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have been sufficient to render the agreements non-binding for
estate tax purposes.
However, we note that the White Stallion buy-sell agreement
allowed a different pricing formula for certain types of lifetime
transfers, and thereby did not equally bind transferors during
life and after death. Specifically, under the “Buy and Sell
Agreement” provision, if a stockholder were to die, become
legally disabled, or desire to sell all or part of his stock, the
remaining members of his group would be obligated to purchase the
stock on a pro rata basis for a price equal to book value at the
end of the preceding fiscal year, less dividends paid within 2-
1/2 months of such fiscal yearend. The transferring stockholder,
his heirs, trustees, etc., reciprocally would be obligated to
sell to those group members. Alternatively, under the “First
Right of Refusal” provision, if all the shareholders of one group
(selling group) wanted to transfer all their interests by
lifetime sale to a third party who was unaffiliated with the
other shareholder group (nonselling group), they could do so at
any price. But, the selling group would be required first to
offer the nonselling group the opportunity to purchase the stock
on the same terms and conditions as any bona fide third party
offer received by the selling group. Thus, a lifetime sale of
all the selling group’s stock could generate a higher price than
would a transfer at death under the book value formula price.
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