Right of First Refusal & Co-Sale Agreement

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This Right of First Refusal and Co-Sale Agreement prevents a major shareholder from selling its shares when potential investors intend to infuse capital into the company.

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This Right of First Refusal and Co-Sale Agreement prevents a major shareholder (often a founder or early investor) without the company or other major shareholders from purchasing the shares or participating in the sale. This type of document is often requested by investors who are about to infuse substantial amounts of capital into a company and want some limitations on how existing shareholders and founders can exit.

This agreement sets forth transactions which are permitted, assignment of rights, prohibited transfers of stock and the exact wording of the legend which each stock certificate will bear.

This Right of First Refusal and Co-Sale Agreement includes:
  • Parties: Names and addresses of the founders and the company and holders of preferred stock;
  • Sales by Founder: Includes provisions regarding notice of sale, rights of first refusal and calculation and delivery of shares;
  • Transfers: Sets out transactions which are permitted and those which are restricted along with an assignment of rights;
  • Termination: Events under which this agreement may be terminated;
  • Signatures: The company, founder and all investors must sign this agreement.

Protect yourself and your rights by using our attorney-prepared forms.

This attorney-prepared packet contains:
  1. General Information
  2. Instructions and Checklist
  3. Right of First Refusal and Co-Sale Agreement
State Law Compliance: This form complies with the laws of all states
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Right of First Refusal
and Co-Sale Agreement

 

 
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT 
 
This Right of First Refusal and Co-Sale Agreement (the Agreement”) is made and entered into as of ____________________ [Date] by and among [Founders] (for purposes of this Agreement, each, a Founder,” and, collectively, the Founders”), ____________________________ [Company], a _____________ [state] corporation (the Company”), and the holders of Preferred Stock of the Company listed on Exhibit A to this Agreement (each an Investor”).
 
RECITALS 
 
The Company and certain of the Investors have entered into a Series A Convertible Preferred Stock Purchase Agreement (the Purchase Agreement”) of even date herewith pursuant to which the Company desires to sell to certain of the Investors and certain of the Investors desire to purchase from the Company shares of the Companys Series A Preferred Stock. The Company and the Founders desire to induce certain of the Investors to purchase shares of Series A Preferred Stock pursuant to the Purchase Agreement by agreeing to the terms and conditions set forth below.
 
AGREEMENT 
 
The parties agree as follows:
 
1. Sales by the Founder.
 
1.1 Notice of Sales. Should the Founder (or a Permitted Transferee, as defined below) propose to accept one or more bona fide offers (collectively, a Purchase Offer”) from any persons to purchase shares of the Companys Common Stock (the Shares”) from such Founder (other than as set forth in Section 2.2 of this Agreement), such Founder shall promptly deliver a notice (the Notice”) to the Company and each Investor stating the terms and conditions of such Purchase Offer including, without limitation, the number of Shares proposed to be sold or transferred, the nature of such sale or transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee.
 
1.2 Company Right of First Refusal. The Company shall have an option, for thirty (30) days after receiving the Notice to give written notice to the selling Founder of its election to purchase some or all of the Shares. The purchase price at which the Shares are offered to the Company shall be the price specified in the Notice.
 
1.3 Investor Right of First Refusal. The Company agrees that in the event that the Company declines to exercise in full the right of first refusal set forth in Section 1.2 herein (the Right of First Refusal”), the Company will provide each Investor with notice of such determination at least ten (10) days prior to the end of such thirty (30) day period. Each Investor shall then have the right to submit, within five (5) days of receipt of such notice, notice of its irrevocable commitment to exercise such Right of First Refusal within thirty (30) days after receipt of the Companys notice, on a pro rata basis, based upon the number of Conversion Shares (as defined below) held by such Investor relative to the aggregate number of Conversion Shares held by all Investors and, if such Investor so chooses, an indication of how many additional shares such Investor is irrevocably committing to purchase of the Shares available for purchase. If any Investors do not exercise their Right of First Refusal, the Shares that would otherwise be allocated to such non-exercising Investors shall all be allocated among the exercising Investors wishing to purchase the remaining Shares on a pro rata basis (based upon the number of Conversion Shares held by such Investor relative to the aggregate number of Conversion Shares held by all such exercising Investors), provided that the Right of First Refusal must be exercised, if at all, prior to the expiration of such thirty-day period.
 
1.4 Co-Sale Right. To the extent that the Right of First Refusal is not exercised by the Company or the Investors, each Investor shall have the right (the Co-Sale Right”), exercisable upon written notice to the Company within five (5) business days after the expiration of the Right of First Refusal to participate in such Founders sale of Shares pursuant to the specified terms and conditions of such Purchase Offer. To the extent an Investor exercises such Co-Sale Right in accordance with the terms and conditions set forth below, the number of Shares which such Founder may sell pursuant to such Purchase Offer shall be correspondingly reduced. The Co-Sale Right of each Investor shall be subject to the following terms and conditions:
 
(a) Calculation of Shares. Each Investor may sell all or any part of that number of shares of Common Stock of the Company issued or issuable upon conversion of Preferred Stock, or Common Stock received in connection with any stock dividend, stock split or other reclassification thereof (the Conversion Shares”) equal to the product obtained by multiplying (i) the aggregate number of Shares covered by the Purchase Offer by (ii) a fraction, the numerator of which is the number of Conversion Shares at the time owned by such Investor and the denominator of which is the sum of (A) the total number of Conversion Shares at the time owned by all Investors participating in such sale plus (B) the total number of Shares at the time owned by such Founder, including shares transferred by such Founder to Permitted Transferees (as defined below) in accordance with this Agreement. The provisions of this Agreement do not confer any Co-Sale Rights with respect to any shares of Common Stock or other securities held by an Investor that are not Conversion Shares.
 
(b) Delivery of Certificates. Each Investor may affect its participation in the sale by delivering to the selling Founder for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent the Conversion Shares which such Investor elects to sell.
 
1.5 No Adverse Effect. The exercise or non-exercise of the rights of the Investors hereunder to participate in one or more sales of Shares made by a Founder shall not adversely affect their rights to participate in subsequent sales of Shares by a Founder.
 
2. Transfers.
 
2.1 Procedures. The stock certificate or certificates which the Investor delivers to the selling Founder pursuant to Section 1.4 shall be delivered by such Founder to the prospective purchaser in consummation of the sale pursuant to the terms and conditions specified in the Notice, and such Founder shall promptly thereafter remit to such Investor that portion of the sale proceeds to which such Investor is entitled by reason of its participation in such sale. To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase Conversion Shares from an Investor exercising its Co-Sale Right hereunder, the selling Founder or Founder shall not sell to such prospective purchaser or purchasers any Shares unless and until, simultaneously with such sale, the selling Founder or Founder shall purchase such Conversion Shares from such Investor for the same consideration and on the same terms and conditions as the proposed transfer described in the Notice (which terms and conditions shall be no less favorable than those governing the sale to the purchaser by the Founder or Founder).
 
2.2 Permitted Transactions. The provisions of Section 1 of this Agreement shall not pertain or apply to:
 
(a) Any pledge of the Companys Common Stock made by a Founder pursuant to a bona fide loan transaction which creates a mere security interest;
(b) Any bona fide gift;
(c) Any transfer to a Founders ancestors, descendants or spouse or to a trust for their benefit; or
(d) any sale or transfer by a Founder of up to 5% of the total number of shares of Common Stock held by such Founder on the date of this Agreement in any twelve-month period;
provided, in each case, that (i) the Founder(s) shall inform the Investors of such pledge, transfer or gift prior to effecting it, and (ii) the pledgee, transferee or donee (each a Permitted Transferee”) shall furnish the Investors with a written agreement to be bound by and comply with all provisions of this Agreement applicable to the Founder.
 
2.3 Assignment of Rights. The rights of the Investors set forth in this Section 1 may be assigned (but only with all related obligations) only to a transferee or assignee of at least twenty percent (20%) of an Investors Conversion Shares set forth on Exhibit A provided that (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, (b) such transferee agrees in writing to be bound by the provisions of this Agreement, and (c) such transferee is not an actual or potential competitor of the Company, as determined in good faith by the Companys Board of Directors. Notwithstanding the foregoing, any Investor may transfer its rights set forth in this Section 1 without regard to the minimum number of Conversion Shares described in the first sentence of this Section 1.6 if the transferee is a constituent partner or member of such Investor or an entity controlling, controlled by or under common control with such Investor.
 
2.4 Prohibited Transfers. Any attempt by a Founder to transfer Shares in violation of Section 1 of this Agreement shall be void and the Company agrees it will not affect such a transfer nor will it treat any alleged transferee as the holder of such shares without the written consent of the holders of a majority of the Conversion Shares.
 
 
 
 
 
3. Legend.
 
3.1 Legended Certificates. Each certificate representing shares of the Common Stock of the Company now or hereafter owned by the Founder or issued to any Permitted Transferee pursuant to Section 2.2 shall bear the following legend:
 
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF COMMON AND PREFERRED STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
 
3.2 Removal of Legend. At any time after the termination of this Agreement in accordance with Section 3.1, any holder of a stock certificate legended pursuant to Section 2.2 may surrender such certificate to the Company for removal of such legend, and the Company will duly reissue a new certificate without the legend.
 
4. Termination.
 
4.1 Termination Events. This Agreement shall terminate upon the earliest to occur of any one of the following events (and shall not apply to any transfer by a Founder in connection with any such event):
 
(a) The liquidation, dissolution or indefinite cessation of the business operations of the Company;
 
(b) The execution by the Company of a general assignment for the benefit of creditors or the appointment of a receiver or trustee to take possession of the property and assets of the Company;
 
(c) A firm commitment underwritten public offering by the Company of shares of its Common Stock pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended, in which the Companys pre-money valuation is equal to or greater than $__________________ [number];
 
(d) The acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or stock sale); provided, however, that the applicable transaction shall not be deemed a liquidation unless the Companys stockholders of record as constituted immediately prior to such acquisition or sale hold less than 50% of the voting power of the surviving or acquiring entity immediately after such acquisition or sale (by virtue of securities issued as consideration for such transaction) in the same relative proportions; or
 
(e) The sale of all or substantially all of the assets of the Company.
5. Miscellaneous.
 
5.1 Successors and Assigns. Except as otherwise provided herein, this Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, the parties respective successors, assigns and legal representatives.
 
5.2 Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company, holders of at least a majority of the Preferred Stock, and holders of a majority of the Founders shares (or their respective successors and assigns) voting together as a class. Any amendment or waiver effected in accordance with this Section 4.2 shall be binding upon the Company, the Investors and any holder of Founder Shares, and each of their respective successors and assigns.
 
5.3 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient on the date of delivery, when delivered personally or by overnight courier or sent by telegram or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such partys address or fax number as set forth below on the signature page or on Exhibit A hereto, or as subsequently modified by written notice.
 
5.4 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall be enforceable in accordance with its terms.
 
5.5 Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of ________________, without giving effect to principles of conflicts of law.
 
5.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
 
5.7 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
 
5.8 Definition of Investor. For purposes of determining the amount of shares held by an Investor, all affiliated Investors shall be treated as a single Investor.
 
5.9 Ownership. The Founder represents and warrants that he is the sole legal and beneficial owner of those shares of Founder Stock he currently holds subject to the Agreement and that no other person has any interest (other than a community property interest) in such shares.
 
5.10 Attorneys Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
 
5.11 Entire Agreement. This Agreement and the Exhibits hereto, along with the Purchase Agreement and each of the Exhibits thereto, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.
 
5.12 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor” hereunder.
 
 
[Signature Pages Follow] 
 
 
The parties have executed this Agreement as of the date first written above.
 
COMPANY: 
 
[Company] 
 
By: _______________  
 [CEO] 
 [Chief Executive Officer] 
 
Company Address:
 
_______________
_______________
Fax Number: _______________  
 
FOUNDER: 
 
_______________
[Founder] 
 
 
INVESTOR: 
 
[Investor] 
 
By: _______________  
Its: _______________  
 
By: _______________  
Name: _______________  
Title: _______________  
Address: _______________  
Fax Number: _______________
 
 
 
EXHIBIT A
SCHEDULE OF INVESTORS 
 
 
 
Investor
Record Holder
Number of Shares
 
 
Number of Pages12
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#43684
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Right of First Refusal
and Co-Sale Agreement

 

 
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT 
 
This Right of First Refusal and Co-Sale Agreement (the Agreement”) is made and entered into as of ____________________ [Date] by and among [Founders] (for purposes of this Agreement, each, a Founder,” and, collectively, the Founders”), ____________________________ [Company], a _____________ [state] corporation (the Company”), and the holders of Preferred Stock of the Company listed on Exhibit A to this Agreement (each an Investor”).
 
RECITALS 
 
The Company and certain of the Investors have entered into a Series A Convertible Preferred Stock Purchase Agreement (the Purchase Agreement”) of even date herewith pursuant to which the Company desires to sell to certain of the Investors and certain of the Investors desire to purchase from the Company shares of the Companys Series A Preferred Stock. The Company and the Founders desire to induce certain of the Investors to purchase shares of Series A Preferred Stock pursuant to the Purchase Agreement by agreeing to the terms and conditions set forth below.
 
AGREEMENT 
 
The parties agree as follows:
 
1. Sales by the Founder.
 
1.1 Notice of Sales. Should the Founder (or a Permitted Transferee, as defined below) propose to accept one or more bona fide offers (collectively, a Purchase Offer”) from any persons to purchase shares of the Companys Common Stock (the Shares”) from such Founder (other than as set forth in Section 2.2 of this Agreement), such Founder shall promptly deliver a notice (the Notice”) to the Company and each Investor stating the terms and conditions of such Purchase Offer including, without limitation, the number of Shares proposed to be sold or transferred, the nature of such sale or transfer, the consideration to be paid, and the name and address of each prospective purchaser or transferee.
 
1.2 Company Right of First Refusal. The Company shall have an option, for thirty (30) days after receiving the Notice to give written notice to the selling Founder of its election to purchase some or all of the Shares. The purchase price at which the Shares are offered to the Company shall be the price specified in the Notice.
 
1.3 Investor Right of First Refusal. The Company agrees that in the event that the Company declines to exercise in full the right of first refusal set forth in Section 1.2 herein (the Right of First Refusal”), the Company will provide each Investor with notice of such determination at least ten (10) days prior to the end of such thirty (30) day period. Each Investor shall then have the right to submit, within five (5) days of receipt of such notice, notice of its irrevocable commitment to exercise such Right of First Refusal within thirty (30) days after receipt of the Companys notice, on a pro rata basis, based upon the number of Conversion Shares (as defined below) held by such Investor relative to the aggregate number of Conversion Shares held by all Investors and, if such Investor so chooses, an indication of how many additional shares such Investor is irrevocably committing to purchase of the Shares available for purchase. If any Investors do not exercise their Right of First Refusal, the Shares that would otherwise be allocated to such non-exercising Investors shall all be allocated among the exercising Investors wishing to purchase the remaining Shares on a pro rata basis (based upon the number of Conversion Shares held by such Investor relative to the aggregate number of Conversion Shares held by all such exercising Investors), provided that the Right of First Refusal must be exercised, if at all, prior to the expiration of such thirty-day period.
 
1.4 Co-Sale Right. To the extent that the Right of First Refusal is not exercised by the Company or the Investors, each Investor shall have the right (the Co-Sale Right”), exercisable upon written notice to the Company within five (5) business days after the expiration of the Right of First Refusal to participate in such Founders sale of Shares pursuant to the specified terms and conditions of such Purchase Offer. To the extent an Investor exercises such Co-Sale Right in accordance with the terms and conditions set forth below, the number of Shares which such Founder may sell pursuant to such Purchase Offer shall be correspondingly reduced. The Co-Sale Right of each Investor shall be subject to the following terms and conditions:
 
(a) Calculation of Shares. Each Investor may sell all or any part of that number of shares of Common Stock of the Company issued or issuable upon conversion of Preferred Stock, or Common Stock received in connection with any stock dividend, stock split or other reclassification thereof (the Conversion Shares”) equal to the product obtained by multiplying (i) the aggregate number of Shares covered by the Purchase Offer by (ii) a fraction, the numerator of which is the number of Conversion Shares at the time owned by such Investor and the denominator of which is the sum of (A) the total number of Conversion Shares at the time owned by all Investors participating in such sale plus (B) the total number of Shares at the time owned by such Founder, including shares transferred by such Founder to Permitted Transferees (as defined below) in accordance with this Agreement. The provisions of this Agreement do not confer any Co-Sale Rights with respect to any shares of Common Stock or other securities held by an Investor that are not Conversion Shares.
 
(b) Delivery of Certificates. Each Investor may affect its participation in the sale by delivering to the selling Founder for transfer to the prospective purchaser one or more certificates, properly endorsed for transfer, which represent the Conversion Shares which such Investor elects to sell.
 
1.5 No Adverse Effect. The exercise or non-exercise of the rights of the Investors hereunder to participate in one or more sales of Shares made by a Founder shall not adversely affect their rights to participate in subsequent sales of Shares by a Founder.
 
2. Transfers.
 
2.1 Procedures. The stock certificate or certificates which the Investor delivers to the selling Founder pursuant to Section 1.4 shall be delivered by such Founder to the prospective purchaser in consummation of the sale pursuant to the terms and conditions specified in the Notice, and such Founder shall promptly thereafter remit to such Investor that portion of the sale proceeds to which such Investor is entitled by reason of its participation in such sale. To the extent that any prospective purchaser or purchasers prohibits such assignment or otherwise refuses to purchase Conversion Shares from an Investor exercising its Co-Sale Right hereunder, the selling Founder or Founder shall not sell to such prospective purchaser or purchasers any Shares unless and until, simultaneously with such sale, the selling Founder or Founder shall purchase such Conversion Shares from such Investor for the same consideration and on the same terms and conditions as the proposed transfer described in the Notice (which terms and conditions shall be no less favorable than those governing the sale to the purchaser by the Founder or Founder).
 
2.2 Permitted Transactions. The provisions of Section 1 of this Agreement shall not pertain or apply to:
 
(a) Any pledge of the Companys Common Stock made by a Founder pursuant to a bona fide loan transaction which creates a mere security interest;
(b) Any bona fide gift;
(c) Any transfer to a Founders ancestors, descendants or spouse or to a trust for their benefit; or
(d) any sale or transfer by a Founder of up to 5% of the total number of shares of Common Stock held by such Founder on the date of this Agreement in any twelve-month period;
provided, in each case, that (i) the Founder(s) shall inform the Investors of such pledge, transfer or gift prior to effecting it, and (ii) the pledgee, transferee or donee (each a Permitted Transferee”) shall furnish the Investors with a written agreement to be bound by and comply with all provisions of this Agreement applicable to the Founder.
 
2.3 Assignment of Rights. The rights of the Investors set forth in this Section 1 may be assigned (but only with all related obligations) only to a transferee or assignee of at least twenty percent (20%) of an Investors Conversion Shares set forth on Exhibit A provided that (a) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are being assigned, (b) such transferee agrees in writing to be bound by the provisions of this Agreement, and (c) such transferee is not an actual or potential competitor of the Company, as determined in good faith by the Companys Board of Directors. Notwithstanding the foregoing, any Investor may transfer its rights set forth in this Section 1 without regard to the minimum number of Conversion Shares described in the first sentence of this Section 1.6 if the transferee is a constituent partner or member of such Investor or an entity controlling, controlled by or under common control with such Investor.
 
2.4 Prohibited Transfers. Any attempt by a Founder to transfer Shares in violation of Section 1 of this Agreement shall be void and the Company agrees it will not affect such a transfer nor will it treat any alleged transferee as the holder of such shares without the written consent of the holders of a majority of the Conversion Shares.
 
 
 
 
 
3. Legend.
 
3.1 Legended Certificates. Each certificate representing shares of the Common Stock of the Company now or hereafter owned by the Founder or issued to any Permitted Transferee pursuant to Section 2.2 shall bear the following legend:
 
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT BY AND BETWEEN THE STOCKHOLDER, THE CORPORATION AND CERTAIN HOLDERS OF COMMON AND PREFERRED STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
 
3.2 Removal of Legend. At any time after the termination of this Agreement in accordance with Section 3.1, any holder of a stock certificate legended pursuant to Section 2.2 may surrender such certificate to the Company for removal of such legend, and the Company will duly reissue a new certificate without the legend.
 
4. Termination.
 
4.1 Termination Events. This Agreement shall terminate upon the earliest to occur of any one of the following events (and shall not apply to any transfer by a Founder in connection with any such event):
 
(a) The liquidation, dissolution or indefinite cessation of the business operations of the Company;
 
(b) The execution by the Company of a general assignment for the benefit of creditors or the appointment of a receiver or trustee to take possession of the property and assets of the Company;
 
(c) A firm commitment underwritten public offering by the Company of shares of its Common Stock pursuant to a registration statement on Form S-1 under the Securities Act of 1933, as amended, in which the Companys pre-money valuation is equal to or greater than $__________________ [number];
 
(d) The acquisition of the Company by another entity by means of any transaction or series of related transactions (including, without limitation, any reorganization, merger, consolidation or stock sale); provided, however, that the applicable transaction shall not be deemed a liquidation unless the Companys stockholders of record as constituted immediately prior to such acquisition or sale hold less than 50% of the voting power of the surviving or acquiring entity immediately after such acquisition or sale (by virtue of securities issued as consideration for such transaction) in the same relative proportions; or
 
(e) The sale of all or substantially all of the assets of the Company.
5. Miscellaneous.
 
5.1 Successors and Assigns. Except as otherwise provided herein, this Agreement and the rights and obligations of the parties hereunder shall inure to the benefit of, and be binding upon, the parties respective successors, assigns and legal representatives.
 
5.2 Amendments and Waivers. Any term of this Agreement may be amended or waived only with the written consent of the Company, holders of at least a majority of the Preferred Stock, and holders of a majority of the Founders shares (or their respective successors and assigns) voting together as a class. Any amendment or waiver effected in accordance with this Section 4.2 shall be binding upon the Company, the Investors and any holder of Founder Shares, and each of their respective successors and assigns.
 
5.3 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient on the date of delivery, when delivered personally or by overnight courier or sent by telegram or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be notified at such partys address or fax number as set forth below on the signature page or on Exhibit A hereto, or as subsequently modified by written notice.
 
5.4 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall be enforceable in accordance with its terms.
 
5.5 Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of ________________, without giving effect to principles of conflicts of law.
 
5.6 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.
 
5.7 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
 
5.8 Definition of Investor. For purposes of determining the amount of shares held by an Investor, all affiliated Investors shall be treated as a single Investor.
 
5.9 Ownership. The Founder represents and warrants that he is the sole legal and beneficial owner of those shares of Founder Stock he currently holds subject to the Agreement and that no other person has any interest (other than a community property interest) in such shares.
 
5.10 Attorneys Fees. In the event that any suit or action is instituted to enforce any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
 
5.11 Entire Agreement. This Agreement and the Exhibits hereto, along with the Purchase Agreement and each of the Exhibits thereto, constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof and no party shall be liable or bound to any other in any manner by any representations, warranties, covenants and agreements except as specifically set forth herein and therein.
 
5.12 Additional Investors. Notwithstanding anything to the contrary contained herein, if the Company shall issue additional shares of its Preferred Stock pursuant to the Purchase Agreement, any purchaser of such shares of Preferred Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed an “Investor” hereunder.
 
 
[Signature Pages Follow] 
 
 
The parties have executed this Agreement as of the date first written above.
 
COMPANY: 
 
[Company] 
 
By: _______________  
 [CEO] 
 [Chief Executive Officer] 
 
Company Address:
 
_______________
_______________
Fax Number: _______________  
 
FOUNDER: 
 
_______________
[Founder] 
 
 
INVESTOR: 
 
[Investor] 
 
By: _______________  
Its: _______________  
 
By: _______________  
Name: _______________  
Title: _______________  
Address: _______________  
Fax Number: _______________
 
 
 
EXHIBIT A
SCHEDULE OF INVESTORS 
 
 
 
Investor
Record Holder
Number of Shares
 
 

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