Shareholder Agreement - Illinois

SHAREHOLDER AGREEMENT — [CORPORATION NAME], an Illinois 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
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
    Exhibits A–E

RECITALS AND PARTIES

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

RECITALS

A. The Corporation is a corporation organized and existing under the Business Corporation Act of 1983, identified at 805 ILCS 5/1.01 (the "Act"), having its registered office in [COUNTY] County, Illinois. The Corporation [is / is not] a close corporation under Article 2A of the Act; Section 2A.05 requires a close-corporation heading in its Articles.

B. As of the Effective Date, the authorized capital of the Corporation consists of [____] shares of [CLASS/SERIES] stock, par value [$____] per share (or [without par value]), of which [____] shares are issued and outstanding and held of record by the Shareholders as set forth in the Share Schedule.

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

D. The Shareholders intend that this Agreement constitute, and be enforceable as, a shareholder agreement under 805 ILCS 5/7.71, a voting agreement under 805 ILCS 5/7.70, and a transfer-restriction agreement under 805 ILCS 5/6.55, and — to the extent the Corporation is or becomes a close corporation — a written agreement under 805 ILCS 5/2A.40, in each case to the fullest extent permitted by Illinois law.

E. The persons executing this Agreement constitute all of the persons who are shareholders of the Corporation as of the Effective Date, so that this Agreement satisfies the unanimity requirement of 805 ILCS 5/7.71(a) (and, where applicable, § 2A.40(a)).

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.

"Act" means the Business Corporation Act of 1983, 805 ILCS 5/1.01 et seq., as amended.

"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.

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

"Close Corporation" means a corporation that has elected close-corporation status under Article 2A of the Act (805 ILCS 5/2A.05 et seq.).

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

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

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

"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 shares purchased under this Agreement.

"Shares" means all shares of capital stock of the Corporation now owned or hereafter acquired by a Shareholder, and any security convertible into or carrying a right to subscribe for or acquire shares.

"Transfer" means any sale, assignment, gift, pledge, hypothecation, encumbrance, or other disposition of Shares 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 Shareholders' mutual interests and the interests of the Corporation by imposing certain restrictions and obligations on the Shareholders and the Shares, and by providing for the continuity, governance, and orderly transfer of ownership of a closely-held Illinois corporation.

2.2 Statutory Basis

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

(a) Shareholder agreements. 805 ILCS 5/7.71 provides that shareholders may unanimously agree in writing as to matters concerning the management of the corporation, provided no fraud or apparent injury to the public or creditors is present and no clearly prohibitory statutory language is violated; that such an agreement is not invalid as between the parties on the ground that it treats the corporation like a partnership or interferes with the discretion of the board; that the agreement is specifically enforceable in accordance with the principles of equity; and that this authority is cumulative with other applicable law. The Shareholders intend that this Agreement be a shareholder agreement under § 7.71, executed unanimously.

(b) Close-corporation agreements (if applicable). If the Corporation is or becomes a Close Corporation, 805 ILCS 5/2A.40 expressly authorizes all shareholders to enter a written agreement relating to any phase of the corporation's affairs, including management of the business, declaration of dividends, who shall be officers or directors, restrictions on transfer of shares, voting requirements (including unanimous voting), employment of shareholders, and arbitration of deadlocks. For a close corporation managed by a board, § 2A.40(c) allows an all-shareholder agreement to interfere with board discretion but imposes on the shareholders the liability for managerial acts that Illinois law imposes on directors.

(c) Transfer restrictions. 805 ILCS 5/6.55 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 between such holders and the corporation, enforceable against the holder and successors/transferees if noted conspicuously on the certificate (or contained in the § 6.35 notice for uncertificated securities). Restrictions to maintain Subchapter S status or any other tax advantage are conclusively presumed reasonable. The transfer restrictions in Section 3 are imposed under § 6.55.

(d) Voting agreements. 805 ILCS 5/7.70 provides that shareholders may provide for the voting of their shares by signing an agreement for that purpose, and that a voting agreement so created is specifically enforceable. Section 6 constitutes a voting agreement under § 7.70.

(e) Voting trusts. To the extent the Shareholders elect to implement a voting trust, 805 ILCS 5/7.65 governs and is incorporated by reference.

2.3 Coordination with Charter Documents

Because Illinois does not validate, against later or non-signatory shareholders, all departures from corporate norms the way an MBCA § 7.32 statute would, the Shareholders agree: (i) to obtain unanimous written assent to this Agreement; (ii) where this Agreement restricts the discretion or powers of the Board, governs distributions, or otherwise departs from the default governance rules of the Act, to consider electing Close Corporation status under Article 2A and to cause corresponding provisions to be adopted in the Articles of Incorporation and/or Bylaws; and (iii) to take all action necessary to give such provisions effect. In the event of a conflict between this Agreement and the Bylaws, the Shareholders 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 Shareholder shall Transfer all or any portion of such Shareholder's Shares except in compliance with this Agreement and applicable law. The Corporation may refuse to register a noncomplying Transfer to the extent the restriction is enforceable against the holder or transferee under 805 ILCS 5/6.55 and registration is not required under 810 ILCS 5/8-401. The parties retain their contractual remedies against a Shareholder who breaches this Section.

3.2 Right of First Refusal

(a) Offer Notice. A Shareholder who receives a bona fide written offer from a third party to purchase any of such Shareholder's Shares and who desires to accept it (the "Selling Shareholder") shall first deliver written notice (the "Offer Notice") to the Corporation and the other Shareholders. 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) Shareholders' Option. To the extent the Corporation does not elect to purchase all of the Offered Shares, the other Shareholders 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 Shareholders).

(d) Sale to Third Party. If the Corporation and the Shareholders do not collectively elect to purchase all of the Offered Shares within the option periods, the Selling Shareholder 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 the following Transfers (each, a "Permitted Transfer"; each transferee, a "Permitted Transferee"). For a voluntary Permitted Transfer, the transferring Shareholder shall obtain the transferee's joinder in the form of Exhibit E before the transfer. A transfer on death remains subject to Section 4 and to the enforceability and registration rules of 805 ILCS 5/6.55 and 810 ILCS 5/8-401:

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

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

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

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

3.4 Prohibited Transfers

No Shareholder shall pledge, hypothecate, or grant a security interest in any Shares, or Transfer any Shares to a competitor of the Corporation, without the prior written consent of Shareholders holding at least [____]% of the outstanding Shares. Any restriction designed to maintain the Corporation's Subchapter S election or any other tax advantage is, under 805 ILCS 5/6.55(d), conclusively presumed to be for a reasonable purpose.

4. BUY-SELL: TRIGGERING EVENTS

4.1 Triggering Events

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

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

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

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

(d) Divorce of a Shareholder, to the extent any Shares (or marital interest therein) would be awarded to a non-Shareholder spouse;

(e) Involuntary Transfer by operation of law, levy, or attachment, to the extent a purchase right may lawfully be exercised; and

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

4.2 Mandatory and Optional Purchase

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

(b) Disability. Disability shall be determined by a licensed physician selected by the Corporation. If the Affected Shareholder disputes that determination, the Shareholder may obtain a second licensed physician's opinion, and those two physicians shall select a third licensed physician whose determination controls. Upon a determination of Disability, the purchase mechanics in Section 4.2(a) apply.

(c) Termination of Employment. Upon Termination of Employment of a Shareholder, the Corporation and the other Shareholders shall have the option (and, if the parties so elect by completing the bracketed term, the obligation) to purchase the terminated Shareholder's Shares. 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) Divorce, Involuntary Transfer, Voluntary Withdrawal. Upon any such Triggering Event, the Corporation (first) and the other Shareholders (second) shall have the option to purchase all of the Affected Shareholder's Shares (or the Shares subject to the involuntary transfer or divorce award) at the Purchase Price determined under Section 5, to the extent the option is enforceable under applicable law. A non-Shareholder spouse or transferee is bound only to the extent applicable law and an enforceable joinder or restriction so provide.

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.

5. VALUATION & PAYMENT TERMS

5.1 Agreed Value

The Shareholders [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 Shares, 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 Shares, with the right to prepay without penalty.

(c) Distribution Limits. Any purchase by the Corporation is subject to the limitations on distributions in 805 ILCS 5/9.10. If a payment by the Corporation would violate § 9.10, the obligation shall be suspended to the extent necessary and the remaining Shareholders may (but need not) purchase the balance.

5.4 Life-Insurance Funding

(a) The Corporation [and/or the Shareholders] may purchase and maintain life-insurance policies on the lives of the Shareholders 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 Shareholder's death, the proceeds shall be applied first to the Purchase Price for that Shareholder's Shares. Proceeds exceeding the Purchase Price shall belong to the Corporation.

(c) If a living Shareholder's Shares are purchased for a reason other than death, that Shareholder may purchase any transferable policy on that Shareholder's life held by the Corporation for its then-current cash surrender value, if any, as stated by the insurer. The option expires [____] days after the Shareholder receives the insurer's written value. This option does not apply after the insured Shareholder's death.

6. VOTING AGREEMENT; BOARD; OFFICERS

6.1 Voting Agreement

Each Shareholder agrees to vote all Shares now or hereafter owned by such Shareholder, and to take all other action within such Shareholder's control (including executing written consents under § 7.10 of the Act), so as to give effect to the provisions of this Section 6. This Section is a voting agreement under 805 ILCS 5/7.70 and is specifically enforceable.

6.2 Board Composition

(a) The Board shall consist of [____] directors, subject to the Articles and Bylaws.

(b) Each Shareholder (or group of Shareholders) holding at least [____]% of the outstanding Shares may designate [one (1)] candidate for director, and the Shareholders shall vote their Shares to elect that candidate, subject to the Act and the Articles. A designating Shareholder may request removal or replacement of its designee; the Shareholders shall vote to carry out that request through the notice, voting, and cumulative-voting protections of 805 ILCS 5/8.35.

(c) If a designated director's seat becomes vacant, the designating Shareholder may name a replacement candidate. The Shareholders shall vote to elect that candidate when the vacancy is filled by shareholder action; any interim Board appointment or other vacancy procedure remains subject to 805 ILCS 5/8.30, the Articles, and the Bylaws.

6.3 Officers

The Shareholders 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 Voting for Directors

The parties acknowledge that 805 ILCS 5/7.40 grants cumulative voting in director elections unless the Articles limit or eliminate it, subject to the vacancy rule in Section 8.30. The Shareholders agree to vote so as to implement Section 6.2, subject to those rules. The Articles [preserve the statutory default / limit cumulative voting as stated in the Articles / eliminate cumulative voting].

7. DRAG-ALONG & TAG-ALONG RIGHTS

7.1 Drag-Along

If Shareholders holding at least [____]% of the outstanding Shares (the "Dragging Shareholders") approve a bona fide arm's-length sale of the Corporation (whether by sale of shares, merger, or sale of substantially all assets) to an unaffiliated third party, the Dragging Shareholders may require each other Shareholder to (a) vote all Shares in favor of the transaction, (b) sell the same proportion of Shares on the same per-share terms, and (c) execute reasonable transaction documents, provided that no Shareholder 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 Shareholders (the "Transferring Shareholders") propose to Transfer, in one transaction or a series, Shares representing more than [____]% of the outstanding Shares to a third party (other than a Permitted Transfer), each other Shareholder may elect to participate in the sale on the same terms, selling a pro rata portion of its Shares. The Transferring Shareholders shall give at least [twenty (20)] days' written notice of the proposed sale, and each electing Shareholder shall respond within [ten (10)] days.

8. PREEMPTIVE RIGHTS

8.1 Grant

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

8.2 Procedure

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

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 Shareholders holding at least [____]% of the outstanding Shares.

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 Shareholders holding at least [____]% of the outstanding Shares (or the unanimous consent where indicated):

(a) amending the Articles of Incorporation or Bylaws;

(b) issuing additional Shares 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;

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

(e) dissolving or liquidating the Corporation;

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

(g) entering into any transaction with a Shareholder, 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 also establish greater quorum or voting requirements for shareholder or director action in the Articles of Incorporation or Bylaws as permitted by the Act (see 805 ILCS 5/7.60 and 5/8.15).

10. INFORMATION RIGHTS

The Corporation shall deliver to each Shareholder: (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 written demand stating a proper purpose, reasonable access during normal business hours to the books and records the Corporation is required to maintain, in accordance with the shareholder inspection rights of 805 ILCS 5/7.75, subject to a confidentiality undertaking.

11. RESTRICTIVE COVENANTS

Employment covenant election: Sections 11.1 and 11.2 apply only to an employee Shareholder named here: [NAME]. For that person, the Corporation records actual or expected annualized earnings of [$____], consideration beyond this Agreement of [____________________], written advice to consult an attorney delivered on [__/__/____], and delivery of the proposed covenant for the statutory review period on [__/__/____]. Complete a separate election for each covered employee Shareholder. A restriction that does not meet 820 ILCS 90/10, 90/15, and 90/20 is not imposed by this Article. A covenant connected to an actual sale of goodwill or ownership interest requires transaction-specific terms.

11.1 Non-Competition

If the employment covenant election above has been completed and the covenant satisfies the applicable law, the named employee Shareholder shall not, for [____] months after employment ends and within [defined territory], perform [specified competing work] for a competing business. This restriction applies only to the extent needed to protect [identified legitimate business interest] and does not bar passive investment that involves no competing work or misuse of Confidential Information.

11.2 Non-Solicitation

If the employment covenant election above has been completed and this covenant satisfies applicable law, the named employee Shareholder shall not, for [____] months after employment ends, solicit [identified employees or customers] for [specified competing purpose] within [defined market or territory]. This Section is subject to the separate nonsolicitation earnings threshold and other requirements of 820 ILCS 90/10, 90/15, and 90/20.

11.3 Confidentiality

Each Shareholder 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 share ownership.

11.4 Remedies; Reformation

For a breach of an enforceable obligation in this Article, the Corporation may seek injunctive relief on proof of the requirements for that remedy. A court may, in its discretion and subject to 820 ILCS 90/35, reform or sever a covenant; it need not rewrite an overbroad restriction.

12. DEADLOCK RESOLUTION

12.1 Deadlock Defined

A "Deadlock" exists if the Board or the Shareholders 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 Shareholders for good-faith negotiation for [thirty (30)] days, and then, if unresolved, to non-binding mediation under Section 15. If the Corporation is a Close Corporation, the parties may also invoke the arbitration-of-deadlocks mechanism contemplated by 805 ILCS 5/2A.40(a)(7).

12.3 Buy-Sell Shotgun

If a Deadlock remains unresolved [sixty (60)] days after mediation begins, any Shareholder (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 Shares to the Offeror at that price, or (b) to buy all of the Offeror's Shares 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 does not limit a shareholder's ability to seek relief under 805 ILCS 5/12.56 when that Section's conditions are met. Section 12.56 permits the circuit court to choose among remedies for a non-public corporation, including a court-ordered share purchase or, if alternatives are insufficient, dissolution. Section 12.50 addresses dissolution actions by nonshareholders and does not independently give a shareholder this remedy.

13. CERTIFICATE LEGEND

Each certificate representing Shares (and any notice for uncertificated Shares under 805 ILCS 5/6.35) shall bear the following conspicuous legend, consistent with 805 ILCS 5/6.55(a) and 5/7.71(b):

THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TRANSFER RESTRICTIONS, VOTING AGREEMENT, AND OTHER TERMS OF A SHAREHOLDER AGREEMENT DATED [__/__/____], ENTERED INTO UNDER 805 ILCS 5/7.71, 5/7.70, AND 5/6.55 [AND, IF APPLICABLE, 805 ILCS 5/2A.40], A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION. SUCH SHARES MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THAT AGREEMENT.

Unless the restriction (and the existence of this Agreement) is noted conspicuously as required, it is ineffective except against a shareholder with actual knowledge at the time of becoming a shareholder (805 ILCS 5/6.55(a), 5/7.71(b)). For a Close Corporation, 805 ILCS 5/2A.25(a) additionally requires each certificate to state all transfer restrictions, shareholder qualifications, and the existence of any Section 2A.40 agreement, or conspicuously state that the full statement and agreement will be furnished without charge on a shareholder's request.

Additional certificate notice for a Close Corporation only, if the full terms will be available on request without charge:

A FULL STATEMENT OF THE CORPORATION'S TRANSFER RESTRICTIONS AND SHAREHOLDER QUALIFICATIONS, AND ANY WRITTEN AGREEMENT UNDER 805 ILCS 5/2A.40, WILL BE FURNISHED BY THE CORPORATION TO ANY SHAREHOLDER ON REQUEST WITHOUT CHARGE.

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 Shareholders; (b) the completion of dissolution or liquidation of the Corporation; (c) a single Shareholder coming to own all outstanding Shares; or (d) the closing of an initial public offering or listing of the Corporation's shares 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 all persons who are Shareholders at the time of amendment. The parties shall update any affected Articles, Bylaws, certificate legends, and uncertificated-share notices as required by the Act. No amendment binds a non-signatory Shareholder beyond the conditions of 805 ILCS 5/7.71(b).

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 Illinois, without regard to conflict-of-laws principles, and the internal affairs of the Corporation are governed by the Act.

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 [COUNTY] County, Illinois.

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], Illinois, subject to 710 ILCS 5/1. A party may seek confirmation of an award under 710 ILCS 5/11 in a court with jurisdiction.

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 a court of competent jurisdiction in [COUNTY] County, Illinois, subject to that court's jurisdiction and the requirements for the requested relief.

15.5 Attorneys' Fees

Subject to mandatory fee rights under 820 ILCS 90/25 for an employee who prevails against an employer's covenant-enforcement claim, the prevailing party in a proceeding to enforce this Agreement may recover reasonable attorneys' fees and costs to the extent permitted by Illinois law.

16. GENERAL PROVISIONS

16.1 Specific Performance

The parties may seek specific performance of the voting and shareholder-management obligations that qualify under 805 ILCS 5/7.70 and 5/7.71(d), subject to the applicable principles of equity. Other breaches remain subject to remedies available under this Agreement and applicable law.

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 the parties and their respective heirs, personal representatives, successors, and permitted assigns to the extent applicable law allows. Before a voluntary transfer, the transferring Shareholder shall require the transferee to execute a joinder agreeing to be bound by this Agreement. Enforcement against a non-signatory transferee remains subject to 805 ILCS 5/6.55 and 5/7.71(b).

16.5 Severability

If a provision is held invalid or unenforceable, a court may sever it to the extent permitted by applicable law, and the remaining provisions continue in effect if they can operate independently. Reformation of a restrictive covenant remains subject to Section 11.4.

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, all of which together constitute one instrument. The parties agree to conduct the signing of this Agreement by electronic means if any party elects that method; each electronic signature shall have the effect given by 815 ILCS 333/5 and 333/7, subject to other applicable law.

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], an Illinois corporation

By: [________________________________]

Name: [____________________]

Title: [____________________]

Date: [__/__/____]

THE SHAREHOLDERS:

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

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

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

18. SOURCES & REFERENCES

• Business Corporation Act of 1983, 805 ILCS 5/1.01 (short title).
• 805 ILCS 5/7.71 — Shareholder agreements (unanimous; management matters; specifically enforceable in equity; cumulative; binds non-signatory only with actual knowledge or conspicuous certificate reference).
• 805 ILCS 5/6.55 — Restriction on transfer of securities (authorization; conspicuous-legend requirement; S-corp/tax-advantage restrictions conclusively reasonable).
• 805 ILCS 5/6.35 — Notice for uncertificated securities.
• 805 ILCS 5/7.70 — Voting agreements (specifically enforceable).
• 805 ILCS 5/7.65 — Voting trust.
• 805 ILCS 5/2A.05 — Formation of a close corporation.
• 805 ILCS 5/8.30, 5/8.35 — Director vacancies and removal, including notice and cumulative-voting protections.
• 810 ILCS 5/8-401 — Duty to register securities transfers when statutory conditions are met.
• 805 ILCS 5/2A.40 — Written agreements as to conduct of certain affairs of a close corporation (management, dividends, officers/directors, transfer restrictions, voting, employment, arbitration of deadlocks; § 2A.40(c) addresses shareholder liability for managerial acts when an agreement interferes with board discretion in a board-managed close corporation).
• 805 ILCS 5/2A.25 — Close-corporation certificate statement and notice rules.
• 805 ILCS 5/6.50 — Preemptive rights (articles control the statutory default for corporations formed on or after January 1, 1982; older corporations have a separate rule).
• 805 ILCS 5/7.40 — Voting of shares; cumulative voting.
• 805 ILCS 5/7.60, 5/8.15 — Greater quorum/voting requirements (shareholders; directors).
• 805 ILCS 5/7.75 — Corporate records; shareholder inspection rights (proper purpose).
• 805 ILCS 5/9.10 — Distributions to shareholders (limitations).
• 805 ILCS 5/12.50, 5/12.56 — Judicial dissolution; remedies in non-public/close corporations (including court-ordered buyout).
• 820 ILCS 90/5, 90/10, 90/15, 90/20, 90/25, 90/35 — Illinois Freedom to Work Act (definitions, thresholds, enforceability, notice, employee fees, and discretionary reformation).
• 710 ILCS 5/1, 5/11 — Written arbitration agreements and confirmation of awards.
• 815 ILCS 333/5, 333/7 — Agreement to use electronic means and legal recognition of electronic signatures.

EXHIBIT A — CERTIFICATE OF AGREED VALUE

Under Section 5.1 of the Agreement, the undersigned Shareholders agree that the value per Share is [$____], effective [__/__/____]. This certificate replaces any earlier agreed-value certificate. The Shareholders shall review it at least annually; Section 5.1 governs whether it remains current for a Triggering Event.

EXHIBIT B — LIFE-INSURANCE FUNDING SCHEDULE

If no policy is used, write None above. The Agreement's purchase and payment terms still apply.

EXHIBIT C — NOTICE ADDRESSES

A party may change its notice address by giving notice under Section 16.3.

EXHIBIT D — OPTIONAL SPOUSAL CONSENT

I, [SPOUSE NAME], spouse of [SHAREHOLDER NAME], acknowledge receipt of the Agreement. I consent to its transfer restrictions and purchase procedures as they may apply to any interest I hold in the Shares, subject to applicable law. This consent does not make me a Shareholder or impose the Shareholder's employment covenants on me.

Spouse signature: [____________________] Date: [__/__/____]

EXHIBIT E — TRANSFEREE JOINDER

For the transfer of [____] Shares of [CLASS/SERIES] from [TRANSFEROR] to [TRANSFEREE], effective [__/__/____], the undersigned transferee agrees to become a party to and be bound by the Shareholder Agreement dated [__/__/____], including its transfer and voting terms, as to those Shares. This joinder does not by itself waive any condition to transfer or registration under the Agreement or applicable law.

Transferee name: [____________________]

Transferee signature: [____________________] Date: [__/__/____]

Corporation acknowledgment: [____________________] Date: [__/__/____]