BECOMING A BUSINESS COUNSELOR: A PATH FOR NEW BUSINESS ASSOCIATES

SHAREHOLDERS' AGREEMENTS

Alan Gutterman

Principal, Gutterman Law & Business

2012

BEYOND THE BAR

BEYOND THE BAR

PRACTICE TOOLS:

SHAREHOLDERS' AGREEMENT—MASTER FORM WITH COMMENTARY

PAGE 2

VOTING AGREEMENT—MASTER FORM WITH COMMENTARY PAGE 21

VOTING TRUST AGREEMENT—MASTER FORM WITH COMMENTARY

PAGE 41

IRREVOCABLE PROXY PAGE 51

STOCKHOLDERS' AGREEMENT FOR MANAGEMENT AND INVESTOR GROUPS

PAGE 52

Reprinted from “Business Transactions Solutions” ©Thomson Reuters 2012, “Business Business Counselor's Law & Compliance Practice Manual” ©Thomson Reuters 2012 and “Organizational Management and Administration: A Guide for Managers and Professionals” ©Thomson Reuters 2011.  To purchase any of these products please visit http://store.westlaw.com  or call 1-800-328-9352

1

SHAREHOLDERS' AGREEMENT — MASTER FORM WITH COMMENTARY

Source: Gutterman, Business Transaction Solutions (BUSTRANSOL §11:35 )

THIS SHAREHOLDERS' AGREEMENT is made [date], between [name of shareholder], of [address], [name of shareholder], of [address], and [name of shareholder], of [address], here sometimes referred to singularly as shareholder, and collectively as shareholders, and [name of corporation], a corporation organized under the laws of the State of [state], with its principal office located at [address], here referred to as corporation.

Recitals

A. Shareholders constitute all of the shareholders of corporation.

B. It is the desire and the intention of the shareholders to establish stock rights in the corporation as among themselves; to provide for the election of directors and officers of the corporation and other matters relating to the management of the corporation; to arrange for their employment by the corporation; to impose certain restrictions on the transfer of shares in the corporation and to establish various options and obligations for the sale and purchase of such shares on the occurrence of various events; and generally provide for the relationships, duties, obligations, and basis of their association so as to successfully perpetrate such an association.

In consideration of the premises and the mutual agreements contained in this agreement, made by each of the parties to the other, it is mutually agreed as follows:

1. Stock Purchases

1.1. CapitalizationEach of the shareholders has purchased [number] shares of the common stock of corporation for the consideration of [amount] per share. Certificates for fully paid and nonassessable stock have been or shall be issued to each shareholder accordingly.

1.2. Preemptive RightsNo shares of stock shall be issued unless each shareholder is simultaneously given the preemptive right to purchase shares of stock in corporation as shall be provided for pursuant to the laws of the State of [state] as though the [articles or certificate] of incorporation contained a provision for such preemptive rights.

1.3. Changes in Capital StructureIn the event that the shares of stock of corporation are changed to or exchanged for a different number or kind of shares of stock, or other securities, whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise, or exchanged for shares of another corporation, or if the number of issued and outstanding shares of stock is increased through the payment of a stock dividend, then there shall be substituted for or added to the stock subject to this agreement, whether issued and outstanding, or reserved for issuance, the number and kind of shares of stock or other securities into which the stock of corporation shall have been so changed, or for which the stock will be exchanged, or to which the stock shall be entitled, as the case may be, and the price of the shares to

2

be purchased by each shareholder shall be approximately adjusted to reflect the events specified in this section.

2. Directors; Officers; General Operations

2.1. Directors and OfficersEach of the shareholders agrees that it will vote its shares, to the extent legally possible, vote as a director to accomplish the following:

(a) The board of directors of corporation will consist of [number] persons, and each of the shareholders shall be elected as a director.

The board of directors shall perform such functions for and on behalf of the corporation, as are not otherwise delegated to some other individual(s) or entity(ies) under either the provisions of this agreement, or by the operation of law. If the board of directors should ever reach an impasse and be unable to take any action because of the lack of a necessary consensus of the members thereof, then an interim director (“Interim Director”) shall be designated by the unanimous written consent of the shareholders, solely for the purpose of resolving the particular impasse. If the Interim Director is ever appointed under the provisions of this Section, then the Interim Director shall be indemnified and held harmless by the corporation against any claim, loss, damage, liability or cost asserted against or incurred by the Interim Director that is related to any action taken by such individual in the capacity of Interim Director to the corporation, unless such claim, loss, damage, liability or cost is determined by a competent court of law having proper jurisdiction, to be the direct result of either a fraud committed by, or the gross negligence of, the Interim Director.

(b) Each of the shareholders will be elected to the office designated after its name below: Name Office[name] President[name] Vice

President[name] Vice

President[name] Secretary[name] Treasurer

(c) Except as otherwise required by this agreement, or by operation of law, or the bylaws of the corporation, no meeting of either the shareholders, or the board of directors, needs to be held at any time.

2.1. Option: Specification of Officers' DutiesSubject to the control of the board of directors, the officers of the corporation shall have the following duties and responsibilities:

(a) The President shall be the general manager and chief executive officer of the Corporation and shall preside at all meetings of shareholders and at all meetings of the Board. The President shall, subject to the control of the Board, have general supervision of the affairs of the Corporation, shall sign or countersign or authorize another officer to sign all certificates, contracts, and other instruments of the Corporation as authorized by the Board, shall make reports to the Board and shareholders, and shall perform all such other duties as are incident to that office or are properly required by the Board.

(b) In the absence of the President, or in the event of the President's death, disability, or refusal to act, the Vice President or, in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their selection, or in the absence of any designation, then in the order of their selection, shall perform the duties of the President, and when so acting, shall have all the powers and be subject to all restrictions upon the President. Each Vice President shall have those

3

powers and discharge those duties as may be assigned from time to time by the chief executive officer or by the Board.

(c) The Secretary shall see that notices for all meetings are given in accordance with the provisions of this agreement, the bylaws of the Corporation, and as required by the [state] Corporations Code, shall keep minutes of all meetings, shall have charge of the seal and the corporate books, and shall make those reports and perform those other duties as are incident to that office, or are properly required by the President or by the Board. The Assistant Secretary or the Assistant Secretaries who may be appointed by the Board, in the order of their seniority, shall, in the absence or disability of the Secretary, or in the event of the Secretary's refusal to act, perform the duties and exercise the powers and discharge those duties as may be assigned from time to time by the chief executive officer or by the Board.

(d) The Treasurer shall serve as the chief financial officer of the Corporation and shall have custody of all moneys and securities of the Corporation and shall keep regular books of account. The Treasurer shall disburse the funds of the Corporation in payment of the just demands against the Corporation, or as may be ordered by the Board, taking proper vouchers for those disbursements, and shall render to the Board from time to time as may be required of that officer an account of all transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform all duties incident to the office or which are properly required by the chief executive officer or by the Board. The Assistant or Assistants to the Treasurer who may be appointed by the Board, in the order of their seniority, shall, in the absence or disability of the Treasurer, or in the event of the Treasurer's refusal to act, perform the duties and exercise the powers of the Treasurer, and shall have those powers and discharge those duties as may be assigned from time to time by the President or by the Board.

2.2. Corporate FundsThe bank account of corporation will be maintained at [name of bank], in [city], [state]. Further or different banking facilities may be selected and arranged for from time to time by the board of directors. No check or draft may be drawn for any obligation in excess of [amount] unless such check or draft is signed by two officers.

2.3. AuditorsUntil their successors are selected by the board of directors, [name of accounting firm] shall be the accountants and auditors of corporation. As soon as practical after the end of each fiscal year, the board of directors shall request corporation's independent accountants to transmit to it a report on corporation's financial statements, after examination of such statements by them. The examination will be conducted, insofar as practicable, in accordance with generally accepted auditing standards, with a view toward the rendering of an unqualified report. Copies of all reports of the accountants and auditors of corporation shall be available to each shareholder as soon as practical after its publication.

2.4. Restrictions on ManagementExcept as otherwise provided herein, or by operation of law, no individual who, or entity which, manages and directs the operation of the business and affairs of the corporation under the provisions of this agreement, shall have any authority to take any of the actions set forth hereafter in this section, without the prior written unanimous consent of the shareholders:

(a) Issue or sell on behalf of the corporation any additional shares;

(b) Sell any asset of the corporation which has a fair market value in excess of [amount], as determined at the time of such sale;

(c) Enter into an arrangement which subjects the corporation to any single obligation, other than an obligation to pay a salary to an employee of the corporation, which is in excess of [amount], in the aggregate, during any single calendar month;

4

(d) Make any payment(s) for or on behalf of the corporation to any person or entity, other than payments of a salary to an employee of the corporation, which is (are) in excess of [amount], in the aggregate, during any single calendar month;

(e) Enter into an obligation to pay a salary to an employee of the corporation which is in excess of an amount to be determined by the shareholders;

(f) Cause the corporation to engage in any type of business other than the [type of business] business; or

(g) Engage in any activity, for or on behalf of the corporation, which is either unlawful, or in specific contradiction with the terms of this agreement.

2.5. IndemnificationThe Corporation agrees to indemnify and hold each of the officers and members of the Corporation's board of directors (“Board of Directors”) harmless from and against any claim, loss, damage, liability or cost asserted against or incurred by such individual which is attributable to the services rendered in that capacity, except for any such claim, loss, damage, liability or cost determined by a competent court of law having proper jurisdiction, to be the direct result of an act by the individual, that is: (i) unlawful; or (ii) specifically outside the scope of such officer's or director's corporate authority.

2.5. Alternative: Detailed Procedures of Indemnification(a) The corporation shall, to the extent legally permissible, indemnify each of the directors and officers of

the corporation against all liabilities and expenses, including amounts paid in satisfaction of judgments, in compromise, or as fines and penalties, and counsel fees, reasonably incurred by such director or officer in connection with the defense or disposition of any action, suit, or other proceeding, whether civil or criminal, in which such director or officer may be involved or with which such director or officer may be threatened, while in office or thereafter, by reason of such director or officer being or having been such a director or officer of the corporation or by reason of such director or officer serving or having served at the request of the corporation as a director, officer, or trustee of a wholly owned subsidiary of the corporation or having served in any capacity with respect to any employee benefit plan maintained by the corporation or any wholly owned subsidiary of the corporation, except with respect to any matter as to which such director or officer shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interest of the corporation or of such subsidiary or, to the extent that such matter relates to service with respect to any such employee benefit plan, in the best interest of the participants or beneficiaries of such employee benefit plan; provided, however, that as to any matter disposed of by a compromise payment by such director or officer, pursuant to a consent decree or otherwise, no indemnification either for such payment or for any other expenses shall be provided unless such indemnification shall be ordered by a court or unless such compromise shall be approved as in the best interest of the corporation, after notice that it involves such indemnification: (1) by a disinterested majority of the directors of the corporation then in office; or (2) by a majority of the disinterested directors of the corporation then in office, provided that there has been obtained an opinion in writing of independent legal counsel to the effect that such director or officer appears to have acted in good faith in the reasonable belief that his or her action was in the best interest of the corporation; or (3) by the holders of a majority of the outstanding stock at the time entitled to vote for directors, voting as a single class, exclusive of any stock owned by any interested director or officer.

(b) Expenses, including counsel fees, reasonably incurred by any director or officer of the corporation in connection with the defense or disposition of any such action, suit, or other proceeding shall be paid from time to time by the corporation in advance of the final disposition thereof on receipt of an undertaking by such director or officer to repay the amounts so paid to the corporation if it is ultimately determined that indemnification for such expense is not authorized under this paragraph.

(c) If in an action, suit, or proceeding brought by or in the right of the corporation, a director of the corporation is held not liable for monetary damages, whether because that director is relieved of

5

personal liability under the provisions of the [articles/certificate] of incorporation of the corporation or otherwise, that director shall be deemed to have met the standard of conduct set forth in (a) above and shall be entitled to indemnification for expenses reasonably incurred in the defense of such action, suit, or proceeding.

(d) The indemnification by the corporation provided for in this agreement shall not be exclusive of or affect any other rights to which any director or officer may be entitled.

2.6. DividendsSubject to the limitations contained in the [state] Corporations Code, dividends shall be paid to the shareholders of the corporation in such amounts, and at such times, as may be determined by the board of directors.

3. Records and ReportsAny individual who, or entity which, manages and directs the operation of the business and affairs of the corporation under this Agreement, shall cause the corporation to maintain the books, records and other documents as required by Section [section number] of the [state] Corporations Code; such individual or entity shall cause the corporation to furnish to each of the shareholders an annual report such as referred to in Section [section number] of the [state] Corporations Code, which report need not be audited.

3. Option: Contents of Financial Statements Included in Annual ReportOn any annual report sent to shareholders, the income statement shall disclose the amount of income or loss to the corporation during the fiscal year, in such categories as may be appropriate to the business of the corporation, and all additions thereto and deductions therefrom. The statement shall set forth in particular the amounts of depreciation, depletion, interest, and amortization accrued during the fiscal year, and shall contain in footnotes the following information:

(a) The nature and degree of ownership by the corporation of any subsidiary corporations the income of which has been consolidated with the income of the corporation for reporting purposes.

(b) The amount and nature of any income of subsidiary corporations that has not been consolidated with the income of the corporation for reporting purposes.

(c) Any extraordinary income or charges, whether or not included in operating income or expenses.

The balance sheet shall fairly and accurately reflect the assets and liabilities of the corporation as of the end of the fiscal year, in such categories as may be appropriate to the business of the corporation, and shall plainly state the nature and degree of ownership by the corporation of any subsidiary corporations the assets of which have been consolidated with the assets of the corporation for reporting purposes. Additionally, the balance sheet shall set forth all accrued but unpaid liabilities, and amounts set aside as reserves for bad debts, depreciation, depletion, amortization of long term debt, and any sinking fund established to retire any class or classes of stock. Portions of long term debt payable within the coming fiscal year shall be carried as current liabilities. Additionally, there shall be set forth in notes to the balance sheet, the following:

(a) The aggregate dollar amount payable by the corporation and any consolidated subsidiaries for the coming fiscal year under any and all leases of real and personal property currently in force.

(b) The manner in which any assets have been valued, if other than at cost.

(c) Any controversies or legal proceedings pending against the corporation and any consolidated subsidiaries that may tend to materially affect the financial position of the corporation or any consolidated subsidiary.

In addition to the items specified above, the annual report shall also describe briefly:

6

(a) Any transaction, excluding compensation of officers and directors, during the previous fiscal year involving an amount in excess of [amount], other than contracts let at competitive bid or services rendered at prices regulated by law, to which the corporation or its parent or subsidiary was a party and in which any director or officer of the corporation or of a subsidiary or any holder of more than [number] percent of the outstanding voting shares of the corporation had a direct or indirect material interest, naming the person and stating the person's relationship to the corporation, the nature of the person's interest in the transaction and, where practicable, the amount of the interest. This report need not be made in cases where the transactions have been approved by the shareholders in the manner provided by law.

(b) The amount and circumstances of any indemnification or advances aggregating more than [amount] paid during the fiscal year to any officer or director of the corporation pursuant to the provisions of these bylaws for indemnification. A report need not be made in the case of indemnification approved by the shareholders as provided by law.

4. Employment

4.1. Employment of Shareholders(a) Corporation hereby employs each of the shareholders in such capacities and to perform such duties

as will be assigned to the shareholder from time to time by the board of directors acting pursuant to corporation's bylaws and under the general direction of the board of directors; provided, however, that [name of shareholder] shall be in over-all charge of [specify particular aspect of corporate activity].

(b) Each shareholder agrees to be so employed by corporation, and each further agrees to serve as a director and officer of corporation. Each shareholder agrees that the compensation to be paid to each of them shall at all times be equal.

(c) For all of the services to be rendered by each of the shareholders, corporation shall pay to each of them an initial salary of [amount] per [time period], and such fringe benefits as the board of directors shall determine. Such compensation will continue until such time as the board of directors shall otherwise determine.

4.2. Restrictions on Competitive ActivitiesEach of the shareholders agrees to devote its best efforts and entire time and attention to the business of corporation, and that it shall not directly or indirectly engage in any other business, either as a proprietor, partner, shareholder, director, officer, creditor, employee, or in any other capacity whatsoever. Nothing in this paragraph shall restrict any shareholder from: (a) owning less than a controlling interest in any securities that are traded over the counter or on a national stock exchange, or (b) acting as a consultant to a person who or company that does not directly or indirectly compete with corporation, and provided further that such consultancy does not conflict or interfere with that shareholder's ability to provide services on a full-time basis to corporation. If any shareholder undertakes such a consultancy, the shareholder must keep the other shareholders of corporation informed of the name of the person, firm, or corporation the shareholder is consulting to and the general nature of the consultancy.

4.3. Conflicting ObligationsEach of the shareholders warrants that it is not limited or restricted in any way from entering into the business contemplated by the shareholders and each agrees to hold each of the other shareholders and corporation harmless in the event of any suit in which the moving party or parties allege that the shareholder's relationships or activities with corporation violate any agreement or duty at common law not to engage in corporation's business.

4.4. Health and Life Insurance(a) Corporation shall have the right at any time during the term of this agreement, or any extension or

renewal thereof, to apply in its own name, for life, health, accident, or other insurance covering [name of shareholder], and [name of shareholder] agrees that corporation may do so and may take out such insurance for any sum corporation may deem necessary to protect its interests under this agreement.

7

(b) Corporation will pay all premiums on insurance policies taken out pursuant to this Paragraph 4.4.

(c) Corporation will be the sole owner of the policies of insurance issued to it, and [name of shareholder] shall have no right, title, or interest in and to such insurance, but [name of shareholder] agrees nevertheless to assist corporation in procuring such insurance by submitting to the usual and customary medical and other examinations and by executing such applications and instruments as may be required by such insurance company or companies.

(d) On termination of [name of shareholder]'s services to and relationship with corporation, for any reason other than by incapacity, with or without cause, [name of shareholder] shall have the right to purchase any or all of such insurance policies covering [name of shareholder] for a sum equal to the then cash surrender value of such policy or policies plus the pro-rated value of the unearned premiums.

4.5. Disability Insurance(a) Corporation will purchase and maintain in force disability insurance covering the shareholders, which

shall commence payment to any of them who is wholly or partially disabled (as defined in the insurance policy) after such disability has existed for [number] days.

(b) Salaries and all rights to fringe benefits shall continue while the shareholder is disabled and receiving payments under any such insurance policy until a purchase of stock shall take place pursuant to Section Five, Paragraph 5.4, except that the sum of any disability benefits under any disability insurance provided by corporation shall be subtracted from the salary paid to the shareholder while the shareholder is disabled. This section is for the benefit of the shareholder and corporation and is not intended to limit any disability benefits that may be payable to the shareholder after the end of the disability period defined in Section Five, Paragraph 5.4 or after a purchase of the shareholder's stock pursuant to that section and paragraph.

4.6. Protection of Confidential InformationEach shareholder agrees that he or she will maintain in confidence and will not disclose or use, either during or after his or her term of employment with the corporation without the prior express written consent of the corporation, any proprietary or confidential information or know-how belonging to the corporation (“Confidential Information”), whether or not it is in written or permanent form, except to the extent required to perform his or her duties on behalf of the corporation as an employee. Such Confidential Information includes, but is not limited to, technical and business information relating to the corporation's inventions or products, research and development, production processes, manufacturing and engineering processes, machines and equipment, finances, customers, marketing, and production and future business plans. Upon termination of his or her employment, each shareholder agrees to deliver to the corporation all written and tangible material in his or her possession incorporating the Confidential Information or otherwise relating to the corporation's business. These obligations with respect to Confidential Information extend to information belonging to customers and suppliers of the corporation who may have disclosed such information to the shareholder in the course of business.

4.7. Option: Assignment of InventionsFor valuable consideration, the receipt of which is hereby acknowledged, each of the shareholders does hereby transfer all of his right, title and interest to the corporation in ideas and proprietary data, if any, to certain technology, inventions and devices, described in [type of document] as products that have been, or will be, developed, manufactured, or sold by the corporation, including, but not limited to, all right, title and interest in any data or other proprietary information or know-how related, necessary or useful to the design, engineering, development, manufacture, sale of said products, or to perfecting patent or trademark rights in and to said products, or improvements or modifications thereon. Each of the shareholders covenants with the corporation that he will prepare detailed drawings, plans and specifications of the said personal property and such other materials as are reasonably necessary for the purposes of ascertaining the potential patentability of said personal property, and he will cooperate fully with the corporation, including any additional research or the preparation of any additional materials or

8

modifications necessary in patent searches, examinations, and applications in this regard if the corporation decides to apply for patents upon any of the said personal property.

5. Buy-Sell Provisions5.1. Restrictions on TransfersEach shareholder agrees that it will not in any manner encumber or dispose of all or any part of the stock the shareholder is purchasing pursuant to this agreement or may subsequently acquire until such shareholder complies with the terms of this Section Five.

5.2. Right of First Offer(a) Commencing as of the sale of this agreement, any shareholder desiring to encumber or dispose of all

or any part of the shareholder's stock in corporation, shall first offer in writing to sell all, and not a part, of such stock to corporation. The offering shareholder must mail a copy of the offer to each of the other shareholders.

(b) Corporation may, within [number] days after receipt of the offer, accept it by mailing written notice of acceptance to the offering shareholder. If corporation does not accept the offer by mailing written notice of acceptance to the offering shareholder, then the other shareholders will within [number] days after receipt of the offer, have the option to accept such offer by mailing written notice of acceptance to the offering shareholder. If the other shareholders do not accept the offer, the offering shareholder shall be free to sell the shares on the open market.

5.3. Right To Cause Repurchase of Shares[Name of shareholder] may at any time require corporation to redeem all and not a part of the stock of any shareholder (other than stock owned by [name of shareholder]), and require any shareholder to sell all and not a part of its stock to the corporation. If corporation does not have the surplus available to make to the purchase or is not otherwise financially able to do so, [name of shareholder] may call on any shareholder to sell all and not a part of its stock to [name of shareholder] or its designee.

5.4. Disability(a) In the event any shareholder is unable to perform services as an employee of corporation by reason

of illness or incapacity for a period of more than [number] consecutive days prior to [date] in any year, or for a period of [number] consecutive days from [date] to [date] in any year, or thereafter for more than [number] consecutive months (all such periods herein referred to as the “disability period”), on the completion of the disability period, such incapacity shall be deemed an automatic offer by such shareholder to sell all its stock in corporation, pursuant to Paragraph 5.2 of this Section Five.

(b) At any time after the end of the disability period and before the shareholder returns to work on a full-time basis, corporation may, if it so elects, declare such shareholder's employment terminated on [number] days' notice given according to the provisions of this agreement. If corporation terminates such shareholder's employment, corporation shall be obliged to accept the offer to sell such shareholder's stock deemed to have been made pursuant to Paragraph 5.2 of this Section Five.

5.5. Termination of Employment(a) The termination by a shareholder of its employment will be deemed an offer to sell its stock pursuant

to Paragraph 5.2 of this Section Five, and to resign as an officer and director of corporation. An offer to sell stock by a shareholder will be deemed an offer by such shareholder to terminate its employment and resign as an officer and director of corporation.

(b) Such termination of employment and resignation as an officer and director will be effective on payment to such shareholder of the first payment for the shareholder's stock and payment in full of all salary due the shareholder, or if such offer is not accepted by corporation or any other shareholder, then the shareholder's employment, officership, and directorship shall terminate either (1) [number] days after the date of the shareholder's offer to sell, or (2) on the date all salary due the shareholder shall have been paid to the shareholder, whichever occurs later.

9

5.6. DeathIn the event of the death of a shareholder, the shareholder's estate will be deemed to have offered, and corporation shall purchase, all the stock of corporation owned any such shareholder.

5.7. Certain Definitions(a) The provisions of Paragraphs 5.8 through 5.13 will apply to determine the purchase price the

purchaser must pay for any stock purchased pursuant to Paragraphs 5.1 through 5.6 hereof, and will provide the terms of payment for the stock.

(b) “Net sales” means gross sales less trade discounts and allowances and merchandise returns.

(c) “Pay-out period” means the [number]-year period from and after the date on which a shareholder sells its stock under this agreement.

(d) “Applicable trademarks” means all trade names, trademarks, and copyrights of corporation, whether registered or unregistered, owned by it or used by it on or any time or from time to time before the “valuation date” (as defined below).

5.8. Purchase Price(a) The purchase price of stock purchased and sold under this agreement shall be the sum of (1) the

book value of the stock as reflected on the financial statements of corporation as of the last day of the month (the “valuation date”) in which the offer to sell (or call, with respect to a transaction under Paragraph 5.3) was made, plus (2) the good will payments provided for below. The purchase price shall be determined in accordance with the provisions of this paragraph by the independent accountants servicing corporation at the time such a determination is required. It is expressly agreed that the determination by such independent accountants, when made, certified, and delivered, shall be binding on all of the parties to this agreement, provided that such accountants shall have used generally accepted accounting principles applied on a consistent basis and provided further, that such accountants shall have given proper effect to all of the provisions of this Paragraph 5.8.

(b) “Book value” shall be the tangible book value without good will except good will created by reason of an acquisition above the book value of the acquiring entity. The parties agree that a physical inventory, observed by the accountants, will be taken of all merchandise and supplies at the valuation date and that date will be the date as of which the financial statement shall be presented for purposes of determination of book value.

(c) The purchaser will pay to the seller (in addition to the payments made on account of the book value for the acquired shares) an amount attributable to the good will of the shares, equal to (1) [number] percent of the net sales of corporation from the sale of all products manufactured or distributed by it under any of the applicable trademarks during the pay-out period, plus (2) [number] percent of all net royalties, licensing receipts, and similar moneys received by corporation during the pay-out period from licenses or grants of similar rights to use or market products under any of the applicable trademarks, plus (3) a percentage (determined as provided below) of all considerations received from the sale or other disposition during the pay-out period of any applicable trademarks or any rights or interests therein or thereto (other than those covered by Clause (2) hereof); the percentage will be an amount equal to [number] percent times the number of years remaining in the pay-out period, as of the date of such sale or other disposition. Clauses (1) and (2) hereof are subject to the proviso that, if the stock of any shareholder other than is purchased under this agreement on or before [date], the annual good-will payments under Clauses (1) and (2) will be deemed to be one-third of the amount provided for in such clauses, and if such stock is purchased after [date], such payments will be two-thirds of the amount otherwise provided for in Clauses (1) and (2).

(d) During a pay-out period, corporation will not sell or otherwise dispose of any applicable trademark except in an arm's length transaction, to a purchaser unaffiliated, directly or indirectly, with

10

corporation or any of the remaining shareholders, and for the fair market value of the applicable trademark so sold.

5.9. Involuntary TransfersIn the event of any sale, transfer, or disposition of any stock subject to this agreement in any manner not mentioned above, whether voluntary or involuntary, including, but not limited to, sale, transfer, or disposition under judicial order, legal process, attachment, enforcement of a pledge, trust, or encumbrance, or sale under any of them, the purchaser or one to whom the stock passes or encumbrance, or sale under any of them, the purchaser or one to whom the stock passes or is disposed of shall offer in writing to sell to corporation and the shareholders all of such stock, within [number] days after such sale, transfer, or disposition on the terms and conditions set forth in Paragraph 5.2 of this agreement, provided, however, that the purchase price of such stock value shall be the lesser of the price paid by the offeror or the book value as determined pursuant to Paragraph 5.8 this agreement as of the last day of the month preceding such offer.

5.10. Transfers in Violation of AgreementAny sale, transfer, disposition, or encumbrance of any stock subject to this agreement made in violation to the terms and conditions of this agreement shall be absolutely null and void, and the stock shall not be transferred or recognized by corporation.

5.11. Corporate ActionsIf at any time corporation is required to make any payment on the purchase of stock by the terms of this agreement, and its surplus is then insufficient for such purpose, then:

(a) The entire available surplus must be used to purchase as many shares of such stock as may be purchased with such surplus amount; and

(b) Corporation must, as rapidly as it acquires sufficient surplus, purchase any shares not purchased to subparagraph (a), above.

5.12. Terms of PaymentIf at any time any of the parties make any purchase of stock pursuant to the terms of this agreement, the purchase price will be paid as follows:

(a) If the book value of the stock to be purchased is [amount] or less, it must be paid within [number] days of the determination of book value.

(b) If the book value of the stock to be purchased is in excess of [amount], it must be paid by an initial installment of [amount] to be paid within [number] days of the determination of book value, with the balance payable in [number] equal monthly installments, commencing [number] months after the determination of book value.

(c) The installments provided for in Subparagraph (b), above, must be evidenced by a series of nonnegotiable promissory notes bearing interest at the rate then paid on [specify type of investment or other comparable rate model]. The notes must provide for the acceleration of the due date of all unpaid notes in the series on default in the payment of any one note and shall give the maker the option of prepayment, either in whole or in part, at any time. In any case, where the notes are to be made by corporation, the remaining shareholders must endorse the notes, subject to the following provision, which must be set forth on the back of each note:

“FOR VALUE RECEIVED, the undersigned and each of them hereby forever waives presentment, demand, protest, notice of protest, and notice of dishonor of the within note and the undersigned and each of them guarantees the payment of the note at maturity and consents without notice to any and all extensions of time or terms of payment made by the holder of the note.” In the event any shareholder fails or refuses to endorse each note, as prescribed above, then corporation and the other shareholders may elect to treat such refusal as an offer to sell all

11

of the stock in corporation owner by such refusing shareholder in accordance with the terms of this agreement.

(d) (1) The payment for goodwill will be determined and paid within [number] days of the end of each

fiscal year of corporation commencing with the fiscal year in which the date of purchase occurs. A purchase will be deemed to have occurred on payment to the seller of the first payment for seller's stock and payment in full of all salary due to the seller, and the shares of stock being purchased will be delivered on such date.

(2) Corporation will maintain separate invoices and books of account for each item involved in the determination of payments for good will. These books of account will be complete and accurate in accordance with generally accepted accounting practice consistently applied so as to make the amount to become due and payable to the seller clearly ascertainable. The seller (and/or the seller's representative) may have reasonable access to, and the right to inspect such books, records, and accounts as may be reasonably necessary to verify the accuracy of any payment made or required to be made for good will.

5.13. Security Interest(a) Pending the payment of the full purchase price, the stock, after it has been transferred to the

purchaser(s), must be endorsed in blank by the purchaser(s) and deposited with the seller, as security for the payment thereof. Any securities issued on or with respect to the pledged stock, whether by way of dividend, spin-off, stock split, recapitalization, or otherwise, will be subject to the pledge provided for herein and will be immediately delivered to the pledgee endorsed in blank to be held by the pledgee pursuant to the same terms and conditions as the securities already on deposit. In the event of a default by the purchaser(s) in the payment of any installment of such purchase price, and if such default continues for a period of [number] days, the stock of such defaulting purchaser(s) must, on written demand of the seller, be sold to any other person, either at public or private sale, on [number] days' notice to such purchaser(s). In addition, the secured party will have all rights provided for by the [state] Uniform Commercial Code. The proceeds of the sale will be paid over to the seller and applied on account of the balance of the purchase price then due from the defaulting purchaser(s), and such purchaser(s) will be liable for any deficiency.

(b) Until default is made in the payment of the purchase price of the stock, the right to vote the stock and to receive cash dividends thereunder will be in the purchaser(s) of the stock, and each of the parties agrees that such purchaser(s) or legal representative, may sign any proxy, power of attorney, or other papers that may be necessary in connection with that right. After a default not cured within [number] days as provided for herein, the stock will be transferred on the books and records of corporation in and to the name of the secured party, who will thereafter have the right to vote the stock and to receive all dividends and distributions thereon.

6. Stock Certificate LegendEach shareholder agrees that it will hold its shares subject to the terms of this agreement, and will not sell, transfer, pledge, assign, encumber, or otherwise dispose of the shares in any manner except as provided by the terms of this agreement. Each shareholder agrees that any certificate issued to the shareholder pursuant to this agreement will be endorsed with the following legend: Sale, transfer, pledge, assignment, or encumbrance of the securities represented by this certificate is subject to the terms of a shareholders' agreement dated [date], which may be examined at the principal office of the corporation.

7. NoticesAll notices pursuant to this agreement must be given by registered or certified mail addressed to the party receiving notice at the address set forth for the party in this agreement or such other address as may be specified by notice in writing given in the same manner by any party or parties to all signatories.

8. Parties Bound; Further Acts

12

This agreement is binding on the parties hereto, their heirs, executors, administrators, successors, and assigns. The parties agree for themselves, and their heirs, executors, administrators, successors, and assigns, to execute any instruments and to perform any acts that may be necessary or proper to carry out the purposes of this agreement, but the failure to execute such instruments will not affect the rights of any party hereto or the obligations of any estate, as provided in this agreement.

9. Governing LawThis agreement is subject to and governed by the laws of [state], regardless of the fact that one or more of the parties now is or may become a resident of another state.

10. Agreement To Prevail in Event of Variation with Terms of CharterThis agreement shall be incorporated in the corporate minutes of corporation. Where there is any variation in the bylaws and/or the [articles or certificate] of incorporation of corporation, the provisions of this agreement will prevail as between corporation's shareholders and any person having notice of this agreement.

11. DurationThis agreement shall remain in effect until terminated by the unanimous written consent of the shareholders, or until the corporation ceases to be a close corporation as defined in Section [number] of the [state] General Corporation Law. In the event that an original issuance of shares by the corporation to a new shareholder who does not become a party to this agreement, this agreement shall nevertheless continue in full force and effect to the extent it is enforceable apart from the provisions of Section [number] of the [state] General Corporation Law.

12. Entire Agreement; Waiver, Modification, and ChangeThis agreement contains the entire agreement of the parties with respect to its subject matter, and no waiver, modification, or change will be valid unless contained in a writing signed by the party or parties to be bound.In witness whereof, the parties have executed this agreement at [place of execution] the day and year first above written.

[signatures]

NOTES

While shareholders' agreements are essential for any statutory close corporation, they may also be useful for other types of closely held corporations. If desired, shareholders may include provisions covering all aspects of corporate management and operations, as well as the details of employment arrangements and buy-sell agreements. In this comprehensive form of agreement, the parties cover future issuances of shares, management and control of the corporation, employment of the shareholders, and buy-sell arrangements.

Recitals

A shareholders' agreement will be most effective as a tool for managing the corporation if all the shareholders, including the holders of relatively small ownership interests, are parties to the agreement. Accordingly, the recitals should acknowledge, if true, that the parties constitute all the shareholders of the corporation, and should also describe the general purposes of the agreement. Among other things, the agreement may serve as a vehicle for the parties to provide for the election of directors and officers, establish employment relationships between the shareholders and the corporation, and describe any buy-sell arrangements.

1. Stock Purchases

13

The agreement should include a description of the current capital structure of the corporation, any preemptive rights with regard to future issuances of new shares, and the effect of any recapitalization or other similar future changes in the capital structure.

1.1. Capitalization

The agreement should describe the number of shares of stock currently held by each of the shareholders. If appropriate, reference should be made to the consideration paid for each of the shares. The agreement should also include an acknowledgment that each of the shareholders is entitled to stock certificates for their shares.

1.2. Preemptive Rights

In most cases, the parties will want to provide that preemptive rights will apply to any future issuances of shares by the corporation. Preemptive rights can be used to protect the shareholders against the possible dilutive effect of issuing shares to nonshareholders or disproportionate issuances among the current shareholder group.

1.3. Changes in Capital Structure

The parties will wish to ensure that any changes in the capital structure would not adversely impact the relative ownership rights of the parties. For example, the agreement will provide that in the event that the outstanding shares are changed or exchanged for different number of shares as a result of a merger, consolidation, or other recapitalization, then an appropriate adjustment will be made to the shares currently held by the shareholders. The same would apply in the event of a stock dividend with respect to outstanding shares.

2. Directors; Officers; General Operations

One of the most important purposes of the shareholders' agreement is to set out the understanding of the shareholders as to management and control of the corporation. Among other things, the agreement will include procedures for the election of directors and officers, maintenance of corporate funds, auditing of the corporation's books and records, restrictions on the activities of the managers of the corporation, indemnification provisions applicable to directors and officers, dividend payment requirements, and instructions regarding the maintenance and inspection of corporate records and reports.

2.1. Directors and Officers

The parties should agree among themselves as to which of them will serve as directors and officers of the corporation, and the agreement will specify that the parties agree to vote their shares as required to effect those choices. In many cases, each shareholder will serve as a director of the corporation. The selection of officers obviously depends on the preferences of the parties. In most cases, the agreement provides for election of a president, one or more vice-presidents, a secretary, and a chief financial officer or treasurer.

Provision may be made for the resolution of disputes in the event the board of directors is unable to reach decision on any matter. One possibility is to provide in advance for selection of an interim director who will serve solely for the purpose of resolving a particular dispute. If an interim director procedure is used, the parties should agree to indemnify the designee for acts taken while serving as a director.

2.1. Option: Specification of Officers' Duties

While the duties and responsibilities of the various officers of the corporation are generally laid out in the bylaws, the parties may prefer to include a detailed description in the shareholders' agreement that purports to regulate the appointment of officers. The provisions set forth herein are generic, and are typical of the language that might be found in the corporate bylaws. The parties are free, however, to vary the descriptions. For example, limitations on the president's authority to enter into specified contracts may

14

be included in the description of his or her duties. Also, the responsibilities of the various vice president's might be further distinguished, as might be appropriate when the corporation has a vice president for each of its basic functions (e.g., sales, manufacturing, legal, etc.).

2.2. Corporate Funds

The agreement should specify the location of the corporation's bank account, and it may also include limitations on the amount of checks or drafts which may be written without the consent of at least two of the officers.

2.3. Auditors

Provision should be made in the agreement for the selection of accountants or auditors to examine the corporation's financial books and records, and prepare financial reports for distribution to the shareholders, on a regular basis.

2.4. Restrictions on Management

While many matters concerning the operations for the corporation will be dealt with by majority rule, there are generally some actions which cannot be taken without obtaining the consent of all of the shareholders, or some percentage-in-interest of the shares that is well in excess of a simple majority vote. Such actions should be listed in the agreement, and may include:

Issuances of additional shares; Sales of significant assets of the corporation; Execution of contracts which impose material financial obligations from the corporation; Significant increases in salaries; Mergers and consolidations; Changes in the business of the corporation; and Engaging in activities which specifically contradict the terms of the agreement.

2.5. Indemnification

The agreement should provide for the corporation to indemnify each of the officers and directors of the corporation to the extent permitted by applicable law. In most cases, indemnification will not be available for activities which are either unlawful, or fall outside the scope of the officers or directors corporate authority. The indemnification provision in the main form is a short-form version, and leaves the details to a separate agreement and/or the corporation's bylaws and the relevant state statute dealing with indemnification of corporate agents. Alternatively, the shareholders may elect to include detailed provisions relating to indemnification directly in this agreement, particularly if no separate indemnification agreement is contemplated (see Alternative). In any event, counsel should carefully review the procedures for indemnification in the applicable state corporations law before drafting an indemnification provision.

2.5. Alternative: Detailed Procedures of Indemnification

This is a detailed form of indemnification provision. While the language is typical of the protections afforded to directors and officers of publicly-traded corporations, it can also be used with smaller, privately-held corporation. The indemnification afforded to agents under the provisions extends beyond service as a director or officer of the corporation to include other activities on behalf of the corporation. The provision also contemplates that the corporation will advance the indemnified party such amounts as may be necessary to defend a claim covered by the indemnification clause. The language includes the standard of care applicable to the indemnified party, and provides that indemnification will not be available in cases where the party did not act in good faith in the reasonable belief that his or her action was in the best interest of the corporation.

15

2.6. Dividends

The parties may wish to include provisions regarding the payment of dividends. In many cases, the agreement simply provides that dividends will be paid at such times as may be determined by the board of directors. In other cases, the parties may wish to ensure that payment of some minimum dividend amount is made each year, although any “required payment” will nonetheless still be subject to any restrictions on dividends or distributions included in the state's corporation laws.

3. Records and Reports

The parties may wish to incorporate the provision of applicable state law regarding the maintenance of books and records regarding the corporate affairs, as well as any requirements regarding distribution of an annual financial or business report.

3. Option: Contents of Financial Statements Included in Annual Report

State corporation law statutes may mandate the form and content of shareholders' reports; however, the shareholders may, either in the bylaws or in a separate agreement such as this, restate the statutory requirements and/or include their own separate requirements that must be satisfied. The scope of the disclosures often depends on the needs of the shareholder group and the degree to which certain shareholders may be uninvolved with various aspects of the day-to-day operations of the business.

This provision contemplates disclosures of “interested transactions” between the corporation and officers or directors that have a value in excess of a specified amount, and is generally based on the requirements suggested by California law. However, counsel should carefully review any other requirements which may be imposed under the laws applicable to the particular corporation. For example, while in California the disclosure level for “interested transactions” is any contract in excess of $40,000, other states may establish different requirements. Also, while California requires disclosures of indemnification payments which exceed $10,000 annually, other states may not have a similar requirement or may have another financial threshold.

4. Employment

The parties may include various provisions regarding the shareholders in their capacities as employees of the corporation, include the general terms of their employment arrangements, restrictions on competitive activities, various representations and warranties regarding their ability to be actively involved in the corporation's business, purchase of life and disability insurance on the employee-shareholders by the corporation, and the obligations of the employee-shareholder to protect the corporation's confidential information.

4.1. Employment of Shareholders

The parties can include a variety of provisions relating to the corporation's employment of the shareholders. Among the areas that might be covered are the duties of each shareholder in his or her capacity as an employee, the amount of compensation to be paid to each employee-shareholder (including benefits), and the circumstance under which employment of a shareholder may be terminated. If desired, the parties may actually draft a form of employment agreement for use in connection with the shareholders, and include it as an exhibit to the agreement.

In this case, the parties have provided that each of the shareholders will be employed by the corporation to perform such duties as may be designated by the board of directors. The parties have also specified that one of them, presumably the one who will be acting as president of the corporation, will have overall responsibility for management of certain aspects of the corporate activities. In addition, the agreement provides for the payment of equal amounts of compensation to each shareholder.

4.2. Restrictions on Competitive Activities

16

The agreement will typically include some general representations from the employee-shareholders regarding their level of commitment to the business of the corporation, as well as restrictions on their ability to engage in activities which either compete with those of the corporation and/or which may divert their attention from the corporation's activities.

In this case, each of the shareholders agrees to devote his or her best efforts and entire time and attention to the business of the corporation. In addition, each shareholder agrees not to engage, directly or indirectly, in any other business; provided, however, shareholders are not be prevented from owning a noncontrolling position in a publicly traded company or from acting as a consultant to persons or firms who are not engaged in activities which are competitive with the corporation. In the event that a shareholder engages in such consulting activities, he or she will be obligated to keep the other shareholders advised of the consultancy, including the name of the person or firm for which the shareholder is working and the general nature of the consulting activities.

4.3. Conflicting Obligations

Each shareholder should represent and warrant that he or she is not limited or restricted from engaging in the business contemplated by the corporation, and will also agree to indemnify the other shareholders in the corporation in the event of any legal action by a third party seeking to prevent the shareholder from engaging in the activities of the corporation. These types of representations are primarily directed at restrictions which might be contained in agreements with prior employers.

4.4. Health and Life Insurance

The agreement may provide for the corporation to purchase health and/or life insurance with respect to one or more of the shareholders. The decision to purchase the insurance, as well as the amount and terms of the insurance, shall be left to the discretion of the corporation, which shall determine such matters with regard to protection of its own interests. The corporation will agree to pay all premiums on any insurance policies and the corporation will be the sole owner of the policies. Shareholders will have the right to purchase life insurance policies owned by the corporation on them at the time of the termination of their employment.

4.5. Disability Insurance

In addition to the other benefits provided to the shareholders pursuant to their employment by the corporation, the parties may wish to explicitly provide that the corporation shall purchase and maintain disability insurance coverage on each of the shareholders. In such cases, the agreement should specify the amount of coverage. The disability insurance coverage provisions should be carefully integrated with any additional provisions applicable to a disabled shareholder under the buy/sell provisions contained elsewhere in the agreement.

4.6. Protection of Confidential Information

The agreement should include an undertaking by each of the shareholders to protect and maintain in confidence all the corporation's trade secrets and other proprietary information.

4.7. Option: Assignment of Inventions

This provision is a general form of assignment covering inventions which any of the shareholders may have developed in the past and which relate to the corporation's current or proposed business. In determining what inventions are covered by the assignment, reference is made to a specific document, such as the corporation's business plan, wherein the inventions may be described along with the corporation's business activities. If no such document exists, the provision might refer to a list of specific inventions that might be appended to the agreement as an exhibit. This provision does not clearly cover inventions which shareholder-employees may develop in the future. If the parties believe that shareholder-employees will develop inventions after the date of the agreement, the clause might be

17

expanded to provide for assignment of such inventions or, alternatively, the corporation may enter into a separate form of assignment of inventions agreement with employees engaged in inventive work.

5. Buy-Sell Provisions

While the parties may enter into a separate buy-sell agreement, it is also common for the parties to include various restrictions on transfers of shares, as well as certain options and obligations to purchase shares upon the occurrence of certain events, in the main shareholders' agreement.

5.1. Restrictions on Transfers

The shareholders will agree not to transfer any shares of stock in the corporation without complying with the provisions of the agreement.

5.2. Right of First Offer

The agreement generally restricts a shareholder from transferring or encumbering his or her shares without first offering to sell the shares to the corporation and/or the other shareholders. The agreement should set forth the procedures to be followed with respect to the right of first offer, including a requirement that the selling shareholder provide notice to the corporation and the other shareholders, and the procedures to be followed in determining whether the corporation or the other shareholders will purchase the shares.

5.3. Right To Cause Repurchase of Shares

One or more of the shareholders may be given the right to compel the corporation to purchase the shares of other specified shareholders. The purpose of such a provision is to guard against the possibility of deadlock in the event that shareholders owning a minority of shares are unwilling to consent to certain actions.

5.4. Disability

In the event that any shareholder shall become disabled during the term of his or her employment with the corporation, the corporation and/or the remaining shareholders are generally given the right to repurchase the shares of the disabled shareholder.

5.5. Termination of Employment

In the event a shareholder's employment with the corporation terminates, the corporation will be given the opportunity to repurchase the terminated shareholder's shares. In addition, the terminated shareholder will resign all of his or her offices with the corporation, as well as his or her position on the board of directors.

5.6. Death

Death of a shareholder may give rise to a mandatory obligation on the part of the estate of the deceased shareholder to sell the shareholder's shares back to the corporation, and an obligation on the part of the corporation to repurchase those shares on the terms set forth in the agreement.

5.7. Certain Definitions

Several of the key provisions typically included in any buy-sell turn on carefully defined concepts, such as “book value” and “net sales.” As such, the drafter may elect to use a separate definition section, rather than including definitions within other substantive provisions. In this case, the definitions are relevant to determining the purchase price for the shares which will be purchased pursuant to other parts of this section.

18

5.8. Purchase Price

There obviously are many ways to determine the purchase price to be paid for shares in a buy-sell arrangement. In this case, the parties have agreed that the value of the shares will be the sum of the book value of the shares as reflected in the financial statements of the corporation plus an amount equal to the value of the goodwill associated with the shares. The agreement includes the definition of book value, which is to be computed by the corporation's independent accountants in accordance with generally accepted accounting principles. In addition, the goodwill of the shares will be determined by reference to a percentage of the net sales of the corporation over a period of years following the purchase of the shares. The agreement should include a covenant from the corporation that it will not dispose of any material, trademark, or assets of the corporation during the pay out period.

5.9. Involuntary Transfers

The agreement may cover the situation where shares are transferred to a third party in a involuntary transfer, including a transfer pursuant to a judicial order or enforcement of pledge. In such cases, the corporation may be given the right to repurchase the shares from the third party. The terms of the repurchase will be less favorable than in other situations, and in this case, the purchase price will be the lower of the price determined pursuant to the formula or the price actually paid by the third party for the shares.

5.10. Transfers in Violation of Agreement

The agreement should specifically provide the transfers made in violation of the terms and conditions set forth therein will be null and void.

5.11. Corporate Actions

The corporation should agree to make available sufficient surplus to allow it to repurchase any shares that it becomes obligated to purchase under the agreement. In the event that the corporation does not have sufficient surplus to purchase shares at the time purchase is required, the corporation will agree to take such actions as may be necessary for it to make such surplus readily available.

5.12. Terms of Payment

The agreement should set forth the procedures to be followed in paying the purchase price to the seller. A variety of methods can be used, including cash payments or installment payments under a promissory note. In addition, payments with respect to goodwill should be made within a specified period following the end of each fiscal year during which such payments are due. The selling shareholder would generally be given the right to inspect the corporation's books and records to ensure that the payments for goodwill have been properly computed. In cases where a portion of the purchase price is to be paid pursuant to a promissory note, the terms of the promissory note should be set out in the agreement or, included as an Exhibit to the agreement.

5.13. Security Interest

In cases where the purchaser is delivering a promissory note to the seller, provision should be made for the shares of stock to be pledged as security for fulfillment of the obligations. In this case, the share certificates for the shares are to be deposited with the seller as security for the payment obligations. The agreement makes it clear that the secure party will have all the rights provided for in the applicable version of the Uniform Commercial Code. While the shares are being pledged, the purchasers will retain the right to vote the stock and receive cash dividends; however, if the purchaser shall default upon payment the stock will be transferred back to the secured party.

6. Stock Certificate Legend

19

The share certificates for the shares held by each of the shareholders should bear a legend which references the restrictions on transfer as well as the fact that the shares themselves are subject to the terms of the shareholder's agreement. The legend should make it clear that a copy of the shareholders' agreement can be inspected at the corporation's principal offices.

7. Notices

The agreement should include a procedure for notices and communications between the parties relating to the matters covered in the agreement.

8. Parties Bound; Further Acts

The agreement should make it clear that the agreement is intended to be binding on the parties, as well as on their heirs, executors, successors and assigns. In addition, the party should agree to take all further actions necessary to ensure that the purposes of the agreement are carried out. In some cases, specific provisions may be included requiring the shareholders to include the instructions in their wills and other documents that should be followed by their legal representatives.

9. Governing Law

The agreement should specify the law which is to govern the matters covered in the agreement.

10. Agreement To Prevail in Event of Variation with Terms of Charter

Since a number of matters covered in the shareholders' agreement may also be referred to in the corporation's charter documents (e.g., articles of incorporation and bylaws), language should be inserted to make it clear that the provisions of the shareholders' agreement are, to the extent permitted by law, to control in the event of a conflict with the charter documents.

11. Duration

It is important for the parties to specify the duration of the agreement. One common method is to provide that the agreement shall remain in effect until terminated or modified by the unanimous written consent of all the parties to the agreement, or until the corporation ceases to qualify for statutory close corporation status. Another method which might be used is to provide for a fixed term in the agreement.

12. Entire Agreement; Waiver, Modification, and Change

There should be language in the agreement providing that the agreement itself is the entire understanding between the parties with respect to the subject matter, and in no waiver, modification or change to the agreement will be valid unless signed in writing by all the parties to the agreement. This type of provision is important to ensure that there are no other understandings or oral agreements which might conflict with the terms of the agreement and cause disputes in the future.

20

VOTING AGREEMENT—MASTER FORM WITH COMMENTARY

Source: Gutterman, Business Transaction Solutions (BUSTRANSOL §11:79 )

Overview:

This form of voting agreement is suitable for use in situations where two distinct groups of company shareholders have been identified and the parties wish to create a structure for allocating the decision-making responsibilities with respect to election of directors and other matters. The fact situation used in this form assumes that one group consists of investors who have purchased a significant block of shares and the other group consists of employee-shareholders, including founders of the company who hold a large block of common shares. The agreement also covers rights among the members of a particular group, including the right of certain investors to designate the nominees of their group to the board of directors. Presumably, this form can be adapted to other situations, such as when the shares are held by two families owning equal interests in the corporation.

This type of agreement may be used in lieu of class voting rights in the charter documents; however, the investors usually will prefer to also have their rights set out in the charter documents due to concerns over the enforceability of a separate voting agreement. This main provisions in this agreement only cover the election of directors; however, alternative and optional provisions have been included which would expand the scope of the agreement to include a wide range of other matters which might otherwise come before the shareholders for review and approval.

The agreement should always carefully identify each of the parties, including new shareholders who may be added over the term of the agreement. This form provides that new shareholders must become parties to the agreement by executing and delivering an addendum in the form attached. The form of addendum is an accession agreement. The Exhibits listing each of the parties to the agreement should be continuously updated, particularly in situations where a great number of shareholder actions are covered by the agreement.

The drafter should carefully understand and observe the definitional concepts included in the agreement with respect to the parties. The term “Investors” includes outside investors in the company, including any new investors who may provide significant amounts of capital in the future. The term “Employee-Shareholders” includes not only the founders, but all other employees who may acquire common shares though compensation arrangements. All the shareholders taken together are referred to as “Shareholders” for purposes of provisions, such as legend requirements, that apply to all parties to the agreement without regarding to how they acquired their shares.

This Agreement is entered into as of this [date] among (i) [name], a [state] corporation (the “Company”), (ii) the purchasers of the Company's [description of stock] listed on Schedule [number/letter] attached hereto (collectively, the “Investors”), (iii) the employee shareholders of the Company listed on Schedule [number/letter] attached hereto (collectively the “Employee Shareholders”), and (iv) each of the persons who shall, after the date hereto, acquire or receive the right to acquire any shares of capital stock of the Company and are required to become a party to this Agreement by executing and delivering to the Company an Accession Agreement in the form of Exhibit A hereto. The Investors, Employee Shareholders, and other persons who may become a party to this Agreement after the date hereof as provided above are sometimes referred to herein individually as a “Shareholder” and collectively as the “Shareholders.”

Recitals

21

WHEREAS, contemporaneously with the execution and delivery of this Agreement, the Investors are purchasing [number] shares of the Company's [description of stock] at a price of [dollar] per share pursuant to the Company's Stock Purchase Agreement of even date herewith (the “Purchase Agreement”) among the parties hereto;

WHEREAS, the Employee Shareholders have acquired shares of the Company's [description of stock] pursuant to certain employee stock purchase and shareholder agreements between such Employee Shareholders and the Company (the “Employee Agreements”); and

WHEREAS, the parties hereto have agreed upon the representation of the Company's Board of Directors (the “Board”), which agreement is material to the decision of all parties in entering into the Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants hereinafter contained, the parties hereto agree as follows:

1. Shares Subject to Agreement

1.1. Investors' SharesThe Investors, as the holders of [number] shares of the Company's [description of stock] (as presently constituted) and as set forth on Schedule I attached hereto, each agree on behalf of themselves and any person to whom they transfer any [description of stock], during the term of this Agreement and any extensions thereof, to hold all of the [description of stock] registered in their respective names (and any securities of the Company issued with respect to, or in exchange or substitution therefor) (hereinafter collectively referred to as the “Investors' Shares”) subject to, and to vote the Investors' Shares in accordance with, the provisions of this Agreement.

1.2. Employee Shareholders' SharesThe Employee Shareholders, as the holders of [number] shares of the Company's [description of stock] (as presently constituted) and as set forth on Schedule II attached hereto, each agree on behalf of themselves, and any person to whom they transfer any [description of stock], during the term of this Agreement and any extensions thereof, to hold all of the [description of stock] registered in their respective names (and any securities of the Company issued with respect to, or in exchange or substitution therefor) (hereinafter collectively referred to as the “Employee Shareholders' Shares”) subject to, and to vote the Employee Shareholders' Shares in accordance with, the provisions of this Agreement.

1.3. Shares Acquired in Future by PartiesEach of the Shareholders expressly agree that the terms and restrictions of this Agreement shall apply to all shares of capital stock of the Company which any of them hereafter acquires by any means during the term of this Agreement and any extensions thereof, including without limitation by purchase, assignment or operation of law, or as a result of any stock dividend, stock split, reorganization, reclassification, whether voluntary or involuntary, or other similar transactions, and to any shares of capital stock of any successor in interest of the Company, whether acquired by sale, merger, consolidation or other similar transaction. Schedules I and II shall be appropriately amended from time to time during the term of this Agreement to reflect future acquisitions of shares of capital stock of the Company by the Shareholders.

1.4. Future Issuances of Company SharesThe Company agrees that it shall not, during the term of this Agreement and any extensions thereof, issue any new shares of the Company's [description of stock] to any person who is not already a party to this Agreement unless and until the person to whom such shares are to be issued becomes a party to this Agreement and agrees to be bound by all the provisions hereof. Such person shall become a party to this Agreement by executing and delivering an Accession Agreement in the form of Exhibit A hereto.

1.4. Alternative: Holders of Minimum Percentage of SharesIn connection with any purchase of the Company's Common Stock subsequent to the date of this Agreement that results in any current or future employee of the Company holding of record [percent] or

22

more of the outstanding shares of Common Stock of the Company, the Company shall require such employee, as a condition of the purchase, to agree to be bound by all of the terms and conditions of this Agreement. Such person shall become a party to this Agreement by executing and delivering an Accession Agreement in the form of Exhibit A hereto. Each such employee purchaser shall be deemed to be one of the Employee Shareholders under this Agreement. The Company shall promptly notify the Investors of the name of any subsequent employee purchaser.

The obligations of any Employee Shareholders who become a party to this Agreement pursuant to this paragraph 1.4 shall terminate if such person ceases to be the beneficial holder of the requisite percentage of the Common Stock; provided, that if such Employee Shareholder thereafter acquires the requisite percentage of the Common Stock, he shall thereupon again agree to be bound by the terms hereof.

1.5. No Partnership RelationshipNotwithstanding, but not in limitation of, any other provision of this Agreement, the Shareholders understand and agree that the creation, management and operation of the Company shall not create or imply a general partnership between or among the Shareholders and shall not make any of the Shareholders the agent or partner of any other Shareholder for any purpose.

2. Designations of Directors(a) Designation. During the term of this Agreement, the number of members of the Company's Board of

Directors shall be [number]. Each time the shareholders of the Company meet, or act by written consent in lieu of meeting, for the purpose of electing directors (an “Election of Directors”), the Investors and the Employee Shareholders agree that of the [number] directors on the Board, the Investors shall designate [number] director-nominees, the Employee Shareholders shall designate [number] director-nominees, and the last [number] director-nominees shall be selected by the Employee Shareholders and the Investors (as described below). The [number] directors-nominees of the Investors shall be designated by [names] (collectively, the “Designating Shareholders”), each designating one director-nominee. The [number] director-nominees of the Employee Shareholders shall be selected by vote of a majority of the holders of the Employee Shareholders' Shares. The remaining [number] director-nominees (“at large nominees”) shall be those individuals designated by both the representatives of the Investors and the Employee Shareholders, each voting as a separate class, to complete a slate of [number] director-nominees.

(b) Vacancies and Removal of Directors. In the case of any vacancy in the office of a director occurring among the directors designated by the Investors or the Employee Shareholders, the remaining director or directors collectively designated by the respective group may, by the remaining director or directors so elected by the group, or if there is no such director remaining, by the aforementioned vote of the members of the respective group, elect a successor or successors to hold the office for the unexpired term of the director or directors whose place or places shall be vacant. Any director who shall have been designated by the Investors or the Employee Shareholders, or any director so elected as provided in the preceding sentence hereof, may be removed during his term of office, whether with or without cause, only by the aforementioned vote of the group that designated such director. If there is a vacancy of an “at-large” director, the director to fill that vacancy shall be designated by the mutual consent of the directors representing the Investors and the Employee Shareholders, each voting as a separate group of electors.

(c) Termination of Designating Shareholders' Rights. The right of any Designating Shareholder to designate a director hereunder, and the obligation of any Investor to vote for the designee of any Designating Shareholder hereunder, shall cease upon the failure of such Designating Shareholder (or its partners, shareholders, parents, subsidiaries, affiliates, or other group members) to own of record an aggregate of at least [percent] of the [description of stock] purchased by it pursuant to the Purchase Agreement. Notwithstanding the preceding sentence, if such Designating Shareholder thereafter reacquires beneficial ownership of at least [percent] of the [description of stock] purchased by it pursuant to the Purchase Agreement, the rights of such Designating Shareholder and the obligations of each Investor with respect to such Designating Shareholder hereunder shall reaccrue. In the event that any Designating Shareholder's right to designate a director terminates as provided

23

herein, the remaining Designating Shareholders shall mutually agree as to the manner in which the director previously designated by such Designating Shareholder shall thereafter be designated, and each of the Investors agree to be bound by such determination. In the event that all Designating Shareholders' rights to designate directors terminate as provided herein, the [number] director-nominees of the Investors shall be selected by a vote of a majority of the holders of Investors' Shares.

2. Alternative 1: Designation by Management Group(a) Designation. Except as otherwise provided herein, each time the shareholders of the Company meet,

or act by written consent in lieu of meeting, for the purpose of electing directors (an “Election of Directors”), [number] directors shall be elected. Of the [number] directors on the Board, the Investors shall have the right to designate, by a majority vote of the Investors' Shares [number] directors; the Employee Shareholders shall designate one (1) director who shall be the Chief Executive Officer of the Company; and the remaining [number] directors (the “at-large” directors) shall be designated by both the Investors and by a majority vote of the Vested Shares of Common Stock (as defined below) held by those Employee Shareholders who remain employed by the Company or an affiliate thereof at the time of such vote (the “Management Group”), each voting as a separate group, provided that if the Management Group shall not vote to elect a designee of the Investors for all of the aforementioned “at-large” director vacancies, then such director or directors (as the case may be) shall be elected by the affirmative vote of the holders of a majority of the Common Stock. Nominees for the positions on the Board shall be nominated by the previous Board in the following manner: (i) the directors representing the Investors shall nominate the directors to be designated by the Investors; (ii) the Board shall nominate the Company's Chief Executive Officer to represent the Employee Shareholders; and (iii) the Board shall nominate the directors to be designated by the Investors and the Management Group, subject to the right of the holders of a majority of the outstanding shares of Common Stock to elect such directors as specified in the preceding sentence in certain circumstances. Any “at-large” director shall be a person otherwise unaffiliated with the Investors or the Company.

(b) Vacancies and Removal of Directors. In the case of any vacancy in the office of a director occurring among the directors designated by the Investors, the remaining director or directors collectively designated by the Investors may, by the remaining director so elected if there is but one, or if there is no such director remaining, by the aforementioned vote of the members of the respective group, elect a successor or successors to hold the office for the unexpired term of the director or directors whose place or places shall be vacant. Any director who shall have been designated by the Investors or the Management Group, or any director so elected as provided in the preceding sentence hereof, may be removed during his term of office, whether with or without cause, only by the aforementioned vote of the group that designated such director. If there is a vacancy of the Employee Shareholders' director, the director to fill that vacancy shall be a member of the Management Group designated by the Board as Chief Executive Officer and director. If there is a vacancy of an “at-large” director, the director to fill that vacancy shall be designated by the mutual consent of the directors: (i) representing the Investors; and (ii) the director representing the Management Group, each voting as a separate group of electors, subject to the right of the holders of a majority of the outstanding shares of Common Stock to elect such directors as specified above in certain circumstances.

(c) Definition of Vested Shares of Common Stock. As used herein, the term “Vested Shares of Common Stock” shall refer to those shares of Common Stock owned by Employee Shareholders which are not subject to repurchase by the Company upon the occurrence of certain events described in the employment agreements between the Company and such Employee Shareholders, including termination of the Employee Shareholders' employment prior to the date specified in such employment agreements.

(d) Cessation of Employment of Management Group Member. In the event any Employee Shareholder ceases to be employed by the Company or any affiliate thereof for any reason prior to the termination of this Agreement, such Employee shall cease to be a member of the Management Group for purposes of designating directors under paragraph 2 hereof, provided however that such Employee Shareholder shall continue to be bound by those provisions of this Agreement which require such

24

Employee to vote his Employee Shareholder's Shares in the manner specified herein. The parties hereto agree that in the event that any Employee Shareholder shall cease to be a member of the Management Group as described herein and a replacement is otherwise designated by the Board of Directors, then such replacement shall, as a condition of such service, become a party to this Agreement in the same manner as his predecessor.

2. Alternative 2: Change of Control Upon Default(a) Ordinary Designation of Directors. During the term of this Agreement, the number of members of the

Company's Board of Directors shall be [number]. Except as provided upon an Event of Default as described below, each time the shareholders of the Company meet, or act by written consent in lieu of meeting, for the purpose of electing directors (an “Election of Directors”), the Investors and the Employee Shareholders agree that of the [number] directors on the Board, the Investors shall designate [number] director-nominees, the Employee Shareholders shall designate [number] director-nominees, and the last [number] director-nominees shall be selected by the Employee Shareholders and the Investors (as described below). The [number] directors-nominees of the Investors shall be designated by [names] (collectively, the “Designating Shareholders”), each designating one director-nominee. The [number] director-nominees of the Employee Shareholders shall be selected by vote of a majority of the holders of the Employee Shareholders' Shares. The remaining [number] director-nominees (“at large nominees”) shall be those individuals designated by both the representatives of the Investors and the Employee Shareholders, each voting as a separate class, to complete a slate of [number] director-nominees. The representatives of the Investors and the Employee Shareholders, each voting as a separate class, shall also agree upon and designate one of the at-large director-nominees to step down upon the occurrence of an Event of Default, as discussed below.

(b) Designation Upon Event of Default. Upon the occurrence of an “Event of Default” as defined in the Company's Articles of Incorporation, permitting the Investors to designate a majority of the Board, the Designating Shareholders, in addition to each supplying a nominee for election to the Board, shall agree upon such person or persons to jointly nominate to the Board (the “Joint Nominee”) as are necessary to obtain not more than a majority of the voting members of the Board. In such event, each of the Investors shall have the right to approve by majority vote the Joint Nominee for election to the Board. A Joint Nominee so approved shall serve on the Board until such time as the Investors are no longer entitled to elect a majority of the Board under the Articles of Incorporation.

(c) Vacancies and Removal of Directors. In the case of any vacancy in the office of a director occurring among the directors designated by the Investors or the Employee Shareholders, the remaining director or directors collectively designated by the respective group may, by the remaining director or directors so elected by the group, or if there is no such director remaining, by the aforementioned vote of the members of the respective group, elect a successor or successors to hold the office for the unexpired term of the director or directors whose place or places shall be vacant. Any director who shall have been designated by the Investors or the Employee Shareholders, or any director so elected as provided in the preceding sentence hereof, may be removed during his term of office, whether with or without cause, only by the aforementioned vote of the group that designated such director. If there is a vacancy of an “at-large” director, the director to fill that vacancy shall, subject to the rights of the Investors upon the occurrence of an Event of Default as set forth in subparagraph (b) above, be designated by the mutual consent of the directors representing the Investors and the Employee Shareholders, each voting as a separate group of electors.

(d) Termination of Designating Shareholders' Rights. The right of any Designating Shareholder to designate a director hereunder, and the obligation of any Investor to vote for the designee of any Designating Shareholder hereunder, shall cease upon the failure of such Designating Shareholder (or its partners, shareholders, parents, subsidiaries, affiliates, or other group members) to own of record an aggregate of at least [percent] of the [description of stock] purchased by it pursuant to the Purchase Agreement. Notwithstanding the preceding sentence, if such Designating Shareholder thereafter reacquires beneficial ownership of at least [percent] of the [description of stock] purchased by it pursuant to the Purchase Agreement, the rights of such Designating Shareholder and the obligations of each Investor with respect to such Designating Shareholder hereunder shall reaccrue.

25

In the event that any Designating Shareholder's right to designate a director terminates as provided herein, the remaining Designating Shareholders shall mutually agree as to the manner in which the director previously designated by such Designating Shareholder shall thereafter be designated, and each of the Investors agree to be bound by such determination. In the event that all Designating Shareholders' rights to designate directors terminate as provided herein, the [number] director-nominees of the Investors shall be selected by a vote of a majority of the holders of Investors' Shares.

3. Election of DirectorsEach of Shareholders jointly and severally agrees that at any Election of Directors, each will, to the extent permitted by the Company's Articles of Incorporation, cast his, her, or its votes for the [number] director-nominees selected by the process set forth in paragraph 2 above.

4. Conduct of Board ActionsIt is agreed that all decisions of the Board shall require [number] affirmative votes, provided that directors designated by the Investors shall not vote with respect to transactions between the Company and the Investors and in which case such transactions will only require the approval of a majority of the remaining directors (even though less than [number] affirmative votes are cast).

4. Alternative: Special Vote on Fundamental MattersExcept as provided in the next sentence, it is agreed that all decisions of the Board shall require [number] affirmative votes, provided that directors designated by the Investors shall not vote with respect to transactions between the Company and the Investors and in which case such transactions will only require the approval of a majority of the remaining directors (even though less than [number] affirmative votes are cast). Notwithstanding the foregoing, during the term of this Agreement, no action shall be taken with regarding to the following matters (“Fundamental Matters”) without the consent of [description of consent requirement], and such consent shall not be unreasonably withheld:

(a) Amending or repealing any provision of the Company's Articles of Incorporation or Bylaws;

(b) Dissolving or liquidating the Company;

(c) Increasing or decreasing the number of directors comprising the Board of Directors of the Company;

(d) Changing the fundamental nature of the Company's business;

(e) Mortgaging or creating a security interest in the assets, including real property, of the Company;

(f) Entering into any loan agreement, financing arrangement, line of credit or similar agreement the effect of which would be to borrow any money for whatever purpose in an amount in excess of [dollar];

(g) Hiring an employee or engaging an agent of the Company for compensation in an amount in excess of [dollar] per annum;

(h) Issuing shares, rights, options, warrants to purchase or securities convertible into shares of stock of the Company of any class, series or kind of stock (whether or not presently authorized), including treasury stock;

(i) Merging or consolidating the Company with any other corporation or business entity, or acquiring the assets or stock of another entity;

(j) Selling or transferring all or a substantial portion of the assets of the Company other than in the ordinary course of business; and

(k) Entering into, terminating, or amending any material written or oral contractual agreement or understanding between the Company and any shareholder of the Company or third party.

26

In the event of any material disagreement among the representatives of the Investors and the Employee Shareholders on the Board with respect to any of the Fundamental Matters, the representatives agree to promptly arrange for a meeting for the purpose of resolving the disagreement. The meeting shall be held within [number] days following the date upon which a representative of one group delivers notice to representatives of the other group calling for such a meeting. If the disagreement is not resolved within [number] days from the date that the original notice of the meeting is given, then [description of consequences].

5. Voting on Other MattersThis Agreement shall not extend to voting upon other questions and matters upon which shares shall have the right to vote under the Company's Articles of Incorporation or Bylaws, or the laws of the State of [name of state].

5. Alternative 1: Consent of Both Groups RequiredThe Shareholders agree (a) that on a proposal (whether or not made as a shareholders' meeting) to amend the Company's Articles of Incorporation or bylaws, or to issue shares of the Company's stock, or [description of action], they will all hold their shares, or sign consents taking action on such proposal as may be mutually agreed by [percent]-in-interest of each of the Investors and Employee Shareholders, each voting as a separate group, and (b) that failing agreement, all of the parties will vote against that proposal and will refuse to sign a consent to that proposal. In the event of any material disagreement among the Investors and the Employee Shareholders with respect to any of the matters listed above, representatives of each group shall promptly arrange for a meeting for the purpose of resolving the disagreement. The meeting shall be held within [number] days following the date upon which a representative of one group delivers notice to representatives of the other group calling for such a meeting. If the disagreement is not resolved within [number] days from the date that the original notice of the meeting is given, then [description of consequences].

5. Alternative 2: Change of Control TransactionsEach time the shareholders of the Company meet, or act by written consent in lieu of meeting, for the purpose of approving a consolidation or merger of the Company with or into any other corporation or corporations, any other corporate reclassification, recapitalization, reorganization or other change or exchange with respect to the outstanding shares of the Company's stock, a sale of all or substantially all of the assets of the Company, or any similar transaction effecting a change in control of the Company (collectively a “Change in Control Transaction”), each of the Employee Shareholders jointly and severally agrees to vote the Employee Shareholders' Shares with respect to approving or disapproving such Change in Control Transaction in the manner designated by the vote or consent of [percent]-in-interest of the Investors. The Company shall furnish written notice to the Investors at least [number] days prior to any such meeting or proposed action by written consent in lieu of meeting and the Investors shall furnish written notice to each of the Employee Shareholders and the Board no later than [number] days following receipt of the Company's notice of any such meeting or proposed action by written consent in lieu of meeting of the manner in which the Investors desire the Employee Shareholders to vote their Employee Shareholders' Shares with respect to approving or disapproving such Change in Control Transaction.

5. Alternative 3: Supermajority Vote of Investors RequiredExcept as expressly provided herein or in the Company's Articles of Incorporation or as required by law, for so long as the Investors continue to hold any equity securities representing at least [percent]of the Investors' Shares initially owned by the Investors as a group, then without the approval by vote or written consent of [percent]-in-interest of the Investors, the Company shall not, and shall not permit any of its subsidiaries, to do any of the following:

(a) Redeem, purchase, or otherwise acquire for value (or pay into or set aside for a sinking fund for such purchases) any capital stock of the Company, and except for the repurchase of shares of Common Stock held by employees, consultants, directors, or officers of the Company that are subject to stock repurchase agreements and, if such repurchases would exceed [dollar] for any such employee, consultant, director or officer, that have been approved by the vote or written consent of [percent]-in-

27

interest of the Investors in the event of termination of employment or the termination of the relationship;

(b) Authorize or issue, or obligate itself to authorize or issue, (i) any other equity security having any preference or priority over, or ranking senior to or on parity with, the Preferred Stock with respect to dividends or rights upon liquidation, dissolution, or winding-up, (ii) other than (A) securities issuable on conversion of the Preferred Stock or (B) Common Stock issuable pursuant to stock options permitted to be granted by Company consistent with its contractual obligations, any other equity security ranking junior to the Preferred Stock with respect to dividends or rights upon liquidation, dissolution or winding-up or (iii) any security convertible into a security described in clauses (i) or (ii);

(c) Alter or change the powers, preferences or rights of the Preferred Stock, or the qualifications, limitations or restrictions thereof;

(d) Increase or decrease (other than by conversion or as otherwise required or permitted hereby) the total number of authorized shares of Preferred Stock;

(e) Sell, assign, license, or otherwise dispose of or voluntarily part with control of (or agree to do any of these) any of the Company's material intellectual property rights to any other person, other than in connection with ordinary customer sales, except as approved by the Board;

(f) Effect any merger, consolidation, recapitalization, reorganization, amalgamation, liquidation, winding up, dissolution or sale, transfer or other action otherwise disposing of or voluntarily parting with the control of (whether in one transaction or a series of transactions) all or substantially all of the property, business or assets of the Company or its subsidiaries other than (i) a merger or consolidation of a subsidiary with the Company or any other subsidiary of the Company provided that, in the case of any such merger or consolidation, the person formed by such merger or consolidation shall be a wholly owned subsidiary of the Company and (ii) any sale, lease, assignment, pledge, transfer or other conveyance of all or a substantial portion of the assets of the Company solely as security for institutional indebtedness approved by the Board;

(g) Amend its Articles of Incorporation or Bylaws;

(h) Declare or distribute any dividend (other than a stock dividend) in respect of capital stock, return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such, or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock other than pursuant to stock options issued pursuant to plans or agreements in an aggregate amount not to exceed [number] shares of Common Stock (subject to appropriate adjustment for any stock dividend, stock split, combination, or other similar recapitalization affecting such shares);

(i) Enter into any agreement, contract, commitment or understanding with any person for the acquisition of any business or assets other than acquisitions not in excess of $3,000,000 in any one year;

(j) Materially change the nature of its business, taken as a whole on a consolidated basis as described in the principal business plan of the Company as carried on at the date hereof and reasonable extensions thereof; or

(k) Enter into any transaction with any affiliate or any officer, director or holder of more than 5% of the outstanding capital stock of the Company which is not on terms comparable to an arms-length transaction.

6. DividendsThis Agreement shall only affect the right of the Shareholders to vote their shares of the Company's capital stock at a special or annual meeting of the Company or consent to proposals otherwise presented

28

to shareholders of the Company. Nothing herein shall restrict the Shareholders from receiving payments of dividends or other distributions from the Company with respect to their shares of capital stock.

7. Restrictions on TransferThe provisions of this Agreement shall be binding upon the successors in interest to any of the Shareholders. No Shareholder may sell, assign, transfer, exchange, gift, devise, pledge, hypothecate, encumber or otherwise alienate or dispose of any capital stock of the Company now owned by such party or owned by such party during the term of this Agreement, or any right or interest therein, whether voluntarily or involuntarily, by operation of law or otherwise, except in accordance with the procedures set forth in [description]. Any such purported transfer in violation of such procedures and all actions by the purported transferor and transferee in connection therewith that might otherwise be covered by the terms and conditions in this Agreement shall be of no force or effect and the Company shall not be required to recognize such purported transfer for any purpose, including without limitation for purposes of dividend and voting rights. The Company shall not permit the transfer of any of the Investors' Shares or the Employee Shareholders' Shares on its books or issue a new certificate representing any of such shares until the proposed transferee(s) agree in writing to become a party to this Agreement and to hold the capital stock of the Company acquired in such transfer subject to the terms and conditions of this Agreement and the procedures set forth in [description].

8. TerminationThis Agreement shall terminate on the earlier of:

(a) [date];

(b) The date on which no shares of the [description of stock] remain outstanding;

(c) The closing of the sale of the Company's Common Stock in a firm commitment, underwritten public offering registered under the Securities Act of 1933, as amended, at a public offering price of not less than $[dollar amount] per share (prior to underwriter commissions and expenses) of Common Stock (as adjusted for subdivisions and combinations of shares and Common Stock dividends) and the aggregate gross proceeds to the Company of not less than $[dollar amount] (after deduction of underwriter commissions and the Company's expenses relating to the issuance, including without limitation fees of the Company's counsel);

(d) The effective date of a merger of the Company with or into another corporation in which the Company is not a survivor or the sale of all or substantially all of the assets of the Company; or

(e) Written approval by holders of [percent]-in-interest of the Investors' Shares, on the one hand, and holders of [percent]-in-interest of the Employee Shareholders' Shares, on the other hand.

9. Representations and WarrantiesEach of the Shareholders hereby represents and warrants to the Company and to each other as follows:

9.1. Absence of ViolationNeither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will constitute a violation of, or default under, or conflict with, or require any consent under any term or provision of any contract, commitment, indenture, lease or other agreement to which such Shareholder is a party or by which such Shareholder or any of his, her or its assets is bound.

9.2. Binding ObligationThis Agreement constitutes a valid and binding obligation of such Shareholder, enforceable in accordance with its terms, except to the extent that such enforceability may be limited by bankruptcy, insolvency and similar laws affecting the rights and remedies of creditors generally, and by general principals of equity and public policy.

10. Legend Required

29

Each certificate representing any of the Investors' Shares and Employee Shareholders' Shares shall be marked by the Company with a legend reading as follows:

The shares evidenced hereby are subject to a Voting Agreement dated as of [date] (a copy of which may be obtained from the issuer), and by accepting any interest in such shares the person accepting such interest shall be deemed to agree to and shall become bound by all the provisions of said Voting Agreement.

11. RemediesEach Shareholder will be entitled to enforce its rights under this Agreement specifically, to recover damages by reason of any breach of any provision hereof and to exercise all other rights existing in its favor. Each Shareholder agrees and acknowledges that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that each Shareholder may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for specific performance in addition to injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement.

12. NoticesAny notice required or permitted to be given to a party pursuant to the provisions of this Agreement shall be in writing and shall be effective upon personal delivery or upon deposit in the U.S. mail, registered or certified, with postage prepaid and clearly addressed to the party to be notified. Mailed notices shall be addressed to (i) the Investors at their respective addresses set forth on Schedule I attached hereto, and (ii) the Employee Shareholders at their respective addresses set forth on Schedule II attached hereto.

13. SeverabilityWhenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be held to be prohibited by or invalid under applicable law, such provision shall be effective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

14. Governing LawThis Agreement shall be governed by and construed under the laws of the State of [state] as applied to contracts between [state] residents entered into and to be performed entirely within the State of [state].

15. CounterpartsThis Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

16. Entire AgreementThis Agreement constitutes the entire agreement of the Shareholders with respect to the subject matter hereof and supersedes all prior agreements and undertakings, both written and oral.

17. Further AgreementsEach of the Shareholders shall execute such documents and take such further actions as may be reasonably required or desirable to carry out the provisions of this Agreement and the transactions contemplated hereby.

18. AssignmentThis Agreement shall not be assigned by operation of law or otherwise without the prior written consent of the other party hereto.

19. Parties in InterestThis Agreement shall be binding upon the heirs, legatees and devisees, executors, administrators, legal representatives, successors and assigns of the Company and the Shareholders. Nothing herein, either express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Nothing in this Agreement shall be construed to create

30

any rights or obligations except among the parties hereto, and no person or entity shall be regarded as a third-party beneficiary of this Agreement.

20. InterpretationThe parties hereto acknowledge and agree that: (i) each party and its counsel have reviewed and negotiated the terms and provisions of this Agreement and have contributed to its revision; (ii) the rule of construction to the effect that any ambiguities are resolved against the drafting party shall not be employed in the interpretation of this Agreement; and (iii) the terms and provisions of this Agreement shall be construed fairly as to all parties hereto and not in favor of or against any party, regardless of which party was generally responsible for the preparation of this Agreement.

21. Amendment; WaiverThis Agreement may not be amended or modified except by an instrument in writing signed by the parties hereto. The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

22. Access to InformationFrom time to time upon request of any partner, designee or officer of any Investor so long as such Investor holds any equity securities of the Company representing at least [percent] of the Investor's Shares initially owned by such Investor, the Company will furnish to such partner, designee or officer, and their representatives (including without limitation their accountants and legal counsel), such information regarding the business of the Company and its subsidiaries (including materials furnished to the directors of the Company and its subsidiaries at or in connection with board meetings) as such partner, designee or officer may reasonably request. Each such partner, designee or officer, and their representatives (including without limitation their accountants and legal counsel), shall have the right during normal business hours and upon reasonable notice to make an independent examination of the books and records of the Company and any of its subsidiaries, to make copies, notes and abstracts therefrom, and to discuss their business, affairs and financial condition with the officers and accountants of the Company. Each such representative will sign a confidentiality agreement, in a form reasonably acceptable to the Investors, if so requested by the Chief Executive Officer or the Board.

23. Option: Irrevocable ProxyIf requested by [percent]-in-interest of the Investors, the Employee Shareholders shall deliver their irrevocable proxies in favor of a designated representative of the Investors with respect to the matters set forth herein and providing that the designated representative may vote the Employee Shareholders' Shares by virtue of such proxy in the manner set forth herein.

IN WITNESS WHEREOF, this Agreement has been duly executed on the date hereinabove set forth.

[name of corporation]

By: [name]

President

EMPLOYEE SHAREHOLDERS:

[names and signatures]

INVESTORS:

[names and signatures]

31

Schedule I: InvestorsInvestor Name and Address No. and Type of Shares Owned [name and address] [no. and type of shares][name and address] [no. and type of shares][name and address] [no. and type of shares]

Schedule II: Employee ShareholdersEmployee Name and Address No. and Type of Shares Owned[name and address] [no. and type of shares][name and address] [no. and type of shares][name and address] [no. and type of shares]

NOTES

Recitals

The recitals describe the background for the agreement. In this case, the general terms of the financing are described, and a statement is included to the effect that the voting agreement is a material consideration to the investors' decision to make the investment in the company. Obviously, changes can be made to cover other situations, such as when the company has only two shareholders or is owned by two family groups.

1. Shares Subject to Agreement

This paragraph identifies the shares to be covered by the agreement. The agreement covers all the shares owned by the parties, as well any shares which are issued in the future in exchange or substitution for such shares. This means that common shares issued to the investors upon conversion of the preferred shares may be covered by the agreement, so long as the agreement remains in effect when the conversion occurs. The language also implies that transferees of the shares will also be bound by the terms of the agreement. Finally, since the goals and objectives of the agreement would be thwarted by any dilutive issuance's of shares to parties not covered under the terms of the agreement, the company has agreed not to issue any additional shares unless the new shareholder agrees to become a party to the agreement. In some cases, an exception will be carved out for the issuance of very small amounts of shares, as might occur when shares are issued to non-key employees; however, even in those cases, persons or entities who will eventually own more than a specified percentage of the outstanding shares (e.g., 1%) will be required to execute the agreement.

1.1. Investors' Shares

This provision sets out the definition of the shares held by the investors which are to be covered by the terms of the agreement. In many cases, investors will be issued preferred shares that will be convertible into common shares. In that situation, the definitional language might be expanded to make it clear that the term “Investors' Shares” includes the preferred stock and any common shares issued upon conversion of such preferred shares.

1.2. Employee Shareholders' Shares

This provision sets out the definition of the shares held by the employee shareholders which are to be covered by the terms of the agreement. Employees rarely received preferred shares. So, in most cases, it will be common shares that are covered by the agreement. In drafting stock option agreements for shares

32

to be issued to employees in the future, counsel should include a reference to this agreement which makes it clear that shares issued to employees upon exercise of options will be subject to the voting restrictions.

1.3. Shares Acquired in Future by Parties

While the provisions above clearly cover shares held by the parties at the time that the agreement is first executed, it is clear that the effectiveness of the agreement depends on whether or not shares acquired by the parties in the future will be covered. That is the purpose of this provision, which makes it clear that all shares of capital stock of the company acquired by the parties over the term of the agreement will be covered by the agreement. Appropriate amendments to each of the schedules should be required in order to maintain a current record of voting restrictions.

1.4. Future Issuance's of Company Shares

In a closely-held business, the parties may not anticipate that a substantial number of additional shares will be issued in the future. However, in the case of a start-up company looking to raise two or three rounds of financing, conceivably a substantial number of shares may be issued in the future, often to persons or entities who are not parties to the original agreement. Again, in order for the voting arrangement to be effective, it should cover a sufficient number of subsequently-issued shares to make the decision-making process among the parties to the agreement “definitive” with respect to matters covered by the agreement. For example, it doesn't make much sense for the parties to determine how they will vote with respect to the election of directors if one or more shareholders who are not parties to the agreement control enough votes to override that determination.

The basic form calls for all subsequent shareholders to become parties to the agreement by executing and delivering the accession agreement attached. The form of accession agreement is included in these materials as master form at § 11:146. This is probably the preferred method to insure the effectiveness of the agreement; however, counsel may recommend that the requirement for adding new parties be limited to persons or entities who acquire a specified minimum number or percentage of shares. See Alternative Clause 1.4 § 11:85 This avoids the need to get extra paperwork from small shareholders, each of which would also be entitled to various notices under the terms of the agreement whenever a vote is scheduled.

1.4. Alternative: Holders of Minimum Percentage of Shares

In order to keep the shareholder group to a manageable number, counsel may often recommend that only persons acquiring a significant number of shares be required to become a party to the agreement. For example, the agreement may provide that only holders of at least 1% of the outstanding shares be required to execute the agreement, and this number may be even larger depending on the ownership percentages of the original parties. To illustrate, if one or two of the shareholders own 40% each of the outstanding capital stock, it probably makes sense to increase the minimum percentage to 5%, since a 1% shareholder (or even a group of 5 holders of 1% of the shares) is unlikely to be able to make a big impact on decision-making.

1.5. No Partnership Relationship

This provision is included to make it clear that while the shareholders have entered into an agreement to establish a process for joint decision-making regarding the business of the company, it is not their intent to form a partnership or agency relationship. Moreover, the parties want to make it clear that their contractual obligations are limited to those set out in the agreement and do not extend to any other business purpose.

2. Designations of Directors

As a general rule, the election of directors will follow the principles of “one share-one vote,” unless some other provision as to the election of directors is included in the charter documents. Some, but not

33

all, states automatically provide for cumulative voting in the election of directors, thereby assuring that holders of less than a majority of the voting shares will be able to elect some representatives to the board of directors. In other states, such as Delaware, cumulative voting with respect to the election of directors is only available if it is actually provided for in the certificate of incorporation.

Most corporate statutes will permit the parties to deviate from the “one share-one vote” rule by providing for class voting with respect to the election of directors. This will be accomplished by including appropriate provisions in the charter documents and by creating a voting agreement similar to this one.

The parties may agree that the investors voting as a separate class will initially have the right to designate a certain number of directors and that the remaining directors will be designated by the holders of the common stock voting as a separate class.

In other cases, the investors and the employees, voting as separate classes, will be entitled to designate an equal number of directors and the remaining director or directors will be elected by both groups voting together.

Whenever a class voting provision is used, covenants should be included elsewhere in the charter documents which prevent the company from changing the size of the board of directors without the consent of the investors and/or the employee shareholders.

In deciding whether to utilize one of the alternative procedures for the election of directors, consideration must be given to the objectives of the investors, the relationship that exists between the investors and members of the management group, and the anticipated future financing requirements of the company.

In situations where the investors are purchasing a majority interest in the company, they may, as a result of the operation of statutory voting provisions, have the right to elect all of the directors.

Recognizing that it is probably desirable to take a balanced approach to board representation, the investors may agree to a class voting scheme which assures them of the right to retain control of the board while allowing one or more members of the management team to also serve as directors.

In any case, the procedures regarding representation on the board of directors will always be heatedly negotiated when the company raises additional funds in future equity financings.

The basic provision in this form is fairly typical of arrangements used by start-up companies obtaining venture capital financing. It provides that the investor group and the employee-shareholder group will each have a right to designate an agreed number of directors, and that both groups acting together must agreement on one or more independent directors. Within the investor group, one or more investors have been given special rights to designate a nominee to the board. This right is generally reserved to the lead investors.

Under subsection (c), a “Designating Shareholder” will forfeit its rights to designate a nominee to the board if it no longer owns at least one-half (1/2) of the shares purchased in the financing. A Designating Shareholder is permitted to make distributions to its affiliates without losing its rights, and may even have its rights restored if its holdings increase back up to the minimum required level.

Of course, the concept of a “Designating Shareholder” can be used for the employee-shareholder group as well.

For example, the right to designate employee-shareholder group nominees may be vested in a group of management shareholders. See Alternative 1.

Additionally, the form can easily be adapted for a closely-held corporation with two shareholders or distinct groups of shareholders. I

If the parties don't wish to provide for an independent director, that language can easily be deleted. Also, procedures for shifting the balance of control upon the occurrence of certain events should be considered. See Alternative 2.

2. Alternative 1: Designation by Management Group

34

This alternative is a variation on the basic form that consolidates control over the voting of the employee-shareholder group in the hands of a smaller group of senior employees, referred to herein as the “Management Group.” After beginning with a provision that establishes the total number of directors which may be designed by employee shareholders, the agreement provides that one of those seats will always be filled by the chief executive officer of the company, regardless of the number of shares held by that person. Then, the remaining designees will be determined by the managers, with voting rights being allocated in relation to their vested ownership of common shares. So, if a person is subsequently added as a member of the Management Group by virtue of his duties and responsibilities, his or her authority will be somewhat limited by the fact that he or she may not have served long enough to have his or her shares vest appreciably.

2. Alternative 2: Change of Control Upon Default

If the investors are not initially given the right to designate a majority of the board of directors, they may bargain for the ability to assume control of the board of directors upon the occurrence of certain events specified in the charter documents. The triggers for these “vote switch” provisions, which are referred to by that name since they effectively switch control over the company's affairs from existing management to the investors, are always the subject of intense negotiations.

In some cases, changes in control may be limited to situations in which the company fails to make a required redemption, defaults its obligations to make a dividend payment, or becomes involved in insolvency or bankruptcy proceedings.

The parties may specify additional events, including a default by the company under any covenants contained in the charter documents, or the company's failure to satisfy specific financial tests.

Vote switch provisions generally set out the procedures to be followed upon the occurrence of an event of default, including the requirement that the company notify the preferred shareholders of the particular event.

Once notice has been delivered, a meeting of the shareholders is convened, or an action by written consent is taken, in order to reconstitute the board of directors.

Once the new directors have been elected, they generally will continue to serve in that manner under the event of default has been cured, at which point the special rights granted to the investors under the vote switch provisions will terminate.

If there is any subsequent event of default, then the vote switch provision will come into effect once again.

As a practical matter, once the investors assume control over the board of directors, they are essentially placed in a position to influence whether or not the company takes the actions which may be required in order to cure the particular event of default which led to the vote switch. As such, representatives of management may wish to impose some standard of conduct upon the representatives of the investors with respect to the manner in which they carry out their duties (e.g., “best efforts to cure the event of default”). In turn, the investors may well argue that the occurrence of certain events, such as insolvency of the company or the commencement of bankruptcy proceedings with respect to the company, are sufficient to establish that management cannot effectively manage and operate the business and, as such, the vote switch should be permanent.

3. Election of Directors

This paragraph binds all the parties to cast their shares for the election of the nominees designated in accordance with the procedures in Section 2. This provision may well become important in situations where the investors have converted some of their shares into common stock, and the investors will also be obligated to vote their common shares as specified in Section 2.

As mentioned in the introduction, a voting agreement will sometimes only cover shares owned by the common shareholders, and those types of agreements will obligate the common shareholders to vote

35

their shares in the manner specified by the investors. Such an agreement may be necessary when the preferred shares are not granted separate class voting rights, but are simply relying on the fact that their “as-if-converted” interest in the company is large enough to entitle them to elect a certain number of members of the board of directors. If, for some reason, the ownership interest of the investors is diluted, they might want to rely on the voting agreement as a means for compelling the common shareholders to vote some portion of their shares for the designated nominees of the investors.

4. Conduct of Board Actions

At the same time that decisions are being made regarding designation and election of directors, consideration should be given to the procedures to be followed by the board in taking actions on behalf of the company. This basic provision sets the number of votes that would normally be required to approve actions at the board level and adopts the customary majority vote rule. The language also provides that “interested director” transactions relating to the investors must be approved only by those designees who have not been nominated by the investors. This is an area where the parties often choose to provide that certain actions at the board level will require a special vote, particularly in the case of fundamental matters that materially impact the structure and business of the corporation. See Alternative Clause 4.

4. Alternative: Special Vote on Fundamental Matters

This alternative provision addresses the voting requirements for approval of certain matters at the board level. Specifically, it defines a number of “fundamental matters,” including liquidation and dissolution of the company and amendment of the charter documents, and then sets out a separate vote or consent requirement (typically unanimous consent or a supermajority votes that assures that a majority of the representatives from both groups are in agreement). This list is illustrative and the parties are, of course, free to add more items or limit the provisions to specific events.

The provision also includes a procedure for mandatory discussions among the representatives of each group in the event that they cannot reach agreement initially.

This dispute resolution procedure is particularly useful for closely-held corporations, and the shareholders thereof may wish to consider formal arbitration as a last resort to break a deadlock.

Alternatively, the parties may provide that the “consequences” will include automatic dissolution and liquidation of the corporation or the right of one or both parties to “put” their shares to the other party.

5. Voting on Other Matters

While the primary purpose of the main text of this agreement is to determine how directors will be elected by the shareholder group, some parties will extend the scope of the agreement to cover matters which may come before the shareholders. If that is not desired, the drafter should simply use the main text which makes it clear that all other matters relating to voting will be governed by the charter documents and applicable corporations law provisions. If shareholder voting will be part of the agreement, the parties may select from a wide range of alternatives, such as:

A requirement that both shareholder groups, by a vote of a specified percentage in interest of the members of the particular group, must consent to certain matters; See Alternative 1.

A provision that vests one shareholder group with the authority to decide certain matters, such as whether or not to accept a proposal that will result in a change in control of the company; See Alternative 2 or

A requirement that one shareholder group (i.e., the investors) must approve certain actions by a supermajority vote. See Alternative 3.

5. Alternative 1: Consent of Both Groups Required

This provision, often used by shareholders of closely-held corporations, requires that each shareholder group must consent to listed actions. The parties are free to list the actions that are to be

36

covered by this provision. In cases where there are more than one shareholder in a group, the provision should specify the decisionmaking process within the group. This provision also sets out a procedure for resolving shareholder impasses. The parties may choose the appropriate remedy, such as binding arbitration or put-call provisions.

5. Alternative 2: Change of Control Transactions

When the company receives financing from outside investors, the investors may want to retain the right to direct decisions that impact their liquidity. This provision accomplishes this objective by providing that employee shareholders must vote their shares as directed by the investors whenever there is a vote on a merger, sale of assets, or other change-in-control transaction.

5. Alternative 3: Supermajority Vote of Investors Required

Another method used by investors to exercise control over the company is the use of so-called supermajority vote provisions. Basically, such provisions restrict the company's ability to take certain actions without obtaining the consent of more than a majority-in-interest of the investors. In effect, the investors have a veto power over the listed actions; however, they are not in a position to force the company to take actions which have not been approved by the appropriate percentage of holders of the common shares. Points of negotiation include:

The actions covered by the requirement; and The percentage of the investor group which must approve the transaction.

In setting the percentage, consideration must be given to the relative shareholdings of the major investors, and it is common to set the percentage at a level which requires that two or more of the lead investors (but not necessarily all) approve the action.

6. Dividends

While this agreement substantially impacts the voting rights associated with the shares held by the parties, this provision makes it clear that the agreement does not impact the shareholders' economic rights, such as the right to receive dividends and other distributions. Restrictions on distributions must be drafted to conform with applicable state corporations laws and should be set out in articles of incorporation (e.g., dividend and liquidation preferences for preferred shares).

7. Restrictions on Transfer

While detailed transfer restrictions are not included in this form, they may be used as a supplemental device to control changes in the ownership group of the company. This section includes a general restriction on transfer without compliance with procedures set out in another document, such as bylaws, a separate buy-sell and/or transfer restriction agreement, or a stock purchase agreement between the company and the investors. If a separate agreement does not exist, the parties might want to consider including transfer restrictions in this agreement or, at a minimum, making it clear that transfers of shares covered by the agreement are not permitted unless the transferee agrees to become a party to this agreement.

8. Termination

Shareholders' agreements will usually terminate upon the earlier of a public offering by the company or the expiration of a stated period of time (e.g., 10 years). In this case, the agreement also will terminate when no shares of a designed class of securities, usually preferred shares issued to investors, remain outstanding. When such a provision is used, consideration must be given to the possibility that it still makes sense for the group voting provisions to remain in effect even if all shareholders own common shares if the company has not yet achieved other milestones, such as a public offering. Of course, if there is only one class of shares outstanding, this termination provision should be eliminated.

37

9. Representations and Warranties

Each shareholder, regardless of whether he, she, or it is an investor or an employee, should be prepared to make some basic representations regarding their right and ability to enter into the agreement.

9.1. Absence of Violation

This so-called “no conflict” representation requires that shareholders represent that they are not obligated under any other agreement which might impact the subject matter of this agreement. Of particular interest is any earlier voting agreement or proxy arrangement which might need to be terminated in order for this agreement to become effective.

9.2. Binding Obligation

This representation is designed to insure that the agreement is enforceable against each of the shareholders. Inability to enforce a voting agreement against a party can have significant consequences, and some lawyers counsel their clients to demand a voting trust arrangement to provide further assurance that the voting arrangement will be recognized and enforced.

10. Legend Required

State corporations laws generally provide that stock certificates representing shares which are subject to restrictions on transferability or voting arrangements must include a conspicuous statement to that effect on the face of the certificate. Unless the statement or legend appears on the stock certificate, the restrictions are not enforceable against a transferee of the shares who does not have actual knowledge of the restriction.

11. Remedies

Since damages may not be an adequate remedy in the event that a party breaches its covenants regarding voting of shares, the parties have agreed that specific performance should always be available for violations of the agreement, as well as injunctive relief. In some cases, the investors may seek some further protection by requesting that the common shareholders deliver their irrevocable proxies in order to allow them to vote the common shares in the manner provided in the agreement.

12. Notices

Notice provisions generally cover the manner in which notices are to be delivered under the agreement, as well as the locations to which notices should be sent.

13. Severability

The severability provision is intended to insure that the agreement will continue to be enforceable even if one of its provisions is found to be invalid.

14. Governing Law

The legality and enforceability of the voting agreement is generally determined under the laws of the state in which the corporation has been incorporated, and counsel should carefully review all relevant statutory and case law before drafting a voting agreement. In some cases, a determination may be made that another form of voting arrangement, such as a voting trust or irrevocable proxy, may be necessary under applicable law in order to insure the desired result.

15. Counterparts

38

Since it is generally difficult to gather all the parties to the voting agreement in one place, provision should always be made for the use of counterpart signature pages.

16. Entire Agreement

The agreement should contain a provision which clearly states, if true, that the agreement is intended to be the full and entire understanding and agreement between the parties with regard to the subject matter. This type of provision reduces the risk that some term or provision described in the term sheet was intended to bind the parties. If the shareholders are already subject to some form of stock restriction or option agreement, or the bylaws deal with voting, the drafter should insert appropriate language to make it clear that the terms of this agreement supersede any earlier or conflicting language in the other agreements or the bylaws.

17. Further Agreements

While this is intended to serve as a comprehensive voting agreement, provision will usually be made for executing further documents which may be necessary to carry out the essential purpose of the agreement. Documents might include certificates to be delivered to third parties that acknowledge that the agreement is in place, proxies, and letters of instruction.

18. Assignment

This section compliments the restrictions on transferability (§ 11:98) associated with the shares covered by the agreement by making it clear that the rights and obligations associated with this agreement may not be assigned without appropriate consent.

19. Parties in Interest

This paragraph makes it clear that the agreement will continue to be binding on successors of the parties, as well as any transferees of shares covered by the agreement. This is a key protection, and the company is obligated not to recognize any transfer of the shares until the transferee has agreed to become a party to the agreement. As this amounts to a restriction on transfer of the shares, an appropriate legend (§ 11:103) must be placed on each of the share certificates.

20. Interpretation

This provision regarding interpretation and construction of the agreement is designed to make it clear that all parties to the agreement participated in drafting and negotiation and that ambiguities should not be resolved against the party which had primary responsibility for drafting. Moreover, it is important to recite, if true, that all parties have had an opportunity to have the agreement reviewed by counsel. This is important since courts may be reluctant to enforce voting provisions in situations where a party agreed to what appears to be an unfavorable restriction without benefit of advice from counsel.

21. Amendment; Waiver

Procedures for amending the voting agreement should always be included. In this case, amendments and waivers may only be effective if they are approved by all parties to the agreement. If a number of shareholders are party to the agreement, it may be best to allow amendment by less than all of the shareholders so long as the hurdle is set high enough (e.g., two-thirds in interest of all shareholders or a majority-in-interest of the members of both shareholder groups).

22. Access to Information

In order for voting rights to be meaningful and informed, shareholders must have access to information regarding the company's business. This provision sets up a procedure which allows investors (and their representatives and agents) to:

39

Obtain financial information regarding the company; and Visit the company's facilities to inspect records and meet with the company's officers and key

employees

These special information rights may be limited to only major investors; however, all shareholders have certain statutory rights to information about the company and its business.

23. Option: Irrevocable Proxy

While voting agreements are generally recognized as enforceable, one or more shareholders may want further assurances that shares held by other shareholders will be voted in the manner contemplated under the agreement. One method for providing comfort is to require that specified shareholders deliver an irrevocable proxy which allows the holder of the proxy to vote the shares as required under the agreement. This optional provision calls for employee shareholders to deliver an irrevocable proxy to representatives of the investor group. Of course, the provision can be varied to cover closely-held corporations with just two or three shareholders.

Schedule I: Investors

A detailed list of the investors should be included as a schedule to the agreement. The following information should be included:

The name and address of each of the investors; and The number and type of shares owned by each investor.

Schedule II: Employee Shareholders

A detailed list of the employee shareholders should be included as a schedule to the agreement. The following information should be included:

The name and address of each of the employees; and The number and type of shares owned by each employee.

40

VOTING TRUST AGREEMENT — MASTER FORM WITH COMMENTARY

Source: Gutterman, Business Transaction Solutions (BUSTRANSOL §11:121 )

Overview:

This voting trust agreement contemplates a voting agreement among subscribers to the capital stock of a corporation. The agreement refers to the shareholders as subscribers but contemplates that they enter into the agreement when they own their shares of the corporation's capital stock. Some of the parties may prefer that the parties enter into the agreement before any of them actually acquires the stock. In that case, counsel will need to alter Recital A and the tense of the verbs in Section One of the agreement accordingly.

Shareholders of course may desire to enter into voting trust agreements at later times, after the corporation has been operating. This may be particularly relevant when the corporation is contemplating a major organizational transaction that involves the issuance of additional shares of stock or when one shareholder is contemplating selling his or her block of stock to an “outsider.” Sometimes some (but not all) shareholders desire to enter into a voting trust agreement; this is perhaps most often the case when the shareholders desiring the agreement hold in the aggregate a majority of the total shareholder voting power. This version of the agreement lends itself to relatively easy modification to accommodate either of these situations.

This version of the agreement implicitly contemplates that the corporation has only one class of capital stock. Counsel may find this version easily adaptable to other cases, and especially to the typical cases in which:

The corporation has more than one class of common stock but all the common stock has identical voting powers and votes together as one class;

The corporation also has (or in the future may have) preferred stock outstanding but the preferred stock has limited voting rights; or

The agreement is among only the holders of the corporation's preferred shareholders.

Shareholders may enter into a voting agreement without establishing a voting trust. The voting agreement alone simply establishes a contractual arrangement of rights and obligations among the parties with respect to their voting. A breach of the voting agreement may entitle an aggrieved party to contractual remedies; the shareholder vote may have been valid under applicable corporate law, however, and the aggrieved party's remedies under the voting agreement may not affect or undo the effect of the vote on the business and affairs of the corporation.

A voting trust agreement, in contrast, establishes a trust mechanism and effects a change in record ownership of the stock. By these mechanisms the parties seek to implement controls that will preclude the possibility of a vote by any party that would violate the parties' voting agreement.

Other documents necessary in connection with a voting trust agreement include voting trust certificates and stock powers. This version of the voting trust agreement sets out the form of voting trust certificate in Section Two of the agreement.

If the agreement is among subscribers for the corporation's capital stock, the voting trust agreement may be a condition and exhibit to, or be incorporated as a part of, a shareholders' agreement among the same investor parties.

The applicable state's corporate law may contain specific provisions authorizing, and may impose requirements or limitations upon, voting agreements, voting trust agreements and the voting trust trustees. Counsel will want to augment or amend this version of the voting trust agreement accordingly to the extent necessary.

41

This version of the agreement contemplates three voting trustees. Depending upon the nature and extent of the authority or discretion the agreement gives to the trustees, the shareholder parties may believe that one or two trustees will be sufficient.

This agreement is made on [date], between the holders of capital stock of [name of corporation], a corporation organized under the laws of [state], herein called the “subscribers”, and [name of voting trustee], [name of voting trustee], and [name of voting trustee], the trustees, herein called the “voting trustees”. The principal office of the corporation is located at [address]. The addresses of the above-named voting trustees are as follows: [addresses of voting trustees].

The addresses of the subscribers and the number of shares owned by each are as follows:

[name] [shareholder's residence] [number of shares][name] [shareholder's residence] [number of shares][name] [shareholder's residence] [number of shares]

Recitals

A. Each of the subscribers represents that it is owner of the number of shares of capital stock of [name of corporation], herein called the corporation, set opposite its name.

B. The subscribers deem it to be in the best interest of the corporation and of all the shareholders thereof that this agreement be made.

For the above reason and in consideration of the agreements herein and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto provide and agree as follows:

1. Transfer of Stock to Voting TrusteesEach of the subscribers agrees that it will forthwith deposit with the voting trustees, or with their authorized agents, the certificate or certificates for its shares of the capital stock, together with proper and sufficient instruments duly executed for the transfer thereof to the voting trustees, and pending the delivery of such instruments, each subscriber hereby sells, assigns, and transfers unto the voting trustees the number of shares of stock of the corporation set opposite the subscriber's name.

2. Voting Trust CertificatesUpon deposit by any subscriber of a certificate or certificates for shares of capital stock hereunder, accompanied by instruments of transfer thereto, the voting trustees will deliver or procure to be delivered to such subscriber on the subscriber's order a voting trust certificate or certificates for the same number of shares of capital stock of the corporation as is represented by the certificate or certificates therefor so deposited, which voting trust certificates to be delivered on deposit of capital stock shall be substantially in the following form:

No. [number]. [number] Shares of [name of corporation]

CAPITAL STOCK VOTING TRUST CERTIFICATE

This certifies that there has been deposited with the undersigned as voting trustees under the voting trust agreement hereinafter mentioned, a certificate or certificates for [number] shares of the capital stock of [name of corporation], a [state] corporation, and that [name], the registered holder, or the registered holder's assigns, is entitled to all the benefits and interests specified in the voting trust agreement arising from the deposit of the shares, all as provided in and subject to the terms of the voting trust agreement to which reference is hereby made. Until termination of the voting trust agreement, the registered holder hereof or assigns is entitled to receive payments equal to the amount of the cash dividends, if any,

42

collected by the undersigned voting trustees or their successors in the trust upon the above-mentioned number of shares of capital stock of the corporation. Until the voting trustees shall have delivered the stock held by them under the voting trust agreement to the holders of voting trust certificates or to an agent or to the corporation as specified in the voting trust agreement, and subject to the terms thereof, the voting trustees, or their successors in the trust, shall possess and shall be entitled to exercise all rights and powers of every nature of absolute owners of the capital stock, including the right to vote thereon and/or to execute consents with respect thereto, by a vote of a majority thereof, it being expressly stipulated that, except as in the voting trust agreement otherwise provided, no voting right passes to the above-named owner hereof or its assigns by or under this certificate or by or under any agreement expressed or implied.

This certificate is issued under and pursuant to, and the rights of the holder hereof are subject to and limited by, the terms and conditions of a certain voting trust agreement dated [date], between holders of capital stock of the corporation and [name of voting trustee], [name of voting trustee], and [name of voting trustee], and successors, as voting trustees, duplicates of which are filed with the voting trustees and with the corporation.

Unless sooner terminated as therein provided, the voting trust agreement shall terminate on [date].This certificate is transferable only with the consent of all the voting trustees and then only on the books of the voting trustees by the registered holder hereof in person or by attorney duly authorized according to rules established for that purpose by the voting trustees and on surrender hereof. Until so transferred, the voting trustees may treat the registered holder as owner hereof for all purposes whatsoever.This certificate shall not become valid unless signed on behalf of the voting trustees by their duly authorized agent.

In witness whereof, the voting trustees have hereunto set their hands on [date].

[name of voting trustee][signature of voting trustee][name of voting trustee][signature of voting trustee][name of voting trustee][signature of voting trustee][name of subscriber][signature of subscribers]

3. Agent of Voting TrusteesThe [name of bank], located at [address], herein sometimes called the agent, is hereby appointed agent of the voting trustees. As such agent, it shall hold the share certificates deposited hereunder, subject to the board of trustees, and shall execute trust certificates on behalf of the trustees, act as transfer agent of the trustees, keep suitable transfer books for the trustees, and otherwise act as their agent under special instructions. The trustees may, at any time and in their discretion, and from time to time on written notice to the agent, revoke its authority as agent and appoint another agent. The agent shall at all times be protected in acting by written instructions of the voting trustees.

The agent of the voting trustees shall incur no liability as such to the voting trustees for anything done or permitted at the request or direction of the voting trustees in the exercise of their powers under this agreement, the stock deposited hereunder being intended to be wholly at the order and under the control of the voting trustees. The agent shall incur no liability whatsoever except for its own misconduct or neglect. The agent shall be protected in acting on any notice, request, consent, assignment, power of attorney, or other instrument, believed by it to be genuine and to have been signed by the proper party or parties. The agent shall be entitled to reasonable compensation for its services, and to be paid all reasonable expenses in connection with the performance of its duties hereunder. The cost and expenses are to be borne by the holders of voting trust certificates pro rata to their respective interests.

43

4. Transferability of Voting Trust CertificatesThe voting trust certificates shall be transferable as therein provided, and not otherwise, and transfers so made of any such certificates shall vest in the transferee all rights and interests of the transferor in and under such certificate, and on such transfer, the voting trustees will deliver or cause to be delivered the voting trust certificate or certificates to the transferee of the same number of shares of capital stock called for by the voting trust certificate so transferred. Until such transfer, the voting trustees may treat the registered holder of a voting trust certificate as owner thereof for all purposes whatsoever. Every assignee or transferee of a voting trust certificate issued hereunder shall, by the acceptance of such a voting trust certificate, become a party hereto with like effect as though an original subscriber hereof.

5. Stock in Name of Voting TrusteesThe shares of capital stock of the corporation, certificates for which shall be deposited hereunder with the voting trustees, shall be vested in the voting trustees and shall be transferred to the name of the voting trustees on the books of the corporation.

6. Voting Trustees Succeed to All Rights in StockUntil the actual delivery by the voting trustees to the holders of voting trust certificates of the capital stock of the corporation or until the voting trustees shall have delivered the stock of the corporation held by them to the agent or to the corporation as provided hereinafter, the voting trustees, or a majority of them, shall possess and in their discretion shall be entitled to exercise in person or by their nominee, all rights and powers of absolute owners in respect of all the stock of the corporation held by them, including the right to vote thereon and to take part and consent to any corporate or shareholders' action of any kind whatsoever and to receive dividends and distributions on the stock. In addition, except as herein provided, it is expressly understood and agreed that the holders of voting trust certificates shall not have any right with respect to any such stock held by the voting trustees to vote or take part in or consent to or in any way control or limit any corporate or shareholders' action. The voting trustees' right to vote shall include the right to vote for election of directors and in favor of or in opposition to any resolution or proposed action of any character whatsoever which may be presented in any meeting requiring the consent of shareholders of the corporation.

7. Election of Board of DirectorsUntil this voting trust agreement shall be terminated as herein provided, the voting trustees hereunder shall vote the stock deposited hereunder to effect the election of and to continue in office a board of directors of the corporation which shall consist of [board specifications].

8. DividendsThe registered holders of voting trust certificates shall be entitled, until distribution of the stock of the corporation deposited hereunder as provided for hereinafter, to receive from time to time payments equal to the cash dividends, if any, collected by the voting trustees upon the like number of shares of capital stock of the corporation represented in such voting trust certificates. In case certificates for any shares of capital stock of the corporation shall be issued to the voting trustees as stock dividends upon the stock of the corporation held by them hereunder, they shall hold such stock and the certificates representing it subject to the provision of this agreement; but the registered holder of each voting trust certificate then outstanding shall be entitled to receive from the voting trustees, voting trust certificates for the number of shares received by the voting trustees as the stock dividend on shares represented by his voting trust certificates. In the event that any dividend or other distribution other than cash or stock of the corporation shall be received by the voting trustees, the voting trustees may in their discretion distribute the same ratably among the holders of voting trust certificates in accordance with their respective shares or may issue such certificates or other evidences of interest therein as to the voting trustees may seem advisable or may hold the same until the termination of this agreement.

9. Termination of Voting TrustOn [date], unless the voting trustees exercise their right, which is hereby expressly granted to them, to terminate this agreement by unanimous vote at any time prior to that date, the voting trustees shall distribute the stock of the corporation held by them to the holders of the voting trust certificates as follows:

44

The voting trustees shall, upon presentation and surrender on or after such date of voting trust certificates accompanied by properly executed transfers thereof to the voting trustees, deliver or cause to be delivered to the holders of outstanding voting certificates, the stock of the corporation held by the voting trustees in the amounts represented by the interests therein of the holders of the voting trust certificates. On or after the termination of this agreement as above provided, the voting trustees may deposit with the agent, or with the corporation, the stock of the corporation held by them hereunder, with properly executed transfers thereof and instructions to distribute the same to the registered holders of such voting trust certificates in the manner above provided, and they shall thereupon be relieved and discharged from all further obligation and liability hereunder.

10. Method of Voting StockExcept with respect to election of directors, the voting trustees shall at all shareholders' meetings vote the stock represented by the respective outstanding voting trust certificates in accordance with the direction of the respective holders thereof. The voting trustees may in all matters act either at a meeting or by a writing or writings with or without a meeting.

11. Resignation of Trustees and Filling Trustee VacanciesThe number of voting trustees shall be [number]. In every case of death, resignation, or incapacity of a voting trustee, the vacancy so occurring shall be filled in the following manner: The vacancy will be filled by the appointment made by a majority of the remaining voting trustees or by a single remaining trustee, as the case may be, by a written instrument, a copy of which shall be deposited with the corporation at its principal office in [state]. If all trusteeships become vacant, the subscribers will elect new voting trustees by a majority vote, with each subscriber having a proportionate number of votes to the number of voting trust certificates held by it for each of the three trusteeships. The voting will be cumulative. Each successor trustee shall from the time of such appointment be deemed a voting trustee hereunder and have all the estate, title, rights, and powers of a voting trustee hereunder. All acts and instruments shall be done and executed which shall be necessarily or reasonably requested for the purpose of effecting such succession and of making the voting trustees as they shall exist upon such appointment the owners of record of the stock deposited with the voting trustees. Until the appointment of a successor, the remaining voting trustees shall have all the estate, title, rights, and powers of the original voting trustees. The voting trustees from time to time in office, may adopt, use, and issue voting trust certificates bearing the names of their predecessors or any of them.

12. Voting Trustees' ProxiesThe voting trustees may vote stock of the corporation in person or by such persons as they shall select as their proxy.

13. Voting Trustees Liability for NegligenceIn voting the shares of stock or doing any act with respect to the control or management of the corporation or its affairs, as holders of the stock deposited hereunder, the voting trustees shall exercise their best judgment in the interest of the corporation, and to the end that its affairs shall be properly managed. No voting trustee shall be liable for any error of judgment or mistake of law or other mistake, or for anything save only the trustee's willful misconduct or gross negligence.

14. Resignation of Voting Trustees' AgentThe agent of the voting trustees may at any time resign its duties hereunder by giving [number] days' notice thereof to the voting trustees, and such agent may at any time be removed by a written instrument signed by at least a majority of the then voting trustees and delivered to the agent. In case of a vacancy in the position of agent, a majority of the voting trustees, by a writing signed by them and delivered to the successor named therein, may appoint a successor to the agent, which successor shall thereupon be entitled to all rights, authority, and powers hereby conferred upon the above-named agent. The agent so resigning or so removed shall thereupon deliver to such successor, the stock of the corporation held by it hereunder, together with all books, registers, and other papers pertaining or relating to the stock or the voting trust certificates which may from time to time be issued hereunder.

15. New Subscribers

45

Any holder of capital stock of the corporation may at any time become a subscriber hereto with respect to any such stock by subscribing to this agreement and depositing the certificates of his or her stock, accompanied by duly executed instruments of transfer as herein provided.

16. NoticeAny notice to be given to the holders of voting trust certificates hereunder shall be sufficiently given if mailed to the registered holders of voting trust certificates at the addresses furnished respectively by such holders to the voting trustees or their agent.

17. Lost Trust CertificatesIn case any trust certificate issued under this agreement shall become mutilated, destroyed, stolen, or lost, the voting trustees, in their discretion, may authorize the issue of a new trust certificate; and thereupon the agent of the trustees shall issue a new trust certificate in substitution therefor for a like number of shares and bearing a like serial number. The applicant for such substituted trust certificate shall furnish to the trustees and to their agent evidence to their satisfaction, respectively, of the mutilation, destruction, theft, or loss of such trust certificate, together with such indemnity to both the trustees and/or their agent, respectively, as, in their discretion, they may require.

18. Voting Trustees Dealing with CorporationThe voting trustees shall not be disqualified by their office from dealing or contracting with the corporation either as vendor, purchaser, or otherwise, nor shall any transaction or contract of the corporation be void or voidable by reason of the fact that any voting trustee or any firm of which any voting trustee is a member or any corporation of which any voting trustee is a shareholder or director, is in any way interested in such transaction or contract; nor shall any voting trustee be liable to account to the corporation or to any shareholder thereof for any profits realized by, from, or through any such transaction or contract by reason of the fact that the voting trustee, or any firm of which the voting trustee is a member, or any corporation of which the voting trustee is a shareholder or director, was interested in such transaction or contract.

19. Amendment of Voting TrustThis agreement may be amended or terminated at any time by an instrument in writing duly executed and acknowledged by the owners and holders of trust certificates representing a majority of the shares of stock of the corporation having voting power.

20. Execution of Voting Trust AgreementThis agreement shall bind and benefit the executors, administrators, assigns, and successors of the respective parties hereto and may be simultaneously executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original; and such counterparts together shall constitute one instrument. An original of this agreement shall be placed with the agent of the trustees, and a duplicate thereof shall be filed with the corporation at its principal office in [state].

21. Acceptance of Trust by Voting TrusteesThe voting trustees hereby accept the above trust subject to all of the terms, conditions, and reservations herein contained, and agree that they will exercise their powers and perform their duties of voting trustees as herein set forth; provided, however, that nothing herein contained shall be construed to prevent any or all of the voting trustees from resigning and discharging themselves from the trust.

In witness whereof, the parties hereto have respectively signed this voting trust agreement on [date].

[name of voting trustee]

[signature of voting trustee]

[name of voting trustee]

46

[signature of voting trustee]

[name of voting trustee]

[signature of voting trustee]

[name of subscriber]

[signature of subscriber]

NOTES

RecitalsIf the parties enter into the agreement before they pay for and acquire the corporation's capital stock,

counsel will want to alter paragraph A accordingly. Counsel may wish to augment or alter paragraph B to set out the purposes or concerns behind the agreement.

1. Transfer of Stock to Voting Trustees

This section provides for the transfer of the capital stock from the shareholder parties to the trustees. Counsel may prefer to specify precisely what documents will be required as the “proper and sufficient instruments duly executed for the transfer.” Such specificity helps to avoid confusion or debate at the time of transfer, and individuals who are not particularly familiar with the mechanics of transfers of securities usually find such precise description instructive and helpful. Typically the required instruments of transfer are “stock powers duly endorsed in blank.”

If the shareholder parties already own the stock, counsel may wisely suggest that the agreement require the shareholders to deliver their stock certificates and powers when they execute the agreement. The portion of this section from “and pending” to the end of the section then may not be necessary.

Counsel will need to revise the text of this Section One if uncertificated securities are involved.

2. Voting Trust Certificates

The shareholder receives a voting trust certificate from the trustees in exchange for the stock he or she places into the trust. The voting trust certificate thus is somewhat analogous to a stock certificate, in that it represents the holder's rights to the voting trust.

The voting trust certificate identifies the registered holder of the certificate and the number of shares of stock the holder delivered to the trustee in exchange for the certificate.

The typical certificate also summarizes or describes the fundamental rights (and obligations, if any) of the holder in the trust and under the trust agreement; it also refers to the agreement and states where one may examine or obtain a copy of the agreement.

If the agreement imposes restrictions on the transfer of the certificates, the restrictions or clear references to them should set forth conspicuously on the certificate. If other applicable law does not provide guidance as to what constitutes adequate notation of such restrictions, counsel may find guidance in the applicable jurisdiction's law about transfer restriction notations on stock certificates.

This version of the agreement sets forth the form of voting trust certificate as part of the text of the agreement. Some counsel find it mechanically preferable to present the form of certificate as an exhibit to the agreement.

3. Agent of Voting Trustees

This version of the agreement contemplates that an agent shall hold the stock certificates, issue the voting trust certificates and otherwise act on behalf of and at the direction of the voting trust trustees. In

47

appropriate situations, the shareholders may determine that the trustee(s) may hold the trust and perform their duties in their own right and do not need to incur the services and expenses of an agent.

4. Transferability of Voting Trust Certificates

Counsel often prefer to set all restrictions on transfer out fully in the agreement. This version of the agreement and certificate give the trustees absolute discretion whether to approve or disapprove any proposed transfer of a voting trust certificate. Counsel may wisely suggest either that the agreement set out principles to guide or limitations upon the exercise of that discretion or that any transfer require the approving vote of a majority of the shareholders who are not proposing to transfer their certificates. Such vote might by on the basis of one vote per certificate holder or of one vote for each share of corporation stock represented by such holder's voting trust certificates.

Counsel may wish to provide in this section that an new voting trust certificate will be issued to the transferee only upon surrender of the transferor's certificate. Many agreements will require that the transferee actually sign a copy of the voting trust agreement and may make such signing a condition precedent to the issuance of the transferee's voting trust certificate.

Transfer restrictions should be noted on the voting trust certificates (§ 11:124).

5. Stock in Name of Voting Trustees

Some states' statutes suggest that the stock certificates must be surrendered to the corporation and reissued in the name of the trustees.

6. Voting Trustees Succeed to All Rights in Stock

This section expressly gives the trustees all voting and other rights with respect the shareholder parties' stock in the corporation, subject to the constraints or obligations imposed upon the trustees by Sections Seven, Eight and Ten, and other provisions, of the voting trust agreement.

7. Election of Board of Directors

The blank in this form of the Section may be filled in with whatever names, phrases or sentences record the shareholder parties' simple or complex agreement. The agreement may be, for example, specific names, a limitation on the number constituting the entire Board and a list of certain individuals who must be directors (but not necessarily constitute the entire Board), or reference to such persons as a certain or a specified group of people name from time to time.

8. Dividends

The typical voting trust agreement pertains to only a shift in shareholder voting rights, not to any ultimate shift in the shareholders' economic interests in the corporation's stock. Their economic interest is indirect during the life of the trust, however, because the trustees become the record owners of the stock. This section address this issue and the mechanics for preserving and distributing the shareholder parties' realized economic benefits from the corporation's capital stock.

Counsel may wish to clarify in this section whether or not the trustees are entitled to deduct agent and trustee fees and other expenses of the trust and to distribute to the shareholder parties only the remaining net amount of dividends received.

9. Termination of Voting Trust

This version of the agreement entitles the trustees to terminate the voting trust agreement by unanimous vote. Many shareholders prefer to keep that power to themselves alone; in that instance, counsel will want to delete the applicable portion of the introductory sentence of this Section and perhaps to insert a reference to Section Nineteen of the agreement.

48

Some state's corporate laws limit the permissible or enforceable duration of a voting trust agreement unless it is expressly renewed or extended by the parties at the end of the permitted or enforceable time period.

10. Method of Voting Stock

This version obligates the trustees to vote the stock as the respective beneficial owners direct, except when voting to elect directors of the corporation. The trustees thus may be obligated to split the total vote in many instances.

Some voting trust agreements may carve other shareholder votes out from this general voting provision. Votes often treated differently in a voting trust agreement include issues of mergers or sales of significant assets and issues affecting the corporation's capital structure (e.g., increases in the number of authorized shares of stock).

11. Resignation of Trustees and Filling Trustee Vacancies

Many shareholders prefer to retain for themselves the right to fill vacancies in trusteeships and not to give that power to the remaining trustees. Counsel may wish to clarify that when voting to fill a trustee vacancy, each voting trust certificate holder shall have a number of votes equal to the number of shares of corporation stock represented by the voting trust certificates held of record by that shareholder, if that is what the parties intend. Many voting trust agreements do not provide that voting by the certificate holders will be cumulative. Counsel may wish to add to this Section that a successor trustee becomes a trustee only upon his, her or its acceptance of the trusteeship and signing of a copy of the voting trust agreement.

12. Voting Trustees' Proxies

This Section reiterates a power granted to the trustees by Section Six (§ 11:128) of the agreement.

13. Voting Trustees Liability for Negligence

This Section limits the trustees' liability to liability for willful misconduct or gross negligence. Although high, such standard for trustee liability is typical. In fact, institutional trustees often will not agree to act as a trustee if the threshold for liability would be lower.

14. Resignation of Voting Trustees' Agent

This Section of course may be eliminated if the agreement does not authorize the trustees to engage an agent (§ 11:125).

15. New Subscribers

New parties to the agreement could be persons or entities who owned shares of the corporation's stock, but did not join in the agreement, when the other parties to the agreement entered into the agreement. Or the new parties may have acquired their stock at a later time, by acquiring newly issued or treasury shares from the corporation or by acquiring shares from a shareholder who did not enter into the agreement.

16. Notice

Counsel may wish to add that such notices will be deemed given only a specified number of days after they are mailed with postage prepaid.

17. Lost Trust Certificates

This Section is substantively similar to the typical corporate by-law provision regarding lost stock certificates.

49

18. Voting Trustees Dealing with Corporation

Shareholders reasonably may have some concern about, and want in some way to limit, the scope of this Section if the trustees have any discretion in the exercise of their authority. This concern may be especially appropriate if the trustees have any discretion in determining how to vote the corporation shares.

19. Amendment of Voting Trust

The phrase “a majority of the shares of stock of the corporation having voting power” proposed in this version of the agreement may be appropriate if all outstanding shares of the corporation will be held under the agreement at all times during the life of the voting trust agreement. If that may not be the case, and perhaps for the sake of caution in any event, counsel may find it prudent to replace that phrase in this version with the phrase “a majority of the shares of the corporation then deposited with the trustees under this agreement.” Many voting agreements require a super-majority vote ( e.g., a two-thirds, three-quarters or even unanimous vote) to approve an early termination of the agreement.

20. Execution of Voting Trust Agreement

This Section sets out “binding effect” and “counterparts” provisions typical to most contracts, as well as certain mechanical requirement unique to the voting trust agreement.

21. Acceptance of Trust by Voting Trustees

This Section records the trustees' agreement to act under and in accordance with the agreement, subject to their rights to resign as such trustees.

50

IRREVOCABLE PROXY

Source: Gutterman, Business Transaction Solutions (BUSTRANSOL §11:151 )

Overview:

This form is the irrevocable proxy to be used in connection with the shareholders' agreement. The proxy grants the president the right to vote the shares of the other shareholders on all but the matters listed in the proxy and in the shareholders' agreement. Reference is also made to the form of employment agreement, which sets out the duties of the president, including the matters as to which the president has full authority without the need to consult the other shareholders.

The undersigned Shareholders, holders of the number of shares indicated opposite their signatures of common stock of [name of corporation] (the “Company”), irrevocably appoint and constitute [name] (“President”) as their attorney and proxy to attend meetings, vote, give consents, and in all other ways to act in their place and stead until [date]. President shall have full power of substitution and revocation and any proxies heretofore given are hereby revoked.This proxy is made and executed in consideration of the purchase by President of stock of the Company, execution of the Shareholders' Agreement dated [date], by and between President and the undersigned Shareholders, and the Employment Agreement dated [date], between the Company and President, providing for a period of employment from [date], to and including [date].President shall have complete discretion to vote the shares under this Irrevocable Proxy as to any matter requiring a vote of Shareholders, except that the written consent of holders of a majority of the outstanding shares of the Company shall be obtained by President to approve any of the following actions by the Company:

(a) Amendment or repeal or alteration in any way of any provision in the Articles of Incorporation or Bylaws of the Company;

(b) Merger or consolidation of the Company;

(c) Transfer of all or substantially all of the assets of the Company;

(d) Issuance of any shares of the Company or issuance of any options or other rights to acquire any shares of the Company (except up to [percent] of the Company's outstanding stock pursuant to an employee stock option plan); or

(e) Issuance of any bonds, debentures, notes or evidences of indebtedness of the Company (other than to trade creditors in the ordinary course of the Company's business).

Any additional shares issued to the Shareholders, or any of them, shall be subject to this Irrevocable Proxy and such certificates shall be affixed with a legend so indicating. This Proxy shall become revocable upon the later to occur of (i) the expiration of the period of employment under the Employment Agreement, or (ii) when President no longer owns any stock of the Company.Dated: [date]

No. of Shares Subject to this Irrevocable Proxy: [number]

[names and signatures of shareholders]

51

STOCKHOLDERS' AGREEMENT FOR MANAGEMENT AND INVESTOR GROUPS

Source: Gutterman, Business Transaction Solutions (BUSTRANSOL §11:152 )

Overview:

This form of stockholders' agreement was used in connection with the preferred stock purchase agreement. The transaction involved a management buyout of a division of a large pharmaceutical company which was financed, in part, by venture capital funding. The stockholders' agreement sets out the agreement between the management group and the investor group as to election of directors and also contains detailed procedures to be followed whenever a party seeks to transfer shares outside of his, her or its specific group. In addition, the agreement covers offers by third parties to acquire control of the corporation and provides that the parties will be bound by the will of the majority as to acceptance of the terms of any such offer.

STOCKHOLDERS' AGREEMENT dated as of [date], among [name of corporation], a [name of state] corporation (the “Corporation”), and those stockholders of the Corporation listed on Schedule I attached hereto (collectively, the “Stockholders”).

The Corporation is a corporation duly organized and existing under the laws of the State of [name of state] with an authorized capitalization of [number] shares of Common Stock, without par value (the “Common Stock”), and [number] shares of Convertible Preferred Stock, without par value (the “Preferred Stock”). Each of the Stockholders owns that number of shares of Common Stock or Preferred Stock set forth opposite the name of each such Stockholder on Schedule [number/letter] attached hereto. It is deemed to be in the best interests of the Corporation and the Stockholders that provision be made for the continuity and stability of the business and policies of the Corporation and, to that end, the Corporation and the Stockholders hereby set forth their agreement with respect to the shares of Common Stock and Preferred Stock owned by the Stockholders.

NOW, THEREFORE, in consideration of the premises and of the mutual consents and obligations hereinafter set forth, the parties hereto hereby agree as follows:

SECTION 1. Definitions As used herein, the following terms shall have the following respective meanings:

(a) Affiliate shall mean a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, any Stockholder.

(b) Eligible Group shall mean any Group except a Selling Group or a Group which includes a Stockholder as to whom or which an Event of Option shall have occurred.

(c) Event of Option shall mean the occurrence of one or more of the following events:

(i) a Stockholder shall be declared bankrupt or a receiver, executor, administrator, guardian, legal committee or other legal custodian of his or its property (including any Stock owned by such Stockholder) shall be appointed; provided, however, that no appointment of any executor or administrator of the property of a Stockholder who is an individual, upon the death of such Stockholder, shall be deemed an Event of Option as to any Stock owned by such Stockholder

52

until and unless such executor or administrator, or any successor thereof, shall have disposed of such Stock other than by transferring it to a member or members of the Group of such Stockholder, which member or members shall have agreed in writing, at the time of such transfer, to be bound by and to comply with, to the same extent as the Stockholder as a result of whose death such Stock was distributed, all applicable provisions of this Agreement and to be deemed a member of such Stockholder's Group;

(ii) a Stockholder shall Sell any Stock in violation of Section 2, 3, 5 or 6;

(iii) a Stockholder who became a Stockholder only by virtue of being an Affiliate ceases to be an Affiliate (in a manner other than as contemplated by Section 1(c) (i)) while it owns any Stock; or

(iv) a writ of attachment or levy or other court order shall prevent a Stockholder from exercising his or its voting and other rights with respect to any Stock.

An Event of Option shall be deemed to be continuing until the procedures set forth in Section 4 with respect to the Stock affected thereby have been exhausted.

(d) Fair Value Per Share shall mean, as of the date of determination, the fair value of each share of Stock determined in good faith by a majority of the Board of Directors of the Corporation or, if such determination cannot be made, by a nationally recognized independent investment banking firm mutually selected by Stockholders holding not less than a majority in voting power of the then outstanding Stock and the Stockholder as to whom or which an Event of Option shall have occurred (or, if such selection cannot be made, by a nationally recognized independent investment banking firm which is selected by the American Arbitration Association in accordance with its rules).

(e) Group shall mean:

(i) In the case of any Stockholder who is an individual, (A) such Stockholder, (B) the spouse, parents, siblings and lineal descendants of such Stockholder, (C) a trust for the benefit of any of the foregoing and (D) any corporation or partnership controlled by such Stockholder;

(ii) In the case of any Stockholder which is a partnership, (A) such partnership and any of its limited or general partners, (B) any corporation or other business organization to which such partnership shall sell all or substantially all of its assets or with which it shall be merged and (C) any Affiliate of such partnership;

(iii) In the case of any Stockholder which is a corporation, (A) any such corporation and any of its subsidiaries, (B) any corporation or other business organization to which such corporation shall sell all or substantially all of its assets or with which it shall be merged and (C) any Affiliate of such corporation; and

(iv) In the case of any Stockholder which is a trust, (A) such trust and (B) the beneficiaries of such trust.

(f) Investors shall have the meaning ascribed thereto in the Purchase Agreement.

(g) Principals shall have the meaning ascribed thereto in the Purchase Agreement.

(h) Prohibited Transferee shall mean any individual, corporation, firm or other legal entity receiving or holding any Stock, directly or indirectly, as the result of the occurrence of an Event of Option.

(i) Proportionate Percentage shall mean the pro rata percentage of a class of Stock (A) being offered by a Selling Group pursuant to Section 3 which each Eligible Group shall be entitled to purchase, if any, or (B) which each Eligible Group shall be entitled to purchase from the Stockholder as to which an Event of Option has occurred, his or its representatives or assigns, or the Prohibited Transferee, as

53

the case may be. Such pro rata percentage, as to each Eligible Group, shall be the percentage figure which expresses the ratio, based upon voting power, between the number of shares of outstanding Stock owned by such Eligible Group and the aggregate number of such shares of Stock owned by all Eligible Groups.

(j) Purchase Agreement shall mean the Convertible Preferred Stock Purchase Agreement dated as of the date hereof, among the Corporation and the Stockholders.

(k) Sell, as to any Stock, shall mean to sell, or in any other way directly or indirectly transfer, assign, distribute, encumber or otherwise dispose of, either voluntarily or involuntarily.

(l) Selling Group shall mean a Group of a Stockholder proposing to Sell its Stock, or which has delivered a notice of intention to Sell, pursuant to Section 3.

(m) Stock shall mean (1) the presently issued and outstanding shares of capital stock of the Corporation, (2) any additional shares of capital stock hereafter issued and outstanding and (3) any shares of capital stock of the Corporation into which such shares may be converted or for which they may be exchanged.

(n) Stockholders shall mean those persons identified on Schedule I attached hereto as the holders of Stock and shall include any other person who agrees in writing with the parties hereto to be bound by and to comply with all applicable provisions of this Agreement as contemplated by Sections 2(b) and 2(c).

SECTION 2. Limitations on Sales of Stock—General Each Stockholder, and each member of the Group of such Stockholder, hereby agrees that he or it shall not at any time during the term of this Agreement Sell any Stock except:

(a) by sale in accordance with Section 3, 4, 5 or 6;

(b) by pledge which creates a mere security interest in the Stock; provided, that the pledgee thereof shall agree in writing in advance with the parties hereto to be bound by and comply with all applicable provisions of this Agreement to the same extent as if it were the Stockholder making such pledge; or

(c) by transfer to another member of the Group to which such Stockholder belongs; provided, that the recipient of such Stock shall agree in writing with the parties hereto to be bound by and to comply with all applicable provisions of this Agreement and to be deemed a member of such Group.

SECTION 3. Procedures on Sale of Stock to Third Parties Except as otherwise expressly provided herein, each Stockholder and each member of the Group to which such Stockholder belongs hereby agrees that it or he shall not Sell any Stock except in accordance with the following procedures:

(a) The Selling Group shall first deliver to the Corporation and each Eligible Group a written notice, which shall be irrevocable for a period of [number] days after delivery thereof, offering all or any part of the Stock owned by the Selling Group at the purchase price and on the terms specified therein, whereupon (i) first, the Corporation shall have the right and option to purchase all of the Stock so offered at the purchase price and on the terms stated in the notice of intention to Sell (such acceptance to be made by the delivery of a written notice to the Selling Group and each Eligible Group within the [number]-day period after delivery of the aforesaid notice of intention to Sell); and (ii) second, if and only if the Corporation shall have failed to accept or shall have rejected in writing the foregoing offer, each Eligible Group shall have the right and option (subject to the provisions of Section 3(e)), to accept its Proportionate Percentage (but not less than its Proportionate Percentage) of the Stock so offered at the purchase price and on the terms stated in the notice of intention to Sell (such acceptance to be made by the delivery of a written notice to the Selling Group within the

54

[number]-day period after the Corporation's failure to accept or rejection in writing of the foregoing offer.

(b) If any Eligible Group shall fail to accept, or shall reject in writing, the offer made pursuant to Section 3(a), then, upon the earlier of the expiration of such [number]-day period or the receipt of written notices of acceptance, or written rejections of such offer, from all Eligible Groups, the Selling Group's then remaining Stock formerly subject to such offer shall be reoffered to the remaining Eligible Groups, if any, which accepted their Proportionate Percentage of such offer. Such subsequent offer shall be on the terms and subject to acceptance in the manner provided in Section 3(a), except that the Eligible Groups receiving such subsequent offer shall have the further right and option to offer, in any written notice of acceptance, to purchase any of such Stock not purchased by other Eligible Groups, in which case such Stock not accepted by the other Eligible Groups shall be deemed to have been offered to and accepted by the Eligible Groups which exercised their further right and option, pro rata in accordance with their respective Proportionate Percentages, and on the above-described terms and conditions.

(c) Sales of Stock under the terms of Sections 3(a) and (b) above shall be made at the offices of the Corporation on a mutually satisfactory business day within [number] days after the expiration of the aforesaid periods. Delivery of certificates or other instruments evidencing such Stock duly endorsed for transfer to the Corporation or members of the Eligible Groups, as applicable, shall be made on such date against payment of the purchase price therefor.

(d) If effective acceptance shall not be received pursuant to Sections 3(a) and (b) above with respect to all or any part of the Stock offered for sale pursuant to the aforesaid written notice, then the Selling Group may sell all or any part of the remaining Stock so offered for sale at a price not less than the price, and on terms not more favorable to the purchaser thereof than the terms, stated in the written notice of intention to Sell, at any time within [number] days after the expiration of the offer required by Sections 3(a) and (b) above. In the event the remaining Stock is not sold by the Selling Group during such [number]-day period, the right of the Selling Group to Sell such remaining Stock shall expire and the obligations of this Section 3 shall be reinstated; provided, however, that in the event the Selling Group determines, at any time during such [number]-day period, that the sale of all or any part of the remaining Stock on the terms set forth in the written notice of intention to Sell is impractical, the Selling Group can terminate the offer and reinstate the procedure provided in this Section 3 without waiting for the expiration of such [number]-day period.

(e) The Selling Group may specify in the written notice of intention to Sell contemplated by Section 3(a) that all Stock mentioned therein must be sold, in which case acceptances received pursuant to Sections 3(a) and (b) hereof shall be deemed conditioned upon (i) receipt of written notices of acceptance with respect to all Stock mentioned in such written notice of intention to Sell and/or (ii) the sale of the remaining Stock, if any, pursuant to Section 3(d) above.

SECTION 4. Event of Option (a) If an Event of Option shall occur, each Eligible Group shall have the right and option to give the

Corporation and the Stockholder (or his representatives or assigns) as to which such Event of Option has occurred, or the Prohibited Transferee, as the case may be, notice of its election to have the Fair Value Per Share determined, whereupon the Stockholders shall cause such determination to be made with reasonable promptness. Upon the completion of such determination, each Eligible Group shall have the right and option for a period of [number] days after such determination, to purchase from such Stockholder, his representatives or assigns, or the Prohibited Transferee, as the case may be, for cash, and at the Fair Value Per Share, its Proportionate Percentage (but not less than its Proportionate Percentage) of the shares of Stock as to which such Event of Option has occurred, which option shall be exercised by delivery to the Corporation, during such [number]-day period, of a written notice of election to purchase such Stock, whereupon the Corporation shall forthwith transmit any written notice of election to purchase delivered pursuant to this Section 4(a) to the Stockholder as to which such Event of Option has occurred, its representatives or assigns, or the Prohibited Transferee, as the case may be, but failure of the Corporation so to transmit any such notice shall in

55

no way invalidate such notice; provided, however, that the Eligible Groups delivering such notice of election to purchase shall have the further right and option to purchase, in any such written notice of election to purchase, any such Stock not purchased by other Eligible Groups, in which case such Stock not accepted by the other Eligible Groups shall be deemed to have been offered to and accepted by the Eligible Groups which exercised their option hereunder, pro rata in accordance with their respective Proportionate Percentages, and on the above-described terms and conditions.

(b) Sales of Stock effected under the terms of Section 4(a) shall be made at the offices of the Corporation on a mutually acceptable business day within [number] days after the expiration of the period referred to in Section 4(a). Delivery of certificates or other instruments evidencing such Stock duly endorsed for transfer shall be made on such date against payment of the purchase price therefor.

(c) If any shares of Stock as to which an Event of Option shall have occurred shall not be purchased in accordance with Section 4(a) for any reason other than failure of the owner thereof to comply with the provisions of this Agreement, such Stock shall thereupon cease to be subject to this Agreement; provided, however, that if such shares of Stock are thereafter acquired by a member of any Group, they shall once again be deemed to be subject to this Agreement.

(d) So long as a Stockholder belonging to an Eligible Group complies with the provisions of this Section 4, the provisions of Section 3 shall not apply to the sale of Stock being effected pursuant to this Section 4.

SECTION 5. Right of Co-sale In the event any Stockholder or member of the Group to which such Stockholder belongs receives a bona fide offer from a third party which is not an Affiliate (the “Section 5 Offeror”) to purchase from such Stockholder or member of the Group of such Stockholder not less than 20% of the Stock owned by such Stockholder or member of such Group for a specified price payable in cash or otherwise and on specified terms and conditions (the “Section 5 Offer”), such Stockholder or member of such Group shall promptly forward a copy of the Section 5 Offer to the Corporation and the other Stockholders. Each such Stockholder or member of such Group shall not sell any such Stock to the Section 5 Offeror unless the terms of the Section 5 Offer are extended to the other Stockholders on a pro rata basis (being the ratio, based upon voting power, between the number of such shares owned by such Stockholder or member of such Group and all Stockholders). Such other Stockholders shall have [number] days from the date of the foregoing offer to accept such offer. Before the Stockholder or member of the Group who had received the Section 5 Offer extends such Section 5 Offer to the other Stockholders pursuant to this Section 5, such Stockholder or member of such Group shall first comply with the provisions of Section 3.

SECTION 6. Obligation to Purchase Stock (a) In the event that after [date], (i) any Group or Groups receives a bona fide written offer from a third

party which is not an Affiliate to purchase not less than 50% of the then issued and outstanding Stock of the Corporation or (ii) the Corporation receives a bona fide written offer from a third party which is not an Affiliate (such third party which is not an Affiliate referred to in clause (i) or this clause (ii) being hereinafter called the “Section 6 Offeror”) to consolidate or merge with any person (in a consolidation or merger in which stockholders of the Corporation receive cash or securities of any other person upon such consolidation or merger) or to sell or otherwise dispose of all or substantially all of its property and assets as an entirety to any person, in each case for a specified price payable in cash or otherwise in excess of [dollar] (non-cash consideration to be valued in good faith by the Board of Directors of the Corporation) and on specified terms and conditions (the “Section 6 Offer”), such Group or Groups or the Corporation, as the case may be, shall promptly forward a copy of the Section 6 Offer to all the Stockholders and/or the Corporation, as the case may be.

(b) Each of the Stockholders shall notify the Corporation of his or its acceptance or rejection of the Section 6 Offer within [number] days after receipt thereof. If Stockholders holding not less than a majority of the then outstanding Stock accept the Section 6 Offer, each of the Stockholders shall tender his or its Stock to the Section 6 Offeror in accordance with the terms of the Section 6 Offer or

56

the Corporation shall consummate the transaction as set forth in the Section 6 Offer, as the case may be (it being understood, however, that in the event the Section 6 Offer referred to in clause (ii) of Section 6(a) relates to a proposed statutory merger, consolidation or sale of all or substantially all of the assets of the Corporation, the acceptance of such Section 6 Offer shall occur upon compliance with the applicable statutory requirements of the state of incorporation of the Corporation and the applicable requirements of the Corporation's Certificate of Incorporation in connection therewith). In the event a Section 6 Offer referred to in clause (i) of Section 6(a) is for less than all the Stock, the amount of Stock to be purchased by such Section 6 Offeror from each Stockholder shall be determined on a pro rata basis based upon the percentage of the then outstanding Stock held by such Stockholder.

(c) In the event Stockholders holding a majority of the then outstanding Stock do not accept the Section 6 Offer within the aforesaid [number]-day period, any Stockholder who has advised the Corporation in writing of his or its intention to accept such Section 6 Offer (an “Accepting Stockholder”) shall have the right to sell to the Corporation and the Corporation shall be obligated to purchase from the Accepting Stockholder, the Stock (or the portion of the Stock which the Accepting Stockholder would have been able to sell pursuant to the Section 6 Offer) held by such Accepting Stockholder at an aggregate price, payable in cash, equal to the consideration that such Accepting Stockholder would have received for such Stock had the Section 6 Offer been accepted and such Stock been disposed of by such Accepting Stockholder pursuant thereto. The obligation of the Corporation to so purchase such Accepting Stockholder's Stock shall commence upon receipt by the Corporation of written notice from such Accepting Stockholder within [number] days of a final determination to the effect that such Section 6 Offer is not to be accepted (or within [number] days of a final determination of the fair value of the consideration payable to such Accepting Stockholder as contemplated by the next succeeding sentence). If the consideration specified in the Section 6 Offer was stated in terms otherwise than in cash, (i) the consideration payable to such Accepting Stockholder for such Stock shall be the fair value thereof determined by a nationally recognized independent investment banking firm selected in good faith by the Board of Directors of the Corporation (or if such selection cannot be made, by a nationally recognized independent investment banking firm selected by the American Arbitration Association in accordance with its rules), and (ii) such Acceptance Stockholder shall have no obligation to sell its Stock as aforesaid until such fair value has been determined and such Accepting Stockholder has offered its Stock to the Corporation.

(d) In the event the Corporation is unable, financially or as a matter of law, to purchase such Accepting Stockholder's Stock as required by Section 6(c) hereof, each Stockholder of the Corporation who had not indicated that he or it would accept the Section 6 Offer (a “Declining Stockholder”) shall be obligated, severally but not jointly, to purchase his or its proportionate percentage of all Accepting Stockholders' Stock as aforesaid, said proportionate percentage being the percentage figure which expresses the ratio, based upon voting power, between the number of outstanding shares of Stock owed by a Declining Stockholder and the aggregate number of outstanding shares of Stock owned by all Declining Stockholders.

(e) So long as a Group or Groups comply with the provisions of this Section 6, the provisions of Section 3 shall not apply.

SECTION 7. Election of Directors (a) Subject to Section 7(b), at each annual meeting of the stockholders of the Corporation, and at each

special meeting of the stockholders of the Corporation called for the purpose of electing directors of the Corporation, and at any time at which stockholders of the Corporation shall have the right to, or shall, vote for directors of the Corporation, then, and in each event, the Stockholders shall vote all shares of Stock owned by them for the election of a Board of Directors consisting of the following directors, designated in the following manner:

(i) three directors shall be designated by Investors holding 66-2/3% in voting power of the shares of Stock then held by all Investors;

57

(ii) four directors shall be designated by the Principals; and

(iii) if the Board of Directors shall consist of more than seven directors, each of the directors in excess of seven shall be a person who is neither an officer or an employee of the Corporation nor an “affiliate” or an “associate” (as said terms are defined in Rule 405 promulgated under the Securities Act of 1933, as amended), of any of the foregoing, including the Corporation, and shall be designated by the Principals and be acceptable to Investors holding 66-2/3% in voting power of the shares of Stock then held by all Investors.

The directors to be designated by the Principals shall be designated by Principals holding 66-2/3% in voting power of the shares of Stock then held by all Principals.

(b) It is understood that (i) the directors which the holders of Preferred Stock, voting separately as one class, are entitled to elect pursuant to the terms of the Certificate of Incorporation of the Corporation are to be designated in the manner provided in Section 7(a) and (ii) the directors to be designated by the Investors pursuant to clause (i) of Section 7(a) are, and are not in addition to, the directors that the holders of Preferred Stock, voting separately as one class, are entitled to elect pursuant to said Certificate of Incorporation; provided, however, that this Section 7 shall not be applicable so long as an Event of Election under (and as defined in) the Certificate of Incorporation exists and is continuing.

SECTION 8. Legend on Stock Certificates Each certificate of the signatories hereto representing shares of Stock shall bear the following legend, until such time as the shares represented thereby are no longer subject to the provisions hereof: THE SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND/OR THE RIGHTS OF THE HOLDER OF SUCH SECURITIES IN RESPECT OF THE ELECTION OF DIRECTORS ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF [date], AMONG [name of corporation] AND CERTAIN HOLDERS OF OUTSTANDING CAPITAL STOCK OF SUCH CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF [name of corporation]

SECTION 9. Duration of Agreement The rights and obligations of each Stockholder under this Agreement shall terminate as to such Stockholder upon the earlier to occur of (i) the transfer of all Stock owned by the Group of which such Stockholder is a member in accordance with this Agreement, (ii) on the ninth anniversary of the date hereof or (iii) the consummation of an underwritten public offering of the Corporation's Common Stock registered pursuant to the Securities Act of 1933, as amended, which results in the automatic conversion of all shares of Preferred Stock into Common Stock pursuant to the terms of the Corporation's Certificate of Incorporation.

SECTION 10. Severability; Governing Law If any provision of this Agreement shall determined to be illegal and unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their terms. This Agreement shall be governed by, and construed in accordance with, the laws of the State of [name of state].

SECTION 11. Benefits of Agreement This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns, legal representatives and heirs.

SECTION 12. Notices All notices, advices and communications to be given or otherwise made to any party to this Agreement, or to the Group of any such party, shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered or certified mail, postage prepaid, addressed to

58

such party at the address set forth below or at such other address as may hereafter be designated in writing by the addressee to the addressor listing all parties:

If to the Corporation, to:

[name of corporation]

[address]

Attention: [name]

If to the Stockholders:

At their respective addresses set forth in Schedule I attached hereto

All such notices, advices and communications shall be deemed to have been received (a) in the case of personal delivery, on the date of such delivery and (b) in the case of mailing, on the third business day following such mailing.

SECTION 13. Modification Except as otherwise provided herein, neither this Agreement nor any provision hereof can be modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom the enforcement of any modification, change, discharge or termination is sought or by the agreement of holders of 66-2/3% in voting power of all shares of Stock subject to this Agreement: provided, however, that no modification or amendment shall be effective to reduce the percentage of the shares of Stock the consent of the holders of which is required under this Section 13.

SECTION 14. Termination of Prior Agreements All prior Stockholders Agreements among the parties to this Agreement or any of them are hereby terminated.

SECTION 15. Captions The captions herein are inserted for convenience only and shall not define, limit, extend or describe the scope of this Agreement or affect the construction hereof.

SECTION 16. Nouns and Pronouns Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of names and pronouns shall include the plural and vice-versa.

SECTION 17. Merger Provision This Agreement constitutes the entire agreement among the parties pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements and understandings of the parties in connection therewith.

SECTION 18. Counterparts This Agreements may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written.

[name of corporation]

By: [name and signature]

59

[title of office]

[name and signature]

[name and signature]

[name and signature]

[name and signature]

60