Saskatchewan CPLED Program
Corporate Commercial Section 1
Forms of Business Organization
Contents
Introduction............................................................... Corporate-1-1
For-profit Business Structures .................................. Corporate-1-1
Sole Proprietorship ............................................. Corporate-1-1
Partnerships......................................................... Corporate-1-4
Joint Ventures ................................................... Corporate-1-13
Corporations ..................................................... Corporate-1-16
Co-operatives.................................................... Corporate-1-16
Not-for-profit Organizations ................................... Corporate-1-18
Associations/Societies ...................................... Corporate-1-18
Non-profit Corporations ................................... Corporate-1-18
Choosing a Form of Business Organization ........... Corporate-1-19
Limited Liability and Nature of Business......... Corporate-1-19
Perpetual Existence........................................... Corporate-1-19
Number of People Involved.............................. Corporate-1-20
Shareholder Relations....................................... Corporate-1-20
Borrowing Requirements.................................. Corporate-1-20
Government Grants........................................... Corporate-1-20
Estate Planning ................................................. Corporate-1-21
Employee Participation..................................... Corporate-1-21
Costs ................................................................. Corporate-1-21
Flexibility.......................................................... Corporate-1-21
Income Tax ....................................................... Corporate-1-21
Precedents:
Partnership Agreement Checklist...........................Corporate-P-1-1
Partnership Agreement...........................................Corporate-P-1-5
Declaration of Limited Partnership......................Corporate-P-1-23
Limited Partnership Agreement ...........................Corporate-P-1-27
No part of this material may be reproduced, in whole or in part
(in any manner), without the specific written permission of
The Law Society of Saskatchewan 2009 © The Law Society of Saskatchewan.
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Introduction
There are a number of ways to structure a business. This chapter
discusses the various forms of business organizations used to
conduct business in Saskatchewan, including for-profit business
structures and not-for-profit organizations, specifically:
•
sole proprietorship;
•
partnership:
•
◊ ordinary;
◊ limited; and
◊ limited liability;
joint ventures;
•
corporations;
•
co-operatives;
•
associations; and
•
non-profit corporations.
For-profit Business Structures
Sole Proprietorships
The simplest form of business structure is the sole proprietorship.
A sole proprietorship exists whenever an individual engages in
business on his or her own account without using any other form
of business organization as a medium and without involving other
persons except as employees. All benefits that arise from the
business accrue exclusively to the sole proprietor. At the same
time, all obligations and liabilities are the personal responsibility
of the sole proprietor. Consequently, the sole proprietor is
responsible for the performance of all contracts of the
proprietorship and any liabilities that may result by virtue of the
tortious acts of the sole proprietor or his employees. Subject to
any statutory exemptions (for example, those provided by The
Exemptions Act), the assets of the sole proprietor are liable to be
seized to satisfy his liabilities. These liabilities may, however, be
limited by the sole proprietor obtaining insurance or contractual
limitations of liability.
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Despite the exposure to personal liability, many businesses are
operated as sole proprietorships. It is less costly to operate a sole
proprietorship, and for many business owners, the cost to
incorporate and maintain a corporation outweighs the benefit of
limited liability. A sole proprietorship may also be appropriate
where an individual has just established his or her business. The
owner may wait until the business has grown to the size where it
needs automobiles, employees, leased space, financing, or other
major changes before incorporating.
Taxation
Income arising from the sole proprietorship is added to the
personal income of the sole proprietor and the sum is taxed at the
proprietor’s individual marginal rate. Individuals are taxed under
the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1 at progressive
rates. The top marginal rate of income tax for an individual
earning business income in Saskatchewan is approximately 44%.
GST
The Goods and Services Tax (“GST”) is a consumption tax aimed
at the final “non-business” purchaser of goods and services.
Businesses that are registered for the GST can get back any GST
they pay on account of business purchases through an input tax
credit system:
(a) if the GST collected or collectible by the business on its
sales and dispositions exceeds the GST paid or payable on
its purchases, the difference is remitted to the Federal
Government; and
(b) on the other hand, if the GST paid or payable by a
business on its purchases exceeds the GST collected or
collectible on its sales or dispositions, the business can
apply for a refund of such excess from the Federal
Government.
A sole proprietor carrying on a “commercial activity” in Canada
is required to be registered for the GST (Excise Tax Act, R.S.C.
1985, c.E-15, section 240). The registration number received
from the taxation authorities is known as a “business number”.
That business number is used by Canada Revenue Agency
(“CRA”) to track GST, payroll source deductions, import-export
transactions and corporate income tax filings for a taxpayer. One
important exception to this GST registration requirement is for
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those persons who are considered “small suppliers” (Excise Tax
Act, section 240(1)(a)). Essentially, a person is considered a
“small supplier” if their total taxable sales in a year do not exceed
$30,000.
Business Name
If a sole proprietor carries on business under a name or style in
the Province of Saskatchewan (which name or style can include
his own family name or surname or a name or style comprised of
his own family name or surname with the addition of some other
word or phrase indicating a plurality of persons), he must register
that business name under The Business Names Registration Act,
R.S.S. 1978, c.B-11, section 4(1). No business name shall be
registered if, in the opinion of the Registrar, the name:
(a) is the same as or similar to the name of any other
corporation, association, partnership or firm if the use of
that name would be likely to confuse or mislead unless:
(i) in the case of a corporation, it undertakes to dissolve or
change its name to a dissimilar name within six
months after registration of the business name; and
(b)
(c)
(d)
(e)
(ii) in the case of an association, partnership or firm, they
undertake to cease to carry on its business or
activities, or to change its name to a dissimilar name
within six months after the filing of the registration of
the business name.
suggests or implies a connection with government.
suggests or implies a connection with a political party or
leader of a political party.
suggests or implies a connection with a university or a
professional association recognized by the laws of Canada
or a province of Canada, unless the university or
professional association concerned consents in writing to
the use of the proposed name.
is identical to a business name reserved pursuant to The
Business Names Registration Act.
There are two principal exceptions to keep in mind when
considering whether or not a business name has to be registered
under The Business Names Registration Act:
(a) a business name does not have to be registered where a
person is practicing a profession where the right to
practice that profession is regulated by the governing
body of that profession under an Act or to a person or
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class of persons exempted under the provisions of The
Business Names Registration Act by regulation. An
example of this would be lawyers and law firms which are
regulated under The Legal Profession Act; and
(b) registration under The Business Names Registration Act
also does not apply to an individual, or to a partnership,
joint venture or syndicate composed of two or more
individuals, where the sole business is the primary
production of agricultural products.
Registration under The Business Names Registration Act will
expire at the end of three years from the date of registration, and
any renewal of registration will expire three years from the date of
the renewal of registration. Registration of a business name may
be renewed at any time within three months before the expiry date
of the registration. The Corporations Branch in Regina will send
out the renewal form in advance of the expiration date.
One other thing to keep in mind is that if the business name or
some part of the business name is so important to your client that
it be protected on a national basis, consideration should be given
to the possibility of registering the trade name under the Trademarks Act.
Partnerships
Partnerships are governed by The Partnership Act, R.S.S. 1978, c.
P-3, with the rules of equity and common law remaining in force
(unless inconsistent with the Act (section 111)).
Indicia of Partnership
A partnership is defined in section 3(1) of The Partnership Act to
be the relationship that subsists between persons carrying on a
business in common with a view of profit. Thus, there are three
components to the definition of partnership. Firstly, there must be
a business. Secondly, the business must be carried on in common.
Thirdly, the business must be engaged in with a view of profit.
Business is defined under section 2(a) of The Partnership Act to
include every trade, occupation or profession. Thus, the definition
is very broad and would include most forms of commercial
activity.
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The parties must carry on a business in common in order for there
to be a partnership. As such, neither an employer-employee
relationship, nor a principal-agent relationship, nor a creditordebtor relationship would not constitute a partnership. Similarly,
the relationship of co-owners of properties does not of itself create
a partnership (section 4, Rule 1) and the sharing of gross returns
would not of itself create a partnership (section 4, Rule 2). The
relationship between members or shareholders of a company or
association does not constitute a partnership either (section 3(2)).
The third criteria necessary to establish a partnership is that there
be a view of profit. Put simply, if the activity engaged in is not
profit-oriented, but, rather is cultural or social, there will not be a
partnership. It is not uncommon for the courts to have to
determine whether or not a particular relationship constitutes a
partnership. In all instances, the critical issue will be the intention
of the parties as disclosed by their agreement and conduct.
Forms of Partnership
The Act contemplates three types of partnerships:
•
ordinary;
•
limited; and
•
limited liability.
Ordinary Partnerships
Basic Principles / Liability
Basic principles governing ordinary partnerships are:
•
a partnership is not a legal entity, separate from its partners;
•
each partner is an agent of the firm and of the other partners
for the purpose of the business of the partnership (section
7);
•
each partner of a firm is liable jointly with the other
partners (to the full extent of the partner's personal assets)
for all debts and obligations of the firm while he or she is
a partner (section 11);
•
a firm is liable and each partner is jointly and severally
liable, for any penalty or loss or injury caused to a nonpartner by the wrongful act or omission of a partner acting
in the ordinary course of business, or with the authority of
the co-partners, to the same extent as the wrongdoing
partner (sections 12 and 14); and
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the remaining partners of the firm can avoid liability
where a partner has no authority to act for the firm in a
particular matter if the person with whom the partner is
dealing knows that he has no authority or does not know
or believe him to be a partner (section 7), or where a
restriction is placed on the power of a partner to bind the
firm and a third party has notice of that restriction (section
10).
Business Name
Persons who have entered into partnership are collectively called
a "firm" and the name under which the business is carried on is
called the "firm name" (section 2). If the partnership is going to
operate under a business name, a declaration should be filed under
The Business Names Registration Act in Form A.
Relations Between Partners
Sections 21 to 33 of The Partnership Act set out certain implied
terms of the partnership in respect to the relationship of the partners
to one another. These mutual rights and duties may, however, be
varied by the consent of all the partners express or implied (section
21). Some of the more important implied rules are:
(a) all partners are entitled to share equally in capital and
profits and must contribute equally towards losses (section
26, Rule 1);
(b) the firm must indemnify every partner for payments or
personal liabilities incurred by the partner in the ordinary
and proper conduct of the business of the firm or in or
about anything done necessarily for preservation of the
business or property of the firm (section 26, Rule 2);
(c) every partner may take part in the management of
partnership business (section 26, Rule 5);
(d) no partner is entitled to remuneration for acting in the
partnership business (section 26, Rule 6);
(e) no person may be introduced as a partner without the
consent of all existing partners (section 26, Rule 7);
(f) any differences to ordinary matters are to be settled with a
majority vote (section 26, Rule 8);
(g) no change may be made in the nature of the partnership
business without the consent of all existing partners
(section 26, Rule 8); and
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(h) unless expressly agreed, a majority of the partners cannot
expel a partner. (See Diefenbacher v. Young (1991), 1
B.L.R (2d) 161, [1991] O.J. No. 398 (QL) (Ont. Ct. (Gen.
Div.); var’d on other grounds at (1995), 123 D.L.R. (4th)
641, (1995), 22 O.R. (3d) 641 (Ont. C.A.). Also, see
section 27 of The Partnership Act.)
Dissolution of the Partnership
Sections 34 to 46 of The Partnership Act deal with dissolution of
the partnership. In the absence of an express agreement to the
contrary, a partnership is dissolved:
(a) at the end of a fixed term if entered into for a fixed term
(section 34(a));
(b) at the termination of a venture or undertaking if entered
into for a single venture or undertaking (section 34(b));
(c) if entered into for an undefined time by a partner giving
notice to the others of an intention to dissolve the
partnership (section 34(c)); or
(d) the death or bankruptcy of a partner (section 35).
A partnership will also be dissolved if an event occurs making it
unlawful for the business of the firm to be carried on (section 36).
In addition, section 37 of the Act provides that a court may decree
the dissolution of the partnership:
(a) where a partner is of permanently unsound mind;
(b) where a partner other than the partner suing becomes
permanently incapable of performing his part of the
partnership contract;
(c) where a partner other than the partner suing has been
guilty of conduct which, in the opinion of the court, is
calculated to prejudicially affect the carrying on of the
business of the firm;
(d) where a partner other than the partner suing willfully or
persistently commits a breach of the partnership
agreement or so conducts himself in matters relating to the
partnership business that it is not reasonably practicable
for the other partner or partners to carry on the business
and partnership with him;
(e) where the business of the partnership can only be carried
on at a loss; or
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(f) wherever a court considers it just and equitable that the
partnership be dissolved. An example would be deceit by
a partner. (See Kucher v. Moore (1991), 3 B.L.R. (2d) 50,
[1991] O.J. No. 1326 (QL) (Ont. Ct.)
Taxation
Ordinary partnerships are not taxable entities. The income or loss
of the partnership is determined at the partnership level. From the
partnership level, the income or loss is allocated among the
members of the partnership.
GST
While a partnership is not considered to be a taxable person for
income tax purposes, it is for the purposes of the GST. For the
purposes of the GST, a "person" includes a partnership (Excise
Tax Act, section 123(1)). The partnership (as opposed to each of
those persons making up the partnership) can register for the
GST. As such, the partnership itself would file a tax return for the
purpose of making any payments to the government on account of
the GST or, alternatively, receiving any refund of GST.
Precedents
A Partnership Agreement Checklist and a Partnership Agreement is
included in the precedents for this section. A Model Partnership
Agreement is also available for a small fee from the Canadian Bar
Association. Information on the purchase of this annotated agreement
can be found at www.cba.org under the heading “Publications”.
Limited Partnerships
General
A limited partnership, like an ordinary partnership, is governed by
The Partnership Act. The rules of equity and common law apply to
the limited partnership relationship unless they are inconsistent
with the provisions of The Partnership Act (section 111). A limited
partnership consists of one or more persons who are “general
partners” and one or more persons who are “limited partners”
(section 50(2)).
Essentially, a limited partnership has all the characteristics of a
general partnership except for one very significant difference - in
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limited partnerships only the "general partner" is liable for the
obligations of the partnership. The "limited partners" have no
liability beyond the amounts they contribute or which they agree
to contribute to capital.
Over the past decade, the establishment of limited partnerships
has become a very popular alternative to incorporation. The main
reason for this has been the ability to allocate tax losses to the
general partners of the limited partnership while at the same time
providing limited liability to the limited partners. As long as the
general partner is a corporation, all participants who are limited
partners would have the protection of limited liability. That is, if
the partnership business failed, the limited partners would lose
their investment and if a corporation were the general partner, the
general partner would, of course, have limited liability to the
extent of its assets.
Formation
In establishing a limited partnership in Saskatchewan, look to section
49 to section 75 of The Partnership Act (“PA”) and section 15 to
section 21 of The Business Names Registration Act. A limited
partnership is formed when the business name of the partnership is
registered pursuant to section 6 and section 7 of The Business Names
Registration Act, and a Declaration is filed in accordance with
section 16 of that Act, which is essentially a list of the basic terms
necessary in any limited partnership agreement. Upon successful
application, a certificate will be issued for the limited partnership,
which incorporated the terms outlined in the Declaration.
Important Characteristics
There are a number of matters that you must be aware of when
considering the formation of a limited partnership:
•
The general partners are responsible, as ordinary partners are,
for all of the liabilities of the partnership (PA, section 56). A
limited partner, however, is only liable for the obligations of
the limited partnership to the extent of the amount of money
or other property that the limited partner contributed or
agreed to contribute to the capital of the limited partnership
(PA, section 57).
•
As long as the limited partner remains a passive investor
sharing only in profits in proportion to his or her
contribution to the limited partnership, the limited partner
will enjoy limited liability. Once the limited partner begins
to take part in the control of the business however, he or she
risks losing the benefits of limited liability. (PA, section
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64). Be careful of a situation where the general partner of
a limited partnership is a limited company, and active
directors or officers of that limited company also happen to
be limited partners. In such circumstances, the limited
partners could be considered to have taken part in the
control of the business of the limited partnership and
thereby lose their limited liability. (See, for example,
Haughton Graphic Ltd. v. Zivot et al (1986), 33 B.L.R. 125,
[1986] O.J. No. 288 (QL) (Ont. H.C.J..), aff’d (1988), 38
B.L.R. xxxiii, [1998] O.J. No. 2957 (QL) (Ont. C.A.).)
•
Limited partners in relation to one another share equally
in returns of capital and in profits in proportion to the
respective amounts of their claims. The limited partners
may agree, however, that one or more limited partners
may have priority over other limited partners with respect
to returns of contributions, compensation by way of
income or any other matter, but the existence of and
nature of the agreement shall be stated in the declaration
(PA, section 61).
•
A limited partner's interest in the partnership is personal
property (PA, section 54(2)).
•
A limited partner's interest is assignable and devolves on
death (PA, sections 66 and 68).
•
The retirement, death or mental incompetence of a general
partner dissolves the partnership unless the business is
continued by the remaining general partners pursuant to a
right to do so stated in the certificate or with the consent
of the remaining partners (PA, section 67).
Taxation
Limited partnerships are not taxable entities. The income or loss
of the partnership is determined at the partnership level. From the
partnership level, the income or loss is allocated among the
members of the partnership.
When dealing with a limited partnership, there are restrictions on
the amount of losses that can be allocated to limited partners. The
general rule is that a limited partner’s share of partnership losses
for tax purposes do not exceed the limited partner’s “at-risk
amount” in respect of his/her/its partnership interest. Essentially,
the “at-risk amount” of a taxpayer’s partnership interest is the
amount of money or other property paid to the partnership for the
interest in the partnership (see, generally, PA sections 96(2.1) to
(2.7)).
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Extra-provincial Limited Partnerships
From time to time, limited partnerships may be set up in other
jurisdictions. If these limited partnerships carry on business in the
Province of Saskatchewan, it is possible to extra-provincially
register these limited partnerships in this province. Generally see
The Partnership Act, sections 75.1 to 75.4, and The Business
Names Registration Act, sections 21.1 to 21.4.
Precedents
A sample Declaration of Limited Partnership and a sample
Limited Partnership Agreement is included in the precedents for
this section.
Limited Liability Partnerships
General
Members of certain professions are permitted to carry on business
under limited liability partnerships (“LLPs”). Where one of the
LLP partners is negligent, the other partners are shielded from
personal liability in excess of their share in the partnership’s
assets.
Limited liability partnerships are governed by The Partnership
Act. LLP legislation is a response to the expansion of
professional liability, caused by the application of
“neighbourhood principle” and the availability of damages for
economic loss. As with limited partnerships, LLPs provide a
degree of liability protection for some partners. But, where
limited partnerships’ law developed to protect silent partners from
personal liability for partnership obligations, LLPs are supposed
to shelter professionals in modern, compartmentalized
partnerships from personal liability for mistakes by other partners.
Liability
The key provision respecting LLPs is section 80. Distinguishing
between partnership and personal liability, it states that a partner
is not personally liable for a partnership obligation solely by the
fact of being a partner (PA, section 80(1)). The drafters seem to
intend this rule to apply to both tort and contract claims (PA,
section 80(1)(b)), thus broadening the “liability shield” farther
than Alberta and Ontario Partnership legislation. Further, a
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partner does not have to indemnify the partnership for these sorts
of obligations (PA, section 80(1)(c)).
Note that the limitation of liability applies prospectively - that is
to obligations arising after the partnership becomes an LLP. For
contractual obligations, it is the date of the contract formation, not
breach, that is important, so that liability limitations only apply to
contracts entered into after the partnership obtains its new status
(PA, section 82).
Besides the express exclusions of liability, the LLP provisions set
out express inclusions of liability. A partner’s contribution to the
partnership is available to creditors (PA, section 80(3)). As well,
in order to provide some relief from the “full shield” approach in
Saskatchewan, the new provisions make partners personally liable
in terms of those statutory obligations for which a corporate
director would be liable if the partnership were a corporation (PA,
section 81(1)).
Attributed “director” liability may also apply to any corporation
that is a partner in an LLP. In such a case, there is a further
imputation of liability from the corporate partner to its directors,
who are then liable as if the partnership as a whole was a
corporation and they were its directors (PA, section 81(2)).
Most importantly, individual partners are personally liable for their
own negligent or otherwise wrongful acts or omissions (PA, section
80(2)). In other words, particular partners who cause losses are
personally liable for them and do no enjoy the limited liability; but
partners who have had nothing to do with the loss are not personally
responsible. As noted, The Partnership Act states that the individual
contributions of each partner are available to third parties (section
80(3)) and it seems implicit that a party can still sue the partnership
as a whole for acts of negligence by certain partners.
Formation
Unlike limited partnerships, LLPs do not require a new
partnership structure or any differentiation between silent and
active partners. In return for limited of liability, the partnership
simply has to register, make public its new status and submit to a
few new regulations, most of which involve distribution of
partnership assets. Registration is open to all professions
regulated by law (PA, section 86(1)) in which the governing body
of the profession does not outlaw such a form of business
organization. In Saskatchewan, The Legal Profession Act permits
law firms to operate as LLPs. To register, the applicant has to
provide the Registrar with the name of the partnership, a
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description of the eligible professions in which the partners
practice, the name and address of the partner designated as the
“representative” and the mailing address of the partnership (PA,
section 86(4)). The applying partnership also must present the
Registrar with a statement from the professional governing body
certifying that the partnership and its partners meet its regulatory
requirements for registering as an LLP (PA, section 86(4)(f)).
After registration, the partnership has to notify its clients of its
change of status and the resulting implications for liability (PA,
section 89). Further public notification results from the
requirement to include one of the following terms in the partnership
name: “Limited Liability Partnership”, “LLP”, “Société à
Responsibilité Limitée” or “SRL” (PA, section 95(1)). The
partnership has to keep a list of partners and make it available to
the public on demand, and the Registrar has prescribed certain
annual reporting requirements in the regulations (PA, sections 91
and 93). As with limited partnerships, the LLP provisions include
restrictions on distributions to partners at the expense of creditors
(PA, sections 83 to 85).
Extra-provincial LLPs
A non-Saskatchewan LLP may extra-provincially register in
Saskatchewan when, in its home jurisdiction, it has a status
equivalent to a Saskatchewan LLP and when the partners carry on
an eligible profession (PA, section 98). Although the law of the
home jurisdiction governs the extra-provincially registered LLP in
terms of internal affairs and organization, and even in terms of
partnership obligations to third parties, its liability protection in
Saskatchewan will not be greater than a Saskatchewan LLP would
enjoy. Note that similar provisions in the partnership legislation
of other jurisdictions mean that Saskatchewan LLPs may not
enjoy their “full shield” protection when operating in the rest of
Canada or North America.
Joint Ventures
General
A joint venture is a common business undertaking founded on
agreement between two or more persons (which may include
corporations) to contribute to an undertaking. It is usual, although
not essential, that a joint venture be limited to one specific
project, for instance, the purchase and operation of a parcel of real
property or the construction of a single project. Once the project
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has been completed, the joint venture terminates and any income
is distributed or losses are paid in accordance with the agreement.
A joint venture is often formed to carry out a project too onerous
to be accomplished by a small group, or where the parties want to
avoid forming a new corporation involving share distributions and
the usual corporate arrangements.
The precise meaning of a “joint venture” is elusive. A joint
venture has been described as a relationship falling short of a
partnership. It would appear that the following factors must be
present in order for a joint venture to exist:
(a) a contribution by the parties of money, property, effort,
knowledge, skill or other assets to a common undertaking;
(b) a joint property interest in the subject matter of the
venture;
(c) a right of mutual control or management of the enterprise;
(d) expectation of profit, or the presence of “adventure”, as it
is sometimes called;
(e) a right to participate in profits; and
(f) most usually, a limitation of the objective to a single
undertaking or ad hoc enterprise.
(Central Mortgage & Housing Corp. v. Graham (1973), 13
N.S.R. (2d)183)
Joint venture agreements are often used in real estate projects,
mineral exploration and drilling ventures, and farming ventures.
Joint venturers owe fiduciary obligations to each other similar to
those owed by partners. In general, these fiduciary duties involve
reciprocal obligations of good faith and loyalty.
In many ways, a joint venture is indistinguishable from a partnership.
Therefore, it is important that a joint venture is properly established.
A well-drafted joint venture agreement will contain a provision to
negate any partnership implications between the parties. However,
such a clause will have little or no effect if the relationship between
the parties is in fact a partnership in accordance with the common
law and The Partnership Act. If a partnership is created, then the
parties' liability to third parties dealing with the joint venture will be
the same as that of a partner under the Act.
All joint venture agreements should include suitable indemnity
clauses to protect the parties from third party claims premised
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upon the existence of a partnership. If the parties intend to rely on
indemnities, joint venturers with sufficient resources to cover
any losses should be the only parties to the venture. Clients must
be aware of the potential exposure to liability, despite having a
carefully drawn agreement. In many cases, the parties fund and
operate the venture through holding companies in order to reduce
personal exposure to losses.
Taxation
For income tax purposes, a joint venture is not a taxable entity. In
this way, it is similar to a partnership. Each joint venturer takes
into account its share of the income or loss of the venture.
However, there are important distinctions between the taxation of
a joint venture and a partnership:
(a) Under the Income Tax Act, the income of the enterprise
conducted by a partnership is determined at the
partnership (as opposed to the partner) level. As such, if
there is depreciable capital property in the partnership, all
capital cost allowance (or in other words, tax
depreciation) must be taken at the partnership level.
Thereafter, any income or loss of the partnership is
allocated to the members of the partnership. There is no
concept, as far as a joint venture is concerned, of
calculating the income from the enterprise at the level of
the joint venture (as opposed to the joint venturers). Thus,
if you were dealing with three equal joint venturers, each
of the three will calculate their own income or loss from
the particular venture. As far as capital cost allowance is
concerned, each of the joint venturers will be free to take
as little or as much (up to the amounts prescribed by the
Regulations to the Income Tax Act ) as he/she/it wishes.
(b) Another distinction for income tax purposes between a
partnership and a joint venture is that when a person is a
member of a partnership, for tax purposes they are
considered to own an interest in the partnership.
Generally speaking, this interest will be non-depreciable
capital property. A sale of it will usually yield a capital
gain or capital loss. The joint venturer, on the other hand,
is not considered to own an interest in anything other than
the actual assets of the enterprise being carried on through
the joint venture. Thus, if you have a real estate joint
venture, if a joint venturer in these circumstances sold out
his/her/its interest in the joint venture, there would likely
be income gains/losses (in addition to possible capital
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gains/losses) as a result of a recapture of depreciation on
the building under section 13 of the Income Tax Act.
(c) One other distinction is that while a partnership is not
considered to be a person for income tax purposes, it is
considered to be an entity separate from the partners
themselves. As such, when property is transferred to a
partnership, there can be deemed income and capital gains
unless an election under section 97(2) of the Income Tax
Act is made to defer or avoid the same. On the other
hand, if you have a joint venture, there are no income or
capital gains to be concerned about when property is
contributed by the joint venturers for use in the enterprise
of the joint venture.
GST
Section 273 of the Excise Tax Act allows an election to be made
in prescribed form (GST 21: “Election to Have Joint Venture
Operator Account for GST”) in a joint venture to allow the
“operator” to be responsible for accounting for the GST and all
purchases and sales made through the joint venture. This election
is available to joint venturers which explore or exploit mineral
deposits or for a “prescribed activity”. Under the Joint Venture
(GST) Regulations, the only prescribed activity currently deals
with real estate development.
Corporations
A corporation is a creature of statute, separate and distinct from
its shareholders or members. In Saskatchewan, a corporation can
be incorporated provincially pursuant to The Business
Corporations Act, or federally, pursuant to the Business
Corporations Act . For more information on corporations, please
refer to Sections 2 and 3 of these materials.
Co-operatives
A co-operative is a structure that can be used for either not-forprofit or for-profit commercial business undertakings.
Cooperatives are governed by The Co-operatives Act, 1996, S.S.
1996, c. C-37.3.
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Section 3 of The Co-operatives Act, 1996 describes the
characteristics of a cooperative:
3 For the purposes of this Act, a body corporate is
organized, operated and administered on a co-operative
basis where:
(a) no member or delegate has more than one vote;
(b) no member or delegate is entitled to vote by proxy;
(c) its business is carried on primarily for the benefit
of its members;
(d) its membership is voluntary and available, without
any artificial restriction or any unlawful basis of
discrimination, to any person who can use its services
and is willing to accept the responsibilities of
membership;
(e) the limit on the interest or dividends on share
capital that it pays does not exceed the prescribed
rate; and
(f) any surplus or saving arising out of its operation
is:
(i) used to develop its business;
(ii) used to provide or improve common services
to members;
(iii) distributed among members in proportion to
their patronage with the co-operative;
(iv) used to educate its members, officers or
employees or the general public in the principles
and techniques of economic and democratic cooperation; or
(v) distributed to non-profit, charitable or
benevolent organizations.
New Generation Co-operatives
The New Generation Co-operatives Act, S.S. 1999, c.N4-001
provides for a new type of co-operative that was designed
specifically for organizations that:
•
produce, process or market agricultural products; or
•
provide services to persons engaged in those
undertakings.
The key difference between New Generation Co-operatives
(“NGCs”) and ordinary co-operatives is that NGCs issue shares
that are linked to delivery obligations. In addition, unlike
traditional co-operatives, NGCs can restrict their membership.
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Not-for-profit Organizations
These organizational structures include associations, societies and
not-for-profit companies.
Associations/Societies
The terms “association” and “society” are not terms of art in
Saskatchewan. They can be used to describe a number of business
organizations. An association or society is a group of persons acting
together for a common goal or purpose and is created by an
agreement between its members. It has no legal status and members
are personally liable to the association’s/society’s creditors.
Non-profit Corporations
Non-profit corporations are governed by The Non-profit
Corporations Act, 1995, S.S. 1995, c.N-4.2. A non-profit
corporation (“NPC”) is a legal entity separate from its members
and directors formed for purposes other than generating a profit
for its stakeholders. Similar to for-profit corporations, members
of an NPC are protected by limited liability.
There are two forms of NPCs: Membership NPCs and Charitable
NPCs. The two forms are distinguished by their objectives:
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•
Membership NPCs exist for the benefit of their members.
Examples of membership NPCs include golf clubs,
special interest organizations and daycares.
•
Charitable NPCs are formed to benefit some segment of
the general public. In order to obtain charitable status, a
NPC must qualify as a charity within the meaning of the
Income Tax Act and must apply to Canada Revenue
Agency to be registered. Registered charities are exempt
from income tax and can issue official tax-receipts to
donors.
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Choosing a Form of Business
Organization
In selecting one business form over another, consider their various
characteristics. Each business form has its advantages and
disadvantages.
Limited Liability and Nature of Business
In ordinary partnerships, each partner is a co-owner of the
partnership assets and jointly liable to the full extent of his or her
assets for the liabilities of the business. In a limited partnership
only the general partner has unlimited liability. A limited liability
partnership minimizes partnership exposure. The unlimited
liability aspects of partnership may be avoided by inserting a
limited company as a partner instead of an individual. This is
equally applicable to limited partnerships where a general partner,
to avoid the results of unlimited liability, is a corporation.
In a corporation, a shareholder's liability is limited to the
investment. In a corporation there is, however, some personal
exposure for directors, officers and major shareholders created by
certain statutory enactments such as payment of wages, filing of
tax returns, and improper loans.
If a substantial uninsurable risk is possible, consider a limited
partnership, LLP, or corporation. This will limit liability to the
investment and not expose personal assets.
Perpetual Existence
A corporation continues notwithstanding the death or withdrawal
of a shareholder or a director. The remaining director(s) can carry
on the business. Major agreements remain in effect. Conversely,
the death of a sole proprietor spells the end of the business. The
death of a partner may result in the dissolution of a partnership (in
the absence of an agreement to the contrary).
A corporation with perpetual existence is usually preferable to a
partnership or sole proprietorship, which, in the absence of special
arrangements, relies on surviving proprietors.
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Number of People Involved
If there are a large number of investors, an incorporated structure
is usually preferred.
Corporations generally have well-established rules for internal
control and procedures, as well as limited liability and flexibility
of financing. It is easier to transfer the ownership of shares in a
corporation than it is to transfer an interest in a partnership.
Shareholder Relations
If there are to be several degrees of control and risk taking, with
some investors taking the role of lenders, incorporation with
various classes of shares can be preferable.
Subject to the remedies and relief available under SBCA (i.e.,
oppression and dissenting shareholder provisions) minority
shareholders are subject to the will of the majority, with the result
that their shares are not necessarily marketable (in the absence of
a buy-sell arrangement on retirement of a shareholder).
Borrowing Requirements
Lenders look first to the ability of a borrower to repay any loans.
Bankers for new corporations with few assets are often reluctant
to lend significant amounts. By contrast, it may be easier for
those doing business under a partnership to qualify for a loan
because the individual partners are fully responsible for the
partnership’s debt obligations, affording a bank more assets as
collateral.
Commonly, lenders to small corporations will require personal
guarantees by the principal shareholders. This negates, in many
cases, the advantage of incorporating a limited liability corporation.
Government Grants
Some grants and loans are available only to corporations while
others are available to all types of business. The availability of
government funding may be a determining factor in how the
business will be organized.
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Estate Planning
While outside the scope of these materials, consider that estate
planning is a relevant consideration in selecting a form of
business.
Employee Participation
Incorporation provides the most convenient form of business
organization where the parties want to benefit employees by
having them share in growth and profits but not in management.
Costs
A carefully drawn partnership agreement can cost as much in
legal fees as incorporation. However, registration fees for
incorporation are higher. Also of note is that partnership
agreements can be altered by the parties fairly simply, whereas
any major changes in a corporate structure requires appropriate
resolutions and filings with the Corporations Branch. Generally,
ongoing maintenance costs of a business are dependent upon the
complexity of the organization, be it a partnership or a
corporation.
Flexibility
Parties to a partnership agreement have considerable latitude in
structuring the arrangement between them. Incorporation
provides considerable flexibility as well, however there are more
statutory requirements. Incorporation generally provides greater
flexibility for income tax and estate planning.
Income Tax
In selecting the proper form of business, one of the most
important issues is tax. When consulted about a suitable form of
business for your client, seek the assistance of a specialist in the
tax field – either a lawyer or an accountant.
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PARTNERSHIP AGREEMENT CHECKLIST
1.
Date:
2.
Describe Partners - Partner can be a corporation. In the event the partner is
an individual, make certain that the partner is at least 18 years of age.
3.
Firm Name - The firm must carry on business under this name. In the event
there is a possibility of conflict with another name, this could result in loss of the name
or an injunction or a passing-off action. Depending on the nature of the name,
consider a search with the Trade-Marks Office and registration under the Trade-marks
Act.
4.
Term of Partnership - Provide for date of commencement. Unless the term is
specifically set out in the agreement, the partnership term will be subject to sections
34 to 37 of The Partnership Act.
5.
Place of Business - Only required if there is a desire to place a geographical
limitation on the partnership.
6.
Description of Business - Establish the extent of the agency of each partner to
one another and to and for the firm. Will be relevant to non-competition clause.
7.
Contribution of Capital - May specify a particular amount or percentage. May
provide that for future contributions which might be allocated to be by way of a
percentage of profits being retained by the partnership.
In the event you are dealing with a limited partnership, a change in contributed
capital would require a new Declaration. In the event there is no specific agreement
regarding contribution of capital, all partners must contribute equally.
8.
Division of Profits - In the absence of an agreement, all partners share equally
(Section 26, Rule 1). Consider any means by which profit share may be reviewed
on a periodic basis along with any criteria which might be utilized so as to effect a
revision of profit allocation.
9.
Accounting and Other Records - Describe the nature of the records which are
to be prepared, maintained and distributed to partners. Records must be sufficient
for income tax purposes and effective business operation. In the event there is no
agreement, each partner has access to the partnership books (Section 26, Rule 9).
10.
11.
Auditor - Provide for the appointment of an auditor if same is warranted.
Fiscal Year - Discuss with clients and their accountant.
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12.
Accounting Principles - Consider issues such as valuation of assets, what
constitutes capital, what constitutes income, rates of depreciation, interest on
advances and capital, write-offs, reserves, what constitutes valid partnership
expenses, calculation of profit, etc.
13.
Banking - Who will be the banker of the firm? What forms of accounts will be
maintained? Who will be entitled to sign cheques? Who can borrow on account of
the firm’s assets? Who can pledge or secure the firm’s assets?
14.
Provision not to allow partners to charge their partnership interest with nonpartnership related obligations.
15.
Each partner is to devote full time and attention to the firm. Provide for other
income which may be included as partnership income, (e.g., directors’ fees,
royalties, teaching salaries, honourariums, etc.). Section 31 of The Partnership Act
provides that every partner must account to the firm for any benefit derived without
the consent of the other partners from any transaction concerning the partnership or
from any use by him of the partnership property, name or business connection.
16.
Management - Designate the individual in charge of sales, administration,
production. In the absence of agreement, all partners are entitled to share in
management (Section 26, Rule 5). Provide for the procedure regarding meetings,
notices, voting, quorums, etc. In the event it is a limited partnership, only the
general partner may manage. May provide for specific matters or transactions to be
dealt with by special majorities or unanimity (e.g., sale or encumbrance of assets out
of the ordinary course of business).
17.
Partnership Contracts - Who has authority to execute on behalf of the
partnership? In the event you are dealing with a limited partnership only, the general
partner can sign.
18.
Drawing Arrangements - How often and in what quantities? Can the
partnership borrow so as to provide for draws in anticipation of future profits?
19.
Retirement, Death or Bankruptcy of a Partner (Sections 28 and 35) - Subject
to any agreement, any partner may determine the partnership at any time on giving
notice of his intention to do so to all the other partners and any partnership is
dissolved as regards all the partners by the death or bankruptcy of a partner. In the
event the partnership is to continue, there should be provision for the firm or
remaining partners to purchase the partnership interest of the partner leaving the
firm, valuation of such interest, means and timing of payments, etc.
20. Non-Competition Clause - Must be reasonable as to area, time and nature of
business. Provide for liquidated damages in the event of breach.
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21.
Sale of Partnership Interest - Section 33(1) of The Partnership Act provides
that an assignment by a partner of his share in the partnership does not entitle the
assignee to interfere in the management or administration of the partnership, but
only entitles the assignee to receive the share of profits to which the assigning
partner would have otherwise been entitled. Generally speaking it is best to prohibit
such assignment, however it may be appropriate in the event the remaining partners
refuse to purchase the interest of the departing partner the value of such interest is,
however, somewhat questionable given the terms of section 33.
22.
Expulsion of Partner - In the absence of an express agreement providing for
expulsion, no majority of the partners can expel any partner (section 27).
23.
Grounds for Dissolution (see sections 34 to 37) - Unless an agreement exists
to the contrary, death, insolvency and notice of a partner to dissolve will dissolve a
partnership. Dissolution is automatic in the event the partnership becomes illegal or
by reason of court order pursuant to section 37.
24.
Admission of a New Partner - Subject to agreement, no person may be
introduced as a partner without the consent of all existing partners (Section 26, Rule
8). Provide for the necessary majority on the vote, the necessary contribution to be
made to capital by the new person and the percentage of capital that person will
then receive.
25.
Obligations to Purchase - For situations where the remaining partners will be
forced to purchase the partnership interests of departing partners. These situations
may include retirement, expulsion, death, bankruptcy, disability, etc. Provision may
be made for rights of first refusal, options to purchase, buy -sell, etc.
26.
Valuation - The nature of the partnership business will usually determine the
manner of valuation of a partnership interest. Whether it be a multiple of earnings,
multiple of assets, the extent to which good will is to be taken into account,
depreciation multiples, along with many other factors will all have to be taken into
account. Do not allow valuation to be based upon future profits as the retiring
partner might then be considered to be a continuing partner. Provide for registration
of all partnership property in the name of the firm or in the name of one or more
partners. In the event the latter is chosen, the property should be defined with as
much specificity as possible.
27.
Limitation of Liability of General Partners to Limited Partners.
28. Insurance - The form and specifics of the policies, life, fire, boiler, theft,
liability, etc. Obligation of each partner to purchase a stipulated amount of life
insurance on the lives of others sufficient to fund obligations to purchase upon the
demise of a partner.
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29. Arbitration of Disputes - One or three arbitrators -arbitration condition
precedent to legal action. Award final and binding. Subject to The Arbitration Act of
the Province of Saskatchewan.
30.
Registration - Provide for appropriate registration under The Business
Names Registration Act. Attach limited partnership declaration to be initialed by all
partners.
31.
Applicable Law.
32.
Binding on heirs, executors, administrators and assigns.
33.
No modification without consent in writing.
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PARTNERSHIP AGREEMENT
THIS PARTNERSHIP AGREEMENT MADE EFFECTIVE THE _____ DAY OF
__________, 20___.
BETWEEN:
________________________________,
a body corporate duly incorporated pursuant to the
laws of the Province of Saskatchewan.
(hereinafter referred to as “_______________”)
OF THE FIRST PART
AND
_______________________________,
of _________________, Saskatchewan
(hereinafter referred to as “_____________”)
OF THE SECOND PART
AND
______________________________,
of ________________, Saskatchewan
(hereinafter referred to as “_____________”)
OF THE THIRD PART
(hereinafter sometimes referred to individually as a “Partner” and
collectively as the “Partners”).
WHEREAS:
1.
The Partners desire to enter into a Partnership for the purposes and on the
terms and conditions hereinafter stated.
2.
_____________ is the Principal of _____________________ (and hereinafter
is referred to individually as a “Principal”).
NOW THEREFORE THE PARTIES AGREE AS FOLLOWS:
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ARTICLE 1.00
2009 © The Law Society of Saskatchewan
FORMATION
1.01 EFFECTIVE DATE
The Partners have agreed to enter into Partnership to pursue the objectives of the
Partnership commencing on the 1st day of January, 20__ (the "Effective Date"), on
the terms and conditions set out in this Agreement.
1.02 PARTNERSHIP NAME
The name of the Partnership shall be "_______________" (the "Partnership"), or
such other name as the Partners may from time to time unanimously determine.
The offices of the Partnership shall be located at _______________, Saskatchewan,
or at such other location as the Partners may from time to time determine.
1.03 PURPOSE OF PARTNERSHIP
The purpose of the Partnership shall be to carry on the business of farming and
related businesses including the ownership of land, buildings and equipment related
thereto.
1.04 SUBSISTENCE OF PARTNERSHIP
The Partnership shall continue to subsist until dissolved in accordance with the
terms of this Agreement.
1.05 ADDITIONAL PARTNERS LIMITED TO FAMILY
Additional Partners may be admitted to the Partnership on the terms and conditions
stated in this Agreement, but admission is restricted to Family Members or 100%
family owned corporations, or family trusts where 100% of the beneficiaries are
Family Members. Family and Family Members is limited to _______, _________,
their children, and their children’s’ spouses; and the grandchildren of _________ and
__________, and the spouses of the grandchildren of ________ and __________.
Spouses means lawfully married spouse. Child/children mean the children born to
________ and ___________. Grandchild/grandchildren means children born to, or
lawfully adopted by, a child of __________ and __________ and such child/spouse.
ARTICLE 2.00
PARTNERSHIP OPERATION
2.01 PLACE OF MEETINGS
All meetings of the Partners shall be held at the home quarter of _______________
and _______________ at ______________, Saskatchewan, unless otherwise
agreed. Any Partner may participate in such meeting by way of telephone
conference call, provided that each member is able to hear the others.
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2.02 MEETING OF PARTNERS
The Partners shall meet periodically, from time to time, at the call of any two of the
Partners or at the call of ___________ alone, to deal with issues of a fundamental
nature affecting the Partnership, their relations with one another, issues specifically
reserved to them as Partners in this Agreement and any other matters which the
Partners wish dealt with at a meeting of Partners.
2.03 At least seven (7) days’ notice of each meeting of the Partners shall be given
to each Partner at the address specified herein.
2.04 WAIVER OF NOTICE
A Partner may, in any manner, waive notice of or otherwise consent to a meeting of
the Partners being held on less than seven (7) days’ notice.
2.05 QUORUM
A Quorum for the proper conduct of the business of a Partnership meeting shall be
two-thirds of the Partners; provided that no meeting of the Partners shall be deemed
to be properly constituted unless each Partner has received or waived, notice of
such meeting.
2.06 PASSING OF RESOLUTIONS/VOTING
Resolutions of the Partners shall be passed, or enacted, upon a majority vote of the
Partners. Votes at meetings of the Partners shall be given by each Partner or its
Principal. Each Partner shall have one (1) vote for each percentage comprising the
Partner’s Capital Interest of that Partner as designated in Section 5.03 hereof. At
any meeting, a declaration by the Chairperson of the meeting that a Resolution has
been carried or carried unanimously or by any particular majority or lost or not
carried by a particular majority shall be conclusive evidence of that fact without proof
of the number or proportion of votes recorded in favour of or against the motion. All
Partnership matters shall be decided by majority vote unless specifically stated
otherwise herein.
2.07 CHAIRPERSON OF PARTNERS’ MEETINGS
The Chairperson of every Partnership meeting shall be ______________, or such
person designated in writing by ___________.
2.08 REPRESENTATIVE OF PARTNERS
The representative of each corporate Partner for the purposes of Partners' meetings
shall be its Principal. The Principal shall be entitled to attend, represent and vote on
behalf of the Partner at all Partners’ meetings.
2.09 DESIGNATION OF PRINCIPALS
The designated Principal of ________________ is _______________.
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2.10 EXECUTION OF INSTRUMENTS
Any of _________ and __________ shall have the authority to sign notes, cheques,
drafts and other obligations of the Partnership and execute all instruments
necessary for the conduct of the business of the Partnership and the carrying out of
the provisions of this Agreement.
2.11 A sale of all or substantially all of the assets of the Partnership or a merger of
the Partnership with another partnership or person shall only occur upon a majority
vote of all of the Partners.
ARTICLE 3.00
PARTNERS’ DUTIES
3.01 PARTNERS’ DUTIES
The Partners shall generally manage and direct the day to day operations of the
Partnership within the parameters of the purposes of the Partnership including, inter
alia, the following:
(a)
Creating a strategic plan for the business of the Partnership, and
implementing it, subject to the directions of the Partners;
(b)
Hiring, supervising, and terminating Partnership employees, and
engaging and discharging solicitors, accountants, consultants and
other professionals for the Partnership's business;
(c)
Implementing all policy decisions of the Partnership, and making routine
decisions in connection with the daily operations of the Partnership;
(d)
Creating and administering all matters pertaining to the financial
operations of the Partnership, including those related to deposit accounts,
arrangements with financial institutions, receiving and disbursing funds on
behalf of the Partnership, relationships between the Partnership and
diverse financial institutions, trade creditors and the like, and paying the
financial obligations of the Partnership, including salaries and other
benefits payable to the employees of the Partnership;
(e)
Creating, preparing and maintaining the books and records of the
Partnership, accounting systems for the operations of the
Partnership, all necessary ledgers, accounts, financial statements and
balance sheets in connection with the Partnership and its operations;
(f)
Producing and distributing on a timely basis operating statements and
minutes of meetings of the Partnership meetings; and
(g)
Monitoring and supervising the fulfillment, on a day-to-day basis, by
the Partnership of its contractual obligations to third parties.
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CAPITAL CONTRIBUTIONS
4.01 CAPITAL ACCOUNT
A capital account shall be maintained by the Partnership for each of the Partners.
4.02 INITIAL CAPITAL CONTRIBUTIONS
The initial capital contributions of each Partner to the Partnership shall be based
upon the fair market value of the property contributed to the Partnership by each of
the Partners. The balance in each Partner’s capital account may vary from time to
time. Each Partner's capital account shall be that Partner’s “Capital Account".
4.03 CONTINUING CALCULATION OF PARTNERS’ CAPITAL ACCOUNT
The capital account for each of the Partners will be maintained by the Partnership.
The Capital Account of each Partner shall be credited with:
(a)
The initial capital contribution of the Partner, if any;
(b)
A subsequent contribution to the Capital Account of the Partner;
(c)
Any profits calculated in accordance with generally accepted
accounting principles (GAAP) of the Partnership allocated to the
Partner. The Capital Account of each Partner shall be debited with:
(i)
all of that Partner’s draws and withdraws of capital; and
(ii)
all of that Partner’s share of the losses calculated in accordance
with GAAP of the Partnership.
4.04 PARTNERS’ CAPITAL INTEREST
The interest of each of the Partners in the capital and assets of the Partnership, from
time to time, after deduction of the outstanding aggregate balance of all Partners’
Capital Accounts shall be adjusted every two years, commencing January 1, 20__ or
more often if required due to the departure of a Partner, restructuring of the
Partnership, or introduction of a new Partner, which is referred to in this Agreement
as each Partner’s Capital Interest.
4.05 ADDITIONAL CAPITAL CONTRIBUTIONS
The Partnership, from time to time, by notice in writing, may require each of the
Partners to contribute additional capital to the Partnership for capital expenses
and/or working capital.
Each Partner shall have thirty (30) days from the date of such notice to advance the
sum required from each of the Partners to the Partnership. If any Partner (the
"Defaulting Partner") fails or refuses to advance its share of the additional capital
contribution required, and provided that the other Partners have made their required
advances, any Partner (the "Contributor") may advance the Defaulting Partner's
share of such capital contribution, and the Contributor shall have a first lien and/or
charge upon the Capital Account and Capital Interest and on all other interests of the
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Defaulting Partner in the Partnership. Such Defaulting Partner shall not be entitled
to its proportionate share of the Partnership profits or otherwise until the Contributor
has been recompensed in full for the capital advanced on behalf of the Defaulting
Partner, together with interest at an annual rate equal to the Prime Lending Rate,
from time to time, of the Bank of ___________, __________, Saskatchewan, plus
one (1%) per cent, from the date of advance of the additional capital until the date of
repayment.
In addition, the Defaulting Partner, so long as it remains in default, shall not enjoy
any of its rights to vote in respect of the Partnership business, and its Principal or
representative on the Management Committee shall not be entitled to vote on any
matter or business coming before the Management Committee, but for all such
purposes, that person shall be deemed to have cast his or her vote in accordance
with the vote of the majority of the other members of the Management Committee.
4.06 INTEREST AND DRAWINGS FROM CAPITAL ACCOUNT
No interest shall be paid or payable in respect of a Partner's Capital Account, unless
otherwise agreed by resolution of the Partners. No Partner shall be entitled to draw
down its initial Capital Account, and/or any additions to its Capital Account, except in
accordance with the terms and conditions of this Agreement, or by resolution of the
Partners.
ARTICLE 5.00
PARTNERSHIP INCOME
5.01 DISTRIBUTION OF PARTNERSHIP INCOME
The net profits or losses of the Partnership for each fiscal year (the "Partnership
Income") for accounting purposes, shall be calculated as soon as possible following
the end of each fiscal year and in any event no later than one hundred twenty (120)
days thereafter and shall be allocated among the Partners as follows:
(a)
(b)
(c)
____________
____________
____________
_____ %
_____ %
_____ %
or such other amounts in relation to each Partner, taking into account all of the
circumstances applicable to each Partner, as the Partners may determine from time
to time by majority resolution of the Partners.
5.02 PARTNERSHIP DRAWS
Each of the Partners may draw monthly during the fiscal year of the Partnership
such amounts as may be approved by the Partnership from time to time. Save as
permitted in this Article, no further or other drawing shall be made by any Partners
on account of its share of Partnership Income without the approval of the
Partnership.
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5.03 ALLOCATIONS OF CAPITAL COST ALLOWANCES OR TAX CREDITS
All capital cost allowances and/or investment tax credits and/or other allowances in
the nature of capital cost allowance or tax credits, howsoever arising in relation to the
operations of the Partnership, are to be allocated in the proportion that the aggregate
share of Partnership Income allocated during the same fiscal year to each Partner
bears to the whole of the Partnership Income allocated amongst the Partners.
5.04 REIMBURSEMENT FOR EXPENSES
Each of the Partners shall be entitled to be reimbursed for the reasonable expenses
and disbursements incurred by him/her or it in furtherance of the business of the
Partnership, such reimbursement to be effected on a monthly basis within such
period of time following the end of each month as the Partners shall determine.
Reimbursement is to be supported by delivery of a monthly expense statement by
each Partner together with appropriate invoices, and it is to be subject to the
approval of the Partners.
ARTICLE 6.00
PARTNERS' OBLIGATIONS
6.01 OBLIGATIONS OF PARTNERS AND PRINCIPALS
Each Partner and Principal shall at all times:
(a)
Show the utmost good faith to the other Partners in all matters relating
to the Partnership;
(b)
Devote their full time and attention to the business and affairs of the
Partnership except to the extent otherwise agreed to by the Partners;
(c)
Use their best endeavors to promote the Partnership business;
(d)
Duly and punctually pay and discharge their separate and private
debts and liabilities and keep the Partnership property and the other
Partners indemnified against the same and against all actions,
proceedings, costs, claims and demands in respect thereof; and
(e)
Indemnify and save harmless the Partnership and the other Partners
from and against all actions, proceedings, costs, claims and demands
arising from any breach by such Partner or Principal of the terms of
this Agreement; and
(f)
Conduct themselves in an appropriate manner so as to enhance the
business and purposes of the Partnership, and maintain and enhance
its reputation.
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6.02 GUARANTEES BY PARTNERS
Unless otherwise specifically agreed to in writing by all of the Partners, no Partner
shall be required to guarantee the repayment of any of the liabilities of the
Partnership unless all Partners concurrently guarantee the same.
6.03 RESTRICTIONS ON PARTNERS, PRINCIPALS AND SHAREHOLDERS
No Partner, nor any Principal, nor any shareholder of a Partner, without the prior
approval of the Partners, shall:
(a)
Engage directly or indirectly in any business in competition with the
Partnership;
(b)
Pledge the credit of the Partnership or incur any liability or lend any
monies on behalf of the Partnership outside of the ordinary course of
the business of the Partnership;
(c)
On behalf of the Partnership, buy or contract for the purchase or sale
of any real property outside of the ordinary course of business of the
Partnership;
(d)
Save as provided in Section 6.02, give any guarantee relating to the
Partnership outside of the ordinary course of the business of the
Partnership;
(e)
Enter into any bond or post bail or become a surety for any person or
knowingly cause or permit or suffer to be done anything whereby the
property of the Partnership may be taken in execution or otherwise
endangered outside of the ordinary course of the business of the
Partnership;
(f)
Assign, mortgage or charge any interest in the Partnership or any part
thereof or enter into any Partnership with any other person concerning
such interest or any part thereof outside of the ordinary course of the
business of the Partnership; or
(g)
Compromise or compound or release or discharge any debt due to the
Partnership outside of the ordinary course of the business of the
Partnership.
6.04 STRENGTH OF RELATIONSHIP
The Partners, and their Principals, acknowledge that the strength of their relationship
is based upon a spirit of mutual cooperation, full discussion, and compromise, and
agree to maintain that philosophy in their relations with one another.
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ARTICLE 7.00
Corporate Commercial Section 1
Forms of Business Organization
RESTRICTION ON CONTROL AND SALE OF CORPORATE
PARTNERSHIP INTERESTS
7.01 NO CHANGE IN CONTROL
Each corporate Partner agrees that there shall be no change in control of that
Partner, from and after the Effective Date, without the majority approval of the other
Partners, which approval may be withheld in their sole discretion.
7.02 NO SALE BY SHAREHOLDERS
The shareholder of each corporate Partner covenant and agree not to sell their
respective shares in the Partner without first obtaining consent of the other Partners,
which consent may be withheld in their sole discretion. In addition, each corporate
Partner shall cause its services to be delivered to the Partnership by its Principal at
all times during the existence of this Agreement, unless otherwise approved by a
resolution of the Partners.
7.03 NO SALE BY PARTNERS
Each Partner covenants and agrees not to sell its respective Partnership interest
without first obtaining the unanimous consent of the other Partners, which consent
may be withheld in their sole discretion.
7.04 SUBSEQUENT TRANSFEREE
No sale of a Partnership interest shall be valid and effectual, notwithstanding
anything else herein contained, unless the transferee agrees in writing to be bound
by the terms and provisions of this Agreement, with any necessary small changes as
required by the Partners to accommodate the addition of that transferee as a party.
7.05 TERMS OF SALE
In the event of the disposition of a Partnership interest, the terms set out in Schedule
"A" shall apply, unless otherwise agreed by the Partners by resolution.
ARTICLE 8.00
ADMISSION, WITHDRAWAL AND EXPULSION OF PARTNERS
8.01 ADMISSION OF PARTNERS
No Partner may be admitted to the Partnership without the prior majority approval of
the Partners. The terms and conditions for admission of a new Partner shall be as
determined by the Partners, subject always to paragraph 1.05.
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8.02 EXPULSION OF PARTNER
In the event that any of the following occur, namely:
(a)
any or all of the shares held by a shareholder of a corporate Partner or
the Partnership Interest of an individual Partner becomes subject to an
order under, or pursuant to The Family Property Act of the Province of
Saskatchewan or similar legislation of any Province having jurisdiction;
or
(b)
the Partner becomes insolvent or is adjudged a bankrupt; a receiver or
a receiver-manager as appointed for all or any portion of the Partner’s
property; any or all of the shares held by a Principal in a corporate
Partner are assigned to a Trustee in Bankruptcy or a receiver and
manager is appointed for all or any portion of the property of a
Principal; or
(c)
the interest of a Partner in the Partnership is made subject to seizure
or execution by a sheriff, a secured creditor, or any other person or any
of the shares held by a Principal Partner are made subject to seizure
or execution by a sheriff, secured creditor or any other person;
(d)
a Partner, or the Principal of a Partner, has failed to satisfy, fulfill and
perform or is in default of any of the terms and provisions of this
Agreement (the “Default”) and such Default continues after thirty (30)
day’s written notice specifying the nature of the Default has been given
to such Partner and the Partner has not remedied the default or
caused the Default to be remedied on or before the expiry of such
notice;
then, on the happening of any such event, the Partners may expel that Partner by
resolution of a majority of the Partners save and except for the offending
Partner/Principal. In such case, the expelled Partner shall be entitled to:
(a)
its drawings to the date of expulsion on account of the Partnership
Income;
(b)
repayment of its Capital Account in ten (10) equal consecutive annual
installments, without interest, from the date of expulsion, and
(c)
payment in ten (10) equal consecutive annual installments of an
amount equal to two-thirds of the fair market value of its Capital
Interest as at the date of expulsion, without interest. The fair market
value of the Capital Interest shall be calculated in the manner
described in Section 8.05.
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8.03 VOLUNTARY WITHDRAWAL
If any Partner wishes to withdraw from the Partnership, he/she or it shall give to the
remaining Partners a minimum of one (1) year's notice in writing of its intention to
withdraw. The effective date of withdrawal shall occur at the fiscal year end of the
Partnership falling one (1) year after the date of delivery of the notice of withdrawal
(the "Withdrawal Date").
The withdrawing Partner shall be entitled to payment, in the aggregate, of the
following amounts:
(a)
Its drawings to the Withdrawal Date on account of the Partnership
Income;
(b)
Repayment of its Capital Account in ten (10) equal consecutive annual
installments commencing with the Withdrawal Date, together with
interest thereon on the amount from time to time remaining unpaid at
an annual rate equal to the Prime Lending Rate of the Bank of
_________, __________, Saskatchewan, plus one (1%) per cent; and
(c)
Payment in ten (10) equal consecutive annual installments of an
amount equal to the fair market value of its Capital Interest as at the
Withdrawal Date, together with interest thereon on the amount from
time to time remaining unpaid at an annual rate equal to the Prime
Lending Rate of the Bank of ________, _________, Saskatchewan,
plus one (1%) per cent. The fair market value of the Capital Interest
shall be calculated in the manner described in Section 8.05.
8.04 INVOLUNTARY WITHDRAWAL
In the event of the death or Total Disability of a Partner or the Principal of a Partner,
unless the Partner’s estate or the corporate Partner whose Principal has died or
becomes Totally Disabled provides a replacement acceptable to the Remaining
Partners as a Partner or as a Principal within one hundred eighty (180) days of the
death or Total Disability of such Principal or Partner, then the Partner or Partner
whose Principal has died or has become Totally Disabled, shall be deemed to have
withdrawn from the Partnership and the date of death of the Principal or the date of
such Total Disability shall be deemed as the Involuntary Withdrawal Date.
For the purposes of this Article, “Totally Disabled” or “Total Disability” means
incapacity, caused by disease or bodily injury to perform any and every duty
pertaining to the Partner or Principal’s occupation and duties as the Partner or
Principal, as attested to by two duly qualified and licensed medical physicians
practicing in the Province of Saskatchewan, and the date of such Total Disability
shall be the date that the last duly qualified and licensed medical physician attests to
the Total Disability of such Partner or Principal.
The withdrawing Partner shall be entitled to payment, in the aggregate, of the
following amounts:
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(a)
Its drawings to the Involuntary Withdrawal Date on account of the
Partnership Income;
(b)
Repayment of its Capital Account in ten (10) equal consecutive annual
installments commencing with the Involuntary Withdrawal Date, together
with interest thereon on the amount from time to time remaining unpaid at
an annual rate equal to the Prime Lending Rate of the Bank of _______,
________, Saskatchewan, plus one (1%) per cent; and
(c)
Payment in ten (10) equal consecutive annual installments of an amount
equal to two-thirds of the fair market value of its Capital Interest as at the
Involuntary Withdrawal Date, together with interest thereon on the amount
from time to time remaining unpaid at an annual rate equal to the Prime
Lending Rate of the Bank of __________, ___________, Saskatchewan,
plus one (1%) per cent. The fair market value of the Capital Interest shall
be calculated in the manner described in Section 8.05.
8.05 DETERMINATION OF FAIR MARKET VALUE
To determine the fair market value of a Capital Interest, the Partnership shall instruct a
chartered business valuator registered under the Canadian Institute of Chartered
Business Valuators to make a determination as to the fair market value of the
Partnership at the fiscal year end immediately prior to or ending on (if applicable), the
date at which the calculation is to be made. For the purpose of determining the fair
market value of a Capital Interest, the valuator shall deduct from the fair market value of
the Partnership calculated by such valuator, the aggregate outstanding balance of all
Partners' Capital Accounts (including the Capital Account balance of the expelled,
withdrawing, or involuntarily withdrawing Partners). If possible, the Partnership shall
instruct the valuator to complete the valuation of the Capital Interest within one hundred
and twenty (120) days of the fiscal year end of the Partnership. The cost of the valuator
shall be borne by the Partnership as a fiscal year end expense. If the expelled or
withdrawing Partner and the remaining Partners do not agree with the determination of
the fair market value of the Capital Interest by such valuator, then each of the expelled
or withdrawing Partner and the other Partners (collectively) shall appoint an additional
valuator, and the additional valuators so appointed together with the valuator appointed
by the Partnership shall determine the fair market value of the Capital Interest, using
such guidelines as the valuators may consider appropriate in the circumstances in
consultation with the accountants for the Partnership (provided there is no deviation from
the guidelines set out in this Section 9.05). In an event of disagreement among the
valuators, it is agreed that the majority decision of the valuators shall be final and binding
upon the Partners. It is the intention of the parties that the determination of the fair
market value shall include the value of goodwill.
Notwithstanding the foregoing, the valuator appointed by the expelled or withdrawing
Partner and the valuator appointed by the other Partners may accept as binding any
previous calculation of the fair market value of the Partnership, or of a Capital
Interest, made by the Partners or Principals and agreed to by them in writing.
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8.06 LIMITATION ON PAYMENTS
Notwithstanding the provisions of Sections 8.02, 8.03 and 8.04, the obligation of the
Partnership to make payments to an expelled or withdrawing Partner in any fiscal year
of the Partnership, shall not exceed twenty-five (25%) per cent of the pre-tax cash flow
of the Partnership, as calculated by the accountants for the Partnership, from time to
time. The pre-tax cash flow shall be calculated by determining the net operating
income for the fiscal year, and deducting the aggregate of any drawings on account of
Partnership Income that have been approved by the Partnership for that fiscal year and
the total debt service of the Partnership. If the full amount otherwise payable to an
expelled or withdrawing Partner cannot be paid as a result of this restriction, the
amount unpaid shall accrue into the following fiscal year of the Partnership, and so on
in like fashion from fiscal year to fiscal year until it can be paid. Interest shall only
accrue on any such amounts if the deferred payments arise out of an obligation of the
Partnership pursuant to Section 8.03 or Section 8.04 hereof.
ARTICLE 9.0
NOTICES
9.01 GIVING OF NOTICES
Any notice or written communication required or permitted to be given shall be in
writing and:
(a)
Delivered personally to the person to whom it is directed; or
(b)
Sent by registered mail, postage prepaid, return receipt requested; or
(c)
Sent by telecopier or similar method of communication, to any
telecopier number provided by that Partner or Principal with
confirmation of receipt requested;
and, in the case of Sections 9.01(b) and 9.01(c), it will be deemed delivered upon
receipt by the initiator of the notice or written communication of the confirmation of
delivery.
9.02 ADDRESS OF NOTICES
All notices may be addressed to the party to whom it is directed at the following
addresses:
or to such other address in Canada or elsewhere as the parties may in writing
advise. Any notice, document or communication shall be deemed to be given and
received when so delivered.
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ARTICLE 10.00
2009 © The Law Society of Saskatchewan
ARBITRATION
10.01 ARBITRATION
All disputes arising out of this Agreement and its interpretation, performance or breach
which cannot be resolved between the Partners, on the request of one (1) or more of
the Partners, shall be submitted to arbitration pursuant to The Arbitration Act, 1992
(Saskatchewan).
10.02 NUMBER OF ARBITRATORS
There shall be three (3) arbitrators. The Partner requiring arbitration and the other
Partner(s) (collectively) shall each be entitled to appoint one (1) arbitrator, with the
two (2) arbitrators so appointed choosing the third.
10.03 PROCEDURE FOR ARBITRATION
The party demanding arbitration shall inform, in writing, the other party of the name of
its arbitrator and the issue to be arbitrated and the party receiving the demand shall
name its arbitrator, within seven (7) days thereafter, and so advise the other in writing.
The two (2) arbitrators so designated shall choose a third arbitrator as chairperson
within fifteen (15) days of the last of the respective appointments. If the party receiving
the demand for arbitration fails to name an arbitrator within the time specified, then an
arbitrator may be named by a Judge of the Court of Queen's Bench for Saskatchewan
as provided in The Arbitration Act, 1992 and if the two (2) arbitrators named shall fail to
name a third arbitrator, then similarly, a judge of the Court of Queen's Bench for
Saskatchewan may name the third arbitrator.
10.04 AWARD OF ARBITRATORS
An award made by two (2) of the three (3) arbitrators shall be final and binding on all
parties. The arbitrators shall determine their own rules and procedures and the rules of
evidence that they shall follow. Each of the parties to the arbitration shall bear the
costs of their professional advisors in relation to the arbitration, and the costs of the
arbitration proceeding and the fees and expenses of the arbitrators, shall be borne
equally by the parties to the arbitration, unless otherwise determined by the arbitration
board in its award.
ARTICLE 11.00
TERMINATION
11.01 DISSOLUTION OF PARTNERSHIP
The Partnership shall only be dissolved upon the approval of dissolution by a
unanimous resolution of the Partners.
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11.02 NO DEEMED DISSOLUTION
The Partnership shall not be dissolved, or terminated, by the resignation, bankruptcy,
insolvency, dissolution, liquidation, winding-up, or receivership of, any of the Partners,
nor the admission, expulsion or withdrawal from the Partnership of any Partners.
Notwithstanding any rule of law or equity to the contrary, the Partnership shall not be
dissolved, nor this Agreement terminated, except in the manner provided.
ARTICLE 12.00
GENERAL
12.01 FISCAL YEAR END
The first fiscal year of the Partnership shall end on such date as may be determined
by resolution of the Partners, and in like fashion in each year thereafter unless the
Partners shall otherwise agree.
12.02 APPOINTMENT OF AUDITOR
The appointment of an auditor for the Partnership is hereby waived until such time
as a majority of the Partners, by written notice to the other Partners, require an
audited financial statement to be prepared. In such event, the appointment of an
auditor will be agreed upon by the Partners and if they cannot agree within ten (10)
days of such written notice, the auditors appointed shall be __________, ________,
Saskatchewan.
12.03 FURTHER AND OTHER DOCUMENTS
Each party agrees to execute and deliver such further and other documents and
perform and cause to be performed such further and other acts and things as may
be necessary or desirable in order to give full effect to this Agreement and every part
thereof.
12.04 ENURMENT
Subject to the restrictions on assignment and transfer in this Agreement, the
Agreement shall enure to the benefit and be binding upon the parties hereto and
their respective heirs, executors, administrators, successors and assigns.
12.05 APPLICABLE LAW
This Agreement shall be governed by and construed in accordance with the laws of
the Province of Saskatchewan.
12.06 INSTRUCTION OF AGREEMENT
The division of this Agreement into sections and the heading of each section is for
convenience of reference and shall not affect the construction or interpretation of this
Agreement.
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12.07 SEVERABILITY
Each of the covenants, provisions, articles, sections, subsections, and other
subdivisions hereof is severable from every other covenant, provision, article, section,
subsection or subdivision hereof, and the invalidity or unenforceability of any one (1) or
more covenants, provisions, articles, sections, subsections or subdivisions of this
Agreement shall not affect the validity or enforceability of the remaining covenants,
provisions, articles, sections, subsections and subdivisions.
12.08 VARIATION OR AMENDMENT OF AGREEMENT
Except as provided herein, no modification, variation or amendment of this
Agreement and no waiver of the performance of any of the covenants or obligations
of any of the parties shall be effective unless the same shall be effected in writing
and executed by all Partners.
12.09 ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with regard to the
matters dealt with herein and no understanding or agreement, verbal or otherwise,
exists among them with respect to the matters dealt with except as expressly set
forth.
12.10 TIME
Time shall be of the essence of this Agreement.
12.11 BINDING ON SHAREHOLDERS AND PRINCIPALS
Each of the shareholders of each of the Partners has executed this Agreement at
the request of the Partners evidencing their intent to be bound by the terms hereof.
IN WITNESS WHEREOF _____________ has hereunto executed this Agreement.
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CO-COVENANTORS
_____________, as Principal of ______________ has executed below
evidencing his covenant to be bound by the terms of the foregoing Partnership
Agreement as Principal to the extent that the same is applicable to him as Principal.
IN WITNESS WHEREOF I, _____________ have hereunto subscribed
my name and affixed my seal.
SIGNED, SEALED AND DELIVERED
BY THE ABOVE NAMED
______________________________,
in the presence of
______________________________
Witness
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SCHEDULE "A" (Article 7.05)
(a)
The remaining Partners (the "Continuing Partners") shall assume
liability for all debts and liabilities of the Partnership from and after the
Withdrawal Date or the Involuntary Withdrawal Date except any debt or
liability in respect of any claim existing at the Withdrawal Date or the
Involuntary Withdrawal Date and arising from any wrongful act or
omission of the Partner who is leaving (the "Outgoing Partner") to the
extent that such claim is not covered by insurance and shall keep the
Outgoing Partner indemnified against such debts and liabilities except
as aforesaid and all actions, proceedings, costs, claims and demands
in respect thereof;
(b)
The Outgoing Partner shall join with the Continuing Partners and with
any person or persons who may enter into the Partnership with the
Continuing Partners in making any election under the Income Tax Act
of Canada in order to ensure the distribution of the Partnership
property without (or to minimize) incidence of tax;
(c)
The Outgoing Partner shall deliver to the Partnership all books of
account, records, letters and other documents in the possession of the
Outgoing Partner relating to the Partnership business but during the
period of three (3) months following the Withdrawal Date or the
Involuntary Withdrawal Date, the Outgoing Partner or its duly authorized
agent shall be permitted to inspect, by appointment, the books of account,
records, letters and other documents of the Partnership business insofar
as they relate to any period preceding that date;
(d)
The Outgoing Partner shall make full disclosure to the Continuing
Partners of all contracts, obligations, and commitments which that
Partners has entered into for or on behalf of the Partnership and shall
sign, execute, and do such other deeds, acts, and things as the
Continuing Partners may reasonably request for the purpose of enabling
the Continuing Partners to recover and collect the book debts and other
assets of the Partnership or for the purpose of conveying, assigning, or
transferring to the Continuing Partners or any of them any Partnership
property which immediately prior to the Withdrawal Date or the
Involuntary Withdrawal Date was vested in the Outgoing Partner as one
of the Partners or in trust for the Partnership.
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DECLARATION OF LIMITED PARTNERSHIP
PURSUANT TO SECTION 16 OF
THE BUSINESS NAMES REGISTRATION ACT OF SASKATCHEWAN
1.
The business name under which the Limited Partnership is to be conducted is
“______________ Program”.
2.
The general business intended to be transacted by the Limited Partnership is
the exploration, development and operation of certain oil and gas properties of
_________ Resources Limited and to save, store, treat, transport and market natural
gas, oil and related hydrocarbons and products derived therefrom.
3.
The names and places of residence of the General and Limited Partners are
as indicated in the schedule annexed hereto and marked “Schedule A”.
4.
The Limited Partnership shall subsist until December 31, 2025, or until the
earlier happening of any of the following events:
(a)
Thirty (30) days following the bankruptcy, dissolution or winding-up of
the General Partner unless replaced as permitted under Article XII of
the Limited Partnership Agreement annexed hereto and marked
“Schedule B”;
(b)
Upon written request by the General Partner then managing the
business of the Partnership and the consent of Limited Partners by
Extraordinary Resolution;
(c)
If, at any time when the General Partner owns more than seventy-five
(75%) percent of the outstanding Units, the General Partner is in
default of any obligation or representation contained in the Limited
Partnership Agreement and such default has continued for at least
thirty (30) days following receipt of written notice to remedy such
default from any Limited Partner, then on an Extraordinary Resolution
of the Limited Partners at a meeting called for that purpose.
5.
The Limited Partners have contributed or agreed to contribute the amounts
indicated opposite their respective names as provided in Schedule A, attached
hereto. Each Limited Partner shall contribute, in cash, Fifty Thousand ($50,000)
Dollars for each Unit of Partnership interest acquired by him.
6.
The Limited Partners are not required to make any other or additional
contributions.
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7.
The Limited Partners’ contributions shall be fully expended or committed for
expenditure by December 31, 2006, and to the extent not so expended or committed for
expenditure shall be returned to the Limited Partners, who contributed the same, on a
pro rata basis; provided however, in no event shall more than Twenty-five Thousand
($25,000) Dollars per Unit be returned pursuant to such provision. Otherwise Limited
Partners are entitled to a return of their contribution upon the dissolution of the Limited
Partnership pursuant to Section 16.3 of the Limited Partnership Agreement. In addition,
distributions pursuant to Article VII of the Limited Partnership Agreement shall be as a
return of capital until such time as Ninety-nine and nine-tenth (99.9%) percent of such
Limited Partners’ share of the Limited Partners’ Contributions have been repaid or
returned.
8.
All profits or other compensation shall be allocated among the Limited
Partners pro rata to the number of Units owned by each Limited Partner in
accordance with the provisions of Section 7.2 of the Limited Partnership Agreement.
9.
A Limited Partner may, without charge, assign his Unit(s) in the Limited
Partnership subject to the following terms and conditions:
(a)
No assignment of any Units will be recognized nor any amended
Certificate filed, nor entered in the register of the Limited Partnership,
unless such assignment is of a whole Unit.
(b)
The assignee shall deliver to the General Partner a transfer in form
satisfactory to the General Partner, duly executed by the assignor and
the assignee together with a copy of the Limited Partnership
Agreement, duly executed by or on behalf of the assignee.
(c)
The Certificate evidencing such Units shall be surrendered to the
General Partner in exchange for a new certificate therefor in the name
of the assignee unless the General Partner is satisfied such Certificate
has been lost or destroyed.
(d)
A Limited Partner shall not, without the consent of the General Partner,
transfer his Units to a party who is not a “Qualified Party” as defined in the
Limited Partnership Agreement. The General Partner may refuse
consent to a transfer to a person who is not a Qualified Party, if in its
judgment the transfer would reduce the Canadian Ownership Rate to a
level such that the Partnership would not qualify for the maximum “PIP
Payments”, as defined in the Limited Partnership Agreement, available.
(e)
If such assignment is made prior to payment in full of the contribution
agreed to be made as provided in Section 5.3 of the Limited Partnership
Agreement, the transferee must make provision satisfactory to the
General Partner for the payment of the balance of such contribution.
(f)
No assignment of a Unit shall relieve the assignor of any liability or
obligation arising prior to such assignment.
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10.
The General Partner may admit additional Limited Partners to the Limited
Partnership; however, the maximum number of Units in the Limited Partnership shall
be forty (40).
11.
A Limited Partner shall not be entitled to any priority over other Limited
Partners with respect either to any return of his contribution or any compensation by
way of income.
12.
The General Partner is a corporation which may be replaced in the following
circumstances:
(a)
Resignation of the General Partner following approval by an
Extraordinary Resolution;
(b)
Deemed resignation thirty (30) days after the bankruptcy or liquidation
of the General Partner;
(c)
Default of any obligation contained in the Limited Partnership
Agreement if the default continues for at least thirty (30) days following
receipt of written notice to remedy such default from any Limited
Partner;
provided that in case aforesaid replacement of the General Partner shall be effective
upon the appointment of a substitute General Partner. In these circumstances the
substitute General Partner is entitled and obliged to continue the business of the
Partnership.
13.
A Limited Partner shall not be entitled to demand or receive property other than
money in return for his contribution. The Partnership will, on the last day of June and
December in each year, pay to each Partner, in accordance with Section 7.2 of
Limited Partnership Agreement, such portion of the cash and marketable securities of
the Partnership (other than “Limited Partners’ Contributions” as defined in the Limited
Partnership Agreement) which is surplus to:
(a)
The unsecured liabilities of the Partnership at the date of distribution;
and
(b)
Amounts which the General Partner, in its discretion, considers should
reasonably be retained for use in Partnership operations.
14.
Distributions made in accordance with the foregoing shall be considered to
be a withdrawal or return of the capital until such time as ninety-nine and nine-tenth
(99.9%) percent of such Limited Partners’ share of the Limited Partners
Contributions have been repaid or returned. Thereafter, such distributions shall be
of income or assets of the Limited Partnership.
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15.
The Limited Partners have given special authority to the General Partner to
execute this Declaration and amendments hereto on behalf of the Limited Partners.
IN WITNESS WHEREOF ________ Resources Limited has executed this
Declaration in its capacity as General Partner and as attorney for the Limited
Partners as of the 31st day of December, A.D. 2005.
GENERAL PARTNER
________ Resources Limited
LIMITED PARTNERS, by their duly
authorized attorney in that regard,
_____________ Resources Limited
Per : _________________
Per:
_____________________
Per:
Per:
_____________________
_________________
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LIMITED PARTNERSHIP AGREEMENT
THIS AGREEMENT MADE THIS ________ DAY OF APRIL, A.D. 2005.
BETWEEN:
CANORE LIMITED,
a body corporate, incorporated pursuant to
the laws of the Dominion of Canada,
Hereinafter called
“the GENERAL PARTNER”
- and Each and every person who subscribes for units
and is accepted as a Limited Partner in the Partnership
formed pursuant to this Agreement,
Hereinafter called
“the LIMITED PARTNERS”
I.
FORMATION OF LIMITED PARTNERSHIP
1.1
The General Partner and the Limited Partners hereby form and enter into a
Limited Partnership (hereinafter called “the Partnership”) in accordance with The
Partnership Act, R.S.S. 1978, c. P-3 and the provisions of this Agreement.
II.
NAME
2.1
The name of the Partnership is “Canore’86-Limited Partnership” or such other
name or names as the General Partner may from time to time select as necessary or
advisable. The General Partner shall register such name or names pursuant to The
Business Names Registration Act, R.S.S. 1978 c. B-11, as amended.
III.
DEFINITIONS
3.1
The following definitions apply to this Agreement:
“Affiliate” shall have the meaning subscribed to it in The Securities Act of the
Province of Saskatchewan, and any amendments thereto.
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“Agreed Subscription” means One Thousand ($1,000) Dollars per unit which
is the amount payable to the Partnership as the subscription price for a Unit.
“Auditor” means Coopers & Lybrand or such other partnership whose partners
are members, in good standing of the Canadian Institute of Chartered
Accountants and who is appointed by the General Partner as auditor for the
Partnership with the approval of an ordinary resolution.
“Capital” at any time means the aggregate amounts paid for the units.
“Certificate” means a certificate of ownership in the form attached as
“Schedule A” indicating that the registered holder thereof is the owner of the
number of units therein stated.
“Declaration” means the declaration filed with the Registrar pursuant to The
Business Names Registration Act as may from time to time be amended.
“Extraordinary Resolution” means a resolution passed by Seventy-five (75%)
percent or more of the votes cast at a meeting of the Partners called for the
purpose of considering such resolution, each Partner having One (1) vote for
each unit held or, alternatively, a resolution signed by Partners holding
Seventy-five (75%) percent or more of the outstanding units entitled to vote
on such resolution at a meeting.
“General Partner” means Canore Limited or any other party who may become
the General Partner of the Partnership in place of or in substitution for Canore
Limited from time to time in each case until such General Partner ceases to
be the General Partner of the Partnership under the terms of this Agreement.
“Income Tax Act” means the Income Tax Act, R.S.C. 1985 (5th Supp.), c.1
and amendments thereto.
“Joint Venture” means an agreement whereby an owner of a leasehold or
working interest agrees to assign an interest in certain specific acreage to the
assignee, retaining some interest such as a carried interest, working interest,
operatorship, or other type of interest, subject to and in consideration of the
assignment by the assignee of an interest to the assignor in certain other
specific acreage, money or other property, the engagement in exploration or
development or other performance as agreed to.“Net Income” or “Net Loss”
means the net income or loss of the Partnership for a fiscal year determined in
accordance with generally accepted accounting principles and shall include
provisions for such reserves as in the opinion of the General Partner are
required for the Partnership business.
“Ordinary Resolution” means a resolution passed by more than Fifty (50%)
percent of the votes cast at a meeting of Partners, each Partner having One
(1) vote for each unit held, or alternatively, a resolution signed by Partners
holding more than Fifty (50%) percent of the outstanding units entitled to vote
at a meeting.
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“Partner” means any Limited Partner or the General Partner.
“Partnership Business” has the meaning assigned by paragraph 4.1.
“Person” means an individual, sole proprietor, partnership, unincorporated
association, syndicate, or organization, trust body, corporate and a natural
person in his capacity as trustee, executor, administrator or other legal
representative.
“Qualified Person” means a person that is competent to enter into this
Agreement and is a resident of Canada within the meaning of the Income Tax
Act.
“Register” means the register of the Limited Partner as maintained by the
General Partner.
“Revenue” means revenue as defined by generally accepted accounting
principles but shall be net of ongoing administrative expenses.
“Substituted Limited Partner” means an assignee or transferee of a unit
entitled to become a Limited Partner pursuant to this Agreement.
“Taxable Income” or “Tax Loss” means the amount of income or loss of the
Partnership for a fiscal year determined by the General Partner pursuant to
the provisions of the Income Tax Act.
“Unit” means the interest of a Limited Partner in the Partnership purchased for
each One Thousand ($1,000) Dollars of agreed subscription.
IV.
BUSINESS OF THE LIMITED PARTNERSHIP
4.1
Purpose
The Partnership is formed for the following purposes:
(a)
To conduct geological research, acquire mineral dispositions
and or claims, explore claims, and develop, produce or sell ores
located in the Province of Saskatchewan;
(b)
To purchase or sell claims or interests therein; and
(c)
To construct and operate facilities for the production, development,
collection, storage, delivery, marketing and sale of minerals;
all of which purposes may be conducted by itself or in association with others by way
of joint venture or otherwise or as a Limited Partner in other partnerships.
4. 2
Powers
The Partnership shall have the power to do all things necessary in order to
carry out the purposes set out in clause 4.1.
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CAPITAL CONTRIBUTIONS
5.1
Capital Contributions of Limited Partners
Each Limited Partner shall contribute in cash by way of capital contribution to
the capital of the Partnership a minimum of Twenty-five Thousand ($25,000) Dollars
for a minimum total of 25 units subscribed for, payable Fifty (50%) percent upon
subscription and Fifty (50%) percent by valid cheque post-dated to August 1, 1986
and delivered with his subscription and shall not be subject to additional
assessments for capital. The minimum subscription shall be Twenty-five (25) units.
The General Partner shall have the right to control the number of units subscribed
for by any Limited Partner. Subject to the provisions of this Agreement, the General
Partner shall be treated as a Limited Partner with the respect to any units held by it.
5.2
Return of Capital Contribution
If any portion of the Partnership capital contribution of the Limited Partners is
not expended or committed to be expended by the 31st day of December, 2006,
funds not so expended or committed, except for funds which the General Partner
considers in its discretion to be necessary for the operations of the Partnership, shall
be returned to each Limited Partner as a return of capital pro rata in proportion to the
number of units held by each.
5.3
Non-Payment of Subscription
If any Limited Partner shall fail to make any payment for its subscription set
out in clause 5.1 for any reason, the General Partner may at any time notify the
defaulting Limited Partner that either:
VI.
(a)
The units which have not been paid for have been cancelled; or
(b)
The units which have not been paid for have been transferred to a
Substituted Limited Partner, which may be the General Partner, in
consideration for the payment by the Substituted Limited Partner to the
Partnership of the amount in default. No refund will be payable to the
defaulting Limited Partner and it is not necessary for the defaulting
Limited Partner to execute any form of transfer in respect of the units
transferred or cancelled. All Limited Partners hereby appoint the
General Partner as their power of attorney to execute any form or
transfer as is necessary to effect the transfer of a unit of a defaulting
partner as set out herein.
FISCAL YEAR AND TERM OF THE PARTNERSHIP
6.1
Fiscal Year
The fiscal year of the Partnership shall terminate on the 31st day of
December, in each year during the term of the Partnership.
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6.2
Term
The Partnership shall continue until the 31st day of December, _____, unless
sooner dissolved according to the terms of this Agreement.
VII.
REPRESENTATIONS AND WARRANTIES OF THE GENERAL AND LIMITED
PARTNERS
7.1
General Partner
The General Partner represents and warrants to and covenants and agrees
with, the Limited Partners that:
(a)
It is a corporation incorporated and in good standing under the laws of
the Dominion of Canada;
(b)
It is registered and will continue to be registered to do business and
has all requisite licences and permits to carry on the business of the
Partnership in all jurisdictions in which the Partnership activities as
proposed to be carried on render such registration necessary or
advisable;
(c)
It has the capacity and corporate authority to act as General Partner in
the performance of its obligations hereunder as General Partner and
such does not and will not conflict with or constitute a breach of its
articles, bylaws or any agreement by which it is bound or to which it is
a party;
(d)
It shall act in the best interests of the Partnership from time to time in
the carrying on of the business and affairs of the Partnership; and
(e)
It will do all things and take all actions in its power as are necessary to
ensure the limited liability of the Limited Partners.
7.2
Limited Partners
Each Limited Partner represents that he is a Qualified Person within the
meaning of this Agreement.
7.3
Survival of Representations and Warranties
The representations and all warranties and covenants in Article VII hereof
shall survive the execution of this Agreement and each party shall ensure the
continuing accuracy of each representation and warranty made by it for the term of
the Partnership.
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VIII.
2009 © The Law Society of Saskatchewan
APPOINTMENT OF SUBSTITUTE GENERAL PARTNER
8.1
Removal of General Partner
The General Partner may be removed as the General Partner of the
Partnership by an ordinary resolution in the event of the bankruptcy of the General
Partner or dissolution, winding up or the appointment of a trustee or receiver of its
assets; provided that the said resolution is passed within One Hundred and Twenty
(120) days after the occurrence of the bankruptcy, dissolution, winding up or
appointment.
8.2
Replacement of the General Partner
The removal of the General Partner, in accordance with clause 8.1 hereof, will
be effective and the General Partner shall cease to be the General Partner of the
Partnership only upon the Limited Partners, by an ordinary resolution, having appointed
a new General Partner to assume the responsibilities and rights of the General Partner
as manager of the Partnership and upon the new General Partner having executed this
Agreement and having assumed the powers, duties and obligations of the General
Partner under this Agreement.
8.3
Transfer of Management to New General Partner
Upon any change to a new General Partner, the General Partner shall do all
things and shall take all action to transfer immediately and effectively the management
and operation, assets, books, records and accounts of the Partnership to the new
General Partner including the execution of all deeds, certificates, declarations and
other documents whatsoever which may be necessary to effect such change and to
convey all the assets of the Partnership to the new General Partner.
8.4
Release of General Partner
Upon removal of the General Partner as set out in clauses 8.1 and 8.2 above,
the Partnership shall release and hold harmless, and the Limited Partners shall
release, the General Partner from all actions, claims, costs, demands, losses,
damages and expenses with respect to events which occur in relation to the
Partnership after the effective date of such removal and which do not relate to the
actions of the General Partner prior to such removal.
IX.
POWERS, AUTHORITY AND DUTIES OF THE GENERAL PARTNER
9.1
Management by General Partner
The General Partner is the manager of the Partnership and no person dealing
with the Partnership shall be required to question the authority of the General
Partner to take any action or to make any decision in the name of and on behalf of
the Partnership.
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9.2
Powers of the General Partner
In addition to the power and authority of the General Partner to act on behalf
of the Partnership as set out elsewhere in this Agreement, the General Partner shall
have the power and authority:
(a)
To manage, control and operate the business of the Partnership and to
do or cause to be done any and all acts necessary, appropriate,
convenient or incidental to the business of the Partnership;
(b)
To acquire interests in leases, permits, reservations, claim blocks,
rights, working interests, royalty interests, contractual rights or options,
joint ventures and any such interests as the General Partner may
select from time to time in connection with the exploration for and
development of mineral ore bodies by the Partnership. The interests
so acquired may consist of all, or any fraction, of the total working
interest and royalties or carried interests or contractual rights therein,
and may be subject to overriding contractual or leasehold of a similar
nature as the General Partner may deem reasonable;
(c)
To hold Partnership assets and property in the name of the Partnership
or the General Partner or a nominee of the General Partner;
(d)
To conduct geophysical, geological and other exploratory or
developmental work and to make decisions with respect to the drilling,
abandoning or developing of mines;
(e)
To execute on behalf of the Partnership, any and all documents or
instruments of any kind which the General Partner may deem
appropriate in carrying out the purpose and business of the
Partnership, including without limitation, joint venture agreements,
limited partnership agreements for the purpose of becoming a limited
partner, operatorship agreements, sales contracts, carried interest
agreements and any amendments thereto;
(f)
To accept contributions of cash, interests in mineral claim blocks or
other consideration in connection with the disposition of any interest in
a mineral claim block, partnership, joint venture or other right, be it in
contract or otherwise;
(g)
To pay or not to pay any charge or assessment;
(h)
To sell, surrender, abandon, encumber or otherwise dispose of any
mineral ore body or interest therein or any other assets of the
Partnership in the ordinary course of the Partnership business
including the power to sell any mineral ore body or interest therein for
the purpose of financing additional operations, provided however, that
no sale of all or substantially all of the assets of the Partnership will be
undertaken without the previous authorization of an extraordinary
resolution;
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(i)
To operate, produce, bind and enter into operating agreements with
others with respect to the properties acquired by the Partnership,
naming a third party as operator or manager, if the General Partner
deems that to be advisable, and containing such terms, provisions and
conditions as the General Partner shall approve;
(j)
To purchase or lease equipment in connection with the business of the
Partnership;
(k)
To open bank accounts for the Partnership and to designate from time
to time authorized signatories to such accounts, and to execute loan
and credit agreements on behalf of the Partnership;
(1)
To borrow money for the purposes of financing additional operations
from time to time, without limit as to amount, to draw, make, execute
and issue promissory notes and other negotiable or non-negotiable
instruments and evidences of indebtedness, and to secure the
payment of the sums so borrowed and to mortgage, pledge, assign
pursuant to the Bank Act, S.C. 1991, c.46, or otherwise mortgage,
pledge or assign all or any part of the property of the Partnership
including, without limitation, the production and proceeds of production
or assign any money owing or accruing to the Partnership and to
engage in any other means of financing in accordance with the general
practice of the mining industry or open to the Partnership;
(m)
To enter into financing, sales, agency and other agreements and
arrangements in connection with the financing of the Partnership and
the distribution of units;
(n)
To submit to binding arbitration any matters pertaining to the assets,
undertaking and business of the Partnership;
(o)
To enter into other partnerships and to incorporate and participate in
companies necessary or advisable for the purpose of the Partnership;
(p)
To bring or defend on behalf of the Partnership any actions or
proceedings in connection with the Partnership business;
(q)
To file any returns required by any government or like authority;
(r)
To make any election that may be made under the Income Tax Act.
9.3
Duties
In addition to the duties of the General Partner set out elsewhere in this
Agreement, the General Partner will manage, control and operate the business of
the Partnership and do or cause to be done in a prudent and reasonable manner
any and all acts necessary, appropriate or incidental to the business of the
Partnership and will do so honestly, in good faith and in the best interests of the
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Limited Partners and in connection therewith, shall exercise the degree of care,
diligence and skill that a reasonably prudent person experienced in the mining
industry would exercise in similar circumstances. In connection therewith, the
General Partner:
(a)
Shall maintain, at the expense of the Partnership, adequate records
and accounts of all operations and expenditures and furnish the
Limited Partner with the periodic reports and information provided for
below, together with all necessary tax reporting information;
(b)
Shall purchase, at the expense of the Partnership, such liability and
other insurance as the General Partner considers ordinary and
appropriate to protect the Partnership’s properties and business;
(c)
Shall determine to what extent the Partnership mineral claim blocks
are to be explored, drilled, sold, developed, disposed of or abandoned
and decide upon the amount of cash needed for the operation of the
Partnership;
(d)
Shall cause the Partnership, in calculating its profit or loss for any fiscal
year, to deduct the maximum capital cost allowance available to it for
that year;
(e)
Shall invest funds not immediately required for the operations of the
Partnership in securities issued or guaranteed by the Government of
Canada or any Canadian province, or certificates of deposit or interest
bearing accounts in Canadian financial institutions, with interest
accruing to the Partnership until required for the purposes of the
Partnership;
(f)
Shall cause the Partnership to employ any person required for the
business of the Partnership; the duties of the General Partner may be
carried out by the General Partner or by independent contractors
retained for specific purposes at the discretion of the General Partner;
(g)
Unless otherwise agreed, shall engage chartered accountants to
conduct an annual audit of financial statements of the Partnership
prepared in accordance with generally accepted accounting principles,
standards and practices applied on a basis consistent with the
immediately preceding fiscal year of the Partnership. Such statements
will include a representation by the General Partner that all revenue
and costs of the Partnership have been calculated and allocated
among the Partners in accordance with the provisions of this
Agreement. A copy of the financial statements and the report thereon
of such accountants will be mailed by the General Partner to each
Limited Partner within One Hundred and Twenty (120) days of the year
end;
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(h)
Shall furnish to each Limited Partner all necessary income tax
reporting information for each calendar year on or before the 31st day
of March of the following year;
(i)
Shall maintain and preserve during the term of the Partnership and for
Six (6) years thereafter, all accounts, books and other relevant
Partnership documents;
(j)
Shall keep the funds of the Partnership separate from the funds of the
General Partner or any other entity; and
(k)
Shall not cause the Partnership to guarantee the obligations, liabilities
of, or make any loans to, the General Partner or to any entity with
which the General Partner does not deal at arm’s length.
CONFLICTS OF INTEREST
10.1
Disposal of Excess Interest
If the General Partner determines that the Partnership should participate in any
exploration and/or development of any mineral claim block to an extent of less than
One Hundred (100%) percent of the available interest, then the General Partner may
purchase such reduced interest or dispose of the balance of the One Hundred (100%)
percent interest by sale of such interest to other joint ventures, partnerships or entities
managed by the General Partner or otherwise. In such event, the affiliated
partnership or entity that purchases such interest will pay for the acquisition, drilling,
exploration and development of any such claim block on a basis not less than the cost
basis of the Partnership’ s share.
10.2
Accounting to Partnership
The General Partner is not required to account to the Partnership or any
Limited Partner for any benefit or profit derived from any similar or competing activity
or from any transactions relating thereto of the General Partner by reason of any
conflict of interest or the fiduciary relationship created by virtue of the position of the
General Partner hereunder unless such similar or competing activity or transaction is
contrary to the express terms of this Agreement or is in contravention of the General
Partner’s fiduciary obligations to the Partnership.
10.3
Transfer of Property to Partnership
In relation to any interest in a mineral claim block acquired by the Partnership
from the General Partner or any other party (the transferor), the transferor will
convey a good and marketable title to such interest, provided that the transferor will
not be required to convey any better title in and to the interest than it is entitled to
under the title instruments and documents by which it obtained its title to the interest,
and the transferor will represent and warrant to the Partnership that at the time of
transfer:
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(a)
The transferor has not sold, assigned or otherwise disposed of all or any
part of its claim or title to such interest and there are no liens, charges,
claims, encumbrances or actions in existence to its knowledge,
contemplated or threatened against or with respect to the interest of the
transferor which have arisen upon or after the acquisition thereof by the
transferor, and the transferor is not aware of any liens, charges, claims,
encumbrances or actions which arose prior to such acquisition and
remain outstanding except, in either case, such as may have been
disclosed to and found acceptable by the Partnership;
(b)
The transferor has performed and observed all its duties, obligations
and covenants of any nature or kind to be satisfied, performed and
observed by it under the terms of the title instruments and documents
and that the transferor is not in default under or in breach of any of the
terms, conditions and covenants thereof and no event has occurred
which, with lapse of time, would become such a breach;
(c)
The transferor has full power and absolute authority to sell, transfer
and assign its interest in said mineral claim block which it is purporting
to sell, transfer and assign and such interest in the mineral claim block
is not subject to any pre-emptive or preferential right of purchase by
any third party;
(d)
As at the date of transfer, to the best of the transferor’s knowledge,
information and belief, all exploration of any mineral claim blocks has
been completed in accordance with all applicable government rules
and regulations of any government authority having jurisdiction
thereover;
(e)
The transferor has not incurred or approved any expenditures with
respect to the interest, contingent or otherwise, for which the
Partnership will have any obligation or liability excepting those which
have been disclosed to, and found acceptable by the Partnership prior
to the date of transfer;
(f)
All applicable taxes and assessments payable for all prior years have
been properly paid; and
(g)
All laws, regulations and orders of all government authorities having
jurisdiction over the interest have been complied with by the transferor.
10.4
Resolution of Conflicts
In resolving conflicts between the Partnership and other limited partnerships
or ventures in which the General Partner has an interest, decisions will be made on
a basis consistent with the objectives of and the funds available to the limited
partnerships or ventures and the time limitations on the investment of those funds,
all consistent with the General Partner’s duty to deal fairly and in good faith with
each limited partnership and venture. In the event that the interests of the General
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Partner are in conflict with those of the Partnership, the General Partner will make
decisions acting in good faith, having regard to the best interest of the Partnership
and in a manner that would not contravene its fiduciary obligations to the
Partnership.
10.5
Benefit to General Partner
The Limited Partners acknowledge that exploration and development
activities on properties owned by the Partnership may lead to the incidental result of
providing additional information with respect to, or increasing the value of, properties
in which the General Partner or other parties not at arm’s length with the General
Partner have an interest and agree that the General Partner and parties not at arm’s
length with the General Partner may take advantage of such knowledge without
accounting to the Partnership therefor, provided that the General Partner is not in
breach of any duty set out in this Agreement.
XI.
LIMITED PARTNERS
11.1
Limited Liability
No Limited Partner shall be liable for the obligations of the Partnership or the
losses thereof except in respect of the amount contributed to the capital of the
Partnership and his interest in the Partnership assets.
11.2
Indemnity from General Partner
The General Partner shall indemnify and hold harmless the Limited Partners
(including former Limited Partners) from and against all costs, damages, liabilities or
losses incurred by a Limited Partner that result from such Limited Partners not having
limited liability, except where the lack or loss of limited liability has been caused by
some act, or omission to act, of such Limited Partner.
11.3
Prohibition from Participation in Management
No Limited Partner, as such, shall take part in the management or control of
the business, transact any business for the Partnership or have the power to sign for
or to bind the Partnership.
11.4
Access to Records
The General Partner, upon receipt of a written request therefor, shall furnish a
Limited Partner with a list of names, addresses and number of units held by all Limited
Partners at no cost to the Limited Partner other than the reproduction and mailing
costs. A Limited Partner shall have the right to examine the books and records of the
Partnership at all reasonable times, including the right to have such examination
conducted at the Limited Partner’s sole expense by any reasonable number of
representatives. Notwithstanding the foregoing, the General Partner may in its
discretion keep assay reports, logs, drill reports, other exploration data and production
information confidential for as long as the value of the information to the Partnership as
a whole depends upon its confidentiality.
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11.5
No Refund on Capital
Except as otherwise set forth in this Agreement, no Limited Partner shall be
entitled to the return of any portion of his partnership capital contribution or to
demand such return.
11.6
No Interest
No Limited Partner shall be entitled to interest on any portion of his
partnership capital contribution.
XII.
LIMITED LIABILITY; INDEMNIFICATION OF GENERAL PARTNER
12.1
Nature of Limited Partners’ Liabilities for Claims Against Partnership
In furtherance of the intent of the parties that no Limited Partner shall be liable
to creditors of the Partnership, the parties agree that:
(a)
The General Partner shall prosecute, defend, settle or compromise all
legal actions, at the expense of the Partnership as may be necessary
to enforce or protect Partnership interests; and
(b)
The General Partner will satisfy any claim against or liability of the
Partnership and any judgment, decree, decision or settlement, firstly
out of any insurance proceeds available therefor, secondly out of
Partnership assets and income, and finally out of the assets and
income of the General Partner.
12.2
Indemnity of General Partner
(a)
In any threatened, pending or completed action, suit or proceeding to
which the General Partner was or is a party or is threatened to be made a party by
reason of the fact that it is or was the General Partner (other than an action by or in
right of the Partnership), the Partnership shall indemnify the General Partner against
expenses, including legal fees, judgments and amounts paid in settlement actually
and reasonably incurred by it in connection with the defence or settlement of such
action, suit or proceeding if it acted in good faith and in a manner it reasonably
believed to be in the interests of the Partnership, except that no indemnification shall
be made in respect of any claim, issue or matter as to which the General Partner
shall have been adjudged to be liable for negligence. The termination of any action,
suit or proceeding by judgment, order or settlement shall not, of itself, create a
presumption that the General Partner did not act in good faith and in a manner which
it reasonably believed to be in the best interests of the Partnership.
(b)
In any threatened, pending or completed action or suit by or in the right
of the Partnership, to which the General Partner was or is a party or is threatened to
be made a party, the Partnership shall indemnify the General Partner against
expenses, including legal fees, actually and reasonably incurred by it in connection
with the defence or settlement of such action or suit if it acted in good faith and in a
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manner it reasonably believed to be in the best interests of the Partnership, except
that no indemnification shall be made in respect of any claim, issue or matter as to
which the General Partner shall have been adjudged to be liable for negligence,
misconduct or breach of fiduciary obligation in the performance of its duty to the
Partnership unless and only to the extent that the court in which such action or suit
was brought shall determine upon application, that, despite the adjudication of liability
but in view of all circumstances of the case, the General Partner is fairly and
reasonably entitled to be indemnified for such expenses as such court deems proper.
(c)
To the extent that the General Partner has been successful on the
merits or otherwise of any action, suit or proceeding referred to above, or in defence
of any claim, issue or matter herein, the Partnership shall indemnify it against all
expenses, including legal fees, actually and reasonably incurred by it in connection
therewith.
12.3
Indemnity by General Partner
The General Partner will indemnify the Partnership for all damages incurred
by the Partnership as a result of any act of gross negligence or wilful misconduct of
the General Partner including that part of the legal expenses incurred by the
Partnership to defend an action based in whole or in part upon an allegation that the
General Partner has been guilty of gross negligence or wilful misconduct, if the
defence relating to such allegation is substantially unsuccessful. If any such action
alleging gross negligence or wilful misconduct is settled by the General Partner,
such action will be deemed, for the purposes of this clause 12.3, to have been
defended unsuccessfully unless the settlement is approved by an extraordinary
resolution.
XIII.
ALLOCATIONS AND DISTRIBUTIONS
13.1
Reimbursement of General Partner
The General Partner is entitled to reimbursement by the Partnership for:
(a)
All costs and expenses that are properly incurred by the General
Partner on behalf of the Partnership; and
(b)
Any advance by the General Partner to the Partnership together with
interest thereon at the rate charged to the General Partner from time to
time by the Canadian Financial Institution used by the General Partner
in Saskatoon, Saskatchewan.
13.2
Repayment of Advances
Repayment of principal and interest on bank loans or on advances by the
General Partner will be allocated to the General Partner and the Limited Partners in
the same proportion that the costs paid with the proceeds of such bank loans or
advances were allocated.
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13.3
Allocation of Costs
Subject to clause 13.1, all costs of the Partnership will be allocated to the
Limited Partners, other than those actually paid for by the General Partner from its
own funds. Subject to the limitations set out in this Agreement, the Limited Partners
shall, in the aggregate, be responsible to contribute One Hundred (100%) percent of
all operating, administrative, exploration and development expenses.
13.4
Allocation of Revenue
Revenue will be credited as follows:
(a)
Until all costs of the Partnership, including capital contributions, have
been recovered (the pay-out amount)
(i)
Ninety-Five (95%) percent to the Limited Partners; and
(ii) Five (5%) percent to the General Partner.
(b)
Thereafter, until a further Two Hundred (200%) percent of the pay-out
amount has been recovered:
(i)
Ninety (90%) percent to the Limited Partners; and
(ii) Ten (10%) percent to the General Partner.
(c)
Thereafter,
(i)
Eighty (80%) percent to the Limited Partners; and
(ii) Twenty (20%) percent to the General Partner.
All payments to the Limited Partners shall be credited to the Limited Partners
in accordance with the number of units held by each Limited Partner.
13.5
Allocation of Credits and Allowances
Any tax credits or allowances will be allocated One Hundred (100%) percent
to the Limited Partners in accordance with their pro rata share of units.
13.6
Unexpended Contribution
Subject to the provisions relating to dissolution contained herein and The
Partnership Act, the Limited Partners are not entitled to the return of their
Partnership capital contributions except that any Partnership capital contributions
which are unexpended and uncommitted by December, 2006, will be paid to Limited
Partners in accordance with their sharing ratio.
XIV.
REGISTER AND TRANSFER OF LIMITED PARTNERSHIP UNITS
14.1
Unit Certificate
(a)
The General Partner shall cause to be issued to each Limited Partner
who has paid his Partnership capital contributions in full, a unit certificate in a form
decided upon by the General Partner indicating that the registered holder thereof is
the owner of the number of units represented by his Partnership capital
contributions.
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(b)
If any unit certificate is lost, mutilated or destroyed, the General
Partner shall cause a replacement certificate to be issued to the Limited Partner
upon receipt of evidence satisfactory to the General Partner of such loss, mutilation
or destruction, and upon receiving such indemnification as it deems appropriate in
the circumstances.
14.2
Transfer of Units
(a)
Subject to the provisions of this Article XIV and subject to any
applicable securities laws, a Limited Partner may transfer without charge any of his
Units. Such transfer shall be effective upon registration of the appropriate notice
and shall be entered on a register of Limited Partners as of that day. Any
distribution made, or to be made hereunder, shall be distributed to those persons
who are Limited Partners at the end of each calendar quarter. The General Partner
and each Limited Partner, by execution hereof shall be deemed to have consented
to the transferee becoming a Substituted Limited Partner upon filing of the amended
Certificate. No transfer of any Unit is effective unless the transferee agrees to be
bound as a Limited Partner of the Partnership by the terms of this Agreement and
executes a transfer form substantially in the form set forth in clause 14.4 hereof.
(b)
There shall be no transfer of less than a whole Unit.
(c)
If a transferor of a Unit is a firm or corporation, or purports to transfer
such interest in any representative capacity, or if an assignment results from the
death, mental incapacity, or bankruptcy of a Limited Partner or is otherwise
involuntary, the transferor or his legal representative shall furnish to the General
Partner, such documents, certificates, assurances, court orders and other material
as the General Partner may reasonably require to effect the said transfer.
(d)
No assignment or transfer of a Unit shall relieve the assignor or
transferor of any liability or obligation which arose before the date of such
assignment or transfer.
(e)
The General Partner, on the tenth business day of the month following
the month in which the duly executed transfer form is received by the General Partner
(or such earlier or later time as may be agreed upon by the General Partner, the
transferor and the transferee) shall effect filings and registrations at such places as in
the opinion of counsel to the Partnership are necessary to reflect the changes in
membership of the Partnership.
(f)
The General Partner, if requested, shall attempt to find a suitable
purchaser of Units unless any securities legislation would require the registration of
the General Partner or impose any other requirement which the General Partner in
its discretion decides is excessive in the circumstances.
(g)
A Unit may only be assigned or transferred with the consent of the
General Partner, in its sole discretion, which consent shall not be unreasonably
withheld or delayed. In particular, the General Partner may withhold its consent to a
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transfer of less than Twenty-Five (25) Units, provided, however, that the consent to
such transfer will not be withheld where the Units that such Limited Partner wishes to
transfer are less than Twenty-Five (25) in number by virtue of a prior partial retirement
of Units pursuant to Article XV hereof.
(h)
If any Limited Partner should become a non-resident of Canada within the
meaning of the Income Tax Act, he shall immediately use his best efforts to transfer his
Units to an entity which is not a non-resident of Canada within the meaning of the said
Act. If such a Limited Partner is unwilling or unable so to transfer his Units within
Ninety (90) days of becoming a non-resident, the General Partner may sell the Limited
Partner’s Units as the agent of the Limited partner in accordance with any applicable
securities legislation and shall deliver the net proceeds obtained on the sale to the
Limited Partner after deducting all its reasonable costs and expenses. Each Limited
Partner hereby agrees to do all acts and execute all requisite documents necessary to
carry out the purposes of this subclause.
14.3
Transfer Form
A transfer of Units shall be in substantially the following form:
I, the undersigned, a Limited Partner of Canore ‘86 - Limited Partnership (herein
called the Partnership) hereby transfer, assign and sell to:
_______________________________
(Name of Transferee)
_______________________________
(Residence Address)
all of my right, title and interest as a Limited Partner in the Partnership and constitute
the above-named Transferee a Substituted Limited Partner to the extent of ________
Units and I agree to execute and deliver to the General Partner any documents
required to effect a valid transfer of the said Units or which are necessary or advisable,
in the opinion of the General Partner, to preserve the status of the Partnership as a
limited partnership. I agree that the power of attorney previously granted to the
General Partner will be effective for the purpose of executing and filing all certificates,
amendments and other instruments necessary to give effect to this transfer.
DATED this____ day of _________, 20___
____________________
(Witness)
_____________________________
(Signature of Limited Partner)
______________________________
(Residence Address)
The above-named Transferee accepts this transfer and agrees to be bound,
as a party to and as a Limited Partner in the Partnership, by the terms of the Limited
Partnership Agreement, from time to time as amended.
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The Transferee hereby irrevocably constitutes and appoints Canore Limited
or such other General Partner as from time to time has control over the management
of the Partnership, with full power of substitution, as his true and lawful attorney and
agent, with full power and authority in his name, place and stead to:
(a)
execute, swear to, acknowledge, deliver, file and record at the
appropriate public offices any and all of the following
(i)
certificates and other instruments necessary or appropriate to
qualify or continue the Partnership as a limited partnership in
Saskatchewan and in any other jurisdiction where the
Partnership may conduct business;
(ii)
instruments and certificates necessary or appropriate to reflect
any amendment, change or modification of the Partnership in
accordance with the terms of the Partnership;
(iii)
conveyances and other instruments or documents necessary to
reflect the dissolution and liquidation of the Partnership
including cancellation of any certificates; and
(iv)
instruments relating to the admission of additional or Substituted
Limited Partners including the within Transferee; and
(b)
execute and file with any governmental body, any documents
necessary to be filed in connection with business of the Partnership.
The Transferee represents and warrants that he is not a non-resident of
Canada within the meaning of Income Tax Act.
The power of attorney granted herein is irrevocable and is a power coupled
with an interest and will survive the death or incapacity of the undersigned and will
extend to the heirs, administrators, successors and assigns of the Transferee.
DATED this ____ day of ___________, 20 ___.
_________________
(Witness)
________________________
(Signature of Transferee)
________________________
(Mailing Address of Transferee)
NOTE:
1. This transfer must be for a whole Unit or for whole Units Transfers of
fractional or partial Units will not be recognized or entered in the register
of Limited Partners.
2. The signature of the Transferor must correspond exactly to the name
which appears on the Unit Certificate.
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XV.
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DISSOLUTION OF THE LIMITED PARTNERSHIP
15.1
Dissolution
The Partnership shall be dissolved on December 31, 2043 and shall be
dissolved earlier upon the happening of any of the following events:
(a)
any event which makes it unlawful for the Partnership Business to be
continued;
(b)
the bankruptcy, insolvency, liquidation, dissolution or winding up of the
General Partner or the occurrence of any other event resulting in a
trustee or receiver being appointed to administer the affairs of the
General Partner provided that such trustee or receiver has continued in
office for a period of One Hundred And Twenty (120) consecutive
days, unless a new General Partner is appointed within One Hundred
And Twenty (120) days after the occurrence of such bankruptcy,
insolvency, liquidation, dissolution, winding up or other event;
(c)
the disposition of all assets of the Partnership; or
(d)
after the Partnership Capital Contributions have been expended, the
affirmative vote of the Limited partners given by Extraordinary
Resolution.
15.2
Incapacity of Limited Partners
The Partnership shall not be terminated by reason only of the death,
incapacity or withdrawal of a Limited Partner or the admission of a new Limited
Partner. Except as set forth in Articles XIV and XV hereof, a Limited Partner shall
not have the right to withdraw from the Partnership.
15.3
Receiver
The General Partner shall serve as the receiver of the Partnership charged
with the responsibility of liquidating the Partnership upon its dissolution. If the
General Partner is unable or unwilling to act in such capacity, the Limited Partners
may by Ordinary Resolution appoint some other appropriate person or party to act
as the receiver of the Partnership. The receiver shall proceed diligently to wind up
the business of the Partnership and to distribute the net proceeds from the sale of
the assets thereof in accordance with clause 15.4. During the course of such
liquidation the receiver shall operate the properties and undertaking of the
Partnership and in doing so shall be vested with all the powers and authority of the
General Partner in relation to the Partnership under the terms of this Agreement.
The receiver shall be paid its reasonable fees and reimbursed for its disbursements
incurred in carrying out its duties hereunder.
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15.4
Liquidation
The receiver shall settle the Partnership accounts as expeditiously as
possible and shall:
XVI.
(a)
sell or liquidate the assets of the Partnership;
(b)
pay or compromise the liabilities of the Partnership;
(c)
place in escrow a cash reserve fund for contingent liabilities in an
amount reasonably determined by the receiver to be appropriate for
such reserve fund. Such fund shall be held for such period as the
receiver regards as reasonable and then shall be distributed pursuant
to subclause (d); and
(d)
after the receiver’s accounts have been audited, distribute the
remaining assets in accordance with clause 13.4.
MEETINGS
16.1
Meetings
An annual general meeting of the Limited Partners of the Partnership shall be
held at least once every calendar year (commencing in 2005) and no more than 16
months after the holding of the last preceding general meeting. In addition, the
General Partner may, at any time and from time to time, and shall, upon receipt of a
written request from Limited Partners holding Twenty-Five (25%) percent of the
outstanding Units, call a meeting of the Limited Partners. In the event that the
General Partner fails to call such meeting within Fifteen (15) days after receipt of a
written request to call such meeting, any Limited Partner may call such a meeting.
Every meeting shall be held at a reasonable time and place in the City of Saskatoon.
The directors and officers of the General Partner may attend and take part in
discussions and proceedings of any meeting of Limited Partners. At the annual
general meeting, the Limited Partners shall appoint the auditors of the Partnership for
the ensuing year and shall receive and consider the report of the General Partner, the
annual financial statements of the Partnership and the auditor’s report thereon.
16.2
Notice of Meetings
At least Thirty (30) days’ notice of any meeting (and not more than Sixty (60)
days’ notice) shall be given to the Limited Partners (and to the General Partner if the
meeting has been called by a Limited Partner). Such notice shall state the time when,
and the place where, the meeting is to be held and shall state briefly the general
nature of the business to be transacted thereat. It shall not be necessary for such
notice to set out the text of any resolution to be proposed or any of the provisions of
this clause. The notice shall set out sufficient information to enable each Limited
Partner to make a reasoned judgment on all matters to be decided at the meeting. No
Extraordinary Resolution shall be passed at any meeting unless the specific subject
matter of such resolution shall have been set out in the notice of meeting.
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16.3
Chairman
The President, or failing him any Vice-President, of the General Partner shall
be the chairman of all meetings, unless those Limited Partners present in person or
represented by proxy shall choose another person present to be chairman.
16.4
Quorum
The Limited Partners present in person or represented by proxy at an annual
general meeting of the Partnership at which only the business described in clause
16.1 above is to be transacted shall constitute a quorum. At all other meetings of
the Partners, Two (2) Limited Partners present in person and representing, either in
person or by proxy, at least Fifty (50%) per cent of the outstanding Units entitled to
vote at the meeting shall constitute a quorum. If a quorum of Limited Partners shall
not be present within Thirty (30) minutes from the time fixed for holding any such
meeting, the meeting shall be adjourned to a date Fourteen (14) days later unless
such date is a non-business day in which case it shall be adjourned to the next
following business day at the same time of day and at the same place. Upon such
an adjournment, at least Seven (7) days’ notice of the adjourned meeting shall be
given to the Limited Partners (and to the General Partner if the meeting as
adjourned had been called by a Limited Partner). At the adjourned meeting, the
Limited Partners entitled to vote at the meeting present in person or represented by
proxy shall form a quorum and may transact the business for which the meeting was
originally called.
16.5
Votes
On any question submitted to a meeting each Limited Partner shall be entitled
to cast one vote for each Unit held by him. Except as otherwise specified in this
Agreement, questions shall be decided by an Ordinary Resolution. In the case of
joint registered holders of a Unit any one of them present in person or by proxy at
the meeting may vote in the absence of the other or others; but in case more than
one of them be present in person or by proxy, they shall vote together in respect of
the Unit of which they are joint registered holders.
16.6
Proxies
Votes at meetings of the Limited Partners may be cast personally or by proxy.
The instrument appointing a proxy shall be in writing under the hand of the person
so appointing or his attorney duly authorized in writing, or if the person so appointing
is a corporation, under its seal or by an officer or attorney thereof duly authorized
and shall cease to be valid one year from its date. Any individual may be appointed
a proxy. The chairman of each meeting shall determine the validity of all
instruments of proxy to be utilized at such meeting.
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16.7
Validity of Proxies
A vote cast in accordance with the terms of an instrument of proxy shall be
valid notwithstanding the previous death, or insanity of the Limited Partner or
revocation of the proxy or transfer of the Unit in respect of which the proxy was
given, provided that no notice in writing of such death, insanity, revocation or
transfer has been received at the place of meeting prior to the time fixed for holding
of the meeting.
16.8
Solicitation of Proxies
Any solicitation of proxies shall be governed by the provisions of The
Securities Act as from time to time in force and the regulations thereunder and will
comply with the laws of other jurisdictions in so far as they may reasonably be
determined to be appropriate, it being the intention hereof that all Limited Partners
from whom a proxy is solicited be provided with sufficient information to enable them
to make a reasoned judgment on all matters for which the proxy is solicited.
XVII. POWER OF ATTORNEY
17.1
Power of Attorney
Each Limited Partner hereby irrevocably makes, constitutes and appoints the
General Partner, and any successor to the General Partner under the terms of this
Agreement, as his true and lawful attorney and agent, with full power and authority in
his name, place and stead to:
(a)
execute, swear to, acknowledge, deliver, file and/or record in the
appropriate public offices in any jurisdiction which the General Partner
considers appropriate any and all of:
(i)
certificates and other instruments necessary or appropriate to
qualify, or to continue the qualification of, the Partnership as a
limited partnership in Saskatchewan and in any other jurisdiction
where the Partnership may conduct business;
(ii)
instruments and certificates necessary or appropriate to reflect
any amendment, change or modification of the Partnership in
accordance with the terms of this Agreement;
(iii)
conveyances and other instruments or documents necessary to
reflect the dissolution and liquidation of the Partnership
including cancellation of any certificates; and
(iv)
instruments relating to the admission of additional or Substituted
Limited Partners; and
(b)
execute and file with any government body, any documents necessary
or appropriate to be filed in connection with the business of the
Partnership or in connection with this Agreement.
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The foregoing power of attorney is hereby declared by each Limited Partner
to be an irrevocable power coupled with an interest, and it shall survive the death or
incapacity of the Limited Partner and shall extend to and bind the heirs, executors,
administrators, successors and assigns of each Limited Partner. Each Limited
Partner agrees to be bound by any representation made by the General Partner and
any successor thereto, while acting in good faith pursuant to the within power of
attorney, and each Limited Partner hereby waives any and all defences which may
be available to him to contest, negate or disaffirm the action of the General Partner
and any successor thereto taken in good faith in accordance with the terms of the
within power of attorney.
XVIII. AMENDMENTS
18.1
Amendments to Limited Partnership Agreement
Except as otherwise provided in this Agreement and subject to clause 18.3
hereof, no amendment to this Agreement shall be effective or binding upon the
parties hereto unless the same shall be consented to by the General Partner and by
the Limited Partners by means of an Extraordinary Resolution.
18.2
Prohibited Amendments
Notwithstanding the above or any other provisions to the contrary which may
be contained in this Agreement, no amendment to this Agreement shall be adopted
if such amendment would change the Partnership to a general partnership or to an
association taxable as a corporation or change the liability of or reduce the interests
of the General Partner or the Limited Partners or require non-consenting Limited
Partners to exchange their interests in the Partnership for shares or other securities
or allow the Limited Partners to take part in the control of the business of the
Partnership.
18.3
Amendments by General Partner
The General Partner, without prior notice to or consent from any Limited
Partner, may amend any provision of this Agreement from time to time:
(a)
to add or to delete from this Agreement any further covenants,
restrictions, or provisions which in the opinion of counsel to the
Partnership are added or deleted only for the protection of the interests
of the Limited Partners;
(b)
to cure an ambiguity, clerical error or manifest mistake or to correct or
supplement any provisions contained herein which in the opinion of
counsel to the Partnership may be defective or inconsistent with any
other provision contained herein, provided that, in the opinion of such
counsel, the cure, correction or supplemental provision does not and
will not materially adversely affect the interest of the Limited Partners;
or
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to make such other provisions in regard to matters or questions arising
under this Agreement which in the opinion of counsel to the
Partnership do not and will not materially adversely affect the interests
of the Limited Partners.
18.4
Effective Date and Notice of Amendment
The effective date of any amendment to this Agreement will be the day
following the day on which an amendment has been filed if required by the laws of
Saskatchewan. Limited Partners will be notified of full details of any amendment to
this Agreement within 30 days of the effective date of the amendment.
XIX.
MISCELLANEOUS
19.1
Notice
(a)
The addresses for service of the General Partner and the Limited
Partners are:
(i)
General Partner, c/o X, Y, Z, Barristers and Solicitors, 123 Legal
Avenue, Lawville, Saskatchewan, S8L 5L9;
(ii)
The Limited Partners, the mailing addresses set out in the
Register of Units;
(iii)
In the case of a substitute General Partner, such address as it
may stipulate by notice to the General Partner. The General
Partner or substitute General Partner shall promptly give notice
thereof to all Limited Partners.
(b)
A Limited Partner may, from time to time, change the address for service
hereunder by written notice to the General Partner. The General Partner may change
its address for service by written notice to the Limited Partners. Any notice may be
served on the parties by hand delivery or by mailing the same, postage prepaid, in a
properly addressed envelope addressed to the party to whom the notice is to be given
at its address for service hereunder and will be deemed to be effected, provided,
however, that in the event of a general postal disruption, notice shall not be provided by
mail.
19.2
Provisions Severable
If any provision of this Agreement, or the application of such provision to any
person or circumstance, shall be held invalid, the remainder of this Agreement, or
the application of such provision to any person or circumstances other than those to
which it is held valid, shall not be affected thereby.
19.3
Counterparts
This Agreement may be executed by multiple counterparts, each of which
shall be deemed to be an original and all of which shall be construed together as
one agreement.
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19.4
Time
Time is of the essence of this Agreement.
19.5
Waiver of Partition
The General Partner and each Limited Partner hereby irrevocably waives
during the term of this Agreement any rights which he may have to maintain any
action for partition or sale with respect to leases or claims held by the Partnership or
any interests therein or any interests of the Partnership in real or personal property,
whether corporeal or incorporeal.
19.6
Further Assurances
Each party hereto agrees to do all such things and take all such actions as
may be necessary to give full force and effect to the matters contemplated by this
Agreement.
19.7
Headings
The table of contents and headings preceding the Articles hereof have been
inserted for ease of reference only and do not affect the meaning, construction or
effect of this Agreement.
19.8
Entire Agreement
This Agreement will constitute the entire agreement between the parties and
there are no other written or verbal agreements or representations.
19.9
Governing Laws
This Agreement shall be governed by and construed in accordance with the
laws of the Province of Saskatchewan.
19.10 Successors and Assigns
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and assigns.
XX.
EXECUTION
20.1
Execution
IN WITNESS WHEREOF this Agreement is executed as of the day and year
first above written.
GENERAL PARTNER
LIMITED PARTNERS
by their Attorney
GENERAL PARTNER
Per:
_______________________
Per:
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