Common use of Rules for Distribution on Winding Up Clause in Contracts

Rules for Distribution on Winding Up. (a) In winding up the Partnership business, the Partnership Property, including the contributions of the Partners required by this section 10.5, shall be applied to discharge its obligations to creditors, including, to the extent permitted by other applicable law, Partners who are creditors other than in their capacities as Partners. Any surplus must be applied to pay in cash the net amount distributable to Partners in accordance with their right to distributions under subsection 10.5(b). (b) Each Partner shall be entitled to a settlement of all Partnership accounts on winding up the Partnership business. In settling accounts among the Partners, the Partnership interest of a withdrawn Partner that has not been redeemed under Chapter 152, Subchapter H of the Code shall be credited with a share of any profits for the period after the Partner's withdrawal but shall be charged with a share of losses for that period only to the extent of profits credited for that period, and the profits and losses that result from the liquidation of the Partnership Property shall be credited and charged to the Partners' capital accounts. The Partnership shall make a distribution to each Partner in an amount equal to that Partner's positive balance in the Partner's capital account. Except as provided by section 152.304(b) or 152.801 of the Code, each Partner shall contribute to the Partnership an amount equal to that Partner's negative balance in the Partner's capital account. (c) Except as provided by section 152.304(b) or 152.801 of the Code, to the extent not taken into account in settling the accounts among Partners under subsection 10.5(b) above: (1) each Partner must contribute, in the proportion in which the Partner shares Partnership losses, the amount necessary to satisfy Partnership obligations, excluding liabilities that creditors have agreed may be satisfied only with Partnership Property without recourse to individual Partners; (2) if a Partner fails to contribute, the other Partners shall contribute, in the proportions in which the Partners share Partnership losses, the additional amount necessary to satisfy the Partnership obligations; and (3) a Partner or Partner's legal representative may enforce or recover from the other Partners, or from the estate of a deceased Partner, contributions the Partner or estate makes to the extent the amount contributed exceeds that Partner's or the estate's share of the Partnership obligations.