Shareholders agreement 090708

MEMORANDUM OF AGREEMENT BETWEEN SHAREHOLDERS OF _____________ (PROPRIETARY) LIMITED _______________________________________________________________ 1. PARTIES The parties to this agreement are: 1.1 : of the first part; 1.2 * : of the second part; 1.3 * : of the third part; 1.4 * : of the fourth part; and 1.5 * : of the fifth part; 2. INTERPRETATION In this agreement: 2.1 Clause headings are for convenience and shall not be used in its interpretation. 2.2 Unless the context clearly indicates a contrary intention, an expression which denotes any gender shall include the other genders, a natural person shall include an artificial person and vice www.docstoc.com/profile/socialnetworx Page 1 of 14 Page 2 of 14 versa, the singular shall include the plural and vice versa and the following expressions shall bear the meanings assigned to them below and cognate expressions shall bear corresponding meanings: ULYATE shall mean ; * shall mean *; * shall mean *; * shall mean *; the COMPANY shall mean ****** [PROPRIETARY] LIMITED; SHAREHOLDERS shall mean *; DIRECTORS shall mean *; SIGNATURE DATE signature to this agreement; shall mean the date on which the last signatory appends his COMPANY'S AUDITORS time of the COMPANY; shall mean the auditors for the time being and from time to INDEPENDENT AUDITORS shall mean a firm of chartered accountants in * appointed by agreement between the directors, or failing agreement, nominated by the President for the time being of the National Council of Chartered Accountants of South Africa; VALUE OF A SHAREHOLDER'S EQUITY on a date, shall mean the value of the shares and of the loan account of that shareholder as at such date, as determined by agreement between the parties from time to time or as determined by the COMPANY'S auditors in accordance with the provisions of Clause **** hereunder; INTEREST unless otherwise agreed between the parties, shall be calculated on the balance of monies outstanding from time to time at a rate equivalent to the Page 3 of 14 commercial lending rate applicable to prime customers of the COMPANY'S banker at the relevant time, and a certificate or letter under the hand of the manager of any branch of the COMPANY'S banker shall be prima facie evidence of the rate of interest charged by such bank to its said customers at the relevant date; BALANCE SHEET DATE in relation to the COMPANY, means the last day of its financial year (which at the present is the last day of * in each and every year); RETIREMENT AGE for the purpose of this agreement, shall be deemed to be upon the attainment of the age of * (*) years; ACT shall mean the Companies Act, 1973, (as amended) and all words and expressions used or defined in the Act shall have the same meaning when used in this agreement, unless inconsistent with the context; the PARTIES shall mean * collectively. 3. PREAMBLE 3.1 The PARTIES have secured the registration of a COMPANY under the name and style of _______ (PROPRIETARY) LIMITED 3.2 The PARTIES have agreed amongst themselves to subscribe for the issued shares in the capital of the COMPANY in the proportions and subject to the terms and conditions herein contained. 3.3 The PARTIES have reached agreement in respect of and desire to record in writing their respective rights and obligations inter se in relation to each other and to the COMPANY. 3.4 It is expedient that the terms and conditions relating to the aforesaid be reduced to writing. Page 4 of 14 4. SHARES 4.1 The PARTIES undertake to ensure that the COMPANY allot and issue the following shares to the PARTIES who undertake to subscribe for the said shares in the following proportions: * - * ordinary shares of the nominal value of R * each representing * % of the issued share capital of the COMPANY; * - * ordinary shares of the nominal value of R * each representing * % of the issued share capital of the COMPANY; * - * ordinary shares of the nominal value of R * each representing * % of the issued share capital of the COMPANY; * - * ordinary shares of the nominal value of R * each representing * % of the issued share capital of the COMPANY; 4.2 The PARTIES undertake to subscribe and pay fully for the aforesaid shares and shall effect payment in respect thereof to the COMPANY against issue to them of the said shares. 4.3 The authorised share capital of the COMPANY shall be R * (* Rand) divided into * ordinary shares of the nominal value of R * each and the issued share capital shall be R * (* Rand) each. 4.4 No further shares of whatsoever class shall be issued without the unanimous consent of all shareholders of the COMPANY. 5. EFFECTIVE DATE The EFFECTIVE DATE of this agreement will be *. 6. BOARD OF DIRECTORS Page 5 of 14 6.1 The board of directors of the COMPANY shall be comprised of * and * and such other persons as the shareholders may appoint from time to time. 6.2 The directors shall endeavour to achieve unanimity with regard to their decisions from time to time but, in the absence of agreement, they shall refer to and have regard to the directions of the shareholders who shall, in those instances, vote in a shareholders' voting poll. 6.3 Notwithstanding anything to the contrary herein contained, the following matters will require the prior written consent of * and *, namely: 6.3.1 Any increase or decrease in the share capital of the COMPANY; 6.3.2 Any alteration to the rate of interest to be charged or debited to any shareholders' loan accounts. 6.3.3 The disposal of all or any part of the COMPANY'S business. 6.3.4 Executive employment agreements. 6.3.5 The authorisation of mortgages or pledges. 6.3.6 The purchase or sale of land or property. 6.3.7 The purchase of fixed assets. 6.3.8 The acquisition of any other business. 6.3.9 The investment of surplus funds. 6.3.10 The giving of guarantees or suretyships. 6.3.11 The payment of director's fees 6.3.12 The entering into of agreements which bind the COMPANY on a long term basis. Page 6 of 14 6.3.13 Binding the COMPANY for the credit of the individual shareholders. 6.3.14 Signing of any leases whether for premises or equipment. 6.3.15 Any amendments to the rates of interest charged on loan accounts. 6.3.16 The purchase of movables exceeding the sum of R * (* Rand). 7. LOAN ACCOUNTS 7.1 * undertakes and agrees forthwith upon signature hereof to lend and advance to the COMPANY the sum of R * (* Rand). 7.2 The shareholders shall provide the COMPANY'S reasonable requirements of loan capital in the proportions in which they hold shares in the capital of the COMPANY to enable the COMPANY to commence and proceed with its contemplated activities. 7.3 The shareholders shall bind themselves as sureties for and co-principal debtors in solidum with the COMPANY, as and when reasonably required to do so, in respect of the COMPANY'S present or future financial obligations; provided that, in the final result and by adjustment between themselves, their obligations shall be in proportion to their respective shareholdings in the capital of the COMPANY. 7.4 The loan accounts of the shareholders in and against the COMPANY shall attract interest as hereinbefore defined and shall be repaid from time to time by agreement between the shareholders and the COMPANY as and when the COMPANY has sufficient funds available for this purpose and with due regard to its commitments and liquidity requirements. 8. SALE OF SHARES AND LOAN ACCOUNT IN THE EVENT OF DEATH In the event of: The death of any of the shareholders, or; Page 7 of 14 The permanent incapacity of a director (and for the purposes hereof permanent incapacity shall mean a director becoming ill or incapacitated for a total period of ONE HUNDRED AND TWENTY (120) days out of any consecutive period of THREE HUNDRED AND SIXTY FIVE (365) days; The other PARTIES shall be obliged to purchase the shares and loan account (the EQUITY) of the deceased or permanently incapacitated party, as the case may be, who shall be obliged to sell the EQUITY upon the following terms and conditions: 8.1 For the purpose of this clause the deceased or permanently incapacitated party shall be described as the TRANSFERRING PARTY and the other parties shall be referred to as the REMAINING PARTIES. 8.2 The TRANSFERRING PARTY shall be obliged to offer his EQUITY to the REMAINING PARTIES at the auditor's valuation as hereinafter defined by giving notice in writing thereof, hereinafter referred to as the TRANSFER NOTICE, as soon as possible, to the REMAINING PARTIES and to the auditors of the COMPANY. 8.3 Upon receipt of the TRANSFER NOTICE the auditors shall compute the value of the TRANSFERRING PARTY'S EQUITY as at the date of the TRANSFER NOTICE and shall furnish a signed certificate of such valuation to the TRANSFERRING PARTY and the REMAINING PARTIES (the said valuation hereinafter referred to as the AUDITOR'S VALUATION). 8.4 In making such valuation the auditors shall take into account the value of the goodwill of the COMPANY and the actual value of the assets of the COMPANY and not merely their book value. To enable them to compute such valuation the auditors shall be entitled to obtain such sworn or other valuation of the COMPANY'S assets as they may deem necessary or desirable and shall be able to take into account all such other factors as they may consider in determining the value of the shares. 8.5 The REMAINING PARTIES shall have the option to purchase the TRANSFERRING PARTY'S EQUITY on the following terms: 8.5.1 By notice in writing given to the TRANSFERRING PARTY at any time within THIRTY (30) days after receipt by the REMAINING PARTIES of the AUDITOR'S VALUATION. 8.5.2 The purchase price of the TRANSFERRING PARTY'S EQUITY shall be the AUDITOR'S VALUATION thereof. Page 8 of 14 8.5.3 Subject to the other terms and conditions hereafter set forth the purchase price shall be payable by the REMAINING PARTIES to the TRANSFERRING PARTY in * (*) monthly instalments with the first instalment being paid on the 1ST day of the month being THREE (3) months after the date upon which the option is exercised and the remaining instalments on the 1ST day of each and every succeeding month thereafter together with interest on the purchase price or the outstanding balance thereof from time to time at the prime bank rate of interest being payable quarterly in arrear, the first payment of interest to be made at the end of the sixth month following the month during which the option shall be exercised and subsequent payments on the last day of each and every third month thereafter. 8.5.4 Notwithstanding anything to the contrary herein contained in the event of a lump-sum payment being made by the REMAINING PARTIES to the TRANSFERRING PARTY from the proceeds of the insurance policy to which further reference is made herein, the contents of Clause 8.5.3 shall apply to any balance of the purchase price owing by the REMAINING PARTIES to the TRANSFERRING PARTY after payment of the said lump-sum. 8.5.5 Against payment of the said lump-sum referred to in Clause 8.5.4 or against payment of the first instalment in terms of Clause 8.5.3, as the case may be, the TRANSFERRING PARTY shall deliver to the REMAINING PARTIES the share certificates, share transfer forms signed in blank, according to law, and all other documents to enable the REMAINING PARTIES to obtain transfer thereof as well as deeds of cession of the loan accounts comprised in the TRANSFERRING PARTY'S EQUITY. 8.5.6 In the event that the REMAINING PARTIES are required to pay the purchase price or the balance of the purchase price by instalments then as security for the REMAINING PARTIES' obligations the latter shall pledge, as securitatem in debiti, the EQUITY of the TRANSFERRING PARTY purchased in terms hereof, to the TRANSFERRING PARTY. 8.5.7 The REMAINING PARTIES shall be obliged prior to exercising their rights as hereinbefore set forth, to procure the release of the TRANSFERRING PARTY from all suretyships, guarantees and/or indemnities signed and/or given by the TRANSFERRING PARTY for any obligations of the COMPANY. 8.6 Notwithstanding anything to the contrary herein contained the right reserved to REMAINING members to purchase the EQUITY herein referred to shall be in respect of the TRANSFERRING MEMBER'S EQUITY pro rata to the respective shareholding of each REMAINING PARTY in the COMPANY. 8.7 Should any party hereto or the executor of his estate object to the auditor's valuation being undertaken by the COMPANY'S auditors, it shall be undertaken by an independent auditor to be agreed upon by the parties unanimously, provided that the valuations shall always be undertaken in accordance with the provisions of this agreement. Page 9 of 14 9. INSURANCE RELATING TO PURCHASE OF EQUITY BY REMAINING PARTIES 9.1 In order to provide the purchase price payable to the REMAINING PARTIES to the TRANSFERRING PARTY in respect of the EQUITY as set forth in Clause 8, the parties agree to effect such insurance policies on their lives in such amounts and in such manner as they may from time to time decide. The parties undertake to determine the value of their respective EQUITIES once annually for the purpose of determining and, if necessary, increasing the amounts of the insurance policies. The amount of the insurance so effected shall at all times be equivalent to the value of the EQUITIES of the respective parties. The proceeds of the said policies issued on the lives of the parties shall be used for the purposes of effecting payment of the purchase price as set forth in Clause 8. Each party shall procure an insurance policy on his life in order to give effect hereto. The parties do hereby irrevocably undertake to cede the proceeds of the policies upon the death of any party to the trust account of attorneys * of *, to be held by the said firm in trust and to be utilised solely to effect payment of the purchase price of the EQUITY in terms of the provisions of this agreement. 9.2 No party shall be entitled, without the consent in writing of all of the other parties to mortgage, pledge, cede, assign or in any other manner whatsoever encumber any of the said policies or to borrow any monies against the securities thereof, save as hereinbefore set forth. 9.3 Upon the death of a party the following provisions shall apply (the parties being referred to as in Clause 8): 9.3.1 Payment of the price of the TRANSFERRING PARTY'S EQUITY shall be effected as follows: 9.3.1.1 By payment of the proceeds received by Messrs * on behalf of the REMAINING PARTIES in respect of the policy issued upon the life of the TRANSFERRING PARTY. 9.3.1.2 The balance, if any, of the purchase price of the EQUITY remaining after such payment shall be paid in accordance with Clause 8.5.3. 9.4 Notwithstanding anything to the contrary herein contained, should the purchase price of the EQUITY be less than the proceeds of the said policy then the purchase price payable in respect of such EQUITY shall be deemed to be an amount equal to the proceeds of such policy. Page 10 of 14 9.5 The REMAINING PARTIES shall indicate within 2 (two) months of the death of the TRANSFERRING PARTY whether they are desirous of purchasing the interest that the estate of the TRANSFERRING PARTY had in the insurance policy effected on the lives of the REMAINING PARTIES. Should the remaining parties wish to purchase such interest the said deceased estate of the TRANSFERRING PARTY shall be obliged to sell such interest at a consideration being the surrender value of such policy together with any bonuses or dividends which may have accrued thereto. 9.6 Premiums on the said life insurance policies shall be the liability of each insured party but payments shall be effected by the COMPANY on behalf of the respective parties and their loan accounts shall be debited accordingly; provided that, if their loan accounts are insufficient, they shall fund the COMPANY with sufficient money to disburse the premiums from time to time. 10. SALARIES 10.1 *, in his capacity as director of the COMPANY, shall be paid a commencing salary of R * (* Rand) per month. 10.2 *, in his capacity as sales manager, shall be paid a commencing salary of R * (* Rand) per month. 11. REMUNERATION *'S remuneration in his capacity as director of the COMPANY shall be an amount of equivalent to * PERCENT (* %) of the after-tax net profits of the COMPANY in respect of each year. The net profits shall be determined by the auditors of the COMPANY and shall be paid to * within * (*) days of the end of the month in which the audited profits of the COMPANY are so determined by the auditors. The determination by the auditors as such shall be final and binding on the parties and in this regard the auditors shall be acting as experts and not as arbitrators. 12. RESTRAINT The parties undertake that for so long as any of them shall be a shareholder in the COMPANY and for a period of * (*) years from the date upon which any of them cease to be a shareholder in the COMPANY, in respect of the entire Republic of South Africa, he will not be or become interested, whether directly or indirectly and whether as employer, employee, agent, representative, shareholder, director, proprietor, partner, financier or otherwise in any business, firm, partnership, company, corporation, institution or association of persons which carries on or conducts or which has any financial interest whatsoever in any business which is the same or similar to any business conducted by the COMPANY. Page 11 of 14 13. ATTORNEYS/AUDITORS The attorneys for the COMPANY shall be * and auditors of the COMPANY shall be *. 14. ARBITRATION Any dispute, question or difference arising at any time between the parties out of or in regard to: 14.1 Any matter arising out of or; 14.2 The rights and duties of any party hereto or; 14.3 The interpretation of or; 14.4 The termination of or; 14.5 Any matter arising out of the termination of or; 14.6 The rectification of this agreement; shall be submitted to arbitration by an arbitrator appointed by the President for the time being of the Law Society of the Cape of Good Hope which arbitration shall be conducted as speedily as possible and otherwise in accordance with the terms of the Arbitration Act as amended. 15. DOMICILIUM The parties hereby choose domicilium citandi et executandi as follows: 15.1 15.2 * * 15.3 * Page 12 of 14 15.4 * 16. GENERAL 16.1 The parties undertake and bind themselves at a meeting called for such purpose by the COMPANY to vote at such meeting for the adoption and ratification of this agreement insofar as it may affect the COMPANY. 16.2 The terms and provisions of this agreement shall be binding upon the shareholders, members, parties, their estates, executors, administrators or successors in title as the case may be. 16.3 No variation from the terms of this agreement shall be binding on the parties unless such variation is reduced to writing and signed by all the parties. 17. CONFLICT WITH COMPANY'S ARTICLES In the event that the terms of this agreement are in conflict with any of the Articles of Association of the COMPANY then and in such event the terms and conditions hereof shall prevail. 18. COSTS The costs of ZZZZZZZZZZZZZ relating and incidental to the preparation and implementation of this agreement including drafting, redrafting, consultations, negotiations, stamp duty and all other attendances howsoever arising necessary to give effect to this agreement shall become payable upon signature hereof and shall be borne by the COMPANY, failing which, borne by the other parties hereto in equal shares. THUS DONE AND SIGNED AT * ON THIS THE * DAY OF *. AS WITNESSES: 1._____________________ Page 13 of 14 2.______________________ _______________________ THUS DONE AND SIGNED AT * ON THIS THE * DAY OF *. AS WITNESSES: 1.______________________ 2.____________________ _____________________ THUS DONE AND SIGNED AT * ON THIS THE * DAY OF *. AS WITNESSES: 1.______________________ 2.______________________ _______________________ THUS DONE AND SIGNED AT * ON THIS THE * DAY OF *. AS WITNESSES: 1.______________________ Page 14 of 14 2.______________________ ______________________ * THUS DONE AND SIGNED AT * ON THIS THE * DAY OF *. AS WITNESSES: 1._________________ the COMPANY, represented herein by: 2.___________________ ______________________ pp COMPANY