A Tennessee Buy Sell Agreement Between Shareholders and a Corporation is a legally binding contract entered into between the owners (shareholders) of a corporation to govern the purchase and sale of their shares in certain events. The agreement outlines the terms and conditions that must be followed when a shareholder wants to sell their shares or when the corporation wants to repurchase them. The primary purpose of a Buy Sell Agreement is to establish a mechanism that ensures the smooth transition of ownership interests in the corporation, especially in cases of certain triggering events such as the death, disability, retirement, bankruptcy, or divorce of a shareholder. It helps maintain stability within the corporation and minimizes conflicts among shareholders by providing a framework for buying out a shareholder's interest in a fair and efficient manner. The key terms and clauses included in the Tennessee Buy Sell Agreement Between Shareholders and a Corporation may include: 1. Triggering Events: This section identifies the events that would activate the buyout provisions, such as death, disability, retirement, bankruptcy, divorce, or voluntary resignation of a shareholder. 2. Purchase or Sale Price: The agreement will specify the method for determining the purchase or sale price of the shares, such as fair market value, fixed price, book value, or through appraisal. 3. Right of First Refusal: This clause grants existing shareholders the first opportunity to purchase the shares being sold by a departing shareholder. If the existing shareholders decline, then the shares can be sold to an outside party. 4. Mandatory or Optional Buyout: The agreement may specify whether the sale of shares is mandatory or optional in case of a triggering event, allowing the shareholders or the corporation the flexibility to decide. 5. Restrictions on Transfer: The agreement may restrict shareholders from transferring their shares to third parties without the approval of existing shareholders or the corporation. 6. Redemption or Cross-Purchase: A redemption agreement allows the corporation to repurchase the shares, while a cross-purchase agreement allows the remaining shareholders to buy the shares directly. 7. Funding Methods: The agreement may establish funding mechanisms for the buyout, such as life insurance policies, sinking funds, installment payments, or borrowing. 8. Dispute Resolution: It is common to include provisions for resolving conflicts or disputes that may arise between the shareholders or the corporation, such as through mediation or arbitration. Different variations of Buy Sell Agreements can exist, tailored to the specific needs and preferences of the shareholders and the corporation. Some common types of Buy Sell Agreements include Stock Purchase Agreements, Entity Purchase Agreements, and Hybrid Agreements. These types differ in terms of who purchases the shares and how the shares are valued. In conclusion, a Tennessee Buy Sell Agreement Between Shareholders and a Corporation is a vital legal document that governs the sale and purchase of shares in a corporation during certain triggering events. It ensures a smooth transition of ownership interests and helps maintain stability within the corporation while protecting the rights and interests of the shareholders.