WAIT-AND-SEE CORPORATE BUY-SELL AGREEMENT

Transcription

1 WAIT-AND-SEE CORPORATE 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. EDITOR'S NOTE: This specimen form refers to multiple life insurance policy ownership options in the section titled FUNDING. The attorney preparing this agreement should consider all tax and legal factors of policy ownership when selecting which provisions to retain and which to modify or delete. ***** WAIT-AND-SEE CORPORATE BUY-SELL AGREEMENT THIS AGREEMENT is made this (day) of (month), (year), by and between (name of shareholder #1) residing at (shareholder #1 address), (name of shareholder #2) residing at (shareholder #2 address) and (name of shareholder #3) residing at (shareholder #3 address), and the hereinafter collectively referred to as "Shareholders," and (name of corporation), an (state of incorporation) corporation with a principal place of business at (address of corporation), hereinafter referred to as the Corporation. The Shareholders and Corporation are hereinafter collectively called the Parties. WHEREAS the Shareholders wish to provide for security, continuity and harmony in management and ownership; and WHEREAS, the Shareholders own the entire capital stock of the Corporation and these Shareholders wish to provide a market for their shares of stock at their death; and Sample Document - Page 1 of 10

2 WHEREAS the Shareholders wish to restrict ownership of the stock to the current Shareholders only to add an individual or individuals identified as sharing a business philosophy with the Shareholders and who would likewise share a concern for the best interests of the corporation and, further, who would join with the Shareholders as a party to this Agreement; and WHEREAS the Shareholders believe that the best interests of the Corporation are served by ownership who work together comfortably; and NOW, THEREFORE, in consideration of the mutual promises contained in this agreement and other good and valuable consideration, the receipt of which is hereby acknowledged, the Parties mutually agree as follows: TRANSFERS AND ENCUMBRANCES 1. Each Shareholder agrees that the Shareholder shall not sell, assign, encumber, pledge or otherwise dispose of any stock of Corporation now owned and afterward acquired by the Shareholder except as specifically provided in this agreement. 2. The Corporation will not enter on the books of the Corporation any attempted encumbrance or transfer of any shares not in accordance with the terms of this Agreement. 3. Each Shareholder agrees to endorse the certificates of stock held by the Shareholder as follows: The sale or transfer of this certificate is restricted and subject to an agreement between (name of Shareholder), (name of Shareholder), and (name of shareholder), the Shareholders of the (name of Corporation), and (name of the Corporation) dated the (day) of (month), (year). A copy of this agreement is on file in the office of the Secretary of the Corporation. All certificates for shares of stock issued to any Shareholder while this Agreement is in effect must also carry this endorsement. BONA FIDE OFFERS 4. A Shareholder (hereinafter called the Offering Shareholder ) may make a voluntary transfer of any share of Corporation stock in response to a bona fide offer if the Offering Shareholder provides written notice of the offer to the Corporation and to Sample Document - Page 2 of 10

3 each of the other Shareholders and offers to sell the stock to the Corporation and to each of the other Shareholders at the price determined under Section 18 of this Agreement (hereinafter the Agreement Price ). The written notice required under this Section must state the details of the proposed transfer including: a) the name, address and occupation of the individual to whom the transfer would be made; b) the price to be paid by the individual for the stock, and the terms and conditions of the payment; and c) any other facts that are material to the proposed transfer. 5. The Corporation shall promptly provide written acknowledgement to each Shareholder that the Corporation received the notice required under Section 4. The Corporation has thirty (30) days from the date the Corporation received the notice in which to opt to purchase any or all of the Offering Shareholder's stock at the Agreement Price. The Corporation must provide written notice to each Shareholder of its intent to exercise the purchase option as to any or all the stock not later then the expiration date of the Corporation's option period. 6. Upon the expiration of the Corporation's thirty (30) day option period to purchase the Offering Shareholder's stock, each of the other Shareholders has thirty (30) days from that date in which the Shareholders may purchase at the Agreement Price shares of the Offering Shareholder's stock in proportion to each Shareholder's respective ownership of the stock (excluding the offered stock) or in other such proportion as the Shareholders may agree to in writing. 7. If any Shareholder does not purchase the shares allotted to that Shareholder before the expiration of the Shareholder's thirty (30) day option period, the remaining Shareholders have ten (10) days from that date to purchase at the Agreement Price those shares in proportion to each Shareholder's respective ownership. 8. If the offer to sell has not been accepted within the Shareholders' ten (10) day option period described in Section 7, then the Offering Shareholder may dispose of the shares as provided in the bona fide offer. INVOLUNTARY LIFETIME TRANSFERS 9. A Shareholder (herein called the Transferring Shareholder ) who has any information that would reasonably lead the Transferring Shareholder to expect that an Sample Document - Page 3 of 10

4 involuntary lifetime transfer is foreseeable must promptly provide written notice to the Corporation and to each of the other Shareholders. The written notice required under this Section must state the details of the proposed involuntary transfer including: a) the name, address and occupation of the individual to whom the transfer would be made; b) the price to be paid by the individual for the stock, and the terms and conditions of the payment; and c) any other facts that are material to the proposed transfer. The Corporation has thirty (30) days from the date the Corporation received the notice under this Section in which to purchase at the Agreement Price any or all of the Transferring Shareholder's stock. Not later then the expiration date of the Corporation's option period, the Corporation must provide written notice to each Shareholder of its intent to exercise the purchase option as to any or all the stock. 10. Upon the expiration of the Corporation's thirty (30) day option period to purchase the Transferring Shareholder's stock, each of the other Shareholders has thirty (30) days from that date in which the Shareholder may purchase at the Agreement Price shares of the Transferring Shareholder's stock in proportion to each Shareholder's respective ownership of the stock (excluding the offered stock) or in other such proportion as the Shareholders may agree to in writing. 11. If any Shareholder does not purchase the shares allotted to that Shareholder before the expiration of the Shareholder's thirty (30) day option period, the remaining Shareholders have ten (10) days from that date to purchase at the Agreement Price those shares in proportion to each Shareholder's respective ownership. 12. If the offer to sell has not been accepted within the Shareholder's ten (10) day option period in Section 11, the Corporation has ten (10) days to purchase any or all of the remaining shares subject to the involuntary transfer. If the Corporations does not purchase the shares during the ten (10) day period, the offering Shareholder may dispose of the shares as stated in the written notice described in Section 9. TRANSFERS ON DEATH 13. Following the death of any Shareholder, the Shareholder's personal representative must promptly provide notice to the Corporation that includes a written offer to sell to Sample Document - Page 4 of 10

5 the Corporation the Shareholder's shares of stock in the Corporation. The Corporation has thirty (30) days from the date the Corporation received the written offer in which to purchase any or all of the deceased Shareholder's stock at the Agreement Price. Not later then the expiration date of the Corporation's option period, the Corporation must provide written notice to each Shareholder of its intent to exercise the purchase option as to any or all the deceased Shareholder's stock. 14. Upon the expiration of the Corporation's thirty (30) day option period to purchase the deceased Shareholder's stock, each of the other Shareholders has thirty (30) days from the date in which the Shareholder may purchase at the Agreement Price shares of the deceased Shareholder's stock in proportion to the Shareholder's respective ownership of the stock (excluding the offered stock) or in other such proportion as the Shareholders may agree. 15. If a Shareholder does not purchase the shares allotted to that Shareholder, the remaining Shareholders have ten (10) days to purchase at the price determined under Section 18 of this Agreement those shares in proportion to each Shareholder's respective ownership. 16. If the Shareholders do not accept the offer to purchase the deceased Shareholder's shares within the Shareholder's ten (10) day option period in Section 15, the Corporation shall purchase at the Agreement Price all of the remaining shares of the deceased Shareholder's stock. 17. Each Shareholder agrees to vote as a stockholder and director in favor of the Corporation's purchase of any shares or the offered stock pursuant to Section 16 of this agreement, and further agrees to approve any amendment to the Corporation's articles of incorporation, charter, by-laws or any other action that may be required to permit the Corporation to purchase shares of the offered stock. AGREEMENT PRICE 18. The Agreement Price of each share is as of the date of this Agreement. The Agreement Price has been agreed upon by the Corporation and each Shareholder as representing the fair value of the interest of each Shareholder, including any interest in the goodwill of the Corporation. The Corporation and the Shareholders further agree to annually review the value of the Corporation and the respective shares of the Shareholders, and shall approve such value by resolution at the annual meeting of Shareholders. The resolution approving the new value shall be attached to Exhibit A (ANNUAL STATEMENT OF AGREEMENT PRICE) and become a part of this agreement. The Corporation and the Shareholders may employ a Sample Document - Page 5 of 10

6 qualified appraiser for the express purpose of recommending an amount for the annual valuation of each share of stock. Any fees and expenses resulting from the qualified appraisal are to be borne solely by the Corporation. If the Corporation and the Shareholders do not approve a new value at the annual shareholder's meeting, the last provided Agreement Price shall remain valid. However, if the offering Shareholder received a bona fide offer, and wishes to accept the bona fide offer, the Agreement Price shall be the lower of the agreed upon price set by the Corporation and the Shareholders under this section or the price stated in the bona fide offer. CLOSING 19. Following the expiration of the last option period, the buying Shareholder(s) and/or the Corporation shall pay the Agreement Price to the offering Shareholder or the deceased Shareholder's estate at a closing to occur not later than thirty (30) days after the expiration of the final option period. The closing shall take place at the Corporation's primary place of business or at some other location mutually agreeable to the Parties at a date and time mutually agreeable to the Parties. 20. At the closing, the respective purchasing Shareholder(s) and/or the purchasing Corporation, depending upon the option to purchase, will pay the offering Shareholder or deceased Shareholder's estate for the offered stock and the offering Shareholder or the offering Shareholder's Personal Representative, will deliver certificates representing all of the shares of the offered stock to the respective purchaser(s). The Corporation will record in its books that the shares of stock have been transferred. Immediately following the closing on the date of the closing with respect to the sale of any shares of stock, the offering Shareholder of the shares will cease to have voting rights for the shares. FUNDING 21. The Corporation will apply for, own, and be the beneficiary of life insurance policies on the life of each stockholder, in the amounts set forth on EXHIBIT B (LIFE INSURANCE POLICIES), which is attached hereto. The Corporation will take any and all actions required to maintain in force all of the insurance policies it is required to maintain under this section, and will not cancel or allow any policy to be cancelled or lapse without the prior written consent of every Shareholder. The Corporation will pay every premium on any life insurance policy it is required to maintain under this section, and, must provide each Shareholder with proof of payment not later than ten (10) days following the premium due date. If the Corporation does not supply proof to a Shareholder, the Shareholder may pay any premium amounts due and be reimbursed for the premium payment by the Corporation. Any and all dividends on a Sample Document - Page 6 of 10

7 policy under this Section will be applied to payment of premiums. The insurance company is hereby authorized and directed to give the insured, upon the insured's written request, any information about the status of any policy on the insured's life subject to this Agreement. 22. Each Shareholder shall procure as owner and beneficiary life insurance on the life of each other Shareholder in amounts as shown on Exhibit B (LIFE INSURANCE POLICIES) of this agreement. All policies purchased in accordance with this agreement including any policies purchased subsequent to the date of this agreement shall be listed on Exhibit B attached to this agreement. 23. The Corporation will pay every premium on any life insurance policy that is required under this Agreement, and within fifteen (15) days of the premium due date provide proof of payment to each Shareholder. If the Corporation fails to supply such proof, any insured Shareholder may pay the premium on the insured's policy and be reimbursed by the Corporation upon proof of premium payment. The insurance company is hereby authorized and directed to give the insured, upon the insured's written request, any information about the status of any policy on the insured's life subject to this agreement. Each Shareholder shall retain ownership of the policies procured by that Shareholder on the life of any other Shareholder. The owning Shareholder may not, however, exercise any of the policy rights (without first having given the insured there under thirty (30) days written notice of the contemplated exercise, unless the owner has obtained from the insured a written waiver of such notice). Any and all dividends on a policy under this Section will be applied to payment of premiums. 24. It is the intent of Shareholders that the proceeds of the life insurance policies listed in Exhibit B shall be used to purchase the decedent's shares in Corporation. In the event that the value of the decedent's shares exceeds the proceeds of the life insurance, the surviving Shareholders shall have the right of paying the excess either in one sum or by executing and delivering a negotiable promissory note for the balance. A promissory note under this Section shall be payable in installments, for a term not to exceed years, the first installment being due and payable months after the death of the Shareholder. This note shall bear interest at the rate of % per year on the unpaid balance. The purchaser shall have the right to prepay the note in full without penalty. The purchaser shall pledge with the legal representative of the decedent all of the decedent's stock as security for the payment of any note; however, the purchaser shall have the privilege of exercising all rights of ownership in such stock prior to default in payment of any installment on the note or any interest on such note. Sample Document - Page 7 of 10

8 25. A Shareholder who transfers shares pursuit to this Agreement may purchase the policy or policies on that Shareholder's life from the owner of the policy. The Shareholder's right to purchase a policy or policies from the owner shall lapse days after the closing date. TERMINATION 26. This agreement shall terminate upon the written agreement of the Shareholders; or the dissolution, bankruptcy or insolvency of the Company; or the death of all the Shareholders simultaneously or within a period of days. Upon the termination of this Agreement, each Shareholder may return their stock certificates to the Secretary of the Corporation who will promptly issue new certificates for an equal number of shares without the restrictive endorsement required by this Agreement. 27. This agreement shall be binding not only upon the parties to it, but also upon their heirs, executors, administrators, successors and assigns, and the parties to this agreement agree for themselves and their heirs, executors, administrators, successors and assigns to execute any instruments in writing which may be necessary or proper in fulfilling the purpose and intent of this agreement. MISCELLANEOUS 28. All Exhibits referred to in this agreement and attached to this agreement are incorporated in this agreement by reference. 29. The law of the State of (name) shall govern this agreement. 30. This agreement represents the final and entire agreement between the parties, and supersedes all prior or contemporaneous agreements, express or implied, written or unwritten. 31. 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. AGREED to by each of the undersigned: Sample Document - Page 8 of 10

9 BY: CORPORATION (Name of corporate signatory) Title of Corporate Signatory SHAREHOLDERS: (typed name of Shareholder) (typed name of Shareholder) (typed name of Shareholder) ***** Sample Document - Page 9 of 10

10 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 10 of 10