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Form #1372

Buy-out agreement for Professional Corporations

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Buy-out agreement for Professional Corporations


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Buy-out agreement.

This agreement made [Date], by _________, a professional corporation of the state of _________, licensed to _________[e.g., practice law] in the state of _________, and _________, _________ and _________, being the holders of all the issued stock of that corporation, states:

1. This agreement shall bind each of the parties jointly and severally to each other jointly and severally, in consideration of their joint and several obligations stated here; and it shall likewise bind them and all persons to whom stock of the corporation is issued by the corporation or to whom it is sold; and it is conditional to the issuance or sale of stock of the corporation that the person to whom it is issued or sold shall become a signatory and party to this agreement.

2. In the event that any stockholder dies or is disqualified to hold stock in the corporation or withdraws from the corporation voluntarily, or is compelled to withdraw from the corporation in accordance with the bylaws of the corporation, the corporation or other stockholders shall purchase his or her stock, and the same shall be sold to the corporation, as hereafter stated. A stockholder is disqualified to hold stock in the corporation, for the purpose of this agreement, when he or she is suspended or barred from the practice of _________ in the state of _________; and the term "disqualified," as used in this agreement, means disqualified to hold stock in the corporation.

3. The life of each stockholder of the corporation is or will be insured under a life insurance policy taken out by the corporation, as set forth in the schedule of life insurance appended here and incorporated here as though fully set forth here. The amount of insurance taken out by the corporation on the life of each stockholder shall be $_____ for each share of stock of the corporation owned by him or her, subject to change from time to time by the vote at a stockholders' meeting called under the bylaws of the corporation or the written consent of the holders of a majority of the stock issued by the corporation; and any such change shall be indorsed on the schedule of life insurance and shall be incorporated in and be part of this contract as though fully set forth here. The corporation shall take out such insurance on the life of each new stockholder of the corporation (exclusive of the estate of any deceased stockholder) and cancel such insurance on the life of each stockholder who becomes disqualified or who withdraws from the corporation voluntarily or involuntarily; and shall indorse the schedule of life insurance accordingly, and the indorsement shall be amendatory of this agreement.

4. The corporation shall pay all premiums on the life insurance as provided for by this agreement and give proof of payment to each stockholder within _________ days after the due date of each premium; and, if any premium is not paid within _________ days after its due date, the insured may pay it and be entitled to be reimbursed for it by the company or the other stockholders of the company.

5. The corporation shall be the sole owner of the policies of life insurance taken out by it under this agreement and of the proceeds of any policy on the death of the insured, though it must apply the proceeds to the purchase of the stock of the corporation owned by the insured at his or her death and the corporation shall as trustee collect, hold and apply the proceeds for that purpose, but any excess of the proceeds over the price of the stock shall belong to the corporation solely and absolutely. The corporation shall be the sole owner of the dividends paid on any policy held by it under this agreement, but it shall as trustee apply the dividends to the payment of premiums on that policy.

6. A disqualified or withdrawing stockholder shall have the right within _________ days after the date of his or her disqualification or withdrawal to purchase any policy of insurance on his or her life held by the corporation pursuant to this agreement. The price shall be the interpolated terminal reserve of the policy as of the date of the disqualification or withdrawal, plus the proportional part of the premiums paid by the corporation (including dividends earned by the policy and applied to premiums) which covers the period between the date of the disqualification or withdrawal and the purchase of the policy.

7. No stockholder during his or her lifetime shall sell, give, transfer or hypothecate in any manner any stock of the corporation held by him or her except to a person qualified to be a stockholder of the corporation and with the written consent of the corporation [holders of a majority of the stock issued by the corporation].

8. Upon the death, disqualification or voluntary or involuntary withdrawal of any stockholder from the corporation, the corporation shall purchase, and the estate of the decedent or the disqualified or withdrawing stockholder shall sell, all of the stock of the deceased, disqualified or withdrawing stockholder in the corporation; or the sale of the stock will be made, with the consent of the corporation, to another stockholder of the corporation or another person who is licensed to _________[e.g., practice law in the courts of the state of _________] and qualified to hold stock in the corporation and who will _________[e.g., practice law] on behalf of the corporation.

9. The price of each share of stock on its purchase, pursuant to this agreement, from the estate of any deceased stockholder or from any disqualified or withdrawing stockholder shall be its book value as of the end of the month preceding the month in which the stockholder dies or becomes disqualified or withdraws, plus an amount for each day after the end of that month until and including the day of the death, disqualification or withdrawal equal to 1/365th of the net corporate income for fiscal year preceding that in which the death, disqualification or withdrawal occurs.

10. The book value of each share of stock of the corporation, for purpose of this agreement, shall be its portion of the book value of all the stock of the corporation, which shall be arrived at by determining the cash [fair market] value of all the assets of the corporation and deducting from it all debts and obligations of every kind and character owing by the corporation. The assets of the corporation, for the purpose of the determination, shall include all its real and personal property including, but not by way of limitation, leaseholds, good and collectible accounts and bills receivable, the cash surrender value of all life insurance policies taken out pursuant to this agreement, the proceeds of any such policy on death of a stockholder, and an amount that is a fair and reasonable representation of the value of the goodwill of the corporation as a going concern.

11. The determination of the book value of the stock of the corporation at the time of the death, disqualification or withdrawal of a stockholder, for purpose of this agreement, shall be made by the accountant serving the corporation at the time of the death, disqualification or withdrawal, and his or her determination shall be conclusive upon all parties to this agreement. If at the time of the death, disqualification or withdrawal the corporation has no accountant then serving it or if the accountant then serving it fails to make a determination and the parties cannot agree upon a determination, the determination shall be made by arbitration by three arbitrators, one arbitrator to be designated by the corporation, one by the estate of the deceased stockholder or by the disqualified or withdrawing stockholder and the third to be selected by the other two, all within a reasonable time. If the two arbitrators selected by the parties cannot agree upon a third arbitrator, the third arbitrator shall be appointed by _________[e.g., the then presiding judge of the _________ court of _________]. The determination of the arbitrators shall be that arrived at by the majority of them [any two of them] and shall be made within a reasonable time, and shall be binding upon all parties to or bound by this agreement.

12. The corporation, a disqualified or withdrawing stockholder, the personal representative of a deceased stockholder, or a designated representative of each, shall make, execute and deliver any documents necessary to carry out this agreement. Each stockholder shall execute a will in which he or she will direct his or her executor to carry out this agreement and make and execute all necessary documents, but his or her failure to leave a will directing his or her executor shall not in any manner affect the rights of the corporation and other stockholders and the obligations of his or her estate under this agreement.

13. The sale and purchase of stock of the corporation on the death, disqualification or withdrawal of a stockholder shall be consummated as soon as reasonably possible after the death, disqualification or withdrawal, and at least within _________ days after that in the case of death, and _________ days after that in the case of disqualification or withdrawal.

14. Shares purchased from a stockholder upon his or her becoming disqualified may be resold to him or her upon his or her again becoming qualified for a price to be determined in the same manner as was the price on the purchase of the stock from him or her; that is, the price shall be the book value of the stock at the end of the month preceding that in which the resale occurs, plus 1/365th, for each day thereafter until the day of the resale including that day, of the net corporate income for the fiscal year preceding that in which the death, disqualification or

withdrawal occurs. The income of the corporation after the disqualification of the stockholder until his or her becoming qualified and repurchase of the stock shall not in any manner accrue to him or her.

15. This agreement may be altered, amended or terminated by a writing signed by the corporation and by all the stockholders. It shall be terminated by bankruptcy, receivership or dissolution of the corporation. It shall also be terminated by the death of _________ stockholders of the corporation simultaneously or within a period of _________ days.

16. Each certificate of stock of the corporation shall have indorsed on it by the corporation the following:

"The sale, transfer or hypothecation of the stock represented by this certificate is subject to a stockholders' agreement, dated [Date], a copy of which is on file and may be inspected at the principal office of the corporation, and all of the provisions of that agreement are incorporated in this certificate as though fully set forth in it. That agreement prohibits the sale, gift, transfer or hypothecation of the stock to any person not qualified to be a stockholder of the corporation and without the written consent of the corporation [holders of a majority of the stock issued by the corporation]. That agreement also requires the sale to, and purchase by, the corporation or its stockholders of the stock of any stockholder who dies, who becomes disqualified to hold the stock, or who voluntarily or involuntarily withdraws from employment by the corporation otherwise than by retirement."

Any certificate of stock issued by the corporation shall be so indorsed and any certificate of stock issued by the corporation without such indorsement shall be surrendered to the corporation to be so indorsed by it and then returned to the holder.

17. It is the intention of this agreement that it shall conform and be construed as in conformity with _________[statutory citation] authorizing the incorporation of professional corporations and their licensing to perform professional services and with all rules and regulations of _________[licensing agency] authorized by it.

18. This agreement is binding upon the corporation, all its present and future stockholders and their successors, heirs, legal representatives and assigns.

In witness, etc.

Contributed by
King and Spelling LLC
 
Total Forms Contributed 117
 

See All King and Spelling LLC's Forms
 

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Terms Of Use

Submissions to this site, including any legal or business forms, posts, responses to questions or other communications by contributors are not intended as and should not be construed as legal advice. You are strongly encouraged to consult competent legal council before engaging in any action based upon content contained on this site.

These downloadable forms are only for personal use. Retransmission, redistribution, or any other commercial use is prohibited. This includes reposting forms from this site to another site offering free legal or other document forms for download.

Please note that the donator may have included different usage terms regarding this form, and you agree to abide by these terms. It is highly recommended that you have a licensed attorney review any legal documents for which you are searching in order to make sure that your needs are being properly and completely satisfied.

Your use of this site constitutes your acceptance of our terms of use and your agreement to hold this site, its officers, employees and any contributors to this site harmless for any damage you might incur from your use of any submissions contained on this site. If you do not agree to the above terms, please do not proceed.

These forms are provided to assist business owners and others in understanding important points to consider in different transactions. They are offered with the understanding that no legal advice, accounting, or other professional service is being offered by these documents or on this website. Laws vary in the different states. Agreements acceptable in one state may not be enforced the same way under the laws of another state. Also, agreements should relate specifically to the particular facts of each situation. Therefore, it is important to consult legal counsel whenever utilizing these forms. The Forms are not a substitute for legal advice YourFreeLegalForms.com is not engaged in recommending or referring members on the site or making claims about the competence, character or qualifications of its participating members.
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Keywords: Buy-out agreement, Professional Corporations

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