Free Shareholders Agreement Template

INTERPRETATION

In this Agreement, unless the context otherwise requires: "Articles" means the Articles of Association of the Company from time to time (being, at the date of this Agreement, in the form of the Model Articles for private companies limited by shares prescribed under the Companies (Model Articles) Regulations 2008 (SI 2008/3229) as modified by special resolution); "Board" means the board of directors of the Company; "Business Day" means any day other than a Saturday, Sunday or public holiday in England and Wales; "CA 2006" or "Companies Act" means the Companies Act 2006; "Shareholder" means any party who holds shares in the Company and any person who becomes a party to this Agreement in accordance with its terms; and "Shares" means the issued ordinary shares and any other shares in the capital of the Company from time to time. The Company is principally engaged in: Development and commercialisation of cloud-based software solutions for the logistics and supply chain sector..

SHARE CAPITAL AND CLASS STRUCTURE

At the date of this Agreement the issued share capital of the Company is 1,000 ordinary shares of £0.001 each, comprising a single class of ordinary shares, each carrying one vote per share and equal rights to participate in dividends and in the distribution of capital on a winding-up. The register of members maintained under section 113 Companies Act 2006 records the Shareholders and their holdings as set out in the parties table above. Any variation of the rights attaching to any class of share shall require the sanction required by section 633 Companies Act 2006 and the prior consent of the holders of not less than three-quarters in nominal value of the issued shares of that class. No Shareholder shall hold shares on trust for any third party without the prior written consent of all other Shareholders, save as permitted by the Articles.

GOVERNANCE AND MANAGEMENT

The Company shall be managed by the Board in accordance with the Articles, this Agreement and the general duties of directors set out in sections 171 to 177 Companies Act 2006 (including the duty to promote the success of the Company for the benefit of its members as a whole under section 172). The Shareholders shall exercise all rights and powers available to them to procure that the Company complies with this Agreement, that Board resolutions giving effect to this Agreement are passed without unreasonable delay, and that decisions made within the Board or at Shareholder meetings are implemented. An annual general meeting shall be held in accordance with Chapter 4 Part 13 Companies Act 2006 (save where dispensed with by elective resolution). Written resolutions of the Shareholders may be used in accordance with sections 288 to 300 Companies Act 2006.

DIVIDEND POLICY

Dividends shall be declared at the discretion of the Board, acting reasonably and subject to the solvency tests in Part 23 Companies Act 2006 (in particular section 830), and once declared shall be distributed among the Shareholders pro rata to their respective shareholdings. The Board shall have regard to the Company's working capital requirements, investment plan and banking covenants before declaring any dividend.

PRE-EMPTION RIGHTS ON TRANSFER

Before transferring any shares to a third party, the Shareholder proposing to transfer (the "Transferring Shareholder") must first serve a transfer notice on the Company offering the shares to each other Shareholder pro rata to their existing shareholding at the proposed transfer price. The other Shareholders shall have 20 Business Days from receipt of the transfer notice to accept in whole or in part by written notice. Any shares not taken up pursuant to the pre-emption procedure may, within the following sixty (60) days, be transferred to the proposed third-party transferee at a price not less than the price offered under the transfer notice and on terms not more favourable than those offered to the Shareholders. Any purported transfer in breach of this clause shall be void and the directors shall refuse to register it in accordance with the Articles.

PRE-EMPTION ON ALLOTMENT (S.561 CA 2006)

The Shareholders shall preserve and enforce their statutory pre-emption rights on allotment under section 561 Companies Act 2006. No new shares may be allotted without first offering them on the same terms to each existing Shareholder pro rata to their holding.

LEAVER PROVISIONS

Any Shareholder who is also an employee, director or consultant of the Company and who ceases to hold that office or engagement (a "Leaver") shall be deemed to have served a transfer notice on the Company in respect of all their shares. The price payable shall depend on the Leaver's status: (a) a "Good Leaver" (including death, permanent ill-health or disability, retirement at or after normal retirement age, redundancy, wrongful or unfair dismissal as found by a tribunal, or voluntary resignation after three (3) years' continuous engagement) shall receive fair market value as determined by the Company's auditors acting as experts; (b) a "Bad Leaver" (including summary dismissal for cause, material breach of this Agreement or any service agreement, fraud or dishonesty, or voluntary resignation before three (3) years' continuous engagement) shall receive the lower of cost paid and nominal value of £0.001 per share. The Board shall determine Leaver status acting reasonably; any dispute shall be referred to expert determination.

BOARD COMPOSITION AND DIRECTORS

Each Shareholder (or group of Shareholders acting in concert) holding twenty per cent (20%) or more of the issued ordinary share capital of the Company shall be entitled to appoint and remove one (1) director to and from the Board by written notice to the Company. Board quorum shall require the presence of at least one director appointed by each Shareholder with appointment rights. Directors' general duties under sections 171-177 Companies Act 2006 (including duty to promote the success of the Company, to exercise independent judgement, and to avoid conflicts of interest) remain paramount and take precedence over Shareholder instructions. Any director may be removed by the Shareholder who appointed them by written notice to the Company, without prejudice to the statutory removal procedure under section 168 Companies Act 2006 (ordinary resolution of the Shareholders on special notice). Directors' service contracts of a term exceeding two (2) years require shareholder approval under section 188 Companies Act 2006. Substantial property transactions with directors fall within section 190 Companies Act 2006 and require shareholder approval where applicable.

RESERVED MATTERS

The following matters (the "Reserved Matters") shall require the prior unanimous written consent of all Shareholders, notwithstanding any lesser threshold that would apply under the Companies Act 2006 or the Articles: (a) amendment of the Articles of Association (in addition to the special-resolution requirement under s.21 CA 2006); (b) the issue, allotment or grant of options over shares, or any variation of class rights under section 633 Companies Act 2006; (c) the acquisition, disposal or hive-down of any business, subsidiary or material asset; (d) the incurrence of any borrowing or guarantee exceeding GBP 50,000 in aggregate or the grant of any charge required to be registered under section 859A Companies Act 2006; (e) entry into any related-party transaction (including any substantial property transaction within section 190 CA 2006 or any director service contract exceeding two (2) years within section 188 CA 2006); (f) any change to the nature or geographic scope of the Company's business; (g) declaration of any dividend outside the agreed dividend policy; (h) the appointment or removal of the Company's auditors or any change of accounting reference date; (i) the winding-up, administration or voluntary arrangement of the Company; and (j) the listing of any shares on a recognised investment exchange or other trading venue.

DEADLOCK RESOLUTION

Any deadlock shall first be escalated by written notice to the senior management (or, in the case of an individual Shareholder, the individual) of each Shareholder for good-faith resolution within thirty (30) days. If unresolved, the Shareholders shall attempt to resolve the matter by mediation conducted in accordance with the Centre for Effective Dispute Resolution (CEDR) Model Mediation Procedure for a further thirty (30) days. If still unresolved, any Shareholder may by written notice require the Company to be sold by way of a managed auction or trade sale on arms' length terms, the Shareholders agreeing to cooperate in good faith with the appointed corporate finance adviser and to vote their shares in favour of the sale at the best price reasonably obtainable.

DRAG-ALONG RIGHTS

If Shareholders holding in aggregate seventy-five per cent (75%) or more of the issued share capital (the "Dragging Shareholders") wish to sell all of their shares to a bona fide third-party purchaser (the "Buyer") on arms' length terms, they may by written notice require all other Shareholders to sell all of their shares to the Buyer on the same terms and at the same price per share. The Dragging Shareholders shall use reasonable endeavours to procure that the Buyer acquires the entire issued share capital of the Company. A Shareholder subject to drag may also, at their option, pursue the statutory squeeze-out procedure in section 974 Companies Act 2006 if the conditions of that section are met. Each Shareholder appoints any director of the Company as their attorney to execute the necessary transfer in the event of default.

TAG-ALONG RIGHTS

If a Shareholder or group of Shareholders proposes to transfer shares representing more than fifty per cent (50%) of the issued share capital to a third party (the "Proposed Buyer") otherwise than pursuant to a drag-along notice, each other Shareholder shall have the right (the "Tag-Along Right") to require the Proposed Buyer to acquire all of its shares on the same terms and at the same price per share. The selling Shareholder(s) shall give at least twenty (20) Business Days' written notice of the proposed transfer to the other Shareholders, and no transfer shall proceed unless the Proposed Buyer has offered to acquire the shares of those Shareholders who have exercised their Tag-Along Right.

RESTRICTIVE COVENANTS

Each Shareholder who ceases to hold shares in the Company (a "Former Shareholder") undertakes that, for a period of twelve (12) months following the date of transfer of their shares, they shall not, directly or indirectly, whether on their own account or with or through any third party: (a) carry on, be engaged in, or be materially interested in any business in direct competition with the Company in any geographic area in which the Company has been actively trading in the twelve (12) months before departure; or (b) entice away from the Company any person who was a director, senior employee, consultant or customer of the Company with whom the Former Shareholder had material dealings in the twelve (12) months before departure. The parties acknowledge that the foregoing restrictions are reasonable and necessary to protect the legitimate business interests of the Company, following the guidance in Herbert Morris v Saxelby [1916] 1 AC 688 and Tillman v Egon Zehnder [2019] UKSC 32, and that each restriction is severable from the others.

In addition to the non-compete restrictions above, each Former Shareholder undertakes that for twelve (12) months following the date of transfer of their shares they shall not, directly or indirectly, solicit, canvass or induce any person who is or was an employee, contractor, customer or supplier of the Company in the twelve (12) months before departure with the intention of diverting business or personnel away from the Company.

UNFAIR PREJUDICE (S.994 CA 2006) — NON-EXCLUSION

Nothing in this Agreement shall operate to exclude, restrict or prejudice any Shareholder's right to present a petition under sections 994 to 996 Companies Act 2006 on the grounds of unfair prejudice. Each Shareholder acknowledges that such statutory right cannot be contracted out of and that the deadlock mechanisms in this Agreement are without prejudice to the Court's jurisdiction to grant relief under Part 30 Companies Act 2006.

GOVERNING LAW AND JURISDICTION

This Agreement and any dispute or claim (including non-contractual disputes or claims) arising out of or in connection with it or its subject matter or formation shall be governed by and construed in accordance with the law of England and Wales. Each party irrevocably agrees that the courts of England and Wales shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this Agreement.

GENERAL PROVISIONS

Entire Agreement: This Agreement together with the Articles constitutes the entire agreement between the parties relating to the ownership and governance of the Company and supersedes all prior arrangements, representations and understandings, save that nothing in this clause shall limit liability for fraud or fraudulent misrepresentation. Variation: No variation of this Agreement shall be effective unless in writing and signed by all parties. Severability: If any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, that provision shall be deemed modified to the minimum extent necessary to make it enforceable and the remaining provisions shall continue in full force. Confidentiality: Each Shareholder shall keep the terms of this Agreement and the affairs of the Company confidential and shall not disclose them without the prior written consent of the other Shareholders, save as required by law, regulation or any competent authority. Notices: Any notice under this Agreement shall be in writing and shall be sent to the party at the address (or email address) set out above (or as subsequently notified) and shall be deemed received in accordance with the deemed-receipt rules commonly applied in English contract practice. Third-Party Rights: A person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms. Counterparts: This Agreement may be executed in any number of counterparts (including by electronic signature), each of which when executed shall constitute a duplicate original.