This Buy-Sell Agreement ("Agreement") is made effective as of _________ (the "Effective Date"), by and among _________, a company organized under the laws of (the "Company"), and each person listed on Schedule A (each an "Owner" and collectively, the "Owners").
The Owners own all of the outstanding common stock of the Company ("The Ownership Interests"). The Company is a Corporation. The Owners enter into this Agreement to promote continuity of ownership, restrict transfers of Ownership Interests, and establish a clear process for purchasing Units upon certain events. Therefore, the parties agree as follows.
Transfers of Ownership Interests
General Transfer Restriction
No Owner may sell, assign, transfer, pledge, encumber, gift, bequeath, or otherwise dispose of any Ownership Interests (whether now owned or later acquired) except as permitted under this Agreement or with the written consent of the Company and all other Owners. Any attempted transfer in violation of this Agreement is void and will not be recognized by the Company or the Owners.
(a) Transfer Defined.
"Transfer" includes any direct or indirect sale, assignment, pledge, lien, encumbrance, gift, bequest, or other disposition of Ownership Interests (or any interest in Units), whether for value or without value; whether voluntary or involuntary; whether by operation of law; and whether during life or at death.
(b) Sale or Transfer Exception.
The phrase "sale or transfer" does not include the Owner's transfer into a self-settled trust for estate planning purposes, provided that (i) the Owner remains the primary beneficiary of the trust during the Owner's lifetime and (ii) the trustee (or the trust, as applicable) agrees in writing to be bound by the terms of this Agreement.
Permitted Voluntary Transfers During Owner's Lifetime
No Owner may voluntarily sell or transfer any Units except as expressly permitted under this Agreement or with the written consent of the Company and all other Owners.
Involuntary Lifetime Disposition
If an Owner becomes aware that any of the Owner's Ownership Interests may be subject to an involuntary transfer (as defined below), that Owner must promptly provide written notice to each of the other Owners describing the event, the affected Ownership Interests, and any person or entity asserting rights in the Ownership Interests (the "Third Party Transferee"). For purposes of this Agreement, the affected Owner will be deemed to have offered the affected Ownership Interests for sale to the other Owners (the "Offered Ownership Interests").
(a) Involuntary Lifetime Disposition.
An "Involuntary Lifetime Disposition" occurs when any Units (or any interest in Units) are or may be taken, transferred, attached, foreclosed upon, or otherwise disposed of without the Owner's voluntary intent, including as a result of (i) execution or foreclosure of any pledge, lien, hypothecation, or other encumbrance, (ii) bankruptcy, receivership, or similar creditor proceeding, (iii) a court determination of incapacity or appointment of a guardian or conservator, or (iv) any other compulsory process. An Involuntary Lifetime Disposition does not include (A) a transfer at the Owner's death or (B) a purchase completed under another section of this Agreement.
(b) Right of First Purchase (Must Buy).
Each of the other Owners shall purchase all of the Offered Ownership Interests. The other Owners shall have 30 days from the effective date of the notice to elect to purchase, and the purchase shall be completed on the closing date determined under this Agreement. Unless the Purchasing Owners unanimously agree otherwise, the Offered Ownership Interests shall be allocated among the Purchasing Owners in proportion to each Purchasing Owner's Ownership Percentage (excluding the affected Owner's Ownership Percentage), as shown on Schedule A. The purchase shall be at the Purchase Price and on the payment terms described below.
Death of an Owner (Buyout Required)
Upon the death of an Owner, the Owner's Personal Representative (defined below) will immediately be deemed to have offered to sell to the other Owners all of the deceased Owner's Ownership Interests (the "Offered Ownership Interests") at the Purchase Price and on the payment terms described below. The other Owners shall purchase all of the Offered Ownership Interests in proportion to each purchasing Owner's Ownership Percentage (excluding the deceased Owner's Ownership Percentage), as shown on Schedule A, unless the purchasing Owners unanimously agree otherwise.
(a) Personal Representative.
A Seller's "Personal Representative" includes any executor, administrator, personal representative, or trustee who has legal authority to manage and transfer the Seller's Units. It also includes any person who succeeds in interest in the Units if no fiduciary has control over the Units.
Purchase by Remaining Owners
If the remaining Owners have the first right to purchase a departing Owner's Units, any purchase required or permitted under this Agreement will be completed by the remaining Owners on the terms set forth herein.
The "Purchase Price" shall be determined in accordance with the provisions, and the payment terms are set forth below.
Book Value/Purchase Price
The Purchase Price shall be one time(s) the "book value" of the Offered Ownership Interests on the last day of the month most recently ended before the date of any deemed offer.
Calculation by the CPA
The book value of the Offered Ownership Interests shall be determined by the independent Certified Public Accountant ("CPA") regularly engaged by the Company. If the Company does not regularly engage an independent CPA, then the Company shall select an independent CPA for this purpose. The CPA shall calculate book value in a manner consistent with the Company's regular financial statements and in accordance with generally accepted accounting principles (GAAP) consistently applied. The Company shall provide the CPA with information reasonably necessary to complete the calculation.
Costs
The Company shall be responsible for the reasonable fees and reimbursed expenses of the CPA for any valuation performed under this section.
Payment Terms and Funding
Any remaining portion of the Purchase Price will be paid by wire/electronic.
If any portion of the Purchase Price remains unpaid after application of available life insurance proceeds (if any), the unpaid portion shall be paid in a single lump sum at the closing.
The Closing
The purchase of the Offered Ownership Interests will take place at a closing at the Company's primary place of business (_________, _________) or at any other place and time to which the parties agree. In the event of the Seller's death or voluntary retirement (if applicable), the closing shall be held 180 days after the date of the Owner's death or the effective date of the Seller's retirement. In all other cases, the closing shall be held within 30 days after the date on which (i) the last option to buy is exercised or lapses, or (ii) the other Owners last become obligated to buy.
(a) Receipt of Payment.
At the closing, the purchasing party shall pay the Purchase Price for the Offered Ownership Interests. Upon receipt of payment in full, the Seller shall deliver a written receipt and any transfer documents reasonably required to complete the transfer, together with evidence of payment of required transfer taxes and fees (if any).
(b) Execution Assistance (Limited Agent).
If an Owner is not present at the closing, and if permitted by applicable law, each Owner appoints the Company, acting through an authorized officer as a limited agent to execute and deliver only those documents reasonably necessary to convey the Owner's Units under this Agreement. No agent is authorized to change the Purchase Price, waive rights, or amend this Agreement.
(c) Death-Tax Liability.
In the case of a sale because of the Seller's death, then notwithstanding any other provision of this Agreement to the contrary, payment for the Offered Ownership Interests shall not be required until the Personal Representative of the Seller provides a release or other assurances to the reasonable satisfaction of the other Owners that the other Owners are protected from any liability for death taxes related to the Offered Ownership Interests.
(d) Escrow of Units.
If any portion of the Purchase Price is evidenced by a promissory note, the Seller shall deliver, in escrow, the certificates (if any) and/or assignment instruments reasonably required to transfer the Offered Ownership Interests (endorsed or executed as appropriate) to an escrow agent that customarily provides escrow services. The escrow agent shall hold such documents as security for repayment of the promissory note. Upon written notice that the promissory note has been paid in full, the escrow agent shall deliver the escrowed documents to the purchasing party(ies).
Required Policies
If the Owners elect to use life insurance to fund purchases under this Agreement, each Owner shall obtain and maintain the life insurance coverage (if any) described on Schedule B and shall take commercially reasonable steps to keep such coverage in force. The death benefit for each policy shall be intended to help fund the purchasing Owner's anticipated obligation to purchase Units under this Agreement.
Premiums
Each Owner shall be responsible for paying premiums for any life insurance policy that the Owner is required to maintain under this Agreement and shall provide reasonable proof of payment to the other Owners within 15 days after each premium due date. If an Owner fails to timely pay a required premium, any other Owner may pay the premium to prevent lapse, and the non-paying Owner shall reimburse the paying Owner upon demand.
Term and Changes to This Agreement
Termination
This Agreement will terminate if the Company is dissolved, put into receivership, or becomes bankrupt. Further, Owners who hold at least _________ percent of the outstanding Units may agree in writing to terminate this Agreement. However, the Owners may not voluntarily terminate this Agreement to the disadvantage of any Owner whose Units have been offered (or deemed offered) for sale but for which the closing date has not yet occurred.
Amendment
This Agreement may be amended upon the written consent of Owners who hold at least _________ percent of the outstanding Units. However, the Owners may not amend this Agreement to the disadvantage of any Owner whose Units have been offered (or deemed offered) for sale but for which the closing date has not yet occurred.
Continuing Effect of Transfer Restrictions
This Agreement continues to apply to (i) any Units that are sold or transferred and (ii) any new Units issued by the Company, whether issued before or after the Effective Date. No transferee will be recognized as an Owner unless and until the transferee agrees in writing to be bound by this Agreement and executes a counterpart signature page (or other joinder) reasonably acceptable to the Company. Upon execution, the transferee will be bound as if an original signatory to this Agreement.
Tax Status
If the Company has elected a tax classification or tax status that depends on the Owners being eligible persons (or eligible types of entities), then no Owner may transfer Units if the transfer could reasonably be expected to jeopardize or terminate that election. Any attempted transfer in violation of this paragraph is void and will not be recognized by the Company.
Binding Effect
This Agreement is binding upon and inures to the benefit of the parties and their respective successors, permitted assigns, legal representatives, heirs, and estates.
Governing Law
This Agreement shall be governed by and construed in accordance with the laws of State of Alabama.
Severability
If any provision of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid, illegal, or unenforceable, but that by limiting such provision, it will become valid, legal, and enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.
Notices
All notices required or permitted to be given under this Agreement must be given in writing and will be deemed given either when personally delivered or on the third day after mailing by U.S. registered or certified mail, postage prepaid, with return receipt requested. Notice to the Company shall be sent to the Company's principal address at _________ (or to any other address the Company designates by notice). Notice to any Owner is valid if sent to the Owner's address listed on Schedule A (or, if not listed, to the Owner's address as it appears in the Company's records).
Specific Performance
The Owners agree that the Units are unique and that the failure to perform the obligations under this Agreement will result in irreparable damage to the other parties. Further, the Owners agree that specific performance of these obligations may be obtained by a lawsuit in equity.
Waiver
The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.
Entire Agreement
This Agreement contains the entire agreement of the Owners with respect to the subject matter contained herein. No other promises, warranties, representations, agreements, or understandings, whether oral or written, exist concerning this subject matter. This Agreement supersedes any previous or simultaneous oral or written promises, warranties, representations, agreements, or conditions between the Owners.
Spouses (If Selected)
If the Owners elect spouse acknowledgment, an Owner's spouse may sign below solely to acknowledge the transfer restrictions in this Agreement. A spouse signing below (a "Spouse") is not an Owner and is not a party to this Agreement except for acknowledging the restrictions as applicable.
Effectiveness
This Agreement shall become effective when signed by all of the Owners listed on Schedule A and by _________, _________, on behalf of _________.
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