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Event of Default: It is a non-obstante clause wherein in the event of breach, the other parties shall be entitled to seek specific performance and such other rights and remedies as are available to them under applicable law.
Pre-emptive rights and right of first refusal clause These clauses protect existing shareholders from the involuntary dilution of their stake in the company. Pre-emption rights provide the company's existing shareholders first offer on an issue of new shares; or first refusal over the sale of existing shares.
For example, let's say an investor owns one million Series A preferred shares with an OIP of $1.00. Under standard terms, their liquidation preference would be $1 million. However, if the Series A preferred shares have a liquidation multiplier of two times, their liquidation preference would be $2 million.
Hence, exit clauses are commonly included in the Shareholders' Agreement to enable all private company shareholders to sell their shares and quit the business in a way that is equitable for all the company's shareholders.
A liquidation preference gives a right to certain shareholders over the others to receive a greater proportion of the remaining value of the company should a liquidation event occur.
The anti-dilution adjustment clause is a provision contained in a security or merger agreement. The anti-dilution clause provides current investors with the right to maintain their ownership percentage in the company by purchasing a proportionate number of new shares at a future date when securities are issued.
A liquidation preference gives a right to certain shareholders over the others to receive a greater proportion of the remaining value of the company should a liquidation event occur.
Shareholders and liquidation The shareholders will only get paid any return on their shares in an insolvent liquidation after all creditors get paid in full. If shareholders also have a claim as a creditor, then they may receive a payment as a creditor (separate from any return on shares).