This is an agreement between the shareholders of a particular corporation to establish
the rules and guidelines of stock ownership. This agreement defines the rights and
responsibilities of each shareholder and provides a method for determining the value of
shares. In addition, this agreement sets out the procedural rules should a shareholder
elect to terminate their association with the company. This agreement can be used by
the shareholders of a small business to establish a uniform and consistent policy
between the shareholders.
SHAREHOLDERS’ AGREEMENT
This Shareholders’ Agreement (the “Agreement”) entered into this ______ day of
______________, 2____ [Instruction: Insert Date], by and between _____________________
[Instruction: Insert Company Name] (“Company”) and __________________ [Instruction:
Insert Shareholder Name], __________________ [Instruction: Insert Shareholder Name],
__________________ [Instruction: Insert Shareholder Name] (each of whom is sometimes
referred to hereinafter individually as “Shareholder” and collectively as “Shareholders”)
WHEREAS, Company is duly incorporated on _____________ [Instruction: Insert
Date], and pursuant to the laws of the State of __________ [Instruction: Insert State], and
Company’s Articles of Incorporation (the “Articles”) authorized a total of _______________
(_____) [Instruction: Insert number of Shares] shares of ______________ [Instruction:
Insert type of Stock (for example: common stock, without par value)] (each a “Share,” the
totality of which comprise all shares of Company, whether now or hereafter authorized or
existing) and has an authorized capital consisting of _________________ (__) shares;
WHEREAS, at the date set forth above, ________________ (___) [Instruction: Insert
cumulative number of Shares issued] Shares of Company are presently issued and outstanding;
WHEREAS, Company and Shareholders desire to entering into this Agreement, which
sets forth the limitations for the transfer of Shares, the disposition of Shares upon a Shareholder’s
death, and certain other matters;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises and
covenants contained herein, and other good and valuable consideration, the receipt of which is
hereby acknowledged, the Parties hereto agree as follows:
1. RESTRICTIONS
A. No Shareholder of Company shall transfer, sell, assign, pledged, or hypothecate
(“transfer”) any of that Shareholder’s Shares to any other party, whether now owned
or hereafter acquired, except as permitted by this Agreement. A Shareholder is
expressly permitted: to transfer, that Shareholder’s Shares to a grantor trust for the
Shareholder’s own benefit or to a third party provided that the Shareholder obtains
the prior written consent of Company and the other Shareholders.
B. By Company’s execution of this Agreement, Company hereby agrees that it shall not
transfer any Shares on the books of Company, unless such transfer of Shares is
permitted by the terms of this Agreement and shall not issue any Shares of Company
except in accordance with this Agreement.
2. RIGHT OF FIRST REFUSAL
A. Any Shareholder who desires to transfer or any of that Shareholder’s Shares (the
“Transferring Shareholder”) shall give notice of such proposed transfer (the “Notice”)
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to Company and to the other Shareholders and shall set out in the Notice the number
and class of Shares that the Transferring Shareholder desires to transfer (the “Offered
Shares”) and the terms upon which and the price at which the Transferring
Shareholder desires to transfer the Offered Shares (the “Purchase Price”).
B. Upon Notice given, the other Shareholders shall have the right to purchase all, but not
less than all, of the Offered Shares for the Purchase Price. The other Shareholders
shall be entitled to purchase the Offered Shares pro rata based upon the number of
Shares beneficially owned by the Shareholder or in such other proportion as the
Shareholders may agree in writing.
C. Within _____ (___) business days of having been given Notice (the “1st Purchase
Period”), each Shareholder who desires to purchase all of the Offered Shares that that
Shareholder is entitled to purchase shall give notice to the Transferring Shareholder,
Company, and the other Shareholders. If any Shareholder does not give such Notice,
the Offered Shares that that Shareholder had been entitled to purchase (the “Rejected
Shares”) may instead be purchased by Shareholders who did give such Notice, pro
rata based upon the number of Shares beneficially owned by such Shareholders as
between themselves or in such other proportion as such Shareholders may agree in
writing, and, within ____ (____) business days of the expiry of the 1st Purchase
Period (the “2nd Purchase Period”). Each Shareholder who desires to purchase all of
the Rejected Shares that that Shareholder is entitled to purchase in accordance with
the provisions of this Paragraph shall provide additional notice to the Transferring
Shareholder, Company, and the other Shareholders. If any Shareholder entitled to
give additional notice does not do so, the Rejected Shares that the Shareholder had
been entitled to purchase may instead be purchased by the Shareholders who did give
such notice, and so on, until the Shareholders are willing to purchase all of the
Offered Shares or until they are not willing to purchase any more. If the Shareholders
are willing to purchase all, but not less than all, of the Offered Shares, the transaction
of purchase and sale shall be completed in accordance with the terms set out in the
Notice.
D. If the Shareholders do not give Notice that they are willing to purchase all of the
Offered Shares, in accordance with the provisions of Paragraph 2(C) above, the rights
of the Shareholders to purchase the Offered Shares shall forthwith cease and the
Transferring Shareholder may transfer the Offered Shares to any person within ___
(__) months after the expiry of the 1st Purchase Period, the 2nd Purchase Period, or
any other applicable purchase period, as the case may be, as specified in Paragraph
2(C), for a price not less than the Purchase Price and on terms no more favorable to
such person than those set forth in the Notice, provided that the person to whom the
Transferring Shareholder’s Shares are to be transferred agrees prior to such transfer to
be bound by this Agreement and to become a party hereto in place of the Transferring
Shareholder with respect to the Offered Shares. If the Offered Shares are