P—Trusteed Cross Purchase Agreement

The trusteed cross purchase agreement is one means of providing for the complete disposition of a business interest. Under this arrangement the owners use a third party to carry out their cross purchase agreement. Although sometimes referred to as a “trustee,” this individual is not acting as a trustee in a formal trust sense. Rather, the trusteed cross purchase agreement more closely resembles an escrow arrangement, under which an escrow agent acts as agent for the owners in carrying out their mutual obligations to each other.

DURING LIFETIME.To illustrate how this works, assume that we have a corporation owned by four stockholders, A, B, C, and D. They enter into an agreement providing for the purchase and sale of their respective interests. Typically, this agreement isbindingand obligates all stockholders, or their representatives, to either buy or sell upon their death, disability, or retirement.