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Sample Term Sheet

Sample Term Sheet

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
elow you can find a Sample Term Sheet

Contents

TERM SHEET FOR THE PURCHASE AND SALE OF SECURED CONVERTIBLE PROMISSORY NOTE OF XYZ CORPORATION

<DATE>

THIS TERM SHEET (the “Term Sheet”) sets forth the principal terms proposed by _________________________ (the “Investor”) for the purchase of a Convertible Promissory Note from XYZ Corporation, an <State> corporation (the “Company”). These terms when finalized will be memorialized in a binding Convertible Note Purchase Agreement executed between the Company and the Investor along with other documents as described herein.

GENERAL:

Type of Security:
Convertible Note, bearing interest at a simple interest rate of _____ (__%) percent calculated on the basis of a 360-day year consisting of twelve, 30-day months (the “Notes”).

Investors:
The Investor named at the beginning of this Term Sheet, as well as other investors designated by and reasonably acceptable to the Company (collectively, the “Investors”).

Total Amount Invested:
U.S. $____________________.

Closing:
As soon as practicable following the Company¡¦s acceptance of this Term Sheet and execution of all other required documentation designated by the Company but no later than <Date> (the ¡§Initial Closing¡¨). Additional closings may occur at any time following the Initial Closing in the Company¡¦s discretion.

TERMS OF THE NOTES:

Term of Payment:
The day that is one year following the date of the Initial Closing shall be the end of the term of the Note (the “Maturity Date”). All principal and accrued interest under the Note is due and payable on the Maturity Date. The Note may be prepaid at any time by the Company without penalty upon five days prior written notice to the Holder.

Terms of Conversion:
The Note would be convertible on the following terms. In the event the Company consummates, prior to the Maturity Date (as defined below) an equity financing pursuant to which it sells shares of its Series A Preferred Stock (the “Series A Preferred Stock”) with an aggregate sales price of not less than $_____________, including any and all convertible notes which are converted into preferred stock (including the Notes issued under this Note Purchase Agreement), and with the principal purpose of raising capital (a “Qualified Financing”), then the Note shall automatically convert all principal and accrued interest under the Note into the Series A Preferred Stock at __% of the price paid by investors in the Qualified Financing. The Note shall convert into shares of Series A Preferred Stock on the same other terms as the other investors purchasing Series A Preferred Stock in the Qualified Financing.

Liquidity Event:
If a Liquidity Event occurs before repayment or conversion of the Note into equity, the Company will pay the holder of the Note an amount equal to ___% of the outstanding principal amount of the Note plus any accrued interest due under the Note upon the closing of such Liquidity Event. (For example the Holder of a $_________ note earning __% interest, upon a Liquidity Event would be paid $_________ plus accrued interest of __% on $_______.) For purposes of this provision, a “Liquidity Event” shall mean (a) a merger of the Company with or into another entity (if after such merger the holders of a majority of the Company’s voting securities immediately prior to the transaction do not hold a majority of the voting securities of the successor entity), (b) a sale by the Company of all or substantially all of its assets or (c) the closing of the Company’s first firm commitment underwritten public offering of the Company’s common stock registered under the Securities Act of 1933, as amended.

Security and Subordination:
Repayment of the Note would be secured by a first priority security interest in collateral consisting of all of the assets of the Company. The Note shall be subordinated to all indebtedness of the Company to banks, commercial finance lenders, insurance companies, leasing or equipment financing institutions or other lending institutions regularly engaged in the business of lending money (excluding venture capital, investment banking or similar institutions which sometimes engage in lending activities but which are primarily engaged in investments in equity securities), which is for money borrowed, or for the purchase or leasing of equipment in the case of lease or other equipment financing, whether or not secured.

OTHER:

Documentation:
The transaction would be documented by counsel of the

Company with the documents containing the provisions described above and consisting of the following:

  • Note Purchase Agreement;
  • Risk Factor Statement;
  • Convertible Promissory Note; and
  • Security Agreement.

Representations & Warranties:
The Convertible Note Purchase Agreement would contain customary representations from the Company including, without limitation: organization and qualification, execution and delivery, validity and enforceability of agreements, issuance of the Note, no litigation and compliance with laws. Customary representations from the Investor would include without limitation: suitability to invest, restrictions on the securities that will be issued in the event of conversion, “lock-up” provisions related to a potential public offering.

Non-Binding Terms:
Except for the provisions set forth in the captions below entitled ¡§Exclusivity¡¨ and “Expenses,” this Term Sheet is not an offer subject to acceptance or a legally binding commitment by Investor, and no obligation will be created by execution of this Term Sheet unless and until definitive documents have been executed and delivered.

Confidentiality:
The Company shall not disclose the terms of this Term Sheet to any person or entity except for the Company’s accountants and attorneys and other potential Investors acceptable to Investor, without the written consent of Investor.

Expiration:
This Term Sheet expires on _____________, 20__ if not accepted by the Company by that date.

Amendment:
Holders of a majority in interest of the principal amount of the Notes may amend or waive any provision of the Notes and such amendment or waiver shall be binding on all holders of the Notes.

Expenses:
The Company and the Investors will each bear their own legal and other expenses with respect to the transactions contemplated herein.

The undersigned hereby agree to the foregoing terms. This instrument may be executed in one or more counterparts and by facsimile, each of which will constitute an original, and all of which will constitute one and the same instrument.

INVESTOR: ______________________

By:_________________________

ACCEPTED AND AGREED TO AS OF THE DATE SET FORTH BELOW:

THE COMPANY: XYZ CORPORATION, an <State> corporation
By: _____
Name:______
Title:_______

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

Sample Subscription Agreement

Sample Subscription 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.

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

Subscription Agreement

[Issuer Name], LP
STATEMENT REGARDING SECURITIES

THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED OR MAY NOT LAWFULLY BE MADE.

THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS UPON THE MERITS OF OR GIVE ITS APPROVAL TO ANY SECURITIES OFFERED HEREBY OR THE TERMS OF THE OFFERING. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED HEREUNDER ARE EXEMPT FROM REPRESENTATION. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE, AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, PURSUANT TO REGISTRATION OR EXEMPTION THEREUNDER. ANY REPRESENTATION TO THE CONTRARY OF THE FOREGOING IS A CRIMINAL OFFENSE.

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES LAWS AND ARE OFFERED PURSUANT TO CERTAIN EXEMPTIONS THEREUNDER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY STATE SECURITIES AGENCY AND NO REGULATORY BODY HAS PASSED UPON OR ENDORSED THESE SECURITIES. THESE SECURITIES MAY NOT BE TRANSFERRED EXCEPT IN TRANSACTIONS WHICH ARE EXEMPT UNDER APPLICABLE SECURITIES LAWS OR PURSUANT TO EFFECTIVE REGISTRATIONS THEREUNDER. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

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. INVESTMENT IN THE [CLASS ??] LIMTED PARTNER UNITS INVOLVES A SIGNIFICANT DEGREE OF RISK AND SHOULD BE UNDERTAKEN ONLY BY PERSONS WHOSE FINANCIAL RESOURCES ARE SUFFICIENT TO ENABLE THEM TO ASSUME SUCH RISK.

INVESTMENT IN SMALL BUSINESS 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.

THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVESTMENT IN THE SECURITIES INVOLVES A HIGH DEGREE OF RISK. INVESTORS MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF THE INVESTMENT FOR AN INDEFINITE PERIOD AND BE ABLE TO WITHSTAND A TOTAL LOSS OF THEIR INVESTMENT.

THIS DISCLOSURE DOCUMENT CONTAINS ALL OF THE REPRESENTATIONS BY THE COMPANY CONCERNING THIS OFFERING. NO PERSON SHALL MAKE DIFFERENT OR BROADER STATEMENTS THAN THOSE STATEMENTS CONTAINED HEREIN. INVESTORS ARE CAUTIONED NOT TO RELY UPON ANY INFORMATION NOT EXPRESSLY SET FORTH IN THIS DOCUMENT.

THE SECURITIES ARE BEING OFFERED ONLY TO PERSONS WHO HAVE SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS TO BE ABLE TO MAKE AN INFORMED DECISION REGARDING AN INVESTMENT IN THE SECURITIES. POTENTIAL INVESTORS MUST REPRESENT THAT THEY ARE CAPABLE OF EVALUATING THE MERITS AND RISKS OF THIS INVESTMENT. INVESTORS MUST BE ACQUIRING THE SECURITIES FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO ANY RESALE OR DISTRIBUTION. THE SECURITIES ARE SUITABLE ONLY FOR PERSONS WHO HAVE NO NEED FOR LIQUIDITY IN THIS INVESTMENT.

FURTHER, THE COMPANY IS EXTENDING THE OFFERING ONLY TO THOSE PERSONS WHO MEET THE DEFINITION OF ¡§ACCREDITED INVESTOR¡¨ UNDER THE SECURITIES ACT OF 1933, REGULATION D. 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 $1,000,000;
2. ANY NATURAL PERSON WHO HAD AN INDIVIDUAL INCOME IN EXCESS OF $200,000 IN EACH OF THE TWO MOST RECENT YEARS OR JOINT INCOME WITH THAT PERSON¡¦S SPOUSE IN EXCESS OF $300,000 IN EACH OF THOSE YEARS AND HAS A REASONABLE EXPECTATION OF REACHING THE SAME INCOME LEVEL IN THE CURRENT YEAR; OR
3. ANY TRUST, WITH TOTAL ASSETS IN EXCESS OF $5,000,000, NOT FORMED FOR THE SPECIFIC PURPOSE OF ACQUIRING THE SECURITIES OFFERED, WHOSE PURCHASE IS DIRECTLY 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.

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.

AN INVESTMENT IN THE SECURITIES IS HIGHLY ILLIQUID. ANY PERSON ACQUIRING THE SECURITIES SHOULD BE ABLE TO WITHSTAND A HIGHLY RISKY INVESTMENT OVER THE TERM OF THE SECURITIES. THERE WILL BE NO MARKET FOR THE SECURITIES.

THE OFFERED SECURITIES ARE BEING OFFERED SUBJECT TO ACCEPTANCE, PRIOR TO SALE AND WITHDRAWAL, CANCELLATION OR MODIFICATION OF THE OFFER BY THE COMPANY AT ANY TIME WITHOUT NOTICE.

[ISSUER NAME], LP

SUBSCRIPTION AGREEMENT
FOR OWNERSHIP OF [CLASS ??] LIMITED PARTNER UNITS OF A LIMITED PARTNERSHIP

Name of Subscriber ___________________________________________________________ .

Total U.S. Dollar Amount of Subscription US $ _______________ (the “Subscription Amount”).

WHEREAS, the undersigned party (the “Subscriber”) desires to subscribe for ___ [Class ??] Limited Partner Percentage Units, (the “[Class ??] Units”), of [Issuer Name], LP (the “Company”), a limited partnership organized under the laws of the State of [Domicile State] for the Subscription Amount stated above; and

WHEREAS, the Company is willing to offer the [Class ??] Units to Subscriber in the manner and subject to the terms set forth in this Subscription Agreement, the Certificate of Formation, the Private Placement Memorandum and the Limited Partnership Agreement of the Company (the “Enabling Documents”);

NOW, THEREFORE, the Company and Subscriber do hereby agree as follows:

1. Delivery of Subscription Amount. In order to subscribe for the [Class ??] Units, Subscriber must: (a) complete and execute this Subscription Agreement as well as the signature page to the Limited Partnership Agreement and deliver both documents to the Company, at: ________________________________; and (b) transmit the Subscription Amount by wiring funds to the _______________________ (the ¡§Escrow Agent¡¨), pursuant to the following wire transfer instructions:

Bank: __________________
Address: ___________________________
City, [Domicile State] _______________
Phone: _________________________
ABA Routing No. __________________
Credit account name: __________________________
Escrow Agent for: [Issuer Name], LP
Address:
Phone:
Credit account number: _____________________

If Subscriber does not execute and deliver to the Company a signature page to the Operating Agreement, upon written request to the Company, Subscriber may have its Subscription cancelled and its Subscription Amount returned in full. However, the Company reserves the right to cancel the Subscription and return the associated Subscription Amount in full if the Subscriber has not executed and returned the Operating Agreement in a timely manner.

Please notify the Company of your wire by fax to the Company at: _____________________. Please ensure the following information is included in your notification:

  • Name and Account Number
  • Amount of Wire
  • Date of Wire
  • Name of Remitting Bank
2. Acceptance. Subject to the acceptance hereof by the Company, Subscriber does hereby subscribe for the [Class ??] Units having a total U.S. dollar amount described on the first page of this Subscription Agreement above.
3. Subscription.
a. The Subscriber hereby subscribes for and agrees to purchase [Class ??] Units of the Company in the aggregate total of the U.S. dollar amount described on the first page of this document, all subject to the terms and conditions of this Subscription Agreement (the ¡§Subscription¡¨).
b. The Subscriber understands that the Company is offering a minimum of ___________ and a maximum of ___________________ Units for _______________ for each [Class ??] Limited Partnership Unit. Upon full subscription, the [Class ??] Limited Partners will own _________ of the equity of the Company. The minimum subscription amount is ____________, although the Company reserves the right to accept a lesser amount.
c. The Subscriber understands that the [Class ??] Limited Partner Units and the General Partner Unit have been issued to management and its affiliates in exchange for services or nominal consideration.
d. The Subscriber understands that the [Class ??] Units are offered with preference described as follows: The investor subscribing for a [Class ??] Unit will be provided a quarterly preferred return (non-cumulative and non-guaranteed) in an amount up to but not exceeding _____________ 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. Additionally, in the event of the sale of all of the assets of the partnership, (the residential real estate portfolio, collectively the ¡§Property¡¨), the [Class ??] Limited Partners will be paid on a prorated basis between them______________ percent of the gain on the sale (the ¡§Bonus Payment¡¨) if any gain is realized, at the time of the closing of the sale of all of the Property. The General Partner and the [Class ??] Limited Partner 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 Property, __________________ percent preferred annual return 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 a priority as to other Partners for repayment of the balance due of his, her or its Capital Account in the event of liquidation.
e. The Subscriber understands that the [Class ??] Units are being issued pursuant to exemption afforded under Regulation D of the Securities Act of 1933, and that therefore the [Class ??] Units can only be sold to the Company and cannot be sold to a third party without a separate exemption from registration.
f. The Subscriber understands that this Subscription Agreement, the consideration delivered and all other subscription documents will be held by the Company prior to the closing of the Offering. The Subscriber understands that if the Offering is terminated without closing, any amount delivered to the Company will be returned to the Subscriber with 1% annualized interest.
g. The Subscriber acknowledges that the Company reserves the right, in its sole and absolute discretion, to accept or reject this Subscription, in whole or in part, and that this Subscription shall not be binding unless and until accepted by the Company.
h. The Subscriber and its/his/her purchaser representative, if any, may only rely on the information furnished or made available or to be made available to the Subscriber and its/his/her purchaser representative, if any, by the Company, as described above.
i. Subscriber acknowledges and agrees that the Subscription Price will be disbursed from the Company¡¦s escrow account at the time the General Partner concludes that the offering is complete.
4. Subscriber Representations, Warranties and Covenants. The Subscriber understands that the information provided by the Subscriber in this Subscription Agreement is being furnished in order for the Company to verify the Subscriber¡¦s qualification to acquire the [Class ??] Units. The Subscriber understands that such information is needed by the Company so that it can determine the validity and applicability of certain exemptions from the registration requirements of the Securities Act of 1933, as amended (the ¡§Act¡¨) and applicable state securities laws (the ¡§State Acts¡¨) in respect to the sale of the [Class ??] Units. Accordingly, the Subscriber represents and warrants to the Company as follows:
a. The Subscriber understands that if it/he/she uses the service of a Purchaser Representative as such term is defined in Regulation D under the Act (¡§Purchaser Representative¡¨), that: (1) it/he/she must acknowledge in writing prior to its/his/her purchase of the [Class ??] Units that such Purchaser Representative is its/his/her Purchaser Representative in connection with evaluating the merits and risks of its/his/her prospective investment in the Company, (2) such Purchaser Representative must disclose, in writing, prior to the acknowledgment referred to above, any material relationship between such Purchaser Representative or its affiliates and the Company or its affiliates which now exists or is mutually understood to be contemplated or which has existed at any time during the previous two years, and any compensation received or to be received as a result of such relationship, including any compensation received or to be received in connection with the offering of the [Class ??] Interests, and (3) the Subscriber must furnish true and complete copies of the foregoing acknowledgments promptly upon their execution.
b. The Subscriber and its/his/her Purchaser Representative, if any, have received and read a copy of the Private Placement Memorandum of the Company dated _____________, the Limited Partnership Agreement of the Company, the Certificate of Formation and this Subscription Agreement, in order that they are able to: (1) ask questions and receive satisfactory answers concerning the Company and its Officers, the business and the financial condition of the Company, and the terms and conditions of the offering, and (2) obtain any additional information which the Company possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy or completeness of such information. The Subscriber also has been furnished access to any and all other information that is material to the Subscriber or would be as requested by a reasonable investor making a decision to purchase the [Class ??] Interests.
c. Neither the Subscriber nor its/his/her Purchaser Representative, if any, has been furnished any offering literature other than the Enabling Documents.
d. The [Class ??] Units are being acquired solely for investment for the Subscriber¡¦s own account and not as nominee or agent or otherwise on behalf of any other entity or person, and are not being acquired with a view to or with a present intention to reoffer, resell, fractionalize, assign, grant any participating interest in, or otherwise distribute the [Class ??] Interests.
e. The Subscriber certifies that: (1) no other entity or person has any direct or indirect beneficial interest in the [Class ??] Interests, (2) the Subscriber is not acting as an underwriter or directly or indirectly participating in any underwriting of the [Class ??] Interests, (3) the Subscriber has not formed any entity for the purpose of making the investment in the [Class ??] Units or if so, has previously reported such fact to the Company, (4) the Subscriber will not take, or cause to be taken, any action that would cause the Subscriber to be an underwriter (as defined in Section 2(11) of the Act) of the [Class ??] Interests, and (5) the Subscriber does not have any contract, undertaking, agreement, arrangement or understanding with any entity or person which is contrary to the representations, warranties and agreements contained in this Subscription Agreement.
f. The Subscriber further agrees that the [Class ??] Units shall only be sold, pledged, assigned, hypothecated, or otherwise transferred (with or without consideration) in compliance with the conditions specified in the Limited Partnership Agreement, to which the Company is a party.
g. The Subscriber agrees that the Company is under no obligation to register the [Class ??] Units under the Act or any State Acts on its/his/her behalf or to assist it/him in complying with any exemption from registration.
h. The Subscriber understands that no federal or state agency has passed upon the [Class ??] Interests, or made any finding or determination as to the fairness of the investment or any recommendation or endorsement of the [Class ??] Interests.
i. The Subscriber is a citizen of either Canada or the United States of America, is at least 21 years of age, and has the legal capacity and authority to execute, deliver and perform this Subscription Agreement, and its/his/her principal residence is located within the state designated under its/his/her name below.
j. All information which the Subscriber has provided to the Company concerning the Subscriber is true and complete as of the date set forth at the end hereof, and if there should be any change in such information prior to this Subscription being accepted, the Subscriber will immediately provide the Company with accurate and complete information concerning any such change.
k. The Subscriber understands that the [Class ??] Units are not a liquid investment.
l. The Subscriber understands that the Company will be subject to all of the risks inherent in the operation of a business in general, including, without limitation, those related to local and national economic conditions, changes in market conditions and costs, changes in management, changes in consumer preferences and demographics, competition, ability to obtain and retain qualified employees, and government laws and regulations.
m. The Subscriber certifies reaffirms that statements set forth on the previously delivered Investor Suitability Questionnaire are applicable to the Subscriber as indicated.
n. The Subscriber represents that the Subscriber: (i) has adequate means of providing for the Subscriber¡¦s current needs and possible contingencies, (ii) has no need for liquidity in this investment, (iii) believes that the nature and amount of this investment is suitable for the Subscriber and consistent with the Subscriber¡¦s overall investment program and financial position, (iv) believes that the Subscriber¡¦s overall commitment to investments which are not readily marketable is not disproportionate to the Subscriber¡¦s net worth and the investment in the [Class ??] Units will not cause such overall investment commitment to become excessive, (v) is under no present or contemplated future need to dispose of the [Class ??] Units to satisfy any existing or contemplated undertaking, need or indebtedness, (vi) is able to bear the economic risks of the investment in the [Class ??] Units, (vii) at the present time is able to afford a complete loss of such investment, and (viii) has such knowledge and experience in business and financial matters that he is capable of evaluating the merits and risks of the investment.
o. The Subscriber is aware that no market may exist for the resale of the [Class ??] Units.
p. The Subscriber is aware of any and all restrictions imposed by the Company on the further distribution of the [Class ??] Units.
5. Indemnification. The Subscriber agrees to indemnify and hold harmless the Company, the General Partner and any entity or person, attorney or other acting on behalf of the Company, from and against any and all damage, loss, liability, cost and expense (including attorneys¡¦ fees) which any of them may incur by reason of the failure by the Subscriber to fulfill any of the terms or conditions of this Subscription Agreement, or by reason of any breach of the representations and warranties made by the Subscriber herein, or in any other document provided by the Subscriber to the Company. All representations, warranties and covenants contained in this Subscription Agreement, and the indemnification contained in this Section 5, shall survive the acceptance of this Subscription.
6. Special Securities Laws Notices. The Subscriber understands and acknowledges that:

THE [CLASS ??] LIMTED PARTNERSHIP UNITS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS, WILL BE ACQUIRED FOR INVESTMENT ONLY, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR TRANSFERRED FOR VALUE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE ACT OR THE STATE ACTS OR AN EXEMPTION THEREFROM, AND THEN ONLY SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE OPERATING AGREEMENT.

7. Miscellaneous.
a. No Waiver. Notwithstanding any of the representations, warranties, acknowledgments or agreements made herein by the Subscriber, the Subscriber does not thereby or in any other manner waive any of the rights granted to it/him/her under federal or state securities laws.
b. Entire Agreement; Modification. This Subscription Agreement, the Enabling Documents and the Risk Factor Statement attached hereto constitutes the entire agreement among the parties hereto with respect to the subject matter hereof, and neither this Subscription Agreement nor any provisions hereof shall be waived, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought.
c. Notices. Any notice, demand or other communication which any party hereto may be required, or may elect, to give to anyone interested hereunder shall be sufficiently given if: (i) deposited, postage prepaid, in the United States mail, certified or registered mail, a nationally recognized overnight delivery service, addressed, in the case of the Company, to the Company, attention President at the above address, and in the case of the Subscriber, to the address set forth on the signature page hereof or at such other address as the Subscriber shall so notify the Company in writing, or (ii) delivered personally at such address.
d. Binding Effect. Except as otherwise provided herein, this Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns, as applicable. If the Subscriber is more than one entity or person, the obligations of the Subscriber shall be joint and several and the agreements, representations, warranties and acknowledgments herein contained shall be deemed to be made by and be binding upon each such person and its/his/her respective heirs, executors, administrators, successors, legal representative and assigns.
e. Assignability. The Subscriber agrees not to transfer or assign this Subscription Agreement, or any of the Subscriber¡¦s interest herein, and further agrees that the transfer or assignment of the [Class ??] Units shall be made only in accordance with applicable laws and the terms of the Limited Partnership Agreement.
f. Applicable Law. This Subscription Agreement shall be governed by and construed in accordance with the laws of the State of [Domicile State], without regard to conflict of law principles.
g. ARBITRATION OF DISPUTES. THE UNDERSIGNED ACKNOWLEDGES, BY HIS, HER OR ITS EXECUTION OF THIS SUBSCRIPTION AGREEMENT, THAT IT CONTAINS A PRE-DISPUTE ARBITRATION CLAUSE. BY SIGNING THIS AGREEMENT, THE PARTIES AGREE AS FOLLOWS:
1). ALL PARTIES TO THIS AGREEMENT ARE GIVING UP THE RIGHT TO SUE EACH OTHER IN COURT, INCLUDING THE RIGHT TO A TRIAL BY JURY, EXCEPT AS PROVIDED BY THE RULES OF THE ARBITRATION FORUM IN WHICH A CLAIM IS FILED.
2). ARBITRATION AWARDS ARE GENERALLY FINAL AND BINDING: A PARTY’S ABILITY TO HAVE A COURT REVERSE OR MODIFY AN ARBITRATION AWARD IS VERY LIMITED.
3). THE ABILITY OF THE PARTIES TO OBTAIN DOCUMENTS, WITNESS STATEMENTS AND OTHER DISCOVERY IS GENERALLY MORE LIMITED IN ARBITRATION THAN IN COURT PROCEEDINGS.
4). THE ARBITRATORS DO NOT HAVE TO EXPLAIN THE REASON(S) FOR THEIR AWARD.
5). THE PANEL OF ARBITRATORS WILL TYPICALLY INCLUDE A MINORITY OF ARBITRATORS WHO WERE OR ARE AFFILIATED WITH THE SECURITIES INDUSTRY.
6). THE RULES OF SOME ARBITRATION FORUMS MAY IMPOSE TIME LIMITS FOR BRINGING A CLAIM IN ARBITRATION. IN SOME CASES, A CLAIM THAT IS INELIGIBLE FOR ARBITRATION MAY BE BROUGHT IN COURT.
7). THE RULES OF THE ARBITRATION FORUM IN WHICH THE CLAIM IS FILED, AND ANY AMENDMENTS THERETO, SHALL BE INCORPORATED INTO THIS AGREEMENT.

NO PERSON SHALL BRING A PUTATIVE OR CERTIFIED [CLASS ??]CTION TO ARBITRATION, NOR SEEK TO ENFORCE ANY PRE-DISPUTE ARBITRATION AGREEMENT AGAINST ANY PERSON WHO HAS INITIATED IN COURT A PUTATIVE [CLASS ??]CTION; OR WHO IS A MEMBER OF A PUTATIVE CLASS WHO HAS NOT OPTED OUT OF THE CLASS WITH RESPECT TO ANY CLAIMS ENCOMPASSED BY THE PUTATIVE [CLASS ??]CTION UNTIL: (a) THE CLASS CERTIFICATION IS DENIED; OR (b) THE CLASS IS DECERTIFIED; OR (c) THE SUBSCRIBER IS EXCLUDED FROM THE [CLASS ??]Y THE COURT. SUCH FORBEARANCE TO ENFORCE AN AGREEMENT TO ARBITRATE SHALL NOT CONSTITUTE A WAIVER OF ANY RIGHTS UNDER THIS AGREEMENT EXCEPT TO THE EXTENT STATED HEREIN.

IN THE EVENT THAT A DISPUTE ARISES BETWEEN THE UNDERSIGNED SUBSCRIBER AND THE COMPANY, OR ANY OF THEIR LEGAL REPRESENTATIVES, ATTORNEYS, ACCOUNTANTS, AGENTS, EMPLOYEES OR ANY OTHER PARTY EMPLOYED BY THE COMPANY, SAID DISPUTE ARISING OUT OF, IN CONNECTION WITH OR AS A RESULT OF THE SUBSCRIPTION HEREBY MADE, THE UNDERSIGNED HEREBY EXPRESSLY AGREES THAT SAID DISPUTE SHALL BE RESOLVED THROUGH ARBITRATION RATHER THAN LITIGATION. THE UNDERSIGNED HEREBY AGREES TO SUBMIT THE DISPUTE FOR RESOLUTION TO EITHER THE AMERICAN ARBITRATION ASSOCIATION, IN PHOENIX, [DOMICILE STATE] OR THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC., IN [DOMICILE STATE], WHICHEVER ASSOCIATION MAY ASSERT JURISDICTION OVER THE DISPUTE, WITHIN FIVE (5) DAYS AFTER RECEIVING A WRITTEN REQUEST TO DO SO FROM ANY OF THE AFORESAID PARTIES. IF THE UNDERSIGNED FAILS TO SUBMIT THE DISPUTE TO ARBITRATION AS REQUESTED, THEN THE REQUESTING PARTY MAY COMMENCE AN ARBITRATION PROCEEDING. THE FEDERAL ARBITRATION ACT SHALL GOVERN THE PROCEEDING AND ALL ISSUES RAISED BY THIS AGREEMENT TO ARBITRATE.

IN WITNESS WHEREOF, the Subscriber has executed this Subscription Agreement on the date above.

THIS AGREEMENT CONTAINS A BINDING ARBIRTATION PROVISION ON _________.

INVESTOR:
By: _________________________________
[Print Name] _________________________
Social Security or EIN Number:
____________________________________
Address:

SUBSCRIPTION ACCEPTED:
[Issuer Name], LP,
By: _______________________________

STATEMENT OF RISK FACTORS

Investing in the Securities involves a high degree of risk. The risk factors and all other information disclosed in this Subscription Agreement 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.
[Copy]

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

Sample Stock Certificate

Sample Stock Certificate

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

~ CERTIFICATE OF STOCK ~

NUMBER: ___ COMMON SHARES:____

ORGANIZED UNDER THE LAWS OF THE STATE OF xxxxxxxxxxxx

XYZ, INC. A XYZ CORPORATION

The Corporation is authorized to issue ________________ Shares of Common Stock without Par Value.

THIS CERTIFIES THAT XXXXXXXX is the owner of XXXXXXXX (xxxxx) fully paid and non-assessable share(s) of Common Stock without Par Value, transferable only on the books of the Corporation by the holder hereof in person or by a duly authorized Attorney upon surrender of this Certificate property endorsed.

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE MADE WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.

Transfer of these Shares is subject to restrictions in the By Laws for this Corporation.

The Corporation will furnish without charge to each Shareholder who so requests, the powers, designations, preferences and relative participation rights of Shareholders and the qualifications, limitations or restrictions of such rights.

In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized Officers.
Dated_____________________

__________________________
xxxxxxxxx, President

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

Sample Security Agreement

Sample Security 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.

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

SECURITY AGREEMENT FOR XYZ CORPORATION

CONVERTIBLE PROMISSORY NOTE

THIS SECURITY AGREEMENT (the “Security Agreement”) is entered into as of ___________, 20__, by and between XYZ Corporation, an <State> corporation (the “Company”), and _______________________ (the “Secured Party”).

RECITALS:

Company has borrowed funds and may borrow through subsequent advances additional funds, from Secured Party pursuant to a Convertible Promissory Note of even date herewith (the “Note”) the terms of which are incorporated herein by reference.

As security for its repayment obligations under the Note, Company has agreed to grant Secured Party a security interest in all of its assets on the terms set forth in this Security Agreement.

NOW, THEREFORE, to that end and in consideration of the premises, covenants and agreements set forth below, and the mutual benefits to be derived from this Security Agreement, and other good and valuable consideration, the parties hereto agree as follows:

1. Security Interest. To secure the “Obligation” (as defined below), Company hereby transfers, conveys, assigns, and grants to Secured Party a security interest in all of Company’s assets, which may include one or more of the following items (hereinafter, collectively, the “Collateral”):
a. General Intangibles. All of Company’s General Intangibles, now existing or hereafter arising or acquired, together with the proceeds therefrom. As used herein, the term “General Intangibles” means all personal property (including things in action) other than goods, accounts, chattel paper, documents, instruments, and money, and includes, but is not limited to, business records, deposit accounts, inventions, intellectual property, designs, patents, patent applications, trademarks, trademark applications, trademark registrations, service marks, service mark applications, service mark registrations, trade names, goodwill, technology, knowhow, confidential information, trade secrets, customer lists, supplier lists, copyrights, copyright applications, copyright registrations, licenses, permits, franchises, tax refund claims, and any letters of credit, guarantee claims, security interests, or other security held by the Company to secure any “Accounts” (as hereinafter defined).
b. Accounts (Including Accounts Receivable). All of Company’s Accounts, whether now existing or hereafter arising or acquired, together with the proceeds therefrom. As used herein, the term “Accounts” means any right of Company to receive payment from another person or entity, including payment for goods sold or leased, or for services rendered, no matter how evidenced or arising, and regardless of whether yet earned by performance. It includes, but is not limited to, accounts, accounts receivable, contract rights, contracts receivable, purchase orders, notes, drafts, acceptances, all rights to payment earned or unearned, and other forms of obligations and receivables.
c. Inventory. All of Company’s Inventory, whether now owned or hereafter acquired, together with the products and proceeds therefrom and all packaging, manuals, and instructions related thereto. As used herein, the term “Inventory” means all goods, merchandise, and personal property held for sale or leased or furnished or to be furnished under contracts of service, and all raw materials, work in process, or materials used or consumed in Company’s business, wherever located and whether in the possession of Company, a warehouseman, a bailee, or any other person.
d. Equipment. All of Company’s Equipment, now owned or hereafter acquired, together with the products and proceeds therefrom, and all substitutes and replacements therefor. As used herein, the term “Equipment” includes all equipment, machinery, tools, office equipment, supplies, furnishings, furniture, or other items used or useful, directly or indirectly, in Company’s business, all accessions, attachments, and other additions thereto, all parts used in connection therewith, all packaging, manuals, and instructions related thereto, and all leasehold or equitable interests therein.
e. Fixtures. All of Company’s interest in and to all fixtures and furnishings, now owned or hereafter acquired, together with the products and proceeds therefrom, all substitutes and replacements therefor, all accessories, attachments, and other additions thereto, all tools, parts, and supplies used in connection therewith, and all packaging, manuals, and instructions related thereto, located on or attached to Company’s business premises located at: XYZ Corporation, ______________________________.
f. Chattel Paper, Documents and Instruments. All of Company’s right, title, and interest in any chattel paper, documents, or instruments, now owned or hereafter acquired or arising, or now or hereafter coming into the possession, control, or custody of either Company or Secured Party, together with all proceeds therefrom. The terms “chattel paper,” “documents,” and “instruments” shall have those meanings ascribed to them in the <State> Uniform Commercial Code.
2. Obligation. This security interest is given as security for all indebtedness and obligations owed by Company to Secured Party, whether now existing or hereafter incurred, under this Security Agreement or the Note, together with all extensions, modifications, or renewals thereof (hereinafter referred to, collectively, as the “Obligation”).
3. Proceeds. As used in this Security Agreement, the term “proceeds” means all products of the Collateral and all additions and accessions to, replacements of, insurance or condemnation proceeds of, and documents covering any of the Collateral, all property received wholly or partly in trade or exchange for any of the Collateral, all leases of any of the Collateral, and all rents, revenues, issues, profits, and proceeds arising from the sale, lease, license, encumbrance, collection, or any other temporary or permanent disposition, of any of the Collateral or any interest therein.
4. Title; Filing. Company warrants that, except as previously disclosed in writing to Secured Party, it is the owner of the Collateral free and clear of all liens, claims, and encumbrances of whatever kind or nature. Company covenants that so long as any portion of the Obligation remains unpaid, Company will not execute or file a financing statement or security agreement covering the Collateral to anyone other than Secured Party, except in the ordinary course of business or as otherwise allowed. Company agrees to sign and deliver one or more financing statements or supplements thereto or other instruments as Secured Party may from time to time require in order to comply with the Uniform Commercial Code or other applicable law to preserve, protect and enforce the security interest of Secured Party and to pay all costs of filing such statements or instruments. In addition, the Secured Party shall have the right to promptly file a financing statement to perfect Secured Party’s interest in the Collateral.
5. Care of Collateral. Company will keep in effect all licenses, permits and franchises required by law or contract relating to Company’s business (if applicable), property, or the Collateral; maintain insurance on the Collateral; keep the Collateral in good repair and be responsible for any loss or damage to it; at all times warrant and defend Company’s ownership and possession of the Collateral keep the Collateral free from all liens, claims, encumbrances and security interests; pay when due all taxes, license fees, and other charges upon the Collateral or upon Company’s business, property or the income therefrom; and not misuse, conceal or in any way use or dispose of the Collateral unlawfully or contrary to the provisions of this Security Agreement or of any insurance coverage. Loss of, damage to, or un-collectability of the Collateral or any part thereof will not release Company from any of its obligations hereunder.
6. Default. A default hereunder will occur if any of the following events occur: (1) Company fails to pay any portion of the Obligation when due; (2) Company fails to perform any undertaking or materially breaches any warranty or covenant in this Security Agreement or the Note; (3) any statement, representation or warranty of Company under this Security Agreement or the Note is untrue in any material respect when made; (4) Company becomes insolvent or unable to pay debts as they mature or makes an assignment for the benefit of creditors or any proceeding is instituted by or against it alleging that it is insolvent or unable to pay its debts as they mature; (5) dissolution of Company; (6) an attachment, garnishment, execution or other process is issued or a lien filed against any property of Company, which is not removed within a reasonable period of time; and (7) Company transfers an interest in any of the Collateral contrary to the provisions of this Security Agreement without the prior written consent of Secured Party other than in the ordinary course of business. Waiver of any default will not constitute a waiver of any other or subsequent default.
7. Remedies. Upon the occurrence of any default hereunder at any time thereafter, all of the Obligation will, at the election of Secured Party and without notice of such election, or demand for payment, become immediately due and payable and Secured Party will have the remedies of a secured party under the <State> Uniform Commercial Code or other applicable law.
8. General. The wavier by Secured Party of any breach of any provision of this Security Agreement 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 Secured Party 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 Secured Party’s written consent. This Security Agreement may not be altered or amended except by a writing signed by all the parties hereto. This Security Agreement will be governed by and construed and interpreted in accordance with the laws of the State of <State>. 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 Security Agreement binds Company, its successors and assigns, and inures to the benefit of Secured Party, its successors and assigns.
9. 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 9 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.

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

SECURED PARTY: ______________________________.

By: _________________________________

THE COMPANY: XYZ CORPORATION, an <State> corporation

By:
Name:
Title:

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

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]_ _