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Agreement To Redeem Stock
(on Stockholder's Death)
AGREEMENT made this [date] by and between [names] (Stockholders) and [name], a corporation organized pursuant to the laws of [state],having principal place of business at [address] (Corporation).
WHEREAS, Stockholders each own one quarter of Corporation's outstanding capital stock; and
WHEREAS, Stockholders wish to keep control of Corporation in the survivors upon the death of one or more of them; and
WHEREAS, Stockholders intend to accomplish this by the provisions of this Agreement;
IT IS AGREED AS FOLLOWS:
1. Buy-Sell. Stockholders will sell and transfer their stock to Corporation, and Corporation will redeem their stock in accordance with the provisions of this Agreement.
2. Death of Stockholder Upon the death of a Stockholder, Corporation shall redeem all of Corporation's stock owned by deceased Stockholder out of Corporation's surplus. Deceased Stockholder's estate shall surrender the certificates representing the redeemed stock. The redemption price shall be computed and paid to deceased Stockholder's estate in accordance with the provisions of this Agreement.
3. Value of Stock. Upon the execution of this Agreement, Stockholders shall fix the value of each share of Corporation's stock and shall set down the value in a writing signed by each of them. Annually, no later than [number] days after the close of Corporation's fiscal year, Stockholders shall refix the value of each share of Corporation's stock and shall set down the value in a writing signed by each of them. In the event Corporation redeems the stock of a deceased Stockholder, the redemption price shall be the value per share last fixed by Stockholders multiplied by the number of shares redeemed.
4. Failure to Value Stock. Should Stockholders fail to value Corporation's stock for [number] successive corporate fiscal years prior to a Stockholder's death, or should a Stockholder die after the close of a fiscal year but before Stockholders have valued the stock as provided in this Agreement, the value of each share of Corporation's stock shall be fixed by the Certified Public Accountant or CPA firm then employed by Corporation. The value shall be fixed as of the close of the last full fiscal year prior to the date of deceased Stockholder's death.
4. Failure to Value Stock. Should Stockholders fail to value Corporation's stock for two successive corporate fiscal years prior to a Stockholder's death, or should a Stockholder die after the close of a fiscal year but before Stockholders have valued the stock as provided in this Agreement, the value of each share of Corporation's stock shall be fixed by a panel of three arbitrators. The panel shall be constituted of one arbitrator chosen by surviving Stockholders, one arbitrator chosen by the legal representative of deceased Stockholder's estate, and the third arbitrator chosen by the first two. The value shall be fixed as of the close of the last full fiscal year prior to the date of deceased Stockholder's death.
5. Manner of Payment. Corporation shall pay ........ dollars ($........) of the redemption price to deceased Stockholder's estate within [number] days after the appointment of the legal representative of the estate. The balance shall be paid over [number] years in [number] equal semiannual installments, the first of which shall be made [number] months following the first payment to deceased Stockholder's estate, together with interest at the rate of ........ percent (........%) per annum on the unpaid balances. The payments shall be secured by a series of promissory notes that shall be delivered to the legal representative of deceased Stockholder's estate together with the first payment of the redemption price.
5A. Acceleration. The promissory notes shall provide that in the event any semiannual installment is not paid in full when due, deceased Stockholder's estate, or deceased Stockholder's successors or assigns, may declare the full balance of the promissory notes immediately due and payable.
5B. Prepayment. Corporation may prepay all or any part of the balance of the redemption price on any payment date, including the first payment, together with all accumulated interest.
6. Inability to Redeem Stock. In the event Corporation cannot purchase deceased Stockholder's shares because its surplus is insufficient at the time it is required to make the first payment and deliver its promissory notes for the balance of the redemption price, the purchase of deceased Stockholder's shares shall be made in the following manner:
a. Whatever surplus is available for the purpose shall be used to redeem part of deceased Stockholder's shares.
b. The remaining shares shall be purchased in equal amounts by surviving Stockholders at the same price and on the same terms that are applicable to a redemption by Corporation of all deceased Stockholder's shares.
7. Delivery of Shares. Upon receipt of the first payment of the redemption price together with the promissory notes securing the balance of the redemption price, the legal representative of deceased Stockholder's estate will deliver all deceased Stockholder's shares, properly indorsed, to Corporation if it redeems all the shares, or surviving Stockholders if they purchase all the shares, or Corporation and surviving Stockholders if it and they together purchase all the shares.
8. Notice on Stock Certificate. The following legend shall be placed on Corporation's certificates of stock immediately following the execution of this Agreement:
"TAKE NOTICE that the sale, assignment, transfer, or pledge of the shares represented by this Certificate upon the death of the owner of the shares is subject to the restrictions contained in an agreement made [date] between [names] and Corporation, a copy of which is on file at Corporation's offices."
9. Termination of Agreement. This Agreement will terminate upon the occurrence of any of the following events:
a. Voluntary or involuntary termination of Corporation's business;
b. The redemption of the shares of second Stockholder to die, leaving only two Stockholders surviving;
c. By written agreement of Stockholders then living; or
d. Adjudication of bankruptcy or insolvency of any Stockholder or appointment of a receiver of the assets of any Stockholder unless the appointment is vacated within [number] days after it became effective.
10. Agreement Binding on Third Persons. This Agreement is binding on Stockholders and Corporation, their heirs, legal representatives, successors, and assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.
[name of corporation]
*** If Required By State Law ***
This Section for Notary:
State of _________
County of ________ [COUNTY]
On [DATE] before me, [NAME OF NOTARY], notary, personally appeared [NAME OF PERSON(S) INVOLVED], personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
Witness my hand and official seal.
My commission expires: _____