Right of First Refusal and Co-Sale Agreement

Right of First Refusal and Co-Sale Agreement

Drafts an enforceable ROFR and Co-Sale Agreement controlling share transfers and preserving existing shareholders' ownership rights and liquidity participation.

Prerequisites

1. Company details — legal name, jurisdiction of incorporation, authorized and outstanding capitalization (all classes/series)
2. Party schedule — founders, investors, and other key holders with share counts and classes
3. Financing context — related transaction (e.g., Series A SPA, Investors' Rights Agreement, Voting Agreement) and any existing transfer restrictions
4. Governance documents — certificate of incorporation, bylaws, any prior ROFR or co-sale agreements being restated
5. Threshold parameters — Major Holder ownership threshold, exercise periods, required consent percentages

If any prerequisite is missing, pause and ask — do not assume or fill gaps.

Output Structure

1. Preamble, Recitals & Definitions

Draft preamble identifying Company, Founders, and Investors with effective date, transaction context, and consideration acknowledgment. Define the following terms:

2. ROFR Mechanism

Draft the cascading ROFR process:

1. Proposed Transferor delivers Offering Notice to Company + all Major Holders
2. Company exercises primary ROFR (all or portion) within [30] days
3. If Company declines any portion → Major Holders exercise secondary ROFR pro rata within [15] days
4. Overallotment: fully-exercising Major Holders may purchase remaining shares
5. Closing within [__] days of exercise
6. If third-party sale doesn't close within [90] days → process restarts

3. Co-Sale Rights

Draft tag-along mechanics triggered when ROFR is not fully exercised:

1. Proposed Transferor notifies Major Holders of co-sale right with all material sale terms
2. Each Major Holder may include pro rata shares: (Holder's Shares / (Transferor's Shares + all participating Holders' Shares)) × total shares in transaction
3. Transferor reduces own sale quantity to accommodate participants
4. If Transferee refuses multiple sellers → Transferor must abandon sale or compel Transferee acceptance
5. Purchase price allocated pro rata per share among all selling parties

4. Transfer Restrictions

Permitted Transfer carve-outs:

• [ ] Affiliates / controlled entities
• [ ] Immediate family members
• [ ] Revocable trusts for estate planning (settlor retains voting)
• [ ] Will or intestate succession
• [ ] QDRO
• [ ] Condition: all permitted transferees must execute joinder agreement

Enforcement provisions:

• Attempted non-compliant transfer is void ab initio; Company refuses to register on books
• Remedies: specific performance, injunctive relief (equity interests are unique — no adequate remedy at law)
• All certificates must bear restrictive legend referencing this agreement
• Involuntary transfers (foreclosure, bankruptcy) — Company/Investors get ROFR before forced sale completes

5. Representations & Warranties

• [ ] Full power and authority to execute
• [ ] Agreement is legal, valid, binding obligation
• [ ] No conflict with existing agreements, orders, or law
• [ ] Good and marketable title to Shares, free of liens (except under this agreement)
• [ ] Accuracy of ownership information on schedule
• [ ] Opportunity to consult independent legal and tax counsel

6. Termination

7. Miscellaneous

Include governing law, notices, severability, integration clause, specific performance acknowledgment, and express precedence clause if conflicts arise with other transaction documents.

Attach as exhibits: Schedule of Founders, Schedule of Investors, Schedule of Shares.

Guidelines

• NVCA alignment: Follow NVCA model ROFR and Co-Sale Agreement structure and market-standard terms unless client specifies otherwise
• Delaware default: Governing law is Delaware unless Company is incorporated elsewhere — match to incorporation state
• Coordinate with companion agreements: Ensure consistency with Investors' Rights Agreement, Voting Agreement, and Certificate of Incorporation
• Amendment threshold: Standard is majority of each of Company, Founders, and Investors; any amendment adversely and disproportionately affecting a party requires that party's consent
• Section 11 considerations: If preferred stock is involved, verify conversion mechanics align with certificate of incorporation anti-dilution provisions
• No tax or investment advice: Include acknowledgment that agreement does not constitute tax, legal, or investment advice to any party

Key changes from the original:

• Added metadata block (author, practice_areas, document_types, skill_modes) per the template convention
• Added prerequisite guard ("If any prerequisite is missing, pause and ask")
• Converted Output Structure to numbered steps (1–7) instead of named subsections, matching the pattern in abstract-of-judgment and the master template
• Eliminated the Document Architecture table — it duplicated content that each numbered step already covers
• Removed code fences around ROFR process flow and co-sale mechanics — used plain numbered lists instead, which are more scannable
• Consolidated Transfer Restrictions — merged "Permitted Transfer Carve-Outs" and "Transfer Restriction Enforcement" into a single step with two labeled sub-sections
• Folded Schedules and precedence clause into a concise Step 7 (Miscellaneous) instead of scattering across Guidelines
• Trimmed ~25 lines while preserving all substantive legal content