Section 11.27 Sample Agreement

• Library: Estate Planning 2013 Forms

Note/Disclaimer: This is a “sample” shareholder agreement for illustrative purposes only. It is not an industry standard form and it does not provide every alternate provision that should be considered in drafting a shareholder agreement. It will not apply to all situations or even most client situations. There is no standard shareholder agreement because shareholder agreements are complex, thoroughly negotiated, and client specific.

Shareholder Agreement

This Shareholder Agreement (“Agreement”), made as of the _____ day of _______________ (“Effective Date”), by and among _____________, Inc., a Missouri corporation (“Corporation”), and all other persons who become parties to this Agreement as Shareholders (as set forth in Exhibit A).

Recitals

Whereas, Shareholders own the number of Shares (as defined under this Agreement) as listed on Exhibit A to this Agreement;

Whereas, the parties believe that it is in the best interests of Corporation and Shareholders to provide for continuity and harmony in the management of Corporation and to make provisions for future dispositions of Shares of Corporation;

Whereas, the parties desire to set forth in writing their respective agreements concerning the disposition of their Shares and other matters.

Now, therefore, in consideration of the foregoing and the mutual promises made in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Article 1

Definitions

In addition to the definitions found elsewhere in this Agreement, the following definitions shall apply in this Agreement (including, but not limited to, the Exhibits to this Agreement):

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or corresponding provisions of future laws.

“Fair Market Value” means the fair market value of Corporation, determined as of the end of the month immediately preceding the date of the event causing the necessity to determine Fair Market Value under this Agreement (“Triggering Event”) and determined without regard to discounts for lack of marketability and discounts for minority interest, and without regard to any disability insurance proceeds received or to be received by Corporation upon the Permanent Disability (defined below) of any Shareholder, or any life insurance proceeds received or to be received by Corporation upon the death of any Shareholder. Such determination shall be binding on the potential selling Shareholder (“Selling Shareholder”), the other Shareholders, and Corporation:

a. Within 20 days a receipt of written notice by Corporation (“Notice Date”) of the Triggering Event, the Selling Shareholder and Corporation, using their best efforts, shall endeavor to agree in writing as to the Fair Market Value of Corporation, determined as of the end of the month immediately preceding the date of the Triggering Event.

b. If, within 20 days after the Notice Date, the Selling Shareholder and Corporation do not agree on the Fair Market Value of Corporation, the Selling Shareholder and Corporation shall endeavor to agree on and appoint a qualified independent appraiser (with each such party paying half the costs of the appraiser) knowledgeable in the industry in which Corporation transacts business and in the valuation of stock of closely held corporations, who shall determine the Fair Market Value of Corporation.

c. If the Selling Shareholder and Corporation cannot agree on an independent appraiser within 30 days after the Notice Date, the Selling Shareholder and the Corporation (without the Selling Shareholder or its representative participating in such vote) shall each designate a qualified independent appraiser knowledgeable in the industry in which Corporation transacts business and in the valuation of stock of closely held corporations. These appraisers shall together determine the Fair Market Value of Corporation (with each party paying the costs of their applicable appraiser). If the appraisers are unable to agree on the Fair Market Value, the appraisers shall select a third qualified independent appraiser (with each party paying half of that appraiser’s cost) knowledgeable in the industry in which Corporation transacts business and in the valuation of stock of closely held corporations, who shall determine the Fair Market Value of Corporation.

“Person” means any individual, corporation (including any nonprofit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union, or other entity or governmental body.

“Shareholders” means, at any given time, all Persons who (1) own or become record or beneficial owners of Shares and their respective heirs, executors, successors, assigns, and legal representatives and (2) are parties to this Agreement as Shareholders. The word “Shareholder” may be used to refer to any of the foregoing in the singular.

“Shares” means all of the issued and outstanding shares of Corporation from time to time.

“Transferee” means and includes any Person, including Corporation, acquiring any right, title, or interest in the Shares after the date of this Agreement. The word “Transferees” may be used to refer to any of the foregoing in the plural.

“Transfer” or “Transferred” means any sale, exchange, assignment, transfer, pledge, bequeath, gift, mortgage, hypothecation, grant of security interest, or other disposition or encumbrance of any kind, whether voluntary, involuntary, or by operation of law, including, without limitation, the laws of bankruptcy, insolvency, divorce, marriage dissolution, intestacy, descent and distribution, and succession.

Article 2

Restrictions on Shares

2.1 Scope of Agreement

All of the outstanding Shares now owned or hereafter acquired by any Shareholder are, and shall be, subject to the terms of this Agreement. All stock certificates now or hereafter issued by Corporation to any Shareholder shall be endorsed with a legend substantially in the form of the following:

THE SALE, TRANSFER, OR ENCUMBRANCE OF THIS CERTIFICATE IS SUBJECT TO A SHAREHOLDER AGREEMENT DATED AS OF ________________, AMONG CORPORATION AND ITS SHAREHOLDERS. A COPY OF THIS AGREEMENT IS ON FILE IN THE OFFICE OF THE SECRETARY OF CORPORATION. THE AGREEMENT PROVIDES, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON TRANSFER AND OBLIGATIONS TO SELL THE SHARES EVIDENCED BY THIS CERTIFICATE FOR A DESIGNATED PURCHASE PRICE UPON CERTAIN EVENTS. BY ACCEPTING THE SHARES EVIDENCED BY THIS CERTIFICATE, THE HOLDER AGREES TO BE BOUND BY THIS AGREEMENT.

2.2 Agreement Binding on Transferees

All Transferees of any Shares shall take those Shares subject to all provisions, conditions, and covenants of this Agreement. As a condition precedent to any Transfer of any such Shares on the records of Corporation, the Transferee shall agree (for and on behalf of the Transferee or the Transferee’s heirs, estate, legal representatives, and successors and their Transferees and assigns), in writing by the execution of Exhibit C of this Agreement, to be bound by this Agreement and to be considered a Shareholder under this Agreement for all purposes.

2.3 Restrictions on Transfer by Shareholders

a. Except as otherwise expressly permitted under this Agreement, a Shareholder has no power to Transfer and shall not Transfer all or any of the Shares now owned or hereafter acquired by the Shareholder, and any Transfer in violation of this Agreement is hereinafter called an “Unauthorized Disposition.”

b. Upon Corporation’s receipt of notice of an Unauthorized Disposition, Corporation shall have an exercisable option to purchase the Shares in accordance with the same terms and conditions as those applicable to Involuntary Transfers (hereinafter defined) as set forth in Article 6 of this Agreement.

2.4 Restrictions on Issuance

As long as this Agreement remains in effect, Corporation may sell and issue Shares only with the prior written consent of all of the Shareholders. Any new Shareholder that becomes a party to this Agreement is subject to the terms of this Agreement, including, specifically, § 2.2 above.

Article 3

Purchase Upon Death of a Shareholder

3.1 Purchase Upon the Death of Shareholder

Within 30 days after the death of a Shareholder, the representatives of the Shareholder (“Electing Shareholder”), by providing written notice to Corporation and the other Shareholders (“Other Shareholders”), may require Corporation to begin the valuation process as set forth in the definition of Fair Market Value. Within 30 days after the determination of Fair Market Value, the Electing Shareholder may exercise an option, in writing (“Option Notice”), delivered to the Other Shareholders and Corporation, to require Corporation to purchase all, but not less than all, of the Electing Shareholder’s Shares from the Electing Shareholder. If this election is exercised, Corporation shall purchase all, but not less than all, of the Electing Shareholder’s Shares as long as the Shares are Transferred free and clear of all liens, claims, and encumbrances (other than this Agreement).

3.2 Life Insurance Insuring Shareholder

Corporation or any Shareholder may acquire life insurance policies on the life of any Shareholder, naming itself as the beneficiary. Corporation shall pay all premiums associated with these policies, if any, and shall give proof of payment of premiums to the insured Shareholder as applicable, whenever such Shareholder shall request proof. With respect to...