Usually it is in the best interest of a small Corporation and of Shareholders to make provisions for the future disposition of the shares of Corporation, and to provide that such shares shall be transferable only upon compliance with decided terms.
Shareholders often desire to set forth their respective rights concerning Corporations stock with regard to death, disability, retirement and other future disposition of the stock by any Shareholder by imposing certain restrictions and obligations on themselves, on Corporation and on their shares of stock of Corporation.
Therefore, Shareholders and Corporation can sign a shareholders agreement which incorporates some of the following provisions: TRANSFERABILITY OF SHARES DURING LIFETIME:
In the event that this section is applicable to any Shareholder, said Shareholder hereby grants to the Corporation and other Shareholders, an option to purchase of stock of Corporation now owned or held, or hereafter acquired, by such Shareholder, such option to be exercisable upon the occurrence of any of the following events:
1. Any attempt by any Shareholder to sell, assign, transfer or in any way dispose of any or all shares of stock, or the beneficial interest therein; or 2. Any pledge or the creation of any encumbrance on any or all of the shares of stock; or 3. Any other transfer of any or all of the shares of stock, or the beneficial interest therein, of Corporation, whether voluntary or involuntary, by operation of law or otherwise, including but not limited to, all executions or legal processes attaching such shares of stock and all processes affecting the interest of any Shareholder with respect to his shares of stock of Corporation; or 4. The judicial declaration that any Shareholder is incompetent or the adjudication that any Shareholder is bankrupt, or the appointment for any Shareholder of a trustee or receiver or any assignment by a Shareholder for the benefit of creditors for the shares of stock of Corporation; or 5. Termination of employment of any Shareholder by Corporation for cause, other than disability for a period not exceeding twelve (12) consecutive months, death or retirement (the term "cause" including the conviction of any Shareholder of a Felony or High Misdemeanor in any Court of competent jurisdiction as well as the conviction of any Shareholder of any crime or disorderly persons offense involving larceny, embezzlement or other unlawful taking of Corporations assets).
Within five days of the occurrence of any of the events set forth above, the Shareholder whose shares of stock are so affected shall send notice in writing to Corporation and to the remaining Shareholders of such fact. During the period with the occurrence of such event, and (a) if notice is given, shall end thirty (30) days after such notice is given, or (b) if no notice is given, shall continue without end, Corporation shall have the right to exercise its option to purchase the shares of stock on the terms and conditions set forth herein.
Any shares of stock not accepted for purchase by Corporation shall be deemed to be offered to the remaining Shareholders who shall have the right, exercisable within an additional period of fifteen (15) days, to exercise their option to purchase the said shares of stock upon the terms and conditions set forth herein.
Upon acceptance of the option, the remaining Shareholders shall each purchase a proportionate share of the stock of the offeror. "Proportionate Share" shall mean that portion of the shares of Corporation offered for sale which the shares of the Corporation owned by a Shareholder bear to the shares of the Corporation (other than those offered for sale) owned by all the Shareholders.
In the event that any remaining Shareholder does not exercise his option to purchase his proportionate share, his proportionate share shall be subject to an option to purchase same by the Shareholders exercising their option as set forth hereinabove.
Corporation shall have and is hereby given the right to refuse to record any transfer of any of the shares of stock covered by this agreement, unless said transfer is made in accordance with the terms hereof.
No Shareholder may be required to sell less than all of the shares of stock of Corporation owned or held by him. If any event occurs pursuant to which Corporation and the remaining Shareholders may exercise their option to purchase, the Corporation and the other Shareholders fail to so exercise their option to purchase all of the shares of stock offered for sale, within the allotted time, said option to purchase shall terminate; provided, however, that if the shares of stock are not sold pursuant to the notice within six (6) months after the notice is given, the stock may not be sold unless reoffered pursuant to this agreement.
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