A well drafted buy and sell agreement is one of the most valuable tools a company can have to protect its value in the event of death, disability or divorce striking one or more of the owners and can also provide vital business saving methods to handle both voluntary sale of shares or bankruptcy of a shareholder. Absent such an agreement, any of the events described above can destroy even a healthy business or force the owners to work with strangers with no expertise within their business. With such an agreement, not only is the business protected, but the family of a deceased shareholder is fairly compensated for their loved one’s ownership interest without draining the company of needed reserves.

Indeed, it is such a valuable and intelligent tool that one would expect each and every company to prepare one from inception. However, most companies fail to draft such a critical device. The reason? Probably the same reason that most people neglect to create a well thought out estate plan. Like a well drafted estate plan, most people do not take the time, trouble (and money) to draft an appropriate buy and sell, preferring to let such unpleasant matters as death, divorce and disability remain in the background while concentrating on the immediate matters of business operations.

This is ill advised for many reasons. First, many of the important provisions of such an agreement are relatively easy to negotiate only before a party becomes disabled or deceased and almost impossible thereafter. Such issues as developing a fair method to value stock are easy to compromise before it is needed since no one knows who will be buying and who will be selling. Terms of the sale and security for same are likewise easily negotiated but certainly in the event of divorce, it is often impossible to engage in useful discussions once emotions become aroused.

Second, such accessory tools as life or disability insurance, which can be quite useful, are only available to fund the agreements prior to the need arising.

Third, it is not uncommon for a party who is becoming elderly or ill to find him or herself unable to convince the other party, at that stage, to agree to reasonable terms since the other party may feel that a "waiting" tactic will force the increasingly desperate elderly or ill shareholder to accept any terms at all.

It is thus critical for the sophisticated business person to create the buy and sell as soon as practicable and definitely long before it is likely to be needed.

This article shall discuss the basics of the variations of buy and sell agreements available to a nonpublic California corporation, recommend certain provisions, briefly describe how insurance may (or may not) be a good idea for funding portions of the agreement, and close with a generic example of a typical buy and sell agreement.

As always, the reader is advised to obtain legal counsel prior to implementing any of the suggestions contained in this article or using the form included.



1. Protection against Divorce and Creditors

Stock held by the owners of a company is like any other asset: it can be bought, sold, willed to third parties, given away, pledged, and is subject to creditor claims and bankruptcy. It can also be claimed by disgruntled spouses in a divorce proceeding. This fact becomes critically important to a company in that if the wrong person is able to seize the stock, what was once a close working relationship can be utterly destroyed.

For instance, if a hostile creditor seizes the stock, one can have an uninformed and uncooperative co-owner suddenly whose only interest in the company is to sell the assets and divide the spoils. Another example is what occurs in the typical contested divorce: the spouses fight over the stock, and either the stock must be bought by one at tremendous premium, or both husband and wife split the stock, attending the shareholder’s meetings, arguing at board meetings, and, in general, making life a misery for the other shareholders.

Such split ownership of stock often destroys the company even if the divorcing shareholder seeks to save it. He or she is distracted, his or her ability to vote in the meetings is split with a hostile ex-spouse, and the other shareholders, seeing the power split, can often end up effectively running the company.

2. Protection of Your Family And You in the Event of Death or Disability

Even more common is the unfortunate result of a failure to have a buy and sell agreement when an owner dies or becomes so disabled as to not be able to contribute to the company any longer.

In the event of death, it is important to note that it is unlikely that the family, now owning stock in a nonpublic company, will find a buyer willing to purchase it for any real value. Conversely, the remaining shareholders face family members who clamor for income while the company now no longer has the services of the now deceased shareholder who was often responsible for much of the past business success and income. In short, at the moment the family wants income, the company is least able to afford it. This often leads to rancor within the business and struggles for control of the board of directors...or leads to guilty surviving shareholders not able to buy the stock for any realistic sum from the now suspicious family and watching long relationships deteriorate into bitter resentment.

Disability can also lead to extremely tense situations. The disabled shareholder often can no longer serve the company, is desperate to keep the income stream going, as is his family, but the remaining owners find themselves having to replace the now disabled shareholder with an expensive employee performing the same duties and are often no longer able to continue payments to the disabled owner. The value of the stock plummets due to the very disability that may force the disabled shareholder to sell, thereby making sale of the stock now unrealistic.

Quite often a family or disabled shareholder ends up with holdings of stock of almost no realistic worth. There are no ready buyers available, the remaining shareholders no longer need their services, and stock once thought valuable by the owner is now worth nothing. There is no legal requirement for other shareholders to either buy stock or declare dividends, so the deceased shareholder’s family finds themselves owning worthless stock though the company may still be generating income. Death or disability, absent a good buy and sell agreement, can make owning a valuable company of almost no value.



Put simply, a buy and sell agreement is a binding contract that requires someone to buy and another person to sell their stock for a given price if certain events occur. It is vital to note that it is binding not only to sell...but to buy. If X occurs, then someone is required to buy and someone is required to sell and failure to consummate the transaction allows legal action to enforce the obligation.

The most common instances of forced buy and sell are in the event of death or disability. The typical provisions state that if a shareholder dies, the other shareholders much buy, pro rata, all of the shares from the estate, usually twenty percent down, five years to pay the rest, the obligation secured with the stock being purchased and personally binding on the various shareholders who buy.

The price can be set by the Board annually, by the shareholders annually, computed pursuant to a formula, or even stated in the agreement. The key provision is that the price IS set ahead of time so that there is no bickering or arguing as to price or terms. Our own recommendation is to create a formula that sets the value and simple have the regular CPA of the company compute it once the death or disability occurs. In that manner, the price is fair regardless of the time it takes for the agreement to actually be needed. A typical formula is book value plus a multiple of net earnings or gross income, averaged over the three years prior to application of the formula.

Once the death occurs, the formula is applied and the sale occurs within a few months thereafter. In that manner, the remaining shareholders retain effective control, but have time to pay off the entire obligation and the family of the deceased shareholder does not have to worry about participating in the running of the business since they have sold their stock and have an assured source of income.

The same method can be used if a shareholder becomes personally disabled...or to buy out the stock of a spouse who is not involved in the company but suing for divorce. As to disability, to avoid costly litigation, it is a good idea to have the regular physician of the stockholder have discretion to determine if the stockholder is truly disabled, but to set firm guidelines in the agreement, such as unable to perform his or her regular duties for two or more years.

Divorce, of course, leads quite often to bitter litigation between spouses and absent a buy and sell agreement a key question often presented to the divorce court is how to divide the stock between the spouses or how to value it if one spouse is to "buy" the other out. Normally, the provision allows the remaining shareholders to buy the divorcing spouse’s stock and resell it for the same price to the remaining spouse in the corporation. The key is to avoid having the corporation dragged into the court dispute and to achieve that the price must be fair as well as the terms. We have found that using the precise same pricing method and terms as the buy out in the event of death or disability is a good idea and we normally provide for binding arbitration in the agreement so that the divorce court does not even have jurisdiction on the issue of the buy out.

The spouses of the shareholders must all execute the buy and sell to make such a provision enforceable and the example attached to this article should give the reader an idea of the cautionary clauses needed to assure enforceability of the clause. This office has had to defend such clauses in numerous divorce courts as the divorce lawyers try to avoid cheap and easy arbitration so that they may gain tactical advantage by having the stock be one more asset in dispute in the divorce. Provided the spouses executed the Buy and Sell, the courts almost always ignore such tactics and order the entire issue of stock evaluation and buy out to go to arbitration, thereby saving time and money for both the corporation and the divorcing spouses.

It is important to note that one is NOT obligated to have the buy and sell apply in all events and one can have it apply for death and disability but not divorce...or any other combination. We do recommend having it apply in as many circumstances as possible.

First Right of Refusal and Right to Sell Stock Upon Termination of Employment are also common clauses in a buy and sell. The former allows the other shareholders or the corporation to match any outside offer to buy stock prior to a shareholder being able to sell. The latter allows or requires a terminated or quitting employee-shareholder to sell the stock upon the end of employment. Such clauses are useful if an employee is to go work for a competitor or if the remaining shareholders only want active shareholders in the company. There are all sorts of variations on these types of provisions: some require the company to buy but are not binding on the departing shareholder; some require the company to buy and the employee to sell; some require the employee to sell only if the company elects to buy. Which variation works for your company depends on many factors which should be discussed with legal counsel.



The sale of the shares may be accomplished in two very different ways. First, each shareholder can agree to purchase, pro rata or otherwise, all the stock being sold. This is called a "cross purchase" of stock. Each shareholder is thus personally liable for the payment of the stock and the disabled or deceased shareholder’s estate is actually selling to as many people as there are surviving shareholders. It is important to note that the purchase is not a tax deductible expense for the buyers. They must use after tax dollars, just as if they were buying any other asset. For the selling party, there may be capital gains to pay.

A second method to achieve the same result is a corporate repurchase agreement by which the corporation and the shareholders all enter into an agreement whereby the corporation buys all the stock being sold. The result is the redemption (repurchase) of all the shares owned by the departing shareholder. The remaining shareholders increase their own shareholdings automatically since the number of shares outstanding is reduced. (For example, if there are three equal shareholders and one dies, the corporation repurchases the stock and the remaining two shareholders automatically increase their holdings from one third to one half of he stock outstanding...without buying any stock on their own account.)

The advantages of a repurchase is that the individual remaining shareholders do not use their own after tax dollars to increase their holdings. (Note, however, that the corporation cannot deduct the expense of buying the stock either...but may be in a different tax bracket or have adequate reserves to make the payments.) In repurchase agreements, it is normal to have the remaining shareholders guarantee the payments over time of the corporation so as to assure security to the estate or disabled (or divorcing) exshareholder.



Both life insurance and disability insurance are often used to fund part or all of the buyout in the event of death or disability. In the case of a corporate repurchase, the corporation owns it; in the case of a stock cross purchase, each shareholder owns it on the other’s lives. The advantages are obvious: one need not go into reserve to buy all or part of the stock, the estate or disabled shareholder receives the money, and in the case of corporate repurchase, it is the corporation which pays for it.

The problems arise when one or more of the shareholders is either elderly or of poor health, thus causing the premiums to be high or making the other shareholders resent the extra cost of the premium. Typically, an elderly shareholder will want the life insurance regardless of cost to protect his or her estate while the younger shareholder, anxious to put all the monies into growing the business, detests the high premiums.

Life insurance companies sell a large variety of policies honed to the various requirements of buys and sells and were one of the earliest proponents of this type of contract since they saw the buy and sell market as a new one to exploit. Even if the company can not afford insurance when the buy and sell is first executed, insurance can always be added later when the monies are available. See the form contract attached.



Certain clauses are especially useful in buy and sell agreements. Clearly an arbitration clause is useful for such a business contract as are clearly worded warnings to all spouses executing the contract so that they understand that the divorce court will lose jurisdiction at to the agreement if the agreement is executed by them.

But by far the most critical clauses pertain to evaluation of the stock and terms of sale. To create an acceptable formula and acceptable terms is usually the most difficult task facing the shareholders but, overall, the most important. Keep in mind that each stockholder must face the fact that he or she (or their estate) may be selling...or buying the stock. Thus a fair formula that takes into account both the changes in business climate and a realistic evaluation of hard assets is essential. While CPAs and attorneys can assist in creating such formulas, ultimately it is the business people who are most familiar with the value of their own company and best suited to choose between the various possible methods.

The contract can cover death; disability; divorce; voluntary termination; involuntary termination; desire to sell; bankruptcy; and a myriad other events that can trigger mandatory or voluntary buyouts. The reader is advised to consult with experienced counsel to determine which of the many clauses available seem worthwhile.

A typical contract with various optional clauses is attached. Please note that it is a corporate repurchase contract...AND IT SHOULD NOT BE USED WITHOUT RECEIVING COMPETENT LEGAL AND TAX ADVICE.


a California Corporation




1.01 This Agreement is entered into this _____ day of _________________, ______, by and between __________________________ INC., a California Corporation hereafter termed "Corporation", with its principal executive office at __________________________, California, and ______________________________________, hereafter termed "Shareholders", and "Stockholders."

1.02 The Shareholders own all of the outstanding shares of the Corporation as follows:



percent ( _0%)

_____ shares of common stock


, as
community property


percent (__%)

_____ shares of common stock

, as his
separate property

percent (__%)

_____ shares of common stock




1.03 The purpose of this Agreement is to provide for the continuity in the management and policies of the Corporation by providing for the purchase of the shares of any deceased or permanently disabled Shareholder or held by the Trust after the death of the primary beneficiary designated in the Trust by the Corporation and giving the Corporation and the Shareholders first option to purchase any shares attempted to be sold by a Shareholder during his/her lifetime.




2.01 Upon the death or permanent disability of a Shareholder, or upon the death of the primary beneficiary of the Trust, the Corporation, cognizant of the desirability of maintaining continuity of management and of retaining as Stockholders only those persons who are actively engaged in the conduct of its business shall buy, and the decedent's estate or the disabled Stockholder or the Trust shall sell, all the stock of the deceased or disabled Shareholder, or held by the trustee, which is subject to this Agreement, to the extent that the Corporation may legally purchase same. The price will be equal to the value of such stock as provided in this Agreement. The Corporation and the Stockholder, or his/her legal representative or the trustee of the Trust, shall give such instruments as may be necessary to complete the sale. Additional stock subsequently acquired by a Stockholder shall be subject to this Agreement.

2.02 The price of such stock will be determined as follows: The Corporation shall pay to the disabled Shareholder or his/her estate or to the Trust the appropriate proportional stock interest of the Shareholder in the total value of the Corporation. The total value of the Corporation shall be the book value of the Corporation at the date of death or disability


2.03 Upon the death or permanent disability of one of the Shareholders, or the death of the primary beneficiary of the Trust, the Corporation may, at its option, pay the full purchase price in cash. In any event, not less than twenty (20) percent of the consideration required under Section 2.02 shall be paid in cash and for the balance promissory notes shall be given with provision for annual payments on the unpaid principal over a period not to exceed ten (10) years from the date of the Shareholder's death or disability or the death of the primary beneficiary of the Trust with interest at prime plus three (3) percent per annum. The notes shall provide for optional acceleration of maturity in event of a default in payment of principal or interest and at the option of the Shareholder or his/her estate or the trustee of the Trust shall be additionally secured by a pledge of all of the stock being purchased. If the Corporation does not settle in the manner required in this paragraph within the period of sixty (60) days from the decedent's death or disability, or the death of the beneficiary of the Trust, the Shareholder or his/her estate or the trustee of the Trust may rescind this Agreement. Conversely, the Corporation shall have the privilege of prepaying, without penalty, any note issued, in whole or in part, at any time.

a. Each and every remaining Shareholder shall execute a personal guarantee of payment to secure the indebtedness, said guarantee to be identical to the form attached hereto as Exhibit "A" and made a part hereof.

b. Interest shall be adjusted every twelve (12) months to conform to the then existing prime rate.


2.04 All relevant valuation terms shall be computed by the Corporation's regular accountant within thirty (30) days of death or disability, utilizing generally accepted accounting principles. Should there be a dispute concerning valuation pursuant to the formula among the Shareholders, the following methods shall be utilized to resolve the issue.

a. Any Shareholder disputing the computation and application of the agreed formula shall select an accountant of his/her own choice. That accountant and the corporate accountant shall, in turn, within ten (10) days, select a third accountant who, at corporate expense, will conclusively determine all evaluations required to generate application of the formula. The decision of the third accountant will be binding on all Shareholders or their estates.

b. Should there be no corporate accountant, one shall be selected by majority vote of the Board of Directors.

c. Should more than one Shareholder dispute the corporate accountant's computation and application of the formula, each Shareholder shall select an accountant who will then, in conjunction with the corporate accountant and any other accountants selected by other Shareholders, determine the identity of an appropriate accountant to conclusively determine application of the formula as described in this Article.


2.05 "Permanent disability" of a Shareholder shall be defined as the Shareholder being unable to perform a substantial portion of his/her regular duties for the Corporation for a period of two (2) years. The opinion of the regular physician of the Shareholder shall conclusively determine whether a Shareholder is permanently disabled pursuant to this Agreement.

a. Should a Shareholder become permanently disabled, the Shareholder will sell and the Corporation purchase all of the shares of the disabled Shareholder, utilizing the price as determined in Section 2.02, and the terms as described in Section 2.03.

b. Date of commencement of permanent disability shall be conclusively determined by the disabled Shareholder's regular physician.

c. If a disabled Shareholder dies during an installment paying period, the Corporation shall use any proceeds from any life insurance policies on the disabled Shareholder to prepay all remaining unpaid installments. Any excess of proceeds over unpaid installments shall belong to the Corporation.

d. Each shareholder herewith irrevocably authorizes and directs his/her physician to respond in writing to the corporate Board of Directors, no more often than twice a year, as to the physical disability of said Shareholder, at corporate expense.

e. This provision shall not apply to the primary beneficiary of the Trust.




3.01 In the event any Shareholder, desires to dispose of any of his/her/its shares in the Corporation during his/her/its lifetime, he/she/it shall first offer to sell such shares to the Corporation and the other Shareholders by giving them written notice to that effect, such notice to specify the number of shares offered for sale and to be given in the manner prescribed in Section 5.06. The Corporation shall have the option for sixty (60) days after receipt of such notice to purchase any or all of the offered shares at the price established in accordance with Section 2.02 of this Agreement, but in cash payment. At the end of its option period, the Corporation shall notify the Shareholders of the number of shares it has elected not to purchase, if any, and the Shareholders shall have the option for thirty (30) days after such notification to purchase all of the shares offered for sale not purchased by the Corporation.

Each Shareholder shall have the right to purchase such portion of the shares offered for sale as the number of shares owned by him/her/it at such time shall bear to the total number of shares owned by all the other Shareholders excluding the selling Shareholder; provided, however, that if any Shareholder does not purchase his/her/its full proportionate allotment of the shares, the unaccepted shares may be purchased by the other Shareholders.

If all of the offered shares are not purchased by the Corporation and/or the Shareholders before the expiration of the second time period above, the offering Shareholder shall be under no obligation to sell any of the offered shares to the Corporation or other Shareholders, but may dispose of such shares in any lawful manner, except that he/she/it shall not sell any such shares to any other person without first giving the Corporation and the other Shareholders the right to purchase them at the price and on the terms offered by such other person.




3.02 To accomplish the purpose of this Agreement, any transfer, sale, assignment, hypothecation, encumbrance, or alienation of any of the shares of the Corporation other than according to the terms of this Agreement is void and transfers no right, title, or interest in or to said shares, or any of them, to the purported transferee, buyer, assignee, pledgee, or encumbrance holder.



3.03 The Shareholders agree, immediately, upon execution of this Agreement, to present the certificates representing the shares in the Corporation presently owned, or hereafter acquired by him/her to the Secretary of the Corporation and cause the Secretary of the Corporation to stamp on the certificate in a prominent manner the following legend:

"The ownership and transfer of this certificate is subject to the terms and limitations contained in a buy sell agreement between the shareholders of this corporation, which defines who may be the owners of such shares, affects the transferability of these shares on death or during life, and the prices to be paid for such shares on certain transfers. A copy of this agreement is available for inspection at the offices of the corporation and of the attorney for the corporation."



4.01 Certain Shareholders at the time of execution of this Agreement are married and are holding all of their shares now owned as community property. To provide for continuity in management and policies, in the event of a dissolution of the marriage of any Shareholder, the Corporation shall purchase, and the spouse of any Shareholder whose marriage is being dissolved, shall sell to, or offer for repurchase by, the Corporation any and all interest in the shares of the Corporation owned by the spouse in the event of dissolution of the existing marriage of such Shareholder, upon the same terms and conditions, and for the same price, as if such spouse was the seller of such stock interest pursuant to Article II hereof. Upon issuance of additional stock, any married persons purchasing the stock shall designate which community property owner is the "spouse" whose interest shall be purchased. Should no election be made, the Shareholder not employed by the Corporation shall be considered the "spouse" under this provision.

4.02 For the purposes of this Agreement, "dissolution of marriage" shall include the terms "separate maintenance", "divorce", and "annulment", and shall be considered as occurring when a Shareholder is named either Petitioner or Respondent in a filed dissolution, annulment, separate maintenance, or divorce proceeding.

4.03 Pursuant to Section 4.01, in the event the spouse of a Shareholder shall be required to sell his/her stock interest to the Corporation, the provisions contained in this Agreement shall constitute the sole means for determining the total price and terms of sale, purchase or repurchase, to be paid to a Shareholder's spouse for all interest, rights, or claims, if any, which such spouse may possess or claim to possess in shares of the Corporation. By executing this Agreement all Shareholders and each spouse of a Shareholder shall be waiving any and all other interests and rights, both in law and equity, which said spouse may possess in stock of the Corporation, and any community property interest said spouse may possess in said stock shall be governed hereby.

4.04 Upon the entry of a decree of separate maintenance or of dissolution of marriage of a Stockholder and his/her spouse, or, should the Corporation elect, any time after the filing of a Petition to Dissolve by Shareholder or Shareholder's Spouse, the Corporation shall purchase the Shareholder's spouse's entire interest in stock of the Corporation pursuant to the evaluation method and terms contained in Article II of this Agreement.

4.05 Any Shareholder whose former spouse's stock interest has been purchased by the Corporation pursuant to Section 4.04 shall have, dating from purchase of spouse's stock by Corporation, a ninety (90) day nontransferable option to purchase from the Corporation shares in a number equal to those redeemed by the Corporation from his/her former spouse pursuant to Section 4.04. The price and terms to be paid for said shares shall be identical to the sums paid by the Corporation to the former spouse on his/her order to redeem the shares. The term "former spouse" shall include a spouse who has been party to a proceeding for separate maintenance.

4.06 Any Shareholder marrying or remarrying after the execution of this Agreement shall either require the new spouse to execute this Agreement, or enter into a written agreement with the new spouse declaring the stock to be and to remain separate property of the Shareholder, delivering an executed copy of said Agreement to Corporation prior to marriage to the new spouse. Failure to abide by this provision shall give Corporation a ninety (90) day option to purchase all Shareholder's stock on the price and terms at ßß 2.02, 2.03 and 2.04, said option commencing from date of marriage. Alternatively, Corporation may elect to rescind this Agreement and shall have the right to rescind within ninety (90) days of such marriage. The Shareholder so marrying shall not participate in making election as to which remedy the Corporation may choose.

4.07 The provisions of Article IV shall not apply to the primary beneficiary of the Trust.




5.01 This Agreement shall be interpreted in accordance with the laws of California.


5.02 Any and all disputes relating to this Agreement or its breach shall be settled by arbitration, in San Francisco, California, in accordance with the then-current rules of the American Arbitration Association ("AAA"), and judgment upon the award entered by the Arbitrator may be entered in any Court having jurisdiction hereof. Costs of arbitration, including reasonable attorney's fees incurred in arbitration, as determined by the Arbitrator, together with any reasonable attorney's fees incurred by prevailing Party in Court enforcement of the arbitration award after it is rendered by the Arbitrator, must be paid to the prevailing Party by the Party designated by the Arbitrator or Court. Said arbitration shall be conducted in the English language and the award rendered in United States dollars. Service of the Petition to Confirm Arbitration and written notice of the time and place of hearing on the Petition to Confirm the Award of the Arbitrator shall be complete on personal delivery or the deposit of the Petition and notice in the United States mail. The Arbitrator shall strictly adhere to California law in making his or her decision. The Arbitrator is empowered to grant any remedy or relief available to a party in a court of law in this jurisdiction.

Should one party either dismiss or abandon his/her claim or counterclaim before hearing thereon, the other Party shall be deemed the "prevailing Party" pursuant to this Agreement. Should both Parties receive judgment or award on their respective claims, the Party in whose favor the larger judgment or award is rendered shall be deemed the "prevailing Party" pursuant to this Agreement. The parties understand and agree that arbitration acts as a waiver of the Parties' right to trial by jury.

At any time after the initiation of arbitration and not less than twenty (20) days prior to the arbitration hearing, any Party may serve an offer in writing upon any other Party to the action to allow an arbitration award to be made in accordance with the terms and conditions stated in the written offer. If the offer is accepted, the offer, together with written acceptance, shall be submitted to the Arbitrator and an award made thereon without further hearing between those Parties. If the offer is not accepted in writing, prior to five (5) days before the hearing or within ten (10) days of mailing of offer, whichever first occurs, it shall be deemed withdrawn and cannot be given in evidence at the hearing. If the Party to whom said written offer was made fails to obtain a larger or more beneficial monetary judgment than the offer from the Arbitrator after hearing, the Party to whom the offer was made must pay to the offering Party the offering Party's costs of arbitration, including, but not limited to, AAA administrative fees, Arbitrator's fees and the costs of experts necessarily incurred in preparation for the arbitration, as well as all attorneys fees incurred by the prevailing Party. The attorney's fees so incurred shall form part of the judgment and shall not be reduced by the Arbitrator unless the Arbitrator determines that clear and convincing evidence has been presented that such fees are unconscionable.


5.03 This Agreement may be altered or amended in whole or part at any time by a written instrument setting forth such changes signed by the Corporation and all Shareholders.


5.04 This Agreement shall terminate upon the occurrence of any of the following events, namely:

a. Cessation of the Corporation business or enterprise during the lifetime of the Stockholders, if prior to disability sale date;

b. Bankruptcy or receivership of any one or more to the Stockholders;

c. Bankruptcy, receivership or dissolution of the Corporation;

d. Death or disability of all the Stockholders during a period of thirty (30) days; and/or

e. Mutual agreement of termination between all the Stockholders.


5.05 Any and all notices or other communications required or permitted by this Agreement or by law to be served on, given to, or delivered to any party hereto by any other party to this Agreement shall be in writing and shall be deemed duly served, given, or delivered when personally delivered to the party or to an officer of the party, or in lieu of such personal delivery, when deposited in the United States mail, first-class postage prepaid, addressed to the Corporation at its principal executive office or to a Shareholder at the address then appearing for him/her/it on the books and records of the Corporation. The Corporation may change the address of its principal executive office in the manner required by law for purposes of this paragraph by giving notice of the change, in the manner required by this paragraph, to each of the Shareholders.


5.06 Should any provisions or portion of this Agreement be held unenforceable or invalid for any reason, the remaining provisions and portions of this Agreement shall be unaffected by such holding.


5.07 It is expressly understood by all parties hereto that in the event of death or dissolution of marriage that this Agreement and its method of evaluation of stock shall be binding on all parties hereto, their assigns and their estates. The parties hereto waive any right they may have to claim community property interests which would interfere in any way with the terms and evaluation of this Agreement.

a. Any party having questions concerning this provision or any portion of this Agreement is advised to consult independent counsel prior to execution of the Agreement.


5.08 This instrument constitutes the sole and only Agreement of the parties hereto respecting the sale and purchase of their shares in the Corporation and correctly sets forth the rights, duties, and obligations of each to the other in relation thereto as of its date. Any prior agreements, promises, negotiations, or representations concerning its subject matter not expressly set forth in this Agreement are of no force or effect.


5.09 This Agreement shall be binding on the parties hereto and on each of their heirs, executors, administrators, successors, and assignees.



By: _______________________________

, President






________________________________DATE: _________________, 20__

Family Trust,

by ,Trustee



__________________________________DATE: ________________, 20__





___________________________________DATE: ________________, 20__




The undersigned, being the spouses of the Shareholders, hereby declare that they have read each and every provision of this Agreement, understand the terms thereof, and agree to be bound by its provisions, including, but not limited to those provisions concerning the lack of community property interest in the Corporation, and agree that any and all disputes concerning the community property nature of this property shall be subject to arbitration as described in ß5.03 hereof. They also understand that execution of this Agreement binds them to arbitration and waiver of the right to trial by jury as to the matters covered by this Agreement. IF YOU HAVE ANY QUESTIONS CONCERNING THE EFFECT OF THIS AGREEMENT YOU SHOULD CONSULT WITH LEGAL COUNSEL OF YOUR OWN CHOOSING PRIOR TO EXECUTING THIS DOCUMENT. ONCE EXECUTED, IT FULLY BINDS YOU.



________________________________DATE: ________________, 20__


________________________________DATE: ________________, 20__