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AGREEMENT, made this _(1)_ day of _____(2)_____,
19_(3)_, by and between _______(4)________, ____(5)_______,
_____(6)______, hereinafter separately referred to as "Stockholder",
and jointly as "Stockholders", and ________(7)_________,
a _____(8)______ corporation, hereinafter referred to as the
W I T N E S S E T H :
WHEREAS, the Stockholders together own 100% of the outstanding
shares of capital stock of the Corporation, and
WHEREAS, as used herein, the term "shares" shall
mean all shares of common stock, at $__(9)___ par value, of
the Corporation now owned or hereafter acquired by the parties,
WHEREAS, the Stockholders are actively engaged in the conduct
of the business of the Corporation, and it is contemplated
that success or failure of the corporate enterprise will at
all times depend in large measure on the personal abilities
of the Stockholders, and
WHEREAS, there is not now, nor is there likely in the future
to be a substantial market for the shares of the Corporation,
WHEREAS, for the foregoing reasons, the parties desire to
provide for the purchase by another Stockholder or by the
Corporation of the stock of any party desiring to sell the
same; and for the purchase by the Corporation of the stock
of a deceased party.
IT IS THEREFORE AGREED, in consideration of the mutual promises
and covenants hereinafter set forth, as follows:
1. Restriction During Life. No stockholder shall transfer
or encumber any of his shares of capital stock of the Corporation
during his lifetime to any person, firm or corporation, without
the consent of the Corporation and the other Stockholder,
unless the Stockholder desiring to make the transfer or encumber
(hereinafter referred to also as the "Transferor")
shall have first made the offer hereinafter described and
such offer shall not have been accepted.
A. Offer by the Transferor: The offer shall be given pro
rata initially to the other Stockholder(s) and shall consist
of an offer to sell or encumber all of the shares of the capital
stock of the Corporation owned by the Transferor, to which
shall be attached a statement of intention to transfer, the
name and address of such prospective transferee, the number
of shares of capital stock involved, and the terms of such
transfer or encumbrance.
B. Acceptance of Offer: Within thirty (30) days after the
receipt of such offer the other Stockholder(s) may, at their
option, elect to accept the offer. If such offer is not accepted
by the other Stockholder(s), the Corporation may within thirty
(30) days after the rejection of such offer, at its option,
elect to accept the offer. The Corporation shall exercise
its election to purchase by giving notice thereof to the Transferor
and to the other Stockholder(s). The other Stockholder(s)
shall exercise the election to purchase by giving notice thereof
to the Transferor and to the Corporation. In either event,
the notice shall specify a date for the closing of the transaction,
which shall not be more than thirty (30) days after the date
of the giving of such notice.
C. Purchase Price: The purchase price for, or the consideration
for the encumbrance of the shares of the capital stock of
the Corporation owned by the Transferor shall be set forth
in paragraph 3 hereof.
D. Closing of Transaction: The closing of the transaction
shall take place at the principal office of the Corporation.
The consideration shall be paid as provided for in paragraph
3 hereof. Certificates for all shares sold or encumbered hereunder,
property endorsed to the Corporation or to the purchasing
Stockholder, as the case may be, shall be delivered by the
transferor not later than the date of closing.
E. Release from Restriction: If the offer is neither accepted
by the Corporation nor by the other Stockholder(s), the Transferor
may make a bona fide transfer to the prospective transferee
named in the statement attached to the offer, such transfer
to be made only in strict accordance with the terms therein
stated. However, if the Transferor shall fail to make such
transfer within __(10)__ (___) days following the expiration
of the election period by the other Stockholder(s), such shares
of capital stock shall again become subject to all of the
restrictions of this Agreement, provided, however, that nothing
contained herein shall be construed as releasing any shares
of this Corporation from any restriction or requirement of
law concerning transfer of such shares.
F. Termination of Employment: Any shareholder whose employment
in any capacity with the company or its subsidiaries terminates
for any reason whatsoever, voluntarily or involuntarily, shall
be considered as of the date of such termination of employment
to have made an offer of all of his shares of stock subject
to the terms of this Agreement, at the purchase price stated
in paragraph 3 hereof.
G. Subchapter "S" Election: If at the time of a
transfer of stock permitted hereunder, the Corporation then
is an "S" corporation, the transferee and new stockholder
shall be required to consent in writing not to revoke such
"S" election without the unanimous approval of all
other stockholders. Such written consent shall be executed
and delivered prior to the delivery of the shares to the transferee
at the closing of such sale and transfer.
2. Purchase Upon Death. Upon the death of a Stockholder (hereinafter
referred to as Decedent), all of the shares of the capital
stock of the Corporation owned by him, and to which he or
his estate shall be entitled, shall be sold and purchased
as hereinafter provided:
A. Obligation of the Corporation to Purchase: It shall be
for the Corporation to purchase from the Decedent's Personal
Representative, and the Decedent's Personal Representative
shall be obligated to sell to the Corporation, all of the
shares of the capital stock of the Corporation owned by the
Decedent and to which the Decedent or his Personal Representative
shall be entitled, at the price set forth in paragraph 3 hereof.
B. Closing: The closing of such purchase and sale shall take
place at the offices of the Corporation, at a date selected
by the Corporation upon _(11)_ days notice to the Transferor
which date shall be not more than _(12)_ days following the
date of the qualification of the Personal Representative and
not less than _(13)_ days following such date.
C. Insurance: To insure or partially insure its obligation
under this Agreement to purchase from the estate of a deceased
Stockholder the shares owned by him prior to his death, the
Corporation shall have the option to purchase policies of
insurance covering the lives of each Stockholder in any amount
deemed desirable. In the event any Stockholder ceases to be
a Stockholder of the Corporation, the Corporation shall terminate
any such insurance on such Stockholder's life and in the event
any Stockholder increases his holdings of the shares of the
Corporation, the Corporation shall procure and maintain, if
so desired by it, additional insurance on the life of such
Stockholder proportionate to the increase in the holdings
of such Stockholder.
If the corporation shall receive any proceeds of any policy
on the life of the Decedent, such proceeds shall be used by
the Corporation to pay the Decedent's Personal Representative
to the extent of the purchase price of the Decedent's stock,
such payment to be deemed made on account of such purchase
D. Balance of Purchase Price: If the amount of any insurance
proceeds is insufficient to pay the purchase price of any
Decedent's shares, then the balance of the purchase price
remaining after credit for any insurance proceeds shall be
payable as follows: _(14)_% of the balance due to be paid
shall be paid in cash, and the balance shall be represented
by a promissory note executed by the purchaser payable in
(15) (___) installments, which note shall be secured by the
stock of the deceased Stockholder.
E. "S" Election: If the corporation is an "S"
corporation at the time of the transfer and sale of its stock,
the transferee and new stockholder shall be required to consent
in writing not to revoke such "S" election without
the unanimous approval of all other stockholders. Such written
consent shall be submitted prior to the delivery of the shares
to the transferee.
A. Unless the parties agree to another price in writing,
the price for each share of capital stock to be sold under
this Agreement shall be equal to its fair market value as
an on-going business concern as determined in the sole discretion
of the company's Certified Public Accountant, (CPA) and such
determination by the CPA shall be binding and conclusive upon
the parties hereto.
B. Unless the parties agree otherwise, the purchase price
shall be paid as follows:
i. __(16)__ percent (___) of the amount determined to be
due as the price to be paid at the closing in addition to
any insurance proceeds and the balance to be payable by the
execution of a promissory note in such amount to be repaid
in _(17)_ (___) installments, such note to be secured by the
stock being sold.
ii. The promissory note shall bear interest until paid in
full at the prime rate as determined from time to time by
Chase Manhattan Bank or any other bank as determined by and
agreed upon by the Stockholders.
iii. In the event that suit shall be required to collect
on the promissory notes above referred to, then in such event,
the defaulting Stockholder or the Corporation shall pay for
attorney fees, and courts costs, incurred in such action.
4. Limitation on Stockholder's Right to Pledge Stock. The
restrictions of paragraph 1 above shall not apply to encumbrances
as collateral for a note or notes in favor of the company
or any one or more of the other Stockholders or in favor of
a recognized lending institution, but only if the proceeds
of such loan are used in their entirety to purchase shares
of the Corporation and the borrowing Stockholder delivers
to the Corporation and the other Stockholder(s) the written
commitment of the lender, in form acceptable to the Corporation
that such lender will not dispose of such shares without first
affording the Corporation and the other Stockholder(s) the
right for a period of _(18)_ days to purchase shares at a
price satisfactory to the Corporation and the other Stockholder(s).
5.Corporate Restrictions After Purchase. So long as any part
of the purchase price of shares of capital stock sold in accordance
with this Agreement remains unpaid, the Corporation shall
A. declare or pay dividends on its capital stock;
B. reorganize its capital structure;
C. merge or consolidate with any other corporation, or sell
any of its assets except in the regular course of business;
D. increase the salary of any officer or executive employee
of the Corporation;
E. allow any of its obligations to become in default; or
F. allow any judgments against the Corporation or any liens
against the Corporation's property to remain unsatisfied.
So long as any part of such purchase price remains unpaid,
the Transferor, or the Personal Representative of the Decedent
shall have the right to examine the books and records of the
Corporation from time to time and to receive copies of all
accounting reports and tax returns prepared for the Corporation.
If the Corporation breaches any of its obligations under this
paragraph, the Transferor or the Personal Representative,
in addition to any other remedies available, may elect to
declare the entire unpaid purchase price due and payable forthwith.
6. Purchase By Stockholder. Whenever a Stockholder purchases
shares of capital stock under this Agreement, such purchaser
(unless he shall have paid the entire purchase price in cash)
shall, following the delivery of the purchased stock, endorse
the new certificates of stock issued to such purchaser, execute
a UCC-1 Financing Statement (for recording), and deliver the
same to the Seller as collateral security for the payment
of the unpaid purchase price; and such capital stock shall
be so held until the entire purchase price shall be paid.
While such capital shall be so held as collateral security
and so long as the Purchaser is not in default, the Purchaser
shall be entitled to all voting rights with respect thereto.
Dividends paid shall be applied to the indebtedness.
7. Purchase By Corporation. Whenever the Corporation shall,
pursuant to this Agreement, be required to purchase shares
of the capital stock of the Corporation, the Stockholders
and the Personal Representative of any Decedent shall do all
things and execute and deliver all papers as may be necessary
to consummate such purchase. Any note required to be given
hereunder by the Corporation as part of the purchase price
shall be endorsed and guaranteed by the remaining or surviving
Stockholders, who shall not be discharged from such liability
by reason of the subsequent extension, modification or renewal
of any such note. Until all amounts due are paid, the stock
certificates and a UCC-1 Financing Statement (to be recorded)
shall be delivered to Seller.
8. Endorsement On Stock Certificates. Each certificate representing
shares of capital stock of the Corporation now or hereafter
held by the Stockholders shall contain with a legend in substantially
the following form: "The transfer or encumbrance of the
shares of stock represented by the within certificate is restricted
under the terms of an Agreement dated ____(19)______ a copy
of which is on file at the Corporation office."
9. Value of Purchase Price for Tax Purposes. It is understood
that the purchase price, determined as set forth hereinabove,
shall be the value of the purchased shares for all tax purposes.
In the event such value is later increased by any federal
or state taxing authority, any tax liability resulting from
such increase shall be borne by the selling Stockholder or
his Personal Representative, as the case may be.
10. Amendments. This Agreement may be amended or altered
by execution of a written agreement authorized by corporate
resolution and signed by all the parties hereto.
11. Notices. Any and all notices, designations, consents,
offers, acceptances, or any other communication provided for
herein, shall be given in writing by registered or certified
mail addressed, in the case of the Stockholders, to his address
appearing on the stockbooks of the Corporation, or to his
residence, or to such other address as may be designated by
him, and in the case of the Corporation, to the principal
office of the Corporation, postage prepaid, by United States
Mail, and shall be considered to have been delivered on the
2nd day following the date stamped by the post office.
12. Invalid Provision. The invalidity or unenforceability
of any particular provision of this Agreement shall not affect
the other provisions hereof and the Agreement shall be construed
in all respects as if such invalid or unenforceable provision
had been omitted.
13. Modification. It is understood between the parties that
this Agreement contains the entire understanding of the parties
and no change or modification of this Agreement shall be valid
unless the same be in writing and signed by all the parties
14.Binding Effect. This Agreement shall bind and, unless
inconsistent with its provisions, shall inure to the benefit
of the Executor, Administrator or Personal Representative,
and the heirs and assigns of each of the Stockholders.
15. Prior Agreement. This Agreement supersedes any prior
Agreement of the parties.
16. Deadlock. If at any time the Stockholders cannot agree
on the Certified Public Accountant of the company and therefore
are unable to establish an acceptable price for purchase,
the matter shall be submitted to arbitration in the following
A. Each Stockholder shall, within __(20)___ (___) days after
notice of such deadlock, appoint a Certified Public Accountant,
and the two accountants shall then appoint a third Certified
Public Accountant within __(21)__ (___) days after the two
accountants are selected, and the average of purchase price
determined by them shall be final, conclusive and binding
upon the Stockholders, their executors, administrators and
personal representatives, and a judgment on such determination
may be obtained in any court of proper jurisdiction. The cost
of such accounting shall be borne equally by the parties unable
to reach agreement hereunder.
In the event any one of the Stockholders shall fail within
the given time to select a Certified Public Accountant to
represent him to resolve the dispute, then and in such event,
the remaining Stockholder shall have the right to institute
suit for specific performance under this Agreement, and the
defaulting Stockholder shall pay for all attorney fees and
court costs of such action.
17. Indebtedness of a Stockholder. In the event that there
is a purchase and sale of shares of stock or interest therein,
pursuant to the provisions hereinabove, and there is any indebtedness
owed by the selling Stockholder or his estate to any party
to this Agreement, then, notwithstanding the said provisions
relating to the payment of the purchase price, and any amount
to be paid for the stock being purchased shall be applied
first to reduce and satisfy any indebtedness owed by the Selling
Stockholder or his estate to any party under this Agreement.
18. Default. In the event of a default in the payment of
any installment of the purchase price, the covenants and conditions
of this Agreement, or any Security Agreement given to Sellers,
Sellers may declare the entire unpaid portion of the purchase
price to be immediately due and payable, and may proceed to
enforce payment of same and to exercise any and all rights
and remedies provided by the Uniform Commercial Code as well
as any other rights and remedies either at law or in equity
available to them, and Seller may assign, sell or transfer
all or any part of the collateral in such manner, at such
price, and on such terms and conditions as Sellers, in their
sole and absolute discretion, may determine. Sellers or the
Corporation shall have the right to purchase any or all of
the collateral, apply any unpaid indebtedness on account thereof,
and have a claim against Purchaser for the balance of such
indebtedness in addition to any and all remedies available
to them at law or in equity.
19. Voting. It is understood and agreed that until the purchase
price shall have been paid in full, the Purchaser shall have
no voting rights whatsoever.
20. Termination of Agreement. This Agreement shall terminate
upon the occurrence of one of the following events:
A. The written agreement of the parties hereto or their successors
in interest to that effect;
B. The bankruptcy, receivership, or dissolution of the Corporation;
C. The disposal of all the shares of stock of any Stockholder
during his lifetime or by his Personal Representative or estate
upon his death, shall terminate this Agreement as to such
retiring or deceased Stockholder; or
D. All of the issued and outstanding stock of the Corporation
becoming owned by one of the Stockholders of the Corporation.
21. Laws Governed By. This Agreement is executed in and shall
be construed by and governed under the laws of the State of
22. Withdrawal from Corporation. Any Shareholder may withdraw
from participation in the Corporation at any time in accordance
with the following provisions:
A. Notice to Corporation. Such Stockholder ("Withdrawing
Stockholder") shall give notice to the Corporation at
least _____(23)_______ (____) days prior to the date (he)(she)
wants to withdraw ("Withdrawal Date") which notice
shall set forth the Withdrawal Date.
B. Offer to Corporation. Within _____(24)_____ (___) days
after receipt of such notice, the Corporation may, at its
option, elect to purchase all, but not less than all, of the
Withdrawing Stockholder's shares. The Corporation shall exercise
its option to purchase by giving written notice thereof to
the Withdrawing Stockholder within said ______(25)_______
(___) day period. Such written notice shall specify a date
for the closing of the purchase, which shall not be more than
___(26)____ (___) days after the date of the giving of such
notice. The purchase price for the shares to be paid by the
Corporation and terms of payment therefor shall be as set
forth in Paragraph 3 hereof.
C. Acceptance by Stockholders. If the Corporation fails to
exercise said option within said _____(27)_______ (____) day
period, then for a ______(28)_______ (____) day period thereafter
the other Stockholder(s) of the Corporation shall have the
option to purchase such shares, such option to be exercised
in the same manner as that of the Corporation, and the purchase
price and terms of payment to be the same for the Stockholder(s)
as for the Corporation as set forth in Paragraph 3 hereof.
The option may be exercised by the Stockholders pro rata (based
on that proportion which the number of shares owned by each
other Stockholder bears to the total number of shares then
outstanding, not counting the shares proposed to be sold),
and if one (or more) of the Stockholders does not desire to
exercise his option, then his option shall be exercisable
on a pro rata basis by the other Stockholders (not counting
for any purpose, the shares proposed to be sold or the shares
owned by any Stockholder who does not desire to exercise his
option); or the option may be exercised by the other Stockholders
on such basis as they may agree upon.
D. Dissolution and Liquidation. In the event that neither
the Corporation nor the other Stockholder(s) purchase the
shares of the Withdrawing Stockholder, the other Stockholder(s)
agree to execute a consent voluntarily dissolving the Corporation.
In addition, the Stockholder(s) agree to liquidate the assets
of the Corporation as soon as practicable thereafter.
IN WITNESS WHEREOF, the parties hereto have hereunto set
their hands and seals the day and year first above written.
Signed, Sealed and Delivered in the Presence of:
President of the Corporation
ATTEST: _________(38)________ Secretary of the Corporation
The information in this document is designed to provide an
outline that you can follow when formulating business or personal
plans. Due to the variances of many local, city, county and
state laws, we recommend that you seek professional legal
counseling before entering into any contract or agreement.
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