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Stock repurchase agreements among shareholders of closely held corporations are common and the purpose of such contracts is clear. Moreover, such agreements are valid, bind the stockholder and his administrator or executor, and may be specifically enforced. The validity of such agreements will be upheld absent any fraud, overreaching, undue influence, duress, or mistake at the time the deceased entered into the agreement, these conditions rendering the agreement void. Thus "fairness" and "good faith" in a closely held corporation generally means that each stockholder must have an equal opportunity to sell his or her shares to the corporation for an identical price. The effect of the agreement is "blind": regardless of who dies first, his or her administrator is required to sell the shares held to the corporations by set procedure for a set price. These circumstances are "fair": The stipulated price provision wherein no one knows for certain at the time the price is set whether he is to be a buyer or a seller is inherently fair and provides mutuality of risk. Moreover, specific performance of an agreement to convey will not be refused merely because the price is inadequate or excessive.
The corporate bylaws of the close corporations, Concord Auto Auction, Inc. ("Concord") and E. L. Cox Associates, Inc., called for an annual meeting at which a revaluation of share price was to be conducted. The shareholders signed a repurchase agreement providing that upon the death of a shareholder the shares held by him or her would be tendered to the corporations for repurchase. The corporations brought an action for specific performance against the administrator of the decedent shareholder’s estate, alleging that the administrator failed to effect the repurchase of the shares as provided by the agreement. The administrator contended that because the corporations failed to hold the annual meeting, the court should intercede to set the share price. The corporations moved for summary judgment.
Under the circumstances, should the court grant the corporations’ motion for summary judgment, and order the administrator to tender the decedent’s shares for repurchase?
The court granted summary judgment in favor of the corporations and dismissed the administrator's counterclaims. The court found that neither the remaining shareholders nor the corporations had a duty to call the annual meeting and that they could not be held responsible for breaching a duty that did not exist. The court found no evidence of willfulness intent to deceive, or knowing manipulation on the part of the corporations or remaining shareholders. The court found that the share prices had been carefully set, were fair when they were established, and that they were evidenced by an agreement that bound all parties equally to the same terms. The court held that the administrator was obligated to tender the decedent's shares for repurchase.