Sale of Business By Transfer of Capital



Stock of Closely Held Corporation

1. Introduction. Agreement made [date] between [name], residing at [address], and [name], residing at [address] (Sellers), and [name], residing at [address] (Buyer).

2. Sale and Purchase of Stock. Sellers will sell to Buyer [number] shares of the issued and outstanding capital stock of [name] (Corporation) free of all liens and encumbrances, that being all of Corporation's issued and outstanding capital stock, and Buyer will purchase the shares subject to the provisions of this Agreement. It is understood that [number] shares are owned by [name], and [number] shares are owned by [name].

3. Purchase Price. The purchase price is ..... dollars ($.....) per share or a total of ..... dollars ($.....).

4. Payment of the Purchase Price. The entire purchase price shall be paid to Sellers on the closing of the sale by certified check drawn on a local bank.

[Alternative Paragraph]

4. Payment of the Purchase Price in Installments. The purchase price shall be paid as follows: ..... dollars ($.....) on the closing of sale by certified check drawn on a local bank. The balance of the purchase price shall be paid in [number] equal monthly installments, the first of which shall be payable one month from the date of closing, and each succeeding payment shall be payable on the [number] day of each succeeding month. The purchase price shall be evidenced by a series of promissory notes, on for each installment, executed by Buyer and delivered to Sellers at the closing. The notes shall be payable at a local bank, shall bear interest at ..... percent (.....%) per annum, and shall provide that upon default in the payment of any one note in the series, the remaining unpaid notes shall become due and payable at the holders option.

[To be used in conjunction with Alternative Paragraph]

4A. Stock as Security for Promissory Notes. To secure the payment of the promissory notes described in Paragraph 4, Buyer shall, at the closing deposit with each Seller the stock sold by Seller and purchased by Buyer. The stock shall be indorsed in blank for transfer. If buyer defaults in the payment of any notes and Seller declares the remaining notes due and payable, Seller, at his [or her] option, may sell the stock and apply the proceeds first to the expenses of the sale and then to payment of the balance of notes with interest.

Any surplus remaining after such application shall be remitted to Buyer.

5. Seller's Representations and Warranties. To induce Buyer to purchase their stock, Sellers jointly and severally represent and warrant the following:

a. Corporation Duly Organized. Corporation is a business corporation organized in accordance with the laws of [state] and is authorized to engage in the business of [nature of business].

b. Corporation in Good Standing. Corporation is in good standing. All taxes currently due, including income and franchise taxes, have been paid. There are no pending actions or proceedings to limit or impair Corporation's power to engage in business or to dissolve Corporation.

c. Stock Properly Issued. Sellers' shares constitute all the issued and outstanding shares of Corporation's stock. The shares have been properly issued and are fully paid and nonassessable.

d. Shares Free of Liens or Encumbrances. Sellers' shares are free of any liens, encumbrances, or agreements of any kind, including stockholders' agreements or voting trusts.

e. Corporation's Assets. Schedule A, attached to this Agreement [Omitted] and made a part of it, lists and describes each asset owned by Corporation as of the date of this Agreement. Unless otherwise stated, Corporation is the sole owner of each asset. None of the assets is subject to any liens or encumbrances except as otherwise stated in Schedule A.

f. Corporation's Liabilities. Schedule B, attached to this Agreement [omitted] and made a part of it, lists and describes Corporation's debts and liabilities as of the date of this Agreement, including the name and address of each of Corporation's creditors, the amount owed to each creditor, and the last date on which the debt or liability may be paid or discharged.

g. Corporation's Financial Condition. There is attached to this Agreement and made a part of it Corporation's most recent financial statements [omitted] consisting of a balance sheet as of [date] and an income statement for the year ended [date. These financial statements have been examined by [CPAs], whose report is annexed to the statements [omitted]. There will be no changes in Corporation's financial condition as set out in the balance sheet between the date of the balance sheet and the closing of this transaction except for those changes that will normally occur in the regular course of Corporation's business.

h. No Suits Pending or Imminent. There are no actions at law or equity or administrative proceedings pending against Corporation or in which Corporation is a plaintiff, defendant, petitioner, or respondent except [list of suits]. Corporation does not propose to commence an action at law or equity or an administrative proceeding in which it will be a plaintiff or petitioner. There are no actions at law or equity or administrative proceedings pending in which it is anticipated that Corporation will join or be joined as a party.

i. No New Contracts Before Closing. Corporation will not enter into any new contracts or agreements between the date of this Agreement and the closing except in the regular course of business and even then only for the purpose of [list of purposes].

j. No Dividends. The Board of Directors of Corporation have not declared any dividends since the date of the balance sheet attached to this Agreement and more fully described in Paragraph 5(g). There are no dividends unpaid that were declared in an earlier period. From the date of this Agreement to the closing, the Board of Directors of Corporation will declare no dividends.

k. No Salary Increases; No New Employees. From the date of this Agreement to the closing, Corporation will not increase any employee's salary or hire any new employee without first obtaining Buyer's written consent.

l. Going Business. At the time of the closing, Corporation will be a going business. If this representation is breached, Buyer may terminate this Agreement and demand any sums Buyer has paid Sellers on account of the purchase price of Seller's shares. Upon return of those sums, this Agreement shall terminate and have no further effect, and Buyer and Sellers shall have no further rights against each other.

m. Officers and Directors. Sellers are the only officers and directors of Corporation. From the date of this Agreement to the closing, Sellers will not elect any other directors or appoint any other officers except as Buyer may direct in writing.

6. Sellers' Indemnity. Sellers jointly and severally guarantee payment of any obligations, debts, and liabilities of Corporation that exist before the closing and are not included in the balance sheet attached to this Agreement unless they were incurred following the date of the balance sheet in the regular course of business or pursuant to the terms of this Agreement. The obligations, debts, and liabilities described in this Paragraph 6 include any that mature after the closing but are based upon Corporation's activities before the closing. Sellers will indemnify Buyer and hold Buyer harmless by reason of any loss, including attorney fees, that Buyer or Corporation may suffer because of Seller's failure to make any payment required pursuant to this Paragraph 6.

7. Buyer's Representations. Buyer represents and warrants that Buyer has inspected Corporation's premises, inventory, furnishings, fixtures, equipment, and other physical assets and knows their condition. Buyer further represents and warrants that Buyer has examined Corporation's books of account and other business records and is satisfied that they properly reflect Corporation's past and present earnings and financial condition. Buyer represents and warrants that Buyer has not relied upon any representations by Sellers or others as to Corporation's past or present earnings or its prospects of future earnings.

8. Representation to Survive Closing. The representations and warranties contained in Paragraph 5 and 7 shall survive the closing.

9. Risk of Loss or Destruction. If Corporation's business is terminated before the closing by loss or damage caused by fire, wind, or other casualty, Buyer may terminate this Agreement and demand the return of any sums Buyer may have paid to Sellers on account of the purchase price of Seller's shares. Upon return of those sums, this Agreement shall terminate and have no further effect, and Buyer and Sellers shall have no further rights against each other. If the loss or damage is not sufficiently severe to terminate or interrupt Corporation's business, the purchase price of the shares shall be adjusted to represent the actual monetary loss to Corporation.

10. Documents to Be Delivered to Buyer at Closing. At the closing, Sellers shall deliver to Buyer the following:

a. Stock Certificates. Certificates representing [number] shares of Corporation's capital stock, indorsed for transfer in blank, with all necessary transfer tax stamps affixed;

b. Corporate Books and Records. Corporation's books of account and business records, minute book, stock transfer book, blank stock certificates, and seal;

c. Resignations. Sellers' resignations as officers and directors of Corporation; and

d. Agreements. All agreements, contracts, and leases to which Corporation is a party.

11. Sellers' Restrictive Covenants. For a period of [number] years from the date of closing, Sellers will not either jointly or severally, directly or indirectly, either as principals, partners, agents, managers, employees, stockholders, directors, officers, or in any other capacity, engage or be interested in the conduct of a business similar to the one in which Corporation is presently engaged in any of the following states or territories of the United States [list].

[Alternative Paragraph]

11. Employment of Sellers by Corporation. At the closing of this transaction and as condition thereof, Corporation will enter into employment agreements with Sellers. The form and terms of the agreements shall conform to the employment contracts that are attached to this Agreement [omitted] and made a part of it.

12. Arbitration. Any and all disputes between the parties arising under this Agreement shall be determined by arbitration in [city] before the American Arbitration Association in accordance with its rules then obtaining, and judgment may be entered upon the award.

13. Time and Place of Closing. The closing shall take place at [address], Corporation's office, on [date] at [hour] AM [PM] [time zone], or such other time or place as the parties may agree upon in writing.

14. Agreement Binding. This Agreement is binding upon and shall inure to the benefit of the parties' heirs, executors, administrators, representatives, successors, and assigns.

15. Applicable Law. This Agreement shall be constructed in accordance with the laws of [state], the state in which Corporation is incorporated.

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Seller

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Seller

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Buyer