Board Observer Rights Letter

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									When an investor is given board observer rights, the investor is allowed to participate in
board discussions, but the investor does not obtain the right to vote on corporate
matters. An observer right is typically contained in a side letter in connection with
venture financing or another investment matter. Board Observers are sometimes
excluded from parts of a board meeting in order to maintain confidentiality. This
document is a legal letter that grants an investor the right to attend meetings of the
board of directors of a company. This document should be used by small businesses or
other entities that want to grant an outside investor the right to observe and participate
in board meetings.
                                     Board Observation Rights
      This Agreement is effective as of____________, by and among___________, a
___________ corporation (the “Company”), and _______________.

        ____________ will be entitled to the following contractual board observer rights, in
addition to rights to nonpublic financial information, inspection rights and any other rights
specifically provided to ___________by the Company and the investors named therein. The
Company shall invite ___________to select one representative of __________ reasonably
acceptable to the Company (the “Representative”) to attend in a nonvoting observer capacity
meeting of its Board of Directors, provided however, that the Company reserves the right to
exclude ___________Representative from access to any material or meeting or portion thereof if
(i) the Company believes upon advice of counsel that such exclusion is reasonably necessary to
preserve the attorney-client privilege between the Company and its counsel; (2) access to such
information or attendance at such meeting could create a conflict of interest between
____________ or ______________ Representative, on the one hand, and the Company, on the
other hand, or (3) such portion of a meeting is an executive session limited solely to members of
the Board of Directors and legal counsel.

        ___________ agrees, and any Representative designated by ___________will agree in
writing, to hold in confidence and trust and to act in a fiduciary manner with respect to all
information provided to ____________ or ________________ Representative in connection
with _____________ rights under this Section 1, except to the extent in the public domain at the
time of such provision, subsequently released into the public domain (through no fault of
___________or ____________ Representative), or otherwise required by law and any other
regulatory process to which ___________ is subject; provided that _________ may disclose
information of a non-technical nature, including financial information, to ____________
partners, members and affiliates. Notwithstanding the foregoing, except for summary financial
information about the Company which ____________ delivers to __________ partners,
members and affiliates pursuant to _______________ regular reporting practices, ____________
will only disclose information provided to ______________ in connection with ___________
rights under this Agreement to those of ____________ partners, members and affiliates who
have agreed in writing to keep such information confidential or who are provided with a copy of
Section 1 of this Agreement and agree to be bound by the terms of this Section 1 to the same
extent as if they were parties hereto.

         The rights described in this Section 1 shall terminate and be of no further force or effect
upon the earlier of: (i) the closing of a firm commitment underwritten public offering of the
Company's securities pursuant to an effective registration statement filed by the Company under
the Securities Act of 1933, as amended; or (2) the first date that __________ and __________
affiliates no longer hold, in the aggregate, at least _____________ shares of the Company's
stock (or shares of the Company's stock issued upon conversion thereof). The confidentiality
provision of this Section 1 will survive any such termination.


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SUBSCRIBED TO AND SWORN TO before me this ___ day of_______________, 20____.


My Commission Expires:______________

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NOTICE: The information in this document is designed to provide an outline that you can follow
when formulating business or personal plans. Due to the variances of many local, city, county
and state laws, we recommend that you seek professional legal counseling before entering into
any                      contract                        or                        agreement.

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