THIS AGREEMENT is made [date], between [party] of [address] (hereinafter referred to as A) and [party] of [address] (hereinafter referred to as B).
1. Property. A has signed a contract of sale for the purchase of certain property located in [town], [county, state] more particularly described as follows: [description of property] (Property).
2. Mortgage Financing. B is able and has agreed to obtain mortgage financing for the acquisition of the Property, in an amount not less than [$ amount], at an interest rate not greater than [percent], with a total loan fee or service cost not greater than [$ amount], and for a term not less than [number] years (Loan).
3. Formation. A and B form a joint venture (Joint Venture) for the term and purposes and in accordance with the provisions in this Agreement.
4. Purpose. A and B wish to create a joint venture solely to acquire the Property, own it, and dispose of it, pursuant to this Agreement.
5. Powers. The Joint Venture has all powers reasonably necessary or incidental to the carrying out of its purpose.
6. Name. The name of the Joint Venture is [name], and its business will be conducted under that name (or such other name as A and B shall agree on).
7. Office. The principal office of the Joint Venture will be located at [address].
8. State Requirements to Conduct Business. A and B, and the Joint Venture, will execute and file all certificates, and take all other action, that may be required to conduct business in the [county, state].
9. Term. The term of this Agreement will commence as of the date of this Agreement, and will end on the date the Property has been disposed of, unless terminated earlier by:
a. Agreement of A and B;
b. Adjudication of either A or B as bankrupt, its filing of a voluntary petition in bankruptcy, the filing of any petition against it under any federal or state bankruptcy or insolvency law, or its filing of a petition or answer seeking the appointment of a receiver of its assets or an arrangement with creditors under any such laws;
c. Breach by either A or B of any material covenant under this Agreement (subject to Paragraph 10); or
d. Death of A.
10. Notice and Cure of a Material Breach. If there is a material breach of this Agreement, the party intending to terminate must give the defaulting party [number] days' written notice, detailing the particular action or condition that is claimed to constitute a material breach. The defaulting party may cure the breach during this period or take steps to cure and, if cured, or if the steps taken to cure the breach will do so within a reasonable period if diligently prosecuted, then this Agreement will not terminate.
11. Representations. A represents that: a. Complete and Valid Contract. The contract of sale for the Property, annexed to this Agreement as Exhibit A (Contract of Sale) [omitted], is true and complete, in full force and effect, and no breach or default exists under such contract. b. Assignment of Contract. A may assign the Contract of Sale, without the consent of the Seller under such contract or any other person; and [other representations, for either A or B as necessary, i.e., as to condition of the Property]. c. Acquisition. A and B will acquire the Property in accordance with the Contract of Sale, Title to the Property, and all other assets acquired or for the Joint Venture, will be held by A and B as tenants in common (with A holding an undivided [percent] interest and B holding an undivided [percent] interest).
12. Acquisition of and Title to the Property. a. Assignment of Contract of Sale. Simultaneously with the execution of this Agreement, A will assign to A and B the Contract of Sale, in the form annexed to this Agreement as Exhibit B [omitted].
b. Loan Commitment. Promptly after execution of this Agreement, and in no event later than the closing date stated in the Contract of Sale, B will obtain a written commitment to make the Loan, issued by a bank or savings and loan association in favor of A and B and to be secured by the Property.
13. Capital Contributions. On the date of this Agreement, A and B will each contribute [$ amount] to the capital of the Joint Venture. On the closing date, as defined in the Contract of Sale, A will contribute [$ amount] to the capital of the Joint Venture. Neither A nor B will have any obligation to contribute any other capital to the Joint Venture.
14. Interests, Profits, and Losses. A is given a [percent] interest in the Joint Venture and in the profits, and is chargeable with such percentage of the losses of the joint Venture. B is given a [percent] interest in the Joint Venture and in the profits, and is chargeable with such percentage of the losses of the Joint Venture.
15. Management. a. Manager. A will act as the manager (Manager) of the Joint Venture.
b. Manager's Authority. Subject to the provisions of Paragraph 15(c), the Manager will have full power and authority to conduct and manage the business of the Joint Venture and to undertake and implement, on behalf of the Joint Venture, all Joint Decisions approved by A and B.
c. Joint Decisions. None of the following matters (Joint Decisions) may be undertaken by or on behalf of the Joint Venture, and no expenditures or obligations may be incurred in connection therewith, without the prior consent or approval of both A and B: i. Encumbrance of Property. The mortgaging or other encumbrance of any portion of the Property or any other property of the Joint Venture (other than the Loan), or the borrowing of funds by or on behalf of the Joint Venture in excess of [$ amount] in the aggregate in any twelve-month period.
ii. The Loan. The modification, extension, or payment of the Loan.
iii. Employment of Related Persons. The employment of, or the payment of any compensation to, any person, corporation, or other entity with or in which either A or B has an interest.
iv. Large Expenditures. The expenditure of any sum in excess of [$ amount] for any one service or item.
v. Employment of Accountants and Attorneys. The employment of independent certified public accountants or attorneys for the Joint Venture, and the discharge of the same.
vi. Sale of the Property. The sale of the Property, or any portion thereof. [Include any other decision in which the consent of both parties is required.]
vii. Other. Any other action which, under any other provision of this Agreement, requires the consent or approval of both A and B.
d. Manager's General Duties. The Manager, on behalf of the Joint Venture, shall diligently and in good faith operate the Property, and implement or cause to be implemented the joint Decisions approved by A and B, and otherwise conduct the business of the Joint Venture in accordance with this Agreement. The Manager will devote such time and attention to the business of the Joint Venture as is reasonably necessary to accomplish the purposes of the Joint Venture.
e. Collections and Payments. The manager will collect all rents and other sums payable to A and B as owners of the Property, and will, out of and to the extent that the funds of the Joint Venture are sufficient: i. Pay all taxes and assessments imposed against the Property and all other debts and obligations of the Joint Venture.
ii. Maintain adequate hazard and public liability insurance with respect to the Property and the Joint Venture.
iii. Comply with all laws and other governmental requirements applicable to the Joint Venture and the Property.
f. Books of Account. The Manager will maintain complete and accurate current books of account for the joint Venture. Such books of account must be kept in accordance with generally accepted accounting principles and practices. Both A and B and their authorized representatives shall, at all reasonable times, have access to, and may inspect and make copies of, such books of account and all other books and records and the Joint Venture and the Manager. At the request of either A or B, an audit of the accounts of the Joint Venture will be made annually by independent certified public accountants selected by both A and B and their report is to be furnished to both A and B.
g. Quarterly Statements. Within [number] days after the close of each calendar quarter, the Manager will cause to be prepared, and furnish to both A and B, a detailed unaudited financial statement, which the Manager states as true and correct to the best of his knowledge, showing the results of the operations of the Joint Venture for such period and its financial condition as of the close of such period.
h. Annual Statements. Within [number] days after the end of each fiscal year, the Manager will cause to be prepared by the Joint Venture's independent certified public accountants and furnish to both A and B: i. A balance sheet of the Joint Venture as of the end of the fiscal year and a related statement of income or loss for the Joint Venture for such fiscal year, which statement, if requested by either A or B, shall be certified by such accountants.
ii. A statement setting forth in reasonable detail each Venturer's share of the income or loss of the Joint Venture for such fiscal year.
iii. Such other information as may be reasonably necessary in order to enable both A and B to prepare their tax returns.
16. Compensation of A and B. Without the prior approval of both A and B, neither A nor B will be entitled to compensation for its services on behalf of the Joint Venture.
17. Distribution of Income. After the end of each calendar quarter, any funds that A and B determine are not required for the payment of the Joint Venture's obligations or for the purposes of the Joint Venture will be distributed [percent] to A and [percent] percent to B.
18. Bank Accounts. All sums received from the Property and all other funds of the Joint Venture will be deposited in the joint names of A and B in such bank accounts as both A and B designate from time to time and withdrawals from such accounts may be made on the signature of such person or persons as both A and B will designate from time to time.
19. Disposition of Property. If the Property is sold to a bona fide purchaser, the proceeds will be used to pay all sums outstanding under the Loan (unless the Loan may be and is assumed by the purchaser) and, thereafter, the net proceeds (less all expenses of the sale, including closing costs, attorney fees, and broker's commissions) will (1) be used toward the payment of any debts and liabilities of the Joint Venture and thereafter (2) to be distributed to A and B according to their respective interests, as enumerated in Paragraph (14).
20. Transfers of Interest in Joint Venture. a. Restriction on Transfer. Neither A nor B may, without the prior written consent of the other party, sell, assign, or transfer in any way, or mortgage, hypothecate or otherwise encumber, its interest in the Joint Venture. Any attempted action in violation of this provision will be null and void. However, no transfer to the heirs or beneficiaries of B upon B's death shall be deemed a transfer in violation of this provision.
b. Conditions of transfer. No sale, assignment, or transfer permitted under Paragraph 20(a) is valid or effective unless: (1) the purchaser, assignee, or transferee assumes, in writing, the obligations of the seller, assignor, or transferor under this Agreement and (2) the instruments effecting such sale, assignment, or transfer, and such assumption, are in form and substance reasonably satisfactory to the attorneys for the other party to this Agreement, and an executed counterpart of each such instrument is furnished to such other party.
21. Liquidation. a. At termination. On termination of this Agreement, all assets of the Joint Venture must be liquidated, as quickly as practicable but in a manner that minimizes the usual losses occurring in a liquidation. A or B may bid for and purchase any of the assets of the Joint Venture.
b. Proceeds. The proceeds of the liquidation are to be applied in the following order of priority: i. Payment of the expenses of liquidation.
ii. Payment of the Loan.
iii. Payment of all other debts and obligations of the Joint Venture, and the creation of a reserve for any contingent liabilities of the Joint Venture.
iv. Payment to A and B, pro rata, of their capital contributions.
v. The balance is payable [percent] to A and [percent] to B.
22. Not a Partnership. This Agreement shall not be deemed to create a partnership between A and B.
23. Governing Law. This Agreement shall be governed by the law of the State of [state].
24. Entire Agreement. This Agreement embodies the entire agreement between A and B with respect to the Joint Venture. All prior agreements, representations, and statements are merged into this Agreement.
25. Survival. All the representations and covenants contained in this Agreement will survive the acquisition of the Property and the termination of the Joint Venture and this Agreement.
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