Right of First Refusal/Right of Co-Sale (Take-Me-Along)

Right of First Refusal: Gives the Company and Investors the right to step in and purchase the shares proposed to be sold by major common stockholders to a third party. The Company has first priority, then, if the Company declines to exercise their right, the opportunity is passed to the Investors. If both the Company and the Investors decide not to purchase the shares, the stockholder is free to sell them to a third-party.
In situations with multiple Investors, they each may exercise their ROFR on a proportional (“pro rata”) basis. If an Investor decides not to participate, the others have a “right of oversubscription” to buy the shares the non-purchasing Investor was entitled to purchase.

Right of Co-Sale: Gives Investors the opportunity to sell their shares to a third-party on the same terms as originally proposed. The Right of Co-Sale comes up in situations where, following an investment, major stockholders decide to jump ship and sell their shares. With the Co-Sale provision, Investors are permitted to “tag along” in the sale and obtain the same terms as the other Investors, usually on a pro rata basis.

Term Sheet Language: Company first and Investors second will have a right of first refusal with respect to any shares of capital stock of the Company proposed to be transferred by current and future employees holding 1% or more of Company Common Stock (assuming conversion of Preferred Stock and whether then held or subject to the exercise of options), with a right of oversubscription for Investors of shares unsubscribed by the other Investors. Before any such person may sell Common Stock, he will give the Investors an opportunity to participate in such sale on a basis proportionate to the amount of securities held by the seller and those held by the participating Investors.