Some cross-purchase agreements use a dollar amount to calculate the buy-out price, while others use a formula. A valuation of the interest that is the subject of the agreement should be made periodically.
Cross-Purchase Agreement among Shareholders of Close Corporation --Purchase by Surviving Shareholders of Interest of Withdrawing or Deceased Shareholder -- Corporation has Option if other Shareholders do not Exercise Option is an agreement between the shareholders of a close corporation that outlines the terms of sale of the shares of a withdrawing or deceased shareholder. The agreement allows the surviving shareholders to purchase the interest of the withdrawing or deceased shareholder, and provides the corporation with an option to purchase the interest if the other shareholders do not exercise their option. The two main types of Cross-Purchase Agreements are Buy-Sell Agreements and Redemptions. A Buy-Sell Agreement outlines the conditions on which the withdrawing or deceased shareholder’s interest will be purchased. It may include provisions such as the purchase price, payment terms, and the purchase process. A Redemption Agreement outlines the terms of the sale of the shares to the corporation. This typically includes the purchase price, payment terms, and tax considerations. It is important for shareholders to enter into a Cross-Purchase Agreement prior to any changes in ownership of the corporation, as it helps to protect the rights of the remaining shareholders and the corporation.
