Definition of "Right of First Negotiation" (ROFO):
A ROFO obliges EPGL to undergo exclusive good faith negotiations with J&J before negotiating with other parties. A ROFR is an option to enter a transaction on exact or approximate transaction terms. A ROFO is merely an agreement to negotiate.
ROFR: Abe owns a house that he plans to sell to Bo for $1 million. However, Carl holds a right of first refusal to purchase the house. Therefore, before Abe can sell the house to Bo, he must first offer it to Carl for $1 million. If Carl accepts, he buys the house instead of Bo. If Carl declines, Bo may now buy the house at the proposed $1 million price.
ROFO: Carl holds a ROFO instead of an ROFR. Before Abe can negotiate a deal with Bo, he must first try to sell the house to Carl. Abe and Carl attempt to reach a deal. If they reach an agreement, Abe sells the house to Carl. However, if they fail, then Abe is free to start fresh negotiations with Bo without any restriction as to price or terms.
So basically, a ROFO ties EPGL's hands...
Is a ROFO in EPGL's best interests, or J&J's? Did J&J pay EPGL for the ROFO? If not, why would EPGL agree to it?
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