Form: Explanation:
Investors Rights Agreement This is an Investors Rights Agreement used in conjunction with a Series A Preferred Stock Purchase Agreement between a startup company and venture capital investors. It provides for: 1. Affirmative covenants by the Company for the benefit of investors (such as requiring the Company to maintain appropriate insurance and internal controls). 2. Demand and piggyback registration rights for the investors. 3. Certain rights of first offer favorable to the investor on issuance of new securities by the Company.
Form 19.17
INVESTORS RIGHTS AGREEMENT This Agreement is made as of the ____ day of __________, 20__ by and among [Name of Company], a ____________________ corporation with a principal place of business at (the “Company”) and each of the stockholders of the Company listed in Exhibit A attached hereto (collectively the “Stockholders”). Background The Company currently has issued and outstanding __________ shares of its Common Stock, and __________ options to purchase Common Shares. On the date of this Agreement, the Company is issuing and selling shares of its Series A Preferred Stock (“Series A Shares”) pursuant to the _____________ Series A Preferred Stock Purchase Agreement (the “Series A Stock Purchase Agreement”), and is issuing Series A Shares upon conversion of certain outstanding debt of the Company. The purchasers of the Series A Shares have required this Agreement as a condition to the closing of their investment under the Series A Stock Purchase Agreement. Certain defined terms are defined in Article IV. AGREEMENT ARTICLE I COVENANTS OF THE COMPANY 1.01 Affirmative Covenants of the Company. The Company covenants and agrees that until the consummation of a Qualified Public Offering, it will perform and observe the following covenants and provisions, and will cause each Subsidiary, if and when such Subsidiary exists, to perform and observe such of the following covenants and provisions as are applicable to such Subsidiary: (a) Financing. Promptly, fully and in detail, inform the Board of Directors of any discussions, offers or contracts relating to possible financing of any material nature for the Company, whether initiated by the Company or any other Person. (b) New Developments. Cause all new technological developments, patentable or unpatentable inventions, discoveries or improvements by the Company’s or any Subsidiary’s employees or consultants to be documented in a reasonable manner and, where prudent and appropriate, to file and prosecute United States and foreign patent, copyright, trademark, mask work or other Intellectual Property Right applications relating to and protecting the Company’s inventions, discoveries or developments on behalf of the Company or any Subsidiary.
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(c) Agreements of Officers and Employees. Cause each employee of the Company or any Subsidiary now or hereafter employed and all consultants of the Company or any Subsidiary involved in the design, review, evaluation or development of products or Intellectual Property Rights to execute and deliver a Confidentiality and Invention Assignment Agreement in form and substance reasonably satisfactory to the Board of Directors of the Company, and the Company shall not amend or waive any of the provisions of any such Confidentiality and Invention Assignment Agreement in any material respect without the approval of the Board of Directors. (d) Indemnification. The Company shall at all times maintain provisions in its By-laws or Articles of Incorporation exculpating and indemnifying all Directors from and against liability to the maximum extent permitted under the laws of the state of its incorporation. (e) Corporate Existence. Maintain and cause each of its Subsidiaries to maintain their respective corporate existence, Intellectual Property Rights, other rights and franchises in full force and effect to the extent appropriate in accordance with good business practice. (f) Properties, Business, Insurance. Maintain and cause each of its Subsidiaries to maintain as to their respective properties and business, with financially sound and reputable insurers, insurance against such casualties and contingencies and of such types and in such amounts as is customary for companies of a similar size and financial condition similarly situated within the same industry. (g) Expenses of Directors. Promptly reimburse in full each Director of the Company for all of his reasonable out-of-pocket expenses incurred in attending each meeting of the Board of Directors of the Company or any committee thereof. (h) Compliance with Laws. Comply, and cause each subsidiary to comply, with all applicable laws, rules, regulations and orders, noncompliance with which could materially adversely affect its business, assets, Intellectual Property Rights, operations or condition, financial or otherwise. (i) Keeping of Records and Books of Account. Keep, and cause each Subsidiary to keep, adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting principles consistently applied, reflecting all financial transactions of the Company and such Subsidiary, and in which, for each fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made. (j) Foreign Corrupt Practices Act Undertaking. Neither the Company nor any subsidiary of the Company shall take any action which would cause the Company or any Subsidiary of the Company to be in violation of the Foreign Corrupt Practices Act. (k) Controls. The Company currently maintains and will maintain a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are
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executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting princ