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.
Colorado Right of First Refusal and Co-Sale Agreement: A Comprehensive Overview of Key Concepts and Types In Colorado, the Right of First Refusal (ROAR) and Co-Sale Agreement are legally binding contracts designed to protect the interests of shareholders or investors in privately-held companies. These agreements outline the rights and obligations of parties involved when a shareholder wishes to sell their shares. Key Terms and Definitions: 1. Right of First Refusal (ROAR): A contractual provision granting existing shareholders the first opportunity to purchase shares being sold by another shareholder before those shares can be offered to a third party. ROAR ensures that shareholders maintain control over who can become a part of the company. 2. Co-Sale Agreement: Also known as a Tag-Along Provision, this agreement requires shareholders selling their shares to a third party to include other shareholders on the same terms and conditions offered to them. Co-sale rights protect minority shareholders from being forced to sell their shares disproportionately. Types of Colorado Right of First Refusal and Co-Sale Agreements: 1. Standalone Right of First Refusal Agreement: This agreement is a standalone document that specifically outlines the Right of First Refusal provision within a company's shareholder agreement. It details the procedures, timelines, and restrictions related to the exercise of the ROAR. 2. Standalone Co-Sale Agreement: This agreement focuses solely on the Co-Sale provision, enabling minority shareholders to participate alongside majority shareholders when a sale opportunity arises. It sets forth the conditions under which the Co-Sale right can be invoked. 3. Combined Right of First Refusal and Co-Sale Agreement: In some cases, both the ROAR and Co-Sale provisions may be combined within a single agreement. This consolidated document outlines the procedures and requirements for exercising both rights, providing shareholders with a comprehensive understanding of their options. 4. Investor-Specific Right of First Refusal and Co-Sale Agreement: Depending on the specific circumstances, an agreement may be tailored to address different rights and obligations for individual investors. These agreements consider the level of investment, relationship to the company, or other factors that warrant unique contractual provisions. Importance and Benefits: Colorado Right of First Refusal and Co-Sale Agreements play a crucial role in the protection of shareholder rights and maintaining equity among shareholders. They offer numerous benefits, including: 1. Preservation of Control: ROAR allows existing shareholders to control who becomes a fellow shareholder, preventing hostile takeovers or undesired partnerships. 2. Protection of Minority Shareholders: Co-Sale provisions protect minority shareholders by ensuring they can participate in any sale transactions on equitable terms as majority shareholders. 3. Transparency and Clarity: By outlining the procedures, timelines, and conditions for exercising ROAR and Co-Sale rights, these agreements provide clarity for all parties involved, reducing disputes and potential litigation. 4. Harmonious Shareholder Relationships: The presence of well-crafted ROAR and Co-Sale Agreements instills confidence in shareholders, promoting harmonious relationships and decreasing conflicts related to share transfers. It is essential for companies and shareholders in Colorado to seek professional legal advice when drafting or entering into Right of First Refusal and Co-Sale Agreements. Professional guidance helps ensure the agreements align with Colorado state laws and accurately reflect the intentions and protections desired by all parties involved.
