Shareholder Agreement Template

SHAREHOLDER AGREEMENT

This Shareholder Agreement (the "Agreement") is made and entered into as of by and between Company Name: , a corporation organized under the laws of , with its principal place of business at , and Shareholder Name: , with address at .

RECITALS

WHEREAS, the Company has authorized share capital consisting of such classes and number of shares as set forth in its articles of incorporation and the Shareholder holds the number and class of shares stated below;

WHEREAS, the parties desire to set forth their respective rights, obligations and restrictions with respect to the ownership and transfer of shares in the Company, to provide for governance of the Company and to establish procedures for resolving disputes;

WHEREAS, the parties acknowledge that it is in their mutual interest to promote the success of the Company and to provide stability in the ownership and management of the Company;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties agree as follows:

1. DEFINITIONS

For the purposes of this Agreement the following terms shall have the meanings set forth below:

"Affiliate" means any person or entity controlling, controlled by or under common control with a party, where "control" means the power to direct management or policies, whether by ownership of voting securities, by contract or otherwise.

"Shares" means the shares of capital stock of the Company held by the Shareholder as specified in Section 2 and any other shares subsequently issued to the Shareholder subject to the terms of this Agreement.

2. SHARE CAPITAL AND OWNERSHIP

The Shareholder represents that as of the Effective Date the Shareholder is the registered and beneficial owner of ( ) of the issued and outstanding shares of the class .

3. REPRESENTATIONS AND WARRANTIES

Each party represents and warrants to the other that: (a) it has full corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder; (b) this Agreement constitutes a legal, valid and binding obligation enforceable against such party in accordance with its terms; and (c) the execution and performance of this Agreement do not and will not violate any agreement, law or order applicable to such party.

4. TRANSFER RESTRICTIONS

4.1 Lock-up and Transfer Approval. Except as otherwise provided in this Agreement, no Shareholder may sell, assign, pledge, encumber or otherwise transfer any Shares unless (i) the transferee executes and delivers to the Company and the other Shareholders a written agreement to be bound by the terms of this Agreement, and (ii) such transfer is approved by the Board of Directors if required by the Company's governing documents.

4.2 Right of First Refusal. Before any Shareholder may effect a transfer of Shares to a third party (other than permitted transfers set out below), the transferring Shareholder shall first offer such Shares pro rata to the non-transferring Shareholders and to the Company upon the same terms and conditions as those offered by the proposed transferee. The offer shall remain open for days.

4.3 Permitted Transfers. Transfers to an immediate family member, to an inter vivos trust for the benefit of the transferring Shareholder or for estate planning purposes shall be permitted provided that any such transferee agrees in writing to be bound by this Agreement.

5. TAG-ALONG AND DRAG-ALONG RIGHTS

5.1 Tag-Along. If one or more Shareholders (the "Selling Shareholders") propose to sell Shares to a third party such that the aggregate sale would result in the purchaser acquiring more than of the voting power of the Company, each non-selling Shareholder shall have the right to sell a pro rata portion of its Shares to the purchaser on the same terms and conditions.

5.2 Drag-Along. If Shareholders holding at least of the voting power approve a sale of the Company, such Shareholders may require the remaining Shareholders to sell their Shares on the same terms and conditions.

6. CORPORATE GOVERNANCE

6.1 Board Composition. The Board of Directors shall initially consist of directors. The Shareholder shall be entitled to nominate director(s) while the Shareholder holds at least of the issued shares.

6.2 Reserved Matters. The Company shall not take any of the following actions without the affirmative vote or written consent of the Board or the requisite Shareholder approval as indicated: amendment of organizational documents, incurrence of debt above approved limits, sale of all or substantially all assets, or issuance of new capital that would dilute existing Shareholders materially.

7. DIVIDENDS AND DISTRIBUTIONS

Dividends shall be declared by the Board in accordance with applicable law and the Company's governing documents. Subject to Board discretion and solvency requirements, the Company shall distribute dividends pro rata in proportion to shareholding unless otherwise unanimously agreed by the Shareholders.

8. INFORMATION, INSPECTION AND ACCOUNTS

The Company shall maintain proper books and records and shall provide the Shareholder with quarterly financial statements and annual audited financial statements prepared in accordance with generally accepted accounting principles. The Shareholder shall have the right to inspect the Company's books upon reasonable prior written notice and during normal business hours.

9. CONFIDENTIALITY

Each party shall keep confidential all non-public information relating to the business, affairs and financial condition of the other party and the Company and shall not disclose such information except to its Affiliates, professional advisors or as required by law. This obligation shall survive termination of this Agreement for a period of years.

10. NON-COMPETE AND NON-SOLICITATION

For a period of years following cessation of share ownership, the Shareholder shall not engage in any business that competes materially with the Company within the territory of . The parties acknowledge that the restrictions are reasonable in scope and duration for the protection of legitimate business interests.

11. INDEMNIFICATION

The Company shall indemnify and hold harmless the Shareholder to the fullest extent permitted by law against any losses, claims, damages or liabilities arising from acts or omissions undertaken in good faith on behalf of the Company, subject to applicable standards of conduct and limitations set forth in the governing documents.

12. TERM AND TERMINATION

This Agreement shall continue in full force and effect until terminated by mutual written agreement of the parties or upon liquidation or winding up of the Company. Termination shall not relieve any party of obligations accrued prior to termination or obligations that by their nature are intended to survive.

13. NOTICES

Company Notice Address

Shareholder Notice Address

All notices required or permitted under this Agreement shall be in writing and shall be deemed given when delivered personally, sent by nationally recognized overnight courier, or three business days after being mailed by certified mail, return receipt requested, to the addresses specified above or to such other address as a party may designate by written notice to the other parties.

14. AMENDMENTS; WAIVER

No amendment, modification or waiver of any provision of this Agreement shall be effective unless made in writing and signed by the Company and Shareholder holding at least the same percentage interest as required for the action under this Agreement. No failure or delay in exercising any right shall operate as a waiver.

15. DISPUTE RESOLUTION

Any dispute arising out of or in connection with this Agreement shall be resolved first by good faith negotiation between the parties. If unresolved within sixty (60) days, the dispute shall be submitted to binding arbitration in accordance with the arbitration rules agreed by the parties, and judgment upon the award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction.

16. GOVERNING LAW; ENTIRE AGREEMENT; SEVERABILITY; COUNTERPARTS

16.1 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of , without giving effect to principles of conflicts of law that would result in the application of the law of any other jurisdiction.

16.2 Entire Agreement. This Agreement, together with the Company's articles of incorporation, bylaws and any shareholder schedules attached hereto, constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral or written.

16.3 Severability. If any provision of this Agreement is held to be invalid, illegal or unenforceable, the remaining provisions shall remain in full force and effect and shall be construed to give effect to the parties' intent to the maximum extent permitted by law.

16.4 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

SIGNATURES

Sign Now