How Investors Structure
Investments
Cosale and Other Agreements
(Slide 49 of 50)
Co-sale agreements entitle investors to
participate in a sale of stock arranged privately between a
management or founder shareholder and a third party. In so
doing, they make it more difficult for a management or founding
shareholder to sell his entire interest without arranging for a
sale of all of the company’s stock. This is intended to align
the managers self interest more closely with the investor’s.
Employment and non-competition agreements spell
out management’s employment rights and prevent managers from
leaving to compete with the company’s business.
Stock certificates evidence the ownership
conferred to the investor. Because the
stock is purchased in a private sale, the certificates usually
contain legends that notify potential future purchasers of
securities law and contractual restrictions on the holders ability
to sell the underlying stock.
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