Legal Question in Business Law in Arizona

Conditions of sale

I owned 15% (1,500,000 shares) of a wireless company that had three other investors. In March the company started doing poorly and two of the partners (CEO & CFO) offered to buy me and the other partner out (with company funds), we agreed in april. According to the shareholder's agreement, unless otherwise agreed, we get the greater of A)$10,000 B)10% C) proceeds (if any). We received $12,000 (10%) down and the rest is due Dec 31st, 2005. Since we signed the note on 04/29/05 the company has gotten progressively worse to the point the they are now severely in the red. I found out 30 min ago that the CFO that owns 34% (now 42%) has just agreed to sell his shares (back to the company) leaving the CEO 100% ownership. He was given $70,000 (30%) down, with the rest not due until Dec 31st, 2007. Is it legal for the company to do this? How can they give him a bigger down payment when the company is doing worse? They do not owe me any payments, but the amount in full plus intrest is due Dec 31st, 2005.

Thank you.


Asked on 8/18/05, 9:15 pm

2 Answers from Attorneys
Gerd Zimmermann zimmermann nielsen & colleagues

Re: Conditions of sale

So long the by-laws or other agreements not object to such transfer, it can be done

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Answered on 8/18/05, 9:26 pm
Donald Scher Donald T. Scher & Associates, P.C.

Re: Conditions of sale

The answer to your question depends upon what is contained in your agreement when you sold your shares and the terms and conditions you provided in that agreement. If you did not impose any limitations in your agreement, then it would appear that the subsequent sale would be OK on whatever terms the parties agree to at that time. You can see now that your agreement should have contemplated the subsequent sale.

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Answered on 8/19/05, 12:52 am


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