may be required to complete the liquidation in accordance with a duly adopted plan of liquidation. Amounts thus contributed shall be distributed to or among the creditors and Partners in accordance with the then-applicable provisions for distribution of Partnership property on dissolution, winding up, and liquidation.

Determination of Profit and Loss

Determination of Profit and Loss. The Partnership’s net profit or net loss for each fiscal year shall be determined as soon as practicable after the close of that fiscal year in accordance with the accounting principles employed in the preparation of the federal income tax return filed by the Partnership for that year, but without any special provisions for tax-exempt or partially tax-exempt income. If the Partnership assets include assets subject to Internal Revenue Code §704(c), the adjustments required under Internal Revenue Code §704(c) in the determination of any item of income, gain, loss, deduction, or credit shall not be taken into account in determining the same for book purposes.

Profit and Loss Defined. “Profit” and “loss” for all purposes of this Agreement shall be determined in accordance with the accounting method followed by the Partnership for federal income tax purposes and otherwise in accordance with generally accepted accounting principles and procedures applied in a consistent manner. The calculation of profit and loss shall take into account Partnership income exempt from federal income tax and Partnership expenses and costs not deductible or properly chargeable to capital for federal income tax purposes. Every item of income, gain, loss, deduction, credit, or tax preference entering into the computation of profit or loss shall be considered as allocated to each Partner in the same proportion as profit is allocated to that Partner for any year in which the Partnership operates at a profit, and in the same proportion as loss is allocated to that Partner for any year in which the Partnership operates at a loss. Any increase or reduction in the amount of any item of income, gain, loss, or deduction attributable to an adjustment to the basis of Partnership property made under a valid election under Internal Revenue Code §754 and under the corresponding provisions of applicable state and local income tax laws shall be charged or credited, as the case may be, and any increase or reduction in the amount of any item of credit or tax preference attributable to any such adjustment shall be allocated to the capital accounts of those Partners entitled to them under such code or laws.

Records and Reports

Partnership Books

Partnership Books. The Partnership shall keep proper and complete books of account of its business at its chief executive office. The Partnership shall provide its Partners and their agents and attorneys access to the books and records, and provide to former Partners and their agents and attorneys access to books and records pertaining to the period during which they were Partners. This right of access includes the opportunity to inspect and copy books and records during ordinary business hours. The Partnership may impose reasonable charges covering the cost of labor and material for copies of documents furnished. The accounting records shall be maintained in accordance with generally accepted bookkeeping practices for this type of business.

Annual Report to Partners

Annual Report to Partners. Within _ _[number]_ _ days after the end of each fiscal year, the Partnership shall furnish to each Partner an annual report consisting of at least:

(1) A copy of the Partnership’s federal and state income tax returns for that fiscal year;
(2) A supporting statement of income or loss;
(3) A balance sheet showing the Partnership’s financial position as of the end of that fiscal year; and
(4) Any additional information that the Partners may require for the preparation of their individual federal and state income tax returns.

Management

Control of Business

Add one of the following alternatives
Alternative 1: Vote based on partners’ interest

Control of Business. Each Partner shall participate in the control, management, and direction of the Partnership’s business. In exercising this control, management, and direction, each Partner’s vote shall be in proportion to the Partner’s interest in the Partnership’s profits and losses.

Alternative 2: All partners have equal votes

Control of Business. Each Partner shall participate in the control, management, and direction of the Partnership’s business. In exercising this control, management, and direction, each Partner shall have the same vote as each other Partner.

Alternative 3: Control by managing partner

Control of Business. The managing partner shall be _ _[name]_ _. _ _[He/She]_ _ shall have control over the business of the Partnership and assume direction of its business operation until replaced by a vote of _ _[number]_ _ percent of the Partnership interests. The managing partner shall consult and confer as far as practicable with the nonmanaging Partners, but the power of decision shall be vested in the managing partner. The managing partner’s duties shall include control over the Partnership’s books and records and hiring any independent certified public accountants _ _[he/she]_ _ considers necessary for this purpose and for the preparation of such reports as may be necessary or required to advise the other Partners of the Partnership’s operations. Except as otherwise expressly provided in this Agreement, all things to be done by the Partnership shall be done under the managing partner’s control and supervision. The managing partner shall devote such time to the business of the Partnership as it _ _[he/she]_ _ determines is necessary in _ _[his/her]_ _ sole discretion. The managing partner shall be entitled to retain such consultants and agents as are reasonably necessary to provide services for operation of the Partnership, provided they remain under the ultimate control of the managing partner, and provided further that the managing partner does not delegate to such consultants or agents responsibilities charged to the managing partner. The managing partner shall be entitled to reimbursement monthly, on the submission of an itemized account, of any sums _ _[he/she]_ _ shall have expended for the benefit of the Partnership’s business. On the managing partner’s death, removal, resignation, or other disability, a successor managing partner shall be selected by a majority in capital interest of the Partners.

Acts Requiring Majority Consent

Acts Requiring Majority Consent. The following acts may be done only with the consent of a majority in _ _[number/capital interest/profit interest]_ _ of the Partners:

(1) Borrowing money in the Partnership’s name, other than in the ordinary course of the Partnership’s business or to finance any part of the purchase price of the Partnership’s properties;
(2) Transferring, hypothecating, compromising, or releasing any Partnership claim except on payment in full;
(3) Selling, leasing, or hypothecating any Partnership property or entering into any contract for any such purpose, other than in the ordinary course of the Partnership’s business and other than any hypothecation of Partnership property to secure a debt resulting from any transaction permitted under (1); or
(4) Knowingly suffering or causing anything to be done whereby Partnership property may be seized or attached or taken in execution, or its ownership or possession otherwise endangered.

Handling Funds

Add one of the following alternatives
Alternative 1: Funds handled by all partners

Handling Funds. All Partnership funds shall be deposited in the Partnership’s name and shall be subject to withdrawal only on the signatures of at least _ _[number]_ _ Partners.

Alternative 2: Managing partner handles funds

Handling Funds. All Partnership funds shall be deposited in the Partnership’s name and shall be subject to withdrawal only on the signature of the managing partner.

Remuneration to Partner

Add one of the following alternatives
Alternative 1: Partners entitled to remuneration

Partners’ Remuneration. Each Partner shall be entitled to

(1) Monthly remuneration as follows: _ _[list names and amounts]_ _; or
(2) Other amounts as may from time to time be determined by the written consent or agreement of all the Partners.

Remuneration shall be treated as a Partnership expense in determining the Partnership’s profits or losses.

Alternative 2: No remuneration

Partners not Entitled to Remuneration. No Partner shall be entitled to remuneration for acting in the Partnership business.

Alternative 3: Remuneration to managing partner

Remuneration of Managing Partner. The managing Partner shall be entitled to monthly remuneration of $_ _[amount]_ _ or such other amount as may from time to time be determined by the unanimous written consent or agreement of the Partners. That remuneration shall be treated as a Partnership expense in determining the Partnership’s profits or losses.

Effect of Assignment of Interest

Assignment of Interest. Any assignment or hypothecation of a Partner’s interest in the Partnership shall terminate that Partner’s right to receive remuneration from the Partnership.

Partner’s Fiduciary Duty

Duty of Loyalty

Duty of Loyalty. Each Partner owes a duty of loyalty to the Partnership and the other Partners, which includes the following:

(1) To account to the Partnership and hold as trustee for it any property, profit, or benefit derived by the Partner in the conduct and winding up of the Partnership business or derived from a use by the Partner of Partnership property or information, including the appropriation of a Partnership opportunity.
(2) To refrain from competing with the Partnership in the conduct or winding up of the Partnership business as or on behalf of a party having an interest adverse to the Partnership.
(3) To refrain from competing with the Partnership in the conduct of the Partnership business before the dissolution of the Partnership.
Add one of the following alternatives
Alternative 1: Noncompeting outside activities permitted

Any Partner may engage in one or more businesses, other than the business of the Partnership, but only to the extent that this activity does not compete or materially interfere with the Partnership’s business and does not conflict with that Partner’s obligations under this Agreement. Neither the Partnership nor any other Partner shall have any right to any income or profit derived by a Partner from any business activity permitted under this section.

Alternative 2: Outside activities restricted

While _ _[name]_ _ is required to participate in the control, management, and direction of the Partnership business, _ _[he/ she]_ _ shall devote _ _[his/her]_ _ full time and attention to the conduct of that business and shall not be actively engaged in the conduct of any other business for compensation or a share in profits as an employee, officer, agent, proprietor, partner, or stockholder. This prohibition shall not prevent _ _[him/her]_ _ from being a passive investor in any enterprise, however, if _ _[he/she]_ _ is not actively engaged in its business and does not exercise control over it. Neither the Partnership nor any other Partner shall have any right to any income or profit derived from any such passive investment.

Alternative 3: Specific enumeration of permitted outside activities

A Partner shall be permitted to engage in the following conduct without being in violation of this Agreement: _ _[Specify type of conduct to be permitted]_ _.

Any act of a Partner that otherwise would violate the fiduciary duties owed by a Partner to the Partnership may be approved by the written consent of _ _[e.g., 51 percent]_ _ of the remaining Partners who do not participate in such act on full disclosure of all material facts by the Partner whose conduct otherwise is deemed to breach such fiduciary duties.

Duty of Care

Duty of Care. During the conduct of any Partnership business or when the Partnership is being wound up, no Partner shall be liable to the Partnership or any other Partner for losses sustained or liabilities incurred, unless it is determined that such conduct is grossly negligent or reckless, or intentional misconduct, or a knowing violation of law.

Duty of Good Faith and Fair Dealing

Duty of Good Faith and Fair Dealing. Each Partner shall discharge its duties to the Partnership and the other Partners and exercise any rights consistently with the obligation of good faith and fair dealing.

Furtherance of Partner’s Own Interests

Furtherance of Partner’s Interests. A Partner does not violate a duty or obligation under this Agreement or controlling law merely because the Partner’s conduct furthers the Partner’s own interest.

Changes in Membership and Partner Dissociation

New Partners

Admission of New Partners. A new Partner may be admitted to the Partnership _ _[as of the beginning of any fiscal year of the Partnership]_ _, but only with the written approval of _ _[all/a majority in capital interest of the]_ _ Partners. Each new Partner shall be admitted only if the new Partner shall have executed this Agreement or an appropriate supplement to it in which the new Partner agrees to be bound by the terms and provisions of this Agreement as they may be modified by that supplement. Admission of a new Partner shall not cause dissolution of the Partnership. Any new Partner so admitted to the Partnership shall contribute capital to the Partnership as agreed by all Partners.

Spousal Consent. Within 20 days after any individual becomes a Partner, or a Partner marries, the Partner shall have the Partner’s spouse execute a consent substantially in the form attached as Exhibit _ _[specify number or letter]_ _, unless the Partner’s spouse is already a Partner.

Partner’s Dissociation

Dissociation. A Partner is dissociated from the Partnership on the occurrence of any of the following events:

(1) Delivery of written notice by the Partner setting forth the Partner’s intention to withdraw as a Partner on the date set forth in the notice but in no event earlier than _ _[e.g., 30 days]_ _ after receipt by the Partnership.
(2) As otherwise provided in this Agreement.
(3) The Partner’s expulsion as provided in this Agreement.
(4) The Partner (a) becomes a debtor in bankruptcy; (b) executes an assignment for the benefit of creditors; (c) seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidation of that Partner or of all or substantially all of that Partner’s property; or (d) fails to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the Partner or of all or substantially all of the Partner’s property obtained without the Partner’s consent or acquiescence, within 90 days after the appointment or within 90 days after the expiration of a stay.
(5) For any individual Partner, on: (a) the Partner’s death; (b) the appointment of a guardian or general conservator for the Partner; or (c) a judicial determination that the Partner has otherwise become incapable of performing the Partner’s duties under the Partnership agreement.

Partner’s Expulsion by Partner Vote

Add one of the following alternatives
Alternative 1: Expulsion by partner votes in accordance with RUPA

Expulsion under RUPA. A Partner may be expelled from the Partnership by the vote of the other Partners holding at least _ _[number]_ _ percent in capital interest of the Partnership (excluding the interest of the Partner to be expelled) if, by that vote, it is determined in the sole discretion of those Partners that:

(1) It is unlawful to carry on the Partnership business with that Partner;
(2) There has been a transfer of all or substantially all of that Partner’s transferable interest in the Partnership, except a transfer for security purposes or issuance of a court’s charging order, neither of which have been foreclosed on;
(3) Within 90 days after the Partnership notifies a corporate Partner that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, there is no revocation of such certificate of dissolution or no reinstatement of its charter or its right to conduct business; or
(4) A partnership, limited partnership, or limited liability company Partner has been dissolved and its business is being wound up.
Alternative 2: Expulsion by partnership agreement

Expulsion under Partnership Agreement. A Partner may be expelled from the Partnership by the vote of the other Partners holding at least _ _[number]_ _ percent in capital interest of the Partnership (excluding the interest of the Partner to be expelled) if, by that vote, it is determined in the sole discretion of those Partners that the Partner to be expelled has materially breached or is unable to perform that Partner’s material obligations under this Agreement or that the continued association of that Partner with the Partnership is detrimental to the best interests of the Partnership’s business.

Expulsion shall become effective when written notice of expulsion is served on the expelled Partner. When the expulsion becomes effective, the expelled Partner’s rights, powers, and authority as a Partner of the Partnership, including its rights to participate in the Partnership’s profits and to draw any salary, shall terminate.

Expulsion by Judicial Determination

Expulsion by Judicial Determination. On application by the Partnership or another Partner, a Partner may be expelled from the Partnership by judicial determination because of any of the following:

(1) The Partner engaged in wrongful conduct that adversely and materially affected the Partnership business.
(2) The Partner willfully or persistently committed a material breach of the Partnership agreement or of a duty owed to the Partnership or the other Partners.
(3) The Partner engaged in conduct relating to the Partnership business that makes it not reasonably practicable to carry on the business in Partnership with the Partner.

Retirement from Partnership Management

Retirement From Partnership Management. At the end of the Partnership’s fiscal year, any Partner who has reached his or her _ _[e.g., 70th]_ _ birthday during that fiscal year shall retire from active participation in the control, management, and direction of the Partnership’s business. Subject to the provisions of this Agreement regarding dissociation and dissolution, such a retirement shall not affect the retiring Partner’s interest in the Partnership, its properties, or its profits and losses.

Retirement From Partnership

Add one of the following alternatives
Alternative 1: Voluntary retirement from partnership

Retirement From Partnership. After his or her _ _[e.g., 70th]_ _ birthday, any Partner may voluntarily retire from the Partnership after giving at least _ _[number]_ _ days’ prior notice to the Partnership. On such retirement, the Partner shall be deemed dissociated from the Partnership.

Alternative 2: Mandatory retirement from partnership

Retirement From Partnership. After his or her _ _[e.g., 70th]_ _ birthday, any Partner may be compelled to retire from the Partnership by a vote of a majority in _ _[number/capital interest]_ _ of the other Partners. On such retirement, the Partner shall be deemed dissociated from the Partnership.

Noncompetition Covenant

Add one of the following alternatives
Alternative 1: Noncompetition covenenat with a time limit

Noncompetition Covenant. Following dissociation of a Partner or the dissolution of the Partnership, the dissociated Partner or the Partner causing the dissolution shall not carry on a business similar to the business of the Partnership within the _ _[cities/counties]_ _ of _ _[names]_ _ for a period of _ _[number]_ _ years as long as any other member of the Partnership, or any person deriving title to the business or its goodwill from any other member of the Partnership, carries on a like business there.

Alternative 2: Noncompetition covenant without time limit

Noncompetition Covenant. Following dissociation of a Partner or the dissolution of the Partnership, the dissociated Partner or the Partner causing the dissolution shall not carry on a business similar to the business of the Partnership within the _ _[cities/counties]_ _ of _ _[names]_ _ as long as any other member of the Partnership, or any person deriving title to the business or its goodwill from any other member of the Partnership, carries on a like business there.

Payment When Business Not Wound Up

Purchase of Dissociated Partner’s Interest. Except as otherwise provided in this Agreement, if a Partner is dissociated from the Partnership and the remaining Partners do not elect to dissolve the Partnership, the Partnership shall cause the dissociated Partner’s interest in the Partnership to be purchased on the following terms:

(1) The buyout price of a dissociated Partner’s interest is the amount that would have been paid on settlement of a Partner’s account under California Corporations Code §16807(b) had the business of the Partnership been wound up if, on the date of dissociation, the assets of the Partnership were sold at a price equal to the greater of the liquidation value or the value based on a sale of the entire business as a going concern without the dissociated Partner and the Partnership was wound up as of that date. Interest shall be paid from the date the amount owed becomes due to the date of payment.
(2) Damages for wrongful dissociation under Corporations Code §16602(b) and all other amounts owing from the dissociated Partner to the Partnership, whether or not presently due, shall be offset against the buyout price. Interest shall be paid from the date the amount owed becomes due to the date of payment.
(3) The Partnership shall indemnify, defend, and hold the dissociated Partner harmless from any Partnership liabilities, whether incurred before or after the event of dissociation, except liabilities incurred by an act of the dissociated Partner after dissociation (a) when the other party reasonably believed that the dissociated Partner was then a Partner, (b) the other party did not have notice of the Partner’s dissociation, or (c) the other party is not deemed to have knowledge of the Partner’s dissociation due to filing of a statement of Partnership authority or statement of dissociation.
(4) (a) If no agreement is reached for the purchase of the dissociated Partner’s interest within 120 days after the dissociated partner’s written demand for payment, the Partnership shall pay, or cause to be paid, in cash to the dissociated Partner the amount the Partnership estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest under this section.
(b) Payment shall be accompanied by all of the following:
(i) A statement of Partnership assets and liabilities as of the date of dissociation.
(ii) The latest available Partnership balance sheet and income statement, if any.
(iii) An explanation of how the estimated amount of the payment was calculated.
(iv) A written notice that the payment is in full satisfaction of the obligation to purchase unless, within 120 days after the written notice, the dissociated partner commences an action to determine the buyout price or to determine any offset, or to decide other terms of the obligations to purchase.
(5) Should any dissociation occur within 90 days before the dissolution of a Partnership, then:
(a) All Partners who dissociate within 90 days before the dissolution shall be treated as Partners for purposes of ending up the Partnership’s business on a dissolution of the Partnership; and
(b) Any damage for wrongful dissociation and all other amounts owed by the dissociated Partner to the Partnership, whether or not presently due, shall be taken into account in determining the amount distributable to the dissociated Partner on such dissolution and winding up.

Payment of Purchase Price by Mutual Agreement When Business Not Wound Up

Purchase of Dissociated Partner’s Interest. Except as otherwise provided in this Agreement, if a Partner is dissociated from a Partnership and the remaining Partners do not elect to dissolve the Partnership, the Partnership shall cause the dissociated Partner’s interest in the Partnership to be purchased for the purchase price determined in accordance this Agreement.

Transfer of Partnership Interests

Definition of Transferable Interest

Transferable Interest Defined. The only transferable interest of a Partner in the Partnership is the Partner’s share of the profits and losses of the Partnership and the Partner’s right to receive distributions.

Transferability of Interest

Add one of the following alternatives’
Alternative 1: Transferability of interest without substitution

Transferability Without Substitution. (1) A transfer in whole or in part of a Partner’s transferable interest in the Partnership shall be permissible but such a transfer does not:

(a) Cause the Partner’s dissociation or dissolution and winding up of the Partnership business;
(b) As against the remaining Partners, entitle the transferee, during the continuance of the Partnership, to participate in the management or conduct of the Partnership business, to require access to information concerning the Partnership transactions, or to inspect or copy Partnership books or records.
(2) Any such transferee has a right only to the following:
(a) To receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled;
(b) To receive on the dissolution and winding up of the Partnership business, in accordance with the transfer, the net amount otherwise distributable to the transferor;
(c) To seek a judicial determination that it is equitable to wind up the Partnership business.
(3) In a dissolution and winding up, a transferee is entitled to an account of Partnership transactions only from the date of the latest account agreed to by all of the Partners.
(4) On transfer, the transferor retains the rights and duties of a Partner other than the interest in distributions transferred.
(5) The Partnership shall not give effect to a transferee’s rights under this section until the Partnership has notice of the transfer.
Alternative 2: Nontransferability

Nontransferability of Interest. A Partner’s interest in the Partnership shall not be transferred, in whole or in part, except by intestate succession, testamentary disposition, or through a decree or judgment from a court of competent jurisdiction. Any other purported transfer of all or part of a Partner’s interest shall be void and of no effect against the Partnership, any other Partner, any creditor of the Partnership, or any claimant against the Partnership. No such transfer shall constitute the transferee a Partner or entitle the transferee to any of the rights of a Partner, other than the right to receive as much of the transferor’s share of Partnership distributions as is transferred to the transferee.

Alternaitve 3: Limited transferability

Limited Transferability. A Partner may transfer all or part of his or her interest in the Partnership only as follows:

(1) To the Partnership or to any other Partner;
(2) By intestate succession or testamentary disposition on the Partner’s death;
(3) By a gift to the Partner’s spouse or children, or to a trustee for the Partner’s spouse or children or both;
(4) To a corporation if, immediately after the transfer, the Partner making the transfer owns at least 50 percent of that corporation’s voting shares; or
(5) To any person after the Partner making the transfer has first offered the other Partners their rights of first refusal in accordance with the terms and conditions of this Agreement.

No such transfer shall constitute the transferee a Partner or entitle the transferee to any of the rights of a Partner, other than the right to receive as much of the transferor’s share of Partnership distributions as is transferred to the transferee. Until the transferee is admitted to the Partnership in substitution for the transferor under the provisions of this Agreement for admitting new Partners, such a transfer shall not terminate any of the transferor’s obligations.

Transfers Under Dissolution of Marriage

Transfers Under Dissolution of Marriage. In this section, “Partner” refers to the party named in the beginning of this Partnership agreement as a Partner and “Spouse” refers to the spouse of that Partner. In the event of a dissolution of marriage of any married Partner decreed by a court of competent jurisdiction, the interest of the Partner in the Partnership shall be allocated and distributed between the Partner and Spouse as the court may decree; provided, however, that:

(1) No spouse shall become a partner of the Partnership by virtue of any allocation or distribution of the interest of such Partner in any such dissolution proceeding;
(2) The spouse shall have only the status of an assignee of the Partner’s right to receive profits and losses of the Partnership under provisions of Corporations Code §16503;
(3) As between the Partner and Spouse, the Partner shall continue to have the exclusive right and authority to act as a partner on behalf of and bind the Partnership as specified in this Agreement; and
(4) Any action, consent, or approval taken or given or any document or instrument executed by the Partner on his or her own behalf (and on behalf of Spouse as an assignee under this Agreement) shall be binding on the Partner and Spouse, and the other Partners and any third party shall be entitled to rely on any action so taken by such Partner in accordance with this Agreement.

Right of First Refusal

Right of First Refusal. If any Partner receives an offer, whether or not solicited by that Partner, from a person not then a Partner to purchase all or any portion of the Partner’s interest in the Partnership, and, if the Partner receiving the offer is willing to accept it, the Partner may transfer the interest or portion specified in the offer only after he or she has afforded the Partnership and the other Partners the following rights of first refusal:

(1) The Partner desiring to make the transfer must first notify the Partnership and each of the other Partners in writing of the interest or portion the Partner proposes to transfer, the price and terms on which it is proposed to be transferred, and the identity of the proposed transferee.
(2) The Partnership shall have the option to purchase that interest or portion from the Partner at a price equal to the lesser of (a) the value of the interest or portion, computed under the provisions of this Agreement for valuing Partnership interests as of the date the notice of the proposed transfer is received by the Partnership, payable as provided in this Agreement, or (b) the same price and on the same terms as those specified in the notice of the proposed transfer. The Partnership shall exercise its option to purchase the interest or portion by written notice from the Partnership to the Partner, given within _ _[number]_ _ days after the Partnership receives the Partner’s notice of his or her desire to transfer.
(3) If the Partnership does not exercise its option to purchase the interest or portion within the time provided, then, within _ _[number]_ _ days after the Partnership receives the Partner’s notice of the proposed transfer, any of the other Partners desiring to purchase all or any part of that interest or portion may deliver to the Partner who proposed to make the transfer and to each of the other Partners written notice of election to purchase all or a specified part of the interest or portion.
(4) If the aggregate parts of the interest or portion specified in notices of election timely made by other Partners equal or exceed the entire offered interest or portion, the Partner desiring to transfer his or her interest or portion shall sell, and the Partners electing to purchase shall purchase, the interest or portion at a price equal to the lesser of (a) the value, as of the date the notice of the proposed transfer is received by the Partnership, of the interest or portion computed under the provisions of this Agreement for valuing Partnership interests, payable as provided in this Agreement, or (b) the same price and on the same terms as those specified in the notice of the proposed transfer. If the aggregate parts of the interest specified in the notices of election timely made exceed the entire interest or portion proposed to be transferred, each Partner making this election shall purchase such part of the offered interest and be liable for such part of the total amount of the purchase price as the part of the interest or portion specified in that Partner’s notice of election bears to the total of all parts of the interest or portion specified in all the notices of election timely made by Partners.
(5) If the Partnership does not exercise its option to purchase the interest within the time provided and if the aggregate parts of the interest or portion specified in the notices of election timely made by Partners are less than the entire interest or portion proposed to be transferred, all of the elections shall be ineffective and the Partner proposing to make the transfer shall not be obligated to sell, nor shall any of the other Partners electing to purchase be entitled or obligated to purchase, all or any part of the offered interest or portion. The Partner proposing to transfer an interest or portion may then, at any time within _ _[number]_ _ days following the expiration of the _ _[number]_ __-day period referred to in paragraph (3), transfer the specified interest or portion to the transferee specified in the notice on terms no more favorable to the purchaser than the terms stated in the notice and at no lower a price than the price stated in the notice.

Valuation of Interest

Add one of the following alternatives’
Alternative 1: Value of partner’s interest based on capital account

Valuation of Interest. The value of a Partner’s interest in the Partnership for purposes of this Agreement shall be calculated by taking into account the following items as of the date the value is to be determined, as these items are reflected on the Partnership’s regularly maintained accounting books and records:

(1) The balance in the Partner’s capital account;
(2) Plus the Partner’s proportionate share of the Partnership’s net profit for the current fiscal year to the date as of which the computation is made and not yet reflected in the Partner’s capital or drawing account;
(3) Less the Partner’s proportional share of any loss shown by the Partnership operations for that period;
(4) Plus any debt or other amount due to the Partner from the Partnership; but
(5) Less any debt owed by the Partner to the Partnership.
Alternative 2: Valuation of partner’s interest by agreement

Valuation of Interest. The value of a Partner’s interest in the Partnership for purposes of this Agreement shall be calculated by applying that Partner’s proportional interest in _ _[e.g., current profits/aggregate capital]_ _ to the value of the Partnership, which shall be determined as follows:

(1) Within _ _[number]_ _ days after the end of each fiscal year of the Partnership, the Partners shall, after due consideration of all factors they consider relevant, determine the Partnership’s value by unanimous written agreement. That value shall remain in effect for the purposes of this Agreement from the date of that written determination until the next such written determination, except as otherwise provided below. The valuation shall be entered on Exhibit _ _[specify number or letter]_ _ and all Partners shall initial the entry.
(2) Should the Partners be unable to agree on a value or otherwise fail to make any such determination, the Partnership’s value shall be the greater of (a) the value last established under this section, or (b) the Partnership’s net worth, determined in accordance with generally accepted accounting principles using the accrual method of accounting, consistently applied, as of the end of the Partnership’s next preceding fiscal year.
(3) Until it is otherwise determined under this section, the Partnership’s value shall be the aggregate initial capital contributions required under this Agreement and actually paid or conveyed to the Partnership.
Alternative 3: Valuation of partner’s interest by appraisal

Valuation of Interest. The value of a Partner’s interest in the Partnership for purposes of this Agreement shall be determined by appraisal as follows:

(1) Within _ _[number]_ _ days after the event requiring appraisal or within _ _[number]_ _ days after appointment of a Partner’s personal representative following the Partner’s death or legal disability, the Partnership and the Partner whose interest is to be appraised (or that Partner’s personal representative) shall jointly appoint an appraiser for this purpose, or, failing this joint action, shall each separately designate an appraiser and within _ _[number]_ _ days after their appointment, the two designated appraisers shall jointly designate a third appraiser. The failure of either the Partnership or the Partner whose interest is being appraised (or that Partner’s personal representative) to appoint an appraiser within the time allowed shall be deemed equivalent to appointment of the appraiser appointed by the other party. No person shall be appointed or designated an appraiser unless that person is then a member of _ _[name of trade association or other qualifying body]_ _.
(2) If, within _ _[number]_ _ days after the appointment of all appraisers, a majority of the appraisers concur on the value of the interest being appraised, that appraisal shall be binding and conclusive. If a majority of the appraisers do not concur within that period, the determination of the appraiser whose appraisal is neither highest nor lowest shall be binding and conclusive. The Partnership and the Partner whose interest is to be appraised, or that Partner’s estate or successors, shall share the appraisal expenses equally.
(3) A Partner’s interest in the Partnership so appraised shall be based on that Partner’s proportional interest in the Partnership’s _ _[e.g., current profits/aggregate capital]_ _.

In arriving at a valuation figure, the appraisers shall evaluate the business as a going concern and observe the following standards but not be limited to them in computing the Partnership’s value:

(1) Inventory shall be valued at the lower of cost or fair market value.
(2) Buildings and land shall be valued at fair market value.
(3) Machinery and equipment shall be valued at replacement cost.
(4) The existence of a willing purchaser shall be assumed when determining fair market value.
(5) A valuation shall be placed on items of substantial value not carried on the Partnership’s books.
(6) Investment securities owned by the Partnership for which there is an established trading market shall be valued at the market price on the effective date of valuation. For this purpose, market price means (a) for securities listed on any national securities exchange or for which sales are reported on NASDAQ, the last reported sales price on that date (or, if no sales on that date are reported, on the next preceding day for which sales were reported), and (b) for other publicly traded securities, the mean between the highest bid and lowest asked prices reported for these securities on that date (or, if no such prices are reported on that date, on the next preceding day for which such prices were reported).
(7) Investment securities owned by the Partnership for which there is no established trading market shall be valued at the amounts at which they are carried on the Partnership’s books in accordance with generally accepted accounting principles, including the equity method under Opinion 18 of the Accounting Principles Board to the extent applicable.
(8) Contingent items shall not be specifically deducted from the valuation figure, but they shall be considered in assessing the value of the Partnership’s goodwill.
(9) Goodwill, including trademarks, trade names, and other intangibles of commercial value such as patents, shall be considered in arriving at a valuation figure.
(10) Past, present, and prospective earnings, including the existing and prospective economic condition of the industry, shall be considered in arriving at a valuation figure.
(11) Adjustments shall be made for the federal and state income tax effect on the differences between tax bases and the market values determined by the appraisers.
Alternative 4: Put/call option setting price

Valuation of Interest. Either Partner (the “Offering Partner”) may give written notice to the other Partner (the “Accepting Partner”) of the Offering Partner’s intent to sell its interests in the Partnership in accordance with these provisions, stating in its written notice the cash purchase price at which the Offering Partner is willing to sell its interest in the Partnership. On receipt of such written notice, the Accepting Partner shall then be obligated to either (a) purchase all of the interest of the Offering Partner for cash at a price equal to the purchase price set forth in the written notice; or (b) sell its interest for cash to the Offering Partner at a price equal to the purchase price set forth in the written notice.

Payment of Purchase Price

Add one or more of the following alternatives’
Alternative 1: Cash

Payment of Purchase Price. Except as otherwise provided, whenever the Partnership is obligated or, having the right to do so, chooses to purchase a Partner’s interest, it shall pay for the interest in cash within _ _[number]_ _ days after the date on which the Partnership’s obligation to pay has become fixed.

Alternative 2: Cash or note

Payment of Purchase Price. Except as otherwise provided, whenever the Partnership is obligated or, having the right to do so, chooses to purchase a Partner’s interest, it shall pay for that interest, at its option, in cash or by promissory note of the Partnership, or partly in cash and partly by note. Any promissory note shall be dated as of the effective date of the purchase, shall mature in not more than _ _[number]_ _ years, shall be payable in installments that come due not less frequently than annually, shall bear interest at the rate of _ _[number]_ _ percent per annum, and may, at the Partnership’s option, be subordinated to existing and future debts to banks and other institutional lenders for money borrowed.

If applicable, add the following option
Option: Limiting amount due

After adding back all direct and indirect Partner remuneration, _ _[number]_ _ percent of the Partnership’s taxable income may be used for payment of a Partner’s or Partners’ interests. Any payment deferred under this section shall bear interest at the same rate applicable to the balance of the note. If deferred payments under this section are not paid within _ _[number]_ _ years of deferral, the Partnership shall be dissolved and the proceeds of dissolution shall be used to liquidate the balance due on the note.

Assumption of Outstanding Partnership Liabilities

Assumption of Outstanding Partnership Liabilities. Except as otherwise provided, the Partnership shall pay, as they mature, all Partnership obligations and liabilities that exist on the effective date of a Partner’s termination and shall hold the terminating Partner harmless from any action or claim arising or alleged to arise from those obligations or from liabilities accruing after that date.

Dissolution and Termination

Dissolution

Events of Dissolution. The Partnership shall be dissolved, and its business shall be wound up, only on the occurrence of any of the following events:

Add one of the following alternatives
Alternative 1: Dissolution of partnership at will by one-half of the partners
(1) The express will to dissolve and wind up the Partnership business of at least one-half of the Partners, including Partners other than wrongfully dissociating Partners who have dissociated within the preceding 90 days, and for which purpose dissociation notice from such Partners constitutes an expression of those Partners’ will to dissolve and wind up the Partnership business.
Alternative 2: Dissolution of partnership at will by all partners
(1) The express will of all of the Partners to wind up the Partnership business.
(2) The expiration of the Partnership term or completion of the undertaking if the Partnership is organized for a specific undertaking.
(3) On expiration of 90 days after a Partner’s dissociation by death, bankruptcy, incapacity, distribution by a trust or estate Partner of its entire interest, or termination of any entity Partner, or by a Partner’s wrongful dissociation, unless before that time a majority in interest of the Partners agree to continue the Partnership.
(4) Any event that makes it unlawful for all or substantially all of the Partnership business to be continued if such event is not cured within 90 days after notice to the Partnership of the event.
(5) On application by a Partner, a judicial determination that any of the following apply:
(a) The economic purpose of the Partnership is likely to be unreasonably frustrated.
(b) Another Partner has engaged in conduct relating to the Partnership business that makes it not reasonably practicable to carry on the business in Partnership with that Partner.
(c) It is not otherwise reasonably practicable to carry on the Partnership business in conformity with the Partnership agreement.
(6) As otherwise set forth in this Partnership Agreement.

Termination of Partnership After Dissolution; Waiver of Termination

Termination After Dissolution; Waiver. (1) Except as provided in this Agreement, the Partnership continues after dissolution only for the purpose of winding up its business. The Partnership is terminated when the winding up of its business is completed.

(2) At any time after the dissolution of the Partnership and before the winding up of its business is completed, all of the Partners, including any dissociating Partner (other than a wrongfully dissociating Partner) may waive the right to have the Partnership’s business wound up and the Partnership terminated. On such event, both of the following shall occur:
(a) The Partnership resumes carrying on its business as if dissolution had never occurred, and any liability incurred by the Partnership or a Partner after the dissolution and before the waiver is determined as if dissolution had never occurred; and
(b) The rights of any third party accruing after commencement of dissolution or arising out of conduct in reliance on the dissolution before the third party knew or received a notification of the waiver may not be adversely affected.

Persons Eligible to Wind Up Partnership

Persons Eligible to Wind Up Partnership. (1) After dissolution, a Partner who has not dissociated may participate in winding up the Partnership’s business, subject to the right of a Partner or its legal representative to petition the court, for good cause shown, for judicial supervision.

(2) The legal representative of the last surviving Partner may wind up a Partner’s business.
(3) The person winding up the Partnership business shall have all of the powers given by law to wind up the affairs of the Partnership.
(4) On dissolution, the Partnership shall cause to be filed a statement of dissolution under California Corporations Code §16805.

Distribution of Assets

Distribution of Assets. (1) On the winding up of the Partnership’s business, the assets of the Partnership, including any contributions by the Partners required in this Agreement, shall be applied to discharge its obligations to creditors, including to the extent permitted by law Partners who are creditors. Any surplus shall be applied to pay in cash the net amount distributable to Partners in accordance with their rights to distributions under this Agreement.

(2) Each Partner shall be entitled to a settlement of all Partnership accounts on winding up the Partnership business. In settling accounts among the Partners, the profits and losses that result from liquidation of the Partnership assets shall be credited and charged to the Partners’ accounts. The Partnership shall make a distribution to a Partner in an amount equal to any excess of the credits over the charges in the Partner’s account. A Partner shall contribute to the Partnership an amount equal to any excess of the charges over the credits in the Partner’s account.
(3) If a Partner fails to contribute the full amount that the Partner is obligated to contribute under this section, all of the other Partners shall contribute, in the proportions in which those Partners share Partnership losses, the additional amount necessary to satisfy the Partnership obligations. A Partner or its legal representative shall be entitled to recover from the other Partners any contribution the Partner makes to the extent the amount contributed exceeds that Partner’s share of the Partnership obligations for which the Partner is personally liable. The estate of a deceased Partner shall remain liable for that Partner’s obligations to contribute to the Partnership.
(4) After the settlement of accounts, each Partner shall contribute, in the proportion in which the Partner shares the Partnership losses, the amount necessary to satisfy Partnership obligations that were not known at the time of settlement for which the Partner is personally liable.

Indemnification

Indemnification. Except as otherwise provided in this Agreement, a Partner shall not be liable to, and the Partnership shall indemnify and hold the Partner harmless from, any and all expense and liability resulting from or arising out of any negligence or misconduct on the Partner’s part to the extent that the amount is not covered by the applicable insurance carried by the Partnership; provided, however, that there shall be no indemnification if it is determined that the Partner’s conduct is grossly negligent or reckless or if the Partner engages in any willful and material breach of any other obligations under this Agreement.

Miscellaneous Clauses

Amendments. This agreement may be amended at any time and from time to time by a writing signed by each person who is then a Partner.

Notices. Any written notice to any of the Partners required or permitted under this Agreement shall be deemed to have been duly given (a) on the date of service if served personally on the party to whom notice is to be given, or (b) on the _ _[e.g., second]_ _ day after mailing if mailed to the party to whom notice is to be given, first class postage prepaid, return receipt requested, and addressed to the addressee at the address stated opposite his or her name below or at the most recent address specified by written notice given to the sender by the addressee under this clause. Notices to the Partnership shall be similarly given, and addressed to it at its principal place of business.

Counterparts. The parties may execute this Agreement in two or more counterparts, which shall, in the aggregate, be signed by all the parties and constitute one agreement. Each counterpart shall be deemed an original instrument as against any party who has signed it.

Governing Law. This agreement is executed in and intended to be performed in the State of California, and the laws of that state (other than as to choice of laws) shall govern its interpretation and effect.

Successors. This agreement shall be binding on and inure to the benefit of the respective successors, assigns, and personal representatives of the parties, except to the extent of any contrary provision in this Agreement.

Severability. If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the rest of the agreement shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.

Headings. Section, paragraph, and other headings contained in this Agreement are for reference purposes only and are in no way intended to describe, interpret, define, amplify, or limit the scope, extent, or intent of this Agreement or any provision of it.

Further Action. Each Partner shall execute and deliver such papers, documents, and instruments, and perform such acts as are necessary or appropriate, to implement the terms of the agreement and the intent of the parties to this Agreement.

Waiver of Partition Action. Each of the parties to this Agreement irrevocably waives, during the term of the Partnership, any right that it may have to maintain any action for partition with respect to the Partnership properties.

Construction. In construing this Agreement, no consideration shall be given to the fact or presumption that any party had a greater or lesser hand in drafting it.

Gender. In construing this Agreement, pronouns of any gender shall be deemed to include the other gender.

Incorporation by Reference. Every exhibit, schedule, and other appendix attached to and referred to in this Agreement is incorporated in this Agreement by reference.

Attorney Fees. If any party requires the services of an attorney to secure the performance of this Agreement or otherwise on the breach or default of another party to this Agreement, or, if any judicial remedy or arbitration is necessary to enforce or interpret any provision of this Agreement or the rights and duties of any person in relation to it, the prevailing party shall be entitled to reasonable attorney fees, costs, and other expenses, in addition to any other relief to which such party may be entitled. Any award of damages following judicial remedy or arbitration as a result of the breach of this Agreement or any of its provisions shall include an award of prejudgment interest from the date of the breach at the maximum amount of interest allowed by law.

Entire Agreement. This Agreement contains the entire agreement of the parties relating to the rights granted and obligations assumed in this Agreement. Any oral representations or modifications concerning this instrument shall be of no force or effect unless contained in a subsequent written modification signed by the party to be charged.

Arbitration. Any controversy among the Partners involving the construction or application of any provision of this Agreement shall be submitted to arbitration at _ _[location]_ _, California, on the request of any Partner. Arbitration shall comply with and be governed under the provisions of the _ _[e.g., California Arbitration Act/commercial arbitration rules of the American Arbitration Association]_ _.

Execution

Execution

IN WITNESS WHEREOF, the Partners have executed this Agreement effective as of the date set forth above.

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Date: _ _ _ _ _ _ __[Signature]__ _ _[Typed name]_ _ _ _[Address]_ _

Exhibit _ _[specify number or letter]_ _

Consent of Spouses

Consent of Spouses

We certify that:

(1) We are the spouses of the persons who signed the foregoing Partnership Agreement and who constitute the members of the Partnership described in that Agreement.

(2) We have read and approve the provisions of that Partnership Agreement, including but not limited to those relating to the purchase, sale, or other disposition of the interest of a deceased, retiring, withdrawing, or terminating Partner.

(3) We agree to be bound by and accept those provisions of that Partnership Agreement in place of all other interests we, or any of us, may have in that Partnership, whether the interest may be community property or otherwise.

(4) Our spouses shall have full power of management of their interests in the Partnership, including any portion of those interests that are our community property, and they have the full right, without our further approval, to exercise their voting rights as Partners in the Partnership, to execute any amendments to the Partnership Agreement, and to sell, transfer, encumber, and deal in any manner with those Partnership interests, including any portion of those interests that are our community property.

Executed on _ _[date]_ _, at _ _[location]_ _, California.

__[Signature of spouse]__ _ _[Typed name]_ _

__[Signature of spouse]__ _ _[Typed name]_ _

__[Signature of spouse]__ _ _[Typed name]_ _

__[Signature of spouse]__ _ _[Typed name]_ _

Sample Nondisclosure Agreement

Sample Nondisclosure Agreement

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

Nondisclosure Agreement

Preamble

EMPLOYEE CONFIDENTIALITY, NONDISCLOSURE, AND NONRECRUITING AGREEMENT (California)

This Employee Confidentiality, Nondisclosure, and Nonrecruiting Agreement (the “Agreement”) is entered into between _ _[name of employer]_ _ (“Company”) and the employee whose name and signature appear below (“Employee”), as of the date set forth below, in regard to the following facts:

Recitals

A. As part of Employee’s employment with Company, Employee has been or will be exposed to or provided with trade secrets (“Trade Secrets”) and proprietary and confidential information (“Confidential Information”) relating to the operation of Company’s business and its clients or customers.
B. Company wishes to protect its Trade Secrets and Confidential Information from unauthorized possession, use, or disclosure and to protect itself from unfair competition. Accordingly, Employee acknowledges that a part of the consideration that Employee is providing Company in exchange for his or her employment and continued employment with Company is Employee’s agreement to maintain the secrecy of Company’s Trade Secrets and Confidential Information in the manner provided herein.

In consideration of the foregoing, Employee agrees as follows:

Duty of Loyalty

1. Duty of Loyalty. While employed by Company, Employee agrees at all times to devote his or her best efforts to the business of the Company, to perform conscientiously all duties and obligations required or assigned, and to not usurp for personal gain any opportunities in Company’s line of business.

Definition of Trade Secrets

2. Protection of Company’s Trade Secrets and Confidential Information.
a. Definition of Trade Secrets. Employee acknowledges and agrees that, through his or her employment with Company, he or she has been or will be exposed to or provided with the Company’s Trade Secrets. As defined by California law, “Trade Secrets” means information, including a formula, pattern, compilation, program, device, method, technique or process, that (i) derives independent economic value, actual or potential, from not being generally known to the public or to other persons or entities who can obtain economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Company’s Trade Secrets include, but are not limited to, the following: _ _[Describe specific formulas, patterns, compilations, programs, devices, methods, techniques, and processes that the company believes constitute its trade secrets]_ _. Employee acknowledges and agrees that Company’s Trade Secrets are not generally known to the public or to the Company’s competitors, were developed or compiled at significant expense by Company over an extended period of time, and are the subject of Company’s reasonable efforts to maintain their secrecy and that Company derives significant independent economic value by keeping secret its Trade Secrets.

Definition of Confidential Information

b. Definition of Confidential Information. Employee acknowledges and agrees that, through his or her employment with Company, he or she has been or will be exposed to or provided with Company’s Confidential Information. “Confidential Information” means information belonging to Company, whether reduced to writing or in a form from which such information can be obtained, translated, or derived into reasonably usable form, that has been provided to Employee during his or her employment with Company, that Employee has gained access to while employed by Company, or that was developed by Employee in the course of Employee’s employment with Company, and that is proprietary and confidential in nature. Company’s Confidential Information includes, but is not limited to, the following: (i) information believed by Company to be a Trade Secret that ultimately does not qualify as such under California law but nonetheless was maintained by Company as confidential; (ii) information concerning the nature of Company’s business and its manner of operation; (iii) the methods and systems used by Company in soliciting, selling, and providing its services and products to its clients and customers; (iv) financial and accounting information, such as cost, pricing, and billing information, client and customer profiles, financial policies and procedures, and revenues and profit margins; (v) sales and marketing information, such as sales strategies and programs; (vi) information concerning Company’s clients and customers and prospective clients or customers; (vii) information concerning Company’s vendors and suppliers; (viii) client and customer lists; (ix) prospective client and customer lists; (x) information regarding client and customer buying habits and special needs; (xi) employment policies and procedures; (xii) personnel records; (xiii) software developed by or for the benefit of Company and related data source code and programming information (whether or not patentable or registered under copyright or similar statutes); (xiv) information about Company’s circuit designs, blueprints, CAD drawings and designs, layouts, algorithms, design technology and know-how, formulas, manufacturing and/or design techniques, inventions (whether patentable or not); and (xv) information concerning Company’s business relationships with persons, firms, corporations, and other entities.

Exclusions From Definitions

c. Information Not Included Within Definition of Trade Secrets or Confidential Information. For avoidance of doubt, Company’s Trade Secrets and Confidential Information do not include any information that (i) is already in the public domain or becomes available to the public through no breach of this Agreement by Employee; (ii) was lawfully in Employee’s possession prior to disclosure to the Employee by Company; (iii) is lawfully disclosed to Employee by a third party without any obligations of confidentiality attaching to such disclosure; or (iv) is developed by Employee entirely on his or her own time without Company’s equipment, supplies, or facilities and does not relate at the time of conception to Company’s business or actual or demonstrably anticipated research or development of Company.

Property of Company

d. Property of Company. Employee acknowledges and agrees that all Trade Secrets and Confidential Information developed, created, or maintained by Employee, alone or with others, while he or she is employed by Company, shall remain at all times the sole property of Company.

Covenant Not to Disclose

e. Covenant Not to Use, Publish, or Disclose Company’s Trade Secrets or Confidential Information During and After Termination of Employment. Employee acknowledges and agrees that Employee’s employment with Company creates a relationship of confidence and trust with Company with respect to all of Company’s Trade Secrets and Confidential Information. Therefore, at any time during Employee’s term of employment or following the termination of Employee’s employment with Company, whether voluntary or involuntary, Employee shall not, except as required in the conduct of Company’s business or as authorized in writing by Company, use, publish, or disclose any of Company’s Trade Secrets or Confidential Information in any manner whatsoever.

Covenant Not to Solicit

f. Covenant Not to Solicit Company’s Clients or Customers After Termination of Employment Through Use of Company’s Trade Secrets or Confidential Information. Employee agrees that for a period of _ _[insert number of months or years; typically under California law 1 to 2 years]_ _ following the termination of his or her employment with Company, whether voluntary or involuntary, Employee shall not, directly or indirectly, solicit or attempt to solicit any business from any of Company’s clients or customers for the purposes of providing products or services that are competitive with those provided by Company when such solicitation or attempt at solicitation is done by Employee through the use of Company’s Trade Secrets or Confidential Information.

Nonrecruiting Covenant

3. Nonrecruiting Covenant. Employee acknowledges and agrees that Company has invested substantial time and effort in assembling its current personnel. Therefore, Employee agrees that for _ _[insert number of months or years; typically under California law 1 to 2 years]_ _ following his or her termination of employment with Company, whether voluntary or involuntary, Employee will not, in regard to any employee of Company that Employee had “material contact” with, directly or indirectly recruit or attempt to recruit any employee of Company or induce or attempt to induce any employee of Company to terminate or cease employment with Company. For purposes of this paragraph, “material contact” shall exist when Employee supervised the employee of Company, or worked directly with the employee of Company, or otherwise received Trade Secrets or Confidential Information from the employee of Company. Notwithstanding the foregoing, nothing in this Section 3 shall prevent Employee from receiving and considering any application from any employee of Company that is not solicited by Employee or on Employee’s behalf.

Covenant Not to Compete During Employment Term

4. Covenant Not to Compete During Term of Employment. Employee agrees that, during his or her term of employment with Company, he or she will not, directly or indirectly, either as an employee, employer, consultant, agent, principal, partner, corporate officer, board member, or director, or in any other individual or representative capacity, engage or attempt to engage in any competitive activity relating to the subject matter of his or her employment with Company or relating to Company’s line of business.

Reasonableness of Restrictive Covenenats

5. Reasonableness of Restrictive Covenants. Employee acknowledges that he or she has carefully read and considered Sections 2, 3, and 4 of this Agreement and agrees that the restrictions set forth therein are fair and reasonable, are supported by valid consideration, and are reasonably required to protect the legitimate business interests of Company.

Prior Agreements

6. Prior Agreements, Relationships, and Commitments.
a. Employee represents that he or she has no agreements, relationships, or commitments to or with any other person or entity that conflict with or would prevent Employee from performing any of Employee’s obligations to Company under this Agreement or would otherwise prevent Employee from performing his or her job duties while employed by Company.
b. Employee will not disclose and has not disclosed to Company and will not use or induce Company to use any trade secrets or confidential information of others. Employee represents and warrants that he or she has returned all property, trade secrets, and confidential information belonging to others and is not in possession of any such property, confidential information, or trade secrets.
c. Employee agrees to indemnify, defend, and hold harmless Company and its officers, directors, and employees from any and all claims, damages, costs, expenses, or liability, including reasonable attorney fees and costs, incurred in connection with or resulting from any breach or default of the representations and warranties contained in this Section 6.

Termination of Employment

7. Termination of Employment. If Employee’s employment with Company is terminated for any reason, whether voluntarily or involuntarily, Employee shall promptly:
a. Inform Company of and deliver to Company all records, files, electronic data, documents, plans, reports, books, notebooks, notes, memoranda, correspondence, contracts, and the like in Employee’s possession, custody, or control that contain any of Company’s Trade Secrets or Confidential Information that Employee prepared, used, or came in contact with while employed by Company;
b. Inform Company of and deliver to Company all records, files, electronic data, documents, plans, reports, books, notebooks, notes, memoranda, correspondence, contracts, and the like in Employee’s possession, custody, or control that pertain in any way to the business of Company and that Employee prepared, used, or came in contact with while employed by Company;
c. Deliver to Company all tangible property in Employee’s possession, custody, or control belonging to Company, including but not limited to key cards, office keys, cell phones, pagers, personal digital assistants, external hard drives, thumb drives, Zip drives, laptop computers, and desktop computers; and
d. Allow Company’s representative to inspect Employee’s personal desktop computer, laptop computer, thumb drive, Zip drive, and any other external hard drive in order to determine whether any of Company’s Trade Secrets or Confidential Information reside on that computer or drive and to remove any Trade Secrets or Confidential Information.
e. Sign the Certificate of Compliance Post-Termination attached to this Agreement as Exhibit A.

Injunctive Relief

8. Injunctive Relief. Employee acknowledges and agrees that if Company’s Trade Secrets or Confidential Information were disclosed to a competing business or used in an unauthorized manner as provided herein, such unauthorized disclosure or use would cause immediate and irreparable harm to Company and would give a competing business an unfair business advantage against Company for which Company may not have an adequate remedy at law. Therefore, Employee agrees that, in addition to any other remedies available to Company at law or in equity, Company shall be entitled to any proper injunction, including but not limited to any temporary, preliminary, or final injunction, any temporary restraining order, and any temporary protective orders, to enforce Sections 2, 3, and 4 of this Agreement in the event of breach or threatened breach by Employee. The restrictive covenants contained in this Agreement are independent of any other obligations between the parties, and the existence of any other claim or cause of action against Company is not a defense to enforcement of those covenants by injunction.

Employment at Will

9. Employment at Will. Employee understands and agrees that nothing in this Agreement shall confer any right with respect to continuation of employment with Company, nor shall it interfere in any way with Employee’s right or Company’s right to terminate Employee’s employment at any time, with or without cause, with or without notice.

Waiver

10. Waiver. No waiver by Company of any breach of this Agreement shall constitute a waiver of any preceding or succeeding breach. No waiver by Company of any right under this Agreement shall be construed as a waiver of any other right.

Tolling and Suspension

11. Tolling and Suspension. In the event of a breach by Employee of any restrictive covenant contained in this Agreement, the running of the period of restriction shall automatically be tolled and suspended for the amount of time that the breach continues and shall automatically commence when the breach is remedied so that Company shall receive the benefit of Employee’s compliance with the terms and conditions of this Agreement.

Entire Agreement, Governing Law, Survival

12. Entire Agreement, Governing Law, Survival. This Agreement constitutes the entire agreement between Company and Employee regarding the secrecy, use, and disclosure of Company’s Trade Secrets and Confidential Information, and this Agreement supersedes any and all prior agreements regarding these matters. The provisions of this Agreement shall be governed by and construed in accordance with the laws of the State of California without giving effect to the principles of conflict of laws. This Agreement consists of a series of separate restrictive covenants, all of which shall survive and be enforceable in law and equity after Employee’s termination or cessation of employment.

Severability

13. Severability. Each provision of this Agreement is intended to be severable. If any court of competent jurisdiction determines that one or more of the provisions of this Agreement, or any part thereof, is or are invalid, illegal, or unenforceable, that invalidity, illegality, or unenforceability shall not affect or impair any other provision of this Agreement, and this Agreement shall be given full force and effect while being construed as if such invalid, illegal, or unenforceable provision(s) had not been contained in it. If the scope of any provision in this Agreement is found to be too broad to permit enforcement of that provision to its full extent, Employee consents to judicial modification of that provision and enforcement to the maximum extent permitted by law.

Closing Paragraph, Signatures

The undersigned acknowledges that he or she has read and understood this Agreement and that he or she signs this Agreement intending to be bound by its terms as of the date set forth below.

Date: _ _ _ _ _ _
[Signature of employee]__ _ _
[Typed name]_ _

Accepted and agreed to by Company:

Date: _ _ _ _ _ _ _ _
[NAME OF ENTITY]_ _, a _ _[specify entity, e.g., California corporation]_ _
By: __[Signature]__
Name: _ _[Typed name]_ _
Its: _ _[Title]_ _

EXHIBIT A CERTIFICATE OF COMPLIANCE POST-TERMINATION

To be executed at time of termination only.

I hereby certify that I have complied with and shall continue to comply with all the terms of the Employee Confidentiality, Nondisclosure, and Nonrecruiting Agreement (the “Agreement”), which I signed. All capitalized terms used but not defined in this Certificate shall have the meanings assigned to them in the Agreement.

I further certify that I do not have in my possession, nor have I failed to return to Company, any Trade Secrets or Confidential Information, or copies of the same, or any other documents, materials, equipment, or other property belonging to Company. I further certify that I will not retain any electronic, written, or other tangible material containing any information concerning or disclosing any of Company’s Trade Secrets or Confidential Information.

I agree that, in compliance with the Agreement, I will preserve as secret all of Company’s Trade Secrets or Confidential Information, and I will not participate in the unauthorized use or disclosure of Company’s Trade Secrets or Confidential Information.

On termination of my employment with Company, I will be employed by ____________________________________________ and will be working in connection with the following projects or matters:

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

________________________________________________________

Date: _ _ _ _ _ _ __[Signature of employee]__ _ _[Typed name]_ _

Sample Noncompete Provision

Sample Noncompete Provision

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

The California Business & Professions Code § 16600 states: “Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” However, a noncompete provision that is narrowly written to protect trade secrets and is actually necessary to do so may be enforceable. Note that a contractual covenant not to compete is not necessary to protect the employer’s trade secrets. Such legal protection is already afforded to the employer under unfair competition laws, including those under the UTSA and the California Business and Professions Code.

The below example is from a Franchise Agreement:

NONDISCLOSURE AND NONCOMPETITION AGREEMENT

Confidant is about to undergo training by _ _[Franchisor’s legal name]_ _ (Franchisor) or one of its franchisees. During this process, Confidant will learn a great deal about the _ _[PRINCIPAL IDENTIFYING MARK]_ _ System, including information about its members’ business affairs, finances, management, marketing programs, philosophy, customers and methods of doing business. Confidant will have access to confidential information developed and maintained at substantial cost by Franchisor. This information is proprietary to Franchisor. Its use by third parties could cause substantial and irreparable damage to the company.

Therefore, in return for either (a) his or her training by _ _[Franchisor’s legal name]_ _ Franchisor to operate a _ _[Unit]_ _, or (b) his or her employment by Franchisor or by one of its franchisees, the undersigned (Confidant) agrees as follows:

1. Nondisclosure of Trade Secrets and Confidential Information

Confidant agrees, during the term of the Franchise Agreement and following termination, expiration, or assignment of the Agreement, not to disclose, duplicate, sell, reveal, divulge, publish, furnish, or communicate, either directly or indirectly, any Trade Secret or other Confidential Information of Franchisor to any other person or company unless authorized in writing by Franchisor. Confidant agrees not to use any Trade Secret or Confidential Information for his or her personal gain or for purposes of others, whether or not the Trade Secret or Confidential Information has been conceived, originated, discovered, or developed, in whole or in part, by Confidant or represents Confidant’s work product. If Confidant has assisted in the preparation of any information that we consider to be a Trade Secret or Confidential Information or has himself or herself prepared or created the information, Confidant assigns any rights that he or she may have in the information as its creator to Franchisor, including all ideas made or conceived by Confidant.

2. Definition of Trade Secrets and Confidential Information

For purposes of this agreement, the terms “Trade Secret” and “Confidential Information” mean any knowledge, technique, processes, or information made known or available to Confidant that we treat as confidential, whether existing now or created in the future, including but not limited to information about the cost of materials and supplies, supplier lists or sources of supplies, sales and marketing information, pricing information, proprietary software, internal business forms, orders, customer accounts, manuals and instructional materials describing our methods of operation, including our Operations Manual, audiotapes and video tapes, products, drawings, designs, plans, proposals, and marketing plans, all concepts or ideas in, or reasonably related to our business that have not previously been publicly released by Franchisor, and any other information or property of any kind of Franchisor that may be protected by law as a Trade Secret, confidential, or proprietary. The Trade Secrets and Confidential Information described in this agreement are the sole property of Franchisor.

3. Return of Proprietary Materials

Upon termination or expiration of franchise ownership or employment by Franchisor or a _ _[PRINCIPAL IDENTIFYING MARK]_ _ franchisee, Confidant must surrender to Franchisor all materials considered proprietary by Franchisor, technical or nontechnical, whether or not copyrighted, that relate to a Trade Secret, Confidential Information, or conduct of the operations of Franchisor. Confidant expressly acknowledges that any such materials of any kind given to him or her are and will remain the sole property of Franchisor.

4. Solicitation of Customers

During the term of Confidant’s relationship with Franchisor or one of its franchisees, and for _ _[number of years of noncompete period]_ _ years after the relationship terminates, Confidant agrees that he or she will not, directly or indirectly or by action in concert with others, solicit, induce or influence or seek to solicit, induce or influence any customer or prospective customer with whom Confidant did business during his or her relationship with Franchisor or one of its franchisees for the purpose of promoting or selling any products or services that are competitive with those offered by Franchisor and its franchisees.

5. Solicitation of Employees

Confidant further agrees that, during the term of his or her relationship with Franchisor or one of its franchisees and for _ _[number of years of noncompete period]_ _ years after its expiration, he or she will not, directly or indirectly or in concert with others, furnish to or for the benefit of any competitor of Franchisor, or the competitor’s employees, agents, licensees, or franchisees, or the competitor’s subsidiaries, the name of any person who is employed or engaged as an independent contractor by Franchisor or by any other franchisee of Franchisor. In addition, Confidant agrees that, during the term of his or her relationship with Franchisor or one of its franchisees, and for _ _[number of years of noncompete period]_ _ years after the relationship terminates, he or she will not, directly or indirectly or by action in concert with others, solicit, induce or influence, or seek to solicit, induce or influence any person who is employed by or engaged as an independent contractor by Franchisor to terminate his or her employment or engagement.

6. Noncompetition

Confidant agrees and covenants that because of the confidential and sensitive nature of the Confidential Information and because the use of the Confidential Information in certain circumstances may cause irrevocable damage to Franchisor, Confidant will not, until the expiration of the _ _[number of years of noncompete period]_ _ year after the termination of the employment relationship between Confidant and Franchisor or the franchisee that employs him or her, or termination of the ownership interest of Confidant in a _ _[PRINCIPAL IDENTIFYING MARK]_ _ franchise, engage in, own an interest in, or serve as an officer, director, employee, agent, independent contractor, partner, shareholder, member or principal, directly or indirectly, or through any organization or Related Party, in any _ _[describe type of business]_ _ that is located within _ _[specify noncompete territory]_ _.

7. Saving Provision

Confidant agrees and stipulates that the agreements and covenants not to compete contained in the preceding paragraph are fair and reasonable in light of all the facts and circumstances of the relationship between Confidant and Franchisor. However, Confidant and Franchisor are aware that in certain circumstances courts have refused to enforce certain agreements not to compete. Therefore, in furtherance of the provisions of the preceding paragraph, Confidant and Franchisor agree that if a court or arbitrator should decline to enforce the provisions of the preceding paragraph, that paragraph must be considered modified to restrict Confidant’s competition with Franchisor to the maximum extent, in both time and geography, which the court or arbitrator finds enforceable.

8. Irreparable Harm to Franchisor

Confidant understands and agrees that Franchisor will suffer irreparable injury that cannot be precisely measured in monetary damages if Confidential Information or proprietary information is obtained by any person, firm, or corporation and is used in competition with Franchisor. Accordingly, Confidant agrees that it is reasonable and for the protection of the business and goodwill of Franchisor for Confidant to enter into this agreement. If there is a breach of this agreement by Confidant, Confidant consents to entry of a temporary restraining order or other injunctive relief and to any other relief that may be granted by a court having proper jurisdiction.

9. Binding Effect

This agreement will bind Confidant’s heirs, executors, successors, and assignees as though originally signed by them.

10. Applicable Law

The validity of this agreement will be governed by the laws of the State where Confidant lives. If any provision of this agreement is void or unenforceable in that State, the remainder of the Agreement will be fully enforceable according to its terms.

Date: _ _ _ _ _ _ __[Signature of Confidant]__ _ _[Typed name]_ _

Sample Non-Solicitation Declaration

Sample Non-Solicitation Declaration

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

DECLARATION OF NON-SOLICITATION

To: <Investor>

From: <Company>

I, the undersigned person, do hereby declare that I have requested information pertaining to <type of investment> investment opportunities with your company.

I have not requesting this information as a result of any public solicitation, offering or promotion and have requested this data for my own personal use. I was referred to you by a private party.

I realize that the requested information is for private use and is not available to the public and that the purpose of this information is not to solicit me to invest in anything.

If I choose to participate in any <type of investment> investment opportunities or private placement opportunities referred to in the requested information provided to me, it will be of my own free will and accord and not through solicitation or coercion by any agents, affiliates or non-affiliated entities related to you directly or indirectly.

Date: ______________________

Signature: ________________________________________________

Name Printed: <investor name>

Full Address:

Telephone: ________________________________________________

E-Mail Address:

This sample has been provided in conjunction with Meyerdirk Consulting. MeyerdirkConsulting.com

Sample Non-Profit Bylaws

Sample Non-Profit Bylaws

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

Contents

NON-PROFIT BYLAWS: PUBLIC BENEFIT CORPORATION

BYLAWS OF _ _[NAME OF CORPORATION]_ _ A California Nonprofit _ _[Public Benefit]_ _ Corporation

Corporate Name. The name of this corporation is _ _[name]_ _.

Principal Office. The principal office for the transaction of the activities and affairs of this corporation is located at _ _[street address and city]_ _, in _ _[name]_ _ County, California. The board of directors may change the location of the principal office. Any such change of location must be noted by the secretary on these bylaws opposite this Section; alternatively, this Section may be amended to state the new location.

[If appropriate, add]

The board may at any time establish branch or subordinate offices at any place or places where this corporation is qualified to conduct its activities.

Purpose. The purpose of this corporation is to _ _[state purposes exactly as in the articles of incorporation]_ _. In the context of these general purposes, the corporation shall _ _[describe purposes more specifically]_ _. Also in the context of these purposes, the corporation shall _ _[repeat any limitations that appear in the articles of incorporation and add any other limitations that do not appear in the articles]_ _.
Construction; Definitions. Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the California Nonprofit Corporation Law shall govern the construction of these bylaws. Without limiting the generality of the preceding sentence, the masculine gender includes the feminine and neuter, the singular includes the plural, the plural includes the singular, and the term “person” includes both a legal entity and a natural person.

[If appropriate, add]

Supporting Corporation. This corporation has been organized and shall operate exclusively to support _ _[name of supported public charity]_ _ and shall be _ _[operated, supervised, or controlled by/supervised or controlled in connection with/operated in connection with]_ _ that organization as specified in Internal Revenue Code §509(a)(3).

If _ _[name of supported organization]_ _ (1) shall cease to be an organization described in Internal Revenue Code §§170(b)(1)(A)(iv), 501(c)(3) and 509(a)(1) or 509(a)(2), or (2) shall substantially abandon the charitable and educational purposes that this corporation is organized to support, the directors shall designate a publicly supported educational or charitable organization as described in Internal Revenue Code §§170(b)(1)(A), 501(c)(3) and 509(a)(1) or 509(a)(2), in substitution for _ _[name of supported organization]_ _, for purposes of Article _ _[specify purposes clause]_ _ of the Articles of Incorporation and Section _ _[number]_ _ of these bylaws.

Irrevocable Dedication of Assets. This corporation’s assets are irrevocably dedicated to _ _[public benefit/charitable/religious]_ _ purposes. No part of the net earnings, properties, or assets of the corporation, on dissolution or otherwise, shall inure to the benefit of any private person or individual, or to any director or officer of the corporation. On liquidation or dissolution, all properties and assets remaining after payment, or provision for payment, of all debts and liabilities of the corporation shall be distributed to a nonprofit fund, foundation, or corporation that is organized and operated exclusively for charitable purposes and that has established its exempt status under Internal Revenue Code §501(c)(3).

MEMBERSHIP

[Add one of the following alternatives]

[Alternative 1: Bylaws specify classes and requirements]

Membership. This corporation shall have _ _[e.g., two]_ _ classes of members, designated as _ _[e.g., regular and associate]_ _. Any person dedicated to the purposes of the corporation _ _[and]_ _ _ _[state other qualifications for each class of membership, including any requirement for approval by a membership committee]_ _ shall be eligible for membership on approval of the membership application by the board and on timely payment of such dues and fees as the board may fix from time to time.

[Alternative 2: Reference to governing document]

Qualifications of members and classes and terms of membership shall be those described by the _ _[governing document]_ _.

Membership Rights. _ _[All/Specify, e.g., names of voting classes]_ _ members shall have the right to vote, as set forth in these bylaws, on the election of directors, on the disposition of all or substantially all of the corporation’s assets, on any merger and its principal terms and any amendment of those terms, and on any election to dissolve the corporation. In addition, those members shall have all rights afforded members under the California Nonprofit Public Benefit Corporation Law.

Termination of Membership. A membership shall terminate on occurrence of any of the following events:

(1) Resignation of the member;
(2) Expiration of the period of membership, unless the membership is renewed on the renewal terms fixed by the board;
(3) The member’s failure to pay dues, fees, or assessments as set by the board within _ _[period of time]_ _ after they are due and payable;
(4) Any event that renders the member ineligible for membership, or failure to satisfy membership qualifications; or
(5) Termination of membership under Section _ _[number]_ _ of these bylaws based on the good faith determination by the board, or a committee or person authorized by the board to make such a determination, that the member has failed in a material and serious degree to observe the rules of conduct of the corporation, or has engaged in conduct materially and seriously prejudicial to the corporation’s purposes and interests.

Suspension of Membership. A member may be suspended, under Section _ _[number]_ _ of these bylaws, based on the good faith determination by the board, or a committee or person authorized by the board to make such a determination, that the member has failed in a material and serious degree to observe the corporation’s rules of conduct, or has engaged in conduct materially and seriously prejudicial to the corporation’s purposes and interests.
A person whose membership is suspended shall not be a member during the period of suspension.

Procedure. If grounds appear to exist for suspending or terminating a member under Sections _ _[numbers]_ _ of these bylaws, the following procedure shall be followed:

(1) The board shall give the member at least 15 days’ prior notice of the proposed suspension or termination and the reasons for the proposed suspension or termination. Notice shall be given by any method reasonably calculated to provide actual notice. Notice given by mail shall be sent by first-class or registered mail to the member’s last address as shown on the corporation’s records.
(2) The member shall be given an opportunity to be heard, either orally or in writing, at least five days before the effective date of the proposed suspension or termination. The hearing shall be held, or the written statement considered, by the board or by a committee or person authorized by the board to determine whether the suspension or termination should occur.
(3) The board, committee, or person shall decide whether the member should be suspended, expelled, or sanctioned in any way. The decision of the board, committee, or person shall be final.
(4) Any action challenging an expulsion, suspension, or termination of membership, including a claim alleging defective notice, must be commenced within one year after the date of the expulsion, suspension, or termination.

MEETINGS

[Add one of the following alternatives]

[Alternative 1: Meeting held on date certain]

Annual Meeting. An annual meeting of members shall be held on the _ _[specific date/day, e.g., first Monday]_ _ of _ _[month]_ _ of each year at _ _[time]_ _, unless the board fixes another date or time and so notifies members as provided in Sections _ _[numbers]_ _ of these bylaws. If the scheduled date falls on a legal holiday, the meeting shall be held on the next full business day. At the meeting, directors shall be elected and other proper business may be transacted, subject to Sections _ _[numbers]_ _ of these bylaws.

[Alternative 2: Meetings held as specified by board]

Annual Meeting. A general meeting of members shall be held at least annually at such time and place, and on such notice, if any, as the board may determine. Unless elected by written ballot, directors shall be elected at this meeting. Subject to Sections _ _[number]_ _ of these bylaws, any other proper business may be transacted at this meeting.

Location of Meetings. Meetings of the members shall be held at any place within or outside California designated by the board or by the written consent of all members entitled to vote at the meeting, given before or after the meeting. In the absence of any such designation, members’ meetings shall be held at the corporation’s principal office. The board may authorize members who are not present in person to participate by electronic transmission or electronic video communication.

Special Meetings. A special meeting called by any person entitled to call a meeting of the members shall be called by written request, specifying the general nature of the business proposed to be transacted, and addressed to the attention of and submitted to the chair of the board, if any, or the president or any vice president or the secretary of the corporation. The officer receiving the request shall cause notice to be given promptly to the members entitled to vote, under Sections _ _[numbers]_ _ of these bylaws, stating that a meeting will be held at a specified time and date fixed by the board.

However, the meeting date shall be at least 35 but no more than 90 days after receipt of the request. If the notice is not given within 20 days after the request is received, the person or persons requesting the meeting may give the notice. Nothing in this Section shall be construed as limiting, fixing, or affecting the time at which a meeting of members may be held when the meeting is called by the board.
Quorum. _ _[Specify rate]_ _ percent of the voting power shall constitute a quorum for the transaction of business at any meeting of members.

VOTING

Eligibility to Vote. Subject to the California Nonprofit _ _[Public Benefit/Mutual Benefit]_ _ Corporation Law, _ _[names of classes]_ _ members in good standing on the record date as determined under Sections _ _[numbers]_ _ of these bylaws shall be entitled to vote at any meeting of members.

Manner of Voting. Voting may be by voice or by ballot, except that any election of directors must be by ballot if demanded before the voting begins by any member at the meeting.

Number of Votes. Each member entitled to vote may cast one vote on each matter submitted to a vote of the members.

Majority Approval. If a quorum is present, the affirmative vote of a majority of the voting power represented at the meeting, entitled to vote and voting on any matter, shall be deemed the act of the members unless the vote of a greater number, or voting by classes, is required by the California Nonprofit _ _[Public Benefit/Mutual Benefit/Religious]_ _ Corporation Law or by the articles of incorporation.

Waiver of Notice or Consent. The transactions of any meeting of members, however called or noticed and wherever held, shall be as valid as though taken at a meeting duly held after standard call and notice, if (1) a quorum is present either in person or by proxy, and (2) either before or after the meeting, each member entitled to vote, not present in person or by proxy, signs a written waiver of notice, a consent to the holding of the meeting, or an approval of the minutes of the meeting. The waiver of notice, consent, or approval need not specify either the business to be transacted or the purpose of the meeting except that, if action is taken or proposed to be taken for approval of any matter specified in Section _ _[number]_ _ of these bylaws, the waiver of notice, consent, or approval shall state the general nature of the proposal. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

A member’s attendance at a meeting shall also constitute a waiver of notice of and presence at that meeting unless the member objects at the beginning of the meeting to the transaction of any business because the meeting was not lawfully called or convened. Also, attendance at a meeting is not a waiver of any right to object to the consideration of matters required to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.

ACTIONS WITHOUT MEETINGS

Action by Unanimous Written Consent. Any action required or permitted to be taken by the members may be taken without a meeting, if all members consent in writing to the action. The written consent or consents shall be filed with the minutes of the meeting. The action by written consent shall have the same force and effect as a unanimous vote of the members.

BOARD OF DIRECTORS

Specific Powers of Board. Without prejudice to the general powers set forth in Section _ _[number]_ _ of these bylaws, but subject to the same limitations, the board shall have the power to do the following:

(1) Appoint and remove, at the pleasure of the board, all corporate officers, agents, and employees; prescribe powers and duties for them as are consistent with the law, the articles of incorporation, and these bylaws; fix their compensation; and require from them security for faithful service.
(2) Change the principal office or the principal business office in California from one location to another; cause the corporation to be qualified to conduct its activities in any other state, territory, dependency, or country; conduct its activities in or outside California; and designate a place in or outside California for holding any meeting of members.
(3) Borrow money and incur indebtedness on the corporation’s behalf and cause to be executed and delivered for the corporation’s purposes, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations, and other evidences of debt and securities.

[If appropriate, add]

(4) Adopt and use a corporate seal; prescribe the forms of membership certificates; and alter the forms of the seal and certificates.

[Add one of the following alternatives]

[Alternative 1: Fixed number of and qualifications for directors]

Number and Qualifications of Directors. The authorized number of directors shall be _ _[number]_ _. The qualifications for directors are _ _[specify]_ _.

[Alternative 2: Variable number of and qualifications for directors]

Number and Qualifications of Directors. The board of directors shall consist of at least _ _[number]_ _ but no more than _ _[number]_ _ directors unless changed by amendment to these bylaws. The exact number of directors shall be fixed, within those limits, by a resolution adopted by the board of directors. The qualifications for directors are _ _[specify]_ _.

Interested Persons as Directors. No more than 49 percent of the persons serving on the board may be “interested persons.” An interested person is (1) any person compensated by the corporation for services rendered to it within the previous 12 months, whether as a full-time or part-time employee, independent contractor, or otherwise, excluding any reasonable compensation paid to a director as director; and (2) any brother, sister, ancestor, descendant, spouse, brother-in-law, sister-in-law, son-in-law, daughter-in-law, mother-in-law, or father-in-law of such person. However, any violation of this paragraph shall not affect the validity or enforceability of transactions entered into by the corporation.

Designated Directors. _ _[All/Specify number, e.g., twelve]_ _ directors shall be designated by _ _[name]_ _. Each director shall hold office for _ _[number]_ _ years and until a successor director has been designated and qualified.

NOMINATIONS AND ELECTIONS OF DIRECTORS

Nominations by Committee. The chair of the board or, if none, the president, shall appoint a committee to nominate qualified candidates for election to the board at least _ _[number]_ _ days before the date of any election of directors. The nominating committee shall make its report at least _ _[number]_ _ days before the date of the election, _ _[or at such other time as the board may set,]_ _ and the secretary shall forward to each member, with the notice of meeting required by these bylaws, a list of all candidates nominated by committee.

Floor Nominations. When a meeting is held for the election of directors, any member present at the meeting in person or by proxy may place names in nomination.

Nominee’s Right to Solicit Votes. The board shall formulate procedures that allow a reasonable opportunity for a nominee to communicate to members the nominee’s qualifications and the reasons for the nominee’s candidacy, a reasonable opportunity for the nominee to solicit votes, and a reasonable opportunity for all members to choose among the nominees.

Use of Corporate Funds. If more people have been nominated for director than can be elected, no corporate funds may be expended to support a nominee without the board’s authorization.

VACANCIES ON THE BOARD OF DIRECTORS

Resignation of Directors. Except as provided below, any director may resign by giving written notice to the chair of the board, if any, or to the president or the secretary of the board. The resignation shall be effective when the notice is given unless it specifies a later time for the resignation to become effective. If a director’s resignation is effective at a later time, the board may elect a successor to take office as of the date when the resignation becomes effective.

Except on notice to the California Attorney General, no director may resign if the corporation would be left without a duly elected director or directors.

Removal of Directors. If the corporation has no members, any director may be removed, with or without cause, by the vote of the majority of the members of the entire board of directors at a special meeting called for that purpose, or at a regular meeting, provided that notice of that meeting and of the removal questions are given as provided in Section _ _[insert appropriate section number]_ _. However, a director who was designated as a director rather than elected by the members may be removed without cause by the person or persons who designated that director, and may not be removed without the written consent of that person or persons. Any vacancy caused by the removal of a director shall be filled as provided in Section _ _[insert appropriate section number]_ _.

Any director who does not attend three successive board meetings will automatically be removed from the board without board resolution unless:

(A) The director requests a leave of absence for a limited period of time, and the leave is approved by the directors at a regular or special meeting. If such leave is granted, the number of board members will be reduced by one in determining whether a quorum is or is not present;
(B) The director suffers from an illness or disability which prevents him or her from attending meetings and the board by resolution waives the automatic removal procedure of this subsection; or
(C) The board by resolution of the majority of board members agrees to reinstate the director who has missed three meetings.

Vacancies Filled by Members. The members may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors.
No Vacancy on Reduction of Number of Directors. Any reduction of the authorized number of directors shall not result in any director’s being removed before his or her term of office expires.

MEETINGS OF BOARD OF DIRECTORS

Meetings by Telecommunication. Any board meeting may be held by conference telephone, video screen communication, or other communications equipment. Participation in a meeting under this Section shall constitute presence in person at the meeting if both the following apply:

(1) Each member participating in the meeting can communicate concurrently with all other members.
(2) Each member is provided the means of participating in all matters before the board, including the capacity to propose, or to interpose an objection to, a specific action to be taken by the corporation.

Annual Meeting of Board. Immediately after each annual meeting of members, the board shall hold a general meeting for purposes of organization, election of officers, and transaction of other business. Notice of this meeting is not required.
Other general meetings of the board may be held without notice at such time and place as the board may fix from time to time.

Special Meetings. Special meetings of the board for any purpose may be called at any time by the chair of the board, if any, the president or any vice president, the secretary, or any two directors.

Director Compensation. Directors _ _[and members of committees of the board]_ _ may receive such compensation, if any, for their services as directors or officers, and such reimbursement of expenses, as the board may establish by resolution to be just and reasonable as to the corporation at the time that the resolution is adopted.

Director Voting. Each director shall have one vote on each matter presented to the board of directors for action. No director may vote by proxy.

OFFICERS OF THE CORPORATION

Election of Officers. The officers of this corporation, except any appointed under Section _ _[number]_ _ of these bylaws, shall be chosen _ _[annually]_ _ by the board and shall serve at the pleasure of the board, subject to the rights of any officer under any employment contract.

Additional Officers. The board may appoint and authorize the chair of the board, the president, or another officer to appoint any other officers that the corporation may require. Each appointed officer shall have the title and authority, hold office for the period, and perform the duties specified in the bylaws or established by the board.

Removal of Officers. Without prejudice to the rights of any officer under an employment contract, the board may remove any officer with or without cause. An officer who was not chosen by the board may be removed by any other officer on whom the board confers the power of removal.

Resignation of Officers. Any officer may resign at any time by giving written notice to the board. The resignation shall take effect on the date the notice is received or at any later time specified in the notice. Unless otherwise specified in the notice, the resignation need not be accepted to be effective. Any resignation shall be without prejudice to any rights of the corporation under any contract to which the officer is a party.

Vacancies. A vacancy in any office because of death, resignation, removal, disqualification, or any other cause shall be filled in the manner prescribed in these bylaws for normal appointments to that office. However, vacancies need not be filled on an annual basis.

Responsibilities of President. Subject to such supervisory powers as the board may give to the chair of the board, if any, and subject to the control of the board, the president shall be the general manager of the corporation and shall supervise, direct, and control the corporation’s activities, affairs, and officers. The president shall preside at all members’ meetings and, in the absence of the chair of the board, or if none, at all board meetings. The president shall have such other powers and duties as the board or the bylaws may require.

Responsibilities of Vice Presidents. If the president is absent or disabled, the vice presidents, if any, in order of their rank as fixed by the board, or, if not ranked, a vice president designated by the board, shall perform all duties of the president. When so acting, a vice president shall have all powers of and be subject to all restrictions on the president. The vice presidents shall have such other powers and duties as the board or the bylaws may require.

Responsibilities of Secretary. The secretary shall keep or cause to be kept, at the corporation’s principal office or such other place as the board may direct, a book of minutes of all meetings, proceedings, and actions of the board, of committees of the board, and of members’ meetings. The minutes of meetings shall include the time and place that the meeting was held; whether the meeting was annual, general, or special, and, if special, how authorized; the notice given; the names of persons present at board and committee meetings; and the number of members present or represented at members’ meetings.

The secretary shall keep or cause to be kept, at the principal California office, a copy of the articles of incorporation and bylaws, as amended to date.

The secretary shall keep or cause to be kept, at the corporation’s principal office or at a place determined by resolution of the board, a record of the corporation’s members, showing each member’s name, address, and class of membership.

The secretary shall give, or cause to be given, notice of all meetings of members, of the board, and of committees of the board that these bylaws require to be given. The secretary shall keep the corporate seal, if any, in safe custody and shall have such other powers and perform such other duties as the board or the bylaws may require.

Responsibilities of Chief Financial Officer. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and accounts of the corporation’s properties and transactions. The chief financial officer shall send or cause to be given to the members and directors such financial statements and reports as are required to be given by law, by these bylaws, or by the board. The books of account shall be open to inspection by any director at all reasonable times.

The chief financial officer shall (1) deposit, or cause to be deposited, all money and other valuables in the name and to the credit of the corporation with such depositories as the board may designate; (2) disburse the corporation’s funds as the board may order; (3) render to the president, chair of the board, if any, and the board, when requested, an account of all transactions as chief financial officer and of the financial condition of the corporation; and (4) have such other powers and perform such other duties as the board or the bylaws may require.

If required by the board, the chief financial officer shall give the corporation a bond in the amount and with the surety or sureties specified by the board for faithful performance of the duties of the office and for restoration to the corporation of all of its books, papers, vouchers, money, and other property of every kind in the possession or under the control of the chief financial officer on his or her death, resignation, retirement, or removal from office.

COMMITTEES OF THE BOARD OF DIRECTORS

Creating a Committee. The Board may create committees as needed, such as fundraising, housing, etc. The Board Chair appoints all committee chairs.

Audit Committee. The corporation shall have an audit committee consisting of at least _ _[number, e.g., one]_ _ _ _[director/directors]_ _, and may include nonvoting advisors. Directors who are employees or officers of the corporation or who receive, directly or indirectly, any consulting, advisory, or other compensatory fees from the corporation (other than for service as director) may not serve on the audit committee. The audit committee shall perform the duties and adhere to the guidelines set forth in the corporation’s audit committee charter as amended from time to time by the board. Such duties include, but are not limited to:

(1) Assisting the board in choosing an independent auditor and recommending termination of the auditor, if necessary;
(2) Negotiating the auditor’s compensation;
(3) Conferring with the auditor regarding the corporation’s financial affairs; and
(4) Reviewing and accepting or rejecting the audit.

Members of the audit committee shall not receive compensation for their service on the audit committee in excess of that provided to directors for their service on the board. If the corporation has a finance committee, a majority of the members of the audit committee may not concurrently serve as members of the finance committee, and the chair of the audit committee may not serve on the finance committee.

Compensation Committee. The corporation shall have a compensation committee consisting of at least three directors and no one who is not a director. Directors who are also employees of the corporation may not serve on the compensation committee. Pursuant to Government Code §12586(g) and the applicable provisions of federal law, the compensation committee shall review the compensation of the _ _[president/chief executive officer]_ _, _ _[treasurer/chief financial officer]_ _, and such other officers of the corporation the compensation committee determines appropriate, annually and whenever a modification in compensation is proposed. The review shall include an evaluation of the performance of the officers and an analysis of appropriate comparability data. Based on its review, the compensation committee shall recommend just and reasonable compensation amounts for the officers to the board. At the request of the president or the board, the compensation committee shall review any issue involving staff compensation and benefits, including but not limited to, housing, health, and retirement plans.

Executive Committee. Pursuant to Section _ _[number]_ _ of these bylaws, the board may appoint two or more directors of the corporation to serve as the executive committee of the board. The executive committee, unless limited by a resolution of the board, shall have and may exercise all the authority of the board in the management of the business and affairs of the corporation between meetings of the board; provided, however, that the executive committee shall not have the authority of the board in reference to those matters enumerated in Section _ _[number]_ _. All actions of the executive committee shall be reported to and ratified by the full board at the next duly scheduled board meeting.

Investment Committee. This corporation shall have an investment committee comprised of not less than three directors. The committee shall act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of like character and with like aims to accomplish the purposes of the institution. Individual investments shall be considered as part of an overall investment strategy. The committee shall consider present and future financial requirements, expected total return, general economic conditions, the appropriate level of risk, appropriate levels of income, growth and long-term net appreciation, and the probable safety of the funds. The committee may retain professional money managers, and shall develop an investment policy that shall be reconsidered at least annually, in light of the changing needs of the corporation, economic conditions, and any other factors that may affect the corporation’s tolerance of risk and need for income. The committee may recommend the retention of property contributed by a donor (whether or not it produces income), and a donor’s request should be a factor in making the determination of whether to sell a particular asset contributed by a donor.

Committee Meetings. Meetings and actions of committees of the board shall be governed by, held, and taken under the provisions of these bylaws concerning meetings and other board actions, except that the time for general meetings of board committees and the calling of special meetings of board committees may be set either by board resolution or, if none, by resolution of the committee. Minutes of each meeting shall be kept and shall be filed with the corporate records. The board may adopt rules for the governance of any committee as long as the rules are consistent with these bylaws. If the board has not adopted rules, the committee may do so.

INDEMNIFICATION

Right to Indemnification. This Corporation shall indemnify any person who was or is a party, or is threatened to be made a party, to any action or proceeding by reason of the fact that such person is or was an Officer, Director, or agent of this Corporation, or is or was serving at the request of this Corporation as a director, officer, employee, or agent of another foreign or domestic corporation, partnership, joint venture, or other enterprise, against expenses, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with such proceeding, to the fullest extent permitted under the California Nonprofit Corporation Law.

In determining whether indemnification is available to the Director, Officer, or agent of this Corporation under California law, the determination as to whether the applicable standard of conduct set forth in Corporations Code §5238 has been met shall be made by a majority vote of a quorum of Directors who are not parties to the proceeding. If the number of Directors who are not parties to the proceeding is less than two-thirds of the total number of Directors seated at the time the determination is to be made, the determination as to whether the applicable standard of conduct has been met shall be made by the court in which the proceeding is or was pending.

The indemnification provided herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled, and shall continue as to a person who has ceased to be an agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.

REQUIRED REPORTS

Corporate Records. This corporation shall keep the following:

(1) Adequate and correct books and records of account;
(2) Minutes of the proceedings of its members, board, and committees of the board; and
(3) A record of each member’s name, address, and class of membership.

The minutes and other books and records shall be kept either in written form or in any other form capable of being converted into clearly legible tangible form or in any combination of the two.

Annual Statement. As part of the annual report to all members, or as a separate document if no annual report is issued, the corporation shall, within 120 days after the end of the corporation’s fiscal year, annually prepare and mail, deliver, or send by electronic transmission to each member and furnish to each director a statement of any transaction or indemnification of the following kind:

(1) Any transaction (a) in which the corporation, or its parent or subsidiary, was a party, (b) in which an “interested person” had a direct or indirect material financial interest, and (c) that involved more than $50,000 or was one of several transactions with the same interested person involving, in the aggregate, more than $50,000. For this purpose, an “interested person” is either

(i) Any director or officer of the corporation, its parent, or subsidiary (but mere common directorship shall not be considered such an interest); or
(ii) Any holder of more than 10 percent of the voting power of the corporation, its parent, or its subsidiary.

The statement shall include a brief description of the transaction, the names of interested persons involved, their relationship to the corporation, the nature of their interest in the transaction, and, if practicable, the amount of that interest, provided that if the transaction was with a partnership in which the interested person is a partner, only the interest of the partnership need be stated.

(2) Any indemnifications or advances aggregating more than $10,000 paid during the fiscal year to any officer or director of the corporation under Sections _ _[numbers]_ _ of these bylaws, unless that indemnification has already been approved by the members under Corporations Code §5238(e)(2).

Private Foundation Restrictions. This corporation shall distribute its income for each taxable year at such time and in such manner as not to become subject to the tax on undistributed income imposed by Internal Revenue Code §4942, shall not engage in any act of self-dealing as defined in Internal Revenue Code §4941(d), shall not retain any excess business holdings as defined in Internal Revenue Code §4943(c), shall not make any investments in a manner as to subject it to tax under Internal Revenue Code §4944, and shall not make any taxable expenditures as defined in Internal Revenue Code §4945(d).

Supporting Organization Restrictions. This Corporation shall not accept any contribution from any “prohibited person.” For purposes of this Section, a “prohibited person” is: (1) a person who controls, directly or indirectly, either alone or with persons listed described in (2) and (3) below, the governing body of this Corporation or any successor organization designated pursuant to Section _ _[section number]_ _ of these Bylaws; (2) a member of the family of an individual listed in (1) above; or (3) a corporation, partnership, trust, or estate more than 35 percent of which is actually or constructively controlled by persons described in (1) or (2) above. For purposes of this Section, a member of an individual’s family includes his or her spouse, ancestors, children, grandchildren, great-grandchildren, and spouses of children, grandchildren, and great-grandchildren, as well as the individual’s brothers and sisters, by whole or half blood, and their spouses.

BYLAW AMENDMENTS

When Members’ Approval Required. Without the approval of the members, the board may not adopt, amend, or repeal any bylaw that would

(1) Increase or extend the terms of directors;
(2) Allow any director to hold office by designation or selection rather than by election by the members;
(3) Increase the quorum for members’ meetings;
(4) Repeal, restrict, create, expand, or otherwise change proxy rights; or
(5) Authorize cumulative voting.

Amending Supermajority Requirements. If any provision of these bylaws requires the vote of a larger proportion of the board than is otherwise required by law, that provision may not be altered, amended, or repealed except by that greater vote.

Members May Adopt, Amend, or Repeal Bylaws. New bylaws may be adopted, or these bylaws may be amended or repealed, by approval of the members, provided, however, that if the corporation has more than one class of voting members, any amendment that would materially and adversely affect the rights of a class as to voting or transfer, in a manner different from how the action affects another class, must be approved by the members of that adversely affected class. Any provision of these bylaws that requires the vote of a larger proportion of the members than otherwise is required by law may not be altered, amended, or repealed except by the vote of that greater number. No amendment may extend the term of a director beyond that for which the director was elected.

[If applicable, add the following option]

Any provision of these bylaws providing for the designation or selection, rather than election, of any director or directors may be adopted, amended, or repealed only by approval of the members, subject to the consent of the person or persons entitled to designate or select any such directors.

CONFLICT OF INTEREST POLICY

Conflicts of Interest. Whenever a director or officer has a financial or personal interest in any matter coming before the board of directors, the affected person shall a) fully disclose the nature of the interest and b) withdraw from discussion, lobbying, and voting on the matter. Any transaction or vote involving a potential conflict of interest shall be approved only when a majority of disinterested directors determine that it is in the best interest of the corporation to do so. The minutes of meetings at which such votes are taken shall record such disclosure, abstention and rationale for approval.

EXHIBIT A

Members of the Board of Directors.

[Name] [Term Expires]

_ _[Name]_ _ _ _[year]_ _

_ _[Name]_ _ _ _[year]_ _

_ _[Name]_ _ _ _[year]_ _

_ _[Name]_ _ _ _[year]_ _

_ _[Name]_ _ _ _[year]_ _

Sample Non-Profit Articles of Incorporation

Sample Non-Profit Articles of Incorporation

The information contained in this sample is provided for informational purposes only, and should not be construed as legal advice on any subject matter. You should not act or refrain from acting on the basis of any content included in this site without seeking legal or other professional advice. The contents of this post contain general information and may not reflect current legal developments or address your situation. We disclaim all liability for actions you take or fail to take based on any content on this site.

This form is borrowed from the California Secretary of State’s Forms for California Nonprofit, Nonstock Corporations. Other California forms can be found here.

Articles of Incorporation for a Public Benefit Corporation in California

I. Name

The name of the corporation is [Name of Corporation] .

II. Purpose

A. This corporation is a nonprofit Public Benefit Corporation and is not organized for the private gain of any person. It is organized under the Nonprofit Public Benefit Corporation Law for:

( ) public purposes.
or ( ) charitable purposes.
or ( ) public and charitable purposes.
B. The specific purpose of this corporation is to______________.

III. Address

The name and address in the State of California of this corporation’s initial agent for service of process is:

Name:
Address:
City:
State: CALIFORNIA

Zip Code:

IV. Activities

A. This corporation is organized and operated exclusively for charitable purposes within the meaning of Internal Revenue Code section 501(c)(3).
B. No substantial part of the activities of this corporation shall consist of carrying on propaganda, or otherwise attempting to influence legislation, and the corporation shall not participate or intervene in any political campaign (including the publishing or distribution of statements) on behalf of any candidate for public office.

V. Assets

The property of this corporation is irrevocably dedicated to charitable purposes and no part of the net income or assets of this corporation shall ever inure to the benefit of any director, officer or member thereof or to the benefit of any private person. Upon the dissolution or winding up of the corporation, its assets remaining after payment, or provision for payment, of all debts and liabilities of this corporation shall be distributed to a nonprofit fund, foundation or corporation which is organized and operated exclusively for charitable purposes and which has established its tax exempt status under Internal Revenue Code section 501(c)(3).

[Signature of Incorporator]

[Typed Name of Incorporator], Incorporator

If an individual is designated as the initial agent for service of process, include the agent’s business or residential street address in California (a P.O. Box address is not acceptable). If another corporation is designated as the initial agent for service ofprocess, do not include the address of the designated corporation.

This sample should be used ONLY as a guideline in the preparation of the original document for filing with the California Secretary of State.