Shareholders' agreement template reference — the 11-article structure and the buyer's diligence checklist.

The 11-article structure is a comprehensive blueprint for a multi-owner agency Shareholders' Agreement. Sellers preparing for sale should treat it as a completeness checklist — for each article, the question is "Is this present in our agreement?" Gaps have specific remediation paths. Strengths can be highlighted in diligence. The template is the structural reference, not the agreement itself.

§ 01 · Articles 1–3 — transfer restrictions and mandatory purchaseThe trigger architecture.

Article 1 — Restriction on Transfer of Stock. General prohibition: no Shareholder may directly or indirectly sell, assign, transfer, mortgage, encumber, pledge, or otherwise dispose of any Stock without first obtaining written consent of the Corporation and other Shareholders. Any purported transfer in violation is null and void.

Article 2 — Transfers Other Than Death or Disability. Involuntary transfer (60-day Corporation option, then 15-day Shareholder option). Retirement / Voluntary Withdrawal (notice and tenure discounts; medical exception). Termination for Cause (optional purchase, discount). Termination Without Cause (mandatory purchase, 25% premium). Selling Shareholder disenfranchisement from purchase-election vote. Sale to third party (specified percentage required). Push-Pull (Shotgun) for 50/50 owners: 15-day Election Notice; ≥45 day close; default to sale if no notice.

Article 3 — Mandatory Purchase Upon Death or Permanent Disability. Death triggers mandatory purchase by surviving Shareholders (or Corporation if they decline); funded by life insurance per Article 6. Permanent Disability triggers buyout one year after declaration; 12-month benefits continuation. Disability definition tied to Group LTD Plan, with three-physician fallback if no Plan exists.

§ 02 · Articles 4–6 — valuation, closing, and insurance fundingThe pricing and payment architecture.

Article 4 — Purchase Price and Valuation. Fair market value per share × number of shares. Determined annually as of December 31 by mutual written agreement; recorded on Certificate of Agreed Value (Schedule A). Currency: if no revaluation for 12+ consecutive months, last value has no force; qualified appraiser determines value (Milly recommends 18-month fail-safe with defined fallback methodology). Payment terms vary by trigger type. Promissory note bears stated interest, accelerates upon default, prepayable without penalty. Stock pledge required for any portion paid by note.

Article 5 — Closing. Closing occurs at principal office of the Corporation not more than 60 days after the later of the triggering event or determination of fair market value.

Article 6 — Insurance. Each Shareholder or the Corporation may own policies on the life of any other Shareholder (listed on Schedule B). Owner is beneficiary; proceeds payable in lump sum upon death. Premiums paid by policy owner with proof within 15 days. Upon exit, departing Shareholder may purchase policies on his own life for cash surrender value + prorated premium + dividends − policy loans; right lapses in 30 days if not exercised.

§ 03 · Article 7 — S Corporation provisionsThe tax protection architecture.

S Corporation Representation. Each Shareholder acknowledges and will maintain S corporation status.

Dividends to Pay Tax Liabilities. Corporation distributes within 30 days after fiscal year end an amount not less than net income × maximum federal tax rate to cover Shareholders' pass-through tax liability.

Preservation of S Corporation Status. No transfer permitted that would terminate S corporation status (e.g., to non-resident aliens, ineligible corporations, or non-qualifying trusts under IRC §1361).

Revocation of Election. Unanimous Shareholder agreement required to terminate S corporation status. Inadvertent Termination provisions require best efforts to obtain IRS waiver under §1362.

§ 04 · Articles 8–11 — covenants, miscellaneous, and the legendThe post-departure and enforcement architecture.

Article 8 — Non-Compete During Ownership. Each Shareholder agrees that during the agreement and while a Shareholder, they shall not own, manage, or participate in any insurance agency business competitive with the Corporation. Standard exception: up to 5% ownership of publicly traded companies.

Article 9 — Non-Solicitation Post Departure. 9.1 Non-Solicitation of Clients: shall not solicit or accept insurance business from any customer for a stated number of years. 9.2 Non-Solicitation of Employees (Non-Piracy): shall not solicit or hire any employee. 9.3 Confidentiality: shall not disclose customer lists, rates, markets, or confidential information; no time limit.

Article 10 — Miscellaneous. Notices, entire agreement, amendment requirements (typically Supermajority or unanimous), severability, governing law, binding effect.

Article 11 — Stock Certificate Legend. All stock certificates must bear the legend referencing the agreement and stating that no transfer may be made except in accordance with its provisions. This legend is the practical enforcement mechanism for Article 1's transfer restrictions.

§ 05 · Buyer diligence, seller pre-listing, and what this means for sellersThe checklist application.

Buyer Diligence Checklist. Review transfer restrictions (Article 1). Identify Shareholders who must consent (Article 2.6). Assess insurance funding adequacy (Schedule B vs current value). Verify CAUV currency (Schedule A ≤ 12 months old). Assess restrictive covenant coverage (Articles 8 and 9). Confirm S-Corp protections (Article 7). Review for amendments since original drafting.

Seller Pre-Listing Checklist. Ensure agreement is current (≤ 3 years since substantive review with counsel). Update CAUV to reflect current EBITDA-multiple methodology. Verify life insurance face values cover current pro-rata agency value. Address non-compete enforceability concerns under current FTC and state law. Document any prior amendments and their impact. Place the agreement plus all schedules and amendments in the Diligence Hub.

Sellers who arrive with the 11 articles complete, schedules current, ancillary templates in place, and amendment history documented earn the Stability Premium within the readiness band.

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