Rush, C.J.
The value of corporate shares may not correspond proportionally to the company’s overall value. Shares are usually valued less if they represent a noncontrolling interest or if they are not publicly traded. When valuing such shares, an appraiser will often account for this reality by applying “minority” and “marketability” discounts.
Here, when tasked with valuing shares, an appraiser applied these discounts, even though the shares would be sold in a compulsory, closed-market sale. The selling shareholder takes issue with the valuation, arguing that minority and marketability discounts are open-market concepts inapplicable to the buyback provision of his shareholder agreement with the company.
While we recognize the public policy rationale underlying the shareholder’s position, we hold that the parties’ freedom to contract may permit these discounts, even for shares in a closed-market transaction. And under the plain language of this shareholder agreement—which calls for the “appraised market value” of the shares—the discounts apply.
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Upholding the parties’ freedom to choose their own valuation terms, we conclude that the discounts can apply to BigInch’s buyback of Hartman’s shares. The clause’s plain and ordinary language anticipates a fair market valuation, and applying the discounts does not yield an absurd result. We thus affirm the trial court’s grant of summary judgment for BigInch.
I. Freedom of contract principles govern our analysis.
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To be sure, the parties here—not the legislature—dictated how to value a former officer or director’s shares when sold to the company. And when parties “stipulate to a valuation method in a purchase agreement,” a court “will not rewrite an explicit agreement.” Shriner v. Sheehan, 773 N.E.2d 833, 843 (Ind. Ct. App. 2002), trans. denied.
Having determined that no blanket rule prevents the discounts from applying to the valuation of Hartman’s shares, we now move on to the next inquiry: does the shareholder agreement’s valuation term call for applying the discounts?
II. The agreement’s valuation term unambiguously allows the discounts to apply.
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In sum, the plain and unambiguous language of the shareholder agreement calls for BigInch to pay Hartman the fair market value of his shares. We thus conclude that Hartman’s shares could be discounted for their lack of marketability and his lack of a controlling interest in the company. To the extent that Hartman contends that his shares were discounted “arbitrarily,” we note that he failed to exercise his contractual right to “obtain an additional third-party valuation company appraisal.” And he has designated no evidence to show that the appraiser failed to correctly calculate the fair market value of his shares.
Conclusion
There is no blanket rule prohibiting agreements that call for openmarket concepts to apply to compulsory, closed-market transactions. Here, the shareholder agreement’s valuation term clearly contemplates a fair market valuation of Hartman’s shares, and so a third-party appraiser could apply minority and marketability discounts. We therefore affirm the trial court’s grant of summary judgment for BigInch.
David, Massa, Slaughter, and Goff, JJ., concur.