Unanimous Shareholder Agreement Template Ontario

UNANIMOUS SHAREHOLDER AGREEMENT TEMPLATE ONTARIO

THIS UNANIMOUS SHAREHOLDER AGREEMENT (the "Agreement") is made and entered into as of this [Day] day of [Month], [Year] (the "Effective Date"),

BETWEEN:

[Insert Corporation Name], a corporation incorporated pursuant to the laws of the Province of Ontario (hereinafter referred to as the "Corporation"),

AND:

[Insert Shareholder 1 Name], residing at [Insert Address], in the Province of Ontario (hereinafter referred to as "[Short Name/Identifier, e.g., Shareholder A]")

AND:

[Insert Shareholder 2 Name], residing at [Insert Address], in the Province of Ontario (hereinafter referred to as "[Short Name/Identifier, e.g., Shareholder B]")

(The aforementioned individual Shareholders, together with any additional persons who subsequently become parties hereto pursuant to the terms of this Agreement, are collectively referred to as the "Shareholders" and individually as a "Shareholder").

RECITALS:

WHEREAS the Corporation was incorporated under the Business Corporations Act (Ontario), R.S.O. 1990, c. B.16, as amended (the "OBCA");

AND WHEREAS as of the Effective Date, the authorized capital of the Corporation consists of an unlimited number of common shares, of which [Insert Number] common shares are validly issued and outstanding as fully paid and non-assessable, and the legal and beneficial ownership of such shares is set forth in Schedule "A" attached hereto;

AND WHEREAS the Shareholders are all of the shareholders of the Corporation entitled to vote in respect of the election of the board of directors of the Corporation;

AND WHEREAS pursuant to subsection 108(3) of the OBCA, the Shareholders desire to enter into this Unanimous Shareholder Agreement to restrict, in whole or in part, the powers of the directors of the Corporation to manage or supervise the management of the business and affairs of the Corporation, and to provide for certain rights, restrictions, and obligations governing their relationship inter se and with respect to the Corporation;

NOW, THEREFORE, THIS AGREEMENT WITNESSETH that in consideration of the mutual covenants, agreements, representations, and warranties contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each Party, the Parties hereto covenant and agree as follows:

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SECTION 1: OPERATIONAL DEFINITIONS

For the purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, the following terms shall have the respective meanings set forth below:

1.1. "Act" or "OBCA" means the Business Corporations Act, R.S.O. 1990, c. B.16, as amended from time to time, or any statute enacted in substitution thereof.

1.2. "Affiliate" has the meaning ascribed thereto in the Securities Act (Ontario), as amended from time to time.

1.3. "Agreement" means this Unanimous Shareholder Agreement, including all recitals and schedules attached hereto, as amended, restated, modified, or supplemented from time to time.

1.4. "Arm's Length" has the meaning ascribed to that term under the Income Tax Act (Canada), as amended from time to time.

1.5. "Board" or "Board of Directors" means the board of directors of the Corporation as constituted from time to time.

1.6. "Business Day" means any day, other than a Saturday, Sunday, or statutory holiday recognized in the Province of Ontario, on which banks are open for business in Toronto, Ontario.

1.7. "Cause" means, with respect to the termination of employment, consultancy, or directorship of any Shareholder, (a) gross negligence or willful misconduct in the performance of duties; (b) conviction of, or entering of a plea of guilty or nolo contendere to, any indictable offense or any crime involving fraud, dishonesty, or moral turpitude; (c) material breach of this Agreement, the articles of incorporation, or any employment agreement between the Corporation and the applicable Shareholder, which breach is not cured within the timeframes specified herein; or (d) chronic absenteeism or substance abuse adversely affecting job performance.

1.8. "Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise, and the terms "Controlled" and "Controlling" shall be construed accordingly.

1.9. "Deemed Transfer" means any transaction or event resulting in a change of Control of a corporate Shareholder, or the death, legal incapacity, bankruptcy, or insolvency of a Shareholder.

1.10. "Director" means a member of the Board of Directors of the Corporation.

1.11. "Encumbrance" means any mortgage, pledge, lien, charge, security interest, hypothec, encumbrance, option, right of first refusal, proxy, voting trust, restriction on transfer of any nature whatsoever, or adverse claim of any kind or character.

1.12. "Fair Market Value" means the cash price that a willing buyer would pay to a willing seller in an arm’s-length transaction, determined in accordance with Section 3.7 of this Agreement.

1.13. "Force Majeure" means any cause beyond a Party's reasonable control, including acts of God, war, terrorism, civil unrest, fire, flood, catastrophic weather events, pandemics, government restrictions, or strikes, provided that lack of finances shall not be deemed a Force Majeure event.

1.14. "Offered Shares" has the meaning ascribed thereto in Section 3.3.

1.15. "Party" means a party to this Agreement and its respective successors and permitted assigns.

1.16. "Person" includes an individual, sole proprietorship, corporation, body corporate, partnership, limited partnership, limited liability company, joint venture, trust, unincorporated organization, government agency, or regulatory authority.

1.17. "Pro Rata Share" means, with respect to any Shareholder at any time, the proportion that the number of Common Shares held by such Shareholder bears to the total number of Common Shares issued and outstanding at that time.

1.18. "Rothschild / Shotgun Notice" has the meaning ascribed thereto in Section 4.3.

1.19. "Shares" means all shares in the capital of the Corporation of any class or classes, now or hereafter authorized, including Common Shares and preferred shares.

1.20. "Transfer" means, when used as a verb, to sell, assign, transfer, convey, pledge, encumber, hypothecate, gift, exchange, or otherwise dispose of, directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, any Share or any right, title, or interest therein; and, when used as a noun, means any such transaction or disposition.

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SECTION 2: SUBSTANTIVE TERMS & OBLIGATIONS

2.1. Organization of the Board of Directors

(a) The Board of Directors of the Corporation shall consist of exactly [Insert Number] Directors. (b) Each Shareholder covenants and agrees to vote all Shares held or controlled by them, at every meeting of Shareholders called for the election of directors, in favor of the election of nominees designated as follows: (i) [Insert Name/Designator] shall be the nominee of [Shareholder A]; (ii) [Insert Name/Designator] shall be the nominee of [Shareholder B]. (c) Pursuant to subsection 108(3) of the OBCA, to the extent that this Agreement restricts the powers of the Directors to manage or supervise the management of the business and affairs of the Corporation, the Shareholders shall possess and exercise all such powers, duties, and responsibilities, and shall be subject to all liabilities of Directors in connection therewith, and the Directors are hereby relieved of such duties and liabilities to the same extent.

2.2. Conduct of Business and Performance Metrics

(a) The Shareholders and the Corporation shall use their respective best commercial efforts to develop, promote, and operate the business of the Corporation in accordance with the annual business plan and budget approved by the Board from time to time. (b) The Corporation shall maintain true, accurate, and complete books of account and records in accordance with International Financial Reporting Standards (IFRS) or Canadian Accounting Standards for Private Enterprises (ASPE) consistently applied. (c) Each Shareholder who is an employee, officer, or consultant of the Corporation covenants to devote their full working time, attention, and best efforts to the advancement of the Corporation’s business and shall not engage in any competing business enterprise directly or indirectly.

2.3. Representations and Warranties

Each Shareholder severally, and not jointly, represents and warrants to and in favor of each other Shareholder and the Corporation that: (a) Such Shareholder has full legal capacity, power, and authority to enter into this Agreement and to perform all obligations required hereunder; (b) This Agreement has been duly executed and delivered by such Shareholder and constitutes a legal, valid, and binding obligation of such Shareholder, enforceable against them in accordance with its terms; (c) The execution, delivery, and performance of this Agreement do not and will not violate, conflict with, or result in a breach of any material contract, court order, statute, or law to which such Shareholder is subject; and (d) Such Shareholder is the sole legal and beneficial owner of the Shares set forth opposite their name in Schedule "A", free and clear of all Encumbrances.

2.4. Financial Information and Information Rights

The Corporation shall furnish to each Shareholder: (a) Within [Insert Number, e.g., 90] days following the end of each fiscal year, audited or reviewed annual financial statements prepared by an independent chartered professional accountant; and (b) Within [Insert Number, e.g., 30] days following the end of each fiscal quarter, unaudited quarterly financial statements and a management discussion and analysis report.

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SECTION 3: RESTRICTIONS ON TRANSFER OF SHARES

3.1. General Prohibition

Except as expressly permitted by this Agreement, no Shareholder shall Transfer any Shares, directly or indirectly, voluntarily or involuntarily, to any Person. Any attempted Transfer in violation of this Agreement shall be null and void ab initio, shall not be recognized by the Corporation, and shall confer no rights upon any purported transferee.

3.2. Permitted Transfers

A Shareholder may Transfer all or any part of their Shares without the prior written consent of the Board, provided that the transferee executes a deed of adherence agreeing to be bound by this Agreement, in the following circumstances: (a) To an Affiliate of such Shareholder, provided that the transferring Shareholder remains jointly and severally liable for the obligations of such Affiliate; or (b) For estate planning purposes, to a family trust or holding company for the sole benefit of the transferring Shareholder, their spouse, or children.

3.3. Right of First Refusal (ROFR)

If a Shareholder (the "Selling Shareholder") receives a bona fide, arm's-length written offer from a third party (the "Third-Party Purchaser") to purchase all or any portion of their Shares (the "Offered Shares"), which the Selling Shareholder desires to accept, the Selling Shareholder shall first offer the Offered Shares to the non-selling Shareholders in the following manner: (a) The Selling Shareholder shall deliver a written notice (the "Transfer Notice") to the Corporation and each non-selling Shareholder, detailing the identity of the Third-Party Purchaser, the purchase price, and all material terms and conditions of the offer. (b) Delivery of the Transfer Notice shall constitute an irrevocable offer by the Selling Shareholder to sell the Offered Shares to the non-selling Shareholders at the price and upon the terms specified in the Transfer Notice. (c) Each non-selling Shareholder shall have [Insert Number, e.g., 30] days from the receipt of the Transfer Notice to elect to purchase all or any portion of their Pro Rata Share of the Offered Shares by delivering written notice to the Selling Shareholder. (d) If the non-selling Shareholders do not elect to purchase all of the Offered Shares within the prescribed period, the Selling Shareholder may, within [Insert Number, e.g., 60] days thereafter, sell the remaining Offered Shares to the Third-Party Purchaser on terms no more favorable to the purchaser than those set forth in the Transfer Notice.

3.4. Piggy-Back Rights (Tag-Along)

If a Selling Shareholder proposes to Transfer a controlling block of Shares (or any Shares representing more than [Insert Number, e.g., 50]% of the issued and outstanding Common Shares) to a Third-Party Purchaser, each non-selling Shareholder shall have the right to require the Third-Party Purchaser to purchase all (or a pro-rata portion) of the non-selling Shareholder’s Shares at the same price and on the exact same terms and conditions as offered to the Selling Shareholder.

3.5. Drag-Along Rights

If Shareholders holding at least [Insert Number, e.g., 75]% of the issued and outstanding Common Shares (the "Dragging Shareholders") approve a bona fide arm’s-length sale of all the issued and outstanding Shares of the Corporation to an independent third-party purchaser, the Dragging Shareholders may compel all other Shareholders (the "Dragged Shareholders") to sell all of their Shares to such third-party purchaser on the same terms and conditions approved by the Dragging Shareholders.

3.6. Deemed Transfers upon Bankruptcy, Death, or Incapacity

(a) Upon the death, legal incapacity, bankruptcy, or insolvency of any Shareholder (or the change of control of a corporate Shareholder), a Deemed Transfer shall be deemed to have occurred. (b) The Corporation or the surviving Shareholders shall have the option, exercisable within [Insert Number, e.g., 90] days of receiving formal notice of the Deemed Transfer event, to purchase all (but not less than all) of the Shares owned by the affected Shareholder or their legal representative at Fair Market Value.

3.7. Determination of Fair Market Value

Where Fair Market Value must be determined under this Agreement, it shall be established as follows: (a) The parties shall attempt in good faith to agree upon the Fair Market Value within [Insert Number, e.g., 15] days. (b) If the parties fail to reach an agreement, the Fair Market Value shall be determined by an independent chartered business valuator jointly appointed by the parties. If the parties cannot agree on a valuator, each party shall appoint a valuator, and the two valuators shall jointly appoint a third independent valuator whose determination shall be final and binding. The costs of the valuation shall be borne equally by the respective parties.

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SECTION 4: DEFAULT, TERMINATION, AND REMEDIES

4.1. Events of Default

A Shareholder shall be deemed to be in default under this Agreement upon the occurrence of any of the following events (each, an "Event of Default"): (a) The breach of any material covenant, representation, warranty, or obligation contained in this Agreement; (b) The making of an assignment for the benefit of creditors, the filing of a petition in bankruptcy, or the appointment of a receiver, manager, or trustee over all or a substantial part of the Shareholder's assets; or (c) The attempted Transfer of any Shares in violation of Section 3 of this Agreement.

4.2. Notice of Default and Cure Periods

Upon the occurrence of an Event of Default, any non-defaulting Shareholder or the Corporation may issue a written notice of default to the defaulting Shareholder. The defaulting Shareholder shall have [Insert Number, e.g., 30] business days from the receipt of such notice to cure the specified default (the "Cure Period"), provided that this Cure Period shall not apply to breaches of Section 3 or defaults incapable of cure.

4.3. Buy-Sell Mechanism (Shotgun Provision)

(a) At any time following the expiration of the Cure Period without cure, or upon the occurrence of a deadlock of the Board or Shareholders that persists for more than [Insert Number, e.g., 60] days, any Shareholder (the "Initiating Shareholder") may serve a written notice (the "Shotgun Notice") upon the other Shareholder(s) (the "Responding Shareholder"). (b) The Shotgun Notice shall state a specific cash price per share (the "Unit Price") and offer to either: (i) Purchase all of the Shares owned by the Responding Shareholder at the Unit Price; or (ii) Sell all of the Shares owned by the Initiating Shareholder to the Responding Shareholder at the Unit Price. (c) Within [Insert Number, e.g., 45] days following the receipt of the Shotgun Notice, the Responding Shareholder shall elect by written notice whether to sell their Shares to the Initiating Shareholder or purchase the Initiating Shareholder's Shares at the Unit Price. (d) If the Responding Shareholder fails to make an election within the prescribed period, the Responding Shareholder shall be deemed to have elected to sell all of their Shares to the Initiating Shareholder at the Unit Price. (e) The closing of any purchase and sale pursuant to this Section 4.3 shall take place within [Insert Number, e.g., 30] days following the final election.

4.4. Termination of Agreement

This Agreement shall terminate automatically and have no further force or effect upon the earliest of: (a) The unanimous written agreement of all Shareholders to terminate this Agreement; (b) The winding-up, dissolution, bankruptcy, or formal liquidation of the Corporation; or (c) The date on which only one Shareholder holds all of the issued and outstanding Shares of the Corporation.

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SECTION 5: BOILERPLATE LEGAL PROVISIONS

5.1. Severability

If any provision of this Agreement is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such provision shall be severed, and the remaining provisions shall remain in full force and effect. The Parties shall negotiate in good faith to replace any invalid provision with a valid provision that most closely approximates the economic and legal intent of the severed provision.

5.2. Entire Agreement

This Agreement, together with the schedules attached hereto, constitutes the entire agreement between the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, of the Parties. There are no warranties, representations, or other agreements between the Parties in connection with the subject matter hereof except as specifically set forth herein.

5.3. Force Majeure

No Party shall be liable or responsible to the other Parties, nor be deemed to have defaulted under or breached this Agreement, for any failure or delay in fulfilling or performing any term of this Agreement when and to the extent such failure or delay is caused by or results from a Force Majeure event, provided that the affected Party gives prompt written notice to the other Parties and uses commercially reasonable efforts to resume performance.

5.4. Governing Law and Attornment

This Agreement, and all claims or causes of action (whether in contract, tort, or statute) that may be based upon, arise out of, or relate to this Agreement, shall be governed by, and enforced in accordance with, the internal laws of the Province of Ontario and the federal laws of Canada applicable therein, without regard to conflict of laws principles. Each Party irrevocably and unconditionally attorns to the exclusive jurisdiction of the courts of the Province of Ontario sitting in the City of Toronto.

5.5. Dispute Resolution

(a) In the event of any dispute, controversy, or claim arising out of or relating to this Agreement, including its formation, breach, termination, or validity (a "Dispute"), the Parties shall first attempt in good faith to resolve the Dispute through senior management or direct executive negotiation for a period of not less than [Insert Number, e.g., 15] days. (b) If the Dispute is not resolved through negotiation, the Dispute shall be referred to and finally resolved by binding arbitration administered by the ADR Institute of Canada (ADRIC) pursuant to its Arbitration Rules. The place of arbitration shall be Toronto, Ontario, the language of the arbitration shall be English, and the tribunal shall consist of a single arbitrator.

5.6. Amendments and Waivers

No modification, amendment, or waiver of any provision of this Agreement shall be effective unless made in writing and signed by all Parties. No failure or delay by any Party in exercising any right, power, or privilege hereunder shall operate as a waiver thereof.

5.7. Notices

All notices, requests, consents, claims, demands, waivers, and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand; (b) when received by the addressee if sent by a nationally recognized overnight courier; (c) on the date sent by email with confirmation of transmission; or (d) on the third day after the date mailed by certified or registered mail, postage prepaid, addressed to the respective Parties at their addresses set forth on page 1 of this Agreement (or to such other address as a Party may designate from time to time by notice).

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SECTION 6: FORMAL EXECUTION BLOCK

IN WITNESS WHEREOF, the Parties hereto have executed this Unanimous Shareholder Agreement as of the Effective Date first written above.

THE CORPORATION:

[Insert Corporation Name]
By: _____________________________________
Name: [Insert Signatory Name]
Title: [Insert Title, e.g., President / CEO]
I/We have the authority to bind the Corporation.

SHAREHOLDERS:

[Insert Shareholder 1 Name]
Signature: _______________________________
Date: ____________________________________

[Insert Shareholder 2 Name]
Signature: _______________________________
Date: ____________________________________

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SCHEDULE "A"

CAPITALIZATION TABLE AND SHAREHOLDERSHIP