A redemption agreement sometimes called a stock redemption agreement, is a legally binding agreement between shareholders of a company. It allows parties to specify the terms in which they may buy, sell, or transfer shares of a company. These agreements may include partners, shareholders, or LLC members.
A redemption agreement is one of two most common buy and sell agreements, the other being a cross-purchase agreement. Redemption agreements define who can purchase or sell shares of a company. These buy and sell agreements can be created and implemented years before they are necessary and can help facilitate a smooth transition of ownership of a business.
Below is a list of common sections included in Redemption Agreements. These sections are linked to the below sample agreement for you to explore.
This Agreement (the “ Agreement ”) is made as of October 4, 2011, by and among Innovative Acquisitions Corp., a Delaware corporation (the “ Issuer ”), and the stockholders of the Issuer listed on Schedule A attached hereto (each individually, a “ Seller ” and collectively, the “ Sellers ”).
W I T N E S S E T H :
WHEREAS, the Sellers are the collective owners of 3,000,000 shares of the Issuer’s common stock, par value $0.0001 per share (“ Common Stock ”); and
WHEREAS, each Seller desires to sell to the Issuer, and the Issuer desires to re-purchase and redeem from such Seller, the number of shares of Common Stock listed on Schedule A set forth opposite such Seller’s name, which shall result in the re-purchase and redemption by the Issuer of an aggregate of 3,000,000 shares of Common Stock (the “ Shares ”), on and subject to the terms of this Agreement.
WHEREFORE, the parties hereto hereby agree as follows:
1. Sale of the Shares . Subject to the terms and conditions of this Agreement, and in reliance upon the representations, warranties, covenants and agreements contained in this Agreement, each of the Sellers shall sell to the Issuer the number of Shares listed on Schedule A set forth opposite such Seller’s name, and the Issuer shall re-purchase and redeem such Shares from each such Seller, for an aggregate purchase price equal to the sum of forty thousand dollars ($40,000) (the “ Purchase Price ”). Each Seller shall be entitled to that portion of the Purchase Price listed on Schedule A set forth opposite such Seller’s name.
(a) The purchase and sale of the Shares shall take place at a closing (the “ Closing ”), to occur immediately following the effectiveness of the merger transaction (the “ Merger ”) contemplated by that certain Agreement and Plan of Merger, dated September 29, 2011 (the “ Merger Agreement ”; capitalized terms used but not specifically defined herein shall have the meanings ascribed to such terms in the Merger Agreement) among the Issuer, Puma Biotechnology, Inc. (“ Puma ”), and IAC Merger Corporation. The parties hereto shall have no obligation to complete the Closing in the event the Merger is not consummated.
(b) At the Closing:
(i) The Sellers shall deliver to the Issuer certificates representing the Shares, duly endorsed in form for transfer to the Issuer.
(ii) The Issuer shall pay to each Seller that portion of the Purchase Price listed on Schedule A set forth opposite such Seller’s name.
(iii) At, and at any time after, the Closing, the Sellers shall duly execute, acknowledge and deliver all such further assignments, conveyances, instruments and documents,
and shall take such other action consistent with the terms of this Agreement to carry out the transactions contemplated by this Agreement, as may be requested by the Issuer.
3. Representations and Warranties of the Sellers . Each Seller makes the following representations and warranties to the Issuer with respect to such Seller and the Shares to be sold by such Seller hereunder:
(a) Such Seller is a citizen of the United States of America.
(b) Such Seller is an “accredited investor” as such term is defined in Rule 501(a) of Regulation D promulgated under the Securities Act.
(c) Such Seller has the requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby and otherwise to carry out its obligations hereunder.
(d) Such Seller owns the number of Shares listed on Schedule A set forth opposite such Seller’s name free and clear of any and all options, liens, claims, encumbrances, security interests, pledges, preemptive rights, rights of first refusal and adverse interests of any kind. Such Seller agrees that the consideration payable by the Issuer for the re-purchase and redemption of such Seller’s Shares is fair and reasonable and that such Seller is in the best position to evaluate and determine the fair value of such Shares. There are no restrictions on the transfer or redemption of such Shares (other than restrictions under the Securities Act or state securities laws). No person or entity (i) owns any equity interest in the Issuer other than the Sellers, or (ii) has any right to purchase such Seller’s Shares or any portion thereof or interest therein.
(e) Such Seller has received and reviewed the Merger Agreement and understands and consents to the transactions contemplated thereby. Such Seller has been afforded the opportunity during the course of negotiating the transactions contemplated by this Agreement to ask questions of, and to secure such information from, the Issuer and its officers and directors with regard to both the Issuer and Puma as it deems necessary to evaluate the merits of consenting to the Issuer’s consummating such transactions, it being understood that such Seller is a stockholder and director of the Issuer and, as such, is intimately familiar with the Issuer and its business, operations, assets, liabilities, prospects and financial condition in all respects. All such questions, if asked, were answered satisfactorily and all information or documents provided were found to be satisfactory.
(f) There is no private or governmental action, suit, proceeding, claim, arbitration or investigation pending before any agency, court or tribunal, foreign or domestic, or, to such Seller’s knowledge, threatened against any of the Sellers or any of their properties. There is no judgment, decree or order against the Sellers that could prevent, enjoin, alter or delay any of the transactions contemplated by this Agreement.
(g) No bankruptcy, receivership or debtor relief proceedings are pending or, to such Seller’s knowledge, threatened against any of the Sellers.
(h) All representations, covenants and warranties of the Sellers contained in this Agreement shall be true and correct on and as of the Closing Date with the same effect as though the same had been made on and as of such date.
4. Termination by Mutual Agreement . This Agreement may be terminated at any time by mutual consent of the parties hereto, provided that such consent to terminate is in writing and is signed by each of the parties hereto.
5. Release . Each Seller, on its own behalf and, to the extent of its legal authority, on behalf of its successors, assigns, heirs, next-of-kin, representatives, administrators, executors, partners, agents and affiliates, and any other person claiming by, through, or under any of the foregoing (individually, a “ Releasing Party ” and collectively, “ Releasing Parties ”), hereby unconditionally and irrevocably releases, waives and forever discharges, effective as of the Effective Time, the Issuer and Puma, and each of their past and present respective officers, directors, employees, stockholders, predecessors, successors, assigns, partners, subsidiaries and affiliates (individually, a “ Released Party ” and collectively, “ Released Parties ”) from any and all claims, obligations, contracts, agreements, rights, debts, covenants and liabilities (including attorneys’ fees and costs) of any nature whatsoever, whether fixed or contingent, known or unknown, suspected or claimed to exist or unsuspected, regardless of whether knowledge of the unknown or unsuspected claim would have materially affected such Seller’s decision to enter into this Agreement, both at law and in equity, arising directly or indirectly from any act, omission, event, or transaction occurring (or any facts or circumstances existing) on or prior to the Effective Time, but excluding (i) claims for breach by the Issuer of any provision of this Agreement, and (ii) such Seller’s rights under the Indemnity Agreement, including such Seller’s indemnification rights thereunder.