Shareholders Agreement
Shareholders agreement is a legal document which makes it possible to foresee the hazards and reduce the risk of litigation between partners. Concretely, it is an agreement established between all or part of the partners in parallel with the statutes of the company, it makes it possible to contractualize the professional relations and the influence of each one in the company.
The practical situation of contracts between shareholders is typically the case of special business agreements that reveal the relationship between the rights and obligations of shareholders through the composition of the board of directors. Whether or not this can be dealt with separately.
The term of Shareholders agreement refers to the agreement carried out outside the basic text of the regulation of a commercial company: the statute. This agreement can be made between the shareholders of the company, between a group of shareholders and the company itself or between a group and third parties.
They can occur for various reasons to have this agreement:
- The statutes of a company are public, while the text of a shareholder agreement is a private document, confidential for the parties (with some exceptions, depending on the regulations of each country).
- These types of agreements usually involve a small group of partners, which makes it easier to reach agreements on their modification, revision or termination.
- They allow to establish obligations between the signatories, with the possibility of establishing compensation clauses in case of breach of the agreement.
Example of our shareholder agreement document:
A shareholders’ agreement explains how to proceed, in cases where shareholders disagree. For example, a type contract defines who can be a shareholder and how much the shares of the shares are worth. Another element that a shareholders agreement deals with is what happens when a shareholder files for bankruptcy, or resigns. This is why the document should state whether the company would need to purchase the stock from the shareholder and the amount the company will pay for them. This type of legal agreement is intended to supplement a company’s incorporation documents, as it offers a chance to go into depth about the actions of the company. In addition, this type of contract is private, unlike incorporation documents, which is why many shareholders choose to use it to spell out their terms on shares.
The dangers of not drafting a shareholders’ agreement
In most countries, registration of a shareholders’ agreement is not required for it to be effective. It is the perceived greater flexibility of contract law over corporate law that provides much of the raison d’être for shareholders’ agreements.
Examples:
- Unprotected shareholder
- Disagreements between partners or shareholders
- An unplanned transfer of shares free of charge
Shareholders’ agreement can constitute a risk for the stakeholders
Examples:
- In some laws, a shareholders’ agreement may constitute a partnership, which may have tax consequences, or lead to financial liability in the event of bankruptcy.
- When the shareholders’ agreement contravenes the provisions of the articles of association, the effectiveness of its clauses may be challenged.
- In countries where contracts are subject to registration fees when they exceed a certain size, the agreement may be subject to redhibitory rights, the omission of which would result in the nullity of the agreement.
- In some cases, the existence of a shareholders’ agreement can be taken as proof of collusion and/or monopolistic practices.
- An updated shareholder pact may be qualified by the Financial Markets Council as an action in concert. Therefore, “persons acting in concert are jointly and severally bound by the obligations imposed on them by law”. Therefore, the signatories of a pact holding more than one third of the voting rights of a company listed on a regulated market must immediately inform the Autorité des marchés financiers and above all are required to file a takeover bid on the rest of the capital. if they rise above the thresholds set by the takeover clauses.
Important matters covered by the shareholders’ agreement
Obligation to refrain from alienating (transfer ownership to another person or group) shares
By signing the agreement, shareholders can create an obligation that they will not allow the alienation of their shares in the authorized capital of the company to third parties for a certain period of time. This condition, in many cases, is the protection of the rights of a strategic investor entering the company through the acquisition of shares (equity investment), the establishment of stable and long-term relations between that investor and the existing shareholders of the company, as well as the acquisition of the controlling package of shares by any competing company. necessary for prevention. Such a condition is usually considered by investors who make venture investments or intend to establish a joint activity (start-up).
Joint sale of shares
This condition, known as “tag-along right” in international practice , means that when the majority shareholder, who is a party to the contract, intends to sell the shares owned by him to any third party, other shareholders (usually minorities) participate in the transaction and sell their shares in proportion to their shares. they get the right to sell to a person under the same conditions and price. The opposite of this is a condition known as “drag-along right” , in which case, when the majority shareholder disposes of his shares to any third party, he can make a claim against the other shareholders who are parties to the agreement, who in turn sell a certain part of their shares to that person on the same terms and price. let them sell.
Right of preemption in the case of alienation of shares
This condition, regardless of whether the company is open or closed, provides for the preferential right of other participants to buy those shares if the contract participant alienates his shares. With this, the participants have the opportunity to prevent the transfer of the control package of the society to third parties, including to raiders as a result of an unwelcome takeover.
Sale of shares at a certain price
In many cases, this condition is reflected in the contract as a put and call option. Among those cases, the following can be mentioned:
1) expiration of a predetermined period,
2) occurrence of any event or vice versa,
3) violation of the terms of the contract by any participant,
4) “deadlock” situation. emergence, i.e. the impossibility of resolving the disputed issue between the participants, etc.
The parties may agree that in the event of any of the aforementioned circumstances, the participant associated with that event will have the right to sell its shares to other participants at a pre-agreed price.
Obligation to take a pre-agreed position during voting on certain issues adopted at the general meeting
For example, a company may have several minority shareholders, each of whom individually owns a small share interest that, when aggregated, constitutes a fairly large share of the authorized capital. In this case, the minority shareholders can sign a shareholders’ agreement to effectively ensure their rights and interests and take a unified position against the majority shareholders.
With that agreement, minorities can undertake to vote unanimously against decisions on, for example, liquidation or reorganization of the company, issuance of additional shares, changes to the charter, and other issues included in the agenda.
Or when any majority shareholder nominates his representative as a candidate for membership of the company’s supervisory board, other shareholders may agree that they will definitely vote in favor of that candidate. At the same time, minority shareholders can conclude such an agreement and stipulate that they will nominate a single candidate to represent them for the membership of the company’s supervisory board and vote unanimously in his favor.
The procedure for resolving disputes by non-judicial methods
The parties can determine that disputes that may arise regarding the activities of the joint-stock company during the period of validity of the contract will be settled through negotiations between them, based on certain rules and procedures, before applying to the court . At the same time, the parties may agree on the consideration of such disputes by independent arbitration, including international arbitration.
Download this Example of Shareholders agreement for free. This shareholders’ agreement has 22 pages and is an MS Word type listed under planning and management documents.
Examples of Shareholders Agreement (Sample Document)
SHAREHOLDERS’ AGREEMENT
BETWEEN
[FOUNDER NAME 1]
[NAME FOUNDER 2]
AND
[NAME OF INVESTOR]
AND
[COMPANY NAME]
Dated [Date]
SHAREHOLDERS AGREEMENT [COMPANY NAME]
BETWEEN THE UNDERSIGNED :
[Name Founder 1], born on [Date of birth] at [Place of birth], [Marital status], residing at [Home address],
[Name Founder 2], born on [Date of birth] at [Place of birth], [Marital status], residing at [Home address],
Firstly,
Hereinafter individually referred to as a [Founder] and collectively the [Founders] or the [Founder Group].
AND
Option the investor is a company:
The company [Corporate name of the investor], [Legal structure of the company] with a capital of [Amount of share capital] euros, whose registered office is located at [Address of the registered office of the company], registered in the register of commerce and companies of [Place of registration] under the unique identification number [SIRET number] represented by [Name of the president], its president,
Option the investor is a natural person:
[Name of investor], born on [Date of birth] at [Place of birth], [Marital status], residing at [Home address],
Hereinafter individually referred to as an [Investor] and collectively the [Investors] or the [Investor Group] in the event of the arrival of additional investors.
On the other hand,
Hereinafter referred to individually as a [Party] and collectively as the [Parties].
IN THE PRESENCE OF:
The company [Corporate name of the company], [legal structure of the company] with a capital of [amount of share capital] euros, whose registered office is [Address of the registered office], registered in the trade and companies register of [ Place of registration] under the [SIRET number], represented by [Name of the president], in his capacity as President, intervening in this subscription agreement to accept, where applicable, the benefit of the rights granted to him and the obligations made available to him. its charge by this Subscription Agreement,
Hereinafter referred to as the [Company].
IT WAS PREVIOUSLY EXPOSED THAT:
The Company is a [Legal structure] under French law which has as its object, directly or indirectly, in France and abroad:
– [Corporate object of the company as mentioned in the statutes]
To enable the Company to finance its new development projects, the Founders approached Investors in order to offer them to participate in the financing of the Company’s development.
The round table linked to this merger consists of the issue of [Number of shares] Category 1 Preferred Shares (ADP1), for a total amount of investment in the company of [Amount of investment] € .
It is in this context that the Parties have agreed to organize their relations through a shareholders’ agreement which cancels and replaces any other agreement concerning the Company [Company name] and its shareholders.
CONSEQUENTLY, IT HAS BEEN AGREED AS FOLLOWS:
ARTICLE 1: DEFINITIONS
In this shareholders’ agreement, the following words and expressions have the meaning attributed to them below.
(a) Shares
The shares issued or to be issued by the Company in representation of its capital.
(b) Family Group
The spouse or direct line ascendants or descendants of a natural person Party, brothers, sisters, parents-in-law.
(c) Pact
This shareholders’ agreement entered into today by the Shareholders among themselves, as it may be amended or supplemented by amendment signed by each of the Parties.
(d) Third Parties
Any natural or legal person who is neither a Party nor the Company.
(e) Transfer
Any transaction resulting in a transfer of ownership, for the benefit of a Party or a Third Party, of Transferable Securities held by a Party, for any reason whatsoever (including in particular donation, partial contribution of assets, merger, demerger or a combined form of these forms of transfer of ownership).
(f) Securities
These include:
(i) the Shares,
(ii) investment certificates and all transferable securities giving access, immediately or in the future, to a portion of the Company’s capital,
(iii) the subscription right attached to the Shares and securities referred to in paragraph (ii) above in the event of the issue of Shares, investment certificates or securities, giving access, immediately or in the future , to a portion of the Company’s capital,
(iv) the voting rights certificates of the Company, and
(v) the free allocation rights of Shares, investment certificates or transferable securities or free voting right certificates attached to the Shares as well as the transferable securities and voting right certificates referred to in paragraph (ii) ) and (iv) above that one or more Parties hold or may come to hold, for any reason whatsoever.
ARTICLE 2: PURPOSE OF THE AGREEMENT
The object of the Agreement is to define the rights and obligations of the Parties and the terms and conditions that they agree to respect during the term of the Agreement with a view to pursuing their common objectives through the Company, without there being any solidarity between the Parties, except as otherwise provided in the Agreement.
ARTICLE 3: DECLARATIONS AND WARRANTIES
Each Party to the Pact declares and guarantees to the other Parties:
– for Parties that are legal persons and investment funds, that:
• it is a company, where applicable, a fund, legally constituted and in a regular situation under French law or under the law of the country in which it is established and that its permanent representative has full powers and qualities to be able to sign and execute the Pact,
• the signing and execution of the Agreement have been validly authorized by its competent bodies and does not entail or will entail any violation, termination or modification of any of the conditions or terms of any contracts or acts to which it is a Party and that the Pact is not in opposition to any provision of the said contracts or acts,
– for the Parties who are natural persons, that:
• it has the capacity to sign and execute the Pact,
• the signing and performance of the Agreement does not and will not result in any violation, termination or modification of any of the terms or conditions of any contracts or acts to which it is a Party and that the Agreement is not in opposition to no provision of such contracts or deeds.
ARTICLE 4: RIGHT OF PRE-EMPTION
Section 4.01: Notification of Assignor
Prior to the Transfer by a Party (hereinafter referred to as an “Assignor”) of all or part of the Shares it holds (hereinafter referred to as the “Transferred Shares”) for the benefit of a Party not belonging to the same Group (Founder Group or Investor Group) or for the benefit of a Third Party (hereinafter referred to as an “Assignor”), the Transferor shall notify the proposed Transfer, (“the Proposed Transfer”), to the other Parties (hereinafter referred to as the “Other Parties”) and to the Company, indicating the identity of the Assignee, its capacity (Third Party, or Party), where applicable the identity of the person who controls the Third Party, the number of Shares the Transfer is contemplated, the price offered by the Transferee (or, in the case referred to in paragraph (b) of section 4.02. below, by the Transferor) and the description of the operation at the end of which the Transfer would be realized.
Section 4.02: Exercise of the right of first refusal
Each Assignor grants to the Other Parties in the case of a Proposed Transfer, a right of pre-emption on the Assigned Shares. This right is granted in priority to the Other Parties who are members of the Group to which the Assignor belongs, and on a subsidiary basis to the Other Parties not belonging to this Group.
Each Other Party shall have a period of one month (reduced to fifteen (15) days if the proposed Transfer consists of an assignment or waiver of preferential subscription rights in favor of the Assignee) from receipt of the notification of the Proposed Transfer to notify the Assignor and the Company that it intends to exercise its right of pre-emption on all or part of the Assigned Shares.
The right of first refusal provided for in this article shall be exercised under the following conditions.
(a) The pre-emption right of the Other Parties may only be exercised collectively or individually up to the totality of the Transferred Shares.
(b) In the event of exercise of the pre-emption right, the purchase price of the Sold Shares will be:
(i) in the event of the sale of the Transferred Shares, the price agreed between the Transferor and the Transferee, or
(ii) in other cases and, in particular, in the event of a gift, exchange, contribution, merger or demerger or a combined form of these forms of transfer of ownership, the price offered in good faith by the Assignor, or in the event of disagreement, set by an expert appointed at the request of the disputing Party or Parties by order of the President of the Commercial Court ruling in summary proceedings and without possible appeal, in accordance with the provisions of Article XXXX of the law of Month, Date and Year Civil Code.
(c) If the repurchase offers combined from the Other Parties belonging to the same Group as the Assignor (the “Priority Preemptors”) concern in total a number of Shares equal to or greater than that of the Assigned Shares, the Assigned Shares will be sold to the Preemptors Priorities having exercised their pre-emption right, in proportion to the number of Shares they hold respectively and within the limit of their request. In the event of fractional shares, the remaining Share(s) will automatically be allocated to the Priority Pre-emptor who has requested the greatest number of Shares or, in the event of a tie, who will hold the greatest number of Shares, or in the event of new equality, to whoever will be the first notified that he intends to exercise his right of pre-emption.
(d) If the combined redemption offers of the Priority Pre-emptors relate in total to a number of Shares lower than that of the Shares Sold but that the Other Parties, belonging to the other group of Parties, have exercised their right of pre-emption for a number of Shares which, added to that of the Priority Pre-emptors, is equal to or greater than the number of Shares Sold, the Priority Preemptors may exercise their right of preemption up to the amount of their offers, as provided for in (c) above, the balance being sold to the Other Parties not being Priority Preemptors and having exercised their right of first refusal, this balance will be distributed among them according to the method described in paragraph (c) above.
(e) In the absence of a redemption offer or if the combined redemption offers of the Other Parties relate to a number of Shares lower than that offered by the Assignor, the Assignor may proceed, subject to compliance with the provisions of article 14 of the Agreement, to the Transfer of the Assigned Shares to the benefit of the Assignee.
(f) In the cases referred to in Section 4.02.b. (ii), in the event of disagreement by at least one Other Party on the price at which the Shares are offered, the dispute must be notified to the Transferor and to the Company within the first fifteen days of the time limit provided for the exercise of the right of preemption. The Company will inform the Other Parties that have not contested the price offered as soon as possible. The appointed expert must submit his report to the Assignor and to the Company, which must notify each of the Other Parties. Any dispute duly notified will have the effect of nullifying any exercise of the right of pre-emption which would have been notified by another Party prior to the notification of the expert’s report. The Other Parties may then exercise their right of pre-emption again, at the price set by the expert, according to the procedures provided for in section 4-02 and within a period of fifteen days beginning to run from the notification of the price set by the expert.
(g) The Transferor will not benefit from a right of reconsideration, except in the event that the pre-emption price has been fixed by the expert in accordance with section 4.02. (b)(ii) and 4.02. (f) above at a level lower than the price offered by the Assignor and provided that the Assignor has notified the Other Parties and the Company that it intends to abandon its proposed assignment within eight (8) working days of the date on which the expert will have submitted his report to him.
(h) Expertise costs will be borne by the Assignor if the price set by the expert is higher than the price he will have offered and by the disputing Party or Parties in other cases.
(i) In the event that the pre-emption right is exercised for a number of Shares at least equal to all of the Shares Sold, the Assignor must proceed with the Transfer of the Shares Sold within the period notified in the Transfer Plan or, failure to notify the deadline, within thirty (30) days of the expiry of the deadline for exercising the right of first refusal.
Section 4.03: Non-application of the right of first refusal
As an exception to the foregoing, the pre-emptive right granted by each Assignor will not apply in the following cases Transfer in favor of:
(a) From a Third Party Company:
(i) in which the Transferor holds directly, alone or with its Family Group, more than 51% of the shares or units giving the right to vote at meetings of shareholders or unitholders, as the case may be, or
(ii) who directly holds more than 51% of the shares or units carrying the right to vote at meetings of shareholders or unitholders, as the case may be, of the Transferor, or
(iii) more than 51% directly owned by a company which itself holds more than 51% of the shares or units giving the right to vote at meetings of shareholders or unitholders, as the case may be, of the Assignor , Where
(b) A natural person who is a member of the Family Group, who holds, alone or with his Family Group, directly more than 51% of the shares or units giving the right to vote at meetings of shareholders or unitholders of the Assignor, as the case may be,
(c) From a Founder if the assignment is from another Founder,
(d) A member of the Transferor’s Family Group, either directly or through a trust of which the latter would be the sole beneficiaries.
Provided that each of the following conditions is met:
– the Transferee will have adhered to the Agreement at the latest during the Transfer as provided for in Article 14 of the Agreement,
– In the cases referred to in paragraphs (a) and (b) above, the Assignor will have provided the Company with a declaration in which the Assignee undertakes to transfer to the Assignor or to a company meeting one of the defined criteria in paragraphs (a) and (b) above in the event that the Assignee ceases to fulfill the condition which exempted the Transfer from the right of first refusal.
Section 4.04: Non-exercise of the right of first refusal
In the event that a Party could have exercised its right of pre-emption on the occasion of a proposed Transfer duly notified and where it would not have been, the notifying Party must proceed with the Transfer in strict compliance with the terms of the notified Transfer Plan and within the time period provided for therein or, failing any time period provided for , within thirty (30) days from the expiry of the pre-emption period.
If the said Party fails to do so, it must again, prior to any Transfer of its Securities, comply with the provisions of the Agreement.
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ARTICLE 5: RIGHT OF JOINT EXIT (TAG ALONG RIGHT)
Tag along is a protection mechanism forminority shareholders of a company that guarantees them the right to leave a company, in case control of the company is acquired by an investor that until then was not part of it.
As with other contractual provisions, tag-along rights originated from the doctrine of freedom of contract and is governed by contract law (in common law countries) or the law of obligations (in civil law countries). As tag-along rights are contractual terms between private parties, they are often found in venture capital and private equity firms but not public companies.
Section 5.01: Pre-emptive Rights and Piggyback Rights
Pre-emptive Rights provide current shareholders with the right to participate in future financing and are frequently included in early-stage Shareholders’ Agreements. This right to buy future shares can be used to protect early investors’ shares from being diluted when a company decides to issue more shares.
A Piggyback Right requires that an Intending Shareholder permit other shareholders to sell their shares along with it on a pro rata basis. The rational for this device is to ensure that shareholders with this benefit can exit a company at the same time and rate as the shareholder subject to the right. The issue with a Piggyback Right is that it can delay and drag out potential sales of shares because they require a notice period (to the other shareholders), and a buyer for more than one shareholder’s shares must be found. This can discourage not only potential buyers, but also shareholders, due to the difficult tasks of finding purchaser(s).
Assuming:
– where one or more Parties (hereinafter referred to as the “Party Concerned” in this article 5), would consider the Transfer of Shares to a Party or a Third Party acting alone or in concert, at the meaning of Article XXXXX of Law No. XXXX of Month, date, Year on commercial companies, and where this Transfer would give this Party or Third Party, and, where applicable, the parties to the concert referred to herein -above (hereinafter referred to as the “Purchaser” in the context of this article 5 the control (the “Control”) of the Company within the meaning of the provisions of article 355-1 of this same law, and
– where the right of pre-emption provided for in article 4 of the Agreement has not been exercised due to the lack of sufficient redemption offers or due to one of the exceptions provided for in section 4.03. of the Pact,
the other Parties (hereinafter referred to as “the Non-Concerned Parties”) will have a tag-along right, under the terms of which they will be allowed to transfer to the Purchaser all or part of their Shares according to the same terms and conditions price conditions than those offered by the Purchaser to the Concerned Party.
The Party Concerned must therefore, prior to a Transfer of all or part of its Shares or any commitment on its part with a view to their Transfer, obtain the irrevocable commitment from the Purchaser that the latter will offer to the Non-Concerned Parties the possibility of transferring to it all of the Shares that the Non-Concerned Parties hold and which they then wish to transfer, under the same conditions and according to the same terms as those offered by the Purchaser to the Concerned Party.
By way of exception, the sale of shares of a Founder to another Founder would not result in the triggering of the tag-along right or the proportional tag-along right as set out in this article 5 even if one of the two Founders would hold the majority of the capital at the end of the sale.
Section 5.02: Notification of proposed transfer
Consequently, in the situation referred to in section 5.01 above, the Party Concerned must notify each of the Non-Concerned Parties, at the same time as the notification provided for in section 4.01 of the Agreement, that the Proposed Transfer referred to in this section 4.01 could have the effect of transferring Control of the Company.
Section 5.03: Deadline for exercising the right of joint exit
The Non-Concerned Parties shall have a period of one month (reduced to fifteen (15) days if the proposed Transfer consists of an assignment or waiver of preferential subscription rights in favor of the Purchaser) from receipt of the notification provided for in section 5.02 above to exercise their right to tag along as follows:
(a) Notification of the number of Shares
If the Non-Concerned Parties wish to exercise their tag-along right, they will notify the Concerned Party, prior to the expiry of the period indicated above, of the number of Shares they wish to transfer (hereinafter referred to as the purposes of this article 5 of the Agreement the “Offered Shares”).
(b) Purchase price
In the event of exercise by a Non-Concerned Party of its tag-along right, the purchase price by the Purchaser of the Offered Shares will be the purchase price agreed between the Purchaser and the Relevant Party for the Transfer of the Shares Assigned, or, if applicable, offered in good faith by the Party Concerned as described in paragraph 4.02. (b) of the Covenant. Any contestation of the price will be governed, mutatis mutandis, by the provisions of paragraph 4.02. (f) of the Covenant.
(c) Deadline for transfer of Shares
In the event of exercise by a Non-Concerned Party of its tag-along right, the Offered Shares will be sold within the time period specified in the notified Transfer Plan and in strict compliance with the terms of said Transfer Plan or, if no period is provided for this purpose, within fifteen days from the date of expiry of the period indicated in section 5.03.
Section 5.04: Transfer and Payment for Shares
In order to ensure that the Purchaser redeems the Offered Shares and pays for them within this period, the Party Concerned shall only transfer ownership of the Sold Shares to the Purchaser and shall only receive the price of the Sold Shares at provided that, simultaneously, the Purchaser is transferred title and acquires head of the sale price of the Offered Shares.
Section 5.05: Control of the Company
In the event that, as a result of the exercise of the right of first refusal provided for in Article 4 of the Agreement, a Party acting alone, or several Parties acting in concert, within the meaning of Article 356-1-3 of the law XXXX of the law of Month, Date, Year on commercial companies, would come to hold Control of the Company, the Non-Concerned Parties would have a right of joint exit in accordance with the provisions of sections 5.01 to 5.03.
It is however specified that the prior commitment provided for in section 5.01 will not be required, that the notification provided for in section 5.02 must be made by the Purchaser or by the Company within fifteen days of the acquisition of Control, and that in the event of acquisition of Control by several Parties acting in concert, these shall be jointly and severally liable for the performance of their commitments under this section 5.05.
Section 5.06: Non-exercise of the joint exit right
In the event that, on the occasion of a duly notified Transfer project, neither Party has exercised its right of joint exit, the Party having notified may proceed with the Transfer provided that it does so in strict compliance with the terms of the notified project and within the period provided for therein or, failing such period, within thirty (30) days from the expiry of the pre-emption and joint exit periods.
If the said Party fails to do so, it must again, prior to any Transfer of its Securities, comply with the provisions of the Agreement.
Section 5.07: Non-acquisition by the Acquirer
If, in contravention of the foregoing provisions, the Purchaser proceeds to the acquisition of the Shares of the Party Concerned but does not purchase the Shares Offered by the Non-Concerned Parties, the Party Concerned shall be required to become the purchaser himself. of all the Offered Shares within eight (8) days of the expiry of the time limit set in accordance with this article 5 for the Purchaser to have the Offered Shares transferred to him.
Similarly, if the Purchaser proceeds to the acquisition of the Shares of the Relevant Party and of the Shares Offered by the Non-Concerned Parties but does not pay for the Offered Shares, the Relevant Party would be jointly and severally liable with the Purchaser to proceed to the payment of the Shares Offered within eight (8) days from the expiry of the period set out in this article 5 for the Purchaser to have the Shares Offered transferred to him.
Section 5.08: Proportional exit right
In the event that a Transfer to a Third Party is not subject to the tag-along right provided for in article 5 above (the Offered Shares), or is subject to the right of pre-emption provided for in article 4 above and this would not be exercised, the Party Concerned undertakes to ensure that each Party who so requests, within a period which will expire fifteen (15) days after the expiry of the period provided for in section 4.02. or 5.03., as the case may be, can transfer to said Third Party a number of Shares N at most equal to the number of Shares obtained by applying the following formula:
N = N’ x A%
Where:
– N’ is the number of Shares Sold or Offered,
– A% is the percentage of the Company’s voting rights held by the Party requesting the redemption of part of its Shares.
The provisions of sections 5.01 to 5.07 above would apply mutatis mutandis in the event of the application of the provisions of this section 5.08.
This article would not apply to a Transfer relating to a number of Shares less than or equal to 10% of the Shares of a Party, nor to a Transfer taking place between Founders.
ARTICLE 6: MISCELLANEOUS PROVISIONS RELATING TO CAPITAL AND SECURITIES
Section 6.01: Application to all securities
The rights of pre-emption, tag-along, proportional tag-along and the purchase option provided for in Articles 4, 5 and 7 of the Agreement will apply not only to the Shares but also to all the Securities issued or to be issued by the Company.
Section 6.02: Prices of Securities
For the implementation of pre-emption, tag-along, proportional tag-along rights and the purchase option, the price of Transferable Securities other than Shares will be determined category of Transferable Security by category of Transferable Security by application of the provisions of paragraph (b) of section 4.02 of the Agreement.
Section 6.03: Registration of Securities
The Parties undertake to register all the Securities that they hold or will hold in pure registered accounts during the term of the Agreement.
If the Assignor referred to in Article 4 of the Agreement or the Party Concerned referred to in Article 5 of the Agreement or the Promissor referred to in Article 7 of the Agreement fails to observe the provisions set out in Articles 4, 5, 7 and 14 of the Covenant, each Party gives irrevocable mandate to the Company, which undertakes to do so, to refuse to make the entries required for the Transfer on the pure registered accounts of the Parties.
Section 6.04: Calculation of percentage or fraction of capital
When, in application of the provisions of the Agreement, it is necessary to calculate a percentage or a fraction of the capital of the Company, the percentage or the fraction will be, with the exception of those provided for in article 7 below, calculated in relation to a “fully diluted” capital, i.e. assuming fully exercised (i) the rights of future access to the capital of the Transferable Securities other than shares and/or (ii) the share subscription warrants entrepreneurs and stock options.
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ARTICLE 7: RIGHT OF REPURCHASE (DRAG ALONG RIGHTS)
Drag Along Rights (also referred to as “drags” or drag-along provisions) are rights that give the majority owners the right to force minority owners to join in the sale of a company.
Section 7.01: Condition of Consent to a Promise
(a) It is agreed that when one or more Parties, or any Third Party, acting alone or in concert within the meaning of article XXXX of the law of Month, Date, Year (the “Beneficiary”) comes to hold, directly or indirectly, more than seventy percent (70%) of the capital or voting rights of the Company, each of the Parties (hereinafter collectively referred to as the “Promisors” and individually a “Promisor”) who would then hold the remainder of the Company’s Shares, must, if the Beneficiary so requests, transfer them to the Beneficiary.
(b) It is also agreed that when a Third Party, acting alone or in concert within the meaning of Article XXXX of the law of Month, Date, Year (the “Beneficiary”) comes to make an offer for 100% of the capital of the Company and that shareholders representing more than seventy percent (70%) of the capital of the Company would like to accept this offer, each Party (hereinafter collectively referred to as the “Promisors ” and individually a “Promisor”) who has not exercised his right of pre-emption on this occasion and who then holds Company Shares should transfer them to the Beneficiary, if the Beneficiary so requests in writing and in view of the written agreement of the shareholders representing more than seventy percent (70%) of the capital of the Company to the Transfer of their Shares.
(c) To this end, the Promissor consents to the Beneficiary this irrevocable promise to sell (the “Promise”).
(d) It is further specified that in the situation referred to in paragraph (b) of this section 6.01, those of the Parties who would consider transferring their Shares to the Third Party must notify each of the other Parties, at the same time and in the same other forms than the notification provided for in section 4.01 of the Agreement, that the Proposed Transfer referred to in section 4.01 takes place within the framework of an offer relating to 100% of the capital of the Company.
Section 7.02: Condition for lifting Promise
Any Beneficiary may lift the Promise if one of the conditions defined in section 7.01 above is met.
Section 7.03: Notification of lifting of Promise
The Beneficiary must notify the Promise of its decision to lift the Promise within three (3) months from the day on which the condition defined in section 7.01.(a) above is fulfilled or in the case referred to in section 7.01.(b) from the day on which he has obtained the agreement of shareholders representing at least seventy percent (70%) of the capital of the Company on the Transfer, as well as the terms of the accepted offer.
Section 7.04: Quantity and Allocation of Shares Exercised
A Beneficiary may only exercise the Promise for all of the Shares still held by each of the Promisors on the date of exercise of the Promise, and this in one go. In the event of a plurality of Beneficiaries, they must agree on the distribution of the Shares transferred between them.
Section 7.05: Not Waiver of Promise
If the Promise has not been lifted under the aforementioned conditions, it will automatically lapse, without compensation due on any part.
Section 7.06: Price of Shares
In the event that the Promise is lifted within the terms and timeframe provided above, the price per Share would be equal to the amount per Share paid by the Beneficiary for the block of Company Shares which enabled him to cross the threshold of seventy percent (70%) of the Company’s shares or voting rights or the price offered by the Third Party, as the case may be.
In the event that the crossing of this threshold is the result of an operation referred to in section 4.02 (b)(ii) of the Contract, the price per Share will be determined in accordance with the provisions of said section 4.02 (b)(ii).
In the event that the Promise is lifted within the terms and time limits provided for above, each Party undertakes to transfer the ownership of its Shares in accordance with the terms of the offer that will have been notified to it.
Section 7.07: Deadline for transfer and payment
If this Promise is lifted within the terms and within the period provided for in section 7.13 of the deed and the price calculated in accordance with section 7.16 of the Agreement, the Transfer of the Shares and the payment of the sale price will take place no later than [one (1) month] after the date on which the lifting of the Promise will have been carried out by the Beneficiary. In the event of an expert’s report, this period of [one (1) month] will only begin to run from the notification of the expert’s report.
Section 7.08: Terms of Transfer and Payment
The Transfer will be carried out by the delivery:
– to the Promissor of a bank check for an amount equal to the purchase price of the shares, or, in other cases, of the consideration for the Shares provided for in the offer,
– to each Beneficiary of a transfer order giving the Company an order to proceed with the Transfer of Shares for the benefit of each Beneficiary, duly completed and signed.
Section 7.09: Failure to perform the Promise
In the event that the Beneficiary has notified the lifting of the Promise within the time limits and conditions provided for above, but where the Promisor has remained in default in the performance of its obligations under the Agreement, the Beneficiary may consign to the Fund Deposits and Consignment the price of the Shares for which the Promise would have been exercised. In this case, the mere delivery to the Company of copies of the notification of the lifting of the Promise and of the receipt of the consignment would constitute a movement order and will oblige the Company to make the resulting entries in the securities movement register and the corresponding shareholder accounts.
ARTICLE 8: EARLY DEPARTURE OF A “FOUNDER”
Section 8.01: Promise Consent Condition
The success of the company depends on the effective presence of the Founders within the company, which is a fundamental element of their participation in the initial capital of the company.
Any Founder or group of Founders (the “Promising Party(ies”) shall, if he or they leave or leave the company by personal will, or for fault of any nature, serious or gross, transfer to the Beneficiary(ies) all or part of the shares of the Company that he or they would remain or would remain to hold on the date of exercise of the Promise, right to the dividend attached and free of any privilege, pledge or security of any kind whatsoever, and this in the proportions following described below.
The occurrence of the departure of a Founding Partner can be in “Good Leaver” or “Bad Leaver” as defined below:
(a) “Good Leaver”: the death of a founding partner or the resignation of a founding partner from his or her corporate office or employment contract due to illness, disability or incapacity or due to a situation of dependence with regard to his spouse/partner or descendant, of a medical or accidental nature,
(b) “Bad Leaver”: the resignation of a founding partner from his employment contract for a reason other than those relating to a case of Good Leaver, the dismissal for serious or gross negligence of a founding partner, the violation of the non-competition agreement, the refusal to transmit information relating to the company to the COSO.
The Committee of Sponsoring Organizations of the Treadway Commission (COSO) is an organization that develops guidelines for businesses to evaluate internal controls, risk management, and fraud deterrence. In 1992 (and subsequently re-released in 2013), COSO published the Internal Control – Integrated Framework, commonly used by businesses in the United States to design, implement, and conduct systems of internal control over financial reporting and assessing their effectiveness.
Section 8.02: Sold Shares
The affected shares are limited to [number of affected shares] shares for [Founder 1] and [number of affected shares] shares for [Founder 2].
The Promisor promises to sell (the Promise II), if he satisfies condition 8.01,
– 100% of the shares concerned if his departure occurs before [Example: December 31, 2019],
– 75% of the shares concerned if his departure occurs after [Example: January 1, 2020 and before December 31, 2020],
– 50% of the shares concerned if his departure occurs after [Example: January 1, 2021 and before December 31, 2021],
– 25% of the shares concerned if his departure occurs after [Example: January 1, 2022 and before December 31, 2022].
Beyond this last date, the promise of sale is null and void.
Section 8.03: Price of Shares
(a) In the case of Good Leaver: the market value will be determined by unanimous agreement of the partners, by reference to the value of the shares retained during any increase in the share capital of the Company, which took place in the [6 previous months].
(b) In the event of Bad Leaver: nominal value if the event of Bad Leaver occurs before [Date]; the market value discounted by [50%] if the Bad Leaver event occurs between [Date].
Section 8.04: Notification of lifting of Promise
The Beneficiary must notify the Promisor of its decision to lift Promise II within [three (3) months] from the day on which the condition defined in section 8.01 above is met.
Section 8.05: Quantity and Allocation of Shares Exercised
A Beneficiary may only exercise Promise II for all of the shares that the Promisor would still hold on the date of exercise of Promise II, and this in one go. In the event of a plurality of Beneficiaries, the shares will be distributed among them in proportion to the shares held or in agreement of them.
Section 8.06: Not Waiver of Promise
If Promise II has not been lifted under the aforementioned conditions, it will automatically lapse, without compensation due on any part.
Section 8.07: Deadline for transfer and payment
The transfer of the shares and the payment of the sale price will take place at the latest [one (1) month] after the date on which the lifting of the Promise will have been carried out by the Beneficiary
Section 8.08: Terms of Transfer and Payment
The transfer will be subject to the delivery:
– to the Promissor of a bank check for an amount equal to the purchase price of the shares,
– to each Beneficiary of a transfer order giving the Company an order to proceed with the transfer of the shares for the benefit of the Beneficiary, duly completed and signed.
Section 8.09: Default of Promise
In the event that the Beneficiary has notified the lifting of Promise II within the time limits and conditions provided for above, but where the Promisor has remained in default in the performance of its obligations under the Agreement, the Beneficiary may consign to the XXXX BANK the price of the Shares for which Promise II would have been exercised. In this case, the mere delivery to the Company of copies of the notification of the lifting of Promise II and the receipt of the consignment would constitute a movement order and will oblige the Company to make the resulting entries in the securities movement register. and the corresponding shareholder accounts.
ARTICLE 9: INVESTORS, ASSIGNMENT TO A THIRD PARTY AND STOCK EXCHANGE
Section 9.01: Introduction of investors and evolution of the agreement
The Parties undertake to make their best efforts to create and put in place the necessary conditions for the entry of financial investors into the capital of the Company if this proves necessary again.
The Parties agree in advance to change the content of the Pact in order to accommodate such future financial investors.
The Parties also irrevocably undertake to maintain the commitments they have made, each as far as it is concerned, by signing this Agreement, within the framework of the signing of any new shareholders’ agreement which may then be negotiated and signed with such future financial investors, which would then cancel and replace the provisions of this Agreement.
Section 9.02: Transfer to a Third Party and IPO
The Parties undertake to make their best efforts to create and implement the conditions necessary for the sale of the company to a third party or the introduction of the Company’s Shares on a French regulated market or a foreign stock exchange and carry out this sale or this introduction no later than [December 31, 2019], insofar as the conditions of the market and of the Company allow it.
ARTICLE 10: OTHER PROVISIONS
Section 10.01: Engagement of Key Individuals and Parties
(a) Non-competition undertaking of Key Persons
The commitment of the “Key Men”, as they are defined below, consists in not occupying a post of administrator, director, employee or consultant in another company, which exercises a directly competing activity, on the territory Europe and on the territory of the United States of America:
– as long as they have the status of Key Man, and
– within [two (2) years] from the end of this Agreement for any reason whatsoever, or, if this date is earlier, from the date on which they cease to have the quality of Key Man.
For the purposes of the Agreement, a Key Person is any natural person whose name appears in [Appendix A] of the Agreement or so designated by the Board of the Company. The Strategic and Operational Committee (COSO) defined in article 11 below, the Key Person(s) abstaining, may also grant exceptions relating to the commitments of the Key Persons or decide that the protection of the Company which attaches to this quality is no longer required and, consequently, to put an end to the qualification of Key Person.
The COSO will set, where applicable, the amount of life insurance that the Company may take out, for its own benefit, on the life of each Key Person.
Any Party having adhered to the Pact who would be a Key Person will be bound by the provisions of this article.
The Parties undertake to make their best efforts to ensure that any new Key Person who is not a Party subscribes to a non-competition agreement in accordance with the terms of this article.
In addition, [Names of founders / other key people] as Key People undertake, each as far as he is concerned, to devote most of their professional time to their activities within the Company, as long as they will be Parties to the Agreement and that they will exercise management functions identical or similar to those exercised by them on the date of signature of the Agreement.
However, in the event that the Company would hold the future the control of subsidiaries, in France or abroad (hereinafter the “Subsidiaries”), within the meaning of the provisions of XXXX of the law of Month, Date and Year, he commitment entered into by [Names of the founders / other men] within the framework of this article of the Agreement would extend to the benefit of the Subsidiaries.
(b) Engagement of loyalty and confidentiality of the Parties
The Parties undertake a duty of loyalty and confidentiality with regard to the Company, in particular with regard to any information whatsoever collected within the Company. They undertake, as such, to use said information only for the benefit of the development of the Company.
Section 10.02: Intellectual Property
Subject to the provisions of Article 10.02.b of the Agreement, the Company shall have an absolute, valid and exclusive right, either through direct ownership or co-ownership, or through a license, to the use of all the rights of literary and artistic or industrial property, in particular software, designs or models, patents, know-how, trademarks, trade names (the “Industrial Property Rights”) that it will use in the context of its day-to-day operation or that will be necessary for the development of its activities.
(a) The Parties will make their best efforts to ensure that each employee of the Company subscribes to a commitment under which this employee transfers to the Company all the intellectual property rights relating to the work that he carries out in the field of activity of the Company as defined in the preamble to this Agreement, it being understood that any patent filing resulting from the Company’s activity will be made in the name of the Company, where applicable in co-ownership insofar as a Third Party has participated in the design of said patent. The Parties will also make their best efforts to protect the intellectual property rights of the company.
(b) The Founders undertake to subscribe within [three (3) months] of the signing of the Agreement to a commitment as described in article 10.02b of the Agreement, if they have not already subscribed to such a commitment prior to the signing of the Pact.
Section 10.03: Issuance of stock options
The Parties agree to take the necessary steps to ensure that the Company issues the stock options or business creator warrants necessary to recruit the best professionals in its field of activity.
ARTICLE 11: STRATEGIC AND OPERATIONAL COMMITTEE (COSO)
The COSO is an internal control framework defined by the Committee Of Sponsoring Organizations of the Treadway Commission. It is used in particular in the context of the implementation of provisions under the Sarbanes-Oxley, SOX or Financial Security Act, LSF, for companies subject respectively to American or French law. The initial repository called COSO 1 has evolved since 2002 towards a second corpus called COSO 2.
Section 11.01: Compliance with legal provisions, the agreement and the articles of association
For all matters relating to the administration and management of the Company, the Parties irrevocably undertake to comply with the legal provisions applicable to the Company, the provisions of the Agreement, as well as the Company’s articles of association (the “Statutes”), and as they may subsequently be modified. However, in the event of a conflict between the Statutes and the Pact, it is expressly agreed that the Pact will prevail between the Parties.
Section 11.02: Creation and General Operation of COSO
A COSO is created. He provides advice and assistance to the Chairman and the Chief Executive Officer of the Company.
The assembly will appoint the members of the COSO which itself will appoint, by simple majority, its President.
The COSO will meet [at least four (4) times a year] and as often as the corporate interest requires, when convened by its Chairman or the Chairman of the company.
Decisions are taken by a majority of the members present or represented, each COSO member has one vote and cannot represent more than one of his colleagues. In the event of a tie vote, the voice of the President of the COSO is preponderant.
The COSO may also deliberate validly, without meeting physically, in any form whatsoever, by telephone, videoconference or otherwise, provided however that the decisions taken are formalized by one or more writings – minutes, letters, faxes or exchanges emails – providing proof of deliberation.
Section 11.03: Allocation of COSO Seats
The Parties undertake to do their best to ensure that the distribution of seats within the Strategic and Operational Committee complies with the following principles:
(a) the Company’s Strategic and Operational Committee will be composed of [6 members at most] and may be increased to [Example: 12 members above 5 million in turnover],
(b) one third of the members will be Founders or personalities chosen by the Founders,
(c) one third of the member(s) will be representatives of the Investors,
(d) one third of the member(s) will be independent persons; for the purposes of this paragraph, any person holding directly or indirectly a number of Shares representing having less than 10% of the Company’s capital and having no capital link or subordination link with respect to a member of the Founders or a member of the Investor Group.
The COSO is, by way of derogation from section 11.02 paragraph 2 above designated under the terms hereof, and by exception, composed of [Number of COSO members] persons, namely:
– [Names of COSO members / corporate names of member companies]
Section 11.04: Matters for COSO Consideration
The Parties agree to use their best efforts and agree to each other that no action will be taken by the Company regarding the matters listed below without having been submitted for examination and to the deliberation for authorization, by simple majority with casting vote of the Chairman in the event of a tie, of the Strategic and Operational Committee.
Thus, any action envisaged in the areas thus listed may be submitted for examination and deliberation for authorization by the Strategic and Operational Committee at the request of two COSO Members:
(a) Modification of the articles of association of the Company and/or the Subsidiaries, likely to infringe, directly or indirectly, in any form whatsoever, for the present or the future, the rights of the Investors, the Founders or the project of development,
(b) Acquisition, transfer, contribution or assignment as a guarantee or surety of any element appearing in the assets of the Company and/or the Subsidiaries if the total amount of the transaction envisaged, on one or more occasions, exceeds [ Amount to be defined],
(c) Capital Transaction,
(d) Payment of dividends,
(e) Selection of an investment banker,
(f) Issuance of stock options or equivalents,
(g) Staff Remuneration Policy,
(h) Any recruitment and any anticipated salary increases,
(i) Any significant transaction not provided for in the budget for an amount greater than [Amount to be defined],
(j) Change of strategic orientation of the Company,
(k) Application for admission of the Shares to trading on a French or European Union regulated market or a foreign stock exchange.
These COSO rules may be modified by the unanimity of the COSO members less two members.
Section 11.05: COSO and Investor Information
The parties and in particular the Chairman and the Chief Executive Officer will regularly inform the Strategic and Operational Committee of the company’s situation.
A weekly, monthly and quarterly management control validated by the Investors will notably provide information on turnover, the order portfolio and cash flow.
The weekly sales management check will be sent by email [Day to be defined],
The monthly management control will be sent by email [Day to be defined] and will include in particular a commercial and budgetary situation (achieved / budgeted objective), various highlights (human, technical, market), priorities to come.
The quarterly management control will be sent by email [Day to be defined] will include in particular a commercial and budgetary situation (achieved / budgeted objective) and an analysis of the competitive position.
The company will adopt a time management system, the essential elements of which will be an integral part of management control.
The first version of the annual budget (operation, cash flow, financing, balance sheet) will also be presented before [Date], the final version [before the start of the fiscal year] and a budget revision will be carried out [before the start of the second semester] .
Specific analyzes must be able to be provided to the Strategic and Operational Committee at the request of one or more of its members.
Section 11.06: Investor Information
The Founders will be responsible for transmitting, at least quarterly, and after communication to the COSO, general information on the company to the other Investors. These are subject to a confidentiality agreement.
ARTICLE 12: CONFIDENTIALITY
Section 12.01: Confidential Information
Each of the Parties undertakes to consider as strictly confidential and not to disclose, assign or transfer to a Third Party, any documents and information that it may acquire or to which it will have had access in the context of its relations with or its responsibilities. in the Company and concerning, in particular, the activity, products, customers, strategy, development, commercial or partnership agreements and the financial situation of the Company or its subsidiaries unless:
– the Company has given its prior consent in this regard, or
– the applicable law or regulations require it, or
– whether it concerns disclosures made to a COSO member, manager, employee or professional adviser of a Party, but only with a view to the execution by this Party of its commitments and obligations or the exercise of his rights resulting from its participation in the Company and if the aforementioned director, executive, employee or professional adviser undertakes beforehand to respect the same commitment of confidentiality, which this Party will vouch for.
Section 12.02: Non-Confidential Information
However, information will not be considered confidential:
– fallen into the public domain by third parties and without negligence on the part of the Party having disclosed the information,
– available from other sources without breach of this confidentiality agreement,
– held by the Parties for more than five (5) years at the time of their disclosure, provided that they were notified as such at the time of their communication.
ARTICLE 13: ENTRY INTO FORCE, DURATION AND TERMINATION OF THE AGREEMENT
Section 13.01: Coming into Force of the Covenant
The Pact will enter into force on the date of signature of the Pact.
Section 13.02: Duration and Termination of the Agreement
The Agreement is concluded for a period of ten (10) years from the date of its entry into force. At the end of this first period of ten (10) years, the Agreement will be automatically renewed for successive periods of one (1) year. On the occasion of each renewal, including the first of them, any Party may denounce the Agreement, as far as it is concerned, by notifying its decision at least six (6) months in advance to the other Parties.
However, on the date on which a Party no longer holds any Shares or Securities of the Company, the Agreement will terminate with respect to this Party, but will remain in force with respect to the other Parties.
As an exception to the foregoing provisions, the Agreement will automatically terminate on the date on which the Company’s Shares are admitted to trading on a French regulated market or a foreign stock exchange.
The Agreement would also terminate automatically in the event that one or more members of the Founder and Investor Groups holding together, directly or indirectly, a number of Shares representing more than 95% of the Company’s capital or voting rights denounces the Pact under the conditions provided for in this article.
The expiration of the Agreement will however have no effect on the validity of any right of a Party arising from the execution of the Agreement prior to its expiration.
ARTICLE 14: PROXY
Proxy or agent (law), a substitute authorized to act for another entity or a document which authorizes the agent so to act.
Section 14.01: Common agent
The Parties agree to jointly and irrevocably designate the Company as joint agent (hereinafter, the [Agent]) responsible for managing the Agreement, as described in section 13.02 of the Agreement.
The Company, represented by its Chairman, intervenes specifically in the Pact to accept this mandate of common interest, in the terms below.
Section 14.02: Role of agent
In its capacity as manager of the Agreement, specially mandated by the Parties for the duration of the Agreement provided for in article 13 above, the Agent:
– shall be solely authorized to process and, where applicable, execute movement orders relating to the Securities issued by the Parties,
– will be required to verify the regularity of requests for movement orders with regard to the commitments contained in the Agreement,
– must ensure that the shareholder accounts opened by the Company mention the restrictions to which the Transferable Securities belonging to the Parties are subject in application of the Agreement.
– The Agent will collect the adhesions to the Pact as provided for in article 14 below.
Section 14.03: Scope of mandate
This mandate will relate to the management of all the Transferable Securities belonging to the Parties.
ARTICLE 15: ACCESSION TO THE PACT
A deed of accession or also called an accession agreement is used to allow a new party to acquire shares in a private company and become part of the company’s shareholders agreement. Shares can be either transferred to the new member by an existing shareholder or the company can issue new shares to the investor.
Section 15.01: Membership by Transfer
In the event that a Party decides to Transfer one or more of its Securities to a Third Party, it undertakes to have said Third Party adhere to the Agreement, at the latest when the Transfer is carried out.
For the implementation of this article, the Shareholders give the Company an irrevocable mandate to obtain the Third Party’s adherence to the Agreement in their name and on their behalf.
Consequently, the mere signature by the Company of a copy of the Agreement also signed by the said Third Party will constitute signature by all the Parties. Said Third Party will thereby become one of the Parties for the purposes of the Agreement and the Agreement will benefit and bind said Third Party and said Third Party will become part of the Transferor’s Group.
The Company will also have all powers to modify the Agreement exclusively in order to include the name of the Third Party and all the Parties will be bound by the modifications thus made.
A copy of the amended Agreement will then be notified to each of the Parties by the Company.
Section 15.02: Membership by capital increase
In the event that a capital increase, voted by one or more Parties representing at least 2/3 of the Shares held by the Parties, would be reserved for a Third Party, the Parties will come together to define in what capacity said third parties will adhere and will then instruct the Company to obtain the said Third Party’s adherence to the Agreement under the terms and conditions provided for in article 14.1 above.
ARTICLE 16: AMENDMENTS TO THE AGREEMENT
The Parties will be bound by any change, any modification and any waiver of any of the provisions of the Agreement, which will be decided by a number of Parties or their duly authorized representatives, representing more than ninety-five percent of the Securities Securities of the Company held globally by the Parties.
As an exception to the foregoing, the Parties may only unanimously modify the provisions of Articles 4, 5, 6, 7, 8 of the Pact.
ARTICLE 17: NOTICES
Section 17.01: Notification Procedures
Any notification required or permitted under the provisions of the Agreement must be in writing and will be validly given if sent by registered mail with acknowledgment of receipt, or by telex or fax confirmed by registered mail with acknowledgment of receipt, addressed to the registered office or at the domicile of a Party or of the Company as it appears at the beginning of the Agreement.
Each Party to the Agreement may modify the address to which notifications and copies thereof should be sent to it, by notifying the said change to the Other Parties as provided above.
Section 17.02: Assumed date of notices
Notices made by mail will be deemed to have been made seven (7) days after the date of mailing.
Notifications made by e-mail will be presumed to have been made on the date of sending the e-mail, on the condition that each notification by e-mail is confirmed by registered mail with acknowledgment of receipt sent the same day.
ARTICLE 18: APPLICABLE LAW AND JURISDICTION
The Pact is, for its validity, interpretation and execution, subject to French law.
Disputes to which the Agreement and its annexes may give rise, or which may be the result or consequence thereof, and which cannot be settled by a transaction will be subject to the exclusive jurisdiction of the Courts of the place of the registered office of the Company.
ARTICLE 19: COMMITMENTS
The Agreement will validly bind and benefit the heirs, legatees and assigns, as well as the legal representatives of each of the Parties.
ARTICLE 20: MISCELLANEOUS PROVISIONS
(a) The Parties agree that the provisions stipulated in the preamble form an integral part of the Agreement.
(b) In the event that any of the provisions of the Agreement are declared null or void in any way and for any reason whatsoever, the other provisions of the Agreement will remain applicable and the Parties undertake to consult each other to remedy the cause of nullity found, so that, unless this is impossible, the Agreement continues its effects without interruption.
(c) The Parties undertake to communicate, sign and deliver any information and any document as well as to perform any acts or take any decisions that may be necessary for the execution of the Agreement.
Done at, on____
In [number of copies] original copies
[Founder 1] [Founder 2]
[Investor]
[company name] represented by [name of chairman]
APPENDIX A: LIST OF KEY INDIVIDUALS
[Founder 1]
[Founder 2]
[Other Key Men/Person]
Sources: Investopedia, CFI Education Inc, Michael C. Volker via Simon Fraser University
Photo credit: stevepb via Pixabay
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