Corporate Cross Purchase Agreement Page 4
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31In the event the disabled Stockholder ceases to be totally disabled after his/her interest
has been sold but prior to the payment of the full purchase price, the remaining balance
due to the disabled Stockholder shall continue to be paid pursuant to the installment terms
of Article 6. of this Agreement.
In the event of death of the disabled Stockholder after his/her interest has been sold but
prior to the payment of the full purchase price, the remaining balance due to the disabled
Stockholder shall continue to be paid pursuant to the installment terms of Article 6. of this
Agreement.
4.
SALE OF STOCK AT DEATH.
Upon the death of a Stockholder, the surviving
Stockholder(s) shall purchase and the estate of the deceased Stockholder shall sell all the
deceased Stockholder's stock in the Corporation, now owned or hereafter acquired. Each
of the remaining Stockholders shall have the right to purchase such portion of the
deceased Stockholder's stock as the number of shares owned by each Stockholder bears
to the total number of shares owned by all Stockholders, exclusive of the shares owned by
the deceased Stockholder. The sale shall occur within such time as the parties may
agree, but in no event shall the sale begin more than _____ days after the qualification of
the deceased Stockholder's legal representative. The purchase or sale price and the
terms of payment for such stock shall be determined in accordance with the provisions of
Articles 5. and 6. of this Agreement.
5.
VALUATION. The value of the deceased or withdrawing Stockholder's stock shall be
determined by appraisal as follows:
The remaining Stockholder(s) and the deceased or withdrawing Stockholder shall each
name one independent certified appraiser; if the two appraisers cannot agree upon a value
within _____ days, they shall appoint a third appraiser and the decision of the third
appraiser shall be binding upon all parties.
[In the event the buy-out is triggered by the total disability of a Stockholder, the valuation
method described above in this Article shall be applied as of the expiration of the
elimination period specified in the individual disability buy-out policies listed in Schedule
"B". Note to Attorney: This paragraph should be included only if optional Article 3. has
been included in the Agreement.]
[Note to Attorney: For many years it was customary to say that a bona-fide arm's length
buy-sell agreement could peg the value of a decedent's interest for estate purposes as
long as: (1) the purchase price was reasonable at the time the agreement was made; and
(2) the purchase and sale were mandatory and binding during life as well as at death. For
buy-sell agreement entered into or substantially modified after October 8, 1990, however,
the buy-sell value will be disregarded unless: (1) the agreement is a bona fide business
arrangement; (2) the agreement is not a device to transfer property to family members for
less than full consideration; and (3) the terms of the agreement are comparable to similar
arrangements entered into by persons in arm's-length transactions. Section 2703 I.R.C.
Based on this new provision of the Code, it appears that a buy-sell agreement will not
establish an estate value unless the price is set by a provision likely to establish fair
DI1087
0108
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