A Management Rights Letter or Agreement is sent/entered by a Company and its minority investors. This letter mainly sets forth the various management rights a Company grants to its minority investors on a non-voting capacity so as to protect their interest in the Company. This letter/ agreement should clearly spells the rights of those investors and how their concerns can be addressed to the Company Board.
This Management Rights Letter sets forth the management rights granted by a company to investors in the company’s retirement pension fund. This letter can also be used to grant management rights to other non-pension fund investors who will not have enough shares to be voted onto the board of directors. Pursuant to the investor’s purchase of the company’s stock, the investor is entitled to certain contractual management rights as listed in this agreement, including consulting and advising the company on business issues, receiving copies of all material provided to the company’s board, and a right to inspect the company’s books, records and facilities. The agreement has a confidentiality clause whereby the investor agrees not to disclose the company’s confidential information. Management Rights Letter __________________ [Instruction: Insert Company Name] __________________ [Instruction: Insert Address 1] __________________ [Instruction: Insert Address 2] __________________ [Instruction: Insert Date] __________________ [Instruction: Insert Investor Name] __________________ [Instruction: Insert Address 1] __________________ [Instruction: Insert Address 2] Re: Management Rights Dear __________________ [Instruction: Insert Investor Name] This letter will confirm our agreement that pursuant to and effective as of your purchase of _______________ (_____) [Instruction: Insert Number of Shares] shares of Series ___ [[Instruction: Insert Series of Stock purchased] preferred stock (the “Preferred Stock”) of _______________________ [Instruction: Insert Company Name] (the “Company”), __________________ [Instruction: Insert Investor Name] ( the “Investor”), shall be entitled to the following contractual management rights, in addition to any rights provided to all investors in connection with the sale of the Preferred Stock: 1. If Investor is not represented on the Company’s Board of Directors (the “Board”), Investor shall be entitled to consult with and advise management of the Company on significant business issues, including, but not limited to, management’s proposed annual operating plans, and management will meet with Investor regularly during each year at for such consultation and advice and to review progress in achieving said plans. 2. If Investor is not represented on the Board, Company shall furnish Investor with copies of all notices, minutes, consents and other material that the Company provides to the Board, provided that Company has the right to exclude the Investor from accessing any material or meeting or portion thereof if the Company believes, upon advice of counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege, to protect highly confidential proprietary information, or for other similar reasons. Investor shall also have the opportunity to address the Board, at a scheduled Board meeting, with respect to Investor’s concerns regarding significant business issues facing the Company provided Investor gives reasonable notice to the Board. 3. Investor may examine the books and records of the Company and inspect its facilities and may request information at reasonable times and intervals in relation to the Company’s financial conditions and operations, provided that access to highly confidential proprietary information and facilities need not be provided. 4. Investor agrees that Investor will keep confidential and will not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company, unless such confidential information: (A) is known or becomes known to the public in general (other than as a result of a breach of this paragraph by Investor); (B) is or has been independently developed or conceived by the Investor without use of the Company’s confidential information; or (C) is or has been made known or disclosed to the Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company. Notwithstanding the foregoing, Investor may disclose confidential information: (i) to Investor’s attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with monitoring its investment in the Company; (ii) to any prospective purchaser of any registrable securities from Investor, if such prospective purchaser agrees to be bound by the provisions of this paragraph; (iii) to any existing or prospective affiliate, partner, member, stockholder, or wholly owned subsidiary of Investor in the ordinary course of business, provided that Investor informs such person(s) that such information is confidential and directs such person(s) to maintain the confidentiality of such information; or (iv) as may otherwise be required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure. 5. The rights described herein shall terminate and be of no further force or effect upon: (A) such time as no shares of the Company’s stock are held by the Investor or Investor’s affiliates; (B) the sale of the Company’s securities pursuant to a registration statement filed by the Company under the Securities Act of 1933, as amended, in connection with the firm commitment underwritten offering of its securities to the general public; or (C) the consummation of a merger or consolidation of the Company that is effected for independent business reasons unrelated to extinguishing such rights and for purposes other than the reincorporation of the Company in a different state or the formation of a holding company that will be owned exclusively by the Company’s stockholders. The confidentiality obligations referenced herein will survive any such termination. Very Truly Yours, INVESTOR: _______________ © Docstoc®, Inc. 2011 – All Rights Reserved ________________________________ [Instruction: sign] By: ___________________________ [Instruction: Insert Name of Signatory] Title: ___________________________ [Instruction: Insert Title of Signatory] Accepted and Agreed: COMPANY: ________________________________ [Instruction: sign] By: ___________________________ [Instruction: Insert Name of Signatory] Title: ___________________________ [Instruction: Insert Title of Signatory _______________ © Docstoc®, Inc. 2011 – All Rights Reserved
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