replied 5 years ago.
You are going to have to modify any general joint venture agreement. I would highly recommend retaining an attorney to finalize the agreement. There is no "form" off the shelf that will be totally applicable to your situation.
These forms - the earlier form and this form - although it states PA - they can be used for any state. You do have to companies - 1 from CA and 1 from DC - so you are going to have to modify any agreement because there would no "form" for such.
Here's the 2nd sample:
General Joint Venture Agreement
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT ("Agreement") is made and entered into as of ______ [date], by and between ______ ("______"), a Pennsylvania corporation, and ______ ("______"), a Pennsylvania corporation.
A. The parties hereto propose to enter into an Agreement to jointly engage in business as ______ ("Business").
B. Each of ______ and ______ shall receive, generally, one-half the benefits and assume one-half the obligations of the Business as more particularly set forth herein.
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby acknowledged, and the mutual promises contained herein, the parties hereto agree as follows:
FORMATION, PURPOSES, DURATION
1.1 Formation. The parties hereto (jointly, the "Venturers" and, individually, a "Venturer") hereby enter into and form a joint venture (the "Joint Venture" or the "Venture") using the fictitious name and style "______" for the purposes set forth in this Agreement.
1.2 Purposes of the Joint Venture. The purpose of the Joint Venture is to engage in business as ______. The Joint Venture is authorized to do any and all acts and things necessary, appropriate, advisable, or incidental to the furtherance and accomplishment of its purposes.
1.3 Scope of Venturers' Authority. Except as provided in this Agreement, neither Venturer shall have any authority to bind or act for, or assume any obligations or responsibility on behalf of, the other Venturer or the Joint Venture. This Agreement shall not be deemed to create a general partnership between the Venturers with respect to any activities other than activities within the scope and business purposes of the Joint Venture specified in Subsection 1.2.
1.4 Principal Place of Business. The principal place of business of the Joint Venture shall be located at ______, ______, Pennsylvania or at such other location as may be approved by the Managers (as hereinafter defined) from time to time.
1.5 Term. The term of the Joint Venture shall commence ______, and shall continue, unless sooner terminated in accordance with other provisions of this Agreement, for so long as the Joint Venture engages in the Business, or until the Venturers agree to its termination; provided, however, that the Joint Venture shall, if not sooner terminated, terminate on ______, unless otherwise extended by mutual written agreement of both Venturers; and provided further, that neither Venturer shall have the right and each Venturer hereby agrees not to withdraw from the Joint Venture, nor to dissolve, terminate, or liquidate, or to petition a court for the dissolution, termination, or liquidation of the Joint Venture, except as provided in this Agreement; and neither Venturer at any time shall have the right, without the consent of the other, to petition or to take any action to subject the Joint Venture assets, or any part thereof, to the authority of any court of bankruptcy, insolvency, receivership, or similar proceeding.
1.6 Accounts Receivable and Contracts to Perform Services. It is expressly understood between the parties that any accounts receivable due to either Venturer for services performed before the effective date of this Agreement will not be contributed to the Venture but will remain the property of said Venturer and that any contracts or agreements of either Venturer to perform services within the scope of the Business of the Joint Venture as of the effective date of this Agreement will become part of the Business of the Joint Venture.
CAPITAL CONTRIBUTIONS, FINANCING, AND DISTRIBUTION
2.1 Joint Venture Interests and Capital Accounts.
2.1.1 Percentage Interests. The Venturers shall have the following undivided percentage interests in the Joint Venture (individually, a "Percentage Interest" and collectively "Percentage Interests"):
2.1.2 Adjustments. Unless otherwise agreed by both Venturers, no adjustment to the Percentage Interest of either Venturer shall be made except as a result of a transfer of a Venturer's Percentage Interest, or a portion thereof, pursuant to Articles VI or VII hereof or the conversion of a Contribution Loan Pursuant to Section 2.4.
2.1.3 Capital Accounts Defined. As used herein, the term "Capital Account" shall mean and refer to the capital account of each Venturer in the Joint Venture reflecting the value of each contribution of such Venturer to the capital of the Joint Venture as of the date of such contribution. A Capital Account, as defined herein, shall be maintained for each Venturer, and shall be subject to adjustment as provided in Section 2.7 and 2.8.
2.2 Initial Capital Contributions by ______. ______ has made an initial capital contribution of $______ in cash and personal property (other than a leasehold and leasehold improvements) valued for purposes of this Agreement at $______; and a leasehold ("Leasehold") and leasehold improvements ("Leasehold Improvements") valued for purposes of this Agreement at $______.
2.3 Initial Capital Contributions by ______. ______ has made an initial capital contribution of $______ in cash and personal property valued for purposes of this Agreement at $______.
2.4 Additional Capital Contributions.
2.4.1 General; Costs. (a) To the extent the Joint Venture requires funds in addition to the capital contributions provided for above in Sections 2.2 and 2.3, the Venturers agree to make additional capital contributions from time to time in accordance with the provisions herein and in the same percentages as their initial Percentage Interests set forth in Subsection 2.1.1 above (without adjustment from time to time as provided herein) and in such amounts as are sufficient to enable the Joint Venture to carry out the purposes of this Agreement; (b) all costs of the Venture shall be borne equally by the Venturers, including all costs attributable to obligations incurred in connection with the Business.
2.4.2 Notice by Managers. (a) If additional capital contributions are required to be made pursuant to this Section 2.4, the Managers shall give notice to each Venturer. Such notice shall specify in reasonable detail the amount and purpose of any such additional capital contributions. Each Venturer shall, within 10 days of the receipt of such notice from the Managers (or such later date as provided in such notice), deposit with the Venture the additional capital contribution required by such Notice; (b) In the event that the Managers cannot agree whether the Joint Venture requires additional funds as provided in Section 2.4.1, either Manager may give the Notice required by this Section 2.4.2 ("Unilateral Notice"). In the event such Unilateral Notice is given, the other Manager may elect to submit to arbitration (as provided in Section 3.1.1) the issue of whether the Joint Venture requires additional funds as provided in Section 2.4.1. Pending the decision of the arbitrator, a Venturer may elect not to make such additional capital contribution. If a Venturer so elects not to make such additional capital contribution, the other Venturer may make a Contribution Loan (as defined below) in the amount of such additional capital contribution to the Joint Venture; provided that the Contributing Venturer (as defined below) may not proceed to exercise its Remedies as provided in Section 2.4.5 in connection with such Contribution Loan unless the arbitrator determines that the Joint Venture requires additional funds as provided in Section 2.4.1 and until ninety (90) days after the decision of the arbitrator. In the event the arbitrator determines that the Joint Venture does not require additional funds as provided in 2.4.1, the Contributing Venturer will be repaid the amount of any such Contributing Loan plus interest (as determined in Section 2.4.3) and the amount of any such additional capital contribution calculated at a rate equal to the lesser of (a) the prime rate in effect from time to time at ______, ______, Pennsylvania, during the time the additional capital contribution is held by the Venture and (b) the maximum rate of interest then permitted by Pennsylvania law.
2.4.3 Contribution Loans. In the event either Venturer ("Non-Contributing Venturer") fails to make any additional capital contribution pursuant to Section 2.4.1, the other Venturer (the "Contributing Venturer") shall have the right to advance directly to the Joint Venture the funds required from the Non-Contributing Venturer as a loan to such Venturer ("Contribution Loan"). In the event the Contributing Venturer does not elect to advance the full amount of the additional funds required from the Non-Contributing Venturer, the Contributing Venturer shall be entitled to withdraw its additional capital contribution and treat the failure of the Non-Contributing Venturer to make the additional capital contribution as an Event of Default.
2.4.4 Repayment through Distributions. In the event the Contributing Venturer elects to make a Contribution Loan, the Contribution Loan shall bear interest at a rate equal to the lesser of the prime rate in effect from time to time at ______, ______, Pennsylvania, plus four percentage points during the time the loan remains outstanding, or the maximum rate of interest then permitted by Pennsylvania law. The Contribution Loan shall be a personal obligation of the Non-Contributing Venturer and shall be repaid out of any subsequent distributions made pursuant to this Agreement to which the Non-Contributing Venturer for whose account the Contribution Loan was made would otherwise be entitled or from any other sources of funds or assets of the Non-Contributing Venturer, which amounts shall be applied first to interest and then to principal, until the Contribution Loan is paid in full. Repayment of either Venturer's Contribution Loan shall be secured by the Non-Contributing Venturer's Joint Venture interest. The Non-Contributing Venturer hereby grants a security interest in such Joint Venture interest to the Contributing Venturer who has advanced such Contribution Loan and hereby irrevocably appoints the Contributing Venturer, and any of its agents, officers, or employees, as its attorneys-in-fact with full power to prepare and execute any documents, instruments, and agreements, including, but not limited to, any note evidencing the Contribution Loan, and such Uniform Commercial Code financing statements, continuation statements, and other security interest in favor of the Contributing Venturer.
2.4.5 Remedies. In the event any Contribution Loan has not been repaid in full within ninety (90) days of the date the Contribution Loan is made, except as provided in Section 2.4.2(b), at any time thereafter, the Contributing Venturer may elect to proceed under either subparagraph (a), (b), or (c), below.
(a) Upon thirty (30) days' prior written notice to the other Venturer, the Contributing Venturer may elect to treat the outstanding principal balance of the Contribution Loan as a contribution to capital, and the Percentage Interest of each Venturer thereupon shall be recalculated as of the effective date of the notice of such election (the "Computation Date "), and shall be equal to a fraction, of which the numerator shall be the aggregate amount of all capital contributions of such Venturer pursuant to Subsections 2.2 and 2.3, plus any additional capital contributions made to the Joint Venture by such Venturer (other than by way of a Contribution Loan made by such Venturer and not previously converted to capital) pursuant to Section 2.4 as of the Computation Date, but excluding any sums advanced for the account of such Venturer as a Contribution Loan by the other Venturer plus 300% of the amount of such Venturer's share of the Contribution Loan to be converted by such Venturer to capital, and the denominator shall be the total aggregate amount contributed by each Venturer pursuant to Section 2.2 and 2.3; plus the aggregate amount of all additional capital contributions made by each of the Venturers as of the Computation Date, but excluding the Contribution Loan which is being converted to capital and the principal balance of all Contribution Loans which remain outstanding immediately after such recalculation; plus 300% of the amount of the Contribution Loan to be converted to capital. Accrued interest on any Contribution Loan which is converted to capital as provided above shall, at the election of the Contributing Venturer, be converted to capital or be payable as provided in Subsection 2.4.4 above; provided, however, that if such accrued interest is not paid in full upon demand, the Venturer making such demand may, at any time thereafter, exercise its rights under subparagraphs (b) and (c), below, with respect to the then outstanding amount of such accrued interest.
(b) The Contributing Venturer may elect to make written demand upon the Non-Contributing Venturer for payment in full of such Contributing Venturer's Contribution Loan, including accrued interest attributable to such Contributing Venturer's Contribution Loan, and, upon failure of the Non-Contributing Venturer to pay the Contribution Loan and interest in full within ten (10) days of such demand, to treat such failure to pay as an Event of Default as provided in Section 7.1 hereof.
(c) The Contributing Venturer may elect to make written demand upon the Non-Contributing Venturer for payment in full of such Contributing Venturer's Contribution Loan, including accrued interest attributable to such Contributing Venturer's Contribution Loan, and, upon failure of the Non-Contributing Venturer to pay the Contribution Loan and interest in full within ten (10) days of such demand, the Contributing Venturer may elect to sell the Non-Contributing Venturer's Joint Venture Interest at public or private sale, to such person or persons and at such price (for cash or on credit), as the Contributing Venturer may determine, with the right to the Contributing Venturer or its affiliates, or any other Person, to purchase all or any part of such Joint Venture Interest. The net proceeds from any such sale shall be applied first to the reasonable costs of such sale, including without limitation, attorneys' fees and collection costs, and second to the payment of the obligations of the Non-Contributing Venturer to the Contributing Venturer. The Non-Contributing Venturer shall be liable for any deficiency, or entitled to any surplus, remaining after such application of such net proceeds.
(d) Until a Venturer has elected to proceed under subparagraph (a), (b), or (c), above, such Venturer's Contribution Loan shall remain in place and shall bear interest and be repaid as provided in Subsection 2.4.4 above. The rights of a Venturer under subparagraph (a), (b), or (c), above, shall be mutually exclusive and a Venturer electing to proceed under subparagraph (a), (b), or (c) shall waive its rights to proceed under the subparagraphs not so elected as to that particular Contribution Loan (except as otherwise provided in subparagraph (a) with respect to the payment of accrued interest on any Contribution Loan which may be converted to capital).
2.5 No Interest on Capital. Interest earned on Joint Venture funds shall inure solely to the benefit of the Joint Venture, and no interest shall be paid upon any contributions or advances to the capital of the Joint Venture nor upon any undistributed or reinvested income or profits of the Joint Venture.
2.6 Distributions to Venturers of Cash Flow from the Business. Cash flow from the Business ("Cash Flow") will be distributed to the Venturers in accordance with their Percentage Interests.
2.7 Reduction of Capital Accounts. Any distribution to a Venturer, whether pursuant to Section 2.6 or any other Section of this Agreement, shall reduce the amount of such Venturer's Capital Account in accordance with Section 2.8, but no adjustment in the Percentage Interest of any Venturer shall be made on account of any such distribution.
2.8 Capital Accounts.
2.8.1 Initial Capital Accounts. Immediately following formation of the Joint Venture and the capital contributions by the Venturers provided in Section 2.2 and Section 2.3, the Capital Account of each venturer shall be as follows:
2.8.2 Adjustments to Capital Accounts. The Capital Accounts of each Venturer shall from time to time be
(a) increased by:
(i) any additional capital contributions of such Venturer; and
(ii) such Venturer's share, determined pursuant to Section 2.9, of the Taxable Income of the Joint Venture, during such fiscal year, whether or not distributed; and
(b) decreased by:
(i) all distributions to or for the account of such Venturer whether of capital or income; and
(ii) such Venturer's share of Tax Losses of the Joint Venture during such fiscal year, determined pursuant to Section 2.9.
2.8.3 Taxable Income or Tax Losses. The terms Taxable Income or Tax Losses mean, at all times during the existence of the Joint Venture, the net income or net loss of the Partnership for federal income tax purposes with respect to each fiscal year, as determined by the Venture's accountants at the close of the Joint Venture's fiscal year, including, without limitation, each item of income, gain, loss, or deduction.
2.9 Allocations of Taxable Income and Tax Losses.
2.9.1 Allocations to Venturers. Taxable Income and Tax Losses of the Venture shall be allocated to the Venturers in accordance with their Percentage Interests; provided, however, that all depreciation attributable to the Leasehold Improvements shall be allocated to ______.
2.9.2 Limitations on Allocations of Tax Losses.
(a) Beginning in the first year in which the Joint Venture has "nonrecourse deductions," as such term is defined and the amount thereof is determined in Treasury Regulation Sections 1.704-2(b)(1) , and in each year thereafter, if there is a net decrease in "partnership minimum gain " (as defined in Treasury Regulations Section 1.704-2(b)(2) ) during a Joint Venture taxable year, all Venturers with deficit Capital Accounts at the end of such taxable year shall be allocated, before any other allocation of Joint Venture items for such taxable year is made under Section 704(b), items of income and gain for such taxable year (and, if necessary, subsequent years) in the amounts and proportions needed to eliminate such deficits as quickly as possible, such allocations to be made in accordance with the "minimum gain chargeback" provisions of Treasury Regulation Sections 1.704-2(b)(2) and 2(d) ;
(b) Any Venturer who unexpectedly receives with respect to the Joint Venture: an adjustment for depletion allowances with respect to oil and gas properties; an allocation of loss or deduction pursuant to Sections 704(e)(2) or 706(d) of the Internal Revenue Code or pursuant to Treasury Regulation Section 1.751-1(b)(2)(ii) , as either of them may be amended; or a distribution in excess of an offsetting increase to such Venturer's Capital Account reasonably expected to occur during (or prior to) the Joint Venture taxable year in which such distribution occurs, will be allocated, as quickly as possible, items of income and gain in an amount and manner sufficient to eliminate any resulting deficit Capital Account balance in excess of the "partnership minimum gain" attributable to such Venturer;
(c) No loss or deduction from Joint Venture operations may be allocated to a Venturer if such allocation would cause the deficit Capital Account balance of such Venturer (excluding any portion of any deficit balance of such Venturer obligated to contribute to the capital of the Joint Venture determined at the end of the Venturer's taxable year to which such allocation relates) to exceed the Venturer's share of the "partnership minimum gain" (as determined at the end of the Venture's taxable year in which such allocations relate) and if at the end of any Joint Venture taxable year, the deficit Capital Account balance of a Venturer that results in whole or in part from such allocation exceeds the "partnership minimum gain" attributable to such Venturer, such Venturer shall be allocated the next items of income and gain for such taxable year (and, if necessary, subsequent years) in the amounts and proportions needed to eliminate such deficit Capital Account balance as quickly as possible, such allocations to be made in accordance with the "minimum gain chargeback" provisions of Treasury Regulation Section 1.704-2(b)(2) and 2(d) ;
(d) Notwithstanding the foregoing provisions, if Taxable Income to be allocated includes income treated as ordinary income for federal income tax purposes because such Taxable Income is attributable to the recapture of depreciation under Section 1245 of the Internal Revenue Code , such Taxable Income, to the extent treated as ordinary income, shall be allocated to, and reported by, the Venturers in proportion to their accumulated depreciation allocations, and the Venture shall keep records of such allocations; and
(e) Notwithstanding any provisions to the contrary, income gain, loss, and deductions with respect to property contributed to the Joint Venture by a Venturer shall be shared among the Venturers so as to take account of the variation between the basis of the property to the Joint Venture and its fair market value at the time of contribution.
2.10 Withdrawals of Capital. Except as otherwise provided herein, no portion of the capital of the Joint Venture may be withdrawn at any time without the approval of the Management Committee. Upon termination of the Joint Venture, the Venturers' capital shall be distributed pursuant to Section 7.4 hereof.
2.11 No Assumption of Liabilities of Venturer by other Venturer or Venture; Indemnification. Neither Venturer hereby assumes any liability of the other Venturer and the Venture does not hereby assume any liability of either Venturer. In particular, without limitation, the Venture does not assume any obligation with respect to the employment or retirement benefits of any employee of either Venturer and neither Venturer assumes any obligation with respect to the employment or retirement benefits of any employee of the other Venturer. Each Venturer ("Indemnitor") shall indemnify and hold harmless the Venture and the other Venturer and its affiliates, directors, and officers from and against any and all claims, demands, losses, damages, liabilities, lawsuits and other proceedings, judgments and awards, and costs and expenses (including but not limited to reasonable attorneys' fees) arising directly or indirectly, in whole or in part, from (i) any action or failure to act by the Indemnitor before the effective date of this Agreement or (ii) any action by Indemnitor on behalf of or in the name of the Joint Venture outside the scope of the business of the Venture or in violation of the terms of this Agreement.
3.1 Management of the Venture.
3.1.1 Management Committee. The overall management and control of the business and affairs of the Joint Venture shall be vested jointly in ______, President of ______ and ______, President of ______ ("Managers"). Subject to the limitations described in Section 3.1.2, each of the Managers shall have the authority to provide any consent or approval or take any action on behalf of the Joint Venture within the scope of the business of the Venture. In the event that the Managers cannot agree with respect to a proposed action to be taken, decision to be made, or obligation to be incurred, the Managers shall submit such issue to arbitration and the decision of the arbitrator(s) shall be final and binding upon the Venturers.
3.1.2 Major Decisions. No act shall be taken, sum expended, decision made, or obligation incurred by the Joint Venture, the Managers, or either Venturer with respect to a matter within the scope of any of the major decisions enumerated below (the "Major Decisions"), unless and until the same has been approved by both Venturers in writing. The Major Decisions shall include:
(a) acquisition of any land or other real property or leasehold or interest therein;
(b) sale or other transfer of, or the mortgaging of or the placing or suffering of any other encumbrance on or affecting, the Leasehold or any part or parts thereof;
(c) termination or modification of the lease or other arrangement involving the rental, use, or occupancy of the Leasehold;
(d) making any expenditure or incurring any obligation by or on behalf of the Joint Venture involving a sum in excess of $5,000 or involving a sum of less than $5,000 where the same relates to a component part of work, the combined cost of which in any one fiscal year exceeds $5,000; or
(e) employing any person whose salary or compensation on an annual basis will exceed $15,000.
3.2 Compensation and Reimbursement of Venturers. Managers shall jointly determine compensation to employees of the Venture and the Cash Flow to be distributed to Venturers.
3.3 Time Devoted to Joint Venture; Other Business Activities; Disclosure, Waiver. The Venturers and their officers shall devote substantially all their time, skill, and attention to the Business. The Venturers shall give, whenever required, an account of all business transactions arising out of or connected with the conduct of the Business. Notwithstanding the foregoing, the Venturers and their officers may participate in various other businesses and undertakings outside the scope of the business of the Venture without limitation. Each Venturer waives any rights it might otherwise have to share or participate in such other interests or activities of the other Venturer or its officers which are outside the scope of the Venture.
4.1 Books and Records.
4.1.1 General. At all times during the term hereof, the Managers shall cause accurate books and records of account to be maintained in which shall be entered all matters relating to the Joint Venture, including all income, expenditures, assets, and liabilities thereof.
4.1.2 Cash Basis. Such books and records of account shall be maintained on the cash basis and shall be adequate to provide either Venturer with all financial information as may be needed by either Venturer or any affiliates of either Venturer for purposes of satisfying the financial reporting obligations of either Venturer or its respective affiliate or affiliates.
4.1.3 Information to Venturers. Each Venturer shall be entitled to any additional information necessary for the Venturer to adjust its cash basis statement to a tax basis as the Venturer's individual needs may dictate.
4.1.4 Location and Rights of Inspection. The Joint Venture's books and records of account shall be kept and maintained at all times at the place or places approved by the Managers. Each Venturer and its authorized representatives shall have the right to inspect, examine, and copy the books, records, files, securities, and other documents of the Joint Venture at all reasonable times.
4.1.5 Fiscal Year. The fiscal year of the Joint Venture shall end on December 31st of each year.
4.1.6 Statements of Financial Condition. The Managers shall prepare a statement of the financial condition of the Joint Venture as of the last day of each quarter of each fiscal year, and income and Cash Flow statements for each quarter of each fiscal year. Each statement of financial condition shall be prepared in accordance with generally accepted accounting principles.
4.1.7 Audit. At the request of either Venturer, the Joint Venture shall engage, as independent auditors for the Joint Venture, a firm of independent certified public accountants approved by the Managers. The independent auditors, if so requested, shall at the end of each fiscal year: (a) audit the records and accounts of the Joint Venture; (b) render their opinion on the statement of financial condition of the Joint Venture as of the end of each fiscal year and of the results of its operations, the changes in its financial condition and its income and Cash Flow for each fiscal year, as prepared by the accountants for the Joint Venture; and (c) render their opinion on the annual Cash Flow computations made by the accountants for the Joint Venture.
4.1.8 Bank Accounts. Funds of the Joint Venture shall be deposited in an account or accounts of a type, in form and name, and in a bank or banks approved by the Managers. Withdrawals from bank accounts shall be made by parties approved by the Managers.
4.1.9 Other Accounting Decisions. All accounting decisions for the Joint Venture (other than those specifically provided for in other Sections of this Agreement) shall be approved by the Managers.
INCOME TAX RETURNS AND FILINGS, TAX ACCOUNTING, TAX ELECTIONS
5.1 Preparation of Tax Returns and/or other Tax Filings. Federal, state, and local income tax returns and other tax filings (if any) of the Joint Venture shall be prepared by the Managers.
5.2 Notice of Tax Audit. Prompt notice shall be given to the Venturers upon receipt of advice that the Internal Revenue Service intends to examine Joint Venture income tax returns for any year.
SALE, TRANSFER OR MORTGAGE
6.1.1 Required Consents. Except as expressly permitted herein, neither Venturer shall sell, assign, transfer, mortgage, charge, or otherwise encumber, or suffer any third party to sell, assign, transfer, mortgage, charge, or otherwise encumber, or contract to do or permit any of the foregoing, whether voluntarily or by operation of law (herein sometimes collectively called a "transfer") any part or all of its Joint Venture interest without the written consent of the other Venturer and any attempt to do so shall be void, excluding only such transfers to a personal representative of a Venturer due to the death or disability of such Venturer. The giving of such consent in any one or more instances shall not limit or waive the need for such consent in any other or subsequent instances.
6.1.2 Indirect Transfers. In order to effectuate the purpose of this Section 6.1, each Venturer agrees that to the extent its interest in the Joint Venture is at any time held by any person that is a partnership, corporation, trust, or other entity, no transfer or other disposition of any stock or partnership or other beneficial interest in any such entity which holds an interest in the Joint Venture will be effected, directly or indirectly, unless approved by both Venturers or in accordance with Section 6.2.
6.2 Permitted Transfers by the Venturers.
6.2.1 Transfers by Venturers. Notwithstanding the provisions of Subsection 6.1.1 and 6.1.2, without the consent of the other Venturer, a Venturer may from time to time transfer its interest in the Joint Venture to a successor who is controlled by or under common control with such Venturer or may transfer a beneficial interest in any entity that holds an interest in the Joint Venturer to a person who is a member of the immediate family of a person who controls the Venturer provided the control of the Venturer does not change. In the event that either Venturer shall at any time transfer or attempt to transfer its Joint Venture interest or a beneficial interest in any entity that holds an interest in the Joint Venture in violation of the provisions of this Agreement and any rights hereby granted, then the other Venturer shall, in addition to all rights and remedies at law and in equity, be entitled to a decree or order restraining and enjoining such transfer and the offending Venturer shall not plead in defense thereto that there would be an adequate remedy at law; it being hereby expressly acknowledged and agreed that damages at law will be an inadequate remedy for a breach or threatened breach of the violation of the provisions concerning transfer set forth in this Agreement.
6.3 No Termination. Notwithstanding any provision to the contrary in this Article VI, neither Venturer shall transfer all or any part of its interest in the Joint Venture to any party other than the other Venturer, whether or not such transfer would otherwise be permitted hereunder, if such transfer would result in a termination of the Joint Venture under the United States Internal Revenue Code. At the request of the other Venturer and as a condition of the consummation of any transfer of all or any part of a Venturer's interest to any party other than the other Venturer, the Venturer proposing to transfer all or any part of its interest shall, at its cost, provide an opinion of counsel, which must be reasonably satisfactory to the other Venturer, that such transfer would not result in such a termination.
DEFAULT AND DISSOLUTION
7.1 Events of Default.
7.1.1 Definitions and Cure Periods. The occurrence of any of the following events shall constitute an event of default ("Event of Default") hereunder on the part of the Venturer with respect to whom such event occurs ("Defaulter"), if within thirty (30) days following notice of such default from the other Venturer, the Defaulter fails to commence substantial efforts to cure such default or thereafter fails within a reasonable time to prosecute to completion with diligence and continuity the curing of such default; provided, however, that the occurrence of any of the events described in subparagraphs (b)-(j), below, shall constitute an Event of Default immediately upon such occurrence without any requirement of notice or passage of time except as specifically set forth in any such subparagraph:
(a) the violation by a Venturer of any of the restrictions set forth in Article VI of this Agreement upon the right of a Venturer to transfer its Joint Venture interest;
(b) institution by a Venturer of proceedings of any nature under any laws of the United States or of any state, whether now existing or subsequently enacted or amended, for the relief of debtors wherein such Venturer is seeking relief as debtor;
(c) a general assignment by a Venturer for the benefit of creditors;
(d) the institution by a Venturer of a case or other proceeding under any section or chapter of the federal Bankruptcy Code as now existing or hereafter amended or becoming effective;
(e) the institution against a Venturer of a case or other proceeding under any section or chapter of the federal Bankruptcy Code as now existing or hereafter amended or becoming effective, which proceeding is not dismissed, stayed or discharged within a period of sixty (60) days after the filing thereof or if stayed, which stay is thereafter lifted without a contemporaneous discharge or dismissal of such proceeding;
(f) a proposed plan of arrangement or other action by a Venturer's creditors taken as a result of a general meeting of the creditors of such Venturer;
(g) the appointment of a receiver, custodian, trustee, or like officer, to take possession of assets having a value in excess of $100,000 of a Venturer if the pendency of said receivership would reasonably tend to have a materially adverse effect upon the performance by said Venturer of its obligations under this Agreement, which receivership remains undischarged for a period of thirty (30) days from the date of its imposition;
(h) admission by a Venturer in writing of its inability to pay its debts as they mature;
(i) attachment, execution, or other judicial seizure of all or any substantial part of a Venturer's assets or of a Venturer's Joint Venture interest, or any part thereof, such attachment, execution, or seizure being with respect to an amount not less than $100,000 and remaining undismissed or undischarged for a period of fifteen (15) days after the levy thereof, if the occurrence of such attachment, execution, or other judicial seizure would reasonably tend to have a materially adverse effect upon the performance by said Venturer of its obligations under this Agreement; provided, however, that said attachment, execution, or seizure shall not constitute an Event of Default hereunder if said Venturer posts a bond sufficient to fully satisfy the amount of such claim or judgment within fifteen (15) days after the levy thereof and the Venturer's assets are thereby released from the lien of such attachment;
(j) upon election of Contributing Venturer pursuant to Section 2.4.2(b) or 2.4.3, failure to make an additional capital contribution;
(k) default in performance of or failure to comply with any other agreements, obligations, or undertakings of a Venturer herein contained; or
(l) dissolution of a Venturer.
7.1.2 Act of Insolvency. The occurrence of any events described in subparagraphs (b) through (i) of Subsection 7.1.1 shall also constitute an "Act of Insolvency," as said term is used in this Agreement.
7.2 Causes of Dissolution. The Joint Venture shall be dissolved only in the event that:
(a) an Event of Default has occurred as provided in Section 7.1 and the nondefaulting Venturer elects to dissolve the Joint Venture as provided in Section 7.3 hereof;
(b) the Venturers mutually agree to terminate the Joint Venture; or
(c) the Joint Venture by its terms, as set forth in this Agreement, is terminated.
7.3 Election of Non-Defaulting Venturer.
7.3.1 Purchase of Defaulter's Interest. On the occurrence of an Event of Default by either Venturer ("Defaulter"), the other Venturer ("Non-Defaulter") shall have the right to acquire the Joint Venture interest of the Defaulter for cash or as provided in Subsection 7.3.2 hereof, at a price determined pursuant to the procedure set forth in Article VIII. In furtherance of such right, the Non-Defaulter may notify the Defaulter at any time following an Event of Default of its election to institute the procedure set forth in Article VIII. On receipt of notice of determination of the net fair market value of the Defaulter's Joint Venture interest, the Non-Defaulter may notify the Defaulter of its election to purchase the interest of the Defaulter.
7.3.2 Purchase by Installment Payments. A Venturer who elects to purchase the Joint Venture interest of the Defaulter shall have the right to purchase such Venturer's interest by payment of twenty percent (20%) of the purchase price (as determined by the procedure pursuant to Article VIII) of such Joint Venture interest at Closing, the balance of the purchase price to be payable in equal monthly installments over a period of five (5) years, the unpaid balance to bear interest at the prime rate as published in the Money Rates section of The Wall Street Journal, in effect from time to time, with the right of prepayment of any amount at any time without premium.
7.3.3 Election to Dissolve. If the Non-Defaulter does not elect to acquire the entire interest of the Defaulter as set forth in Subsection 7.3.1, the Non-Defaulter may elect to dissolve and terminate the Joint Venture pursuant to Section 7.2 of this Agreement by written notice to the Defaulter. The right of the Non-Defaulter to institute the procedures for purchase of the Defaulter's Joint Venture interest as set forth in this Section 7.3 shall continue until such Non-Defaulter elects to exercise its right to terminate the Joint Venture as provided in this Subsection 7.3.3.
7.3.4 Winding Up. On dissolution of the Joint Venture pursuant to Section 7.2 hereof, the Joint Venture shall immediately commence to wind up its affairs, and the Venturers shall proceed with reasonable promptness to liquidate the business of the Joint Venture.
7.3.5 Management Rights During Winding Up. During the period of the winding up of the affairs of the Joint Venture, the rights and obligations of the Venturers set forth herein with respect to the management of the Joint Venture shall continue. For purposes of winding up, the Managers shall continue to act as such and shall make all decisions relating to the conduct of any business or operations during the winding-up period and to the sale or other disposition of Joint Venture assets; provided that, if the termination of the Venture results from an Event of Default, the defaulting Venturer and its affiliates shall have no further right to participate in the management or affairs of the Venture but shall nonetheless be bound by all decisions made by the Non-Defaulter. Each Venturer hereby waives any claims it may have arising from decisions made by the Non-Defaulter of the Joint Venture, so long as such Non-Defaulter acts in good faith.
7.3.6 Allocation in the Event of Transfer. If an interest in the Joint Venture is duly transferred, there shall be allocated to each venturer who held the transferred interest during the fiscal year of transfer the product of (a) the Venturer's Taxable Income or Tax Losses allocable to such transferred interest for such fiscal year, and (b) a fraction, the numerator of which is the number of days such Venturer held the transferred interest during such fiscal year, and the denominator of which is the total number of days in such fiscal year.
7.3.7 Distributions in Liquidation.
(a) The assets of the Joint Venture shall be applied or distributed in liquidation in the following order or priority:
(i) In payment of debts and obligations of the Joint Venture owed to third parties, which shall include either Venturer as the holder of any secured loan;
(ii) In payment of debts and obligations of the Joint Venture to either Venturer;
(iii) To the Venturers, in accordance with their Percentage Interests.
(b) If, after any distributions under this Section 7.3.7, any Venturer would have a negative Capital Account in excess of its share of partnership minimum gain as defined in Section 2.9.2, such Venturer shall relinquish to those other Venturers having positive Capital Accounts, pro rata in accordance with the percentage that each such Venturer's positive Capital Account represents of the total of all positive Capital Accounts, such amount of any proceeds otherwise distributable to it as will result in the elimination (or reduction to the maximum extent possible) of such negative Capital Account;
(c) For purposes of determining the Capital Accounts of the Venturers, if any of the assets of the Joint Venture are to be distributed in kind, the fair market value of such assets shall be determined as of the time of such distribution. There shall be allocated among the Venturers, in accordance with Section 2.9, the amount of Taxable Income and Tax Losses, if any, which would have been realized by the Joint Venture if such assets had been sold by the Venture for prices equal to their respective fair market values as so determined. The fair market value of such assets shall be determined by an independent appraiser to be selected by the Joint Venturer's accountant;
(d) Any payments made under this Section upon the liquidation of a Venturer's interest in the Venture or upon liquidation of the Venture shall be distributed within the time period required by Treasury Regulation Section 1.704-1(b)(2)(ii)(b) .
(e) The assets of the Joint Venture, excluding the Leasehold, Leasehold Improvements, contracts, and accounts receivable, shall be sold and the proceeds applied or distributed as provided above. Any outstanding contracts or accounts receivable held by the Joint Venture at the time of liquidation on which payments are being made or are to be made to the Joint Venture shall not be sold but shall be retained and as payments are made shall be applied or distributed as provided above. The parties hereto recognize that upon liquidation, persons for whom the Joint Ventures had performed services or with whom the Joint Venture had entered into contracts may elect to continue to deal with either Venturer; no compensation will be due from one Venturer to another as a result of such election.
7.4 Disposition of Documents and Records. All documents and records of the Joint Venture including, without limitation, all financial records, vouchers, cancelled checks, and bank statements, shall be delivered to ______, upon termination of the Joint Venture. Unless otherwise approved by the other Venturer, ______, shall retain such documents and records for a period of not less than seven (7) years and shall make such documents and records available during normal business hours to the other Venturer for inspection and copying at the other Venturer's cost and expense. In the event either Venturer ("Withdrawing Venturer"), for any reason ceases, as provided herein, to be a Venturer at any time prior to termination of the Joint Venture, and the Joint Venture is continued without the Withdrawing Venturer, the other Venturer ("Surviving Venturer") agrees that said documents and records of the Joint Venture up to the date of the termination of the Withdrawing Venturer's interest shall be maintained by the Surviving Venturer, its successors and assigns, for a period of not less than seven (7) years thereafter; provided, however, that if there is an audit or threat of audit, such documents and records shall be retained until the audit is completed and any tax liability finally determined. Said documents and records shall be available for inspection, examination, and copying by the Withdrawing Venturer upon reasonable notice during said seven (7) year period.
VALUATION AND PAYMENT
8.1 Valuation of and Payment for Venturer's Interest. Whenever this Agreement provides for the valuation of an interest in the Joint Venture to be purchased or sold, the value of such interest in the Joint Venture shall be determined and paid as follows: The parties shall first attempt to agree upon the "net fair market value" of the Joint Venture and of the interests in the Joint Venture to be purchased or sold. The "net fair market value" of the Joint Venture shall mean the cash price which a sophisticated purchaser would pay on the effective date of the appraisal for all assets of the Joint Venture (including goodwill) in excess of the financing then encumbering the Joint Venture assets, such valuation to be made on the assumption that such assets are subject to this Agreement and to any other agreements, including leases, management, and service agreements then in effect. A sophisticated purchaser shall be one who would take into account the nature, extent, maturity date, and other terms of the liabilities of the Joint Venture whether fixed or contingent, including the favorable or unfavorable nature of any financing then encumbering the Venture's assets, and the prospects that the income from the Joint Venture assets would be sufficient to satisfy such liabilities when due, excluding any liability under any financing already taken into account. The "net fair market value" of a Joint Venture interest shall mean the value of the interest to be sold or purchased, based on the net fair market value of the Joint Venture, and subject to the terms and provisions of this Agreement.
8.2 Appraisal Procedure. In the event the Venturers are unable to mutually agree upon the net fair market value of the Joint Venture and of the Joint Venture interests to be sold or purchased within thirty (30) days of the date the appraisal procedure of this Article VIII is instituted as provided in this Agreement, the Venturers shall then attempt to agree upon the appointment of a disinterested appraiser who shall be a member of the American Institute of Appraisers. If the Venturers are unable to agree upon the selection of an appraiser within thirty (30) days of the date the appraisal procedure is instituted as provided in this Agreement, each Venturer shall appoint one appraiser and the two appraisers so appointed shall appoint a third appraiser. Each appraiser so selected shall furnish the Venturers with a written appraisal within thirty (30) days of his or her selection, setting forth his or her determination of the net fair market value of all assets owned by the Venture. The valuation of the appraiser or the average of the two closest valuations of such appraisers if three appraisers are selected shall be treated as the net fair market value of the Venture. The market value of the interest of a Venturer will equal the Venturer's Percentage Interest of the net fair market value of the Venture.
9.1 Initiation. In such cases where this Agreement provides for the determination of any matter by arbitration, the same shall be settled and finally determined by arbitration in accordance with the Rules of Commercial Arbitration of the American Arbitration Association, or its successor, and the provisions of Title 42, Pennsylvania Consolidated Statutes , Sections 7341 and 7342, or any successor or amended statute or law containing similar provisions, shall be applicable in any such arbitration; or in any case where the American Arbitration Association, or its successor, is not in existence or fails or refuses to act within a reasonably prompt period of time (but in no event exceeding sixty (60) days from the date a request for arbitration is filed), the arbitration shall proceed in accordance with the laws relating to arbitration then in effect in the Commonwealth of Pennsylvania, including but not limited to Sections 7301 through 7320 of Title 42, Pennsylvania Consolidated Statutes , as the same may be amended or superseded from time to time. Any arbitration pursuant to this Agreement shall be conducted by one arbitrator selected by the Venturers; if the Venturers cannot agree upon an arbitrator each shall select one arbitrator and the two arbitrators so selected shall select a third arbitrator; if the two arbitrators cannot agree upon a third arbitrator they will request the American Arbitration Association, or its successor, to appoint the third arbitrator. The judgment upon the aware rendered in any such arbitration shall be final and binding upon the parties and may be entered in any court having jurisdiction thereof.
9.2 Costs. All fees and expenses of the arbitrators and all other expenses of the arbitration, except for attorneys' fees, shall be shared equally by the Venturers. Each Venturer shall bear its own attorneys' fees.
10.1 Complete Agreement; Amendment. This Agreement constitutes the entire agreement between the parties and supersedes all agreements, representations, warranties, statements, promises, and understandings, whether oral or written, with respect to the subject matter hereof, and neither party hereto shall be bound by nor charged with any oral or written agreements, representations, warranties, statements, promises, or understandings not specifically set forth in this Agreement or the exhibits hereto. This Agreement may not be amended, altered, or modified except by a writing signed by both the Venturers.
10.2.1 Addresses. All notices under this Agreement shall be in writing and shall be delivered by personal service, or by certified or registered mail, postage prepaid, return receipt requested, to the Venturers at the addresses herein set forth and to the Joint Venture at its principal place of business.
The addresses for notices are as follows:
If to ______
With a copy to:______
If to ______
With a copy to:______
10.2.2 Effective Date. All notices, demands, and requests shall be effective upon being deposited in the United States mail. However, the time period in which a response to any such notice, demand, or request must be given shall commence to run from the date of receipt on the return receipt of the notice, demand, or request by the addressee thereof. Rejection or other refusal to accept or the inability to deliver because of a changed address of which no notice was given as provided in Subsection 10.2.3 shall be deemed to be receipt of the notice, demand, or request sent.
10.2.3 Changes. By giving to the other parties at least thirty (30) days' prior written notice thereof, the parties hereto and their respective permitted successors and assigns shall have the right from time to time and at any time during the term of this Agreement to change their respective addresses for notices, and each shall have the right to specify as its, his, or her address for notices any other address within the United States of America.
10.3 Attorneys' Fees. Should any litigation be commenced between the parties hereto or their representatives or should any party institute any proceeding in a bankruptcy or similar court which has jurisdiction over any other party hereto or any or all of its, his, or her property or assets concerning any provision of this Agreement or the rights and duties of any person or entity in relation thereto, the party or parties prevailing in such litigation shall be entitled, in addition to such other relief as may be granted, to a reasonable sum as and for its, his, her, or their attorneys' fees and court costs in such litigation which shall be determined by the court in such litigation or in a separate action brought for that purpose.
10.4 Validity. In the event that any provision of this Agreement shall be held to be invalid or unenforceable, the same shall not affect in any respect whatsoever the validity or enforceability of the remainder of this Agreement.
10.5 Survival of Rights. Except as provided herein to the contrary, this Agreement shall be binding upon and inure to the benefit of the parties signatory hereto, their respective heirs, executors, legal representatives, and permitted successors and assigns.
10.6 Waiver. No consent or waiver, express or implied, by a Venturer to or of any breach or default by the other Venturer in the performance by such other Venturer of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other Venturer of the same or any other obligations of such other Venturer hereunder. Failure on the part of a Venturer to complain of any act or failure to act of the other Venturer or to declare the other Venturer in default, irrespective of how long such failure continues, shall not constitute a waiver by such Venturer of its rights hereunder. The giving of consent by a Venturer in any one instance shall not limit or waive the necessity to obtain such Venturer's consent in any future instance.
10.7 Remedies in Equity. The rights and remedies of either of the Venturers hereunder shall not be mutually exclusive, i.e., the exercise of one or more of the provisions hereof shall not preclude the exercise of any other provisions hereof. Each of the Venturers confirms that damages at law will be an inadequate remedy for a breach or threatened breach of this Agreement and agree that, in the event of a breach or threatened breach of any provision hereof, the respective rights and obligations hereunder shall be enforceable by specific performance, injunction, or other equitable remedy, but nothing herein contained is intended to, nor shall it, limit or affect any rights at law or by statute or otherwise of any party aggrieved as against the other for a breach or threatened breach of any provision hereof, it being the intention by this Section to make clear the agreement of the Venturers that the respective rights and obligations of the Venturers hereunder shall be enforceable in equity as well as at law or otherwise.
10.8 Terminology. All personal pronouns used in this Agreement, whether used in the masculine, feminine, or neuter gender, shall include all other genders; and the singular shall include the plural and vice versa. Titles of Articles, Sections, and Subsections are for convenience only, and neither limit nor amplify the provisions of this Agreement itself. The use herein of the word "including," when following any general statement, term, or matter, shall not be construed to limit such statement, term, or matter to the specific items or matters set forth immediately following such word or to similar items or matters, whether or not nonlimiting language (such as "without limitation," or "but not limited to," or words of similar import) is used with reference thereto, but rather shall be deemed to refer to all other items or matters that could reasonably fall within the broadest possible scope of such general statement, term, or matter.
10.9 Counterparts. This Joint Venture Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute one and the same agreement.
10.10 Further Assurances. Each party hereto agrees to do all acts and things and to make, execute, and deliver such written instruments, as shall from time to time be reasonably required to carry out the terms and provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above set forth.
______________________ By: ______________________
______________________ By: ______________________
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