Rights of first offer and refusal

What are rights of first offer and rights of first refusal?

A right of first offer (ROFO) and a right of first refusal (ROFR) are similar, but distinct, contractual rights that give one party (the holder) an opportunity to preemptively acquire certain property owned by another party (the owner). In both cases, the right is usually triggered when the owner decides to sell the subject property.

With a ROFO, the holder gets to make an offer to the owner (or, alternatively, to consider an offer from the owner) to buy the subject property before it is offered for sale to anyone else. ROFOs tend to favor the owner, because the owner doesn’t have to accept the holder’s offer (or, if the owner is the one setting the offer terms, it doesn’t have to make them favourable to the holder). If the offer is rejected, then the owner is generally free to sell the property to whomever it wants.

On the other hand, with a ROFR, the holder gets to decide whether to purchase the subject property on specified terms (usually based on an offer from a third party) ahead of any other prospective buyer. ROFRs tend to favor the holder, because (i) the purchase terms are more likely to be based on prevailing market conditions (rather than the owner’s potentially inflated notion of the property’s value) and (ii) the holder has more control over the outcome, since the owner has to sell to the holder if it accepts the proposed terms of sale.

ROFOs and ROFRs are perhaps most common in agreements governing the ownership of interests in a business (e.g., shareholders’ agreements, partnership agreements, LLC operating agreements, etc.) as well as real estate lease agreements. However, these rights can also be found in other types of agreements, such as commercial agreements, franchise agreements, and employment agreements.

How do you review rights of first offer and rights of first refusal in contracts?

After locating all ROFO and/or ROFR language in each agreement, some key things to focus on when reviewing these provisions include:

1. Type of right. The section of the agreement in which the right is located may have a heading that clearly indicates whether it is a ROFO or ROFR, in which case it will be fairly obvious what type of right it is (even still, it may be worth checking the wording of the clause to ensure it was not mislabeled). Where there is no such section heading, then it will be necessary to review the terms of the clause to confirm the type of right. Some clauses, such as examples 3 and 11 below, may not have a clear section heading but may nevertheless include phrases like “right of first offer”, “right of first refusal”, “ROFO”, “ROFR”, etc., which will help identify the type of right.
2. Property to which the right applies. This aspect of the clause may be apparent from the type of agreement. For example, if it’s a lease agreement, chances are the right applies to the leased premises. That said, it’s still important to review the clause itself to confirm exactly what property is subject to the ROFO or ROFR. Furthermore, where the subject property is shares of a corporation, an interest in partnership, etc., be sure to note whether the holder must acquire all of the subject property or whether it has the flexibility to acquire only part of it.
3. Triggering event(s). In many cases, these rights will be triggered when the owner decides to sell the subject property or receives an offer from a third party to buy the property. It’s important, however, to read the terms of these rights thoroughly to understand the circumstances in which they may be triggered (and as noted in point 6 below there may be exceptions).
4. Manner of exercise. Since, as noted above, these rights are typically triggered when the owner of the subject property either (i) decides to sell it or (ii) receives an offer from a third party to buy it, notice of this development to the holder often initiates the exercise process. Once the holder has received this notice, it usually has a specified period of time to decide (i) in the case of a ROFO, to accept or reject the offer presented to it or to make an offer to the owner, depending on terms of the right; or (ii) in the case of a ROFR, to decide whether to purchase the subject property on the terms presented to it by the owner. Holders may want to consider whether the notice period stated in the ROFO or ROFR gives them enough time to weigh their options before making a decision. Be sure to note, as well, any financial conditions associated with the right and/or its exercise, such as whether the availability of the right is contingent on the payment of a fee (see example 6 below) or the terms of the right require payment of a deposit at the time of exercise (see example 7 below).
5. Expiration of the right. If a holder does not respond to the owner’s notice within the requisite time period, then the owner is generally free to sell the property to third parties or to accept a third party offer to buy the property, as the case may be, and the holder’s right has effectively lapsed. Note, however, that in some cases, such as example 15 below, the holder may have a second opportunity to exercise the right if the proposed sale price to a third party falls below a certain amount relative to the price the holder originally offered or was presented with, as the case may be. Furthermore, if the holder does not exercise the right in time or declines to exercise it, and the owner is unsuccessful in selling the property to a third party within a certain time period (or at all), the holder’s right may be revived (see example 7 below). Be sure, however, to pay attention to any ROFO or ROFR that has a defined expiration (see, for instance, examples 4 and 9 below), as this may have important implications for either or both the holder and the owner.
6. Excluded transactions. The terms of a ROFO or ROFR may include certain excluded transactions that do not trigger the right, such as (i) transfers to individuals, corporations or other entities that are related to or affiliated with the owner, (ii) issuances of shares or other securities by the owner, or (iii) the registration of a lien or mortgage on the subject property (see, for instance, examples 8 and 15 below). These exclusions are there mainly to ensure that the owner (a) has some flexibility to deal with the subject property as needed in response to economic, commercial or strategic developments and/or (b) does not inadvertently trigger the right.
7. Restrictions on assignment. The terms of some rights, such as example 15 below, may indicate that the ROFO or ROFR is not assignable or transferable. As noted above, such restrictions may be of particular interest to a prospective purchaser of the holder or the holder’s assets.

As with the review of any contractual provision, it’s also important to be aware of other provisions that may affect the interpretation of ROFOs and ROFRs. For example, if a ROFO or ROFR contains defined terms that are important to its interpretation - for instance “Permitted Transfers” in example 4 below - reviewers should consult the defined terms section of the agreement to confirm the meaning of those terms. If the right’s duration is tied to the term of the agreement, the term and renewal clauses can provide useful information about the length of the term. Finally, since both owners and holders may need to provide notice as part of the process of engaging these rights, the notice section details how and to whom notice needs to be given for it to be legally binding.

Software that uses AI to identify and extract ROFOs and ROFRs (as well as other terms that may affect their interpretation) can accelerate the work of finding these provisions and enable a more comprehensive review than can otherwise be done manually.

Examples of rights of first offer and rights of first refusal

Below are some examples of ROFOs and ROFRs from different kinds of agreements. While these examples do not necessarily cover the full range of these rights one may encounter, they are meant to illustrate the degree to which these provisions can vary from contract to contract. Where an example includes broader contextual language, the ROFO or ROFR is highlighted in bold.

Example 1: From an Option and Joint Venture Agreement

Right of First Refusal

13.3 No party will sell, assign, transfer or otherwise dispose of an interest in the Property except in accordance with §13.1 or §13.2 or upon the following conditions:

(a) if a party (the “Seller”) desires to sell, assign, transfer or otherwise dispose of all or any part of an interest in the Property to a third party (the “Offered Interest”), the Seller will first offer (the “Offer”) the same in writing to the other party for cash. The Offer will state the purchase price payable by the third party in cash in Canadian dollars or, if the purchase price is for consideration other than cash, the cash equivalent of such consideration in Canadian dollars, and will state the other terms and conditions on which the Seller is willing to sell;

(b) the other party will have sixty (60) days to accept the Offer. If the Offer is accepted by the other party (in this §13.3 the “Purchasing Party”) , the Seller will forthwith transfer to the Purchasing Party the subject matter of the Offer, upon the Purchasing Party paying the purchase price;

(c) the Purchasing Party will be prohibited from transferring, assigning, selling, conveying or pledging to any other third party other than an affiliate such Offered Interest for a period of one year after the completion of sale;

(d) the Purchasing Party must provide to the Seller an undertaking that it has not entered into any negotiations of any sort with parties for the sale, assignment, transfer, conveyance or pledge of the Offered Interest; and

(e) if the Offer is not accepted as to the whole of the subject matter thereof by the other party within sixty (60) days following receipt of the Offer, then, at any time during the further period of one hundred twenty (120) days immediately thereafter, the Seller may sell, assign, transfer or otherwise dispose of the subject matter of the Offer to a third party, but only at a price and on terms and conditions the same as or more favourable to the Seller than those set out in the Offer.

Example 2: From a Shareholders’ Agreement

2.4 Right of First Refusal.

(a) If any Shareholder or the Company, to the extent it holds any Shares, (the “First Offeror”) proposes to Transfer any Shares to any third party, other than pursuant to a Permitted Transfer, the First Offeror shall, before such Transfer:

(i) Deliver to the other Shareholders an offer (the “First Offer”) to Transfer such Shares upon the terms set forth in this Section 2.4(a), including (A) the number of Shares to which the First Offer relates (the “Offered Shares”) and the name of the First Offeror, (B) the name and address of the proposed offeree (the “First Offeree”), (C) the proposed amount and type of consideration (including, if the consideration consists in whole or in part of non-cash consideration, such information available to the First Offeror as may be reasonably necessary for the Company and the other Shareholders to properly analyse the economic value and investment risk of such non-cash consideration) and the terms and conditions of payment offered by the First Offeror. The financial terms and conditions of the First Offer shall be no less favourable than those offered by a third party. For the avoidance of doubt, any Preferred Shares that are to be Transferred to a First Offeree pursuant to this Section 2.4 shall, prior to such Transfer, be converted into ordinary shares in the Company in accordance with the Amended and Restated Articles. The First Offer shall remain open and irrevocable for a period of 30 Business Days (the “Acceptance Period”) from the date of its receipt by the other Shareholders.

(ii) Any Shareholder (an “Accepting Shareholder”) may accept the First Offer and purchase its Pro Rata Amount (based on the number of Shares held by all Accepting Shareholders) of all (and not part only)

Offered Shares (with respect to each Accepting Shareholder, its “Allotment”) by delivering to the First Offeror a notice (the “Acceptance Notice”) in writing within the Acceptance Period. For the avoidance of doubt, in the event that there is only one Accepting Shareholder, the Pro Rata Amount and such Accepting Shareholder’s Allotment shall be all (and not part only) of the Offered Shares and such Accepting Shareholder shall be obliged to purchase all (and not part only) of the Offered Shares. Each Accepting Shareholder purchasing its Allotment may also accept the First Offer and purchase its Pro Rata Amount (based on the number of Shares held by all Accepting Shareholders purchasing their Allotments) of any Shares not so purchased. “Pro Rata Amount” means, with respect to any Shareholder, the quotient obtained by dividing (i) the number of Shares held by such Shareholder by (ii) the aggregate number of Shares held by all Shareholders, assuming in each case the conversion or exchange of all securities by their terms convertible into or exchangeable for ordinary shares and the exercise of all vested and “in the money” options to purchase or rights to subscribe for ordinary shares (including warrants) or such convertible or exchangeable securities.

(iii) The First Offeror may Transfer to the First Offeree any or all of the Offered Shares not purchased by the Accepting Shareholder(s) (for the avoidance of any doubt, if the Accepting Shareholder(s) do(es) not purchase all of the Offered Shares, then the First Offeror may Transfer all (and not only the un-purchased part) of the Offered Shares to the First Offeree), on terms and conditions no more favorable to the First Offeree than are described in the First Offer, within 30 Business Days after expiration of the Acceptance Period. If such Transfer is not made within such 30 Business Day period, the restrictions provided for in this Section 2.4 shall again become effective.

Example 3: From a LLC Operating Agreement

(b) Except as otherwise set forth in this Section or in this Agreement, a Member may transfer, sell or assign its entire Membership Interest only if it has received the approval of the Board of Directors. Subject to the foregoing: (i) the Company first for a period of fifteen (15) days, and thereafter the other Members in proportion to their Membership Interest in the Company for a period of fifteen (15) days, shall have the right, but not the obligation, to purchase all, but not less than all, of the Membership Interest proposed to be transferred, which right shall be exercisable on the terms and for the purchase price set forth in writing in a bona fide offer made for the Membership Interests by a third-party (the “Right of First Refusal”), and (ii) there shall have been filed with the Company a duly executed and acknowledged counterpart of the instrument making such assignment signed by both the assignor and assignee and such instrument evidences the written acceptance by the assignee of all of the terms and provisions of the Agreement, represents that such assignment was made in accordance with all applicable laws and regulations and the assignee shall have represented to the Company in writing that it meets the investor suitability standards established by the appropriate state of residence, or, in the absence thereof, the investor suitability standards established by the Company. The Board of Directors shall use reasonable care to determine that transfers are in accordance with applicable laws and regulations, including obtaining an opinion of counsel to that effect. Any Member that assigns all of its Membership Interest shall cease to be a Member of the Company. Any Membership Interests acquired by the Company pursuant to Section 8.1 may, subject to applicable law, be re-offered by the Company to suitable investors.

Example 4: From a Stock Purchase Agreement

E. RIGHT OF FIRST REFUSAL

1. Grant. The Corporation is hereby granted the right of first refusal (the “First Refusal Right”), exercisable in connection with any proposed transfer of the Purchased Shares in which Optionee has vested in accordance with the Vesting Schedule. For purposes of this Article E, the term “transfer” shall include any sale, assignment, pledge, encumbrance or other disposition of the Purchased Shares intended to be made by Owner, but shall not include any Permitted Transfer.

2. Notice of Intended Disposition. In the event any Owner of Purchased Shares in which Optionee has vested desires to accept a bona fide third-party offer for the transfer of any or all of such shares (the Purchased Shares subject to such offer to be hereinafter referred to as the ‘Target Shares”), Owner shall promptly (i) deliver to the Corporation written notice (the “Disposition Notice”) of the terms of the offer, including the purchase price and the identity of the third-party offeror, and (ii) provide satisfactory proof that the disposition of the Target Shares to such third-party offeror would not be in contravention of the provisions set forth in Articles B and C.

3. Exercise of the First Refusal Right. The Corporation shall, for a period of forty-five (45) days following receipt of the Disposition Notice, have the right to repurchase any or all of the Target Shares subject to the Disposition Notice upon the same terms as those specified therein or upon such other terms (not materially different from those specified in the Disposition Notice) to which Owner consents. Such right shall be exercisable by delivery of written notice (the “Exercise Notice”) to Owner prior to the expiration of the forty-five (45)-day exercise period. If such right is exercised with respect to all the Target Shares, then the Corporation shall effect the repurchase of such shares, including payment of the purchase price, not more than fifteen (15) business days after delivery of the Exercise Notice; and at such time the certificates representing the Target Shares shall be delivered to the Corporation.

Should the purchase price specified in the Disposition Notice be payable in property other than cash or evidences of indebtedness, the Corporation shall have the right to pay the purchase price in the form of cash equal in amount to the value of such property. If Owner and the Corporation cannot agree on such cash value within thirty (30) days after the Corporation’s receipt of the Disposition Notice, the valuation shall be made by an appraiser of recognized standing selected by Owner and the Corporation or, if they cannot agree on an appraiser within forty-five (45) days after the Corporation’s receipt of the Disposition Notice, each shall select an appraiser of recognized standing and the two (2) appraisers shall designate a third appraiser of recognized standing, whose appraisal shall be determinative of such value. The cost of such appraisal shall be shared equally by Owner and the Corporation. The closing shall then be held on the later of (i) the fifteenth (15th) business day following delivery of the Exercise Notice or (ii) the fifteenth (15th) business day after such valuation shall have been made.

4. Non-Exercise of the First Refusal Right. In the event the Exercise Notice is not given to Owner prior to the expiration of the forty-five (45)-day exercise period, Owner shall have a period of thirty (30) days thereafter in which to sell or otherwise dispose of the Target Shares to the third-party offeror identified in the Disposition Notice upon terms (including the purchase price) no more favorable to such third-party offeror than those specified in the Disposition Notice; provided, however, that any such sale or disposition must not be effected in contravention of the provisions of Article B and Paragraph C.3. The third-party offeror shall acquire the Target Shares free and clear of the Repurchase Right and the First Refusal Right, but the acquired shares shall remain subject to Article B and Paragraph C.3. In the event Owner does not effect such sale or disposition of the Target Shares within the specified thirty (30)-day period, the First Refusal Right shall continue to be applicable to any subsequent disposition of the Target Shares by Owner until such right lapses.

5. Partial Exercise of the First Refusal Right. In the event the Corporation makes a timely exercise of the First Refusal Right with respect to a portion, but not all, of the Target Shares specified in the Disposition Notice, Owner shall have the option, exercisable by written notice to the Corporation delivered within fifteen (15) business days after Owner’s receipt of the Exercise Notice, to effect the sale of the Target Shares pursuant to either of the following alternatives:

(i) sale or other disposition of all the Target Shares to the third-party offeror identified in the Disposition Notice, but in full compliance with the requirements of Paragraph E.4, as if the Corporation did not exercise the First Refusal Right; or

(ii) sale to the Corporation of the portion of the Target Shares which the Corporation has elected to purchase, such sale to be effected in substantial conformity with the provisions of Paragraph E.3. The First Refusal Right shall continue to be applicable to any subsequent disposition of the remaining Target Shares until such right lapses.

Failure of Owner to deliver timely notification to the Corporation shall be deemed to be an election by Owner to sell the Target Shares pursuant to alternative (i) above.

6. Recapitalization/Reorganization.

(a) Any new, substituted or additional securities or other property which is by reason of any Recapitalization distributed with respect to the Purchased Shares shall be immediately subject to the First Refusal Right, but only to the extent the Purchased Shares are at the time covered by such right.

(b) In the event of a Reorganization, the First Refusal Right shall remain in full force and effect and shall apply to the new capital stock or other property received in exchange for the Purchased Shares in consummation of the Reorganization, but only to the extent the Purchased Shares are at the time covered by such right.

7. Lapse. The First Refusal Right shall lapse upon the earliest to occur of (i) the first date on which shares of the Common Stock are held of record by more than five hundred (500) persons, (ii) a determination is made by the Board that a public market exists for the outstanding shares of Common Stock or (iii) a firm commitment underwritten public offering, pursuant to an effective registration statement under the 1933 Act, covering the offer and sale of the Common Stock in the aggregate amount of at least ten million dollars ($10,000,000). However, the Market Stand-Off shall continue to remain in full force and effect following the lapse of the First Refusal Right.

Example 5: From a Stock Purchase Agreement

2.8 First Right of Refusal. In addition each party to this Agreement will have a first right of refusal for thirty (30) days in case the other party wishes to sell his shares in the Company.

Example 6: From a Supply Agreement

2.3 Right of First Refusal

2.3.1 Fee. Upon payment of one million dollars ($1,000,000), and the five (5) subsequent payments on the anniversary of the Effective Date of this Agreement of one hundred thousand dollars ($100,000) for the remainder of the Term (“ROFR Fee”), Manufacturer grants Customer a right of first refusal (“ROFR”) during the Term for additional Product as detailed below.

2.3.2 Available Quantity. Within thirty days (30) days prior to the beginning of each calendar year Manufacturer shall provide Customer with written notice of the total Product not already subject to an existing contractual obligation that Manufacturer expects to manufacture and make available to third parties for that upcoming year (“Available Quantity”). The Available Quantity shall be updated and communicated in writing to Customer (each an “Update”) upon the following occurrences: 1) six months from the original forecast for that year, and 2) if Manufacturer intends to provide greater volumes of Product to third parties than those specified in the last Available Quantity forecast or Update submitted to Customer.

2.3.3 Purchase Right. Customer shall have fifteen (15) days upon receipt of the Available Quantity or any subsequent Update to purchase all or part of the available Product at the then current price per kilogram called for in this Agreement. Whatever volumes Customer has not elected to purchase, Manufacturer shall be free to dispose of in its sole discretion. Any additional Product Customer purchases pursuant to this ROFR shall be added to Customer’s binding forecast and minimum volume obligations.

2.3.4 Refund of ROFR Fee. If Manufacturer does not routinely implement HAV testing by December 31, 2007, Manufacturer shall either a) provide HAV testing for all Product purchased by Customer at no additional cost to Customer, or b) will refund the entire ROFR Fee paid by Customer. Furthermore, if (i) If Product does not receive FDA approval and Customer has not exercised any of its rights under the ROFR during the Term, or Manufacturer makes changes to the batch production records or the Specification, as described in Section 3.1, such that the Product is no longer in compliance with the FDA approval received by Customer, and Customer did not receive FDA approval for such batch production record or Specification change, (ii) Customer terminates this Agreement pursuant to Section 6.2, or (iii) Manufacturer ceases to manufacture Product, then Manufacturer shall pay Customer the pro rata share of the RFR Fee equal to the ratio between (A) the period since the Commencement Date and the date of termination, and (B) six (6) years.

2.3.5 Exclusion of Product. For purposes of clarification, Product sent to third party toll manufacturers for the benefit of Manufacturer (i.e., not sold to such third parties), are not subject to the ROFR provisions contained herein.

Example 7: From an Industrial Lease Agreement

18.22 Right of First Refusal. So long as this Lease is still in effect and no Event of Default by Tenant then exists beyond any applicable notice and cure periods, for the first eighteen (18) months of the Term beginning on the Commencement Date, before Landlord may sell the Building to any party other than Tenant, Landlord must give written notice to Tenant of Landlord’s intention to so sell the Land and Building (the “Sale Notice”), which shall include the identity of the proposed purchaser (the “Proposed Purchaser”) and the principal terms applicable to such proposed sale. If, within ten (10) business days of Tenant’s receipt of the Sale Notice, Tenant delivers a written offer to Landlord to purchase the Premises pursuant to the same terms set forth in the Sale Notice (“Tenant’s Offer”), together with a refundable earnest money deposit equal to five percent (5%) of the purchase price (the “Earnest Money”), Tenant shall be obligated to purchase from Landlord, and Landlord shall be obligated to sell to Tenant, the Premises pursuant to the terms set forth in the Sale Notice (which terms will be reflected in more definitive agreements to be executed by Landlord and Tenant). Following delivery of the Earnest Money to Landlord, Tenant will have thirty (30) days within which to close (the last day of such 30-day period and as may be extended, the “Closing Date”) on the purchase of the Land and Building or it shall forever lose its right of first refusal to buy the Land and Building, subject to any mutually agreed upon extensions by Landlord and Tenant. $100,000.00 of the Earnest Money shall become non-refundable on the date that is fifteen (15) days from the deposit of the Earnest Money. Tenant shall have the right to extend the Closing Date by thirty (30) days up to two (2) separate times by providing written notice to Landlord of its intent to extend. The first time Tenant elects to extend the Closing Date, fifty percent (50%) of the remaining portion of the Earnest Money (after deduction of the $100,000.00 that has already become non-refundable) shall become non-refundable. The second time Tenant elects to extend the Closing Date, all remaining Earnest Money shall become non-refundable. Tenant may elect, in its sole and absolute discretion, to withdraw Tenant’s Offer at any time prior to the Closing Date and Landlord’s sole and exclusive remedy shall be to keep the portion of the Earnest Money that has become non-refundable as liquidated damages. If Tenant withdraws Tenant’s Offer on or prior to the date that all Earnest Money has become non-refundable, then Tenant shall receive a refund of the portion of the Earnest Money that is still refundable. If Tenant fails to timely deliver Tenant’s Offer to Landlord pursuant to the terms set forth above, the relevant Proposed Purchaser shall be entitled to purchase from Landlord, and Landlord shall be permitted to freely sell to such Proposed Purchaser, the Premises on terms no more favorable to such Proposed Purchaser than the terms set forth in the Sale Notice; provided, however, that if such sale of the Premises to such Proposed Purchaser is not completed within one hundred eighty (180) days of the date of the applicable Sale Notice, the right of first refusal described herein shall again apply to such proposed sale. Upon receipt of a Sale Notice, Tenant shall have the right to assign its rights and obligations under this Section 18.22 to an affiliate without Landlord’s consent. In the event the sale of the Land and Building fails to occur as a result of a Landlord default, Tenant’s shall receive a full refund of its Earnest Money.

Example 8: From a Subscription Agreement

SECTION 9. RIGHT OF FIRST OFFER. Subject to the terms and conditions of this Section 9, and except for any securities offered pursuant to this offering or in a Qualified Public Offering, the Company hereby grants to Purchaser a right of first offer with respect to future sales by the Company of its Common Stock or securities convertible into or exercisable for any shares of its Common Stock (such Common Stock or securities, the “Applicable Securities”). In the event Company proposes a sale of Applicable Securities, the Company shall first make an offering of such Applicable Securities to each Purchaser in accordance with the following provisions:

(a) the Company shall deliver a written notice (the “First-Offer Notice”) to each Purchaser stating (i) the Company’s bona fide intention to offer such Applicable Securities, (ii) the number of shares of such Applicable Securities to be offered, and (iii) the price for which it proposes to offer such Applicable Securities;

(b) within ten (10) calendar days after mailing of the Notice, Purchasers may elect to purchase, at the price and on the terms specified in the First-Offer Notice, Applicable Securities having an aggregate purchase price of up to 150% of the principal amount of the Notes held by Purchasers;

(c) the Company may, during the 120-day period following the expiration of the ten (10) day period provided in Section 9(b) hereof, offer any Applicable Securities which have not been subscribed for pursuant to Section 9(b) hereof to any person or entity at a price not less than, and upon terms no more favorable to the offeree than, those specified in the First-Offer Notice. If the Company does not consummate the proposed sale of the Applicable Securities within such period, the right provided hereunder shall be deemed revived and such Applicable Securities shall not be offered unless first reoffered to holders of the Notes in accordance herewith.

(d) Notwithstanding any other provision herein, the right of first offer pursuant to this Section 9 shall not apply (i) to the issuance of up to 15.79 shares of Common Stock (or rights or options therefor) (adjusted to reflect subsequent stock splits, stock dividends or stock distributions) issued after the date hereof to employees, officers, directors, or consultants of the Company (either directly or pursuant to a stock option plan or restricted stock plan approved by the shareholders and directors of the Company); (ii) to shares issued or issuable by the Company in connection with any merger or reorganization transaction in which the Company is the surviving company, or (iii) to the Qualified Public Offering.

Example 9: From an Option Agreement

RIGHT OF FIRST REFUSAL. The Company shall have a right of first refusal, as set forth below, to purchase the shares acquired upon exercise of your option before the shares (or any interest in them) can be validly transferred to any other person or entity.

(a) NOTICE OF INTENT TO SELL. Before there can be a valid sale or transfer of any shares acquired upon exercise of your option (or any interest in them), you must first give notice in writing to the Company, mailed or delivered in accordance with the provisions of Section 16, of your intention to sell or transfer such shares (the “Option Notice”). The Option Notice shall specify the identity of the proposed transferee, the number of shares to be sold or transferred to the transferee, the price per share and the terms upon which you intend to make such sale or transfer. If the payment terms for the shares described in the Option Notice differ from delivery of cash or a check at closing, the Company shall have the option, as set forth herein, of purchasing the shares for cash (or a cash equivalent) at closing in an amount which the Company determines is a fair value equivalent of that payment. The determination of a fair value equivalent shall be made in the Company’s best judgment and such determination shall be mailed or delivered to you (the “Company’s Notice”) within ten (10) days of its receipt of the Option Notice. Should you disagree with the Company’s determination of a fair value equivalent, you shall have the right (the “Retraction Right”) to retract the proposed sale or transfer to a third party and the offer of shares to the Company pursuant to the Option Notice (such retraction to be made in writing and mailed or delivered in accordance with the provisions of Section 16). If you again propose to sell or transfer the shares, you shall again offer such shares to the Company pursuant to the terms of this Section 11 prior to any sale or transfer.

(b) OPTION TO PURCHASE. Subject to your Retraction Right, during the 60-day period commencing upon receipt of the Option Notice by the Company (the “Option Period”), the Company shall have an option to purchase any or all of the shares specified in the Option Notice at the price offered therein (the “Right of First Refusal”).

(c) PURCHASE OF SHARES. Not more than thirty (30) days after receipt of the Option Notice, the Company shall give written notice to you of the number of shares to be purchased (or, if no shares are to be purchased, stating such fact) by the Company pursuant to the terms of this Section 11 (the “Purchase Notice”). Purchases pursuant to this Section 11 shall be consummated within thirty (30) days after delivery of the Purchase Notice to you, but in no event later than the expiration of the Option Period. The purchase price shall be paid at the closing in cash, by check, by cancellation of money purchase indebtedness, or, if the payment terms set forth in the Option Notice differ from payment in cash or by check at closing, in accordance with the payment terms set forth in the Option Notice (or payment of the amount set forth in the Company’s Notice in cash, by cancellation of money purchase indebtedness, or by check). The purchase price shall be paid against surrender by you of a stock certificate evidencing the number of shares specified in the Option Notice, with duly endorsed stock powers.

(d) ABILITY TO SELL UNPURCHASED SHARES. Unless all of the shares referred to in the Option Notice are to be purchased as indicated in the Purchase Notice, you may dispose of any shares referred to in the Option Notice that are not to be purchased by the Company to the person or persons specified in the Option Notice during a period of twenty (20) days commencing upon your receipt of the Purchase Notice; provided, however, that you shall not sell or transfer such shares (a) at a lower price or on terms more favorable to the purchaser or transferee than those specified in the Option Notice, or (b) to a person other than the person or persons specified in the Option Notice; and provided further that such transfer is consistent with the other provisions and limitations of the Plan, this Option Agreement (including these terms), and the Notice of Exercise. If the transfer is not consummated within such twenty (20) day period, you shall again offer such shares to the Company pursuant to the terms of this Section 11 prior to any sale or transfer to the same or any other person.

(e) ASSIGNMENT. Notwithstanding anything to the contrary, the Company may assign any or all of its rights under this Section 11 to one or more stockholders of the Company.

(f) TERMINATION OF RIGHT OF FIRST REFUSAL. The Company’s Right of First Refusal shall terminate to the extent that it is not exercised prior to the consummation of the Company’s sale of its Common Stock in a firm commitment underwritten public offering pursuant to a registration statement under the Securities Act of 1933, as amended.

(g) NO STOCKHOLDER RIGHTS FOLLOWING REPURCHASE. If you (or any permitted transferee) hold shares as to which the Right of First Refusal has been exercised, you shall be entitled to payment in accordance with the provisions of this Section 11, but (unless otherwise required by law) shall no longer be entitled to participation in the Company or other rights as a stockholder with respect to the shares being purchased by the Company pursuant to the Right of First Refusal. To the maximum extent permitted by law, your rights following the exercise of the Right of First Refusal shall, with respect to the purchase of the shares covered thereby, be solely the rights that you have as a general creditor of the Company to receive payment of the amount specified in this Section 11.

Example 10: From a Shareholders’ Agreement

Right of First Offer. Prior to making any Transfer, other than as permitted under paragraph 3(d) below, a holder of Shareholder Shares wishing to transfer such Shareholder Shares (the “Selling Shareholder”) shall deliver written notice in accordance with paragraph 21 (the “Transfer Notice”) to each Investor Shareholder and the Company. The Transfer Notice shall disclose in reasonable detail the number of Shareholder Shares to be transferred, the cash purchase price (the “Offer Price”) at which the Selling Shareholder proposes to sell such number of Shareholder Shares, and the terms and conditions of the proposed Transfer. The Transfer Notice shall constitute a binding offer to sell the subject Shareholder Shares to the Investor Shareholders (other than the Selling Shareholder) and, if and to the extent that any such Shareholder Shares are not purchased by such Selling Shareholders, to the Company, in each case on the terms and conditions set forth in the Transfer Notice and in accordance with this paragraph 3(b). The Investor Shareholders may elect to purchase, pro-rata based on the number of Shareholder Shares held by each, all or any portion of the Shareholder Shares to be transferred upon the same economic terms and conditions as those set forth in the Transfer Notice by delivering a written notice of such election to the Selling Shareholder and the Company within 10 business days after the Transfer Notice has been delivered pursuant to this paragraph 3(b), provided that all elections by ABC Co.’s Affiliates shall be made by ABC Co. on behalf of its Affiliates. If the Investor Shareholders have not elected to purchase all of the Shareholder Shares to be transferred, the Company may elect to purchase all, but not less than all, of the remaining Shareholder Shares to be transferred upon the same economic terms and conditions as those set forth in the Transfer Notice by delivering written notice in accordance with paragraph 21 of such election to the Selling Shareholder within 15 business days after the Transfer Notice has been delivered pursuant to this paragraph 3(b) (such date, the “Authorization Date”). If the Investor Shareholders and the Company do not elect to purchase all of the Shareholder Shares specified in the Transfer Notice, the Selling Shareholder may Transfer the remaining Shareholder Shares specified in the Transfer Notice at a cash price no less than the Offer Price and on terms no more favorable to the Proposed Purchaser than those specified in the Transfer Notice during the 60 day period immediately following the Authorization Date. If the Investor Shareholders or the Company have elected to purchase Shareholder Shares pursuant to this paragraph 3(b), the Transfer of such shares shall be consummated as soon as practicable after the delivery of the election notice(s) to the Selling Shareholder, but in any event within 30 days after the Authorization Date.

Example 11: From an Employment Agreement

(iii) To the extent that legal title in any Employment IPRs or Employment Inventions does not vest in Company by virtue of Paragraph 5(b)(i), Employee agrees, immediately upon creation of such rights and Inventions, to offer to Company in writing a right of first refusal to acquire them on arm’s length terms to be agreed between the parties. Employee agrees that the provisions of this Paragraph 5(b) shall apply to all Employment IPRs and Employment Inventions offered to Company under this Paragraph 5(b) until such time as Company has agreed in writing that Employee may offer them for sale to a third party.

Example 12: From a Distribution Agreement

Right of First Refusal for Future Products

11.1 The Distributor will have a right of first refusal to acquire the marketing, distribution and sales rights for Future Products for the Retail Market within the Territory on the following basis:

(A) Upon the Company intending to market any Future Product or upon the receipt by the Company from a third party of a written offer to enter into an agreement for the marketing, distribution and sale of any Future Product (the “New Product Third Party Proposal”) and the determination of the Company to accept the New Product Third Party Proposal, subject to compliance with the terms and conditions of this Agreement, then the Company will deliver to the Distributor notice of the Distributor’s right to enter into an agreement with the Company for the marketing, distribution and sale of the Future Product on the terms and subject to the conditions of the Company’s proposal or the New Product Third Party Proposal as the case may be (a “New Product Right of First Refusal Notice”);

(B) Upon delivery of a New Product Right of First Refusal Notice, the Distributor will have a period of thirty (30) days in which to accept or reject the offer to enter into an agreement with the Company for the marketing, distribution and sale of the Future Product on the terms and subject to the conditions of the Company proposal or New Product Third Party Proposal; as the case may be;

(C) In the event of acceptance by the Distributor of the New Product Right of First Refusal Notice, then the Distributor and the Company will enter into an agreement with the Company for the marketing, distribution and sale of the Future Product on the terms and subject to the conditions of the Company Proposal or New Product Third Party Proposal as the case maybe;

(D) In the event that the Distributor does not accept the Company’s offer, then the Company will have the right to commence marketing or to enter into an agreement with the third party for the marketing, distribution and sale of the Future Product on the terms and subject to the conditions of the New Product Third Party Proposal, as the case may be. In the event the Company does not commence marketing within six (6) months on the terms of its proposal or the Company not enter into the agreement with the Third Party on the terms of the New Product Third Party Proposal, then the terms and conditions of this Section 11.1 will apply to any new proposal by the Company or any new proposal or counter-proposal from the third party or a new Third Party.

Example 13: From an Aircraft Lease Agreement

14.5 Lessor may elect to sell the Aircraft to a third party purchaser (the “Third Party”) during the term of this Agreement. Following Lessor’s acceptance of an offer from a Third Party, Lessor may not make any sale of the Aircraft or its interest therein, or any rights relating thereto, without Lessor first offering the Aircraft to Lessee on the same terms and conditions as those offered to and accepted by the Third Party and the Lessors. Such terms and conditions shall include a proposed purchase price equal to or in excess of the Payoff amount for the Aircraft proposed to be sold. Such offering to the Lessee shall be in writing and shall be subject to acceptance for no more than thirty (30) days from the date of receipt of the offer by Lessee. Should Lessee decline to exercise its right to accept the offer, Lessor shall have the option to sell the Aircraft to the original proposed Third Party; provided, however, that such sale is on the same terms and conditions as originally offered to such Third Party and to Lessee. Any attempted sale made in violation of this Agreement shall be null and void, and the party to whom any prohibited sale is made shall not be entitled to have an FAA Bill of Sale recorded with the FAA.

Example 14: From a Shareholders’ Agreement

1. RIGHT OF FIRST REFUSAL

a) In the event that the Group or any of them (referred to as “Offeror” for the purpose of this Article) herein above wishes to dispose of their shares, in part or as a whole, the said shares shall first be offered to ABC Co. (referred to as “Offeree” for the purpose of this Article). ABC Co. is entitled to offer its shares to any party of whatsoever kind and shall be entitled to determine the price of such shares in its sole discretion.

b) The price of such shares shall be determined as follows:

i) If the Company is not listed, then based on Net Asset value Method decided by an independent valuer; or

ii) If the Company is listed, then on the basis of the average of the last six months as the price prevailing at the Stock Exchange.

c) If Offeree does not wish to take up such additional shareholding in the Company, it shall inform the Offeror of such decision within a period of 90 (ninety) days, whereupon the Offeror may offer the shares to a third party on the same terms and conditions as had been presented to the Offeree. In case of failure to respond to the Offer from the Offeror within 90 days of the Offer, it shall be deemed that Offeror has waived his right of first refusal and Offeror may offer the shares to a third party on the same terms and conditions as had been presented to the Offeree.

Example 15: From a Commercial Lease Agreement

Article 27 – Right of First Offer/Right of First Refusal

Section 27.01 Before offering the Premises for sale to any unaffiliated third parties, and provided that the Premises is being offered as a “one-off” sale versus a multi-property offering, Landlord shall deliver to Tenant a notice (the “ROFO Notice”), advising Tenant that the Premises are for sale. Tenant shall, by written notice to be delivered to Landlord before the tenth (10th) business day following Tenant’s receipt of the ROFO Notice (such 10-business day period, the “ROFO Notice Response Period”, TIME BEING OF THE ESSENCE), shall provide written notice to Landlord (the “ROFO Offer”) setting forth the offer price and other material terms and conditions upon which Tenant would be willing to purchase the Premises. Landlord in its sole discretion may either (i) accept the ROFO Notice, or (ii) decline the ROFO Notice. If Landlord accepts the ROFO Notice, then the parties shall enter into a purchase agreement reasonably acceptable to both Tenant and Landlord to purchase the Premises in accordance with the ROFO Notice, failing which Tenant’s right of first offer shall terminate. If Tenant fails to transmit the ROFO Notice during the ROFO Notice Response Period, or prior to the last day of the ROFO Notice Response Period, waives its right in writing (or is deemed to waive its right) to offer to purchase the Premises, then Tenant’s right of first offer shall irrevocably terminate and Landlord shall have the right to sell the Premises to any third party on any terms and conditions Landlord elects without being subject to any right of Tenant, and Tenant shall have no further rights or interest to purchase the Premises (except as otherwise set forth in Section 27.02). Landlord shall not be required to deliver more than one ROFO Notice to Tenant during the Term of this Lease

Section 27.02

(a) Without limiting the provisions of Section 27.01, Landlord shall not sell or convey (other than to Tenant as contemplated by this Lease) the Premises unless Landlord first notifies Tenant of Landlord’s intention to sell and/or convey the Premises to an unaffiliated third party (the “Potential Purchaser”), and Landlord, in its good faith judgment, believes that there is a substantial likelihood that a contract may be entered into between such Potential Purchaser and Landlord with respect to the sale of the Premises. In such case, then Landlord shall give Tenant a written notice (the “Offer Notice”) specifying the purchase price and other material economic terms for which Landlord is willing to sell the Premises to the Potential Purchaser and offering to sell the Premises to Tenant on the terms and conditions so set forth. No terms contained in the Offer Notice shall require the purchase of any assets other than the Premises.

(b) Tenant shall have ten (10) business days after the date of receipt of the Offer Notice during which to notify Landlord that Tenant accepts such offer and agrees to purchase the Premises on the same terms and conditions set forth in the Offer Notice, as the same may be modified by the terms set forth in this Article 27.02, TIME BEING OF THE ESSENCE.

(c) If Tenant does not timely deliver an acceptance notice or, prior to the last day on which an effective acceptance notice may be delivered, waives its right in writing (or is deemed to waive its right) to purchase the Premises, then Landlord shall, subject to the terms and conditions of Section 27.02(d) below, be free to sell the Premises to the Potential Purchaser at a price no less than ninety percent (90%) of the price set forth in the Offer Notice or on terms which, taken as a whole, are not materially more favorable to the Potential Purchaser than the terms stated in the Offer Notice.

(d) If (i) within one hundred twenty (120) days after Tenant’s failure to timely deliver its acceptance notice or its waiver or deemed waiver of its right to purchase the Premises, Landlord does not give notice to Tenant that a contract of sale for the Premises meeting the requirements set forth in Section 27.02(c) above has been fully executed and delivered by Landlord and the Potential Purchaser or (ii) Landlord desires to sell the Premises at a total price to the Potential Purchaser which is less than ninety percent (90%) of the total price set forth in the Offer Notice or on terms which, taken as a whole, are materially less favorable to Landlord than the terms stated in the Offer Notice, Landlord must deliver a new Offer Notice to Tenant and the provisions of this Section 27.02 shall apply thereto as if the prior Offer Notice had never been delivered.

Section 27.03 The provisions of this Article 27.03 shall not be applicable to any sale, transfer, conveyance, gift or other disposition made to any person or entity that is controlling, controlled by, or under common control with Landlord or is a parent, spouse, sibling or descendant of any person who is a shareholder, partner, member or principal of Landlord.

Section 27.04

(a) Tenant’s right to purchase the Premises under this Article 27 shall not be exercisable if Tenant shall then be in default, or Tenant or its subsidiaries shall occupy less than eighty (80%) percent of the Premises upon Tenant’s transmittal of the Offer Notice, and upon the intended closing date of Tenant’s purchase of the Premises.

(b) If Tenant timely exercises its right to purchase the Premises as provided in this Article 27, then Landlord shall sell to Tenant and Tenant shall purchase from Landlord, the Premises upon all of the terms set forth in the ROFO Notice or the Offer Notice, as the case may be, and otherwise on such additional terms and conditions as Landlord and Tenant shall mutually agree upon, Landlord and Tenant agreeing to negotiate in good faith the remaining terms for the sale of the Premises.

(c) Landlord and Tenant, within thirty (30) days after the date Tenant notifies Landlord that Tenant accepts the offer in the ROFO Notice or the Offer Notice, as the case may be, shall enter into a contract of sale (the “Contract of Sale”) to reflect the aforesaid terms and conditions for the sale of the Premises by Landlord to Tenant. If Landlord and Tenant are unable in good faith to agree within said thirty (30) day period on the terms of the Contract of Sale, then Tenant shall enter into the Contract of Sale in accordance with the terms proposed by Landlord within five (5) business days after such thirty (30) day period. If Tenant fails to enter into a Contract of Sale in accordance with the immediately preceding sentence, then Tenant shall be deemed to have waived its right to purchase the Premises on the terms set forth in the ROFO Notice or the Offer Notice, as the case may be.

(d) If Tenant shall purchase the Premises pursuant to this Article 27, Landlord need not convey any better title thereto than existed on the date of the commencement of the Term hereof, and Tenant shall accept such title, subject, however, to all charges, liens, security interests and encumbrances on the Premises (including without limitation those created or caused to be created by Tenant) and all applicable legal requirements, but free of the lien of any mortgage and charges, liens, security interests and encumbrances created by or resulting from acts of Landlord or any successor of Landlord without the written consent of Tenant. Upon the date fixed for any purchase of the Premises, Tenant shall pay to Landlord the purchase price therefor specified herein together with all Fixed Rent, additional rent and other sums then due and payable hereunder to and including such date of purchase, and Landlord shall deliver to Tenant an appropriate deed to the Premises and any other instruments necessary to effectuate the conveyance.

(e) Upon the completion of such purchase, but not prior thereto (whether or not any delay or failure in the completion of such purchase shall be the fault of Landlord), this Lease shall terminate, except with respect to obligations and liabilities of Tenant hereunder, actual or contingent, which have arisen on or prior to such date of purchase.

(f) Tenant’s right to purchase under this Article 27 shall be personal to Tenant or a permitted assignee and shall not be otherwise transferable.