VIEWS: 557 PAGES: 9 CATEGORY: Equity Financing POSTED ON: 1/22/2011
This is an agreement between the shareholders of a small corporation that defines the rights and obligations of each shareholder. This particular agreement provides a “Put and Call Option” whereby a shareholder that desires to sell their shares in the company must first offer their shares to the corporation or other shareholders for purchase. If the corporation or the other shareholders do not purchase the shares, the transferring shareholder may have the right to dissolve the corporation. This agreement should be used by the shareholders of a small business that want to provide a “Put and Call Option” in their shareholders agreement.
This is an agreement between the shareholders of a small corporation that defines the rights and obligations of each shareholder. This particular agreement provides a “Put and Call Option” whereby a shareholder that desires to sell their shares in the company must first offer their shares to the corporation or other shareholders for purchase. If the corporation or the other shareholders do not purchase the shares, the transferring shareholder may have the right to dissolve the corporation. This agreement should be used by the shareholders of a small business that want to provide a “Put and Call Option” in their shareholders agreement. SHAREHOLDERS AGREEMENT THIS AGREEMENT made and entered into as of this ________ day of ____________, 201________ [Instruction: insert date]. BETWEEN ____________________________ [Instruction: insert company name] (the “Company”), a company organized and existing under the laws of the state of ___________________, [Instruction: insert state name] with its head office located at ___________________________________________, [Instruction: insert address] AND _______________________ [Instruction: insert shareholder name], residing at ______________________________________________________________________, [Instruction: insert address] AND ________________________ [Instruction: insert shareholder name], residing at ______________________________________________________________________, [Instruction: insert address] AND ________________________ [Instruction: insert shareholder name], residing at ______________________________________________________________________, [Instruction: insert address] (Collectively referred to as “Shareholders”) [Instruction: Delete or cross out any unnecessary name placeholders, above. Add additional lines, as needed, if there are more than 3 shareholders.] RECITALS WHEREAS, all of the issued shares and outstanding stock of the Company are owned by the Shareholders hereunder in the following percentages: Name Number of Shares _______________________ [Instruction: ________ [Instruction: insert insert shareholder name] number of shares] ________________________ [Instruction: ________ [Instruction: insert insert shareholder name] number of shares] © Copyright 2011 Docstoc Inc. 2 ________________________ [Instruction: ________ [Instruction: insert insert shareholder name] number of shares] [Instruction: Provide the name of each shareholder, as well as the number of shares owned by each person, in the spaces provided, above. Delete unnecessary boxes. Add additional boxes, as needed, if there are more than 3 shareholders.] WHEREAS, it is in the best interest of the Company and in order to insure harmonious and successful management and control of the Company, and to make provision for the manner and method by which a Shareholder may dispose of his shares. NOW, THEREFORE, in consideration of the mutual promises of the parties hereto and intending to be legally bound, the parties hereby agree as follows: 1. Directors For the term of this Agreement, the Shareholders shall act as the Directors of the Company. The Directors shall have the authority to take any actions that they deem to be appropriate and necessary for the smooth and efficient management of the Company. 2. Officers The following individuals shall serve as Officers of the Company: President _________________________ [Instruction: insert name] Treasurer _________________________ [Instruction: insert name] Vice President __________________ [Instruction: insert name] Secretary ______________________ [Instruction: insert name] 3. Unanimous Consent The Company shall not, without vote by a special majority of at least eighty percent (80%) of the issued and outstanding shares of the Company, do any of the following acts set forth below: (a) Any amendment or additions to the Articles of Organization and/or to the Bylaws of the Company or reconstitution or reclassification of the board of directors; (b) Any merge or consolidation with or into any other company, or reconstruction or amalgamation of the business of the Company, nor any entrance into any partnership or profit sharing agreement with any other person or corporation; (c) Any sale, lease, exchange, transfer, or disposition of all or substantially all of the assets, business or property of the Company © Copyright 2011 Docstoc Inc. 3 (d) Any borrowing of money, other than in the ordinary course of Business, from any third party or entity or any creation of any encumbrance (other than a lien arising by operation of law) over the whole or any part of its undertaking, property or assets; 4. Death Or Disability of a Management Shareholder Upon any permanent disability or death of a managing shareholder, or upon the ending of a major shareholder’s employment, such Shareholder or his heirs, executors, guardian or personal representative within ______________ [Instruction: insert number of days] days after such event shall offer to sell all of the shares owned by such Shareholder. The offer must be first made to the Company in writing and Company shall have _____________ [Instruction: insert number of days] days after such offer has been received by the Company. If the Company fails to purchase all Shares offered, the offer will then be made to other Shareholders and such offer shall exist for a period of ______ [Instruction: insert number of days] days after the offer has been received by the other Shareholders. 5. Lifetime Sale of Shares A Shareholder shall have no rights to sell, transfer, pledge, hypothecate or assign or in any way dispose of all or any part of the shares owned by him except by making sale to the Company or the other Shareholder in the following manner: (a) In the event if a Shareholder desires to dispose of his/her stocks, he/she shall first offer his/her shares to the Company and thereafter to the other Shareholder at such price and on such terms and conditions as Shareholder and the Board of Directors may mutually agree. The Shareholder shall first give written notice to the Company and the other Shareholders of his/her intention to dispose of his/her stocks, mentioning the number of Shares he/she desires to dispose of, the proposed purchase price and also attach a copy of the offer received by the Shareholder. (b) The Company shall have exclusive right and the first option to purchase all of the Shares which the offering shareholder proposes to sell. The Company shall exercise its right to purchase the Shares by giving a notice to the offering shareholder within _____________ [Instruction: insert number of days] days after receipt of the notice from offering shareholder. The notice should state that the Company elects to purchase the Shares on a specific date and time for closing. (c) If the Company fails to purchase all of the stock offered for sale or fails to accept the offer within ________________ [Instruction: insert number of days] days from the receipt of the offer for sale, then the remaining Shareholders shall have the option to purchase all or the remaining shares. Any remaining Shareholders, if they desire to purchase the stock offered, shall indicate their acceptance to the offering shareholder, within __________________ [Instruction: insert number of days] days after the receipt of the original offer. (d) In the event if both the Company and the other Shareholders elect not to purchase all of the Shares which the offering Shareholder proposes to sell, the offering Shareholder may © Copyright 2011 Docstoc Inc. 4 accept the offer of any third party buyer and transfer all Shares to such a third party upon the completion of such a sales transaction. 6. Right of First Refusal (a) The Company shall not issue, sell, transfer or exchange or agree to sell, transfer or exchange: (i) any shares of the common stock of the Company or any equity of the Company that is convertible into common stock; or (ii) any debt security of the Company that can be converted into common stock; or (iii) any option, warrant or other right to subscribe for, purchase, or otherwise acquire any security interest or any such debt security of the Company, Unless, in all three of the above case, the Company has first offered to sell to the Shareholders, in proportion to their ownership of shares in the Company. Such shares and equity shall be offered at a price, and upon such terms, as have been specified by the Company in writing to the Shareholders. Such an offer shall remain open for a period of ______________ [Instruction: insert number of days] days from the date it is offered by the Company to the Shareholders. (b) The Shareholders may submit a notice of acceptance specifying their intention to accept the offer in writing prior to the expiry of the period specified in the offer by the Company. In the event that the Shareholders fail to give their notice of acceptance within the specified time period, the Company shall sell the shares to which no notice of acceptance has been given to any person or persons and upon such terms and conditions that are no more favorable to such person or person and less favorable to the interests of Company. 7. Put & Call Option Any Shareholder shall, at any time, have the right to offer for sale of his shares in the Company to the Company and then to the other Shareholders in proportion to the shares held by them; and if all such shares are not purchased either by the Company or by the other shareholders within _________________ [Instruction: insert number of days] days of the offer, then such Shareholder shall, for a period of _________________ [Instruction: insert number of days] days after the termination of all offers, have the right to require the dissolution of the Company; provided, however, that if a Shareholder exercises his right to make such a demand and does not thereafter elect to require the dissolution of the Company, then neither such Shareholder nor any other owner of those unpurchased shares shall thereafter have the right to make such a demand or cause such a dissolution at any time within _______________ [Instruction: insert number of years] years after the expiration of the thirty-day period within which the right to require dissolution could have been exercised. 8. Action in Violation of This Agreement © Copyright 2011 Docstoc Inc. 5 In the event the shares of any Shareholder are sold, transferred or disposed of in any manner contrary to the provisions of this Agreement, or if any shares of the Company are taken in execution or sold in any voluntary or involuntary legal proceeding, execution sale, bankruptcy, insolvency or in any other manner, the Company and the Shareholder shall, in addition to any other rights and remedies available hereunder, be entitled to purchase such shares from the transferee thereof, under the same terms and conditions as set forth in this Agreement as if the transferee had offered to sell such shares, however in no event shall the purchase price exceed the amount paid for the said shares by the transferee if such shares were acquired by the transferee for consideration. 9. Termination This Agreement shall come into effect from the date set forth above and shall remain in full force and effect for as long as the Shareholders continue to be the shareholders of the Company, or until the adjudication of the Company as a bankrupt or until the dissolution of the Company. 10. Confidentiality The parties hereto agree that all information, data and material relating to the financial, technical, marketing or other matters disclosed by a party to another party (hereinafter, "Confidential Information") pursuant to this Agreement is confidential. Such information, data or other material shall not be used for any other purpose except for the purpose for which it was disclosed except with prior written consent of the disclosing party. Notwithstanding anything to the contrary, this clause shall not apply to information:- (a) That is in the public domain or becomes public knowledge without the default of the receiving Party; or (b) Was already known by the receiving Party prior to the date of its receipt from the disclosing Party; or (c) Is obtained by the receiving Party from a bona fide third party having free right of disposal of such information. 11. Waiver No waiver or modification of any of the provisions of this Agreement or any of the rights or remedies of the parties hereto shall be valid unless such change is in writing, signed by the party to be charged therewith. No waiver of any of the provisions of this Agreement shall be deemed a waiver of any other provision. 12. Amendment No modification, variation or amendment of this agreement shall be of any force unless it is in writing and has been signed by all the Parties. 13. Entire Agreement © Copyright 2011 Docstoc Inc. 6 This Agreement shall constitute the entire agreement between the parties in relation to its subject matter and replaces any and all prior agreements, undertakings, arrangements, understandings or statements of any nature made by the parties or any of them whether oral or written with respect to the subject matter. Each of the parties acknowledges that it is not relying on any statements, warranties or representations given or made by any of them in relation to the subject matter hereof, save those expressly set out in this Agreement, and that it shall have no rights or remedies with respect to such subject matter otherwise than under this Agreement. 14. No Assignment / No Partnership No Party shall assign or agree to assign this agreement in whole or in part without the prior written consent of all the other Parties. No Party shall have the right or authority to bind any other Party or to act as agent of any other Party. 15. Governing Law This agreement shall be governed by and construed in accordance with the laws of the state of ______________. [Instruction: insert state name] 16. Arbitration All disputes under this Agreement shall be settled by arbitration in the county of _________________ [Instruction: insert county name], before a single arbitrator, pursuant to the commercial law rules of the American Arbitration Association. Any award rendered by the arbitrator shall be conclusive and binding upon the parties hereto, and all parties agree to waive any right to appeal any arbitration decision. 17. Force Majeure No party shall be liable to any other for failure to perform any obligations hereunder to the extent and for such period as such failure is due to reasons outside that party's reasonable control including fire, flood or other natural catastrophe, war, riot or civil disturbance or governmental action, order or decree. The party so affected shall continue to take all actions reasonably within its power to comply as far as possible with its obligations. The affected party shall promptly notify the other party after the occurrence of the relevant event and shall use every reasonable effort to minimise the effects of such event. 18. Notices Any notice, request, consent or other communication to be given by a party under this agreement shall be in the English language in a writing addressed to the address mentioned in the introductory paragraph of this Agreement or to such other address for a party as may be notified in writing by that party to the other party. All important notices should be dispatched by such means where receipt is evidenced. 19. Counterparts © Copyright 2011 Docstoc Inc. 7 This agreement shall be executed in any number of counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. 20. Waiver No waiver by any Party at any time of any breach of any of the terms and conditions of this agreement shall be incorporated as a waiver of any subsequent breach, whether of the same or any other terms and conditions of this Agreement. 21. Severability If any provision of this Agreement shall be determined by the arbitrators or any Court having jurisdiction, to be invalid, illegal or unenforceable, the remainder of this Agreement shall not be affected thereby, but shall continue in full force and effect as though such invalid, illegal or unenforceable provision or provisions were not originally a part hereof. IN WITNESS WHEREOF the authorised representatives of the Parties have hereunto duly executed and delivered this agreement the day and year first above written. SHAREHOLDER # 1 (name and signature) _____________________________________ SHAREHOLDER # 2 _____________________________________ SHAREHOLDER # 3 _____________________________________ [Instruction: insert or redact signature lines as necessary] © Copyright 2011 Docstoc Inc. 8
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