Investor Rights Agreement
This Investor Rights Agreement is made on [AGREEMENT DATE][ (the "Effective Date")] between [COMPANY NAME], a [CORPORATE JURISDICTION] corporation with its principal place of business at [COMPANY ADDRESS] (the "Company") and each investor listed on Schedule A (List of Investors) (collectively referred to as the "Investors").
The parties agree as follows (the capitalized terms used in this agreement, in addition to those above, being defined in section 17 (Definitions)):
1. Demand for Registration
1.1. Request from Initiating Holders. If the Company receives a written request from the Holders of at least % in the aggregate of the then-outstanding Registrable Securities (collectively, the "Initiating Holders") that the Company file a registration statement under the Securities Act covering the registration of their Registrable Securities, the Company shall, within  days of receiving that request,
(a) give Notice of the request to all Holders, and
(b) subject to the limitations of this section 1 (Demand for Registration), effect, as expeditiously as reasonably possible, the registration under the Securities Act of all Registrable Securities that all Holders request to be registered.
1.2. Intention to Distribute the Registrable Securities. If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwriting, then
(a) they shall so advise the Company as a part of their request made under this section 1 (Demand for Registration), and
(b) the Company shall include that information in the Notice referred to in section 1.1 (Request from Initiating Holders).
1.3. Conditions on Exercise of Right. In that case, the right of any Holder to include its Registrable Securities in the registration is conditional upon
(a) the Holder's participation in the underwriting, and
(b) the inclusion of the Holder's Registrable Securities in the underwriting to the extent provided in this agreement.
1.4. Selection of Underwriters. The Holders of a majority of the Registrable Securities held by all Initiating Holders shall, for this purpose, choose one or more underwriters, each of which must be a firm that is reasonably acceptable to the Company.
1.5. Underwriting Agreement. All Holders that propose to distribute their securities through such an underwriting shall enter into an underwriting agreement in customary form with the underwriters.
1.6. Limiting Number of Underwritten Securities. If the underwriters advise the Company that marketing factors require limiting the number of securities to be underwritten, then
(a) the Company shall so advise all Holders of Registrable Securities that would otherwise be underwritten, and
(b) the number of shares that may be included in the underwriting will be allocated to those Holders on a pro rata basis based on the number of Registrable Securities held by all such Holders,
except that the number of shares of Registrable Securities to be included in the underwriting and registration will not be reduced unless all other securities of the Company are first entirely excluded from the underwriting and registration. The parties shall, in that case, exclude from the underwriting any such excluded Registrable Securities.
1.7. Exemption from Requirement to Register. The Company will not be required to make a registration under this section 1 (Demand for Registration)
(a) before the [third] anniversary of the date of this agreement,
(b) after the Company has already made one registration under this section 1 (Demand for Registration) and that registration has been declared or ordered effective,
(c) if, within  days of receipt of a written request from Initiating Holders under section 1.1 (Request from Initiating Holders), the Company gives Notice to the Holders of the Company's intention to file, within  days, a registration statement for its Qualified IPO, or
(d) if the Company provides to the Holders requesting a registration statement under this section 1 (Demand for Registration) a certificate signed by the Chairman of the Board stating that, in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such a registration statement to be made at that time, then the Company may defer the filing for a period of not more than  days after receipt of the request of the Initiating Holders.
2. Company Registration
2.1. Notice re Qualified IPO. If the Company proposes to register any of its stock under the Securities Act in connection with a Qualified IPO of those securities solely for cash, the Company shall, at that time, promptly give each Holder Notice of its intention to do so.
2.2. Registration for Requesting Holders. Upon the written request of each Holder given within  days after mailing of that Notice, the Company shall use reasonable efforts to cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be registered.
2.3. Termination or Withdrawal of Registration. The Company may terminate or withdraw any registration initiated by it under this section 2 (Company Registration) before it becomes effective, whether or not any Holder has elected to include any securities in the registration.
2.4. Registration Expense. The Company shall bear the expense of the registration referred to in this section 2 (Company Registration).
3. Piggyback Registration
3.1. Notice of Intention to File Registration Statement. If at any time the Company proposes to file a registration statement under the Securities Act in connection with an offering of its Common Stock for the Company's own account or for the account of any holders of its Common Stock, then the Company shall give Notice of this proposed filing to each Holder at least  days before the anticipated filing date.
3.2. Offer to Holders. The Notice referred to in section 3.1 (Notice of Intention to File Registration Statement) must offer each Holder the opportunity to register such number of shares of Registrable Securities as the Holder may request on the same terms as the Company's or the Holder's registration, but the Holders have this right only
(a) after a Qualified IPO, and
(b) if the underwriters for the primary offering approve that secondary shares be included.
4. Form S-3 Registration
4.1. Request to Effect a Form S-3 Registration. If the Company receives from any Holder of Registrable Securities then outstanding a written request that the Company effect a registration on Form S-3 (and any related qualification or compliance) in connection with some or all of the Registrable Securities owned by the Holder, then the Company shall
(a) promptly give Notice of the proposed registration (and any related qualification or compliance) to all other Holders, and
(b) effect such registration (and any related qualification or compliance) as may be so requested and as would permit or facilitate the sale and distribution of some or all of the Registrable Securities as are specified in the request, together with some or all the Registrable Securities of any other Holder joining in the request as are specified in a written request given within  days after receipt of the Company's Notice.
4.2. Exemption from Requirement to Register. The Company will not be obligated to effect any such registration, qualification, or compliance under this section 4 (Form S-3 Registration)
(a) if Form S-3 is not available for the offering by the Holders,
(b) if the Holders, together with the holders of any other securities of the Company entitled to inclusion in the registration, propose to sell Registrable Securities and other securities (if any) at an aggregate price to the public (net of any underwriters' discounts or commissions) of less than $[5 million],
(c) if the Company provides to the Holders a certificate signed by the Chairman of the Board stating that, in the good faith judgment of the Board, it would be seriously detrimental to the Company and its stockholders for such a Form S-3 Registration to be effected at that time, in which case the Company may defer the filing of the Form S-3 registration statement for a period of not more than  days after receipt of the request of the Holder or Holders under this section 4 (Form S-3 Registration),
(d) if the Company has, within the [six]-month period preceding the date of the request, already effected one registration on Form S-3 for Holders under this section 4 (Form S-3 Registration), or
(e) during the period ending  days after the effective date of a registration statement subject to section 2 (Company Registration).
4.3. Obligation to File a Registration Statements. Subject to the requirements of sections 4.1 (Request to Effect a Form S-3 Registration) and 4.2 (Exemption from Requirement to Register), the Company shall file a registration statement covering the Registrable Securities and other securities so requested to be registered after receipt of the requests of the Holders.
4.4. Characterization of Registrations. Registrations effected under this section 4 (Form S-3 Registration) will not be counted as demands for registration under section 1 (Demand for Registration) or registrations effected under section 2 (Company Registration).
5. Lock-Up Agreement
5.1. Lock-Up Period. In connection with the Qualified IPO of the Company's securities and upon request of the Company or the underwriters managing the offering of the Company's securities, no Holder may sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company, other than those included in the registration, without the prior written consent of the Company or the underwriters, as the case may be, for such period of time (not to exceed  days) from the effective date of the registration statement.
5.2. Limitations. The obligations described in section 5.1 (Lock-up Period)
(a) apply only if all officers and directors of the Company and all % or greater stockholders enter into similar agreements with periods of at least up to  days (subject to any extension described above), and
(b) do not apply to a registration relating solely to (i) employee benefit plans or (ii) a transaction under Rule 145 under the Securities Act.
5.3. Stop-Transfer Instructions. In order to enforce the Holders' obligations under section 5.1 (Lock-up Period), the Company may impose stop-transfer instructions in connection with the securities of each Holder (and the securities of every other Person subject to the restrictions in section 5.1 (Lock-up Period).
5.4. Transferees Bound. No Holder may transfer any securities of the Company unless the transferee agrees in writing to be bound by of the terms of section 5.1 (Lock-up Period).
6. Rule 144 Reporting. With a view to making available to the Holders the benefits of certain rules and regulations of the Commission that may permit the sale of the Registrable Securities to the public without registration, the Company shall use reasonable efforts to
6.1. make and keep public information available (as those terms are understood and defined in Rule 144 of the Securities Act) at all times after the effective date of the first registration filed by the Company for an offering of its securities to the general public,
6.2. file with the Commission, in a timely manner, all reports and other documents required of the Company under the Exchange Act, and
6.3. so long as a Holder owns any Registrable Securities, provide to each Holder upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 of the Securities Act and of the Exchange Act.
7. Limitation on Subsequent Registration Rights. Other than as provided in section 9 (Additional Parties), the Company shall not, after the date of this agreement, enter into any agreement with any holder or prospective holder of any securities of the Company that would grant the holder rights to either demand the registration of shares of the Company's capital stock or include those shares in a registration statement that would reduce the number of shares includable by the Holders.
8. Restrictions on Transfer
8.1. Conditions to Transfer. No Holder may dispose of all or any of the Registrable Securities that it holds unless
(a) there is then in effect a registration statement under the Securities Act covering the proposed disposition, and
(b) the disposition is made in accordance with that registration statement.
8.2. Exceptions. Despite the provisions of section 8.1 (Conditions to Transfer), no such restriction will apply to a transfer by a Holder that is
(a) a partnership transferring to its partners or former partners in accordance with partnership interests,
(b) a corporation transferring to a wholly-owned subsidiary or a parent corporation that owns all of the capital stock of the Holder,
(c) a limited liability company transferring to its members or former members in accordance with their interest in the limited liability company, or
(d) an individual transferring to the Holder's family member or trust for the benefit of the individual Holder,
but only if, in each case, the transferee agrees in writing to be subject to the terms of this agreement to the same extent as if it were an original Holder.
8.3. Legend on Certificates. Each certificate representing Registrable Securities must be stamped or otherwise imprinted with legends substantially similar to the following (in addition to any legend required under applicable state securities Laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS OF AN INVESTOR RIGHTS AGREEMENT BETWEEN THE STOCKHOLDER AND THE COMPANY. COPIES OF THE INVESTOR RIGHTS AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY.
9. Additional Parties. From and after the date of this agreement, the Company may grant registration rights under this agreement to any holder or prospective holder of securities of the Company. Upon execution of a signature page to this agreement by any such additional party and by the Company, the additional party will be considered an Investor for all purposes of this agreement.
10. Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or Persons or Persons or entities under common management or control shall be aggregated together for the purpose of determining the availability of any rights under this agreement.
11. Company's Obligations. Whenever required to effect the registration of any Registrable Securities, the Company shall do the following:
11.1. Filing a Registration Statement
(a) Preparation and Filing. The Company shall prepare and file with the Commission a registration statement in connection with the Registrable Securities and use reasonable efforts to cause the registration statement to become effective.
(b) Effectiveness of Registration. Upon the request of the Holders of a majority of the Registrable Securities registered, keep the registration statement effective for up to  days or, if earlier, until the Holders have completed the distribution related to it.
(c) Suspension Period. The Company may, however, at any time, upon Notice to the participating Holders and for a period not to exceed  days thereafter (the "Suspension Period"), delay the filing or effectiveness of any registration statement or suspend the use or effectiveness of any registration statement if the Company reasonably believes that there is or may be material non-public information or events involving the Company, the failure of which to be disclosed in the prospectus included in the registration statement could result in a Violation.
(d) No Sales during Suspension Period. The Initiating Holders may not offer or sell any Registrable Securities under the registration statement during the Suspension Period.
(e) Extension of Suspension Period. With the consent of the holders of a majority of the Registrable Securities registered under the applicable registration statement, the Company may extend the Suspension Period for an additional consecutive  days.
11.2. Filing Amendments. The Company shall prepare and file with the Commission any amendments and supplements to the registration statement and the prospectus used in connection with the registration statement as may be necessary to comply with the Securities Act in connection with the disposition of all securities covered by the registration statement for the period set forth in section 10.01 (Filing a Registration Statement).
11.3. Providing Prospectus. The Company shall provide to the Holders
(a) the number of copies of a prospectus (including a preliminary prospectus) in conformity with the requirements of the Securities Act, and
(b) any other documents that they may reasonably request in order to facilitate the disposition of Registrable Securities that they own.
11.4. Efforts to Register. The Company shall use reasonable efforts to register and qualify the securities covered by the registration statement under the securities Laws of any other jurisdictions that may be reasonably requested by the Holders, but in order to do so, the Company will not be required to qualify to do business or to file a general consent to service of process in any of those jurisdictions.
11.5. Performing Obligations under Underwriting Agreement. In connection with any underwritten public offering, the Company shall enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the managing underwriters of the offering. Each Holder participating in the underwriting shall also enter into and perform its obligations under the underwriting agreement.
11.6. Notifying Holders. The Company shall give Notice each Holder of Registrable Securities covered by the registration statement at any time when a prospectus relating to it is required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in the registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated in it or necessary to make the statements in there not misleading in the light of the circumstances then existing.
11.7. Obtaining Supporting Documents. In connection with any underwritten public offering, the Company shall use reasonable efforts to provide, on the date that the Registrable Securities are delivered to the underwriters for sale
(a) an opinion, dated as of that date, of the counsel representing the Company for the purposes of the registration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, and
(b) a letter, dated as of that date, from the Company's independent certified public accountants, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the underwriters.
11.8. Expenses of Registration
(a) Payment of Expenses. The Company shall pay all expenses other than underwriting discounts and commissions incurred in connection with registrations, filings, or qualifications made under sections 1 (Demand for Registration), 2 (Company Registration), and 4 (Form S-3 Registration) including all fees and disbursements of counsel for the Company, and the reasonable fees and disbursements of one counsel for the selling Holders, not to exceed $[25,000], selected by them with the Company's approval.
(b) Exception. The Company will not, however, be required to pay for any expenses of any registration proceeding that is begun under section 1 (Demand for Registration) or section 4 (Form S-3 Registration) if the registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating Holders shall bear those expenses), unless the Holders of a majority of the Registrable Securities agree to forfeit their right to one registration under either of those sections, as applicable.
12. Holder's Obligations
12.1. Provide Information. The Holder shall, as a condition precedent to the Company's obligations to take any action in connection with the Registrable Securities of any selling Holder, provide the Company with any information regarding (a) itself, (b) the Registrable Securities that it holds it, and (c) the intended method of disposition of those securities as the Company reasonably requires to effect their registration.
12.2. No Delay of Registration. No Holder may obtain or seek an injunction restraining or otherwise delaying any registration as the result of any controversy that might arise in connection with the interpretation or implementation of any of sections 1 (Demand for Registration) to 6 (Requirement to Provide Information), inclusive.
13. Company's Covenants. So long as any Holder owns any Registrable Securities, the Company agrees, as follows:
13.1. Board of Directors
(a) Election of Directors. The Company shall take or cause to be taken such actions as may be required from time to time to establish and maintain the number of persons comprising the Board at [NUMBER OF COMPANY BOARD MEMBERS]. The Investors shall take or cause to be taken such actions as may be required from time to time to elect as directors [NUMBER OF INVESTOR BOARD MEMBERS] directors designated by [DESIGNATING INVESTOR] who will initially be [INITIAL DIRECTORS].
(b) Board Observers and Committees. One or more individuals appointed by [DESIGNATING INVESTOR] will be entitled to observe at all meetings of the Board and each meeting of all committees of the Board and to participate in all discussions during each such meeting. The Board or Board committee may, however, exclude any observers from all or any portion of a meeting and from receiving any related materials if the Board or the committee, as the case may be, in its discretion, deems it reasonably necessary to preserve the attorney-client privilege or to avoid any conflicts of interest.
(c) Removal of Directors. If the Investor that designated a director for election requests that director's removal from the Board for any reason, each other Investor shall take all action necessary to remove that director.
(d) Filling Vacancies. In the event of the death, resignation, or removal of a director, each Investor shall vote all shares that it owns to elect another person designated by the same Investor that designated the deceased, resigning, or removed director if, at the time the vacancy occurs, that Investor continues to have the right to have a person designated by it elected as a director under paragraph (a) of this section 13.1 (Board of Directors).
13.2. Information Rights. The Company shall, upon request, deliver to each Major Investor the following:
(a) Yearly Financial Statements. Within  days after the end of each fiscal year of the Company, the Company shall provide each Investor with the Company's balance sheet, statement of income, and statement of cash flows for that year, all prepared in accordance with GAAP (except as noted). These financial statements will be audited by independent public accountants of national standing selected by the Board.
(b) Quarterly Financial Statements. The Company shall provide to each Investor, within  days after the end of the first, second, and third quarterly accounting periods in each fiscal year, (a) the Company's balance sheet as of the end of each such quarter, and (b) the Company's statement of income and statement of cash flows for that period and for the current fiscal year to date, prepared in accordance with GAAP (except as noted).
(c) Budget and Operating Plans. The Company shall provide to each Investor, at least  days before the beginning of each fiscal year, an annual budget and operating plans for that fiscal year.
13.3. Inspection. The Company shall permit each Major Investor, at the latter's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at such reasonable times as may be requested by the Major Investor. The Company will not, however, be obligated under this section 15.03 (Inspection) to provide access to any information that it reasonably considers to be a trade secret or similar confidential information.
13.4. Right of First Offer
(a) Grant of Right. The Company hereby grants to the Investor the right to purchase its pro-rata proportion of all or any part of New Securities that the Company may, from time to time, propose to sell or issue. Subject to the terms specified in this section 13.4 (Right of First Offer), and applicable securities Laws, if the Company proposes to offer or sell any New Securities, the Company shall first make an offering of such New Securities to the Investor in accordance with the following provisions of this section 13.4 (Right of First Offer).
(b) Offer Notice. The Company shall deliver a Notice (the "Offer Notice") to the Investor stating
(i) its bona fide intention to offer such New Securities,
(ii) the number of such New Securities to be offered, and
(iii) the price and terms, if any, upon which it proposes to offer such New Securities.
(c) Investor's Pro-rata Proportion. The Investor may elect, by giving Notice to the Company within  days after the Company gives the Offer Notice to the Investor, to purchase or obtain, at the price and on the terms specified in the Offer Notice, up to the Investor's pro-rata proportion of the New Securities. For the purposes of this agreement, the investor's pro-rata proportion will be equal to the proportion that
(i) the number of shares of Common Stock (and any other securities convertible into, or otherwise exercisable or exchangeable for, shares of Common Stock then held) issued to and held by the Investor bears to
(ii) the total number of shares of Common Stock of the Company then issued and outstanding (on an as-converted basis).
(d) Offer of Unsubscribed Portion. If the Investor elects not to purchase all New Securities referred to in the Offer Notice, the Company may, during the -day period following the expiration of the period provided in paragraph (c) (Investor's Pro-rata Proportion) of this section 13.4 (Right of First Offer), offer the remaining unsubscribed portion of New Securities to any third party at a price not less than, and upon terms no more favorable to the offeree than, those specified in the Offer Notice.
(e) Revival of Right of First Offer. If the Company does not enter into an agreement for the sale of the New Securities within that period, or if it does but the agreement is not consummated within  days of the execution of the agreement and purchase and sale,
(i) the Investor's right of first offer under this section 13.4 (Right of First Offer) will be deemed to be revived, and
(ii) the New Securities will not be offered to any third party unless first reoffered to the Investors in accordance with this section 13.4 (Right of First Offer).
(f) Exceptions. The right of first offer in this section 13.4 (Right of First Offer) does not apply in the following circumstances:
(i) in connection with a stock split or dividend,
(ii) in connection with a recapitalization or reorganization of the Company,
(iii) under an employee stock option plan, stock purchase plan, or similar benefit program or agreement where the primary purpose is not to raise additional equity capital for the Company,
(iv) where securities are issued as direct consideration in connection with a bona fide business acquisition by the Company (whether by merger, consolidation, or otherwise),
(v) upon the exercise of warrants or options, or upon the conversion of convertible securities, outstanding as of the date of this agreement or as to which the Investor has been previously offered the right to participate as contemplated by this section 13.4 (Right of First Offer), and
(vi) securities issued in a transaction registered under the Securities Act.
13.5. Reservation of Common Stock. The Company shall at all times reserve and keep available, solely for issuance and delivery upon the conversion of the preferred stock, all Common Stock that may be issuable upon such a conversion.
14.1. Confidentiality Obligations. During the term of this agreement and for a period of [five] years after it ceases to be an Investor, the Investor shall hold all Confidential Information in confidence in accordance with the terms of this agreement. The Investor shall not use any Confidential Information for any purpose other than to monitor its investment in the Company.
14.2. Permitted Disclosure. The Investor may disclose Confidential Information
(a) to its attorneys, accountants, consultants, and other professional advisors, but only to the extent necessary to obtain their services in connection with monitoring its investment in the Company,
(b) to any prospective purchaser of any Registrable Securities from the Investor, but only if such prospective purchaser agrees to be bound by the provisions of this section 14 (Confidentiality),
(c) to any existing or prospective affiliate, partner, member, stockholder, or wholly-owned subsidiary of the Investor, but only if the Investor
(i) informs that Person that the information is Confidential Information, and
(ii) directs that person to maintain its confidentiality, or
(d) by including in the Investor's reports to its limited partners or equity owners (i) a summary only of financial information concerning the Company, and (ii) general statements concerning the nature and progress of the Company's business.
14.3. Required Disclosure. The Investor may disclose Confidential Information to a third party if it is required to do so by Law but only if, before that disclosure, the Investor, to the extent permitted by Law,
(a) gives the Company Notice to allow it a reasonable opportunity to either seek a protective order or other appropriate remedy or waive the recipient's compliance with this section 14 (Confidentiality),
(b) reasonably cooperates with the Company[, at the Company's expense,] in its reasonable efforts to obtain a protective order or other appropriate remedy,
(c) discloses only that portion of the Confidential Information that[, having consulted with its counsel,] it is legally required to disclose, and
(d) uses reasonable efforts to obtain reliable written assurance from the third party that the Confidential Information will be kept confidential.
14.4. Value and Nature of Confidential Information. The Investor acknowledge that the Confidential Information is proprietary and has competitive value to the Company. Accordingly, any disclosure to the Company's competitors or to the public would be detrimental to the best interests of the Company, which may incur losses, costs, and damages as a result.
14.5. Burden of Proof. The Investor will have the burden of proof relating to all exceptions to the definition of Confidential Information.
15. Assignment of Registration Rights. A Holder may assign its rights under this agreement to cause the Company to register Registrable Securities, but only with all related obligations, to a transferee or assignee of those securities that
15.1. is a subsidiary, parent, partner, limited partner, retired partner, or stockholder of a Holder,
15.2. if the Holder is an individual, is the Holder's family member or trust for the Holder's benefit, or
15.3. after the assignment or transfer, holds at least [250,000] shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, or the like), but only if
(a) the Company is, within a reasonable time after the transfer, provided with Notice of the name and address of the transferee or assignee and the securities in connection with which the registration rights are being assigned, and
(b) the transferee or assignee agrees in writing to be bound by the terms of this agreement,
and such an assignment will be effective only if, immediately following the transfer, the further disposition of the securities by the transferee or assignee is restricted under the Securities Act.
16.1. Termination of Registration Rights. All of the Company's obligations to register Registrable Shares under sections 1 (Demand for Registration), 2 (Company Registration), and 4 (Form S-3 Registration) will terminate upon the earliest of (a) [five] years after the closing of a Qualified IPO, (b) the date on which no Holder holds any Registrable Shares, and (c) an Acquisition.
16.2. Termination of Right of First Offer Obligations. The obligations contained in section 13.4 (Right of First Offer) will terminate
(a) immediately before the consummation of a Qualified IPO,
(b) when the Company first becomes subject to the periodic reporting requirements of section 12(g) or 15 of the Exchange Act, or
(c) upon the closing of an Acquisition.
16.3. Termination of Agreement. This agreement will terminate upon the earlier of
(a) the time immediately before the closing of an Acquisition, and
(b) the date that is [five] years after the closing of a Qualified IPO.
17. Indemnification. If any Registrable Securities are included in a registration statement in accordance with any of the preceding sections of this agreement, then the following terms apply:
17.1. Holder Indemnified Persons. To the extent permitted by Law, the Company shall indemnify each Holder Indemnified Person against any Claims, but only to the extent that a Claim arises out of or is based upon an actual or alleged Violation.
17.2. Payment of Expenses. The Company shall pay to each such Holder indemnified Person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim.
17.3. Exclusion. The indemnity contained in section 17.2 (Payment of Expenses) does not apply to amounts paid in settlement of any Claim if the settlement is made without the Company's consent, nor will the Company be liable to any Holder Indemnified Person for any such Claim to the extent that it arises out of or is based upon a Violation that occurs in reliance upon and in conformity with written information provided expressly for use in connection with such registration by any such Holder Indemnified Person.
17.4. Company Indemnified Persons. To the extent permitted by Law, each selling Holder shall indemnify each Company Indemnified Person against any Claims, but only to the extent that the Claim arises out of or is based upon an actual or alleged Violation, in each case to the extent (and only to the extent) that the actual or alleged Violation occurs in reliance upon and in conformity with written information provided by such Holder expressly for use in connection with such registration.
17.5. Payment of Expenses. Each indemnifying Holder under section 17.4 (Company Indemnified Persons) shall pay, as incurred, any legal or other expenses reasonably incurred by any Person intended to be indemnified under section 17.4 (Company Indemnified Persons), in connection with investigating or defending any such Claim, but
(a) the indemnity agreement contained in section 17.4 (Company Indemnified Persons) does not apply to amounts paid in settlement of any such Claim if the settlement is effected without the consent of the Holder, and
(b) in no event will any indemnity payment under section 16.04 (Company Indemnified Persons) exceed the net proceeds that the indemnified Holder received from the offering.
17.6. Notice of Claim. A Person entitled to indemnification under this section 17 (Indemnification) shall give prompt Notice to the indemnifying party of any claim or potential claim for indemnification.
17.7. Exclusive Remedies. The rights granted under this section 17 (Indemnification) are the exclusive remedies available under this agreement in connection with the Claims that this section addresses.
18. Definitions. In addition to the terms at the top of the first page of this agreement, the following definitions apply:
18.1. "Acquisition" has the meaning given to it in the Company's Certificate of Incorporation, as amended and restated on one or more occasions.
18.2. "Board" means the Company's Board of Directors.
18.3. "Claim" means any claim, liability, or expense (including legal fees) to which a Person may become subject under the Securities Act, the Exchange Act, or other applicable Law.
18.4. "Commission" means the Securities and Exchange Commission or any other federal agency that, at the relevant time, administers the Securities Act.
18.5. "Common Stock" means the Company's common stock.
18.6. "Company Indemnified Person" means
(a) the Company,
(b) each of its directors,
(c) each of its officers who has signed the registration statement,
(d) each Person, if any, who controls the Company within the meaning of the Securities Act,
(e) any underwriter and any other Holder selling securities in a registration statement, and
(f) each other Person, if any, who controls, within the meaning of the Securities Act or the Exchange Act, any such underwriter or other Holder.
18.7. "Confidential Information" means all material, non-public information, written or oral, whether or not it is marked as confidential, disclosed or made available to the Investor, directly or indirectly, through any means of communication by the Company, but does not include information that
(a) is or becomes publicly known through no wrongful act of the recipient,
(b) the Investor received in good faith on a non-confidential basis from a source other than the Company or its representatives,
(c) was in the Investor's possession before its disclosure by the Company or its representatives, or
(d) the Investor developed independently without breach of this agreement.
18.8. "Control" means, for a Person, the ownership interest in an entity that has the practical effect of giving that Person, either alone or with others, the majority voting interest in that entity, and the terms "Controlled" and "Controlling" have comparable meanings.
18.9. "Exchange Act" means the Securities Exchange Act of 1934.
18.10. "GAAP" means the generally accepted accounting principles defined by the professional accounting industry in effect in the United States.
18.11. "Governmental Authority" means
(a) the government of the United States or any other nation, or any of its or their geographical or political units or subdivisions, and
(b) any body, agency, tribunal, arbitrator, court, authority, or other entity that exercises executive, legislative, judicial, taxing, regulatory, or administrative powers or functions of, or relating to, government.
18.12. "Holder" means any holder of outstanding Registrable Securities that have not been sold to the public, but only if the holder is either an Investor or a permitted assignee or transferee of registration rights under this agreement.
18.13. "Holder Indemnified Person" means
(a) each Holder,
(b) the partners, officers, and directors of each Holder,
(c) any underwriter for a Holder, and indem
(d) each other Person, if any, who controls, within the meaning of the Securities Act or the Exchange Act, the Holder or the Holder's underwriter.
18.14. "Initiating Holders" has the meaning given to it in section 1.1 (Request from Initiating Holders).
18.15. "Law" means
(a) any law (including the common law), statute, by-law, rule, regulation, order, ordinance, treaty, decree, judgment, and
(b) any official directive, protocol, code, guideline, notice, approval, order, policy, or other requirement of any Governmental Authority having the force of law.
18.16. "Major Investor" means an Investor that holds at least [500,000] shares of Registrable Securities, subject to appropriate adjustment for stock splits, stock dividends, combinations, or the like.
18.17. "New Securities" means, collectively,
(a) equity securities of the Company, whether or not currently authorized, as well as rights, options,
(b) warrants to purchase such equity securities, and
(c) securities of any type that are, or may become, convertible or exchangeable into or exercisable for such equity securities.
18.18. "Notice" means any notice, request, direction, or other document that a party can or must make or give under this agreement.
18.19. "Offer Notice" has the meaning given to it in paragraph (b) (Offer Notice) of section 13.4 (Right of First Offer).
18.20. "Person" includes
(a) any corporation, company, limited liability company, partnership, Governmental Authority, joint venture, fund, trust, association, syndicate, organization, or other entity or group of persons, whether incorporated or not, and
(b) any individual.
18.21. "Qualified IPO" means the Company's first public offering of its Common Stock registered under the Securities Act that is underwritten on a firm-commitment basis.
18.22. "Registrable Securities" means all Common Stock of the Company issued or issuable upon conversion of the Company's preferred stock (including Common Stock issued under stock splits, stock dividends, and similar distributions in connection with those securities), and any securities of the Company that have been granted registration rights.
18.23. "Securities Act" means the Securities Act of 1933.
18.24. "Selected Courts" means, collectively, the federal and state courts located in the State of [SELECTED STATE] in [SELECTED COUNTY] County.
18.25. "Suspension Period" has the meaning given to it in paragraph (c) (Suspension Period) of section 10.1 (Filing a Registration Statement).
18.26. "Violation" means
(a) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained in there or any amendments or supplements,
(b) the omission or alleged omission to state in there a material fact required to be stated in there, or necessary to make the statements in there not misleading, or
(c) any violation or alleged violation by the Company of
(i) the Securities Act, the Exchange Act, or any state securities Law, or
(ii) any rule or regulation promulgated under any of those Laws.
19. General Provisions
19.1. Entire Agreement. This agreement contains all the terms agreed to by the parties relating to its subject matter. It replaces all previous discussions, understandings, and agreements.
19.2. Amendment. This agreement may not be amended or modified, and no term of it may be waived, without the written consent of both the Company and the holders of at least [66 ]% of the outstanding shares of Common Stock.
19.3. Acknowledgement of Contract Terms. Every Holder who is an individual acknowledges that he or she
(a) has read this agreement,
(b) understands its terms,
(c) has had the opportunity to consult[ and has consulted] with independent legal counsel, and
(d) has signed this agreement voluntarily.
19.4. Remedies Cumulative. Except as provided in section 17.7 (Exclusive Remedies), the rights and remedies available to a party under this agreement are cumulative and in addition to, not exclusive of or in substitution for, any rights or remedies otherwise available to that party.
19.5. Survival. Sections 14 (Confidentiality) and 17 (Indemnification) survive the termination of this agreement.
19.6. Severability. If any part of this agreement is declared unenforceable or invalid, the remainder will continue to be valid and enforceable.
19.7. Waiver. No waiver of a condition or nonperformance of an obligation is effective unless it is in writing and signed by the party granting the waiver. No waiver by a party affects the exercise of any of its other rights or remedies. A party's failure or neglect to enforce any of its rights under this agreement will not be deemed to be a waiver of that or any other of its rights. No single or partial exercise of any right or remedy will preclude any other or further exercise of any right or remedy.
19.8. Governing Law. This agreement will be governed by and construed in accordance with the Laws of the State of [GOVERNING LAW STATE], without regard to its conflict of Laws rules.
19.9. Dispute Resolution
(a) Arbitration. Any dispute or controversy arising under or in connection with this agreement will be settled exclusively by arbitration in [STATE], in accordance with the rules of the American Arbitration Association then in effect by [NUMBER OF ARBITRATORS] arbitrator(s).
(b) No Punitive Damages. The arbitrator(s) will not have the power to award punitive damages.
(c) Judgment. The successful party may enter the arbitral judgment in any court having jurisdiction.
19.10. Attorney Fees. If either party brings legal action to enforce its rights under this agreement, the prevailing party will be entitled to recover its expenses (including reasonable attorneys' fees) incurred in connection with the action and any appeal.
19.11. Consent to Jurisdiction. The parties hereby irrevocably and unconditionally
(a) consent to submit to the exclusive jurisdiction of the Selected Courts for any action or proceeding arising out of or relating to this agreement, and agree not to commence any action or proceeding relating to this agreement except in the Selected Courts, although a party may commence an action or proceeding in a court other than a Selected Court but only for the purpose of enforcing an order or judgment issued by one of the Selected Courts,
(b) consent to service of any process or other document in any action or proceeding made by registered first-class mail, postage prepaid, return receipt requested or by nationally recognized courier guaranteeing overnight delivery and agree that service of the process or other document will be effective service for any action or proceeding brought against it in a Selected Court, although this does not affect either party's right to serve process in any other manner permitted by Law,
(c) waive any objection to the laying of venue of any action or proceeding arising out of this agreement in the Selected Courts, and
(d) waive and agree not to plead or claim in any Selected Court that an action or proceeding brought in any Selected Court has been brought in an inconvenient forum.
(a) Statutes, etc. Unless specified otherwise, any reference in this agreement to a statute includes the rules and policies made under that statute and any provision that amends, supplements, supersedes, or replaces that statute or those rules or policies.
(b) Number and Gender. Unless the context requires otherwise, words importing the singular number include the plural and vice versa; words importing gender include all genders.
(c) Headings. The headings used in this agreement and its division into sections, and other subdivisions do not affect its interpretation.
(d) Internal References. References in this agreement to sections, and other subdivisions are to those parts of this agreement.
19.13. Counterparts. This agreement may be signed in any number of counterparts, each of which is an original and all of which taken together form one single document.
19.14. Effectiveness of Agreement. This agreement is effective as of the date shown at the top of the first page, even if any signatures are made after that date.
This agreement has been signed by the parties.
List of Investors