Montague Law | Free Legal Form Template
This Right of First Refusal and Co-Sale Agreement (this "Agreement") is made and entered into as of [DATE], by and among [COMPANY NAME], a [STATE] corporation (the "Company"), each of the investors listed on Schedule A attached hereto (each, an "Investor" and collectively, the "Investors"), and each of the stockholders listed on Schedule B attached hereto (each, a "Key Holder" and collectively, the "Key Holders"). The Investors and Key Holders are hereinafter referred to collectively as the "Stockholders."
The Company and the Investors are parties to that certain Series [__] Preferred Stock Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to which the Investors are purchasing shares of the Company’s Series [__] Preferred Stock, par value $[__] per share (the "Series [__] Preferred Stock").
The obligations of the Investors under the Purchase Agreement are conditioned upon, among other things, the execution and delivery of this Agreement by the Company, the Key Holders, and the Investors.
The Company, the Key Holders, and certain of the Investors may be parties to that certain Right of First Refusal and Co-Sale Agreement dated as of [DATE] (the "Prior Agreement"). The Prior Agreement shall be amended and restated in its entirety and superseded and replaced by this Agreement, and shall be of no further force or effect.
In consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows.
"Affiliate" means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer, director, or trustee of such Person, or any venture capital fund or registered investment company now or hereafter existing that is controlled by one or more general partners, managing members, or investment advisers of, or shares the same management company or investment adviser with, such Person.
"Board of Directors" means the Board of Directors of the Company.
"Change of Control" means (a) a merger or consolidation of the Company with or into any other entity or entities in which the stockholders of the Company immediately prior to such merger or consolidation do not own, directly or indirectly, at least fifty percent (50%) of the combined voting power of the surviving entity or entities immediately following such merger or consolidation, (b) a sale, transfer, or other disposition of all or substantially all of the assets of the Company, or (c) the acquisition by any Person or group of Persons of beneficial ownership of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then-outstanding securities.
"Common Stock" means shares of the common stock of the Company, par value $[__] per share.
"Company Notice" means the written notice delivered by the Company to the Investors pursuant to Section 3 of this Agreement following the Company’s receipt of a Proposed Transfer Notice from a Key Holder, which Company Notice shall include (a) the identity of the Key Holder proposing the Proposed Transfer, (b) the number of shares of Transfer Stock proposed to be transferred, (c) the proposed purchase price per share, (d) the identity of the Prospective Transferee, and (e) the material terms and conditions of the Proposed Transfer not purchased by the Company.
"Deemed Liquidation Event" shall have the meaning ascribed to such term in the Company’s Certificate of Incorporation, as may be amended from time to time (the "Certificate of Incorporation").
"Equity Securities" means all shares of Common Stock and Preferred Stock (on an as-converted-to-Common-Stock basis) then held by a Stockholder, together with all shares of Common Stock then issuable (directly or indirectly) upon conversion, exercise, or exchange of any convertible securities, options, or warrants then held by such Stockholder.
"Immediate Family Member" means, with respect to any natural person, such person’s spouse, domestic partner, parents, grandparents, lineal descendants (including adopted children and stepchildren), siblings, and the lineal descendants of siblings.
"Investor Notice" means the written notice delivered by the Company to the Investors pursuant to Section 4(a) of this Agreement following the expiration of the Company’s exercise period under Section 3, which Investor Notice shall include (a) the information contained in the Proposed Transfer Notice, (b) the number of shares of Transfer Stock, if any, purchased by the Company pursuant to Section 3, and (c) the number of shares of Remaining Transfer Stock available for purchase by the Investors.
"Key Holder" means each Person identified as a Key Holder on Schedule B, together with any Person who hereafter becomes a party to this Agreement as a Key Holder pursuant to Section 21 of this Agreement.
"Permitted Transferee" means (a) with respect to any Key Holder who is a natural person, (i) any Immediate Family Member of such Key Holder, (ii) any trust for the direct or indirect benefit of such Key Holder or any Immediate Family Member of such Key Holder, (iii) any limited liability company, corporation, or partnership in which such Key Holder and/or Immediate Family Members of such Key Holder hold all of the equity interests, or (iv) any individual retirement account for the benefit of such Key Holder; and (b) with respect to any Key Holder that is an entity, (i) any Affiliate of such Key Holder, (ii) any partner, member, stockholder, or other equity holder of such Key Holder, or (iii) any Person to whom Transfer Stock is distributed by such Key Holder; provided that, in each case, (x) the Permitted Transferee shall have executed and delivered to the Company a joinder agreement in the form attached hereto as Exhibit A, (y) the transfer would not require the Company to register the Transfer Stock under any applicable federal or state securities laws, and (z) the Permitted Transferee is not a competitor of the Company, as determined in good faith by the Board of Directors.
"Person" means any individual, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, governmental authority, or other entity.
"Preferred Stock" means all shares of the Company’s preferred stock, including the Series [__] Preferred Stock and any other series of preferred stock authorized and issued from time to time by the Company.
"Pro Rata Share" means, with respect to each Investor in connection with a Proposed Transfer, the ratio of (a) the number of shares of Equity Securities owned by such Investor immediately prior to the Proposed Transfer, to (b) the total number of shares of Equity Securities owned by all Investors immediately prior to the Proposed Transfer.
"Proposed Key Holder Transfer" means any assignment, sale, offer to sell, pledge, mortgage, hypothecation, encumbrance, disposition of, or any other like transfer or encumbering of any Transfer Stock (or any interest therein) proposed by any Key Holder, whether voluntary, involuntary, or by operation of law, excluding any Exempt Transfer as defined in Section 7 of this Agreement.
"Proposed Transfer" means any Proposed Key Holder Transfer.
"Proposed Transfer Notice" means the written notice from a Key Holder to the Company setting forth the terms and conditions of a Proposed Transfer, which notice shall include (a) a statement of the Key Holder’s bona fide intention to make the Proposed Transfer, (b) the name, address, and relationship (if any) to the Key Holder of each Prospective Transferee, (c) the number of shares of Transfer Stock proposed to be transferred to each Prospective Transferee (the "Offered Shares"), (d) the per share price or other consideration (including the fair market value of any non-cash consideration as determined in good faith by the Board of Directors) proposed for the Transfer Stock (the "Offered Price"), and (e) a description of all other material terms and conditions of the Proposed Transfer, including a true and complete copy of any written offer, letter of intent, or agreement pursuant to which the Proposed Transfer is to be consummated.
"Prospective Transferee" means each Person to whom a Key Holder proposes to transfer Transfer Stock in a Proposed Transfer.
"Qualifying Offer" means a bona fide, arm’s-length offer from a third party that is not an Affiliate of the Key Holder proposing the Proposed Transfer.
"Remaining Transfer Stock" means any shares of Transfer Stock that remain after the Company has exercised or declined to exercise its right of first refusal under Section 3 of this Agreement.
"Requisite Holders" means Investors holding at least [a majority / sixty-seven percent (67%)] of the shares of Preferred Stock then held by all Investors (on an as-converted-to-Common-Stock basis).
"Transfer Stock" means shares of Common Stock owned or held by a Key Holder, or issued or issuable with respect to Common Stock owned or held by a Key Holder upon conversion, exchange, or exercise of any convertible security, warrant, or option, whether or not such Key Holder is the beneficial or record holder of such shares; provided, however, that, for purposes of determining the number of shares of Transfer Stock held by a Key Holder, all shares of Preferred Stock held by such Key Holder shall be deemed to have been converted to Common Stock at the then-applicable conversion ratio.
"Underwriter" means the managing underwriter or underwriters, or in the case of a non-underwritten offering, the placement agent or agents (if any), for an initial public offering of the Company’s securities.
"Qualified Public Offering" or "QPO" means the closing of the Company’s first firm-commitment underwritten public offering of shares of Common Stock pursuant to an effective registration statement filed under the Securities Act of 1933, as amended (the "Securities Act"), resulting in aggregate gross cash proceeds to the Company of not less than $[__] (before deduction of underwriting discounts, commissions, and offering expenses), with a per share price to the public of not less than $[__] per share (as adjusted for any stock splits, stock dividends, combinations, subdivisions, recapitalizations, or similar events).
3.1 Proposed Transfer Notice. Each Key Holder proposing to make a Proposed Transfer shall deliver a Proposed Transfer Notice to the Company not later than forty-five (45) days prior to the consummation of the Proposed Transfer. The Proposed Transfer Notice shall constitute a binding offer by the Key Holder to sell to the Company all or any portion of the Transfer Stock covered by the Proposed Transfer at the Offered Price and on the terms and conditions set forth therein. The Proposed Transfer Notice shall be accompanied by a true and complete copy of any binding or non-binding written agreement between the Key Holder and the Prospective Transferee relating to the Proposed Transfer, and the Key Holder shall promptly furnish to the Company any additional information regarding the proposed transaction as the Company may reasonably request. If the Offered Price includes non-cash consideration, the Proposed Transfer Notice shall include a good faith estimate of the fair market value of such non-cash consideration as determined by the Board of Directors, and the Company may elect to pay such fair market value in cash in lieu of non-cash consideration.
3.2 Company’s Right. Upon receipt of a valid Proposed Transfer Notice, the Company shall have the right, exercisable by delivering written notice to the Key Holder (the "Company Exercise Notice") within fifteen (15) days after the date of receipt of the Proposed Transfer Notice (the "Company Exercise Period"), to purchase all or any portion of the Transfer Stock covered by the Proposed Transfer at the Offered Price and on the terms and conditions set forth in the Proposed Transfer Notice. The Company Exercise Notice shall specify the number of shares of Transfer Stock that the Company elects to purchase (the "Company Purchased Shares").
3.3 Closing of Company Purchase. The closing of any purchase of Transfer Stock by the Company pursuant to this Section 3 shall take place within ten (10) business days after the date the Company delivers the Company Exercise Notice, or at such other time as the Company and the Key Holder may mutually agree. At such closing, the Key Holder shall deliver to the Company one or more certificates representing the Company Purchased Shares, duly endorsed for transfer and free and clear of all liens, claims, security interests, and encumbrances of any kind, accompanied by such stock powers, assignments, and other instruments of transfer as the Company may reasonably request, and the Company shall deliver to the Key Holder the aggregate purchase price for the Company Purchased Shares by certified check, wire transfer of immediately available funds, or cancellation of indebtedness owed by the Key Holder to the Company, at the Company’s election.
3.4 Partial Exercise. In the event the Company exercises its right of first refusal under this Section 3 with respect to fewer than all of the shares of Transfer Stock covered by the Proposed Transfer, the Company shall deliver to the Investors an Investor Notice pursuant to Section 4 of this Agreement with respect to the Remaining Transfer Stock. For the avoidance of doubt, the Company may exercise its right of first refusal with respect to any number of shares up to and including the total number of shares of Transfer Stock covered by the Proposed Transfer, and such partial exercise shall not affect the rights of the Investors under Section 4 of this Agreement.
3.5 Non-Exercise by Company. If the Company does not deliver a Company Exercise Notice within the Company Exercise Period, or delivers a Company Exercise Notice declining to purchase any shares of Transfer Stock, the Company shall be deemed to have waived its right of first refusal under this Section 3 with respect to the Proposed Transfer, and the Company shall promptly (and in no event more than five (5) business days after expiration of the Company Exercise Period) deliver an Investor Notice to the Investors in accordance with Section 4 of this Agreement.
4.1 Investor Notice. In the event the Company does not exercise its right of first refusal with respect to all of the Transfer Stock covered by a Proposed Transfer, the Company shall deliver to each Investor an Investor Notice within five (5) business days following the earlier of (a) the expiration of the Company Exercise Period without the Company having elected to purchase all of the Transfer Stock, or (b) the date the Company delivers a Company Exercise Notice electing to purchase fewer than all of the shares of Transfer Stock covered by the Proposed Transfer. The Investor Notice shall set forth (i) the information contained in the Proposed Transfer Notice, (ii) the number of Company Purchased Shares, if any, and (iii) the number of shares of Remaining Transfer Stock available for purchase by the Investors.
4.2 Primary Right. Each Investor shall have the right, exercisable by delivering written notice to the Company and the Key Holder (the "Investor Exercise Notice") within fifteen (15) days after the date of receipt of the Investor Notice (the "Investor Exercise Period"), to purchase up to its Pro Rata Share of the Remaining Transfer Stock at the Offered Price and on the terms and conditions set forth in the Proposed Transfer Notice. Each Investor Exercise Notice shall specify the maximum number of shares of Remaining Transfer Stock that such Investor is willing to purchase.
4.3 Over-Allotment Right. In the event that any Investor does not elect to purchase its full Pro Rata Share of the Remaining Transfer Stock, the Company shall, within five (5) business days after the expiration of the Investor Exercise Period, give written notice (the "Over-Allotment Notice") to each Investor that has elected to purchase its full Pro Rata Share of the Remaining Transfer Stock (each, a "Fully Participating Investor"), setting forth (a) the aggregate number of shares of Remaining Transfer Stock not subscribed for by other Investors (the "Over-Allotment Shares"), and (b) each Fully Participating Investor’s pro rata share of such Over-Allotment Shares (determined by the ratio of such Fully Participating Investor’s Equity Securities to the total Equity Securities held by all Fully Participating Investors). Each Fully Participating Investor shall have the right, exercisable by delivering written notice to the Company and the Key Holder within ten (10) days after receipt of the Over-Allotment Notice (the "Over-Allotment Period"), to purchase up to its pro rata share of the Over-Allotment Shares at the Offered Price and on the same terms and conditions.
4.4 Closing of Investor Purchase. The closing of any purchase of Remaining Transfer Stock by the Investors pursuant to this Section 4 shall take place within ten (10) business days after the expiration of the later of the Investor Exercise Period and the Over-Allotment Period, as applicable, or at such other time as the Investors and the Key Holder may mutually agree. At such closing, the Key Holder shall deliver to the purchasing Investors one or more certificates representing the shares being purchased, duly endorsed for transfer and free and clear of all liens, claims, security interests, and encumbrances, accompanied by stock powers and other instruments of transfer as the Investors may reasonably request, and the purchasing Investors shall deliver to the Key Holder the aggregate purchase price for the shares being purchased by certified check or wire transfer of immediately available funds.
4.5 Consummation of Proposed Transfer. In the event the Company and the Investors do not exercise their rights of first refusal with respect to all of the Transfer Stock covered by the Proposed Transfer within the time periods specified in Section 3 and this Section 4, respectively, the Key Holder may, subject to the rights of the Investors under Section 5 of this Agreement (Right of Co-Sale), consummate the Proposed Transfer with respect to any shares of Transfer Stock not purchased by the Company or the Investors (the "Non-Purchased Shares") to the Prospective Transferee identified in the Proposed Transfer Notice, at a price not less than the Offered Price and on terms and conditions not more favorable to the Prospective Transferee than those set forth in the Proposed Transfer Notice; provided that (a) such Proposed Transfer is consummated within sixty (60) days following the expiration of the later of the Company Exercise Period and the Over-Allotment Period, and (b) such Proposed Transfer is otherwise effected in compliance with all applicable federal and state securities laws and this Agreement. If the Proposed Transfer is not consummated within such sixty (60)-day period, or if the terms of the Proposed Transfer are modified in any material respect, the Key Holder shall be required to deliver a new Proposed Transfer Notice and again comply with the procedures set forth in Section 3 and this Section 4 before consummating any such transfer.
4.6 Deemed Waiver. Notwithstanding anything to the contrary in this Section 4, an Investor shall be deemed to have waived its right of first refusal with respect to a Proposed Transfer if such Investor fails to deliver an Investor Exercise Notice within the Investor Exercise Period, or, in the case of a Fully Participating Investor, fails to deliver a notice of exercise within the Over-Allotment Period.
5.1 Co-Sale Right. In the event the Company and the Investors do not exercise their respective rights of first refusal under Sections 3 and 4 with respect to all of the Transfer Stock covered by a Proposed Transfer, each Investor shall have the right (the "Co-Sale Right"), exercisable upon written notice to the Key Holder (the "Co-Sale Exercise Notice") within fifteen (15) days after the later of (a) the expiration of the Investor Exercise Period, or (b) if applicable, the expiration of the Over-Allotment Period (the "Co-Sale Exercise Period"), to participate in the Proposed Transfer on the same terms and conditions as specified in the Proposed Transfer Notice.
5.2 Pro Rata Participation. Each Investor who exercises its Co-Sale Right shall have the right to sell, at the same price per share and on the same terms and conditions as the Key Holder, up to that number of shares of Common Stock (including shares of Common Stock issuable upon conversion of Preferred Stock) equal to the product of (a) the aggregate number of Non-Purchased Shares to be sold by the Key Holder in the Proposed Transfer, multiplied by (b) a fraction, the numerator of which is the number of shares of Equity Securities owned by such Investor immediately prior to the consummation of the Proposed Transfer, and the denominator of which is the sum of (i) the total number of shares of Equity Securities owned by all Investors exercising their Co-Sale Right, plus (ii) the total number of shares of Equity Securities (including Transfer Stock) owned by the Key Holder.
5.3 Co-Sale Mechanics. Each Investor exercising its Co-Sale Right shall effect its participation in the Proposed Transfer by delivering to the Key Holder, within five (5) business days after delivery of the Co-Sale Exercise Notice, one or more share certificates representing the number of shares of Transfer Stock that such Investor is entitled to sell in the Proposed Transfer pursuant to Section 5.2, properly endorsed for transfer and accompanied by stock powers and such other instruments of transfer as the Key Holder or the Prospective Transferee may reasonably request. The Key Holder shall (a) include the shares of Transfer Stock delivered by each participating Investor in the Proposed Transfer to the Prospective Transferee at the same price per share and on the same terms and conditions as apply to the Key Holder’s shares, and (b) promptly remit, or cause the Prospective Transferee to remit, to each participating Investor that portion of the sale proceeds to which such Investor is entitled by reason of its participation in the Proposed Transfer.
5.4 Conversion of Preferred Stock. To the extent that the Prospective Transferee objects to the delivery of Preferred Stock in lieu of Common Stock, any Investor exercising its Co-Sale Right may convert such shares of Preferred Stock into shares of Common Stock prior to or simultaneously with the closing of the Proposed Transfer, and the Company shall take all actions necessary to facilitate such conversion. In such event, the Investor shall deliver to the Key Holder certificates representing shares of Common Stock in lieu of certificates for Preferred Stock, and the participation of such Investor in the Proposed Transfer shall otherwise be on the same terms and conditions as provided in this Section 5.
5.5 Reduction of Key Holder Shares. The number of shares of Transfer Stock that the Key Holder may sell in the Proposed Transfer shall be correspondingly reduced by the number of shares of Transfer Stock sold by participating Investors pursuant to this Section 5. The Key Holder shall not consummate any Proposed Transfer unless the Prospective Transferee has agreed to purchase the shares of Transfer Stock of each Investor exercising its Co-Sale Right on the same terms and conditions as apply to the shares to be sold by the Key Holder.
5.6 Partial Exercise. Each Investor may exercise its Co-Sale Right with respect to any number of shares up to the maximum number of shares to which such Investor is entitled under Section 5.2, and a partial exercise of the Co-Sale Right by any Investor shall not affect such Investor’s rights with respect to any subsequent Proposed Transfer.
5.7 Allocation of Proceeds. If any Proposed Transfer is consummated with the participation of one or more Investors exercising their Co-Sale Rights, the aggregate sale proceeds shall be remitted directly by the Prospective Transferee to (a) each participating Investor, in respect of such Investor’s shares of Transfer Stock included in such Proposed Transfer, and (b) the Key Holder, in respect of the Key Holder’s shares of Transfer Stock included in such Proposed Transfer, in each case, on a per-share basis. To the extent that the Prospective Transferee pays any consideration other than cash, such non-cash consideration shall be shared among the Key Holder and participating Investors pro rata in proportion to the number of shares of Transfer Stock sold by each such Person.
5.8 Deemed Sale. For purposes of this Agreement, each Investor who exercises its Co-Sale Right shall be deemed to have sold the same proportion of each class or series of its shares as the Key Holder sells of each class or series of the Key Holder’s shares included in the Proposed Transfer.
5.9 Change of Control Liquidation Preference Allocation in Co-Sale Proceeds. In the event that a Co-Sale Right is exercised in connection with a transaction that constitutes a Change of Control or Deemed Liquidation Event (as defined in the Restated Certificate), the aggregate consideration received by the Co-Sale Participants and the transferring Key Holder shall be allocated among such persons in accordance with the liquidation preference and distribution provisions set forth in the Restated Certificate, as if such consideration were being distributed in a liquidation of the Company. For the avoidance of doubt, holders of Preferred Stock exercising their Co-Sale Right shall be entitled to receive their applicable liquidation preference (including any participation rights) before any remaining consideration is distributed to holders of Common Stock. Any escrow amounts, earnout payments, or contingent consideration shall be allocated among participants in the same manner and proportion.
6.1 Put Right. In the event a Key Holder transfers any Transfer Stock in contravention of the provisions of Sections 3, 4, or 5 of this Agreement, each Investor who would have been entitled to exercise its rights under Sections 4 or 5 with respect to such transfer shall have the right (the "Put Right") to require the Key Holder to purchase from such Investor the type and number of shares of stock that such Investor would have been entitled to sell to the Prospective Transferee under Section 5 of this Agreement had the Key Holder complied with the provisions thereof, at the same price per share and on the same terms and conditions as the Key Holder’s transfer to the Prospective Transferee.
6.2 Exercise of Put Right. An Investor may exercise its Put Right by delivering written notice to the Key Holder within thirty (30) days after the date on which such Investor becomes aware of the transfer in contravention of this Agreement (the "Put Notice"). The Put Notice shall specify the number of shares of stock that such Investor elects to sell to the Key Holder and shall be accompanied by one or more stock certificates representing such shares, properly endorsed for transfer.
6.3 Closing of Put Transaction. The closing of any purchase of shares by the Key Holder pursuant to this Section 6 shall take place within ten (10) business days after the Key Holder’s receipt of the Put Notice. At such closing, the Key Holder shall deliver to the Investor the aggregate purchase price for such shares by certified check or wire transfer of immediately available funds, and the Investor shall deliver to the Key Holder one or more stock certificates representing such shares, properly endorsed for transfer.
6.4 Obligation to Purchase. The obligation of the Key Holder to purchase shares of stock from the Investors pursuant to this Section 6 shall be unconditional and absolute, and shall not be subject to offset, counterclaim, defense, or reduction of any kind. The remedies provided in this Section 6 shall be in addition to, and not in limitation of, any other rights and remedies available to the Investors at law or in equity, including the right to seek specific performance and injunctive relief pursuant to Section 19 of this Agreement.
7.1 Exempt Transfers. Notwithstanding the foregoing provisions of Sections 3, 4, and 5, the following transfers of Transfer Stock by a Key Holder (each, an "Exempt Transfer") shall not be subject to the Company’s right of first refusal under Section 3, the Investors’ right of first refusal under Section 4, or the right of co-sale under Section 5: (a) any transfer of Transfer Stock by a Key Holder to a Permitted Transferee; (b) any transfer of Transfer Stock by a Key Holder to the Company in connection with a repurchase of such Transfer Stock by the Company pursuant to the terms of any equity incentive plan, restricted stock purchase agreement, or stock option agreement approved by the Board of Directors; (c) any transfer of Transfer Stock by a Key Holder in connection with a Deemed Liquidation Event or a Change of Control that has been approved by the Board of Directors and the requisite vote of the Company’s stockholders; and (d) any transfer by a Key Holder of shares of Common Stock acquired in open-market transactions after the date of the Company’s initial public offering.
7.2 Conditions on Exempt Transfers. Notwithstanding the foregoing, no Exempt Transfer shall be effective unless and until (a) the Permitted Transferee or other transferee has executed and delivered to the Company a joinder agreement in the form attached hereto as Exhibit A, agreeing to be bound by the terms and conditions of this Agreement to the same extent as the transferring Key Holder with respect to the Transfer Stock so transferred, (b) the transfer would not require the Company to register the Transfer Stock under the Securities Act or any applicable state securities laws, and (c) the transfer is not to any Person who, directly or indirectly, competes with the Company in any material respect, as determined in good faith by the Board of Directors. Notwithstanding any Exempt Transfer, the transferring Key Holder shall remain jointly and severally liable for any breach of this Agreement by such Permitted Transferee or other transferee.
7.3 Involuntary Transfers. In the event of any involuntary transfer of Transfer Stock by a Key Holder, including without limitation a transfer (a) pursuant to a decree of divorce, dissolution, or separate maintenance, a property settlement, a separation agreement, or any other agreement with a spouse, former spouse, or domestic partner, (b) pursuant to an order of a court of competent jurisdiction, (c) by operation of law in connection with the death, disability, or incapacity of a Key Holder, or (d) to a trustee in bankruptcy or a receiver or other fiduciary in any insolvency proceeding, the Key Holder (or such Key Holder’s estate, personal representative, or successor-in-interest, as applicable) shall give prompt written notice to the Company and the Investors describing in reasonable detail the circumstances of such involuntary transfer. In the event of any such involuntary transfer, the Company and the Investors shall have the right to purchase the Transfer Stock so transferred on the same terms and conditions as set forth in Sections 3 and 4 of this Agreement, as if such involuntary transfer were a Proposed Transfer, and the transferee of such involuntary transfer shall take such Transfer Stock subject to all of the terms and conditions of this Agreement.
7.4 Investor Exempt Transfers. For the avoidance of doubt, nothing in this Agreement shall restrict the ability of any Investor to transfer any shares of capital stock of the Company held by such Investor to any Affiliate of such Investor, any fund or entity managed by the same management company or investment adviser as such Investor, or any partner, member, stockholder, or other equity holder of such Investor; provided that the transferee shall agree in writing to be bound by the applicable provisions of this Agreement to the same extent as the transferring Investor.
7.5 De Minimis Basket Exemption. Notwithstanding Sections 3, 4, and 5 of this Agreement, a Key Holder may Transfer shares of Common Stock representing, in the aggregate during any twelve (12) month period, up to ten percent (10%) of the total shares of Common Stock held by such Key Holder as of the first day of such twelve (12) month period (as adjusted for stock splits, stock dividends, combinations, recapitalizations, and similar events), without compliance with the provisions of Sections 3, 4, or 5 of this Agreement (the "De Minimis Basket"); provided that (a) such Transfers are made in bona fide arm’s-length transactions, (b) the Key Holder provides the Company with written notice of such Transfer within ten (10) days following consummation thereof, (c) the transferee executes and delivers to the Company a Joinder Agreement, and (d) such Transfer does not, individually or in combination with prior De Minimis Basket Transfers by such Key Holder, violate any applicable securities laws.
8.1 Void Transfers. Any Proposed Transfer or attempted transfer of Transfer Stock by a Key Holder in violation of the provisions of this Agreement shall be void and of no force or effect ab initio, and no such transfer shall be recorded on the books of the Company, and the purported transferee of such Transfer Stock (the "Purported Transferee") shall not be treated as the holder of such shares for any purpose, including for purposes of voting, receiving dividends or other distributions, or exercising any rights as a stockholder of the Company.
8.2 Refusal to Register Transfer. The Company shall not register any transfer of Transfer Stock on its books, issue a new certificate for any such Transfer Stock, or otherwise give effect to any such purported transfer, unless and until the Company has received satisfactory evidence that the provisions of this Agreement have been complied with in full, including (a) receipt of a Proposed Transfer Notice in accordance with Section 3, (b) expiration of the Company Exercise Period and the Investor Exercise Period (and, if applicable, the Over-Allotment Period and the Co-Sale Exercise Period) without full exercise of all applicable rights of first refusal and co-sale, or full exercise of such rights by the Company and/or Investors, and (c) compliance with all conditions to an Exempt Transfer, if applicable.
8.3 Instructions to Transfer Agent. The Company is authorized and directed to give instructions to any transfer agent for the Company’s capital stock, consistent with the terms of this Agreement, including instructions that no transfer of Transfer Stock is to be registered unless the transfer complies with the provisions of this Agreement.
8.4 Company Remedies. In addition to the remedies available to the Investors under Section 6 of this Agreement, the Company shall have the right to seek injunctive or other equitable relief to enforce the provisions of this Section 8, without the necessity of proving actual damages or posting any bond or other security.
9.1 Market Standoff. In connection with the Company’s initial underwritten public offering of securities, and upon request of the Company or the Underwriter, each Stockholder agrees not to, without the prior written consent of the Underwriter, during the period commencing on the date of the final prospectus relating to the Company’s initial public offering and ending on the date specified by the Company or the Underwriter (which period shall not exceed one hundred eighty (180) days from the date of such final prospectus, or such longer period as the Underwriter may require solely to the extent necessary to comply with applicable regulatory requirements, including FINRA Rule 2711 or any similar or successor provision) (the "Lock-Up Period"): (a) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right, or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company held by such Stockholder (whether such shares are then owned by such Stockholder or are thereafter acquired), or any securities convertible into or exercisable or exchangeable for any shares of capital stock of the Company; or (b) enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Company’s capital stock, whether any such transaction described in clause (a) or (b) is to be settled by delivery of capital stock of the Company, in cash, or otherwise.
9.2 Underwriter’s Lock-Up Agreement. Each Stockholder agrees to execute and deliver to the Underwriter such forms of lock-up or market standoff agreements as the Underwriter may reasonably request in connection with the Company’s initial public offering, in form and substance consistent with the provisions of Section 9.1 and otherwise reasonably satisfactory to the Company and the Underwriter; provided that the terms and conditions of any such lock-up or market standoff agreement shall apply equally to all holders of the Company’s capital stock who are subject to lock-up obligations in connection with such initial public offering.
9.3 Stop-Transfer Instructions. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the shares of capital stock of each Stockholder (and the shares or securities of every other Person subject to the foregoing restrictions) until the end of the Lock-Up Period, and each Stockholder agrees that, if so requested, such Stockholder will promptly execute any agreement reasonably requested by the Underwriter to give effect to the restrictions set forth in this Section 9.
9.4 Equal Application. Notwithstanding anything to the contrary in this Section 9, the obligations of the Stockholders under this Section 9 shall not apply unless all officers, directors, and stockholders holding more than one percent (1%) of the Company’s outstanding capital stock (after giving effect to conversion into Common Stock of all outstanding Preferred Stock) are subject to substantially similar restrictions on the transfer of their shares of capital stock during the Lock-Up Period.
9.5 Survival. The provisions of this Section 9 shall survive the termination of this Agreement with respect to any initial public offering, and shall be binding upon each Stockholder for so long as such Stockholder holds any shares of the Company’s capital stock.
9.6 Rule 10b5-1 Trading Plan Carve-Out. Notwithstanding Section 9.1, the restrictions set forth in this Section 9 shall not apply to the sale of shares pursuant to a trading plan established by a Stockholder in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 (a "10b5-1 Plan"), provided that (a) such 10b5-1 Plan was adopted in good faith by such Stockholder at a time when such Stockholder was not in possession of material nonpublic information concerning the Company, (b) such 10b5-1 Plan was adopted at least thirty (30) days prior to the commencement of the lock-up period, (c) such 10b5-1 Plan has been approved by the Company’s General Counsel (or, if the Company does not have a General Counsel, by the Company’s outside legal counsel), and (d) any sales pursuant to such 10b5-1 Plan during the lock-up period do not exceed, in the aggregate, the number of shares specified in such plan as of the date of its adoption. For the avoidance of doubt, no new 10b5-1 Plan may be established or any existing 10b5-1 Plan modified during the lock-up period.
10.1 Required Legends. Each certificate, instrument, or book-entry representing shares of Transfer Stock held by a Key Holder, and each certificate, instrument, or book-entry representing shares of capital stock of the Company held by any Stockholder subject to the provisions of Section 9 (Lock-Up Agreement), shall bear the following legend or legends, as applicable, in addition to any other legends required by applicable law or by any other agreement to which the Company is a party:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, AMONG THE HOLDER, THE COMPANY, AND CERTAIN HOLDERS OF THE COMPANY’S STOCK, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH AGREEMENT PROVIDES, AMONG OTHER THINGS, FOR CERTAIN RESTRICTIONS ON TRANSFER. THE COMPANY WILL FURNISH WITHOUT CHARGE TO THE HOLDER OF RECORD OF THIS CERTIFICATE A COPY OF SUCH AGREEMENT UPON WRITTEN REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD AFTER THE EFFECTIVE DATE OF THE COMPANY’S REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET FORTH IN A RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT AMONG THE HOLDER, THE COMPANY, AND CERTAIN HOLDERS OF THE COMPANY’S STOCK, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH LOCK-UP PERIOD IS BINDING ON TRANSFEREES OF THESE SHARES."
10.2 Instructions to Transfer Agent. The Company shall instruct any transfer agent or registrar for the Company’s capital stock to require compliance with this Agreement (including presentation of evidence satisfactory to the Company of compliance herewith) as a condition to registering any transfer of Transfer Stock, and the Company agrees that it shall promptly do so upon execution of this Agreement and at any time thereafter upon the reasonable request of any Investor.
10.3 Removal of Legends. The foregoing legends shall be removed from any certificate or instrument representing shares of Transfer Stock (a) upon the termination of this Agreement in accordance with Section 11, or (b) upon request of the holder following completion of a Qualified Public Offering, and the Company shall, upon request of the holder, issue new certificates or instruments without such legends at such time.
11.1 Term. This Agreement shall become effective as of the date first written above and shall continue in effect until the earliest to occur of the following events (the "Termination Events"): (a) the closing of a Qualified Public Offering; (b) the consummation of a Deemed Liquidation Event or Change of Control; (c) the date on which the Requisite Holders, the Company, and Key Holders holding a majority of the shares of Transfer Stock then held by all Key Holders, in each case acting by written consent, agree to terminate this Agreement; or (d) the dissolution, liquidation, or winding up of the Company.
11.2 Termination of Key Holder Obligations. The rights and obligations of any individual Key Holder under Sections 3, 4, and 5 of this Agreement shall terminate with respect to such Key Holder (but not with respect to any other Key Holder) upon the earliest to occur of: (a) a Termination Event; (b) the date on which such Key Holder no longer holds any shares of Transfer Stock (excluding any shares of Transfer Stock that have been transferred to a Permitted Transferee who has executed a joinder agreement pursuant to Section 7.2); (c) the termination of such Key Holder’s employment or service relationship with the Company and all subsidiaries, if applicable, and the expiration or exercise of all options or other convertible securities held by such Key Holder, whichever is later; or (d) the written consent of the Company and the Requisite Holders.
11.3 Effect of Termination. Upon termination of this Agreement in accordance with Section 11.1, no party shall have any further rights or obligations hereunder; provided, however, that (a) the provisions of Section 6 (Effect of Failure to Comply), Section 12 (Governing Law and Jurisdiction), Section 14 (Severability), Section 15 (Notices), Section 16 (Entire Agreement), Section 17 (Delays and Omissions), Section 18 (Counterparts and Electronic Signatures), and Section 19 (Specific Performance) shall survive any termination of this Agreement, (b) the termination of this Agreement shall not affect any rights or obligations that accrued prior to such termination, and (c) the provisions of Section 9 (Lock-Up Agreement) shall survive any termination of this Agreement to the extent provided in Section 9.5.
12.1 Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed by, construed under, and enforced in accordance with the internal laws of the State of [STATE], without giving effect to any choice-of-law or conflict-of-law rules or provisions (whether of the State of [STATE] or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of [STATE].
12.2 Exclusive Jurisdiction. Each party to this Agreement hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the state and federal courts located in [STATE] (collectively, the "Designated Courts"), in any action or proceeding arising out of or relating to this Agreement, any document or agreement entered into in connection herewith, or the transactions contemplated hereby or thereby, and each party hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in any such Designated Court. Each party hereby irrevocably waives, and agrees not to assert in any suit, action, or proceeding, any claim that it is not personally subject to the jurisdiction of any such Designated Court, that such suit, action, or proceeding is improper, or that any such Designated Court is an inconvenient forum for such suit, action, or proceeding (whether based on the doctrine of forum non conveniens or otherwise).
12.3 Waiver of Jury Trial. EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY DOCUMENT OR AGREEMENT ENTERED INTO IN CONNECTION HEREWITH, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF ANY ACTION, SUIT, OR PROCEEDING, (B) SUCH PARTY HAS CONSIDERED AND UNDERSTANDS THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER KNOWINGLY AND VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.3.
12.4 Service of Process. Each party irrevocably consents to service of process in the manner provided for notices in Section 15 of this Agreement. Nothing in this Agreement shall affect the right of any party to serve process in any other manner permitted by applicable law.
13.1 Amendment. Any provision of this Agreement may be amended, modified, or supplemented, and the observance of any provision of this Agreement may be waived (either generally or in any particular instance, and either retroactively or prospectively), only by a written instrument executed by (a) the Company, (b) the Requisite Holders, and (c) Key Holders holding at least a majority of the shares of Transfer Stock then held by all Key Holders; provided, however, that no such amendment, modification, supplement, or waiver shall impose any additional material obligations on a Key Holder or Investor, or reduce or adversely affect the rights of a Key Holder or Investor under this Agreement, without the prior written consent of such Key Holder or Investor, as applicable.
13.2 Effect of Amendment or Waiver. Any amendment, modification, supplement, or waiver so effected shall be binding upon the Company and all of the Stockholders. In the event of any conflict between this Agreement and any amendment, modification, or supplement hereto, the terms of such amendment, modification, or supplement shall control.
13.3 No Course of Dealing. No course of dealing between or among the parties, nor any delay in exercising any right, power, or privilege hereunder, shall operate as a waiver of any right, power, or privilege hereunder, nor shall any single or partial exercise of any right, power, or privilege preclude any other or further exercise thereof or the exercise of any other right, power, or privilege. The rights and remedies provided for in this Agreement are cumulative and not exclusive of any rights or remedies that any party may otherwise have at law or in equity.
13.4 Additional Investors and Key Holders. Notwithstanding anything to the contrary in this Section 13, any amendment, modification, or supplement to Schedule A or Schedule B for the purpose of adding additional Investors or Key Holders pursuant to Section 21 of this Agreement may be effected by the Company alone, without the consent of any Stockholder, by execution of a joinder agreement in the form attached hereto as Exhibit A.
If any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect the validity, legality, or enforceability of any other provision of this Agreement or the validity, legality, or enforceability of such provision in any other jurisdiction. If any provision is determined to be invalid, illegal, or unenforceable, the parties hereto shall negotiate in good faith to modify this Agreement to give effect to the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. In addition, any court of competent jurisdiction is hereby authorized to reform, modify, or limit such provision so as to render it valid and enforceable to the fullest extent permitted by applicable law.
15.1 Methods of Delivery. All notices, requests, consents, claims, demands, waivers, and other communications required or permitted under this Agreement (each, a "Notice") shall be in writing and shall be deemed to have been given (a) when delivered by hand (with written confirmation of receipt by the receiving party), (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested), (c) on the date sent by email (with confirmation of transmission, and provided that no bounce-back or undeliverable notification is received by the sender) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient, or (d) on the third (3rd) business day after the date mailed by certified or registered mail, return receipt requested, postage prepaid.
15.2 Addresses. All Notices shall be sent to the respective parties at the following addresses (or at such other address for a party as shall be specified in a Notice given in accordance with this Section 15): (a) if to the Company, to the address set forth on the signature page hereto, Attention: Chief Executive Officer, with a copy (which shall not constitute Notice) to [COMPANY NAME], [Address], Attention: General Counsel; (b) if to any Key Holder, to the address set forth below such Key Holder’s name on Schedule B hereto; and (c) if to any Investor, to the address set forth below such Investor’s name on Schedule A hereto.
15.3 Changes of Address. Any party may change its address for purposes of this Section 15 by giving the other parties written notice of the new address in the manner set forth above. Unless and until such written notice is received, the address set forth herein or on the applicable schedule shall be deemed to continue in effect for all purposes hereunder.
15.4 Deemed Receipt. Notwithstanding Section 15.1, if Notice is given by certified or registered mail and such mail is returned to the sender as undeliverable or unclaimed, such Notice shall be deemed to have been given on the earlier of (a) the date on which such returned Notice is re-sent by any other method described in Section 15.1 and received by the addressee, and (b) the tenth (10th) business day after the date of the original mailing.
This Agreement (including all Exhibits and Schedules attached hereto), together with the Purchase Agreement, the Investors’ Rights Agreement, and the Voting Agreement (collectively, the "Transaction Documents"), constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous agreements, understandings, representations, warranties, inducements, and conditions, whether written or oral, of any nature whatsoever with respect to the subject matter hereof. For the avoidance of doubt, this Agreement amends, restates, supersedes, and replaces in its entirety the Prior Agreement, which shall be of no further force or effect from and after the date hereof. No party is relying on any statement, representation, or warranty, oral or written, made by any other party or any other Person not set forth in this Agreement in entering into this Agreement. The parties hereto further acknowledge that the Transaction Documents referred to herein are entered into simultaneously with this Agreement and are integral to the transactions contemplated hereby.
No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative, and the exercise of any particular remedy shall not preclude the pursuit of any other remedy available under this Agreement, at law, or in equity.
This Agreement may be executed and delivered in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Execution and delivery of this Agreement by exchange of facsimile copies or scanned copies bearing the facsimile, electronic, or digital signature of a party shall constitute a valid and binding execution and delivery of this Agreement by such party. Such facsimile copies, scanned copies, and electronic or digital signatures shall constitute enforceable original signatures for all purposes. A party’s electronic, digital, or facsimile signature on any counterpart of this Agreement shall have the same force and effect as an original signature. Any party delivering an executed counterpart of this Agreement by facsimile, email (including any electronic signature complying with the U.S. federal ESIGN Act of 2000, the Uniform Electronic Transactions Act, or other applicable law), or other form of electronic transmission shall also deliver an original executed counterpart of this Agreement, but the failure to do so shall not affect the validity, enforceability, or binding effect of this Agreement.
19.1 Equitable Relief. The parties acknowledge and agree that each party’s obligations under this Agreement are unique and that a breach of this Agreement by any party would cause irreparable harm to the other parties for which monetary damages would be inadequate. Accordingly, each party agrees that, in the event of any breach or threatened breach of this Agreement by any party, the non-breaching parties shall be entitled to seek equitable relief, including injunction, specific performance, and any other relief available in equity, in addition to all other remedies available at law, without the necessity of proving actual damages.
19.2 No Bond or Security. In connection with any action or proceeding for equitable relief pursuant to this Section 19, each party hereby waives any requirement for the securing or posting of any bond or other security and agrees that proof of actual damages shall not be a prerequisite to obtaining specific performance, injunctive relief, or any other equitable remedy.
19.3 Preservation of Rights. The exercise by any party of its rights under this Section 19 shall not constitute an election of remedies or a waiver of such party’s right to pursue any other remedy available at law or in equity. The rights and remedies provided in this Section 19 are cumulative and shall not limit the rights of any party under any other provision of this Agreement or under applicable law.
All shares of capital stock of the Company held or acquired by Affiliated entities or Persons shall be aggregated together for the purpose of determining the availability of any rights, and the obligations of any Person, under this Agreement. For purposes of this Section 20, "Affiliated" means, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with such specified Person. Without limiting the foregoing, all shares held by any investment funds or entities managed by the same management company or investment adviser, or by Affiliates of such management company or investment adviser, shall be treated as held by a single Investor for purposes of calculating Pro Rata Share, determining the availability of rights of first refusal and co-sale under Sections 4 and 5, and for any voting or consent thresholds under this Agreement. Any Key Holder who holds Transfer Stock through one or more Permitted Transferees shall be deemed to hold all such shares for purposes of determining such Key Holder’s obligations under this Agreement.
21.1 Additional Key Holders. In the event that, after the date of this Agreement, the Company issues shares of Common Stock, or options or warrants to purchase shares of Common Stock, to any employee, officer, director, or consultant of the Company (or any subsidiary), who is required by the Board of Directors to become a party to this Agreement, the Company shall cause such person to execute and deliver a joinder agreement in the form attached hereto as Exhibit A, and Schedule B shall be updated to include such person as a Key Holder. The Company shall provide the Investors with written notice promptly following any such joinder, which notice shall include a copy of the executed joinder agreement and an updated Schedule B. Upon execution and delivery of such joinder agreement, such person shall be deemed to be a party to this Agreement as a Key Holder, with all of the rights and obligations of a Key Holder hereunder, as if such person had been an original signatory to this Agreement.
21.2 Additional Investors. In the event that, after the date of this Agreement, the Company issues shares of Preferred Stock or other equity securities to any Person who is not already a party to this Agreement and such Person is required by the terms of the applicable purchase or subscription agreement to become a party to this Agreement, the Company shall cause such Person to execute and deliver a joinder agreement in the form attached hereto as Exhibit A, and Schedule A shall be updated to include such Person as an Investor. Upon execution and delivery of such joinder agreement, such Person shall be deemed to be a party to this Agreement as an Investor, with all of the rights and obligations of an Investor hereunder, as if such Person had been an original signatory to this Agreement.
21.3 No Action Required by Other Parties. No action or consent of any existing Stockholder shall be required in connection with the addition of additional Key Holders or Investors pursuant to this Section 21, and the Company is hereby authorized to amend Schedule A and Schedule B accordingly without any further action by any party hereto.
21.4 Joinder Agreement. The form of joinder agreement is attached hereto as Exhibit A. Each joinder agreement shall contain representations and warranties by the joining party that (a) such party has full legal capacity and authority to execute and deliver the joinder agreement and to perform its obligations under this Agreement, (b) the execution and delivery of the joinder agreement does not and will not conflict with or violate any law, regulation, order, agreement, or instrument to which such party is a party or by which such party or its property is bound, and (c) such party has received a copy of this Agreement and has had the opportunity to review it with legal counsel.
21.5 Mandatory Joinder for Significant Equity Holders. Without limiting the generality of Section 21.1, the Company shall require any employee, consultant, or other service provider of the Company or its subsidiaries who, upon the grant, issuance, vesting, or exercise of any equity award or other equity interest, holds shares of the Company’s capital stock (including shares issuable upon exercise of vested options) representing one percent (1%) or more of the Company’s outstanding capital stock (calculated on a fully-diluted basis), to execute and deliver a counterpart signature page or Joinder Agreement to this Agreement, pursuant to which such person shall become a "Key Holder" bound by all terms and conditions applicable to Key Holders hereunder. The Company shall monitor equity holdings of its employees, consultants, and service providers and shall enforce this joinder requirement promptly upon any such person reaching the one percent (1%) threshold.
Each Key Holder who is a natural person and who is married as of the date of this Agreement shall cause his or her spouse to execute and deliver to the Company a Consent of Spouse in the form attached hereto as Exhibit B (the "Spousal Consent"), effective as of the date hereof. Notwithstanding the execution of the Spousal Consent, the spouse of any Key Holder shall not be deemed to be a party to this Agreement or to have any rights or obligations hereunder other than as expressly set forth in the Spousal Consent.
The Spousal Consent shall provide that the spouse of the Key Holder acknowledges that he or she has read this Agreement and understands its contents, consents to the provisions of this Agreement as they may affect any community property interest or other marital property interest that such spouse may have in the Transfer Stock, agrees that such spouse’s interest, if any, in the Transfer Stock shall be irrevocably bound by this Agreement and that such spouse’s community property interest, if any, shall be subject to the terms and conditions of this Agreement, and agrees that such spouse will take no action at any time to hinder the operation of this Agreement on any Transfer Stock.
In the event that any Key Holder marries subsequent to the execution of this Agreement, such Key Holder shall, within thirty (30) days of such marriage, cause his or her spouse to execute and deliver to the Company a Spousal Consent in the form attached hereto as Exhibit B. In the event that any Key Holder fails to obtain a Spousal Consent as required by this Section 22, the Company shall have the right, in addition to any other remedies available hereunder, to refuse to register any transfer of Transfer Stock by such Key Holder until such Spousal Consent has been obtained and delivered to the Company.
Each Key Holder acknowledges and agrees that the failure to deliver a Spousal Consent as required by this Section 22 shall not affect the validity or enforceability of this Agreement as between the Key Holder and the other parties hereto, and each Key Holder represents and warrants that such Key Holder’s obligations under this Agreement are valid and binding upon such Key Holder, regardless of whether a Spousal Consent has been obtained.
Except as otherwise provided herein, the terms, covenants, representations, warranties, and conditions of this Agreement shall inure to the benefit of and shall be binding upon the respective heirs, executors, administrators, successors, legal representatives, and permitted assigns of each of the parties hereto. No party may assign its rights or obligations under this Agreement without the prior written consent of the Company and the Requisite Holders, except that (a) any Investor may assign its rights and obligations to any Affiliate or Permitted Transferee of such Investor who executes a joinder agreement in accordance with this Agreement, (b) any Key Holder may transfer shares of Transfer Stock to a Permitted Transferee in accordance with Section 7 of this Agreement, and (c) an Investor’s rights under Sections 4 (Investor Right of First Refusal), 5 (Right of Co-Sale), and 6 (Effect of Failure to Comply) are assignable to any transferee or assignee of shares of Preferred Stock (or Common Stock issuable upon conversion thereof) held by such Investor, provided that such transferee or assignee executes a joinder agreement in accordance with Section 21 of this Agreement.
Any attempted assignment or transfer in violation of this Section shall be null and void and of no force or effect. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective heirs, executors, administrators, successors, legal representatives, and permitted assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
In the event any suit, action, or other legal proceeding is brought in connection with this Agreement or the enforcement of any provision hereof, the prevailing party shall be entitled to recover, in addition to any other relief to which such party may be entitled, its reasonable and documented out-of-pocket costs and expenses incurred in connection therewith, including reasonable attorneys’ fees and costs of investigation, preparation, and litigation at trial and on any appeal or review. For purposes of this Section, the "prevailing party" shall mean the party that obtains substantially the relief sought, whether by settlement, judgment, or otherwise.
Each Key Holder acknowledges that the Company has incurred, and the Investors have incurred, significant legal costs and expenses in connection with the negotiation and preparation of this Agreement and the other Transaction Documents, and that such costs and expenses are a material inducement for the Company and the Investors to enter into this Agreement.
25.1 Negotiation. In the event of any dispute, controversy, or claim arising out of or relating to this Agreement, the parties shall first attempt to resolve such dispute through good faith negotiation. The disputing party shall deliver written notice to the other parties describing the dispute in reasonable detail (the "Dispute Notice"). Within fifteen (15) business days after receipt of the Dispute Notice, senior representatives of the parties shall meet (in person or by videoconference) and attempt in good faith to resolve the dispute.
25.2 Litigation. If the parties are unable to resolve the dispute within thirty (30) days after delivery of the Dispute Notice (or such longer period as the parties may agree in writing), any party may initiate legal proceedings in the Designated Courts in accordance with Section 12 of this Agreement. Nothing in this Section 25 shall preclude any party from seeking provisional or equitable relief from the Designated Courts at any time, including injunctive relief, specific performance, or other interim measures, as provided in Section 19 of this Agreement.
25.3 Confidentiality. All negotiations and discussions pursuant to this Section 25 shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence and shall be subject to such protections. No statement, admission, or offer made in the course of such negotiations shall be admissible as evidence or constitute a waiver of any rights in any subsequent proceeding.
Based on our analysis of the AMASS Brands, Inc. ROFR/Co-Sale Agreement (June 2024, filed with S-1 in 2026), which covers ten series of preferred stock and includes sophisticated multi-tier purchase mechanics.
Traditional ROFR/Co-Sale agreements terminate automatically upon an IPO (the theory being that once shares are publicly traded, transfer restrictions are unnecessary and potentially unenforceable). However, with the rise of Direct Listings as an alternative path to public markets, modern agreements must address whether the ROFR and co-sale rights also terminate upon a Direct Listing.
In the AMASS Brands ROFR/Co-Sale Agreement (June 2024, filed with S-1 in 2026), the termination provision (Section 6.1) explicitly includes “Direct Listing” alongside IPO and Deemed Liquidation Event as a termination trigger. This is important because without this language, a Direct Listing could leave the ROFR/Co-Sale agreement technically in effect even after shares begin trading publicly, creating an anomalous situation where Key Holders need to offer their shares to the Company and existing investors before selling on the open market.
The lock-up provision (Section 5.1 in the AMASS agreement) takes a different approach: it applies the 180-day lock-up only to a traditional underwritten IPO, not to a Direct Listing. The rationale is that in a Direct Listing, there is no underwriter requiring a lock-up, no stabilization period, and no public offering that could be damaged by insider selling. All officers, directors, and Key Holders are bound by the lock-up, which begins on the effective date of the registration statement. The template includes a bracketed option: [OPTION A: Lock-up applies to IPO only; OPTION B: Lock-up applies to both IPO and Direct Listing for [90][180] days].
Negotiation Insight: Founders should generally prefer the IPO-only lock-up (Option A) because it preserves maximum flexibility in a Direct Listing scenario. Investors may push for Option B with a shorter lock-up period (90 days rather than 180) as a compromise. Note that even without a contractual lock-up, many Direct Listings include voluntary lock-up agreements negotiated with the exchange or financial advisors, typically with staggered release windows.
A sophisticated provision found in the AMASS Brands agreement (Section 2.2(d)(ii)) addresses how acquisition consideration is allocated when a co-sale right is exercised in connection with a Change of Control transaction. This provision ensures that the liquidation preference waterfall established in the Certificate of Incorporation governs the distribution of consideration even in a co-sale scenario.
In a typical co-sale, a participating investor sells alongside the Key Holder on the same terms and conditions. But in a Change of Control (acquisition), the consideration must be allocated according to the certificate’s liquidation preferences, not simply pro rata. This means preferred stockholders exercising co-sale rights receive their liquidation preference amounts before common holders receive anything. The provision requires that the Purchase and Sale Agreement between the co-selling investors and the acquirer incorporate the Company’s certificate liquidation waterfall by reference.
The template also addresses escrow and contingent consideration in co-sale transactions: if part of the acquisition price is held in escrow (common for indemnification holdbacks) or is contingent on milestones, the allocation of such amounts follows the same waterfall. Initial consideration is distributed first per the preferences, and subsequent releases from escrow or milestone payments are allocated to the remaining participants in order of priority until each tier is made whole.
Beyond the standard ROFR mechanics, modern agreements include “Prohibited Transferee” provisions that give the Board authority to block transfers to certain categories of recipients regardless of whether existing holders exercise their ROFR. The AMASS Brands agreement (Section 3.3) identifies two categories of prohibited transferees: (1) competitors of the Company, and (2) customers, suppliers, or distributors of the Company where the transfer would create a competitive disadvantage.
The competitive transferee restriction protects against the scenario where a Key Holder (often a departing co-founder) sells their shares to a direct competitor, potentially giving that competitor access to cap table information, pro rata rights in future rounds, and (depending on the information rights threshold) access to confidential financial data. The Board determination is typically made in its reasonable business judgment and is final and binding on all parties.
The customer/supplier restriction addresses a more subtle concern: if a major customer acquires a significant equity stake through secondary purchase, the commercial relationship dynamics shift in ways that may disadvantage the Company. The customer-investor may seek to use their shareholder position to extract more favorable commercial terms, demand information about other customer relationships, or block strategic transactions (such as selling the company to a competitor of the customer-investor). The template includes this provision as an optional addition with bracketed Board determination mechanics.
Based on our review of the AMASS Brands ROFR/Co-Sale Agreement, here are the market-standard procedural timelines for each step of the transfer process, with commentary on negotiation ranges:
1. Proposed Transfer Notice: Key Holder delivers written notice to Company and Investors at least [45] days before the proposed transfer date. The notice must include: identity of the Prospective Transferee, number of shares, price per share, and all material terms. Range in practice: 30-60 days; 45 days is the modal observation in our EDGAR benchmarks.
2. Company ROFR Exercise: [15] days from receipt of Proposed Transfer Notice. The Company has first priority to purchase all or any portion of the Transfer Stock at the stated price. Range: 10-20 days; 15 is standard.
3. Secondary Notice to Investors: [15] days after Company exercise period expires. Company notifies each Investor of any unsubscribed shares. This is the “Secondary Refusal Right” — investors can purchase pro rata.
4. Investor Exercise Period: [10] days from receipt of Secondary Notice. Each Investor may commit to purchase up to its pro rata share of the remaining Transfer Stock.
5. Undersubscription Notice: [5] days after Investor exercise period. Company notifies each Fully Exercising Investor of any remaining unsubscribed shares.
6. Undersubscription Exercise: [10] days from receipt of Undersubscription Notice. Fully Exercising Investors may pick up any shares not purchased by other investors (the “over-allotment” mechanism). This is critical because it allows committed investors to maintain or increase their ownership.
7. Co-Sale Exercise: [15] days from expiration of all ROFR periods. If any shares remain unsold after the ROFR process, participating investors may exercise co-sale (tag-along) rights to sell alongside the Key Holder.
8. Closing Deadline: [45] days from the later of: (a) expiration of the co-sale exercise period, or (b) the closing date stated in the original Proposed Transfer Notice.
9. Stale Notice Period: [45] days. If the transfer is not completed within the Closing Deadline, the entire process resets and a new Proposed Transfer Notice is required. This prevents a Key Holder from using a stale notice with outdated terms.
Practical Note: The total elapsed time from initial notice to final closing can be 80-120 days under these timelines. Founders selling secondary shares (e.g., in a tender offer) should plan accordingly. In practice, many sophisticated secondary transactions are structured to obtain advance waivers from the Board and existing investors, avoiding the full procedural timeline.
This template is provided by Montague Law for informational purposes only and does not constitute legal advice. Consult a qualified attorney before using this document.