PARTNERSHIP BUYOUT AGREEMENT

 

 

 

This Partnership Buyout Agreement (this "Agreement") is made and effective this [Date],

 

BETWEEN:                   [FIRST PARTNER NAME] (the "First Partner"), an individual residing at:

                                    [ COMPLETE ADDRESS]

 

 

AND:                            [SECOND PARTNER NAME] (the "Second Partner"), an individual residing at:

                                    [COMPLETE ADDRESS]

 

 

AND:                            [THIRD PARTNER NAME] (the "Third Partner"), an individual residing at:

                                    [COMPLETE ADDRESS]

 

 

AND:                            [FORTH PARTNER NAME] (the "Forth Partner"), an individual residing at:

                                    [COMPLETE ADDRESS]

 

 

NOW THEREFORE, in consideration of the mutual promises and obligations hereinafter set forth, each Partner, for itself, and the Partnership as an entity, agree as follows:

 

 

  1. PURPOSE

 

The purpose of this agreement is:

 

  1. To provide for the sale by a Partner during his lifetime, or by the estate of a deceased Partner, of his participation in the Partnership, and the purchase of that participation by the Partnership at an equitably established price;

 

  1. Restrict the transfer or sale of the participation by the Partners;

 

  1. To provide all or a substantial portion of the funds for the purchase and;

 

  1. Provide stability and continuity in the management of the Partnership.

 

 

  1. PARTNER’S PARTICIPATION

 

At this time, each Partner’s participation in the Partnership is as follows:

 

_______________________ owns ____________________%

Partner

_______________________ owns ____________________%

Partner

_______________________ owns ____________________%

Partner

_______________________ owns ____________________%

Partner

 

  1. RESTRICTION ON PARTICIPATION

 

  1. While this agreement is in effect, no Partner shall have any right to assign, encumber or dispose of his participation in the Partnership except as provided herein.

 

  1. No Partner (or any party acting on behalf of a Partner) may sell or transfer his participation, whether owned or subsequently acquired, except in accordance with the provisions of this Agreement or with the written consent of the Partnership and all other Partners.

 

  1. Any attempt to sell or transfer the participation that contravenes the terms of this agreement is null and void and is not binding on or recognized by the Partnership or the Partners.

 

  1. Definition of sale or transfer. The term "sale or transfer" includes any sale, pledge, encumbrance, gift, bequest, or other transfer of any participation, whether or not the transfer would be made

 

  1. for value, or
  2. to another Partner, or
  3. voluntarily or involuntarily or by operation of law, or
  4. during his lifetime or upon his death.

 

 

  1. WITHDRAWAL OF A PARTNER

 

If a Partner wishes to withdraw from the Partnership or to sell or otherwise dispose of part of its participation during its lifetime, it must notify the Partnership and each of the other Partners in writing.  If there is a potential acquirer other than the existing Partners, such notice shall state the name and address of such acquirer and the terms of the proposed transfer.

 

 

  1. RIGHT TO PURCHASE

 

  1. Upon receipt of the written notice, the Partnership shall be entitled to purchase all of the participation offered for sale or transfer.

 

  1. If the Partnership does not purchase all of the participation offered for sale within [SPECIFY] days of receipt of the notice, the other Partners shall have an additional [SPECIFY] days to purchase the unsold portion at the same price. Each Partner shall individually have the right to purchase that portion of the available share which bears the same ratio to that share as the share that the purchaser already owns to the combined shares of all Partners, excluding the share offered for sale and any share retained by the selling Partner.

 

  1. If a Partner fails to repurchase its full share of the available participation within the specified period, the other Partners shall have an additional period of [SPECIFY] days to repurchase the unsold portion at the same price.

 

 

 

 

 

  1. DEATH OF PARTNER

 

Upon the death of a Partner, his estate shall sell, and the Partnership shall purchase, all of his participation in the Partnership for the price and on the other terms and conditions herein provided.  The Partners expressly agree that upon the death of a Partner, the surviving Partners shall continue the Partnership without interruption.

  1. PURCHASE PRICE

 

The purchase price shall be the fair market value of the Partnership’s capital assets, including goodwill. However, if a lower price was stated in the notice to the Partnership, the Partnership shall have the right to purchase at such lower price.

 

At this time the fair market value of the Partnership’s capital assets, including goodwill, is $[SPECIFY]; the fair value of unrealized receivables is $[SPECIFY]; and the fair value of inventory items is $[SPECIFY]. Therefore, the value of each Partner’s participation in the Partnership is as follows:

 

_______________________                                $____________________

First Partner

_______________________                                $____________________

Second Partner

_______________________                                $____________________

Third Partner

_______________________                                $____________________

Forth Partner

 

In determining the value of the deceased Partner's stake, the Partnership shall not take into account the excess of the proceeds of the death claim over the cash surrender values of the life insurance policies subject to this Agreement.

 

These values shall remain effective for the purposes herein until there is a redetermination of the values.

However, at the end of each fiscal year of the Partnership, and whenever there is a change in the percentage participations of the Partners, the Partners shall redetermine these values and shall indicate the new values.

 

 

  1. NO REDETERMINATION

 

If there has been no redetermination of value within 2 years prior to the death of a Partner, the value of the deceased Partner's participation shall be the last valuation agreed upon by the parties, adjusted to reflect any increase or decrease in the capital account of such deceased Partner between the date of the last agreed upon valuation and the date of death, such increase or decrease to be determined by the accounting firm normally engaged by the Partnership.

 

 

  1. LIFE INSURANCE

 

In order to guarantee the full redemption of the Participation or a substantial part of the purchase price of a deceased Partner's participation, life insurance must be in force. The Partnership shall therefore take out Partner life insurance with [NAME OF INSURANCE PROVIDER] as follows:

 

Policy #                        Amount                                     Insured             Beneficiary

 

______________            ______________                        First Partner                  The Partnership

______________            ______________                        Second Partner             The Partnership

______________            ______________                        Third Partner                 The Partnership

______________            ______________                        Forth Partner                 The Partnership

 

 

Also, the Partnership will, from time to time, acquire additional policies on the life of the Partners to implement this agreement.  It may also release policies from the Agreement, increase, decrease or make other changes to existing policies, or substitute other life insurance policies on the same life or lives for all policies subject to this Agreement.  The Partners hereby agree to do whatever is necessary to enable the Partnership to obtain additional insurance on their life(s) or to make changes to existing policies.

 

The Partnership shall apply for and be the owner and principal beneficiary of a single amount of all life insurance policies subject to this Agreement and shall pay the premiums for all such policies when due.  The Partnership may apply policy dividends to the payment of premiums.  Proof of premium payment must be provided by the Partnership whenever requested by a Partner.  If the Partnership does not pay a premium within [SPECIFY] days after it is due, the Insured is entitled to pay that premium and be refunded by the Partnership.

 

While this Agreement remains in effect, it is expressly agreed that the Partnership will not exercise any of the rights or privileges granted to it as owner under the terms of the policies (such as the right to borrow, cash surrender, change beneficiaries or assign a policy) except with the written consent of all Partners.

 

 

  1. PROFIT SHARING

 

The Partnership shall pay a Selling Partner's participation in cash on the date of sale, and thereafter, except to the extent of any retained participation in the Partnership, the Selling Partner shall no longer share in the profits of the Partnership.

 

 

  1. PAYMENT TERM

 

  1. In the event of the death of a Partner, payment for the cost of his or her participation, purchased and transferred, will first come from the proceeds of the amount payable under any life insurance policy on the lives of the Partner.

 

  1. To the extent that there is no life insurance policy or if the life insurance proceeds are less than the purchase price, the remaining amount is payable in cash.

 

  1. However, at the other Partner's option, the balance may be paid in [SPECIFY NUMBER] equal monthly instalments of principal and interest. These payments will begin on the closing date and will include participation compounded annually at the prime rate indicated on the website of the Central Bank of [COUNTRY], on the closing date.

 

  1. Each other Partners shall deliver to the Selling Partner a negotiable promissory note as proof of such debt. This note will allow the other Partners to prepay all or part of the principal balance of the note, at any time, without penalty or premium.

 

  1. Payments are first charged to interest

 

 

  1. CLOSING

 

The purchase of the offered participation will take place at a closing at the Partnership's primary place of business or at any other place and time to which the parties agree. In the case of the death or voluntary retirement of the Seller, the closing shall be held 180 days after the date of the Partner's death or the effective date of retirement.

 

 

  1. POWER OF ATTORNEY

 

Each Partner hereby appoints the Partnership, as its agent and mandatary responsible for executing and delivering all documents necessary for the transfer of its participation, if such selling Partner is not present at the closing.

This power of attorney carries participation and will not terminate in the event of the disability or death of the Shareholder and will continue for as long as this Agreement is in effect.

 

 

  1. TERMINATION

 

This agreement will terminate in the even one of the following occurs:

 

 

 

 

 

 

  1. AMENDMENTS

 

This agreement may be amended or modified only by a written agreement signed by all of the parties.

 

 

  1. NOTICES

 

Any notice or other communication given or made to any party under this Agreement shall be in writing and delivered by hand, sent by overnight courier service or sent by certified or registered mail, return receipt requested, to the Company at the address stated above and to the Partners at the address in the Partnership’s records.

 

 

  1. BINDING EFFECT

 

This Agreement is binding on and enforceable by and against the parties, their successors, legal representatives, and assigns.

 

 

  1. GOVERNING LAW

 

The terms of this Agreement shall be governed by and construed in accordance with the laws of the state of [SPECIFY], not including its conflicts of law provisions.

 

 

  1. DISPUTE

 

Any dispute arising from this Agreement shall be resolved in the courts of the state of [SPECIFY].

 

 

  1. WAIVER

 

Any party's failure to insist on compliance or enforcement of any provision of this Agreement shall not affect its validity or enforceability or constitute a waiver of future enforcement of that provision or of any other provision of this Agreement.

 

  1. EFFECTIVENESS

 

This Agreement shall become effective when signed by all the Partners.

 

 

IN WITNESS WHEREOF, the parties have indicated their acceptance of the terms of this Agreement by the latest of the signatures set forth below, effective on the Effective Date.

 

 

 

[FIRST PARTNER]                                                        [SECOND PARTNER]

 

 

                                                                                                                                                           

Authorized Signature                                                     Authorized Signature

 

                                                                                                                                                           

Print Name and Title                                                      Print Name and Title

 

 

 

 

[THIRD PARTNER]                                                        [FORTH PARTNER]

 

 


 
                                                                                                                                                           

Authorized Signature                                                     Authorized Signature

 

                                                                                                                                                           

Print Name and Title                                                      Print Name and Title