This is a "Right of First Refusal and Co-Sale Agreement." It is entered into by the corporation and the purchasers of preferred stock. It gives the company and the purchasers of preferred stock certain rights of refusal and options upon the transfer of stock.
California Right of First Refusal and Co-Sale Agreement: A Right of First Refusal (ROAR) and Co-Sale Agreement is a legal document often used in the state of California, which outlines the rights and obligations of parties involved in a potential sale or transfer of shares or membership interests in a company. In essence, it provides existing shareholders or members with the opportunity to participate in the transaction before outside parties. Keywords: California, Right of First Refusal, Co-Sale Agreement, shares, membership interests, company, existing shareholders, transfer, transaction, outside parties. The California Right of First Refusal and Co-Sale Agreement typically consists of several important clauses, which include: 1. Right of First Refusal: This clause grants existing shareholders or members the right to match the terms offered by a third-party interested in purchasing shares or membership interests. Before accepting an outside offer, the selling shareholder or member must provide written notice to the existing shareholders or members, allowing them a specified period to exercise their right of first refusal. 2. Purchase Price: The agreement should outline the purchase price or the mechanism for determining it. Typically, it is either a fixed price or determined through an independent appraisal. The price should be fair and reasonable to protect the interests of the involved parties. 3. Exercise of Right of First Refusal: In this section, the agreement should clarify the procedure for shareholders or members to exercise their right of first refusal. It may include details like the method of acceptance, the timeframe within which it must be exercised, and any necessary payment arrangements. 4. Co-Sale Rights: A Co-Sale provision allows existing shareholders or members to sell a pro rata portion of their shares or membership interests alongside the selling shareholder or member. This clause ensures that existing shareholders or members are not disadvantaged if a significant portion of the company's ownership is transferred. Types of California Right of First Refusal and Co-Sale Agreements: 1. Simple Right of First Refusal: This type grants existing shareholders or members the option to purchase shares or membership interests on the same terms offered by a third party. If they choose not to exercise this right, the selling shareholder or member is then free to proceed with the sale. 2. Right of First Offer: This variant requires the selling shareholder or member to first offer the shares or membership interests to the existing shareholders or members at a specified price or on specified terms. The existing shareholders or members can accept the offer or negotiate the terms. If they decline the offer, the selling shareholder or member is then free to seek buyers elsewhere. 3. Hybrid Right of First Refusal: This type combines elements of both the simple right of first refusal and the right of first offer. It allows existing shareholders or members to have the option of matching the terms offered by a third-party or negotiating new terms within a specified timeframe. 4. Right of Co-Sale: In a co-sale agreement, existing shareholders or members are given the opportunity to sell a pro rata portion of their shares or membership interests alongside the selling shareholder or member. This allows them to maintain their ownership percentages in the company and ensures they are not left with a minority stake after the transaction. In conclusion, California Right of First Refusal and Co-Sale Agreements offer protections and opportunities for existing shareholders or members when it comes to the sale or transfer of shares or membership interests in a company. These agreements are essential to safeguard the interests of the parties involved and regulate the overall transaction process.
