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Purchase by Partnership of Disabled Partner's Interest
Agreement made on [date] by and between [name], residing at
[address], and [name], residing at [address] (hereafter,
collectively Partners), and [name] (Partnership).
WHEREAS, the Partners are engaged in business as partners in
WHEREAS, the Partners wish to provide for disability payments to a
Partner who becomes permanently disabled for a period not to exceed
[number] months; and
WHEREAS, the Partners wish to give the nondisabled partner the
right to buy the disabled Partner's interest in Partnership at the end
of said [number]-month period provided the disabled Partner has
remained permanently disabled;
NOW, THEREFORE, the parties agree as follows:
1. Disability Insurance. Each Partner has obtained a
disability income policy from [name] Insurance Company that pays the
monthly sum of ---------- dollars ($----------) in the event of total
disability. The policies are as follows: [partners' names], Policy
Numbers [numbers] (the Policies). The Policies are hereby assigned to
2. Payment of Premiums. Partnership shall pay all the
premiums that are due on the Policies and shall give each Partner proof
of such payment no later than [number] days after the due date for the
payment of each premium. If a premium is not paid within [number] days
after it is due, the insured shall have the right to pay the premium and
be reimbursed by Partnership.
3. Payment in the Event of Disability. If a Partner shall
become totally disabled, he shall receive monthly payments from
Partnership in a sum not to exceed the Partner's average monthly draw.
Such payments shall continue for a period of [number] months or until
the Partner is no longer disabled, whichever shall be shorter. The
payments shall be made from the funds received by Partnership from the
disability income policy covering the disabled Partner. The disability
payments shall be in lieu of all other payments except that the
disability payments shall not affect the Partner's right to share in any
Partnership profits or his obligation to share in any Partnership
losses. As used herein, "average monthly draw" means the average of all
amounts distributed (other than distributions of Partnership profits) to
the Partner over the [number]-month period ending with the date on
which the Partner first became disabled.
4. Definition of Disability. A Partner is deemed to be
totally disabled if, under the terms of the disability income policy
covering the disabled Partner, the [name] Insurance Company determines
that he is totally disabled.
5. Option to Purchase Disabled Partner's Interest.
Partnership, at the option of the nondisabled Partner, shall have the
right to purchase the disabled Partner's Partnership interest at the
price set out in Paragraph 6. To exercise such option, Partnership must
give the disabled Partner notice of its intent not before [number]
months and not after [number] months from the date it was determined
that his disability commenced. The notice shall be in writing and shall
be delivered to the disabled Partner either personally or by registered
or certified mail, return receipt requested, and shall be deemed given
when personally delivered or when it is posted. All disability payments
falling due to the disabled Partner after the date the option is
exercised shall be applied against the purchase price of his Partnership
6. Purchase Price of Disabled Partner's Share. Unless and
until changed in accordance with this Paragraph 6, the value of each
Partner's interest in Partnership and the purchase price of a disabled
Partner's share shall be ---------- dollars ($----------), of which
---------- dollars ($----------) shall be the goodwill of Partnership as
a going concern. On each anniversary date of this Agreement, the
Partners shall redetermine the value of each Partner's interest,
including the amount to be ascribed to goodwill. Such determination
shall be reduced to writing, signed by both Partners, and attached to
this Agreement, and shall become the purchase price of a disabled
Partner's interest in Partnership until the next determination thereof.
7. Payment of Purchase Price. Not later than [number]
days after the disabled Partner has been notified of Partnership's
exercise of the option to purchase his Partnership interest, the
disabled Partner shall transfer his interest to Partnership.
Simultaneously with such transfer, Partnership shall deliver to the
disabled Partner any life insurance policies it may have on the disabled
Partner's life together with [number] promissory notes signed by
Partnership and the nondisabled Partner. The total sum of the notes
shall be the purchase price of the disabled Partner's interest as
determined by Paragraph 6 less the cash surrender value of the life
insurance policies on the date on which they are delivered to the
disabled Partner and any disability payments made following notice of
Partnership's exercise of its option in accordance with Paragraph 5. The
notes shall be in equal amounts, the first of which shall be payable one
month following their delivery to the disabled Partner and the remainder
payable monthly thereafter. The notes shall bear interest at the rate of
---------- percent (----------%) per annum and shall provide that the
entire unpaid amount shall become immediately due upon default in the
payment of any one.
8. Entire Agreement. This Agreement contains the entire
understanding between the parties and supercedes all previous agreements
regarding the subject matter thereof, whether oral or in writing. This
Agreement may not be modified or terminated except in accordance with
its terms or by a writing signed by both parties.
9. Governing Law. This Agreement shall be governed and
construed in accordance with the laws of [state] applicable to
agreements made and to be performed entirely within that State.
10. Headings. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.
11. Agreement Binding. This Agreement is binding on and inures
to the benefit of the parties lawful representatives, assigns, executors,
*** If Required By State Law ***
This Section for Notary:
State of _________
County of ________ [County]
On [Date] before me, [Name of Notary], notary, personally appeared [Name of Person(s) Involved], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
My commission expires: _____