Buyout Agreement

Do you Have Buy Out Agreement?

A Buy Out Agreement also called a buy-sell or Business Continuity agreement is a contractual agreement between two co-owners of a company determining a way to handle the departure of a member. It is an important agreement in LLC ownership process as it clearly establishes the member’s interest.

Buy Out Agreement is necessary since at some later date any member could leave the company. If there is no proper Agreement, Laws of the state may enforce the dissolution of the company. A buyout agreement provides clear-cut guidelines for approaching changes in ownership preventing unsolicited buyers from obtaining an interest in the company.The buyout agreement is needed for every company except those that have a single owner, married and Parent/Child owners. These agreements enable one to transfer the ownership smoothly, guides in creating value for ownership interest and states in terms of payment for a member leaving the company. It also provides rules to purchase out leaving member interest.

The buyout agreement could be a stand-alone agreement or may form part of the operating agreement. The Buyout may be necessitated due to death of a member, bankruptcy, retirement, incapacity etc.This agreement gives the ownership right to purchase interests of a member wishing to leave or even to force a sale of interest for the benefit of the company or due to change in the ownership of the company. It is an agreement which protects the ownership rights to carry on their business without any fear of losing our interest over the company.

(No Ratings Yet)

Sample Template Preview

BUYOUT AGREEMENT

WHEREAS, _________________________________________ as landlord/seller (hereinafter “OWNER”) and _____________________________________________ as tenant/buyer (hereinafter “INVESTOR”) have entered into a certain  Lease/Purchase Agreement dated _____________, 20_______, a copy of which is attached hereto and incorporated by reference as Exhibit “A”  (hereinafter “AGREEMENT”), for the lease and sale of certain real property located at _________________________________
______________________________ (hereinafter “PROPERTY”) and

WHEREAS, INVESTOR has subleased the Property to ____________________
____________________________________ (hereinafter “BUYER”) under a certain Lease Agreement dated _____________, 20______, a copy of which is attached hereto and incorporated by reference as Exhibit “B” (hereinafter “LEASE”), and

WHEREAS, INVESTOR, has offered BUYER a written option dated _________, 20_____ to purchase the Property from INVESTOR for the sum of $________________, a copy which is annexed hereto as Exhibit “C” and incorporated by reference (hereinafter “OPTION”), and

 WHEREAS, BUYER has given written notice of his/their option to purchase to INVESTOR and has made diligent application for an institutional loan, and

NOW, THEREFORE, the parties agrees as follows:

TERMINATION OF AGREEMENT

The AGREEMENT between Investor and Owner will hereby be terminated, and both parties shall be fully released from liability under said agreement.

ASSIGNMENT OF LEASE AND OPTION

INVESTOR’s rights and obligations under the aforementioned LEASE and OPTION agreements between INVESTOR and BUYER are hereby assigned to OWNER. OWNER and BUYER agree to release, defend and indemnify INVESTOR from any and all liability or obligation arising under the LEASE and OPTION agreements.

CLOSING WITH BUYER

OWNER agrees to close escrow directly with, and transfer title to BUYER in accordance with the terms of the OPTION agreement.  OWNER agrees to make all necessary efforts and take all reasonable efforts to cooperate with BUYER and/or his lender, mortgage broker, appraiser or other parties involved with BUYER’S loan process, including, but not limited to any documents required to be executed by OWNER for the loan process.

CONSIDERATION

INVESTOR shall be paid the sum of $_____________ in cash (hereinafter “CONSIDERATION”) from the SELLER’s proceeds as consideration for the termination of LEASE/PURCHASE AGREEMENT and assignment of LEASE and OPTION agreements to OWNER. In the event that BUYER does not complete his loan or otherwise does not complete the exercise of the OPTION agreement on or before ______________, 20_____, this BUYOUT AGREEMENT, the cancellation of the LEASE/PURCHASE AGREEMENT and the assignments of the LEASE and OPTION agreements shall become null and void, and all parties will be in the same position as they started before the commencement of this BUYOUT AGREEMENT.

DEFAULT BY OWNER

In the event OWNER fails to comply with the terms of this agreement, including, but not limited to the cooperation with BUYER, his lender, mortgage broker, appraiser or other parties in connection with BUYER’s loan, or if OWNER fails to deliver marketable title as required by the OPTION agreement, OWNER shall be in default of this agreement.  At such time, INVESTOR may, at his option, cancel this BUYOUT AGREEMENT, placing all parties in the same position as they started before the commencement of this BUYOUT AGREEMENT, which shall nullify the cancellation of the LEASE/PURCHASE AGREEMENT and the assignments of the LEASE and OPTION agreements.  INVESTOR may also seek damages against OWNER, including, but not limited to, lost profits, courts costs, attorney’s fees, and consequential damages.  At a minimum, OWNER agrees that INVESTOR’s loss in the event of OWNER’s default will be the CONSIDERATION as stated above.

SECURITY AGREEMENT

As security for OWNER’s  performance under this BUYOUT agreement, OWNER agrees to execute a Performance Mortgage, Deed of Trust or other customary security instrument, which will recorded as a lien against the Property in an amount equal to the CONSIDERATION as stated above.

________________________________    ________________________________
OWNER                    BUYER

________________________________
INVESTOR

EXHIBITS: Residential Lease/Purchase Agreement, Lease, Tenant’s Purchase Option