Option to sell and
option of first purchase.
This agreement made and entered into this _________
day of _________, between A and B, parties of the first part, and C, party of
the second part, provides that:
A and B have invested in the stock of _________
Company of _________ and are its principal shareholders and have made loans to
the corporation evidenced by negotiable promissory notes of the corporation.
C is desirous that possible losses, arising out of the
operation of the business of corporation to A and B jointly be minimized to the
extent provided.
C is desirous of obtaining an option to purchase the
investments of A and B jointly in corporation in the event that both elect to
dispose of them jointly;
In consideration of the mutual promises and covenants
contained and the payment of $_____ by each of the parties to each other party,
the receipt and sufficiency of which consideration is acknowledged, it is
agreed and covenanted by the parties as follows:
1. In the event that A and B jointly desire to dispose
of all of their stockholdings in corporation, C shall have the option to
purchase all stock at the highest price at which A and B jointly have a firm
binding offer to buy all stock. C's option to purchase shall be for the period
of _________ after receipt of notice in writing of the price offered for all
the stock, the name of the person making the offer, and the terms and
conditions of the offer. C, if he [she] chooses to exercise this option, shall
notify A and B of the election to buy, in person, by telephone, telegraph,
private messenger or mail. C shall have the option to make payment for all
stock under the same terms and conditions of the above firm binding offer to
purchase, or C may elect to make payment for all stock in cash within _________
after notice of the election to purchase under this option.
2. Providing that A and B together own all of the
outstanding stock of corporation, at the option of A and B jointly, C shall
purchase from A and B the entire stockholdings of A and B together with all
outstanding obligations of the corporation to the parties as shall be evidenced
by valid and enforceable negotiable promissory notes of the corporation,
secured or unsecured, at a price not less than a sum arrived at as follows:
The total amount of money paid by A and B for their
respective shares in the corporation plus the balance due A and B respectively
on loans to the corporation as shall be evidenced by valid and enforceable
negotiable promissory notes of the corporation, secured or unsecured.
Less: All sums paid by the corporation to A and B or
either in excess of $_____ per month of the drawing accounts of A and B, all
interest paid to A and B or either, and all other distributions or payments of
any kind made by the corporation to A and B or either, which payments or
distributions constitute income to either of the parties reportable by either
or both of the parties in filing respectively their federal income tax returns;
Less: The total amount of actual capital losses or any
other type of loss suffered by the corporation (liquidated at the time of
purchase by C or unliquidated at that time but subsequently liquidated) which
could have been insured against but either were not insured against at all or
were only partially insured against by corporation. The extent of a reduction
of the purchase price based upon this consideration shall be computed as of the
time of loss;
Less: Conversion of capital assets to the extent
distributed to A and B in excess of $_____ of the drawing accounts of A and B
and not resulting in a reduction of the principal amounts due by the
corporation to A and B or either, on loans made to corporation.
The option of A and B under this clause (2) shall
expire _________.
3. Upon the election of A and B to sell all of their
stockholdings in corporation to C pursuant to the option set forth in paragraph
2 of this agreement, C shall make payment for the stockholdings as follows:
_________. C shall discharge his [her] obligations to make payment by
delivering checks, money orders or bank drafts to A and B or either or in any
other manner agreed to by all of the parties. C shall have the right to
withhold from payment of the total purchase price the full amount of any
unliquidated claims against corporation which could have been insured against
but were not insured against at all or were not fully insured against, until
the time the actual loss upon the unliquidated claims have been established.
Upon the establishment of actual losses, C shall pay to A and B the difference
between the amount withheld and the actual loss suffered by the corporation
upon the claim or claims.