Stockholders' Agreement
(DE S Corporation)

Summary

This template stockholders' agreement is an agreement among stockholders of a privately held corporation that has elected to be treated as an S corporation under subchapter S of the Internal Revenue Code establishing certain rights and imposing certain limitations with respect to their shares in the corporation. This template stockholders' agreement grants some stockholders a right of first refusal over the transfer of shares by other stockholders. This template includes practical guidance and drafting notes. Stockholders' agreements are commonly entered into among stockholders of privately held companies where the stockholder base is small and each stockholder may be more interested or involved in the management of the corporation. Stockholder agreements typically include provisions governing the election of directors and other governance matters, preemptive rights to prevent stockholder dilution in the event the corporation issues additional shares, and limitations on transfers of stock. Stockholders' agreements for S corporations play an important role in safeguarding S corporation status in the event of stockholder retirement, termination of a stockholder's employment, or the death, disability, divorce, or other creditor issues of a stockholder. The template contemplates an "all or nothing" approach with respect to the right of first refusal, such that the non-transferring stockholders and the Company must agree to purchase all, but not less than all, of the offered shares. If they do not agree to purchase all of the offered shares, they will not have a right to purchase any of the offered shares. The following template may be modified to permit a "some or all" approach, such that the non-transferring stockholders and the Company may purchase all or any portion of the offered shares, and the transferring stockholder may transfer only the balance to the proposed transferee. The tag-along rights of the non-transferring stockholders would be the same under either approach. For a full listing of key content covering Delaware corporate formation, organization, maintenance, ownership, management, and dissolution, see Corporation Resource Kit (DE). For a more detailed discussion of the role that stockholders' agreements play in s corporation governance and management, see Shareholder Agreements for S Corporations. See Stockholders' Agreements in M&A Deals for an overview of the role of stockholders' agreements in M&A transactions, generally. For a full listing of related stockholders' agreement content, see Stockholders' Agreement Resource Kit.