SOLE PROPRIETORSHIP BUYOUT AGREEMENT (A.K.A. ONE-WAY BUY-SELL AGREEMENT)

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1 SOLE PROPRIETORSHIP BUYOUT AGREEMENT (A.K.A. ONE-WAY BUY-SELL AGREEMENT) FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION. Specimen documents are made available for educational purposes only. This specimen form may be given to a client s attorney for consideration as a sample document, when requested. This specimen form shall not be given to a client. This document should not be used as drafted. It has not been adapted to the specific circumstances or objectives of any individual client, nor has it been prepared to meet the legal requirements of any particular state. Clients should be advised to seek legal counsel when entering into any transaction and in the preparation of all legal documents. All formalities required under applicable local law should be observed. CAUTION: Laws with respect to marital rights and possible tax consequences of this agreement should be reviewed carefully by legal counsel before implementing the agreement for a particular client. ***** BUSINESS SALE AND PURCHASE AGREEMENT This agreement is made this (day) of (month), (year), by and between (name of sole proprietor), of (locality), County of (name), State of (name), hereinafter referred to as "Proprietor," and (name of purchaser), of (locality), County of (name), State of (name), hereinafter referred to as "Purchaser." WHEREAS, Proprietor owns the entire right, title and interest in an unincorporated business doing business as (name of business ), hereinafter referred to as "Business," and seeks to provide for the sale of Business in the event of (his or her) death or retirement; and WHEREAS, Purchaser seeks to acquire Business upon Proprietor s death or withdrawal from Business; NOW, THEREFORE, in consideration of the mutual promises contained in this agreement, and of other good and valuable consideration the receipt of which is hereby acknowledged, Proprietor and Purchaser agree as follows: Sample Document - Page 1 of 6

2 I. Proprietor agrees that upon (his or her) death, the entire interest in Business shall be sold to the Purchaser subject to the terms and conditions set forth in this agreement, and Purchaser agrees to buy Business subject to such terms and conditions. II. Proprietor agrees that (he or she) shall not sell, assign, convey, encumber, or otherwise dispose of Business or of any asset of Business, except as specifically provided in this agreement. III. If the Proprietor decides to dispose of Business during (his or her) lifetime, then Proprietor shall first offer it for sale to Purchaser at the price determined under Article IV. hereof. If this offer has not been accepted within (number of) days, then Proprietor may sell Business at such price and on such terms and conditions as (he or she) sees fit; however, Proprietor may not consummate any such sale to another party without first offering Purchaser a right to purchase Business at the same price as the third party, and on the same terms and conditions as offered by such third party, which option Purchaser must exercise within (number of) days after being notified. IV. The current value of Business, as determined by the parties to this agreement, is $. Within sixty (60) days after the end of each fiscal year, the parties shall redetermine the value of Business, and that value shall be endorsed on Exhibit A., attached to and made a part of this agreement. Each such endorsement shall be dated and signed by the parties to this agreement. If a redetermination has not been endorsed on Exhibit A. for a particular fiscal year, the last determined value endorsed shall prevail. It is the intent of the parties that the value of the Proprietor's interest as determined by this agreement shall include goodwill. A complete inventory of all assets of the Business shall be attached to and made part of Exhibit A. Any changes to such inventory shall be dated and signed by the parties to this agreement. The current value of Business stated above was determined with the assistance of a certified appraiser, whose credentials and report are attached to and made part of this agreement as Exhibit B. The appraiser was instructed to determine the fair market value of Business in an arm's-length transaction between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell. V. Purchaser has procured as owner and beneficiary a life insurance policy on the life of Proprietor in the amount shown in Exhibit C., attached to and made part of this agreement. All policies purchased to fund Purchaser s obligations under this agreement, including any policies purchased after the date of this agreement, shall be listed on said Exhibit C. Sample Document - Page 2 of 6

3 VI. Purchaser shall be the owner of said policies and shall pay the planned premiums on such policies as their premiums become due. If any premium is not paid within twenty (20) days after its planned date, Proprietor shall be entitled to pay such premium as the agent of Purchaser, and Purchaser agrees to reimburse Proprietor promptly for any such advance of premiums. The Purchaser agrees to furnish annually to the Proprietor proof of payment of premiums on said policies. The insurance company is authorized and directed to give Proprietor, upon (his or her) written request, any information about the status of any policy on (his or her) life obtained by Purchaser to fund obligations under this agreement. Purchaser shall retain ownership of the policies procured by (him or her) on the life of Proprietor. Purchaser may not, however, exercise any of the policy rights (without first having given Proprietor thirty (30) days written notice of such contemplated exercise, unless Purchaser has obtained from Proprietor a written waiver of such notice). This agreement shall extend to and include all additional life insurance policies issued pursuant to this agreement, such additional policies to be listed in Exhibit C., attached to and made a part of this agreement. VII. Purchaser shall not execute any loans against, make withdrawals from, impair, alter, or in any manner encumber such policies without the prior written consent of the Proprietor; however, Purchaser may exercise any dividend options or other rights provided by the policies. VIII. It is the intent of the parties that the proceeds of the life insurance policies listed in Exhibit C. shall be used to purchase Proprietor's interest in Business. In the event that the value of Proprietor's interest exceeds the proceeds of such life insurance, Purchaser shall have the right either to pay the excess in one sum, or to execute and deliver a negotiable promissory note for the balance. Said note shall be payable in installments, for a term not to exceed years, the first installment being due and payable months after the death of Proprietor. This note shall bear interest at the rate of % per year on the unpaid balance. Purchaser shall have the right to prepay the note in full without penalty. Purchaser shall pledge with the legal representative of deceased Proprietor a sufficient security interest in the assets of Business to secure such note; however, Purchaser shall have any and all rights of ownership in Business prior to default in payment of any installment on the note or of any interest on such note. IX. In the event that this agreement is terminated for some cause other than the Proprietor s death, Proprietor shall have an option exercisable within thirty (30) days after such termination to purchase any or all policies on (his or her) life for a price equal to the fair market value of the policy. If such right is not exercised within (number of) months, Purchaser or (his or her) heirs or assigns may dispose of the policies at (his or her) discretion. Sample Document - Page 3 of 6

4 X. This agreement shall terminate upon the mutual consent of the parties, upon the death of Purchaser prior to or within thirty (30) days after the death of Proprietor, or upon the bankruptcy or insolvency of Proprietor or Purchaser. XI. This agreement shall be binding upon the parties, their heirs, executors, administrators, successors and assigns. Proprietor and Purchaser agree for themselves, and for their heirs, executors, administrators, successors and assigns, to execute any instruments in writing, including deeds to real property, which may be necessary to fulfill in good faith the intent of this agreement. During any reasonable interval between the death or disability of Proprietor, and the consummation of the purchase by Purchaser of Business, subject to the terms of this agreement, the parties agree that Purchaser shall operate the Business as it is ordinarily and necessarily operated, and that Purchaser shall be entitled to the profits and/or losses of such operation. No extraordinary or unnecessary operations or actions shall be undertaken by Purchaser during such interval without the prior approval of Proprietor's guardian, attorney-in-fact, heirs, executors, administrators, or successors and assigns, as the case may be. XII. The law of the State of (name) shall govern this agreement. XII. This agreement represents the final and entire agreement between the parties, and supersedes all prior or contemporaneous agreements, express or implied, written or unwritten. XIV. This agreement may be altered, amended, or revoked only by a writing signed by both parties. XV. If any part or portion of this agreement is held to be invalid or otherwise unenforceable, the remainder shall have force and effect to the full extent permitted by law. XVI. No insurance company is a party to this agreement. Performance of contractual obligations in accordance with policy provisions shall fully discharge insurers from all liability to any parties hereunder. IN WITNESS WHEREOF, Proprietor and Purchaser have set their hands and seals hereunto on the date first above written, in (locality), County of (name), State of (name). Sample Document - Page 4 of 6

5 PROPRIETOR (typed name of Proprietor) PURCHASER (typed name of Purchaser) ***** Sample Document - Page 5 of 6

6 This information is provided by American General Life Insurance Company (AGL) and The United States Life Insurance Company in the City of New York (US Life), members of American International Group, Inc. (AIG). All companies mentioned, their employees, financial professionals, and other representatives, are not authorized to give legal, tax, or accounting, advice, including the drafting or execution of any legal document. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. AGL and US Life shall not be liable for any loss or damage caused by the use of, or reliance on, the tax, accounting, legal, investment or financial items contained in this material. FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION All rights reserved. Sample Document - Page 6 of 6

CORPORATE STOCK REDEMPTION AGREEMENT

CORPORATE STOCK REDEMPTION AGREEMENT FOR FINANCIAL PROFESSIONAL USE ONLY-NOT FOR PUBLIC DISTRIBUTION. Specimen documents are made available for educational purposes only. This specimen form may be given