THIS AGREEMENT made as of among , of (" ") and , with its principal place of business at
(" "), and , of (the "Corporation").
WHEREAS the Corporation was incorporated under the laws of
;
AND WHEREAS the Shareholders own all of the issued and outstanding Common Shares in the following proportion:
AND WHEREAS the Shareholders have agreed to execute and deliver this Agreement as a Shareholders’ Agreement as they are desirous of entering into certain arrangements regarding the purchase and sale of their Common Shares and to restrict in part the powers of the Directors to manage the business and affairs of the Corporation in the manner hereinafter described. NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the respective covenants and agreements of the parties herein contained, it is agreed by and between the parties as follows:
Article 1 Definitions
1.1 In this Agreement, the following words and phrases shall have the following respective meanings unless the context otherwise provides: (a) (b) (c) (d) “Agreement” means this Agreement and any Schedules hereto; “Common Share” means a common share in the capital of the Corporation; “Director” means any director of the board of directors of the Corporation and “Board of Directors” means the board of directors of the Corporation; “Prime Rate” means a revolving rate of interest commonly known as the prime rate of interest announced from time to time by as a reference rate then in effect for determining interest rates; “Proportionate Shareholdings” when used in connection with any Shareholder, means a fraction the numerator of which is the number of Common Shares held by such Shareholder and the denominator of which is the total number of issued and outstanding Common Shares; “Section” and “Subsection” refer to a section or subsection of this Agreement;
(e)
(f)
Page 2 (g) “Shareholder” means any of , and any person who becomes the holder of one or more Common Shares in accordance with the provisions of this Agreement; “Shareholder’s Loan” means any loan made by a Shareholder to the Corporation in accordance with the provisions of this Agreement;
(h)
Article 2 Purpose and Intent
2.1 The parties shall cause the Corporation to carry on the business of a and to generally carry on all ancillary and related activities which in the mutual opinion of the parties will enhance the Corporation’s income and profit. The parties agree that the Corporation shall operate under the name of “ “.
2.2 2.3
The Shareholders will irrevocably instruct their nominees and representatives at all the meetings of the Shareholders and insofar as permitted by law their nominees or representatives on the Board of Directors always to vote and act in accordance with the terms of this Agreement so as to give this Agreement full force and effect and to carry out its intent.
Article 3 Organization
3.1 The Corporation shall be organized as follows: (a) There shall be two (2) Directors on the Board of Directors, consisting of one (1) nominee of each Shareholder. The first members of the Board of Directors shall be as nominee of and as nominee of . The Corporation shall have three (3) officers, namely, President, Secretary and Treasurer. The parties agree that the following persons will be appointed to hold the following offices of the Corporation: President Secretary Treasurer (c) All cheques and other banking documents, deeds, transfers, contracts, agreements and other documents that are required to be executed by the Corporation from time to time shall be executed on its behalf by any one of the Shareholders.
(b)
Page 3 (d) All share certificates issued or to be issued by the Corporation shall be endorsed with a memorandum as follows: “This certificate is subject to a Shareholders’ Agreement dated , a copy of which is filed with the Secretary of the Corporation, and the shares represented by this certificate cannot be sold, transferred, assigned or otherwise disposed of or mortgaged, pledged, hypothecated, charged or otherwise encumbered except pursuant to the terms of the said Shareholders’ Agreement.” (e) The by-laws of the Corporation shall provide or shall be deemed hereby to be amended to provide amongst other things, as follows: (i) (ii) (iii) the presence of two (2) Directors shall be required to constitute a quorum at any meeting of the Board of Directors; any resolution of the Board of Directors shall require affirmative votes of at least two (2) Directors; the presence of two (2) Shareholders holding Common Shares, having voting rights and representing in person or by proxy one hundred percent (100%) of all issued Common Shares shall be required to constitute a quorum at any meeting of Shareholders; any resolution of the Shareholders shall require the affirmative votes of one hundred percent (100%) of all issued Common Shares entitled to voting rights at the meeting at which such resolution is being passed; each Director shall have the right at any time and from time to time to call a meeting of the board of directors on not less than seven (7) days’ notice; any Shareholder shall have the right at any time or from time to time to call a meeting of the Shareholders on not less than seven (7) days’ notice; the Chairman presiding at meetings of the Board of Directors shall have the right to vote in his capacity as Director in the first instance, but shall have no second or casting vote in case of an equality of votes;
(iv)
(v) (vi) (vii)
(viii) the Chairman presiding at meetings of the Shareholder shall have the right to vote in the first instance in his capacity as a Shareholder and as a proxy if so appointed but shall have no second or casting vote in case of an equality of votes.
Article 4
Page 4
Conduct of Business
4.1 The parties agree that the powers of the directors will be restricted and, except with the written consent of all of the Shareholders: (a) (b) (c) (d) (e) no dividends shall be declared; no management or consulting fees shall be paid; no additional shares in the capital stock of the Corporation shall be issued or allotted; there shall be no material change in the nature of the business of the Corporation nor any action taken which may lead to or result in such material change; the Corporation shall not directly nor indirectly make loans or advances, give guarantees for, invest in, or give security for or guarantee the debts of any other corporation or person; the Corporation shall not sell, lease, exchange or dispose of its undertaking or any part thereof as an entirety or substantially as an entirety; the Corporation shall not hypothecate, mortgage, pledge or otherwise encumber its assets or any of them except as may be required by its bankers in connection with its normal banking activities and arrange lines of credit; the number of Directors shall not be increased nor decreased; if at any time or from time to time additional shares in the capital of the Corporation are to be allotted, issued or sold, then they shall be allotted, issued and sold to the Shareholders pro rata in relation to their then existing Proportionate Shareholdings; and there will be no amendments to any of the Corporation’s by-laws or the Articles of Incorporation.
(f) (g)
(h) (i)
(j)
Article 5 Financing
5.1 The parties agree that they will actively pursue and work towards attaining satisfactory bank credit and financing for the Corporation, it being the intention of the parties that such financing be sought in the highest amount necessary so that the equity investment required by the Shareholders should be kept to a minimum.
Page 5 5.2 The Shareholders shall be jointly and severally liable with respect to any guarantees or other security given by any of the Shareholders, to secure any loans or advances made to the Corporation by any third party. In the event any Shareholder is called upon to honor any such guarantee or other security and so does, then such Shareholder shall have the right to recover any money so paid in excess of the amount which would have been required on the basis of Proportionate Shareholdings, jointly and severally from the Corporation and the Shareholders. Notwithstanding the foregoing, if bank credit and financing cannot be arranged in an amount sufficient for the Corporation to carry on its business in a proper manner, upon unanimous consent of the Board of Directors, all further monies required shall be advanced to the Corporation as a Shareholder’s Loan by the Shareholders, pro rata in relation to their then existing Proportionate Shareholdings. Any Shareholder’s Loans, to the extent to which they have been advanced by the Shareholders in proportion to their respective Proportionate Shareholdings, shall bear no interest unless and until the Shareholders agree to the contrary, in which case such loans shall bear such rate of interest as is from time to time agreed upon. Except as expressly set forth below, none of the Shareholder’s Loans shall be due or payable to or called by any of the parties. Any Shareholder having outstanding a Shareholder’s Loan which bears to all Shareholders’ Loans then outstanding a greater proportion than the respective Proportionate Shareholding of such Shareholder shall be called the “Credit Shareholder” and any Shareholder having outstanding a Shareholder’s Loan which bears to all Shareholders’ Loans then outstanding a lesser proportion that the respective Proportionate Shareholding of such shareholder shall be called the “Debit Shareholder”. If for any reason Shareholders’ Loans outstanding to the Shareholders at any time or from time to time are not exactly in the same proportions as the respective Proportionate Shareholdings of the Shareholders, that portion of the Shareholder Loans outstanding to the Credit Shareholder in excess of its Proportionate Shareholding shall be payable to it out of monies available for distribution by the Corporation, and in any such case any payments made by the Corporation out of any monies available for distribution to the Shareholders shall be firstly applied by the Corporation to bring the Shareholders’ Loans outstanding to the appropriate amount necessary so that the Shareholders’ Loans are exactly in the same proportion as the respective Proportionate Shareholdings of the Shareholders. If at any time or from time to time any Shareholder defaults in advancing forthwith its proportionate share of any monies which may at any time be required by the Corporation, then such Shareholder shall be referred to herein as the “Defaulting Shareholder” and the others shall be referred to herein as the “Non-defaulting Shareholders”. In the event of default as aforesaid and provided such default continues for a period of five (5) days after
5.3
5.4
5.5
5.6
Page 6 written notice thereof to the Defaulting Shareholder by the Non-defaulting Shareholders, the Non-defaulting Shareholders shall have the following rights: 5.7 Any Non-defaulting Shareholder may advance to the Corporation the amount so required to be advanced by the Defaulting Shareholder and such amount shall constitute a debt owing to such Non-defaulting Shareholder by the Defaulting Shareholder and shall be repaid forthwith by the Defaulting Shareholder to the Non-defaulting Shareholder, and until repaid, shall bear interest at the Prime Rate plus three percent (3%) per annum calculated monthly on the amount from time to time owed to the Non-defaulting Shareholder by the Defaulting Shareholder as aforesaid and, until so repaid, such amounts, together with interest thereon as aforesaid, shall, to the extent thereof, be and constitute a first lien and charge on and against the Common Shares of the Defaulting Shareholder, on and against the Shareholder Loans of the Defaulting Shareholder, and on and against all other interest of the Defaulti