- 99 -
fails to satisfy the second prong of the Lauder II test because
it was not equally binding during life and at death.
C. Were Agreements Entered Into for Bona Fide Business
Reasons?
The buy-sell agreements in these cases were adopted and
maintained to ensure continued family ownership and control of
the True Companies. Dave True’s experiences of owning and
operating businesses with outsiders (and then having to buy them
out) motivated him to use buy-sell provisions (even when Jean
True was his only co-owner) to restrict a related owner’s ability
to sell outside the family. As previously stated, courts
consistently have recognized the goal of maintaining exclusive
family control over a business to be a bona fide business
purpose. See supra p. 71.
By maintaining family control and ownership, Dave True was
able to continue his policy of channeling profits from the True
companies into True Oil to fund the costs of searching for
additional reserves through exploratory drilling. In addition,
the buy-sell agreements were used to secure active participation
from owners of the True family businesses, because Dave True
feared that passive owners would not share his long-term vision
for the success and perpetuation of the True companies. Under
the buy-sell agreements, an owner who with his or her spouse
ceased to devote all or a substantial part of his or her time to
the business would be required to sell his or her interest in the
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