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Piggyback rights in a shareholder agreement enable investors to include their shares in any registration that the company undertakes. This means if ObjectSoft Corp. decides to register its shares for sale, investors holding 6% Series G convertible preferred stocks can also have their stocks included. This feature in the Orange California Registration Rights Agreement is critical for investors who wish to sell their shares during company-initiated offerings, ensuring they do not miss profitable opportunities.
The first round of stock made available to the public by a startup is referred to as Series A preferred stock. This type of stock is generally offered for purchase during the seed stage of a new startup and can be converted into common stock in the event of an initial public offering or sale of the company.
What Is Convertible Preferred Stock? Convertible preferred stocks are preferred shares that include an option for the holder to convert the shares into a fixed number of common shares after a predetermined date.
An Investor Rights Agreement (IRA) is an agreement between an investor and a company that contractually guarantees the investor certain rights including, but not limited to, voting rights, inspection rights, rights of first refusal, and observer rights.
The right to vote on all major business decisions; The right to be informed about all significant business decisions; The right to sue you or the company if they feel their rights aren't be respected.
Class B, preferred stock: Each share confers one vote, but shareholders receive $2 in dividends for every $1 distributed to Class A shareholders. This class of stock has priority distribution for dividends and assets.
Series A Preferred Stock is the first round of stock offered during the seed or early stage round by a portfolio company to the venture capitalist. Series A preferred stock is convertible into common stock in certain cases such as an IPO or the sale of the company.
In an unregistered securities offering, an agreement between the issuer and the purchasers of the security that creates an obligation for the issuer to register the re-offer and resale of the securities being offered at some time in the future (usually within six months).
The right of first refusal and co-sale (ROFR/Co-sale) work together to prevent a founder or major common shareholder for selling shares without the company and the investors being allowed to purchase the shares or participate in the sale of the shares.
Convertible preferred stock gives an investor a stream of income (dividends on the preferred stock) as well as potential 'upside' advantages. It can be converted into the common stock of the company at the predetermined date and conversion ratio. Investors find this to be an attractive feature of a preferred stock.