Shareholder Agreement - Delaware

SHAREHOLDER AGREEMENT — [CORPORATION NAME], a Delaware corporation

TABLE OF CONTENTS

1. Definitions
2. Purpose & Statutory Authorization
3. Transfer Restrictions
4. Buy-Sell (Triggering Events; Mandatory and Optional Purchase)
5. Valuation & Payment Terms
6. Voting Agreement; Board; Officers; Stockholder Management
7. Drag-Along & Tag-Along Rights
8. Preemptive Rights
9. Protective Provisions / Supermajority
10. Information Rights
11. Restrictive Covenants
12. Deadlock Resolution
13. Certificate Legend
14. Term & Termination
15. Dispute Resolution & Governing Law
16. General Provisions
17. Signatures
18. Sources & References

RECITALS AND PARTIES

THIS SHAREHOLDER AGREEMENT (this "Agreement") is made and entered into as of [__/__/____] (the "Effective Date") by and among [CORPORATION NAME], a Delaware corporation (the "Corporation"), and the persons listed on the Share Schedule below and who execute this Agreement (each, a "Stockholder" and, collectively, the "Stockholders").

RECITALS

A. The Corporation is a corporation organized and existing under the Delaware General Corporation Law, 8 Del. C. § 101 et seq. (the "DGCL"), with its registered office in Delaware.

B. The Corporation [is / is not] a statutory "close corporation" within the meaning of 8 Del. C. § 342, having [elected / not elected] close corporation status under 8 Del. C. §§ 343–344.

C. As of the Effective Date, the authorized capital of the Corporation consists of [____] shares of [CLASS/SERIES] stock, par value [$____] per share, of which [____] shares are issued and outstanding and held of record by the Stockholders as set forth in the Share Schedule.

D. The Corporation is a closely-held corporation whose stock is not publicly traded. The Stockholders desire to provide for the management, ownership, and continuity of the Corporation; to restrict the transfer of its stock; to provide an orderly mechanism for the purchase and sale of stock upon certain events; to coordinate the voting of their stock and the composition of the Board; and to otherwise set forth their respective rights and obligations.

E. The Stockholders intend that this Agreement be enforceable to the fullest extent permitted by Delaware law, including the transfer-restriction provisions of 8 Del. C. § 202, the voting-trust and voting-agreement provisions of 8 Del. C. § 218, and, to the extent the Corporation is a close corporation, the special provisions of 8 Del. C. §§ 350, 351, and 354.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows.

Share Schedule (Ownership as of the Effective Date)

1. DEFINITIONS

For purposes of this Agreement, the following terms have the meanings set forth below. Other terms are defined where they first appear.

"Affiliate" means, as to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such Person.

"Agreed Value" has the meaning set forth in Section 5.1.

"Board" means the board of directors of the Corporation (or, if and so long as the Corporation has elected management by stockholders under 8 Del. C. § 351, the Stockholders acting as directors).

"Business Day" means any day other than a Saturday, Sunday, or legal holiday in the State of Delaware.

"Close Corporation" means a corporation that has elected and continues to qualify as a close corporation under 8 Del. C. §§ 342–346.

"Disability" means a Stockholder's inability, by reason of physical or mental illness or injury, to perform substantially all of the duties such Stockholder customarily performs for the Corporation for a continuous period of [____] days or for [____] days in any [twelve (12)]-month period, as determined in accordance with Section 4.2(b).

"DGCL" means the Delaware General Corporation Law, 8 Del. C. § 101 et seq., as amended.

"Fair Market Value" has the meaning set forth in Section 5.2.

"Immediate Family" means a Stockholder's spouse, children (natural or adopted), grandchildren, parents, and siblings, and a trust established solely for the benefit of any of them or the Stockholder.

"Permitted Transferee" has the meaning set forth in Section 3.3.

"Person" means an individual, corporation, partnership, limited liability company, trust, estate, association, or other entity.

"Purchase Price" means the price determined under Section 5 for stock purchased under this Agreement.

"Shares" or "Stock" means all shares of capital stock of the Corporation now owned or hereafter acquired by a Stockholder, and any securities convertible into or exercisable for such shares, as contemplated by 8 Del. C. § 202.

"Transfer" means any sale, assignment, gift, pledge, hypothecation, encumbrance, or other disposition of Stock or any interest therein, whether voluntary or involuntary, by operation of law or otherwise.

"Triggering Event" has the meaning set forth in Section 4.1.

2. PURPOSE & STATUTORY AUTHORIZATION

2.1 Purpose

The purpose of this Agreement is to promote the Stockholders' mutual interests and the interests of the Corporation by imposing certain restrictions and obligations on the Stockholders and the Stock, and by providing for the continuity, governance, and orderly transfer of ownership of a closely-held Delaware corporation.

2.2 Statutory Basis

This Agreement is entered into under and is intended to be enforceable pursuant to Delaware law, including:

(a) Transfer restrictions (§ 202). 8 Del. C. § 202 authorizes a written restriction on the transfer or registration of transfer of securities to be imposed by the certificate of incorporation, the bylaws, or an agreement among security holders or among such holders and the corporation. Such a restriction may be enforced against the holder and any successor or transferee if permitted by § 202 and noted conspicuously on the certificate (or, for uncertificated shares, contained in the notice under 8 Del. C. § 151(f)); otherwise it is ineffective except against a person with actual knowledge of it. The transfer restrictions in this Agreement are imposed for reasonable purposes within the meaning of § 202, including to maintain the Corporation's closely-held status and any applicable tax or securities-law advantage.

(b) Voting agreements and voting trusts (§ 218). 8 Del. C. § 218(c) provides that an agreement between two or more stockholders, if in writing and signed, may provide that in exercising voting rights the shares held by them shall be voted as provided by the agreement or as the parties may agree, and § 218(d) preserves the validity of any voting or other agreement or irrevocable proxy not otherwise illegal. To the extent the Stockholders elect to implement a voting trust, 8 Del. C. § 218(a)–(b) governs. The voting provisions of Section 6 constitute an agreement under § 218.

(c) Close corporation provisions (§§ 350, 351, 354) — if applicable. If the Corporation is a Close Corporation:

(1) Under 8 Del. C. § 350, this Agreement (being a written agreement among Stockholders holding a majority of the outstanding stock entitled to vote) is not invalid, as between the parties, on the ground that it restricts or interferes with the discretion or powers of the Board; the effect is to relieve the directors and impose on the contracting Stockholders the liability for managerial acts or omissions to the extent the Board's discretion is controlled by this Agreement.

(2) Under 8 Del. C. § 351, the certificate of incorporation may provide for management by the Stockholders rather than by a board; if so elected, the Stockholders are deemed directors for purposes of the DGCL and are subject to directors' liabilities.

(3) Under 8 Del. C. § 354, no provision of this Agreement (or of the certificate of incorporation or bylaws) relating to any phase of the Corporation's affairs — including management, dividends, election of directors or officers, employment of Stockholders, or arbitration of disputes — is invalid on the ground that it is an attempt to treat the Corporation as a partnership or to arrange the Stockholders' relations as if they were partners.

2.3 Coordination with Charter Documents

To the extent any provision of this Agreement restricts the discretion or powers of the Board, governs distributions, or otherwise departs from the default governance rules of the DGCL, the Stockholders agree to cause corresponding provisions to be adopted in the certificate of incorporation and/or bylaws and to take all action necessary to give them effect. If the Corporation is not a Close Corporation, board-restricting provisions are intended to operate through the certificate of incorporation as permitted by 8 Del. C. § 141(a) and through the Stockholders' voting agreement under § 218. In the event of a conflict between this Agreement and the bylaws, the Stockholders shall, as among themselves, be bound by this Agreement and shall vote to conform the bylaws to this Agreement.

3. TRANSFER RESTRICTIONS

3.1 General Prohibition

No Stockholder shall Transfer all or any portion of such Stockholder's Stock except in strict compliance with this Agreement and applicable law. Any purported Transfer in violation of this Agreement shall be void ab initio, shall not be recognized on the books of the Corporation, and shall confer no rights upon the purported transferee. (If the Corporation is a Close Corporation, an unauthorized transfer is also subject to the consequences in 8 Del. C. § 347.)

3.2 Right of First Refusal

(a) Offer Notice. A Stockholder who receives a bona fide written offer from a third party to purchase any of such Stockholder's Stock and who desires to accept it (the "Selling Stockholder") shall first deliver written notice (the "Offer Notice") to the Corporation and the other Stockholders. The Offer Notice shall identify the prospective transferee, the number of Shares offered (the "Offered Shares"), the price, and all material terms.

(b) Corporation's Option. The Corporation shall have [thirty (30)] days after receipt of the Offer Notice to elect, by written notice, to purchase all or any portion of the Offered Shares on the same terms set forth in the Offer Notice.

(c) Stockholders' Option. To the extent the Corporation does not elect to purchase all of the Offered Shares, the other Stockholders shall have an additional [thirty (30)] days to elect to purchase the remaining Offered Shares, pro rata in proportion to their respective holdings (with rights of over-allotment among electing Stockholders). This ROFR structure is a restriction permitted by 8 Del. C. § 202(c)(1).

(d) Sale to Third Party. If the Corporation and the Stockholders do not collectively elect to purchase all of the Offered Shares within the option periods, the Selling Stockholder may, within [sixty (60)] days thereafter, Transfer the Offered Shares to the identified third party at a price not less than, and on terms no more favorable to the transferee than, those in the Offer Notice, provided the transferee first executes a joinder agreeing to be bound by this Agreement. Any Shares not so transferred again become subject to this Agreement.

3.3 Permitted Transfers

The right of first refusal in Section 3.2 shall not apply to, and a Stockholder may make, the following Transfers (each, a "Permitted Transfer"; each transferee, a "Permitted Transferee"), provided the transferee executes a joinder agreeing to be bound by this Agreement and the Stock remains subject hereto:

(a) a Transfer to the Corporation or to another Stockholder;

(b) a Transfer to a member of the Stockholder's Immediate Family or to a trust or entity wholly owned for estate-planning purposes, provided the transferring Stockholder retains voting control of the Stock during such Stockholder's lifetime;

(c) a Transfer upon death by will or intestacy, subject to Section 4; and

(d) any Transfer approved in writing by Stockholders holding at least [____]% of the outstanding Stock.

3.4 Prohibited Transfers

No Stockholder shall pledge, hypothecate, or grant a security interest in any Stock, or Transfer any Stock to a competitor of the Corporation, without the prior written consent of Stockholders holding at least [____]% of the outstanding Stock. Any prohibition on transfer to designated persons or classes of persons is intended to be enforceable under 8 Del. C. § 202(c)(5), provided the designation is not manifestly unreasonable. If the Corporation is a Close Corporation, no Transfer shall cause it to have more than 30 record holders or otherwise lose its status under § 342.

4. BUY-SELL: TRIGGERING EVENTS

4.1 Triggering Events

The occurrence of any of the following with respect to a Stockholder (a "Triggering Event"; such Stockholder, the "Affected Stockholder," or such Stockholder's estate or representative) gives rise to the purchase rights and obligations in this Section 4:

(a) Death of a Stockholder who is an individual;

(b) Disability of a Stockholder who is an individual;

(c) Termination of Employment of a Stockholder who is employed by the Corporation, whether voluntary or involuntary, with or without cause;

(d) Bankruptcy or Insolvency of a Stockholder, including the filing of a voluntary or involuntary petition, an assignment for the benefit of creditors, or the appointment of a receiver;

(e) Divorce of a Stockholder, to the extent any Stock (or marital interest therein) would be awarded to a non-Stockholder spouse;

(f) Involuntary Transfer by operation of law, levy, or attachment; and

(g) Voluntary Withdrawal by a Stockholder who delivers a written notice of intent to withdraw and sell.

4.2 Mandatory and Optional Purchase

(a) Death. Upon the death of a Stockholder, the Corporation [shall (mandatory) / may (optional)] purchase, and the deceased Stockholder's estate shall sell, all of the deceased Stockholder's Stock at the Purchase Price determined under Section 5. To the extent the Corporation does not purchase all such Stock, the surviving Stockholders [shall / may] purchase the balance pro rata.

(b) Disability. Disability shall be determined by a licensed physician selected by the Corporation (or, if the Affected Stockholder disputes the determination, by a third physician jointly selected by the Corporation's and the Stockholder's physicians). Upon a determination of Disability, the purchase mechanics in Section 4.2(a) apply.

(c) Termination of Employment. Upon Termination of Employment of a Stockholder, the Corporation and the other Stockholders shall have the option (and, if the parties so elect by completing the bracketed term, the obligation) to purchase the terminated Stockholder's Stock. The parties shall complete: purchase is [mandatory / optional]; in the case of termination [for cause], the Purchase Price shall be [Fair Market Value / __% of Fair Market Value / Agreed Value].

(d) Bankruptcy, Divorce, Involuntary Transfer, Voluntary Withdrawal. Upon any such Triggering Event, the Corporation (first) and the other Stockholders (second) shall have the option to purchase all of the Affected Stockholder's Stock (or the Stock subject to the involuntary transfer or divorce award) at the Purchase Price determined under Section 5. The non-Stockholder spouse, trustee, or transferee shall be bound by this Section.

4.3 Closing

The closing of any purchase under this Section shall occur within [sixty (60)] days after the later of the Triggering Event or the final determination of the Purchase Price, at the Corporation's principal office. At closing, the seller shall deliver the certificates (or transfer instructions for uncertificated shares) duly endorsed, free of liens, and the buyer shall deliver the consideration in accordance with Section 5.3. Any repurchase by the Corporation is subject to the surplus/net-assets limitations of 8 Del. C. § 160.

5. VALUATION & PAYMENT TERMS

5.1 Agreed Value

The Stockholders [may] establish an agreed value per Share (the "Agreed Value") by executing a Certificate of Agreed Value attached as Exhibit A, to be reviewed and updated at least annually. If a Certificate of Agreed Value has been executed within [twenty-four (24)] months before a Triggering Event, the Agreed Value shall be the Purchase Price.

5.2 Formula / Appraisal (Fair Market Value)

If no current Agreed Value exists, the Purchase Price shall be the "Fair Market Value" of the Stock, determined as follows (the parties shall select one method):

(a) Formula. [Describe formula — e.g., [____] times trailing twelve-month EBITDA, less indebtedness, multiplied by the selling percentage]; or

(b) Appraisal. Fair Market Value shall be determined by an independent appraiser. The Corporation and the seller shall each select one qualified appraiser within [fifteen (15)] days; if the two appraisals are within [ten percent (10%)] of each other, the Fair Market Value is their average; otherwise, the two appraisers shall select a third, whose determination (within the range of the first two) is binding. The appraisal shall [apply / not apply] minority and marketability discounts.

5.3 Payment Terms

(a) Cash / Insurance Proceeds. At closing, the buyer shall pay [____]% of the Purchase Price in cash, including any life-insurance proceeds applied under Section 5.4.

(b) Promissory Note. The balance shall be evidenced by a promissory note payable in [____] equal [monthly / quarterly / annual] installments over [____] years, bearing interest at [the applicable federal rate / ____% per annum], secured by a pledge of the purchased Stock, with the right to prepay without penalty.

5.4 Life-Insurance Funding

(a) The Corporation [and/or the Stockholders] may purchase and maintain life-insurance policies on the lives of the Stockholders to fund the purchase obligations on death. The Corporation shall be the [owner and beneficiary] of such policies.

(b) The policies and beneficiaries are listed on Exhibit B. Upon a Stockholder's death, the proceeds shall be applied first to the Purchase Price for that Stockholder's Stock. Proceeds exceeding the Purchase Price shall belong to the Corporation.

(c) A Stockholder whose Stock is purchased (or such Stockholder's estate) shall have the option to purchase any policy on such Stockholder's life for its interpolated terminal reserve (cash surrender) value.

6. VOTING AGREEMENT; BOARD; OFFICERS; STOCKHOLDER MANAGEMENT

6.1 Voting Agreement

Each Stockholder agrees to vote all Stock now or hereafter owned by such Stockholder, and to take all other action within such Stockholder's control (including executing written consents under 8 Del. C. § 228), so as to give effect to the provisions of this Section 6. This Section is a voting agreement under 8 Del. C. § 218(c), and any proxy granted to enforce it may be made irrevocable as permitted by 8 Del. C. § 212(e).

6.2 Board Composition

(a) The Board shall consist of [____] directors.

(b) Each Stockholder (or group of Stockholders) holding at least [____]% of the outstanding Stock shall be entitled to designate [one (1)] director, and the Stockholders shall vote their Stock to elect each such designee. A designating Stockholder may remove and replace its designee at any time, and the Stockholders shall vote accordingly.

(c) A vacancy created by a designated director shall be filled only by the Stockholder entitled to designate that director.

6.3 Officers

The Stockholders shall cause the Board to elect the following officers, who shall serve until removed in accordance with the bylaws: [President / CEO: ____; Secretary: ____; Treasurer/CFO: ____].

6.4 Management by Stockholders (Close Corporation Only)

If the Corporation is a Close Corporation and the certificate of incorporation so provides under 8 Del. C. § 351, the business of the Corporation shall be managed by the Stockholders rather than by a board, and the Stockholders shall be deemed directors for purposes of the DGCL and subject to directors' liabilities. The conspicuous-legend requirement of § 351 shall be satisfied per Section 13.

6.5 Cumulative Voting

The parties acknowledge that, under 8 Del. C. § 214, cumulative voting applies only if the certificate of incorporation so provides. The certificate of incorporation [shall / shall not] authorize cumulative voting; the Stockholders agree to vote so as to implement the designation rights in Section 6.2.

7. DRAG-ALONG & TAG-ALONG RIGHTS

7.1 Drag-Along

If Stockholders holding at least [____]% of the outstanding Stock (the "Dragging Stockholders") approve a bona fide arm's-length sale of the Corporation (whether by sale of stock, merger, or sale of substantially all assets) to an unaffiliated third party, the Dragging Stockholders may require each other Stockholder to (a) vote all Stock in favor of the transaction, (b) sell the same proportion of Stock on the same per-share terms, and (c) execute reasonable transaction documents, provided that no Stockholder shall be required to give representations other than as to title, authority, and ownership, and that liability shall be several (not joint) and capped at the proceeds received.

7.2 Tag-Along

If one or more Stockholders (the "Transferring Stockholders") propose to Transfer, in one transaction or a series, Stock representing more than [____]% of the outstanding Stock to a third party (other than a Permitted Transfer), each other Stockholder may elect to participate in the sale on the same terms, selling a pro rata portion of its Stock. The Transferring Stockholders shall give at least [twenty (20)] days' written notice of the proposed sale, and each electing Stockholder shall respond within [ten (10)] days.

8. PREEMPTIVE RIGHTS

8.1 Grant

Except for Exempt Issuances, before the Corporation issues any new Stock or securities convertible into Stock, it shall offer each Stockholder the right to purchase such Stockholder's pro rata portion (based on then-current ownership) on the same price and terms, so as to maintain such Stockholder's percentage ownership.

8.2 Procedure

The Corporation shall deliver written notice of the proposed issuance describing the securities, price, and terms. Each Stockholder shall have [twenty (20)] days to elect to exercise its preemptive right. Stock not subscribed for may be issued to the proposed purchaser within [ninety (90)] days on terms no more favorable than those offered to the Stockholders.

8.3 Exempt Issuances

"Exempt Issuances" means issuances (a) under a board-approved equity-incentive plan, (b) upon conversion or exercise of outstanding securities, (c) in connection with a bona fide acquisition or strategic transaction approved under Section 9, or (d) approved by Stockholders holding at least [____]% of the outstanding Stock.

9. PROTECTIVE PROVISIONS / SUPERMAJORITY

Notwithstanding any contrary provision of the bylaws, the Corporation shall not take any of the following actions without the approval of Stockholders holding at least [____]% of the outstanding Stock (or the unanimous consent where indicated):

(a) amending the certificate of incorporation or bylaws;

(b) issuing additional Stock or securities (other than Exempt Issuances) or creating a new class or series;

(c) declaring or paying any dividend or distribution other than pro rata (subject to 8 Del. C. § 170);

(d) merging, consolidating, converting, or selling all or substantially all assets;

(e) dissolving, liquidating, or filing for bankruptcy;

(f) incurring indebtedness in excess of [$____] or granting liens on material assets;

(g) entering into any transaction with a Stockholder, director, officer, or Affiliate other than on arm's-length terms;

(h) materially changing the nature of the Corporation's business; and

(i) approving annual compensation of any officer in excess of [$____].

The parties may, consistent with 8 Del. C. § 102(b)(4) and § 216, establish greater quorum or voting requirements for stockholder or director action in the certificate of incorporation or bylaws.

10. INFORMATION RIGHTS

The Corporation shall deliver to each Stockholder: (a) annual financial statements within [one hundred twenty (120)] days after fiscal year-end; (b) quarterly unaudited statements within [forty-five (45)] days after each fiscal quarter; and (c) upon [five (5)] Business Days' written demand stating a proper purpose, reasonable access during normal business hours to the books and records the Stockholder is entitled to inspect under 8 Del. C. § 220, subject to a confidentiality undertaking.

11. RESTRICTIVE COVENANTS

11.1 Non-Competition

During the period each Stockholder owns Stock and for [two (2)] years thereafter, no Stockholder who is also an employee, officer, or director shall, within [geographic area], directly or indirectly engage in or own an interest in any business that competes with the Corporation, except for passive ownership of less than [two percent (2%)] of a publicly traded company.

11.2 Non-Solicitation

During the same period, no such Stockholder shall solicit (a) any employee or contractor of the Corporation to terminate their relationship, or (b) any customer or supplier to cease or reduce business with the Corporation.

11.3 Confidentiality

Each Stockholder shall hold in confidence all Confidential Information of the Corporation and shall not use or disclose it except for the benefit of the Corporation, both during and after the period of stock ownership.

11.4 Remedies; Reformation

The Stockholders acknowledge that breach of this Section would cause irreparable harm and agree that the Corporation shall be entitled to injunctive relief in addition to other remedies. If any covenant is held overbroad, a court may, to the extent permitted by Delaware law, reform it to the maximum enforceable scope.

12. DEADLOCK RESOLUTION

12.1 Deadlock Defined

A "Deadlock" exists if the Board or the Stockholders are unable, after [two (2)] properly noticed meetings held at least [fifteen (15)] days apart, to reach the vote required to act on a material matter, and the inability materially impairs the Corporation's business.

12.2 Escalation; Mediation

Upon a Deadlock, the matter shall first be referred to the senior representatives of the disputing Stockholders for good-faith negotiation for [thirty (30)] days, and then, if unresolved, to non-binding mediation under Section 15.

12.3 Buy-Sell Shotgun

If a Deadlock remains unresolved [sixty (60)] days after mediation begins, any Stockholder (or 50% group) (the "Offeror") may deliver a written notice to the other (the "Offeree") stating a price per Share. The Offeree shall, within [thirty (30)] days, elect either (a) to sell all of its Stock to the Offeror at that price, or (b) to buy all of the Offeror's Stock at that same price. Failure to elect within the period shall be deemed an election to sell. The resulting purchase shall close under Section 4.3 and be paid under Section 5.3.

12.4 Other Remedies

The buy-sell procedure is in addition to, and not in lieu of, the parties' statutory rights. For a Close Corporation, the Court of Chancery may appoint a custodian or provisional director or order other relief under 8 Del. C. §§ 352–353; the parties may also pursue dissolution under 8 Del. C. § 273 (joint-venture deadlock) or § 226, as applicable.

13. CERTIFICATE LEGEND

Each certificate representing Stock (and any notice for uncertificated Stock under 8 Del. C. § 151(f)) shall bear the following conspicuous legend, consistent with 8 Del. C. § 202(a) and, for a Close Corporation, §§ 202(a), 351, and 202(d):

THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TRANSFER RESTRICTIONS, VOTING AGREEMENT, AND OTHER TERMS OF A SHAREHOLDER AGREEMENT DATED [__/__/____], A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION. SUCH STOCK MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THAT AGREEMENT. [FOR A CLOSE CORPORATION ELECTING § 351 MANAGEMENT BY STOCKHOLDERS, ADD: THIS CORPORATION IS A CLOSE CORPORATION; ITS BUSINESS IS MANAGED BY THE STOCKHOLDERS PURSUANT TO 8 DEL. C. § 351.] THE STOCK HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED ABSENT REGISTRATION OR AN EXEMPTION THEREFROM.

Under 8 Del. C. § 202(a), unless the restriction is noted conspicuously on the certificate (or contained in the § 151(f) notice for uncertificated shares), it is ineffective except against a person with actual knowledge of it. If the Corporation is a Close Corporation, the special legend required by 8 Del. C. § 347 must also appear (stating that the Corporation is a close corporation under subchapter XIV).

14. TERM & TERMINATION

14.1 Term

This Agreement becomes effective on the Effective Date and continues until terminated under Section 14.2.

14.2 Termination

This Agreement terminates upon the earliest of: (a) the written agreement of all Stockholders; (b) the dissolution, bankruptcy, or liquidation of the Corporation; (c) a single Stockholder coming to own all outstanding Stock; or (d) the closing of an initial public offering or listing of the Corporation's stock on a national securities exchange.

14.3 Effect of Termination

Termination does not affect rights or obligations that accrued before termination, including any closing of a purchase already triggered. The confidentiality obligations of Section 11.3 survive termination.

14.4 Amendment

This Agreement may be amended only by a writing signed by the Corporation and by Stockholders holding at least [____]% of the outstanding Stock (or, where it disproportionately and adversely affects a Stockholder, with that Stockholder's written consent). To preserve the § 350 safe harbor, any amendment to board-restricting provisions should continue to be signed by Stockholders holding a majority of the outstanding voting stock. The parties may specify that certain provisions require unanimous consent.

15. DISPUTE RESOLUTION & GOVERNING LAW

15.1 Governing Law

This Agreement is governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict-of-laws principles, and the internal affairs of the Corporation are governed by the DGCL.

15.2 Mediation

Before commencing arbitration or litigation (other than for injunctive relief), the parties shall attempt in good faith to resolve any dispute through non-binding mediation administered by [mediation provider] in [City], Delaware.

15.3 Arbitration

Any dispute not resolved by mediation shall be finally resolved by binding arbitration administered by the [American Arbitration Association] under its Commercial Arbitration Rules, before [one (1) / three (3)] arbitrator(s), seated in [City], Delaware. Judgment on the award may be entered in any court of competent jurisdiction. 8 Del. C. § 354 confirms that an agreement to arbitrate disputes among close-corporation stockholders is not invalid as a partnership-style arrangement.

15.4 Forum; Injunctive Relief

Notwithstanding Section 15.3, any party may seek temporary or preliminary injunctive relief or specific performance (including to enforce Sections 3, 6, and 11) from the Delaware Court of Chancery (or, where it lacks jurisdiction, the state or federal courts located in Delaware), to which the parties submit to jurisdiction and venue.

15.5 Attorneys' Fees

The prevailing party in any proceeding to enforce this Agreement is entitled to recover reasonable attorneys' fees and costs.

15.6 Jury Trial Waiver

EACH PARTY KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF THIS AGREEMENT NOT SUBJECT TO ARBITRATION.

16. GENERAL PROVISIONS

16.1 Specific Performance

The parties agree that the Stock is unique, that monetary damages are inadequate for breach of this Agreement, and that the non-breaching parties are entitled to specific performance, consistent with 8 Del. C. § 218(c).

16.2 Further Assurances

Each party shall execute such further documents and take such further actions as may be reasonably necessary to carry out this Agreement.

16.3 Notices

All notices shall be in writing and delivered personally, by nationally recognized overnight courier, or by certified mail (return receipt requested) to the addresses on Exhibit C, and are effective upon receipt (or refusal).

16.4 Successors and Assigns; Joinder

This Agreement binds and inures to the benefit of the parties and their respective heirs, personal representatives, successors, and permitted assigns. No Person shall acquire Stock unless such Person first executes a joinder agreeing to be bound by this Agreement.

16.5 Severability

If any provision is held invalid or unenforceable, it shall be reformed to the minimum extent necessary, and the remaining provisions shall remain in full force and effect.

16.6 Entire Agreement

This Agreement, together with its Exhibits, constitutes the entire agreement among the parties regarding its subject matter and supersedes all prior understandings.

16.7 Counterparts; Electronic Signatures

This Agreement may be executed in counterparts and by electronic signature, each of which is deemed an original and all of which together constitute one instrument.

16.8 No Third-Party Beneficiaries

Except as expressly provided, this Agreement is solely for the benefit of the parties and their permitted successors and assigns.

17. SIGNATURES

IN WITNESS WHEREOF, the parties have executed this Shareholder Agreement as of the Effective Date.

THE CORPORATION:

[CORPORATION NAME], a Delaware corporation

By: [________________________________]

Name: [____________________]

Title: [____________________]

Date: [__/__/____]

THE STOCKHOLDERS:

[________________________________]
Name: [____________________]
Date: [__/__/____]

[________________________________]
Name: [____________________]
Date: [__/__/____]

[________________________________]
Name: [____________________]
Date: [__/__/____]

18. SOURCES & REFERENCES

• Delaware General Corporation Law, 8 Del. C. § 101 et seq.
• 8 Del. C. § 202 — Restrictions on transfer and ownership of securities (authorizes transfer restrictions in the certificate of incorporation, bylaws, or security-holder agreements; conspicuous-notation requirement; permitted ROFR, mandatory-purchase, consent, and prohibition restrictions; conclusively reasonable purposes).
• 8 Del. C. § 218 — Voting trusts and other voting agreements (§ 218(a)–(b) voting trusts; § 218(c) stockholder voting agreements; § 218(d) saving clause for other lawful agreements/irrevocable proxies).
• 8 Del. C. §§ 341–356 — Close Corporations; Special Provisions, including:
• § 342 — Close corporation defined (≤ 30 record holders; § 202 transfer restriction; no public offering).
• § 343, § 344 — Formation and election of close corporation status.
• § 347 — Issuance/transfer of stock in breach of qualifying conditions; required legend.
• § 350 — Agreements restricting discretion of directors (majority-stockholder agreements not invalid as between the parties; shifts directorial liability to contracting stockholders).
• § 351 — Management by stockholders (certificate may provide for stockholder management in lieu of a board).
• §§ 352–353 — Appointment of custodian / provisional director for deadlock.
• § 354 — Operating corporation as partnership (stockholder agreements not invalid as partnership-style arrangements).
• 8 Del. C. § 141(a) — Board management except as otherwise provided in the certificate of incorporation (basis for board-restricting charter provisions in a non-close corporation).
• 8 Del. C. § 151(f) — Notice for uncertificated shares.
• 8 Del. C. § 160 — Corporation's power to acquire its own stock (surplus limitation).
• 8 Del. C. § 170 — Dividends; limitation.
• 8 Del. C. § 102(b)(3) — Preemptive rights (opt-in only).
• 8 Del. C. § 212(e) — Irrevocable proxies.
• 8 Del. C. § 214 — Cumulative voting (opt-in only).
• 8 Del. C. § 220 — Stockholder inspection of books and records (proper purpose).
• 8 Del. C. § 228 — Stockholder action by written consent.
• 8 Del. C. §§ 226, 273 — Judicial dissolution / deadlock dissolution.