15.1 Corporate Redemption Agreement

• Library: A Lawyer's Guide to Estate Planning: Fundamentals for the Legal Practitioner (ABA) (2018 Ed.)

15.1 Corporate Redemption Agreement

Three business persons who are unrelated want to enter into a buy-sell agreement for their business that will provide for a buyout in the event of death, or one of them wanting to sell his or her interest. The comments that follow explain some of the considerations involved in using this type of agreement rather than a cross-purchase agreement. When using the corporate redemption agreement, consideration must be given to the alternative minimum tax. See Chapter 10 and the discussion at 10.34. There is a complete discussion of buy-sell agreements in Chapter 10. Three additional ABA publications providing in-depth treatment of buy-sell agreements are L. Mezzullo, An Estate Planner's Guide to Buy-Sell Agreements (2d ed.; ABA, 2007); L. Mezzullo, An Estate Planner's Guide to Family Business Entities (3d ed.; ABA, 2010); and D. Dreux et al., Business Succession Planning and Beyond (ABA, 1997).

AGREEMENT

THIS AGREEMENT is entered into this __________ day of __________ 20___ by XYZ Company, Inc., a Kentucky corporation, hereinafter referred to as "Corporation," and John A. Roe, Frank B. Doe, and Jane C. Moe, hereinafter referred to as "Stockholders."

WHEREAS, the Stockholders presently own all of the issued and outstanding capital stock of the Corporation, and

WHEREAS, the parties desire to make their stock subject to certain restrictions and obligations;

NOW THEREFORE, in consideration of the mutual promises herein contained, the parties agree as follows:

1. Sale During Lifetime. If a Stockholder during lifetime desires to sell his or her stock in the Corporation, the selling Stockholder shall first give written notice to the Corporation of the Stockholder's offer to sell all of his or her stock in the Corporation for a value per share as determined in paragraph three. The Corporation shall have thirty days after receipt of the written offer to accept the offer to sell such stock. If the Corporation does not accept the offer to sell all of the stock within thirty days of receipt of such offer, then the stock shall be offered to the other Stockholders at the same price. The Stockholders shall have thirty days after the Corporation's right has expired to accept the offer to sell such stock. The purchasing Stockholders shall purchase the stock based upon their respective pro rata ownership in the Corporation. If a Stockholder does not desire to purchase his or her pro rata share of such stock, then the other Stockholder shall...