DIY Legal Forms

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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 Partnership; and

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 Partnership.

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 Interest.

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, and administrators.

[signatures]

*** If Required By State Law ***

This Section for Notary:

Acknowledgment

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.

Signature ________
Notary

My commission expires: _____

(Seal)