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Outline

  •     Share purchase agreements 
    • close corporation liquidity 
    • drafting issues 
      • who buys?  corporation / shareholders 
      • mandatory / permissive? 
      • how funded?  escrow / installments / insurance 
      • price?  periodic agreement / appraisal 
      • enforceability:  interference with management
  • Extra-contract opportunism - withdrawal/termination 
    • strict contract interpretation:  
      • no fiduciary duties, unless specified
    • liberal contract interpretation:  
      • imply fiduciary duties, unless avoided explicitly
    • good faith duties in employment at will

Daily Thoughts

Farmer Joe decided his injuries from the accident were serious enough to sue the trucking company that caused the accident. In court the trucking company's fancy lawyer questioned farmer Joe.

"Didn't you say at the scene of the accident, 'I'm fine,"' asked the lawyer. 

Farmer Joe responded, "Well, I'll tell you what happened. I hitched my horse Bessie to the wagon and we headed down the highway ..."

"I didn't ask for the details," the lawyer interrupted, "just answer the question. Did you not say at the scene of the accident, 'I'm fine!'."

Farmer Joe said, "Well, I had just turned Bessie onto Route 49 when ..."

The lawyer interrupted again and said, "Judge, I am trying to establish that, at the scene of the accident, this man told the officer on the scene that he was fine. Now he is trying to sue my client, and we believe he is a fraud. Please tell him to simply answer the question."

By this time the judge was fairly interested and said to the lawyer, "I'd like to hear what he has to say."

Joe proceeded, "Well, as I was saying, I had just turned Bessie onto the highway when this big semi-truck ran the stop sign and smacked my wagon right in the side.  I was thrown into one ditch and Bessie into the other. I was hurting real bad and didn't want to move. But I could hear ol' Bessie moaning and groaning. I knew she was in terrible shape just by her groans."

Farmer Joe continued, "Shortly after all this, an officer came on the scene. He could hear Bessie moaning and groaning so he went over to her. After he looked at her, he took out his gun and shot her between the eyes. Then the officer came across the road and looked at me. He asked, "How are you feeling?"

Problems

Last year Sheila joined the prestigious investment banking firm First Lynch Securities, Inc. under an at-will employment arrangement.  To entice her to join, management offered Sheila 1000 shares of FLS common stock.  She noticed that FLS stock was not publicly traded and asked, "What about liquidity?"  Not to worry, she was told.  “The stock comes with a spangling shareholders' agreement, which requires the corporation to buy your stock at book value when you leave for whatever reason.”  This pleased Sheila after she inspected the company’s books and saw that book value stood at $50 per share.  But soon Sheila had a falling out with management.  Anticipating her imminent departure, management revalued the company's assets and liabilities to decrease book value by 50% to $25 per share.  This readjustment was consistent with established accounting principles; the earlier book value may have been overstated.  Then FLS management terminates Sheila’s employment with a note, “So long, sucker.”

Party A (Sheila) Argue that she is entitled to at least $50 per share.

Party B (FLS) Argue that Sheila is entitled to no more than $25 per share.

Readings