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This Series Seed Preferred Stock Purchase Agreement (this "Agreement") is entered into as of [DATE], by and among [COMPANY NAME], a [STATE] corporation (the "Company"), and each of the purchasers listed on the Schedule of Purchasers attached hereto as Exhibit A (each, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company desires to issue and sell to the Purchasers, and the Purchasers desire to purchase from the Company, shares of the Company’s Series Seed Preferred Stock, par value $0.0001 per share (the "Series Seed Preferred Stock" or the "Shares"), on the terms and conditions set forth herein;
WHEREAS, the Company’s Board of Directors (the "Board") has authorized the sale and issuance of the Shares to the Purchasers pursuant to this Agreement and has approved the filing of the Amended and Restated Certificate of Incorporation in the form attached hereto as Exhibit B (the "Restated Certificate") with the Secretary of State of the State of [STATE];
WHEREAS, the parties desire to set forth the terms and conditions upon which the Shares will be issued to the Purchasers and to establish certain rights, preferences, privileges, and restrictions with respect to the Shares as more fully described in the Restated Certificate;
NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants, and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
This Investor Rights Agreement (this "Agreement") is made and entered into as of [DATE], by and among [COMPANY NAME], a [STATE] corporation (the "Company"), and the persons and entities listed on Exhibit A hereto (each, an "Investor" and collectively, the "Investors").
The Company and the Investors are parties to that certain Series Seed Preferred Stock Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to which the Investors are purchasing shares of the Company’s Series Seed Preferred Stock, par value $0.0001 per share (the "Series Seed Preferred Stock").
In order to induce the Investors to purchase the Series Seed Preferred Stock pursuant to the Purchase Agreement, the Company hereby agrees to provide the Investors with certain registration rights, information rights, rights of participation, and other rights as set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants, and conditions set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows.
This Voting Agreement (this "Agreement") is made and entered into as of [DATE], by and among [COMPANY NAME], a [STATE] corporation (the "Company"), each holder of the Company’s Series [_] Preferred Stock, par value $[_] per share (the "Series [_] Preferred Stock"), listed on Schedule A hereto (together with any subsequent investors, or transferees, who become parties hereto as "Investors" pursuant to Sections 19 and 7.2 hereof, the "Investors"), and those certain stockholders of the Company listed on Schedule B hereto (together with any subsequent stockholders who become parties hereto as "Key Holders" pursuant to Sections 19 and 7.2 hereof, the "Key Holders").
The Company and the Investors are parties to that certain Series [_] Preferred Stock Purchase Agreement of even date herewith (the "Purchase Agreement"), pursuant to which the Investors are purchasing shares of the Company’s Series [_] Preferred Stock from the Company.
The obligations of the Investors under the Purchase Agreement are conditioned upon, among other things, the execution and delivery of this Agreement by the parties hereto.
In order to induce the Investors to purchase shares of the Company’s Series [_] Preferred Stock pursuant to the Purchase Agreement, and as a condition and inducement to the Investors’ entry into the Purchase Agreement, the Company, the Investors, and the Key Holders each desire to enter into this Agreement to set forth their agreements and understandings with respect to how shares of the Company’s capital stock held by them will be voted on, and certain related matters, on and after the date of this Agreement.
The parties acknowledge that the voting arrangements and other agreements set forth herein are a material inducement to the Investors’ willingness to consummate the transactions contemplated by the Purchase Agreement and to invest in the Company on the terms described therein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1.1 Sale and Issuance of Series Seed Preferred Stock. Subject to the terms and conditions of this Agreement, each Purchaser agrees, severally and not jointly, to purchase at the Closing (as defined in Section 3.1), and the Company agrees to sell and issue to each such Purchaser at the Closing, that number of shares of Series Seed Preferred Stock set forth opposite such Purchaser’s name on the Schedule of Purchasers at a purchase price per share equal to $[PRICE PER SHARE] (the "Purchase Price Per Share"). The aggregate number of shares of Series Seed Preferred Stock to be sold and issued to all Purchasers pursuant to this Agreement shall not exceed [TOTAL SHARES] shares (the "Maximum Authorized Shares"), for an aggregate purchase price not to exceed $[AGGREGATE PURCHASE PRICE] (the "Aggregate Purchase Price").
1.2 Authorization of Shares. On or prior to the Closing, the Company shall have authorized (a) the sale and issuance of the Shares to the Purchasers pursuant to this Agreement and (b) the reservation of shares of Common Stock of the Company ("Common Stock") for issuance upon conversion of the Shares (the "Conversion Shares"). The Shares shall have the rights, preferences, privileges, and restrictions set forth in the Restated Certificate.
1.3 Use of Proceeds. The Company shall use the proceeds from the sale of the Shares for general corporate purposes, including but not limited to product development, hiring of key personnel, working capital, and other lawful business activities as determined by the Board, and shall not use any portion of the proceeds for (a) repayment of indebtedness owed to any officer, director, or stockholder of the Company, (b) any personal expenditure by any officer, director, or stockholder of the Company, or (c) any purpose that would violate applicable law.
1.4 Defined Terms. Capitalized terms used and not otherwise defined in this Agreement have the meanings set forth in Section 12 of this Agreement.
As used in this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" means, with respect to any specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such specified Person. For purposes of this definition, "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise.
"Board" or "Board of Directors" means the board of directors of the Company as constituted from time to time.
"Common Stock" means the common stock of the Company, par value $0.0001 per share.
"Damages" means any and all losses, damages, liabilities, costs, and expenses (including reasonable attorneys’ fees and expenses of investigation and defense).
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
"Form S-1" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
"Form S-3" means such form under the Securities Act as in effect on the date hereof or any registration form under the Securities Act subsequently adopted by the SEC that permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.
"GAAP" means generally accepted accounting principles in the United States as in effect from time to time.
"Holder" means any Investor who holds Registrable Securities, and any permitted transferee of such Investor to whom registration rights have been duly assigned in accordance with Section 6.6 of this Agreement.
"Immediate Family Member" means, with respect to any natural person, such person’s spouse, domestic partner, parents, grandparents, lineal descendants, siblings, and the lineal descendants of siblings.
"Initiating Holders" means, collectively, Holders who properly initiate a registration request under this Agreement and who hold not less than a majority of the then-outstanding Registrable Securities held by all Holders.
"IPO" means the Company’s first underwritten public offering of its Common Stock under the Securities Act, resulting in aggregate gross proceeds to the Company of not less than fifty million dollars ($50,000,000) (before deduction of underwriting discounts, commissions, and expenses).
1.1 "Affiliate" means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including, without limitation, any general partner, managing member, officer, director, or trustee of such Person, or any venture capital fund or registered investment company now or hereafter existing that is controlled by one or more general partners, managing members, or investment advisors of, or shares the same management company or investment advisor with, such Person.
1.2 "Board of Directors" means the board of directors of the Company as constituted from time to time in accordance with the terms of this Agreement and the Restated Certificate.
1.3 "CEO Director" means the individual serving as the Chief Executive Officer of the Company who shall serve as a member of the Board of Directors pursuant to Subsection 2.1(a)(iii) of this Agreement.
1.4 "Change of Control" means (a) a merger, consolidation, or other business combination or reorganization of the Company with or into any other entity or entities, or a sale of all or substantially all of the capital stock of the Company (whether by merger, recapitalization, consolidation, reorganization, combination, sale of outstanding securities, or otherwise), in each case as a result of which the holders of the Company’s outstanding voting securities immediately prior to such transaction hold less than a majority of the outstanding voting securities of the surviving or resulting entity immediately following such transaction; or (b) a sale, lease, exclusive license, or other disposition of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole.
1.5 "Common Director" means any member of the Board of Directors designated by the Key Holders pursuant to Subsection 2.1(a)(ii) of this Agreement.
1.6 "Common Holders" means the holders of outstanding shares of the Company’s Common Stock.
1.7 "Common Stock" means shares of the Company’s common stock, par value $[_] per share.
1.8 "Drag-Along Sale" has the meaning set forth in Section 5.1 of this Agreement.
1.9 "Electing Holders" has the meaning set forth in Section 5.1 of this Agreement.
1.10 "Founder" or "Founders" means [FOUNDER NAME(S)].
1.11 "GAAP" means generally accepted accounting principles in the United States, consistently applied.
1.12 "Independent Director" means any member of the Board of Directors who is designated pursuant to Subsection 2.1(a)(iv) of this Agreement and who qualifies as an "independent director" under the applicable rules of the Securities and Exchange Commission and any national securities exchange on which the Company’s securities may be listed.
1.13 "IPO" means the Company’s first underwritten public offering of its Common Stock under the Securities Act of 1933, as amended (the "Securities Act").
2.1 Optional Tranched Closing Structure. If the Schedule of Purchasers designates the financing as a "Tranched Financing," the purchase and sale of the Shares shall occur in multiple tranches (each, a "Tranche") as set forth in the Milestone Schedule attached hereto as Exhibit F (the "Milestone Schedule"). In such event, the Aggregate Purchase Price shall be allocated among the Tranches as specified in the Milestone Schedule, and the provisions of this Section 2 shall apply in addition to, and not in limitation of, the provisions of Sections 1 and 3.
2.2 Milestone Definitions and Achievement Criteria. Each Tranche following the Initial Tranche (as defined below) shall be conditioned upon the Company’s achievement of the milestone or milestones (each, a "Milestone") set forth in the Milestone Schedule corresponding to such Tranche. The first Tranche (the "Initial Tranche") shall close on the Closing Date without regard to Milestone achievement. Each subsequent Tranche (each, a "Subsequent Tranche") shall close within fifteen (15) Business Days following delivery by the Company of a written Milestone Achievement Certificate (as defined in Section 2.3) to the Purchasers. A Milestone shall be deemed achieved only upon (a) the occurrence of the events or satisfaction of the criteria described in the Milestone Schedule with respect to such Milestone, and (b) written certification thereof by the Company’s Chief Executive Officer, confirmed by the Board (including the affirmative vote of at least one director elected by the holders of Series Seed Preferred Stock, if any), that such Milestone has been achieved in all material respects.
2.3 Milestone Achievement Certificate and Financial Commitment Notice. Upon achievement of a Milestone, the Company shall deliver to each Purchaser a written certificate executed by the Chief Executive Officer of the Company (a "Milestone Achievement Certificate") setting forth in reasonable detail (a) the Milestone achieved, (b) the date of achievement, (c) supporting documentation evidencing such achievement, and (d) the number of shares of Series Seed Preferred Stock to be issued in the corresponding Subsequent Tranche and the aggregate purchase price therefor (collectively, a "Financial Commitment Notice"). Each Purchaser shall have ten (10) Business Days following receipt of the Financial Commitment Notice to deliver written objection to the Company, setting forth in reasonable detail the basis for such Purchaser’s good faith belief that the applicable Milestone has not been achieved. If no objection is timely delivered, the Milestone shall be conclusively deemed achieved for purposes of this Agreement.
2.4 Obligation to Fund Subsequent Tranches. Subject to satisfaction of the conditions set forth in Section 2.2 and Section 6 (as applied to each Subsequent Tranche closing), each Purchaser shall be obligated to fund its pro rata portion (determined by reference to such Purchaser’s percentage of the Aggregate Purchase Price set forth on the Schedule of Purchasers) of each Subsequent Tranche within fifteen (15) Business Days following the conclusive determination of Milestone achievement pursuant to Section 2.3. Time is of the essence with respect to each Purchaser’s funding obligations under this Section 2.4.
2.5 Consequences of Failure to Fund. If any Purchaser fails to fund its pro rata portion of a Subsequent Tranche within the time period specified in Section 2.4 (a "Defaulting Purchaser"), then (a) the Defaulting Purchaser’s shares of Series Seed Preferred Stock previously acquired hereunder shall, at the election of the Company (exercisable by written notice to the Defaulting Purchaser within thirty (30) days following such failure), automatically convert into shares of Common Stock at a conversion price equal to seventy-five percent (75%) of the then-applicable Purchase Price Per Share (the "Reduced Conversion Price"), (b) the Defaulting Purchaser shall forfeit any information rights, board observer rights, and pro rata participation rights under the Related Agreements, and (c) the Company may, at its option, offer the unfunded portion of such Subsequent Tranche to the non-defaulting Purchasers on a pro rata basis, or to third parties approved by the Board. For the avoidance of doubt, the conversion described in clause (a) shall not affect the rights of non-defaulting Purchasers.
2.6 Milestone Schedule Amendments. The Milestone Schedule may be amended only with the written consent of the Company and the Majority Purchasers. If a Milestone becomes incapable of achievement due to circumstances beyond the Company’s reasonable control (excluding the Company’s failure to perform), the Company and the Majority Purchasers shall negotiate in good faith to establish a substitute milestone of reasonably equivalent difficulty and commercial significance.
1.14 "Key Holders" means those stockholders of the Company listed on Schedule B hereto, and any transferees or assignees who become parties to this Agreement as Key Holders pursuant to Section 7.2 or Section 19 hereof, in each case for so long as such Person holds shares of the Company’s capital stock.
1.15 "Liquidation Event" means any voluntary or involuntary liquidation, dissolution, or winding up of the Company, or any Change of Control, that is treated as a liquidation event pursuant to the terms of the Restated Certificate.
1.16 "Person" means any individual, corporation, partnership, trust, limited liability company, association, or other entity.
1.17 "Preferred Director" means any member of the Board of Directors designated by the holders of Preferred Stock in accordance with Subsection 2.1(a)(i) of this Agreement.
1.18 "Preferred Holders" means the holders of outstanding shares of the Company’s Preferred Stock.
1.19 "Preferred Stock" means, collectively, all shares of the Company’s preferred stock, including the Series [_] Preferred Stock and any other series of preferred stock issued by the Company, whether now outstanding or hereafter issued.
1.20 "Requisite Holders" means, collectively, (a) the holders of a majority of the shares of Preferred Stock then outstanding (voting together as a single class on an as-converted basis), (b) the holders of a majority of the shares of Common Stock then held by the Key Holders, and (c) the Company (acting through its Board of Directors or a duly authorized committee thereof).
1.21 "Restated Certificate" means the Company’s Amended and Restated Certificate of Incorporation, as may be amended, restated, supplemented, or otherwise modified from time to time.
1.22 "Sale of the Company" has the meaning set forth in Section 5.1 of this Agreement.
1.23 "Shares" means and includes any securities of the Company the holders of which are entitled to vote for members of the Board of Directors, including, without limitation, all shares of Common Stock, all shares of Preferred Stock (on an as-converted basis), and any shares of Common Stock issued or issuable upon conversion of shares of Preferred Stock or upon exercise of options or warrants.
1.24 "Transfer" means any sale, assignment, transfer, pledge, hypothecation, encumbrance, or other disposition of any Shares (or any interest therein), whether voluntary, involuntary, or by operation of law, including, without limitation, a transfer by gift, devise, or descent, or a transfer to a receiver, levying creditor, trustee, or receiver in bankruptcy, or a transfer pursuant to a domestic relations order, property settlement agreement, or similar judicial or administrative decree.
1.25 "Voting Threshold" has the meaning set forth in Section 5.1 of this Agreement.
"Key Employee" means any executive-level employee (including the chief executive officer, chief financial officer, chief technology officer, and any division head or vice president) of the Company as well as any employee designated as a Key Employee by the Board.
"Major Investor" means any Investor that, individually or together with such Investor’s Affiliates, holds at least [NUMBER] shares of Registrable Securities (as adjusted for any stock split, stock dividend, combination, recapitalization, or similar event).
"New Securities" means, collectively, equity securities of the Company, whether or not currently authorized, as well as options, warrants, or other rights to purchase or otherwise acquire such equity securities, or securities of any type whatsoever that are, or may become, convertible or exchangeable into or exercisable for such equity securities.
"Person" means any individual, corporation, partnership, limited liability company, trust, unincorporated association, joint venture, governmental authority, or other entity or group (as defined in the Exchange Act).
"Pro Rata Share" means, with respect to each Major Investor, the ratio of (a) the number of shares of Common Stock owned by such Major Investor immediately prior to the issuance of New Securities (assuming full conversion or exercise of all outstanding convertible or exercisable securities then held by such Major Investor) to (b) the total number of shares of Common Stock then outstanding immediately prior to the issuance of New Securities (assuming full conversion or exercise of all outstanding convertible or exercisable securities).
"Qualified IPO" means a firm commitment underwritten public offering of shares of Common Stock, registered under the Securities Act, with aggregate gross proceeds to the Company of not less than fifty million dollars ($50,000,000) (before deduction of underwriting discounts, commissions, and expenses), and a per-share offering price of not less than three (3) times the original per-share purchase price of the Series Seed Preferred Stock (as adjusted for stock splits, stock dividends, combinations, recapitalizations, and similar events).
"Registrable Securities" means (a) the shares of Common Stock issuable or issued upon conversion of the Series Seed Preferred Stock, (b) any Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, the shares referenced in clause (a), and (c) any equity securities issued or issuable directly or indirectly with respect to the shares referenced in clause (a) or clause (b) by way of stock dividend, stock split, or combination of shares, recapitalization, merger, consolidation, spin-off, reorganization, or other similar change. Notwithstanding the foregoing, Registrable Securities shall not include any shares (i) sold by a Person in a transaction in which the applicable rights under this Agreement are not validly assigned in accordance herewith, (ii) sold in a registered public offering under the Securities Act or sold pursuant to Rule 144 promulgated under the Securities Act, or (iii) that are eligible for resale without registration and without restriction pursuant to Rule 144 under the Securities Act.
"Registration Expenses" means all expenses incurred by the Company in complying with the registration provisions of this Agreement, including all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, fees and disbursements of counsel for the Company, the reasonable fees and disbursements of one special legal counsel selected by the Holders of a majority of the Registrable Securities included in such registration (not to exceed twenty-five thousand dollars ($25,000)), and fees and expenses of the Company’s independent certified public accountants (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters).
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Selling Expenses" means all underwriting discounts, selling commissions, and stock transfer taxes applicable to the sale of Registrable Securities, and fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel included in Registration Expenses).
2.1 Board Composition. Each Stockholder (as defined below) agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner shall be necessary, including, without limitation, by written consent in lieu of a meeting, to ensure that at each annual or special meeting of stockholders at which an election of directors is held or pursuant to any written consent of the stockholders, the following persons shall be elected to the Board of Directors:
(a)(i) Preferred Directors. [NUMBER] members designated from time to time by the holders of a majority of the shares of Series [_] Preferred Stock, exclusively and as a separate class (each, a "Series [_] Director"). The initial Series [_] Director(s) shall be [NAME(S)]. For the avoidance of doubt, the right of the holders of the Series [_] Preferred Stock to designate director(s) under this Subsection 2.1(a)(i) shall be in addition to any rights to designate directors set forth in the Restated Certificate.
(a)(ii) Common Directors. [NUMBER] member(s) designated by the holders of a majority of the shares of Common Stock then held by the Key Holders who are then providing services to the Company as officers, employees, or consultants, voting as a separate class (each, a "Common Director"). The initial Common Director(s) shall be [NAME(S)].
(a)(iii) CEO Director. The Company’s then-current Chief Executive Officer (the "CEO Director"), who shall initially be [CEO NAME].
(a)(iv) Independent Director(s). [NUMBER] member(s) who are not (A) an employee or officer of the Company, (B) an Investor or an Affiliate of an Investor, or (C) a member of the immediate family of any individual described in clause (A) or (B) above, and who are mutually acceptable to (I) the holders of a majority of the shares of Preferred Stock then outstanding (voting together as a single class on an as-converted basis) and (II) the holders of a majority of the shares of Common Stock then held by the Key Holders who are then providing services to the Company as officers, employees, or consultants (each, an "Independent Director"). The initial Independent Director shall be [NAME], or if no individual is so designated, such seat shall remain vacant until such individual is so designated and elected in accordance with this Subsection 2.1(a)(iv).
2.2 Board Size. Each Stockholder agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner shall be necessary, including, without limitation, by written consent in lieu of a meeting, to ensure that the size of the Board of Directors shall be set and remain at [NUMBER] directors, provided that this number may be changed by the unanimous written consent of the Requisite Holders. No party to this Agreement shall take any action to remove or change the number of authorized directors on the Board of Directors unless such action has been approved by the Requisite Holders.
3.1 Closing. The purchase and sale of the Shares shall take place at the offices of counsel to the Company, or at such other location or by electronic exchange of documents as the parties may mutually agree, at 10:00 a.m. local time on [DATE], or at such other time and place as the Company and the Purchasers holding a majority of the Shares to be purchased collectively may mutually agree upon, orally or in writing (which date and time are designated as the "Closing" and the "Closing Date"). In the event there is more than one closing, the term "Closing" shall apply to each such closing unless otherwise specified herein.
3.2 Delivery by the Company. At the Closing, subject to the terms and conditions hereof, the Company will deliver to each Purchaser (a) a stock certificate or book-entry statement representing the number of Shares being purchased by such Purchaser as set forth on the Schedule of Purchasers, registered in the name of such Purchaser (or in such nominee name as designated by such Purchaser), (b) a copy of the Restated Certificate as filed with the Secretary of State of the State of [STATE], certified by such Secretary of State, (c) a copy of the resolutions of the Board and, if required, the stockholders of the Company, authorizing the transactions contemplated by this Agreement, certified by the Secretary of the Company, and (d) such other documents and instruments as may be reasonably requested by the Purchasers or their counsel.
3.3 Delivery by the Purchasers. At the Closing, subject to the terms and conditions hereof, each Purchaser will deliver to the Company (a) the aggregate purchase price for the Shares being purchased by such Purchaser, as set forth on the Schedule of Purchasers, by wire transfer of immediately available funds to an account designated in writing by the Company or by such other method of payment as may be mutually agreed upon by such Purchaser and the Company, and (b) a fully executed counterpart signature page to this Agreement and to each of the Related Agreements (as defined below).
3.4 Subsequent Closings. The Company may sell and issue additional shares of Series Seed Preferred Stock to additional purchasers on or before the date that is ninety (90) days following the initial Closing Date (each, a "Subsequent Closing"), provided that (a) such additional purchasers execute counterpart signature pages to this Agreement and each of the Related Agreements, (b) the aggregate number of shares of Series Seed Preferred Stock sold and issued pursuant to this Agreement, including at all Subsequent Closings, does not exceed the Maximum Authorized Shares, and (c) the Purchase Price Per Share for such additional shares shall be equal to the Purchase Price Per Share set forth in Section 1.1. Each such additional purchaser shall, upon the applicable Subsequent Closing, become a "Purchaser" for all purposes of this Agreement. The Schedule of Purchasers shall be updated to reflect the additional Purchasers and the Shares purchased by them.
2.1 Request by Holders. Subject to the conditions of this Section 2, at any time after the earlier of (a) three (3) years after the date of this Agreement or (b) one hundred eighty (180) days after the effective date of the Company’s IPO, the Initiating Holders may request in writing that the Company effect a registration under the Securities Act of all or a portion of the Registrable Securities held by the Initiating Holders. Such request shall specify the number of shares of Registrable Securities proposed to be sold by the Initiating Holders and shall also specify the intended method of disposition thereof (including whether such offering is to be an underwritten offering). The Company shall, within ten (10) business days after receipt of such written request, give written notice of such request (the "Request Notice") to all Holders, and the Company shall include in such registration all Registrable Securities held by all such Holders who wish to participate in such registration and who provide written notice thereof to the Company within twenty (20) days after delivery of the Request Notice.
2.2 Number of Demand Registrations. The Company shall be obligated to effect no more than two (2) registrations on Form S-1 pursuant to this Section 2. A registration shall not be counted as one of the permitted demand registrations until it has become effective under the Securities Act and the Holders are able to register and sell at least fifty percent (50%) of the Registrable Securities requested to be included in such registration; provided, however, that if, after such registration has become effective, the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction, or other order or requirement of the SEC or other governmental authority, and such interference is not the result of any act or omission by the Holders, such registration shall not be counted as one of the permitted demand registrations.
2.3 Minimum Threshold. The Company shall not be obligated to effect a registration pursuant to this Section 2 unless the Registrable Securities requested to be registered have an anticipated aggregate offering price (net of Selling Expenses) of at least five million dollars ($5,000,000).
2.4 Deferral by the Company. Notwithstanding the foregoing obligations, the Company shall not be obligated to file a registration statement pursuant to this Section 2 if the Company, within twenty (20) days after receipt of a request from the Initiating Holders, delivers to such Initiating Holders a certificate signed by the Company’s chief executive officer stating that in the good faith judgment of the Board, it would be materially detrimental to the Company and its stockholders for such registration statement to be effected at such time, in which event the Company shall have the right to defer the filing of the registration statement for a period of not more than ninety (90) days after receipt of the request of the Initiating Holders; provided, however, that the Company may not invoke this right more than once in any twelve (12) month period; provided, further, that the Company shall not register any other securities during such deferral period (other than pursuant to a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan, or a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities).
2.5 Underwriting. If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means of an underwritten offering, they shall so advise the Company as a part of their request, and the Company shall include such information in the Request Notice. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. The managing underwriter for such offering shall be selected by the Initiating Holders, subject to the consent of the Company, which consent shall not be unreasonably withheld, conditioned, or delayed. All Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting.
Except as set forth on the Disclosure Schedule attached hereto as Exhibit C (the "Disclosure Schedule"), the Company hereby represents and warrants to each Purchaser as of the date of this Agreement and as of the Closing Date as follows. For purposes of these representations and warranties, the term "Company’s knowledge" or "to the knowledge of the Company" means the actual knowledge, after reasonable inquiry, of the Company’s officers and directors.
4.1 Organization and Good Standing. The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of [STATE]. The Company has all requisite corporate power and authority to own and operate its properties and assets, to carry on its business as presently conducted and as proposed to be conducted, to execute and deliver this Agreement, the Related Agreements, and each other agreement, document, or instrument contemplated hereby or thereby, and to perform its obligations hereunder and thereunder. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Material Adverse Effect (as defined in Section 12).
4.2 Authorization. All corporate action on the part of the Company, its officers, directors, and stockholders necessary for the authorization, execution, and delivery of this Agreement and the Related Agreements, the performance of all obligations of the Company hereunder and thereunder, and the authorization, issuance, sale, and delivery of the Shares and the Conversion Shares has been taken or will be taken prior to the Closing. This Agreement and each of the Related Agreements, when executed and delivered by the Company, shall constitute the valid and legally binding obligation of the Company, enforceable against the Company in accordance with their respective terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
2.3 Failure to Designate a Board Member. In the absence of any designation from the persons or groups entitled to designate a director as specified above, the director previously designated by such persons or groups and then serving shall be reelected, and, in the event of a vacancy on the Board of Directors, such vacancy shall remain unfilled pending designation by the group entitled to designate such director pursuant to the terms of this Agreement. No person entitled to designate or vote for directors pursuant to this Agreement shall take any action to remove any director not designated by such person or group, unless the group entitled to designate such director consents to such removal in writing or such removal is for Cause (as defined in the next sentence). For the purposes of this Section 2.3, "Cause" means (a) a conviction of, or plea of nolo contendere to, a felony or a crime involving moral turpitude, (b) a finding by a court of competent jurisdiction of liability for gross negligence or willful misconduct in the performance of such director’s fiduciary duties to the Company, or (c) such director’s willful and continued failure to perform the duties and obligations of a director of the Company after written notice from the Board of Directors specifying such failure.
2.4 Removal of Board Members. Each Stockholder also agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to ensure that: (a) no director elected pursuant to Section 2.1 may be removed from office unless (i) such removal is directed or approved by the affirmative vote of the person(s) entitled under Section 2.1 to designate that director, or (ii) such removal is for Cause as defined in Section 2.3; and (b) any vacancies created by the resignation, removal, or death of a director elected pursuant to Section 2.1 shall be filled pursuant to the provisions of this Section 2. All Stockholders agree to execute any written consents required to perform the obligations of this Section 2, and the Company agrees at the request of any party entitled to designate directors to call a special meeting of stockholders for the purpose of electing directors.
3.1 Notice of Registration. If at any time after the date of this Agreement the Company proposes to register any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than (a) a registration relating solely to the sale of securities to participants in a Company stock plan, (b) a registration relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act, (c) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or (d) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered), the Company shall promptly give each Holder written notice of such registration (a "Piggyback Notice"). Upon the written request of each Holder given within twenty (20) days after delivery of such Piggyback Notice by the Company, the Company shall, subject to the provisions of Section 3.2, cause to be registered under the Securities Act all of the Registrable Securities that each such Holder has requested to be included in such registration.
3.2 Underwriting and Priority. If the registration of which the Company gives notice under Section 3.1 is a registered public offering involving an underwriting, the Company shall so advise each Holder in the Piggyback Notice. In such event, the right of any Holder to include its Registrable Securities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders proposing to distribute their Registrable Securities through such underwriting shall enter into an underwriting agreement in customary form with the managing underwriter or underwriters selected for such underwriting. Notwithstanding any other provision of this Agreement, if the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of shares to be underwritten, then the Company shall so advise all Holders of Registrable Securities that would otherwise be included in such registration, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders in the following priority: (a) first, to the Company for securities being sold for its own account; (b) second, to each of the Holders requesting inclusion of their Registrable Securities in such registration, pro rata among such Holders on the basis of the number of Registrable Securities owned by each such Holder relative to the number of Registrable Securities owned by all such Holders requesting inclusion; and (c) third, to any other stockholder of the Company whose securities have been requested to be included in such registration.
3.3 Right of Withdrawal. Any Holder shall have the right to withdraw such Holder’s request for inclusion of its Registrable Securities in any registration statement pursuant to this Section 3 by giving written notice to the Company of such withdrawal at least five (5) business days prior to the planned effective date of such registration statement. The Company (or, in the event the Company elects to withdraw the registration statement, the managing underwriter) may, without the consent of the Holders, withdraw a registration statement at any time before it becomes effective.
3.4 No Obligation to Proceed. The Company shall have no obligation to proceed with any offering described in Section 3.1 and may, at any time and in its sole discretion, abandon the proposed offering in which Holders have requested to participate. No such abandonment shall affect the Holders’ rights under Section 2.
4.3 Capitalization. The authorized capital stock of the Company, immediately prior to the Closing, consists of (a) [NUMBER] shares of Common Stock, par value $0.0001 per share, of which [NUMBER] shares are issued and outstanding, and (b) [NUMBER] shares of Preferred Stock, par value $0.0001 per share, of which [NUMBER] shares have been designated as Series Seed Preferred Stock, none of which are issued and outstanding. All issued and outstanding shares of Common Stock have been duly authorized, validly issued, are fully paid and nonassessable, and were issued in compliance with all applicable federal and state securities laws. The Company has reserved (i) [NUMBER] shares of Common Stock for issuance upon conversion of the Shares, and (ii) [NUMBER] shares of Common Stock for issuance to employees, consultants, officers, and directors of the Company pursuant to the Company’s [YEAR] Equity Incentive Plan (the "Option Plan"), of which [NUMBER] shares are subject to outstanding options or other equity awards and [NUMBER] shares remain available for future grant. There are no outstanding convertible notes, SAFEs (Simple Agreements for Future Equity), warrants, options, or other rights to acquire any equity securities of the Company other than as described herein and on the Disclosure Schedule. The Company is not a party to or bound by any agreements or arrangements providing for anti-dilution protection, preemptive rights, rights of first refusal, co-sale rights, or registration rights, other than pursuant to the Related Agreements.
4.3.1 Fully-Diluted Capitalization. For purposes of this Agreement, the "Fully-Diluted Share Count" means, as of any date of determination, the sum of (a) all shares of Common Stock then issued and outstanding, plus (b) all shares of Common Stock issuable upon conversion of all shares of Preferred Stock then outstanding (assuming conversion at the then-applicable conversion price), plus (c) all shares of Common Stock issuable upon exercise or conversion of all options, warrants, convertible notes, SAFEs, and other convertible or exercisable securities then outstanding (whether or not then vested or exercisable), plus (d) all shares of Common Stock reserved and available for future issuance under the Option Plan and any other equity incentive plan of the Company (the "Option Pool Reserve"). The Fully-Diluted Share Count as of immediately following the Closing (giving effect to the issuance of the Shares and the Option Pool Reserve) is set forth on the capitalization table attached to the Disclosure Schedule as Schedule 4.3.1. The Option Pool Reserve, immediately following the Closing, shall represent not less than [NUMBER] percent ([NUMBER]%) of the Fully-Diluted Share Count, and the Company represents that the Option Pool Reserve is unallocated and available for future grants to employees, consultants, officers, and directors as determined by the Board (the "Option Pool Waterfall"). The Option Pool Waterfall shall be calculated as follows: total shares reserved under the Option Plan, minus shares subject to outstanding and unexercised options, minus shares subject to outstanding and unvested restricted stock awards, minus shares previously exercised or settled, equals the Option Pool Reserve available for future grant.
2.5 Observer Rights. As long as [INVESTOR NAME] (the "Lead Investor") holds at least [NUMBER OR PERCENTAGE] of the shares of Series [_] Preferred Stock purchased by such Investor pursuant to the Purchase Agreement (as adjusted for stock splits, stock dividends, recapitalizations, and similar events), the Company shall invite a representative designated by the Lead Investor (the "Observer") to attend all meetings of the Board of Directors and all committees thereof in a nonvoting, observer capacity and, in this respect, shall provide the Observer with copies of all notices, minutes, consents, and other materials (whether in written, electronic, or other form) that it provides to its directors at the same time and in the same manner as provided to such directors, provided, however, that such Observer shall agree to hold in confidence and trust and to act in a fiduciary manner with respect to all information so provided, and provided further that the Company reserves the right to withhold any information and to exclude the Observer from any meeting or portion thereof if the Board of Directors determines in good faith that access to such information or attendance at such meeting would adversely affect the attorney-client privilege between the Company and its counsel or create a conflict of interest. The Company shall reimburse the Observer for all reasonable out-of-pocket travel expenses incurred in connection with attending meetings of the Board of Directors or any committee thereof.
2.6 Board Committee Composition. The Board of Directors shall have a Compensation Committee and an Audit Committee, each of which shall have at least one Preferred Director as a member. The Compensation Committee shall be responsible for reviewing and approving executive compensation and equity incentive grants. The Audit Committee shall be composed of at least one Independent Director and shall oversee the Company’s financial reporting and internal controls. The Board of Directors may establish such additional committees as it deems necessary or appropriate from time to time, and the composition of each such committee shall be determined by the Board of Directors with due consideration of the designation rights set forth in this Section 2.
2.7 Matters Requiring Board Approval. The Company shall not, without the prior approval of the Board of Directors, which approval shall include the affirmative vote of at least [one/a majority of] the Preferred Director(s) then serving on the Board of Directors: (a) make any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company; (b) make any loan or advance to any Person, including, without limitation, any employee or director of the Company, except advances in the ordinary course of business and advances for travel expenses; (c) guarantee any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business; (d) make any investment other than investments in prime commercial paper, money market funds, certificates of deposit in any United States bank having net assets in excess of $100,000,000, or obligations issued or guaranteed by the United States of America or any state thereof; (e) incur any aggregate indebtedness in excess of $[_] that is not already included in a budget approved by the Board of Directors, other than trade credit incurred in the ordinary course of business; (f) enter into or be a party to any transaction with any director, officer, or employee of the Company or any "associate" or "affiliate" of any such Person (as such terms are defined in the rules promulgated under the Securities Act), except for transactions contemplated by this Agreement, the Purchase Agreement, or any related agreements, or transactions made in the ordinary course of business at arm’s length terms and approved by a majority of the disinterested members of the Board of Directors; (g) hire, terminate, or change the compensation of any executive officer, including approving any option grants to such executive officers; (h) change the principal business of the Company, enter new lines of business, or exit the current line of business; or (i) sell, assign, license, pledge, or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business.
2.8 "Stockholder" shall mean any holder of Shares who is a party to this Agreement, including, without limitation, each Investor and each Key Holder.
4.4 Intellectual Property. The Company owns or possesses sufficient legal rights to all Intellectual Property (as defined in Section 12) that is necessary to conduct its business as presently conducted and as proposed to be conducted, without any known infringement or violation of, or conflict with, the rights of others. To the Company’s knowledge, no product or service marketed, sold, or provided by the Company violates, infringes, or misappropriates any intellectual property right of any third party. No claims are pending or, to the Company’s knowledge, threatened by any person or entity challenging the Company’s right to use any Intellectual Property owned by or licensed to the Company. Each current and former employee, officer, consultant, and independent contractor of the Company who has contributed to the development of any Intellectual Property on behalf of the Company has executed a written agreement assigning to the Company all rights in and to such Intellectual Property. The Company has taken commercially reasonable steps to protect and maintain the confidentiality of its trade secrets and other proprietary information.
4.5 Litigation. There is no action, suit, claim, proceeding, or investigation pending or, to the Company’s knowledge, currently threatened in writing against the Company that questions the validity of this Agreement or the Related Agreements, or the right of the Company to enter into such agreements, or that might result, either individually or in the aggregate, in a Material Adverse Effect or in any material change in the current equity ownership of the Company. The Company is not a party to or, to the Company’s knowledge, subject to the provisions of any order, writ, injunction, judgment, or decree of any court or government agency or instrumentality. There is no action, suit, proceeding, or investigation by the Company pending or that the Company currently intends to initiate.
4.6 Compliance with Laws. The Company is not in violation of any applicable statute, rule, regulation, order, or restriction of any domestic or foreign government or any instrumentality or agency thereof having jurisdiction over the Company or its properties or assets, the violation of which would have a Material Adverse Effect. The Company has all franchises, permits, licenses, and similar authority necessary for the conduct of its business as presently conducted, the lack of which would have a Material Adverse Effect, and the Company is not in default under any of such franchises, permits, licenses, or similar authority.
4.7 Financial Statements. The Company has made available to each Purchaser its unaudited financial statements, including a balance sheet and statement of operations and cash flows (collectively, the "Financial Statements"), for the fiscal periods ending on [DATE]. The Financial Statements are complete and correct in all material respects and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP") applied on a consistent basis throughout the periods indicated, except that the Financial Statements may not contain all footnotes required by GAAP and are subject to normal year-end audit adjustments, which are not expected to be material. The Financial Statements fairly present in all material respects the financial condition and operating results of the Company as of the dates, and for the periods, indicated therein.
4.1 Request for Form S-3 Registration. After the Company has qualified for the use of Form S-3, the Holders of not less than twenty percent (20%) of the Registrable Securities then outstanding may request in writing that the Company effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by such Holder or Holders. Such request shall specify the number of Registrable Securities proposed to be sold and the intended method of disposition thereof.
4.2 Procedures. Upon receipt of a request under Section 4.1, the Company shall (a) promptly give written notice of the proposed registration and the Holder’s or Holders’ request therefor, and any related qualification or compliance, to all other Holders, and (b) as soon as practicable, use commercially reasonable efforts to effect such registration and all such qualifications and compliances as may be so requested and as would permit or facilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all or such portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given to the Company within fifteen (15) days after delivery of such written notice from the Company.
4.3 Minimum Threshold. The Company shall not be obligated to effect any such registration, qualification, or compliance pursuant to this Section 4 if the Registrable Securities requested to be registered have an anticipated aggregate offering price (net of Selling Expenses) of less than one million dollars ($1,000,000).
4.4 Limitations. The Company shall not be obligated to effect more than two (2) registrations on Form S-3 pursuant to this Section 4 in any twelve (12) month period. A registration on Form S-3 shall not be counted as a demand registration under Section 2.
4.5 Deferral. The Company shall have the right to defer the filing of a Form S-3 registration statement under this Section 4 under the same conditions and subject to the same limitations as set forth in Section 2.4.
5.1 Company Obligation. All Registration Expenses incurred in connection with any registration, qualification, or compliance pursuant to Sections 2, 3, or 4 of this Agreement shall be borne by the Company. All Selling Expenses relating to Registrable Securities registered pursuant to this Agreement shall be borne by the Holders of such Registrable Securities pro rata on the basis of the number of Registrable Securities registered on their behalf.
5.2 Allocation. If a registration proceeding pursuant to Section 2 or Section 4 is withdrawn at the request of the Initiating Holders (other than as a result of information concerning the business or financial condition of the Company that is made known to the Holders after the date on which such registration was requested) and if the Initiating Holders elect not to have such registration counted as a registration requested under Section 2 or Section 4 (as applicable), the Holders requesting such withdrawal shall bear the Registration Expenses of such registration on a pro rata basis based on the number of Registrable Securities for which registration was requested; provided, however, that if at the time of such withdrawal the Holders shall have learned of a material adverse change in the condition, business, or prospects of the Company from that known to the Holders at the time of their request and have withdrawn the request with reasonable promptness after learning of such material adverse change, then the Holders shall not be required to pay any of such Registration Expenses and such withdrawal shall not be counted as a registration.
3.1 Obligation to Vote. Each Stockholder agrees to vote, or cause to be voted, all Shares owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner as shall be necessary to increase the number of authorized shares of Common Stock or Preferred Stock from time to time to ensure that there will be sufficient shares of Common Stock available for conversion of all of the shares of Preferred Stock outstanding at any given time and for the exercise of all options, warrants, and other convertible securities of the Company outstanding at any given time.
3.2 The obligation set forth in Section 3.1 shall include, without limitation, voting (a) to increase the authorized number of shares of Common Stock to an amount sufficient to permit the conversion of all outstanding shares of Preferred Stock, (b) to increase the authorized number of shares of Common Stock or Preferred Stock to an amount sufficient to permit the issuance of shares of Common Stock or Preferred Stock upon exercise of all outstanding options, warrants, and other convertible securities, and (c) to increase the authorized number of shares of any class or series of capital stock as may be required in connection with any financing or other transaction approved by the Board of Directors and the Requisite Holders.
3.3 Nothing in this Section 3 shall be construed to require any Stockholder to exercise any option, warrant, or other convertible security, or to require any Stockholder to approve any amendment to the Restated Certificate that would adversely affect such Stockholder’s rights, preferences, or privileges in a manner that is disproportionate to the effect on other holders of the same class or series of capital stock, except to the extent necessary to increase the authorized number of shares as described in Sections 3.1 and 3.2.
4.8 Material Contracts. The Company has made available to each Purchaser true, correct, and complete copies of all material contracts, agreements, and instruments to which the Company is a party or by which it is bound (the "Material Contracts"). Each Material Contract is valid, binding, and in full force and effect and enforceable in accordance with its terms. Neither the Company nor, to the Company’s knowledge, any other party to any Material Contract is in breach of or default under any Material Contract, and no event has occurred that with notice or lapse of time, or both, would constitute a breach or default thereunder.
4.9 Tax Matters. The Company has timely filed all federal, state, local, and foreign tax returns required to be filed by it (all such returns being accurate and complete in all material respects), and the Company has paid all taxes, assessments, and other governmental charges due and payable in respect of the periods covered by such returns. No deficiency or adjustment for any taxes has been proposed, asserted, or assessed in writing against the Company that has not been resolved and paid in full. There are no liens for taxes upon any assets of the Company, other than statutory liens for taxes not yet due and payable. The Company has not been notified in writing that any taxing authority intends to audit or examine any tax return of the Company. The Company has withheld and paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party. The Company is not a party to any tax sharing, tax indemnity, or tax allocation agreement.
4.10 Employee Matters. The Company is not bound by or subject to any collective bargaining agreement or other contract or arrangement with any labor union or organization. To the Company’s knowledge, there are no pending or threatened labor disputes, work stoppages, or strikes against the Company. The Company is in compliance in all material respects with all applicable laws relating to employment and employment practices, including terms and conditions of employment, wages, hours, equal opportunity, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and immigration. The Company has complied in all material respects with the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and the rules and regulations thereunder, and no liability has been or is expected to be incurred under Title IV of ERISA by the Company. To the Company’s knowledge, no officer, director, or key employee of the Company has any present intention of terminating his or her employment or engagement with the Company.
4.11 Environmental Compliance. The Company is in compliance in all material respects with all applicable Environmental Laws (as defined in Section 12). The Company has not received any written notice of any pending or threatened claim, action, or proceeding relating to any Environmental Law. No hazardous substances have been released, discharged, or disposed of by the Company on, at, under, or from any property currently or formerly owned, operated, or leased by the Company in violation of any Environmental Law.
4.12 Subsidiaries. The Company does not currently own or control, directly or indirectly, any interest in any other corporation, partnership, limited liability company, association, joint venture, or other business entity, except as set forth on the Disclosure Schedule.
4.13 No Brokers. The Company has not incurred, and will not incur, directly or indirectly, any liability for brokerage or finders’ fees or agents’ commissions or investment bankers’ fees or any similar charges in connection with this Agreement or any transaction contemplated hereby.
4.1 Investor Protective Provisions. For so long as any shares of Preferred Stock remain outstanding, the Company shall not, and shall cause its subsidiaries not to, without the prior written consent of the holders of at least [a majority / [_]%] of the shares of Preferred Stock then outstanding, voting together as a single class on an as-converted basis (the "Investor Majority"):
(a) amend, alter, or repeal any provision of the Restated Certificate or the Company’s bylaws (the "Bylaws") in a manner that adversely affects the powers, preferences, or rights of the Preferred Stock;
(b) create, authorize, or issue any new class or series of capital stock having rights, preferences, or privileges senior to, or on parity with, the Preferred Stock, or increase the authorized number of shares of Preferred Stock (or any series thereof), or reclassify any outstanding shares of capital stock into shares having rights, preferences, or privileges senior to, or on parity with, the Preferred Stock;
(c) declare or pay any dividend on, or make any other distribution with respect to, any class or series of capital stock (other than dividends payable solely in shares of Common Stock), or redeem, purchase, or otherwise acquire (or pay into or set aside any sinking fund for such purpose) any shares of capital stock of the Company; provided, however, that this restriction shall not apply to (i) the repurchase of shares of Common Stock from employees, officers, directors, consultants, or other persons performing services for the Company or any subsidiary upon termination of their employment or service pursuant to agreements providing for the right of said repurchase at cost or at the lower of cost or fair market value, or (ii) the repurchase of shares of Common Stock issued to or held by any Stockholder in connection with a bona fide equity incentive plan approved by the Board of Directors;
(d) effect any Liquidation Event, Change of Control, or Sale of the Company (as defined in Section 5.1), or consent to any of the foregoing;
(e) increase or decrease the authorized number of members of the Board of Directors;
(f) create or hold capital stock in, or acquire any interest in, any subsidiary that is not wholly owned (directly or indirectly) by the Company, or sell, transfer, or otherwise dispose of any capital stock of any wholly owned subsidiary of the Company, or permit any subsidiary to sell or issue any capital stock or other securities;
4.14 Qualified Small Business Stock. The Company represents and warrants that, as of immediately following the Closing, the Company shall qualify as a "qualified small business" within the meaning of Section 1202(d) of the Internal Revenue Code of 1986, as amended (the "Code"), and the Shares shall constitute "qualified small business stock" ("QSBS") within the meaning of Section 1202(c) of the Code. Without limiting the generality of the foregoing, the Company represents that (a) as of the Closing Date, the aggregate gross assets of the Company (as defined in Section 1202(d)(2) of the Code), including the proceeds received pursuant to this Agreement, have not exceeded Seventy-Five Million Dollars ($75,000,000), (b) the Company is a domestic C corporation that is not an ineligible corporation within the meaning of Section 1202(e)(4) of the Code, (c) at least eighty percent (80%) of the value of the assets of the Company is used in the active conduct of one or more qualified trades or businesses within the meaning of Section 1202(e)(3) of the Code, and (d) the Company has not made any redemptions described in Section 1202(c)(3) of the Code during the two-year period preceding the Closing Date. The Company shall use commercially reasonable efforts to ensure that the Shares continue to constitute QSBS, including by providing to each Purchaser, upon reasonable request, such information as may be necessary to confirm the QSBS status of the Shares. The Company shall notify each Purchaser promptly in writing if the Company becomes aware of any event or circumstance that would cause the Shares to fail to qualify as QSBS.
6.1 Company Obligations. Whenever required under this Agreement to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably possible: (a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use commercially reasonable efforts to cause such registration statement to become effective and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep such registration statement effective for a period of up to one hundred twenty (120) days or, if earlier, until the distribution contemplated in the registration statement has been completed; provided, however, that such one hundred twenty (120) day period shall be extended for a period of time equal to the period during which the Holder refrains from selling any securities included in such registration at the request of an underwriter of Common Stock (or other securities) of the Company; (b) prepare and file with the SEC such amendments and supplements to such registration statement, and the prospectus used in connection with such registration statement, as may be necessary to comply with the Securities Act in order to enable the disposition of all securities covered by such registration statement; (c) furnish to the Holders such number of copies of a prospectus, including a preliminary prospectus, as required by the Securities Act, and such other documents as the Holders may reasonably request in order to facilitate their disposition of their Registrable Securities; (d) use commercially reasonable efforts to register and qualify the securities covered by such registration statement under such other securities or blue sky laws of such jurisdictions as shall be reasonably requested by the Holders; provided, however, that the Company shall not be required to qualify to do business or to file a general consent to service of process in any such states or jurisdictions, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; (e) in the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual and customary form, with the underwriter(s) of such offering; (f) use commercially reasonable efforts to cause all such Registrable Securities covered by such registration statement to be listed on a national securities exchange or trading system and on each securities exchange and trading system on which similar securities issued by the Company are then listed; (g) provide a transfer agent and registrar for all Registrable Securities registered pursuant to this Agreement and provide a CUSIP number for all such Registrable Securities, in each case not later than the effective date of such registration; and (h) use commercially reasonable efforts to comply with all applicable rules and regulations of the Financial Industry Regulatory Authority ("FINRA").
6.2 Information from Holders. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 6 with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as is reasonably required to effect the registration of such Holder’s Registrable Securities.
6.3 Rule 144 Reporting. With a view to making available to the Holders the benefits of Rule 144 under the Securities Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration or pursuant to a registration on Form S-3, the Company shall: (a) make and keep available adequate current public information, as those terms are understood and defined in Rule 144, at all times after the effective date of the registration statement filed by the Company for the IPO; (b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and (c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request, (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act, and the Exchange Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the SEC that permits the selling of any such securities without registration or pursuant to Form S-3.
6.4 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Agreement may be assigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities that (a) is an Affiliate of, or Immediate Family Member of, or trust for the benefit of, such Holder, (b) is a Holder’s Affiliate, partner, member, retired partner, retired member, stockholder, or other equity holder, or (c) after such assignment or transfer, holds at least such number of shares of Registrable Securities (subject to appropriate adjustment for stock splits, stock dividends, combinations, capitalizations, and similar events) as set forth on Schedule 1 hereto; provided, however, that (i) the Company is, within a reasonable time after such transfer, furnished with written notice of the name and address of such transferee or assignee and the Registrable Securities with respect to which such registration rights are being assigned, (ii) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including the provisions of Section 10 below, and (iii) such assignment shall be effective only if immediately following such transfer the further disposition of such securities by the transferee or assignee is restricted under the Securities Act.
(g) incur, assume, or guarantee any indebtedness for borrowed money in excess of $[_] individually, or $[_] in the aggregate, other than equipment financing, trade credit, and similar obligations incurred in the ordinary course of business;
(h) enter into, amend, or terminate any transaction or agreement with any officer, director, founder, or stockholder holding more than [_]% of the Company’s outstanding capital stock (on an as-converted basis), or any Affiliate of the foregoing, other than (i) at-will employment arrangements in the ordinary course of business, (ii) transactions contemplated by the Purchase Agreement, this Agreement, and the other transaction documents, and (iii) transactions approved by a majority of the disinterested members of the Board of Directors on arm’s length terms;
(i) increase the number of shares of Common Stock reserved for issuance under the Company’s equity incentive plan(s) (collectively, the "ESOP") beyond the ESOP pool approved in connection with the Purchase Agreement, or modify the terms of the ESOP in any material respect, including, without limitation, any change to the vesting schedule applicable to options granted thereunder;
(j) make any change to the Company’s independent registered public accounting firm;
(k) effect any voluntary dissolution, liquidation, or winding up of the Company;
(l) pay, declare, or set apart for payment any dividend or other distribution (in cash, property, or otherwise) on any shares of capital stock of the Company, or directly or indirectly redeem, purchase, or otherwise acquire any shares of the Company’s capital stock, other than repurchases of Common Stock from former employees, consultants, or officers of the Company at no greater than the original purchase price thereof pursuant to repurchase agreements approved by the Board of Directors; or
(m) enter into any agreement, commitment, or arrangement to do any of the foregoing.
4.2 Key Holder Protective Provisions. For so long as the Key Holders collectively hold at least [_]% of the shares of Common Stock (on an as-converted basis) held by them as of the date of this Agreement, the Company shall not, and shall cause its subsidiaries not to, without the prior written consent of the holders of a majority of the shares of Common Stock then held by the Key Holders: (a) amend, alter, or repeal any provision of the Restated Certificate or the Bylaws in a manner that disproportionately and adversely affects the rights of the Common Stock relative to the Preferred Stock; (b) increase the aggregate number of shares reserved for issuance under the Company’s equity incentive plans by more than [_]% in any twelve-month period; or (c) take any action that would result in the taxation of the Key Holders under Section 409A of the Internal Revenue Code of 1986, as amended (the "Code").
4.3 Scope of Protective Provisions. The protective provisions set forth in this Section 4 are in addition to, and not in limitation of, any protective provisions set forth in the Restated Certificate or applicable law. To the extent that the Restated Certificate contains protective provisions that are more restrictive than those set forth herein, the provisions of the Restated Certificate shall control. To the extent that this Agreement contains protective provisions that are more restrictive than those set forth in the Restated Certificate, the provisions of this Agreement shall control, and the Company and the Stockholders shall take all necessary actions to give effect to the protective provisions of this Agreement.
4.15 Outbound Investment Security Program Compliance. The Company represents and warrants that (a) the Company is not a "covered foreign person" as defined under the Outbound Investment Security Program regulations promulgated pursuant to Executive Order 14105 (as amended, the "OISP Regulations"), (b) the Company does not engage in, and the proceeds from the sale of the Shares will not be used directly or indirectly to engage in, any "prohibited transaction" or "notifiable transaction" (each as defined in the OISP Regulations), (c) the Company is not a "person of a country of concern" (as defined in the OISP Regulations), and (d) to the extent the Company is engaged in the development or production of (i) artificial intelligence systems, (ii) semiconductors or microelectronics, or (iii) quantum information science or technology (collectively, "Covered Technology Sectors"), the Company’s activities in such Covered Technology Sectors do not constitute activities that would be subject to the prohibitions or notification requirements of the OISP Regulations. The Company shall promptly notify each Purchaser in writing if the Company becomes aware that any of the foregoing representations has become inaccurate or if the Company’s activities become subject to the OISP Regulations.
4.16 Data Security Program Compliance. The Company represents and warrants that (a) the Company is in compliance in all material respects with all applicable data privacy and data security laws, regulations, and orders, including, to the extent applicable, the regulations promulgated pursuant to Executive Order 14117 regarding access to Americans’ bulk sensitive personal data and United States Government-related data by countries of concern (the "DSP Regulations"), (b) the Company does not engage in any "covered data transaction" (as defined in the DSP Regulations) that would be prohibited or restricted under the DSP Regulations, (c) to the extent the Company collects, processes, stores, or transfers (i) bulk personal data (including, without limitation, human genomic data, biometric identifiers, precise geolocation data, personal health data, or personal financial data) or (ii) human genomic data of any quantity, in each case as such terms are defined in the DSP Regulations, the Company has implemented and maintains commercially reasonable administrative, technical, and physical safeguards to protect such data in compliance with all applicable laws and regulations, and (d) the Company has not received any written notice from any governmental authority alleging any violation of applicable data privacy or data security laws, regulations, or orders. For the avoidance of doubt, the Company’s compliance obligations under this Section 4.16 are in addition to, and not in limitation of, the Company’s obligations under Section 4.6 (Compliance with Laws).
5.1 Drag-Along Obligation. In the event that (a) the holders of at least [a majority / [_]%] of the shares of Preferred Stock then outstanding (voting together as a single class on an as-converted basis), (b) the holders of a majority of the shares of Common Stock then held by the Key Holders, and (c) the Board of Directors (including at least [one / a majority of] the Preferred Director(s) then serving) (collectively, the "Electing Holders") approve a Sale of the Company in writing, specifying that this Section 5 shall apply to such transaction (a "Drag-Along Sale"), then each Stockholder and the Company hereby agree:
(a) if such Drag-Along Sale requires stockholder approval, each Stockholder shall vote (in person, by proxy, or by action by written consent, as applicable) all Shares held by such Stockholder in favor of, and adopt, such Drag-Along Sale, and in favor of any related amendment to the Restated Certificate or other corporate action required in connection therewith;
(b) if such Drag-Along Sale is structured as a stock sale, each Stockholder shall agree to sell all of such Stockholder’s Shares and rights to acquire Shares on the terms and conditions set forth in the applicable definitive agreement(s) relating to such Drag-Along Sale;
(c) each Stockholder shall execute and deliver all related documentation and take such other action in support of the Drag-Along Sale as shall be reasonably requested by the Company or the Electing Holders in order to carry out the terms and provisions of this Section 5, including, without limitation, executing and delivering instruments of conveyance and transfer, executing any purchase agreement, merger agreement, indemnity agreement, escrow agreement, consent, waiver, or other document or agreement, and voting or giving a written consent or proxy with respect to any Shares held by such Stockholder; and
(d) each Stockholder shall refrain from exercising any dissenters’ rights, appraisal rights, or similar rights under applicable law in connection with such Drag-Along Sale.
5.2 Sale of the Company. For purposes of this Section 5, a "Sale of the Company" shall mean either: (a) a transaction or series of related transactions in which a Person, or a group of related Persons, acquires from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company (a "Stock Sale"); or (b) a transaction that qualifies as a Change of Control.
Each Purchaser, severally and not jointly, hereby represents and warrants to the Company as of the date of this Agreement and as of the Closing Date as follows.
5.1 Authorization. Such Purchaser has all requisite power and authority to execute and deliver this Agreement and the Related Agreements to which it is a party and to carry out the provisions of this Agreement and such Related Agreements. All action on the part of such Purchaser and, if applicable, its officers, directors, partners, managers, and members, as applicable, necessary for the authorization, execution, and delivery of this Agreement and such Related Agreements, and the performance of all obligations of such Purchaser hereunder and thereunder, has been taken. This Agreement and each Related Agreement to which such Purchaser is a party, when executed and delivered by such Purchaser, shall constitute valid and legally binding obligations of such Purchaser, enforceable in accordance with their respective terms, except as limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and other laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (b) laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
5.2 Investment Intent. Such Purchaser is acquiring the Shares for investment for its own account, not as a nominee or agent, and not with a view to, or for resale in connection with, any distribution or public offering thereof within the meaning of the Securities Act of 1933, as amended (the "Securities Act"). Such Purchaser has no present intention of selling, granting any participation in, or otherwise distributing the Shares. Such Purchaser does not presently have any contract, undertaking, agreement, or arrangement with any person to sell, transfer, or grant any participation in the Shares to such person or to any third person. Such Purchaser understands that the Shares have not been, and will not be, registered under the Securities Act, by reason of a specific exemption from the registration provisions of the Securities Act, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of such Purchaser’s representations as expressed herein.
5.3 Accredited Investor Status. Such Purchaser is an "accredited investor" as defined in Rule 501(a) of Regulation D promulgated under the Securities Act, as presently in effect. Such Purchaser is able to bear the economic risk of holding the Shares for an indefinite period, and has the ability to absorb a complete loss of its investment in the Shares. Such Purchaser has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Shares.
7.1 Indemnification by the Company. To the extent permitted by law, the Company will indemnify and hold harmless each Holder, and the partners, members, officers, directors, managers, employees, and agents of each such Holder, and each Person, if any, who controls such Holder within the meaning of the Securities Act or the Exchange Act (each, an "Indemnified Holder"), against any Damages, and the Company will pay to each Indemnified Holder any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 7.1 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Company, which consent shall not be unreasonably withheld, conditioned, or delayed, nor shall the Company be liable for any Damages to the extent that they arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of any Indemnified Holder expressly for use in connection with such registration.
7.2 Indemnification by Holders. To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, and each of its directors, each of its officers who has signed the registration statement, each Person (if any) who controls the Company within the meaning of the Securities Act or the Exchange Act, legal counsel and accountants for the Company, any underwriter, any other Holder selling securities in such registration statement, and any controlling Person of any such underwriter or other Holder, against any Damages, in each case only to the extent that such Damages arise out of or are based upon actions or omissions made in reliance upon and in conformity with written information furnished by or on behalf of such selling Holder expressly for use in connection with such registration; and each such selling Holder will pay to each person intended to be indemnified under this Section 7.2 any legal or other expenses reasonably incurred thereby in connection with investigating or defending any such claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this Section 7.2 shall not apply to amounts paid in settlement of any such claim or proceeding if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld, conditioned, or delayed; and provided further that in no event shall the aggregate amounts payable by any Holder by way of indemnity or contribution under Sections 7.2 and 7.4 exceed the net proceeds to such Holder from the sale of Registrable Securities sold by such Holder in the relevant registration (after deducting any Selling Expenses borne by such Holder).
7.3 Notice and Defense. Each Person entitled to indemnification under this Section 7 (an "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any litigation resulting therefrom; provided, however, that counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not be unreasonably withheld, conditioned, or delayed); and provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 7 to the extent that such failure to give notice did not result in material prejudice to the Indemnifying Party. The Indemnified Party may participate in such defense at such party’s expense unless (a) the Indemnifying Party has agreed in writing to pay such expenses, (b) the Indemnifying Party shall have failed to promptly assume the defense of such claim and employ counsel reasonably satisfactory to the Indemnified Party, or (c) the named parties to any such action (including any impleaded parties) include both the Indemnified Party and the Indemnifying Party, and the Indemnified Party shall have been advised by counsel that a conflict of interest is likely to exist if the same counsel were to represent both the Indemnified Party and the Indemnifying Party. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation.
7.4 Contribution. If the indemnification provided for in Sections 7.1 and 7.2 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any Damages, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder, shall contribute to the amount paid or payable by such Indemnified Party as a result of such Damages in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such Damages, as well as any other relevant equitable considerations; provided, however, that no contribution by any selling Holder, when combined with any amounts paid by such selling Holder pursuant to Section 7.2, shall exceed the net proceeds from the offering received by such selling Holder (after deducting any Selling Expenses borne by such selling Holder), except in the case of willful misconduct or fraud by such selling Holder. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.
5.3 Conditions to Drag-Along Obligation. The obligations of the Stockholders under this Section 5 with respect to a Drag-Along Sale are subject to the satisfaction of each of the following conditions: (a) the consideration to be received by each Stockholder shall be allocated among the Stockholders on the basis of, and in accordance with, the relative liquidation preferences and distribution rights of the Preferred Stock and Common Stock as set forth in the Restated Certificate, as if such consideration were being distributed in a Liquidation Event; (b) if any stockholders of the Company are given an option as to the form and amount of consideration to be received in connection with the Drag-Along Sale, all Stockholders will be given the same option; (c) if any Stockholder is required to provide any representations, warranties, or indemnification obligations in connection with such Drag-Along Sale (other than representations and warranties as to authority, ownership, and the absence of encumbrances), the liability for such representations, warranties, and indemnification obligations shall be allocated among the Stockholders on a pro rata basis based on the consideration received by each Stockholder (or, in the case of indemnification, shall be satisfied from an escrow funded from the aggregate consideration on a pro rata basis), and in no event shall any Stockholder’s liability for indemnification exceed the net proceeds actually received by such Stockholder in connection with such Drag-Along Sale (excluding any liability of a Stockholder resulting from such Stockholder’s fraud, willful misrepresentation, or breach of any covenant or obligation that is specific to such Stockholder);
(d) if any Stockholder is required to enter into a noncompetition, nonsolicitation, or similar restrictive covenant agreement in connection with such Drag-Along Sale, (i) such agreement shall not exceed [_] months in duration, and (ii) such Stockholder shall receive separate and adequate consideration for entering into such agreement (provided that this clause (d) shall not apply to any employee or consultant of the Company who is separately compensated for such agreement); and (e) the Drag-Along Sale shall not require any Stockholder to make any out-of-pocket expenditure (excluding immaterial costs incurred in connection with the execution and delivery of documentation), and the fees and expenses of any legal counsel or other advisors retained in connection with the Drag-Along Sale shall be allocated among the Stockholders on a pro rata basis based on the consideration received or, at the Company’s election, borne by the Company.
5.4 No Public Market. Such Purchaser understands that no public market now exists for the Shares, and that the Company has made no assurances that a public market will ever exist for the Shares. Such Purchaser acknowledges that the Shares must be held indefinitely unless subsequently registered under the Securities Act or an exemption from such registration is available.
5.5 Access to Information. Such Purchaser has had the opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Shares and the business, properties, prospects, and financial condition of the Company. Such Purchaser has received and reviewed all information that it considers necessary or appropriate for deciding whether to purchase the Shares. The foregoing, however, does not limit or modify the representations and warranties of the Company in Section 4 of this Agreement or the right of the Purchasers to rely thereon.
5.6 No General Solicitation. Such Purchaser is not purchasing the Shares as a result of any advertisement, article, notice, or other communication regarding the Shares published in any newspaper, magazine, or similar media, broadcast over television, radio, or the internet (including any website or social media post), or presented at any seminar or any other general solicitation or general advertising. Such Purchaser’s investment decision is based solely on its own independent evaluation and analysis.
5.7 OISP Compliance. Such Purchaser represents and warrants that (a) such Purchaser is not a "person of a country of concern" or a "controlled foreign entity" (each as defined in the OISP Regulations), (b) the funds used by such Purchaser to acquire the Shares do not originate from, and are not controlled by, any person of a country of concern, (c) such Purchaser’s acquisition of the Shares does not constitute a "prohibited transaction" or a "notifiable transaction" (each as defined in the OISP Regulations), and (d) if such Purchaser is an entity, no person of a country of concern holds, directly or indirectly, a controlling interest in such Purchaser. If, following the Closing, such Purchaser becomes aware that any of the foregoing representations has become inaccurate, such Purchaser shall promptly notify the Company in writing.
5.8 DSP Compliance. Such Purchaser represents and warrants that (a) such Purchaser is not a "covered person" (as defined in the DSP Regulations) and is not owned or controlled by, or acting as an agent of, any country of concern or covered person, and (b) such Purchaser’s acquisition of the Shares, and the exercise of any governance, information, or other rights attendant thereto, will not result in a "covered data transaction" that is prohibited or restricted under the DSP Regulations.
8.1 Participation. No Person may participate in any registration hereunder that is underwritten unless such Person (a) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled to approve such arrangements (including the provisions regarding indemnification and contribution contained therein), and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, lock-up agreements, and other documents required under the terms of such underwriting arrangements.
8.2 Selection of Underwriters. In the case of any underwritten offering pursuant to a demand registration under Section 2, the managing underwriter or underwriters shall be selected by the Initiating Holders, subject to the reasonable consent of the Company. In the case of any underwritten offering pursuant to a piggyback registration under Section 3, the managing underwriter or underwriters shall be selected by the Company.
8.3 Cutback. Notwithstanding any other provision of this Agreement, if the underwriter(s) advise(s) the Company in writing that marketing factors require a limitation of the number of securities to be underwritten pursuant to a registration under Section 2, then the Company shall so advise all Holders that would otherwise be underwritten pursuant thereto, and the number of shares that may be included in the underwriting shall be allocated: (a) first, to and among the selling Holders requesting such registration, pro rata on the basis of the number of Registrable Securities each such selling Holder has requested to be included in such registration; and (b) second, to the Company and any other holders, pro rata, on the basis of the number of shares each has requested to be included.
8.4 Lock-Up. Each Holder agrees, in connection with any registration of the Company’s securities (whether or not such Holder is participating in such registration), upon the request of the Company or the managing underwriter(s) in an underwritten offering, not to sell, make any short sale of, grant any option for the purchase of, or otherwise dispose of any Registrable Securities (other than those Registrable Securities included in such registration) without the prior written consent of the Company or such underwriter(s), as the case may be, for such period of time (not to exceed one hundred eighty (180) days) from the effective date of such registration as the Company or the underwriter(s) may specify. Each Holder further agrees to execute such agreements as may be reasonably requested by the underwriter(s) that are consistent with the foregoing or that are necessary to give further effect thereto.
8.5 Pro Rata Waiver Requirement for Lock-Up. Notwithstanding any other provision of this Section 8, any waiver, termination, or release (in whole or in part) of the lock-up obligations set forth in Section 8.4 granted by the Company or any managing underwriter to any Holder shall apply on a pro rata basis to all Holders then subject to such lock-up obligations. No selective waiver, release, or shortening of the lock-up period shall be permitted with respect to any individual Holder unless the same proportional waiver, release, or shortening is simultaneously extended to all other Holders who are similarly situated and subject to the same lock-up restrictions. For the avoidance of doubt, this Section 8.5 shall apply to any waiver or release granted to officers, directors, or other stockholders of the Company who are subject to lock-up agreements entered into in connection with the same registration.
5.4 Drag-Along Notice. The Company shall give written notice (the "Drag-Along Notice") of a proposed Drag-Along Sale to each Stockholder not less than [ten (10) / fifteen (15) / twenty (20)] business days prior to the anticipated closing date of such Drag-Along Sale. The Drag-Along Notice shall set forth: (a) the name and address of the proposed acquirer(s); (b) the material terms and conditions of the proposed Drag-Along Sale, including the per-share consideration to be received by each class and series of capital stock (or a reasonable estimate thereof); (c) the anticipated closing date of the Drag-Along Sale; and (d) copies of any material agreements relating to the Drag-Along Sale (in draft or final form).
5.5 Power of Attorney. Each Stockholder hereby grants to the Electing Holders (or their designee), and to any officer of the Company designated by the Electing Holders, a coupled-with-an-interest, irrevocable power of attorney, effective only in connection with a Drag-Along Sale and solely to the extent a Stockholder fails to comply with the provisions of Section 5.1 within five (5) business days of the anticipated closing date, to: (a) vote such Stockholder’s Shares in favor of such Drag-Along Sale and in favor of any related amendments to the Restated Certificate; (b) execute and deliver on behalf of such Stockholder all instruments of conveyance, transfer, and assignment as may be necessary or appropriate to consummate such Drag-Along Sale; and (c) execute and deliver on behalf of such Stockholder all consents, waivers, ancillary agreements, and other documents as may be reasonably required in connection therewith. Each Stockholder agrees that the foregoing power of attorney is coupled with an interest, is irrevocable, and shall survive the death, incompetency, disability, bankruptcy, or dissolution of such Stockholder and the Transfer of all or any portion of such Stockholder’s Shares, and shall be binding on any transferees or assignees of such Stockholder.
5.6 Series-Specific Drag-Along Carve-Out. Notwithstanding Section 5.1, with respect to holders of shares of the most recently issued series of Preferred Stock (the "Last Round Investors"), the obligations under this Section 5 shall not apply unless the aggregate consideration to be received by the Last Round Investors in the Drag-Along Sale equals or exceeds the greater of (a) the original issue price per share of such series (as adjusted for stock splits, dividends, and recapitalizations) multiplied by the number of shares held by such Last Round Investor, and (b) one times (1.0x) the aggregate liquidation preference applicable to such shares under the Restated Certificate. This Section 5.6 may not be amended or waived without the written consent of the holders of at least [a majority / [_]%] of the shares of the most recently issued series of Preferred Stock then outstanding.
9.1 Termination. The registration rights granted under Sections 2, 3, and 4 of this Agreement shall terminate and be of no further force or effect upon the earliest to occur of (a) the fifth (5th) anniversary of the Company’s IPO, (b) with respect to any individual Holder, the date on which all Registrable Securities held by such Holder can be sold without restriction under Rule 144 under the Securities Act during any ninety (90) day period, and (c) the closing of a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation, as amended and restated from time to time) in which the consideration received by the Holders for each share of Series Seed Preferred Stock is at least three (3) times the applicable original issue price of such share.
9.2 Suspension Periods. The Company may, upon the happening of any event of the kind described in Section 2.4, suspend the use of any registration statement or prospectus for a period not to exceed ninety (90) days in any twelve (12) month period by giving written notice to the Holders whose Registrable Securities are registered pursuant to such registration statement. Upon the receipt of such notice, each such Holder shall forthwith discontinue the disposition of Registrable Securities pursuant to such registration statement until the Holder’s receipt of written notice from the Company that disposition may be resumed, and the Company shall use commercially reasonable efforts to ensure that the use of the registration statement may be resumed as soon as practicable.
9.3 Blackout Provision During Registration Preparation. During the preparation and filing of any registration statement pursuant to this Agreement or otherwise, the Company may, upon written notice to all Holders, impose a blackout period of not more than thirty (30) days during which no Holder shall sell, transfer, or otherwise dispose of any Registrable Securities. The Company shall provide at least five (5) business days’ advance written notice before the commencement of any such blackout period, and shall notify the Holders promptly upon the termination of such period. The Company shall not impose more than two (2) such blackout periods in any twelve (12) month period, and consecutive blackout periods shall be separated by at least sixty (60) days. During any such blackout period, the Company shall use commercially reasonable efforts to minimize the duration of the restriction and to cause the applicable registration statement to be filed or become effective as promptly as practicable.
6.1 Specific Performance. Each party hereto acknowledges and agrees that the other parties would be irreparably harmed and would not have any adequate remedy at law if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. Accordingly, each party agrees that the other parties shall be entitled to seek an injunction, restraining order, specific performance, or other equitable relief to enforce specifically the terms and provisions of this Agreement, including, without limitation, the voting, board composition, drag-along, and transfer restriction provisions hereof, in any court of competent jurisdiction, without the necessity of proving actual damages or posting a bond or other security, in addition to all other remedies available at law or in equity.
6.2 Irrevocable Proxy. Each Stockholder hereby constitutes and appoints as the proxies of such Stockholder, and hereby grants a power of attorney to, the then-current Chief Executive Officer of the Company and each Preferred Director, and a designee of the holders of a majority of the Preferred Stock (collectively, the "Proxies"), with full power of substitution, with respect to the matters set forth in Sections 2 and 3 of this Agreement and, to the extent applicable, Section 5 of this Agreement, to vote all Shares held by such Stockholder from time to time as directed by the terms of this Agreement, to sign such Stockholder’s name to any consent, certificate, or other document that the Company may, from time to time, request relating to matters covered by this Agreement, and to take such further action as the Proxies shall deem necessary or appropriate in order to carry out the provisions of Sections 2, 3, and 5 of this Agreement. Each Stockholder hereby declares that this proxy and power of attorney are irrevocable, are granted solely to secure the performance of such Stockholder’s obligations under this Agreement, and are coupled with an interest sufficient in law to support the creation of an irrevocable proxy. This proxy and power of attorney shall be valid and remain in full force and effect until the termination of this Agreement in accordance with Section 8 hereof. Each Stockholder hereby revokes any and all previous proxies or powers of attorney with respect to the Shares and shall not hereafter, unless and until this Agreement terminates, purport to grant any other proxy or power of attorney with respect to any of the Shares, deposit any of the Shares into a voting trust, or enter into any agreement (other than this Agreement), arrangement, or understanding with any Person, directly or indirectly, to vote, grant any proxy or give instructions with respect to the voting of any of the Shares, in each case with respect to any of the matters set forth herein.
6.3 Cumulative Remedies. All remedies available under this Agreement, at law (including, without limitation, damages), or in equity (including specific performance, injunctive relief, and declaratory relief) shall be cumulative and not alternative, and the exercise of any particular remedy shall not preclude the exercise of any other remedy.
6.4 Attorneys’ Fees. If any action at law or in equity (including arbitration) is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees, costs, and necessary disbursements incurred in connection with such action, in addition to any other relief to which such party may be entitled.
10.1 Annual Financial Statements. As soon as practicable after the end of each fiscal year of the Company, and in any event within one hundred twenty (120) days after the end of each such fiscal year, the Company shall deliver to each Major Investor an audited consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal year, together with audited consolidated statements of income, stockholders’ equity, and cash flows for such fiscal year, all prepared in accordance with GAAP and audited and certified by an independent public accounting firm of national standing selected by the Board.
10.2 Quarterly Financial Statements. As soon as practicable after the end of each of the first three (3) fiscal quarters of each fiscal year of the Company, and in any event within forty-five (45) days after the end of each such fiscal quarter, the Company shall deliver to each Major Investor an unaudited consolidated balance sheet of the Company and its subsidiaries as of the end of such fiscal quarter, together with unaudited consolidated statements of income and cash flows for such fiscal quarter and for the current fiscal year to date, all prepared in accordance with GAAP (subject to the absence of footnotes and normal year-end audit adjustments). Such financial statements shall be accompanied by a certificate of the Company’s chief financial officer (or, if no chief financial officer is then serving, the chief executive officer) certifying that such financial statements have been prepared in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes) and fairly present in all material respects the financial condition and results of operations of the Company and its subsidiaries as of the date thereof and for the periods covered thereby.
10.3 Monthly Financial Reports. As soon as practicable after the end of each calendar month, and in any event within thirty (30) days after the end of each such calendar month, the Company shall deliver to each Major Investor an unaudited consolidated balance sheet and an unaudited consolidated statement of income and cash flows for such month, in each case prepared in accordance with GAAP (subject to the absence of footnotes and normal year-end audit adjustments), together with a comparison of actual results against the Company’s then-current annual operating budget.
10.4 Annual Budget and Business Plan. At least thirty (30) days prior to the beginning of each fiscal year, the Company shall deliver to each Major Investor an annual budget and business plan for the upcoming fiscal year, as approved by the Board, in such detail as is reasonably satisfactory to the Major Investors.
10.5 Quarterly Capitalization Table. Within fifteen (15) days after the end of each fiscal quarter of the Company, the Company shall deliver to each Major Investor a fully-diluted capitalization table of the Company, certified by the Company’s chief financial officer (or, if no chief financial officer is then serving, the chief executive officer), showing (a) all outstanding shares of Common Stock, (b) all outstanding shares of each series of Preferred Stock, (c) all outstanding options, warrants, and other rights to purchase or acquire equity securities of the Company (whether vested or unvested), (d) all outstanding convertible instruments (including convertible notes, SAFEs, and similar instruments), (e) all shares reserved for future issuance under equity incentive plans, and (f) the percentage ownership of each stockholder, option holder, and warrant holder on a fully-diluted, as-converted basis. Such capitalization table shall separately identify any securities that are subject to repurchase rights, vesting schedules, or other restrictions on transfer.
7.1 Restrictions on Transfer. Each Stockholder agrees that such Stockholder shall not Transfer any Shares unless the transferee agrees in writing to be bound by, and become a party to, this Agreement by executing and delivering to the Company a counterpart signature page or joinder agreement in the form attached hereto as Exhibit A (a "Joinder Agreement"), in which the transferee shall agree to be bound by and subject to all of the terms, conditions, rights, and obligations of this Agreement applicable to the Stockholder from whom such Shares are being transferred (including, without limitation, the voting obligations set forth in Sections 2 and 3, the drag-along obligations set forth in Section 5, and the protective provisions set forth in Section 4). Any Transfer or purported Transfer of Shares in violation of this Section 7.1 shall be void and of no force or effect, and the Company shall not register any such Transfer on its books or treat any purported transferee as the owner of such Shares for any purpose.
7.2 Permitted Transfers. Notwithstanding Section 7.1, a Stockholder may Transfer Shares to an Affiliate of such Stockholder or, in the case of an individual, to such Stockholder’s spouse, domestic partner, parent, sibling, children (natural or adopted), or grandchildren, or to a trust, partnership, limited liability company, or other estate planning vehicle for the benefit of the foregoing (each, a "Permitted Transferee"), provided that (a) the Permitted Transferee executes and delivers to the Company a Joinder Agreement, (b) such Transfer is effected in compliance with all applicable securities laws, and (c) the transferring Stockholder shall remain jointly and severally liable for all obligations of the Permitted Transferee under this Agreement until such time as the Permitted Transferee ceases to hold any Shares.
7.3 Stock Certificate Legends. Each certificate, instrument, or book-entry representing any Shares issued to or held by a Stockholder or any Permitted Transferee of a Stockholder shall bear the following legend (in addition to any other legends required by applicable law or any other agreement to which the Company is a party):
"THE SHARES REPRESENTED HEREBY ARE SUBJECT TO A VOTING AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH MAY BE OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF SAID VOTING AGREEMENT."
The Company, by its execution of this Agreement, agrees that it will cause the legend set forth above to be placed upon any certificate, instrument, or book-entry for any Shares. The Company agrees that it will not remove, and will not permit to be removed (upon registration of transfer, exchange, or otherwise), the legend from any such certificate or instrument or book-entry for such Shares and will not permit a transfer of any Shares unless the transferee has executed a Joinder Agreement, unless such Shares are being transferred pursuant to a transaction in which this Agreement is terminated in accordance with Section 8.
7.4 Void Transfers. Any Transfer of Shares in contravention of this Agreement shall be null and void and of no force or effect, and the Company shall refuse to recognize any such Transfer and shall not reflect on its books any change in record ownership of Shares pursuant to any such Transfer.
10.6 Inspection Rights. The Company shall permit each Major Investor (or its designated representative), at such Major Investor’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 during normal business hours and upon reasonable advance notice as may be requested by such Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section 10.6 to provide access to any information that the Company reasonably and in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in form reasonably acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.
10.7 Confidentiality. Each Investor agrees that it 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 pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), 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 Section 10.7 by such Investor), (b) is or has been independently developed or conceived by such Investor without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Investor by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Investor may disclose confidential information (i) to its Affiliates, 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 such Investor, if such prospective purchaser agrees to be bound by the provisions of this Section 10.7, (iii) to any Affiliate, partner, member, stockholder, or other equity holder of such Investor in the ordinary course of business, provided that such Investor informs such Person that such information is confidential and directs such Person to maintain the confidentiality of such information, or (iv) as may otherwise be required by law, regulation, or judicial or administrative order, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.
10.8 Termination of Information Rights. The covenants set forth in this Section 10 shall terminate and be of no further force or effect upon the earliest to occur of (a) the closing of the Company’s IPO, (b) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (c) the closing of a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation, as amended and restated from time to time).
8.1 Term. This Agreement shall become effective as of the date first set forth above and shall continue in force and effect until, and shall terminate upon, the earliest to occur of: (a) the consummation of a firmly underwritten IPO pursuant to an effective registration statement under the Securities Act covering the offer and sale of Common Stock to the public at a per-share price of not less than $[_] (as adjusted for stock splits, stock dividends, recapitalizations, and similar events) and with aggregate gross proceeds to the Company of not less than $[_] (a "Qualified IPO"); (b) the consummation of a Change of Control or Sale of the Company in which the consideration received or deemed received by the holders of Preferred Stock equals or exceeds $[_] per share of Preferred Stock (as adjusted for stock splits, stock dividends, recapitalizations, and similar events); (c) the liquidation, dissolution, or winding up of the Company; or (d) the written consent of the Requisite Holders to terminate this Agreement.
(e) the effectiveness of a resale registration statement on Form S-1 or Form S-3 under the Securities Act covering all Registrable Securities (as defined in the Investors’ Rights Agreement) held by all Investors that permits the public resale of such securities without restriction as to volume, manner of sale, or holding period, and such registration statement has remained effective and available for use for a period of not less than ninety (90) consecutive days.
8.2 Termination of Individual Rights. The rights and obligations of any individual Stockholder under this Agreement (other than the Company) shall terminate with respect to such Stockholder at such time as such Stockholder no longer holds any Shares; provided, however, that any obligations arising prior to such termination shall survive the termination of this Agreement as to such Stockholder, and provided further that any transferee of such Stockholder’s Shares who has executed a Joinder Agreement shall assume the rights and obligations of such Stockholder with respect to the Shares so transferred.
8.3 Effect of Termination. Upon the termination of this Agreement in accordance with Section 8.1, the provisions of this Agreement (other than this Section 8.3 and Sections 9, 10, 12, 13, and 14) shall be of no further force or effect, and no party hereto shall have any further obligations under this Agreement; provided, however, that the termination of this Agreement shall not relieve any party from liability for any breach of this Agreement that occurred prior to such termination.
8.4 Survival of Certain Provisions. The provisions of Sections 6 (Remedies), 9 (Governing Law and Jurisdiction), 10 (Amendment and Waiver), 12 (Notices), 13 (Entire Agreement), and 14 (Delays and Omissions) shall survive the termination of this Agreement.
11.1 Right of Participation. Subject to the terms and conditions of this Section 11, each Major Investor shall have the right to purchase its Pro Rata Share of any New Securities that the Company may from time to time propose to sell or issue after the date of this Agreement (the "Right of Participation"). Each Major Investor shall be entitled to apportion the Right of Participation hereby granted to it in such proportions as it deems appropriate, among (a) itself, (b) its Affiliates, and (c) its Immediate Family Members, in each case, so long as any such Affiliate or Immediate Family Member is an accredited investor as defined in Rule 501(a) under the Securities Act.
11.2 Notice of Proposed Issuance. In the event the Company proposes to issue New Securities, the Company shall give each Major Investor written notice (the "Issuance Notice") of its intention to issue New Securities, describing the type of New Securities and the price and the general terms upon which the Company proposes to issue such New Securities. Each Major Investor shall have twenty (20) days from the date of delivery of the Issuance Notice to agree to purchase all or any portion of its Pro Rata Share of such New Securities for the price and upon the general terms specified in the Issuance Notice, by giving written notice to the Company setting forth the quantity of New Securities to be purchased.
11.3 Overallotment. To the extent that any Major Investor does not elect to purchase its full Pro Rata Share of New Securities, the Company shall deliver a second notice (the "Overallotment Notice") to each Major Investor that elected to purchase its full Pro Rata Share, specifying the number of remaining New Securities available for purchase. Each such Major Investor shall have ten (10) days from the date of delivery of the Overallotment Notice to agree to purchase all or any portion of the remaining New Securities for the price and upon the terms specified in the original Issuance Notice, by giving written notice to the Company setting forth the quantity of additional New Securities to be purchased. To the extent that multiple Major Investors desire to purchase remaining New Securities in excess of the number available, such remaining New Securities shall be allocated among such Major Investors pro rata based on the number of shares of Common Stock then held by each such Major Investor (on an as-converted basis) relative to the number of shares of Common Stock then held by all such requesting Major Investors (on an as-converted basis).
11.4 Closing. The closing of any sale of New Securities with respect to which the Right of Participation has been exercised shall occur at the same time as, or promptly following, the closing of the sale of New Securities giving rise to such right.
9.1 Governing Law. This Agreement and any controversy, dispute, or claim arising out of or relating to this Agreement (whether in contract, tort, or otherwise) shall be governed by, and construed and enforced in accordance with, the internal laws of the State of [STATE], without giving effect to any choice-of-law or conflict-of-law rules or provisions (whether of the State of [STATE] or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of [STATE].
9.2 Exclusive Jurisdiction. Each party hereto hereby irrevocably and unconditionally (a) submits to the exclusive jurisdiction of the state and federal courts located in [COUNTY], [STATE] (the "Chosen Courts") for the purpose of any action, suit, or proceeding arising out of or relating to this Agreement, and (b) agrees that all claims in respect of any such action, suit, or proceeding shall be heard and determined exclusively in the Chosen Courts. Each party hereto hereby irrevocably and unconditionally waives (i) any objection that such party may now or hereafter have to the laying of venue of any action, suit, or proceeding in the Chosen Courts, and (ii) any claim that any action, suit, or proceeding brought in the Chosen Courts has been brought in an inconvenient forum.
9.3 Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE ACTIONS OF ANY PARTY HERETO IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE, AND ENFORCEMENT OF THIS AGREEMENT. EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY LEGAL COUNSEL THAT THIS WAIVER IS KNOWING AND VOLUNTARY.
9.4 Service of Process. Each party irrevocably consents to service of process by means of notice given in accordance with Section 12 of this Agreement. Nothing in this Section 9.4 shall affect the right of any party to serve legal process in any other manner permitted by applicable law.
10.1 Amendment. This Agreement may not be amended, modified, or supplemented except by a written instrument executed by (a) the Company, (b) the holders of at least [a majority / [_]%] of the shares of Preferred Stock then outstanding (voting together as a single class on an as-converted basis), and (c) the holders of a majority of the shares of Common Stock then held by the Key Holders. Any amendment or modification effected in accordance with this Section 10.1 shall be binding upon each party hereto and each subsequent holder of any Shares. The Company shall give prompt written notice of any amendment, modification, or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination, or waiver; provided that the failure to give such notice shall not affect the validity of such amendment, modification, termination, or waiver.
10.2 Effect of Amendment on Individual Classes. Notwithstanding Section 10.1, this Agreement may not be amended, modified, or supplemented in a manner that (a) adversely affects the rights of a holder of a particular series of Preferred Stock in a manner that is disproportionate to the effect on holders of other series of Preferred Stock, without the written consent of the holders of a majority of the shares of such disproportionately affected series then outstanding; (b) imposes any new obligation or liability on any Stockholder (other than an obligation that applies equally to all Stockholders of the same class), without the written consent of such Stockholder; or (c) modifies this Section 10.2 without the written consent of each Stockholder.
10.3 Waiver. No waiver of any provision of this Agreement shall be effective unless set forth in a written instrument signed by the party or parties to be bound thereby. No waiver of any provision of this Agreement shall constitute a waiver of any other provision of this Agreement (whether or not similar), nor shall any waiver constitute a continuing waiver unless otherwise expressly provided. The failure of any party to enforce any provision of this Agreement shall not be construed as a waiver of such party’s right to subsequently enforce such provision or any other provision of this Agreement.
10.4 Consent of Company. For purposes of this Section 10, the consent or action of the "Company" shall mean the consent or action of the Company acting through its Board of Directors (or a duly authorized committee thereof), which consent or action shall include the affirmative vote or consent of at least [one / a majority of] the Preferred Director(s) then serving on the Board of Directors.
11.5 Excluded Issuances. Notwithstanding anything to the contrary in this Section 11, the Right of Participation shall not apply to, and "New Securities" shall not include, (a) shares of Common Stock (or options or warrants to purchase Common Stock) issued to employees, officers, directors, contractors, consultants, or advisors of the Company pursuant to incentive or stock purchase plans, restricted stock agreements, or other compensatory arrangements that are approved by the Board, provided that the aggregate number of shares so issued does not exceed the number of shares reserved for issuance under the Company’s equity incentive plan as approved by the Board; (b) shares of Common Stock issued upon the conversion of the Series Seed Preferred Stock or other convertible securities issued and outstanding as of the date of this Agreement; (c) shares of any series of Preferred Stock issued in a Qualified Financing (as defined in the Company’s Certificate of Incorporation); (d) shares of Common Stock or Preferred Stock issued in connection with a bona fide business acquisition approved by the Board, whether by merger, consolidation, sale of assets, sale or exchange of stock, or otherwise; (e) shares of Common Stock or Preferred Stock issued in connection with any equipment loan or leasing arrangement, real property leasing arrangement, or debt financing from a bank or similar financial institution approved by the Board; (f) shares of Common Stock issued upon the exercise of warrants outstanding as of the date of this Agreement; (g) shares of Common Stock or Preferred Stock issued in connection with strategic transactions involving the Company and other entities, including joint ventures, manufacturing, marketing, distribution, or technology transfer arrangements, provided that the primary purpose of such transaction is not the raising of capital and such transaction is approved by the Board; and (h) shares of Common Stock issued or issuable in connection with any stock split, stock dividend, recapitalization, or similar event.
11.6 Failure to Exercise. To the extent that the Major Investors fail to exercise their Right of Participation within the applicable periods set forth in Sections 11.2 and 11.3, the Company shall have ninety (90) days thereafter to sell or enter into an agreement (pursuant to which the sale of New Securities covered thereby shall be closed, if at all, within sixty (60) days from the date of such agreement) to sell the New Securities not elected to be purchased by the Major Investors at a price and upon terms no more favorable to the purchasers thereof than the price and terms specified in the Issuance Notice. If the Company has not sold such New Securities or entered into such an agreement to sell such New Securities within such ninety (90) day period (or sold and issued New Securities in accordance with the foregoing within sixty (60) days from the date of such agreement), the Company shall not thereafter issue or sell any New Securities without first again offering such securities to the Major Investors in the manner provided above.
11.7 Termination. The Right of Participation set forth in this Section 11 shall terminate and be of no further force or effect upon the earliest to occur of (a) the closing of the Company’s IPO, (b) the closing of a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation, as amended and restated from time to time), or (c) with respect to any individual Major Investor, the date on which such Major Investor (together with its Affiliates) ceases to hold at least the number of shares required to qualify as a Major Investor.
11.1 If any provision of this Agreement is held to be invalid, illegal, or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement or any other jurisdiction, but this Agreement shall be reformed, construed, and enforced in such jurisdiction as if such invalid, illegal, or unenforceable provision had never been contained herein.
11.2 In the event that any provision of this Agreement is held to be invalid, illegal, or unenforceable, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be consummated as originally contemplated to the greatest extent possible.
11.3 If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted.
12.1 Observer Designation. For so long as [INVESTOR NAME] (together with its Affiliates) holds at least the number of shares required to qualify as a Major Investor, the Company shall invite a representative designated by [INVESTOR NAME] (the "Observer") to attend all meetings of the Board in a nonvoting, observer capacity. The Observer shall be entitled to receive all notices, agendas, board packages, and other materials provided to the members of the Board at the same time such materials are provided to the directors, and shall be entitled to attend and participate in discussions at all meetings of the Board (including telephonic meetings), but the Observer shall have no right to vote on any matter presented to the Board.
12.2 Expense Reimbursement. The Company shall reimburse the Observer for all reasonable and documented out-of-pocket expenses incurred in connection with attending meetings of the Board, consistent with the Company’s reimbursement policies applicable to non-employee directors.
12.3 Exclusion from Confidential Sessions. Notwithstanding the foregoing, the Company reserves the right to exclude the Observer from access to any material or attendance at any meeting or portion thereof if the Board determines in good faith, upon advice of counsel, that such exclusion is reasonably necessary (a) to preserve the attorney-client privilege between the Company and its counsel, (b) because of a conflict of interest between the Company and [INVESTOR NAME] with respect to the matter under discussion, or (c) to comply with applicable law or fiduciary obligations of the directors.
12.4 Confidentiality. The Observer shall be subject to the same confidentiality obligations as set forth in Section 10.6 with respect to all information received in connection with such Observer’s attendance at meetings of the Board.
12.5 Termination. The right set forth in this Section 12 shall terminate upon the earliest of (a) the closing of the Company’s IPO, (b) the date on which [INVESTOR NAME] (together with its Affiliates) ceases to hold at least the number of shares required to qualify as a Major Investor, or (c) the closing of a Deemed Liquidation Event.
12.1 All notices, requests, consents, claims, demands, waivers, and other communications hereunder (each, a "Notice") shall be in writing and shall be deemed to have been duly given (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third (3rd) business day after the date mailed by certified or registered mail, return receipt requested, postage prepaid.
12.2 Notices to the Company shall be directed to the Company’s principal executive office, to the attention of its Chief Executive Officer and its General Counsel (or, if the Company does not have a General Counsel, to its Chief Executive Officer), at the address set forth on the signature pages hereto, with a copy (which shall not constitute notice) to the Company’s outside legal counsel at the address set forth on the signature pages hereto.
12.3 Notices to Investors shall be directed to each Investor’s address as set forth on Schedule A hereto, or at such other address as shall have been specified by such Investor in a Notice to the Company. Notices to Key Holders shall be directed to each Key Holder’s address as set forth on Schedule B hereto, or at such other address as shall have been specified by such Key Holder in a Notice to the Company.
12.4 Any party may change the address to which Notices are to be directed to such party by giving a Notice of such change to the Company (if the party is not the Company) and to each other party in accordance with the provisions of this Section 12. The Company shall promptly forward any such notice of address change to all other parties hereto.
13.1 Proprietary Information and Inventions Agreements. The Company shall require each current and future employee, officer, and consultant of the Company and each of its subsidiaries to enter into a proprietary information and inventions assignment agreement in a form reasonably acceptable to the Investors (each, a "PIIA"). Each PIIA shall contain, at a minimum, provisions requiring the applicable individual to (a) maintain the confidentiality of the Company’s proprietary information, (b) assign to the Company all intellectual property rights in any inventions, developments, and works of authorship conceived, created, or reduced to practice by such individual during the course of his or her employment or engagement with the Company, and (c) refrain from engaging in any activity that would conflict with his or her obligations to the Company.
13.2 Key Employee Non-Competition. The Company shall use commercially reasonable efforts to obtain from each Key Employee, as a condition to employment, a non-competition and non-solicitation agreement providing that such Key Employee will not, during the term of his or her employment and for a period of twelve (12) months thereafter, (a) directly or indirectly engage in or assist any business that competes with the Company’s business, (b) directly or indirectly solicit, induce, or encourage any employee or consultant of the Company to leave the employment or engagement of the Company, or (c) directly or indirectly solicit or divert any customer, vendor, or business partner of the Company, in each case to the extent enforceable under applicable law.
13.3 Standard Vesting. Unless otherwise approved by the Board (including at least one director designated by the Investors), all stock options and other equity awards granted by the Company after the date of this Agreement shall be subject to vesting over a four (4) year period, with a one (1) year cliff vesting period (during which no shares shall vest) and monthly or quarterly vesting thereafter, and shall provide for acceleration of vesting upon a termination without Cause or resignation for Good Reason within twelve (12) months following a Change of Control (as each such term is defined in the applicable equity incentive plan or award agreement).
13.1 This Agreement (including the schedules and exhibits hereto), together with the Purchase Agreement, the Investors’ Rights Agreement of even date herewith, and the Right of First Refusal and Co-Sale Agreement of even date herewith (collectively, the "Transaction Agreements"), constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and supersedes all prior agreements and understandings relating to the subject matter hereof.
13.2 No party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or in any other Transaction Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
13.3 Each party hereto acknowledges that, in entering into this Agreement, such party has not relied on any promise, representation, warranty, or statement made by or on behalf of any other party (or any officer, agent, advisor, or representative of any other party) that is not set forth in this Agreement or in the other Transaction Agreements.
14.1 Directors’ and Officers’ Insurance. Within ninety (90) days after the date of this Agreement, the Company shall obtain and thereafter maintain in full force and effect directors’ and officers’ liability insurance ("D&O Insurance") with a reputable insurance carrier, in an amount and on terms satisfactory to the Board, but in any event with aggregate coverage of not less than two million dollars ($2,000,000) per occurrence and five million dollars ($5,000,000) in the aggregate. In the event of a Deemed Liquidation Event, the Company shall, if available on commercially reasonable terms, use commercially reasonable efforts to obtain a tail policy providing coverage for a period of not less than six (6) years following the closing of such transaction.
14.2 Key Person Insurance. The Company shall obtain and maintain in full force and effect key person life insurance policies on each of its founders and chief executive officer in an amount not less than one million dollars ($1,000,000) per individual, naming the Company as the sole beneficiary of such policies.
14.3 Employee Stock Option Plan. The Company shall maintain an equity incentive plan (the "Plan") that has been approved by the Board and the Company’s stockholders. The Plan shall provide for the issuance of incentive stock options (as defined in Section 422 of the Internal Revenue Code of 1986, as amended), nonqualified stock options, restricted stock, restricted stock units, and such other forms of equity compensation as the Board may approve from time to time. All equity awards under the Plan shall be subject to the vesting requirements set forth in Section 13.3.
14.4 Compliance with Laws. The Company shall comply in all material respects with all applicable laws, rules, regulations, orders, and decrees of any governmental authority, including the Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act 2010, and all applicable export control and sanctions laws and regulations administered by the U.S. Department of the Treasury’s Office of Foreign Assets Control, the U.S. Department of Commerce’s Bureau of Industry and Security, and any other applicable governmental authority.
14.1 No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or a waiver of or acquiescence to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring.
14.2 All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative. The exercise of any one remedy shall not preclude the exercise of any other remedy. Any waiver, permit, consent, or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing.
14.3 No course of dealing between or among any of the parties hereto shall be deemed to modify, amend, or discharge any provision of this Agreement or any rights or obligations of any party under or by reason of this Agreement.
14.5 NVCA 2025 Governance Policies. The Company shall, within one hundred eighty (180) days of the date of this Agreement, adopt and implement written policies, in form and substance reasonably satisfactory to the holders of a majority of the then-outstanding Registrable Securities, addressing each of the following: (a) human resources management, including employee onboarding, performance evaluation, and termination procedures; (b) equal employment opportunity, in compliance with all applicable federal and state employment laws; (c) diversity, equity, and inclusion, setting forth the Company’s commitment to fostering a diverse and inclusive workplace and establishing measurable goals and reporting mechanisms; (d) anti-harassment and anti-discrimination, including procedures for reporting, investigating, and resolving complaints of harassment or discrimination in the workplace; and (e) whistleblower procedures, providing a confidential mechanism for employees and other stakeholders to report concerns regarding illegal or unethical conduct without fear of retaliation. The Company shall provide copies of such policies to each Major Investor upon request and shall review and update such policies at least annually.
14.6 Most Favored Nation. If the Company enters into any agreement with any holder of any securities of the Company that provides such holder with registration rights, information rights, or participation rights that are more favorable than those granted under this Agreement, the Company shall promptly notify the Investors of such more favorable terms and, upon the request of any Major Investor, the Company shall amend this Agreement so as to provide such Major Investor with such more favorable terms.
15.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000, the Uniform Electronic Transactions Act, or other applicable law, such as www.docusign.com) or other transmission method, and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
15.2 The words "execution," "signed," "signature," and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity, or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law.
15.3 For the avoidance of doubt, a signed copy of this Agreement delivered by facsimile, email, or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.
16.1 All references to numbers of shares in this Agreement shall be appropriately adjusted to reflect any stock dividend, stock split, reverse stock split, combination of shares, reclassification, recapitalization, or other similar change in the capital structure of the Company occurring after the date of this Agreement. In the event of any such stock dividend, split, reverse split, combination, reclassification, recapitalization, or other similar change in the capital structure of the Company, the Company shall promptly notify each Stockholder of such change and provide a revised schedule reflecting the adjusted share numbers.
16.2 In the event of a merger, consolidation, or reorganization of the Company that does not constitute a termination event under Section 8, and in which the shares of the Company’s capital stock are converted into or exchanged for securities, cash, or other property, the provisions of this Agreement shall apply, to the extent applicable, with equal force to such replacement securities, cash, or other property, and the Company shall cause the successor or surviving entity to assume this Agreement and to be bound by the terms hereof to the same extent as the Company.
16.3 No adjustment pursuant to this Section 16 shall give any Stockholder additional rights or increase any Stockholder’s obligations under this Agreement beyond those that existed immediately prior to such adjustment.
14.7 Protective Provisions and Board Consent Matrix. Notwithstanding any other provision of this Agreement or the Company’s Certificate of Incorporation or Bylaws, the Company shall not, without the prior approval of the Board, which approval must include the affirmative vote of at least one (1) director elected by the holders of the Series Seed Preferred Stock (each, a "Preferred Director"), take any of the following actions: (a) approve or materially modify the Company’s annual operating plan or budget; (b) hire any employee with an annual base compensation (including salary, guaranteed bonus, and signing bonus) in excess of $[NUMBER]; (c) create, incur, assume, or permit to exist any lien, security interest, mortgage, pledge, or other encumbrance on the assets of the Company (other than purchase money liens and liens arising in the ordinary course of business that do not exceed $[NUMBER] in the aggregate); (d) issue, sell, or grant any equity securities of the Company or any subsidiary, or any options, warrants, convertible notes, or other rights to acquire such equity securities (other than pursuant to the equity incentive plan approved by the Board); (e) enter into, amend, or terminate any contract, agreement, or commitment involving aggregate payments or obligations by or to the Company in excess of $[NUMBER]; (f) acquire (by merger, stock purchase, asset purchase, or otherwise) all or substantially all of the assets, business, or equity interests of any other Person, or any division or business unit thereof; (g) create, form, or establish any subsidiary or enter into any joint venture or strategic alliance; (h) enter into any transaction or agreement with any Affiliate of the Company, any officer, director, or stockholder of the Company, or any Immediate Family Member of any such Person (other than compensation arrangements approved by the Board in the ordinary course); or (i) exclusively license, sell, assign, or otherwise transfer or dispose of any material intellectual property of the Company (other than non-exclusive licenses granted in the ordinary course of business to customers and end users). Any action taken in violation of this Section 14.7 without the requisite Board and Preferred Director approval shall be void and of no force or effect.
14.8 Investor Liability Cap. Notwithstanding anything to the contrary in this Agreement (including Section 7), the aggregate liability of each Investor under or in connection with this Agreement, whether arising by way of indemnification, contribution, breach of any representation, warranty, or covenant, or otherwise, shall not exceed the aggregate purchase price actually paid by such Investor (or its predecessor in interest) for the securities purchased by such Investor pursuant to the Purchase Agreement. The liability of each Investor under this Agreement is several and not joint, and no Investor shall be liable for the obligations, acts, or omissions of any other Investor hereunder. No Investor shall have any liability under this Agreement for any consequential, incidental, indirect, special, exemplary, or punitive damages, regardless of whether such Investor was advised of the possibility of such damages.
17.1 All Shares held or acquired by a Stockholder and/or its Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement, and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate. For the avoidance of doubt, Shares held by a Stockholder’s Affiliates shall be counted toward the determination of whether such Stockholder meets any share ownership threshold specified in this Agreement.
17.2 For purposes of determining whether any approval threshold has been met under this Agreement, Shares held by a Stockholder who is both an Investor and a Key Holder shall be counted in the class or classes to which such Shares belong. If a Stockholder holds both Preferred Stock and Common Stock, such Stockholder’s Preferred Stock shall be counted toward any approval threshold applicable to Preferred Holders, and such Stockholder’s Common Stock shall be counted toward any approval threshold applicable to Key Holders or Common Holders.
17.3 Each Stockholder who is a party to this Agreement shall be responsible for ensuring that its Affiliates comply with the terms of this Agreement, and any breach by an Affiliate shall be deemed a breach by the Stockholder.
18.1 If any individual Stockholder is married on the date of this Agreement, such Stockholder’s spouse shall execute and deliver to the Company a consent of spouse in the form of Exhibit B hereto (a "Spousal Consent"), effective on the date hereof. Notwithstanding the execution of a Spousal Consent, the foregoing shall not be deemed to confer or convey to any spouse any rights in any Stockholder’s Shares that do not otherwise exist under applicable law. Conversely, the failure of any spouse to execute a Spousal Consent shall not affect the validity or enforceability of this Agreement against such Stockholder.
18.2 If any individual Stockholder should marry or remarry subsequent to the date of this Agreement, such Stockholder shall within thirty (30) days thereafter obtain the spouse’s written acknowledgement and agreement, in a form substantially similar to Exhibit B hereto, that such spouse has read this Agreement and is familiar with the terms and conditions hereof, and agrees to be bound by all of the provisions of this Agreement to the extent that such spouse may acquire rights in any Shares, whether pursuant to applicable community property laws or otherwise.
18.3 Each individual Stockholder agrees that any Transfer by such Stockholder to such Stockholder’s spouse or former spouse pursuant to a domestic relations order, property settlement agreement, or similar judicial or administrative decree shall be subject to the joinder requirements of Section 7 of this Agreement, and such Stockholder shall cause such spouse or former spouse to execute and deliver a Joinder Agreement to the Company prior to or concurrently with any such Transfer.
15.1 Right of First Refusal. Each holder of the Company’s Common Stock who is a party to this Agreement or who becomes bound by this Agreement (each, a "Key Holder") shall not sell, assign, transfer, pledge, hypothecate, or otherwise dispose of (collectively, "Transfer") any shares of Common Stock or any interest therein unless such Key Holder first complies with the provisions of this Section 15. Before any proposed Transfer, the Key Holder shall deliver to the Company and to each Major Investor a written notice (the "Transfer Notice") stating (a) the Key Holder’s bona fide intention to sell or otherwise Transfer such shares, (b) the name of each proposed purchaser or other transferee (the "Proposed Transferee"), (c) the number of shares proposed to be Transferred (the "Offered Shares"), and (d) the price and terms of the proposed Transfer. The Company shall have the first right to purchase all or any portion of the Offered Shares at the price and on the terms specified in the Transfer Notice. The Company shall have twenty (20) days from the date of delivery of the Transfer Notice to exercise this right by giving written notice to the Key Holder.
15.2 Investor Right of First Refusal. To the extent the Company does not exercise its right to purchase all of the Offered Shares, each Major Investor shall have the right, exercisable within fifteen (15) days after receipt of notice from the Company that the Company has declined to purchase all of the Offered Shares, to purchase its pro rata portion (based on the number of shares of Common Stock held by such Major Investor on an as-converted basis relative to the total number of shares of Common Stock held by all Major Investors on an as-converted basis) of the remaining Offered Shares at the price and on the terms specified in the Transfer Notice.
15.3 Co-Sale Right. To the extent the Company and the Major Investors do not exercise their rights to purchase all of the Offered Shares, each Major Investor shall have the right, exercisable within fifteen (15) days after the expiration of the period set forth in Section 15.2, to participate in such Transfer on a pro rata basis. Each Major Investor who elects to exercise its co-sale right (a "Co-Sale Participant") shall be entitled to sell a number of shares of its Common Stock (on an as-converted basis) equal to the product obtained by multiplying (a) the aggregate number of Offered Shares to be Transferred by (b) a fraction, the numerator of which is the number of shares of Common Stock (on an as-converted basis) owned by such Co-Sale Participant and the denominator of which is the total number of shares of Common Stock (on an as-converted basis) owned by the Key Holder and all Co-Sale Participants, at the same price and on the same terms and conditions as the Key Holder’s proposed Transfer.
15.4 Exempt Transfers. Notwithstanding the foregoing, the provisions of this Section 15 shall not apply to (a) any pledge of shares made pursuant to a bona fide loan transaction that creates a mere security interest, (b) any Transfer to an Immediate Family Member, trust for the benefit of the Key Holder or an Immediate Family Member, or entity wholly owned by the Key Holder or his or her Immediate Family Members, provided that the transferee agrees in writing to be bound by this Agreement, (c) any Transfer that occurs by operation of law, including a Transfer to or for the benefit of any spouse or former spouse in connection with a divorce, or (d) any Transfer to the Company.
19.1 Joinder of New Stockholders. Notwithstanding anything to the contrary contained herein, if the Company issues additional shares of the Company’s capital stock after the date hereof, as a condition to the issuance of such shares, the Company shall require that the purchaser or recipient of such shares execute a Joinder Agreement in the form of Exhibit A hereto, pursuant to which such purchaser or recipient shall become a party to this Agreement and shall be deemed, as applicable, an "Investor" or "Key Holder" for all purposes hereunder, with the same rights and obligations as other Investors or Key Holders, as applicable.
19.2 Additional Investors. In the event that after the date of this Agreement, the Company enters into an agreement with any Person to issue shares of the Company’s capital stock to such Person (other than shares issued to service providers pursuant to the ESOP or other equity compensation arrangements approved by the Board of Directors), the Company shall cause such Person, as a condition precedent to the issuance of such shares, to become a party to this Agreement by executing and delivering a Joinder Agreement, and Schedule A or Schedule B hereto, as applicable, shall be updated to reflect the addition of such Person without requiring an amendment to this Agreement pursuant to Section 10.
19.3 Treatment of Additional Parties. Any Person who becomes a party to this Agreement by executing a Joinder Agreement in accordance with this Section 19 shall be treated as an Investor or Key Holder, as applicable, for all purposes of this Agreement, and Schedules A or B hereto shall be deemed amended to include such Person, without any further action by the parties hereto. Notwithstanding the foregoing, any such additional Person shall only be entitled to the rights and subject to the obligations applicable to the class of Stockholder (i.e., Investor or Key Holder) specified in such Person’s Joinder Agreement.
19.4 Obligation of Company. The Company shall not issue or permit the transfer of any Shares on its books unless the transferee or issuee has agreed in writing to be bound by the terms of this Agreement by executing and delivering to the Company a Joinder Agreement, except for (a) Shares issued pursuant to the ESOP or other equity compensation arrangements approved by the Board of Directors, provided that the terms of such arrangements require that recipients become bound by the terms of this Agreement upon the exercise of any option or the vesting or settlement of any award, and (b) Shares issued upon conversion of the Preferred Stock in connection with a Qualified IPO or other termination event under Section 8.
19.5 Mandatory Joinder for Significant Holders. Without limiting the generality of Sections 19.1 through 19.4, the Company shall, as a condition to the grant or issuance of any shares of the Company’s capital stock (including upon exercise of options or settlement of other equity awards) to any employee, consultant, or other service provider who, upon such grant or issuance, will hold shares representing one percent (1%) or more of the Company’s outstanding capital stock (on a fully-diluted basis), require such person to execute and deliver a Joinder Agreement and become a Key Holder bound by all obligations applicable to Key Holders under this Agreement.
16.1 Drag-Along Obligation. If (a) the Board (including at least a majority of the directors elected by the holders of the Series Seed Preferred Stock, voting as a separate class), (b) the holders of a majority of the then-outstanding shares of Common Stock (on an as-converted basis), and (c) the holders of a majority of the then-outstanding shares of Series Seed Preferred Stock (collectively, the "Electing Holders") approve a Deemed Liquidation Event (as defined in the Company’s Certificate of Incorporation, as amended and restated from time to time) (a "Drag-Along Sale"), then each stockholder of the Company and each party hereto shall (i) vote (in person, by proxy, or by action by written consent, as applicable) all shares of capital stock of the Company owned by such stockholder in favor of, and adopt, such Drag-Along Sale (together with any related amendment to the Company’s Certificate of Incorporation or other organizational documents required to implement such Drag-Along Sale) and to vote in opposition to any and all other proposals that could reasonably be expected to delay, impede, or interfere with the consummation of such Drag-Along Sale, (ii) if such Drag-Along Sale is structured as a sale of stock, agree to sell all of such stockholder’s shares of capital stock of the Company on the terms and conditions approved by the Electing Holders, (iii) refrain from exercising any dissenters’ rights or rights of appraisal under applicable law with respect to such Drag-Along Sale, and (iv) execute and deliver all related documentation and take such other action in support of the Drag-Along Sale as shall reasonably be requested by the Company.
16.2 Conditions. The obligations of the parties under Section 16.1 shall be subject to the following conditions: (a) the consideration payable to all stockholders in the Drag-Along Sale shall be allocated among the stockholders in accordance with the liquidation preference provisions set forth in the Company’s Certificate of Incorporation, as if the total consideration were being distributed in a Deemed Liquidation Event; (b) if any stockholders are given an option as to the form and amount of consideration to be received in such Drag-Along Sale, each stockholder shall be given the same option; (c) each stockholder shall be obligated to make or agree to the same representations, warranties, covenants, indemnities, and agreements as the other stockholders, except that each stockholder’s liability for representations and warranties and indemnification obligations (other than with respect to representations and warranties regarding such stockholder’s ownership of and authority to sell shares) shall not exceed such stockholder’s pro rata portion of any escrow, holdback, or adjustment mechanism established in connection with such Drag-Along Sale; and (d) no stockholder shall be obligated to agree to any non-competition or non-solicitation covenant in connection with such Drag-Along Sale.
16.3 Termination. The obligations set forth in this Section 16 shall terminate upon the closing of the Company’s IPO.
20.1 Each Stockholder agrees that such Stockholder shall keep confidential and shall not disclose, divulge, or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company pursuant to the terms of this Agreement (including notice of the Company’s intention to file a registration statement), 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 Section 20 by such Stockholder), (b) is or has been independently developed or conceived by such Stockholder without use of the Company’s confidential information, or (c) is or has been made known or disclosed to such Stockholder by a third party without a breach of any obligation of confidentiality such third party may have to the Company.
20.2 Notwithstanding the foregoing, a Stockholder may disclose confidential information (a) to its Affiliates, attorneys, accountants, consultants, and other professionals, to the extent necessary to obtain their services in connection with monitoring its investment in the Company, provided that such recipients are bound by confidentiality obligations at least as protective as those set forth herein; (b) to any prospective purchaser of any Shares from such Stockholder, provided that such prospective purchaser has agreed in writing to be bound by confidentiality obligations at least as protective as those set forth herein; (c) as may be required by any court, governmental agency, or regulatory authority, or by applicable law or regulation, or by any subpoena or similar legal process, provided that such Stockholder shall provide the Company with prompt written notice of any such requirement (to the extent legally permitted) so that the Company may seek an appropriate protective order or waive compliance with this Section 20; or (d) as may be necessary in connection with any legal proceeding relating to this Agreement.
20.3 The obligations of each Stockholder under this Section 20 shall survive the termination of this Agreement for a period of two (2) years following the date of such termination, except with respect to confidential information that constitutes trade secrets of the Company, in which case the obligations shall survive for so long as such information remains a trade secret under applicable law.
21.1 Each party hereto agrees to execute and deliver, from time to time, such additional instruments, documents, conveyances, or assurances and to take such further actions as shall be necessary or reasonably requested by another party in order to carry out the purposes and intent of this Agreement and the transactions contemplated hereby, including, without limitation, executing any additional agreements, certificates, or instruments of transfer reasonably required to effectuate the purposes and intent of this Agreement.
21.2 Without limiting the generality of Section 21.1, each party shall use commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper, or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement as promptly as practicable, including, without limitation, (a) the preparation and filing of all regulatory and governmental filings that are necessary or advisable in connection with the transactions contemplated by this Agreement, (b) the satisfaction of the conditions to the obligations of the parties under this Agreement, and (c) the execution and delivery of such additional instruments and documents as any party may reasonably require.
22.1 The parties shall attempt in good faith to resolve any dispute arising out of or relating to this Agreement promptly by negotiation between executives who have authority to settle the controversy and who are at a higher level of management than the persons with direct responsibility for administration of this Agreement. Any party may give the other party or parties written notice of any dispute not resolved in the normal course of business. Within fifteen (15) days after delivery of the notice, the receiving party shall submit to the other a written response. The notice and the response shall include a statement of each party’s position and a summary of the arguments supporting that position, and the name and title of the executive who will represent that party and of any other person who will accompany the executive.
22.2 If the dispute has not been resolved by negotiation within thirty (30) days of the disputing party’s notice, or if the parties fail to meet within such thirty (30) day period, any party may initiate litigation in the Chosen Courts in accordance with Section 9.2 of this Agreement. Notwithstanding the foregoing, any party may seek injunctive or other equitable relief in any court of competent jurisdiction at any time without first complying with this Section 22.1, to prevent irreparable harm pending the resolution of such dispute.
22.3 All negotiations pursuant to this Section 22 shall be treated as confidential settlement discussions and shall be subject to applicable rules of evidence regarding the inadmissibility of settlement communications.
17.1 General Obligation. Each Investor acknowledges that the information received by it pursuant to this Agreement may constitute material nonpublic information. Each Investor agrees that it will maintain the confidentiality of, and will not disclose or use (except in connection with monitoring its investment in the Company or as otherwise expressly permitted hereunder), any Confidential Information (as defined below), without the prior written consent of the Company. "Confidential Information" means any information delivered to any Investor by the Company or its agents, representatives, or employees in connection with this Agreement that is proprietary in nature and that was clearly designated or marked as "confidential" or "proprietary" at the time of disclosure, or that the Investor knows or should reasonably know is confidential or proprietary, including information relating to the Company’s customers, suppliers, technology, trade secrets, know-how, business plans, finances, strategy, and personnel.
17.2 Exceptions. The obligations set forth in Section 17.1 shall not apply to information that (a) was publicly known and made generally available in the public domain prior to the time of disclosure to the Investor; (b) becomes publicly known and made generally available after disclosure to the Investor through no action or inaction of the Investor in breach of this Agreement; (c) is already in the possession of the Investor at the time of disclosure as shown by the Investor’s files and records; (d) is obtained by the Investor from a third party without a breach of such third party’s obligations of confidentiality; or (e) is independently developed by the Investor without use of or reference to the Confidential Information, as shown by documents and other competent evidence in the Investor’s possession.
17.3 Required Disclosures. In the event that an Investor is required by applicable law, regulation, or legal process (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand, or similar process) to disclose any Confidential Information, such Investor shall, to the extent legally permitted, provide the Company with prompt written notice of such requirement so that the Company may seek an appropriate protective order or other appropriate remedy or waive compliance with the terms of this Agreement. If such protective order or other remedy is not obtained, or if the Company waives compliance with the provisions of this Section 17, the Investor shall furnish only that portion of the Confidential Information that is legally required to be disclosed and shall use commercially reasonable efforts to obtain assurances that confidential treatment will be accorded to the Confidential Information so disclosed.
17.4 Whistleblower Safe Harbor. Notwithstanding anything to the contrary in this Agreement (including this Section 17 and Section 10.6), nothing in this Agreement shall prohibit or restrict any Investor, or any of its directors, officers, employees, representatives, or agents, from (a) reporting possible violations of federal, state, or local law or regulation to any governmental agency or entity, including the U.S. Department of Justice, the SEC, the U.S. Congress, or any agency Inspector General (collectively, "Government Authorities"), (b) making disclosures that are protected under the whistleblower provisions of applicable federal, state, or local law or regulation, including Section 21F of the Exchange Act, (c) filing a charge or complaint with, or otherwise communicating with or participating in any investigation or proceeding that may be conducted by, any Government Authority, including by providing documents or other information to such Government Authority, or (d) receiving an individual monetary award or other incentive payment for information provided to any Government Authority pursuant to 18 U.S.C. Section 1833(b) or any other whistleblower award program. Pursuant to 18 U.S.C. Section 1833(b), an individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. No prior authorization from the Company is required for any such reporting, disclosure, or communication, and no Investor is required to notify the Company that it has made any such report, disclosure, or communication.
18.1 Governing Law. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed by, and construed and interpreted in accordance with, the laws of the State of [STATE], without giving effect to principles of conflicts of law that would result in the application of the laws of any other jurisdiction.
18.2 Exclusive Jurisdiction. Each of the parties hereto irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the courts of the State of [STATE] sitting in [COUNTY], [STATE] and of the United States District Court for the [DISTRICT] of [STATE], and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each of the parties hereto irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such [STATE] state court or, to the fullest extent permitted by applicable law, in such federal court.
18.3 Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
18.4 Equitable Relief. Each party acknowledges and agrees that a breach or threatened breach of certain provisions of this Agreement may give rise to irreparable harm for which monetary damages would not be an adequate remedy. Accordingly, each party agrees that, in addition to any other remedies available at law or in equity, the non-breaching party shall be entitled to seek specific performance, injunctive relief, or other equitable remedies without the necessity of proving actual damages or posting a bond or other security.
This Agreement (including all Exhibits and Schedules hereto), together with the Purchase Agreement and the other agreements and instruments contemplated by the Purchase Agreement, constitutes the full and entire understanding and agreement among the parties with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing between the parties is expressly canceled. No party shall be liable or bound to any other party in any manner by any representations, warranties, covenants, or agreements except as specifically set forth herein and therein.
22A.1 Submission to Arbitration. Any dispute, controversy, or claim arising out of or relating to this Agreement, or the breach, termination, or invalidity thereof, that is not resolved through negotiation in accordance with Section 22.1 within thirty (30) days of the disputing party’s notice, may be submitted to final and binding arbitration administered by the American Arbitration Association (the "AAA") under its Commercial Arbitration Rules then in effect, as modified by this Section 22A.
22A.2 Arbitration Procedures. The arbitration shall be conducted in [CITY], [STATE] by a panel of three (3) arbitrators selected in accordance with the AAA’s Commercial Arbitration Rules. Discovery shall be limited to (a) the production of documents directly relevant to the issues in dispute, and (b) up to three (3) depositions per side, each not to exceed seven (7) hours of testimony. The arbitrators shall render a written decision with a reasoned basis within thirty (30) days following the close of the hearing. A certified court reporter shall attend all hearings and the proceedings shall be transcribed. The arbitrators shall have no authority to award punitive, exemplary, or consequential damages, and the parties hereby waive any right to seek or recover such damages in any arbitration under this Section 22A.
22A.3 Judgment and Enforcement. Judgment on the award rendered by the arbitrators may be entered in any court having jurisdiction thereof. The arbitration award shall be final and binding on the parties, and the parties agree that they shall not seek to vacate, modify, or correct the award except on the grounds specified in the Federal Arbitration Act, 9 U.S.C. Sections 1-16.
22A.4 Costs and Fees. The costs of the arbitration, including the fees and expenses of the arbitrators, shall be shared equally by the parties to the arbitration, provided that each party shall bear its own attorneys’ fees and costs, except that the arbitrators shall have the authority to award reasonable attorneys’ fees and costs to the prevailing party if the arbitrators determine that the non-prevailing party’s claims or defenses were frivolous or brought in bad faith.
22A.5 Preservation of Equitable Remedies. Nothing in this Section 22A shall limit any party’s right to seek temporary, preliminary, or permanent injunctive relief or other equitable relief in any court of competent jurisdiction at any time, including without limitation prior to, during, or after the pendency of any arbitration proceeding, to prevent irreparable harm or preserve the status quo. Any such application to a court for equitable relief shall not be deemed incompatible with, or a waiver of, the agreement to arbitrate contained in this Section 22A.
22A.6 Confidentiality of Proceedings. The parties agree that the arbitration proceedings, including any discovery, testimony, briefs, or other submissions, and any award or decision, shall be kept confidential by the parties and the arbitrators, except (a) as may be required by applicable law, rule, or regulation, (b) as may be necessary in connection with a judicial challenge to, or enforcement of, an award, or (c) with the prior written consent of all parties to the arbitration.
23.1 Successors and Assigns. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and permitted assigns of the parties hereto. No party may assign this Agreement or any rights or obligations hereunder without the prior written consent of the other parties, except that any party may assign its rights and obligations hereunder to an Affiliate or Permitted Transferee in connection with a permitted Transfer of Shares in accordance with Section 7, provided that such assignee executes and delivers a Joinder Agreement to the Company.
23.2 No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon any Person, other than the parties hereto and their respective successors and permitted assigns, any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided herein. No Person who is not a party to this Agreement may enforce any provision of this Agreement.
23.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. All references in this Agreement to sections, subsections, exhibits, and schedules shall, unless otherwise provided, refer to sections and subsections hereof and exhibits and schedules attached hereto.
23.4 Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. Unless the context of this Agreement clearly requires otherwise: (a) references to the plural include the singular and vice versa; (b) references to "herein," "hereof," "hereunder," and similar terms refer to this Agreement as a whole and not to the particular section or provision where such reference appears; (c) "including" and variations thereof shall not be deemed to be terms of limitation but rather shall be deemed to be followed by the words "without limitation"; (d) "or" is used in the inclusive sense of "and/or"; and (e) references to any statute, rule, or regulation shall include any amendment thereto, any successor statute, rule, or regulation, and any rules and regulations promulgated thereunder.
20.1 Amendments. Any term of this Agreement may be amended, terminated, or waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the then-outstanding Registrable Securities; provided, however, that any amendment, termination, or waiver that adversely affects the rights of one or more Holders in a manner that is disproportionate to the adverse effect on the rights of the other Holders under this Agreement (in each case relative to the number of Registrable Securities held by such Holders) shall also require the written consent of the Holder or Holders so adversely and disproportionately affected.
20.2 Effect of Amendment or Waiver. Any amendment, termination, or waiver effected in compliance with this Section 20 shall be binding on each party hereto and all of such party’s successors and permitted assigns, whether or not any such party, successor, or assign entered into or approved such amendment, termination, or waiver. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.
In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by applicable law. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business, and other purposes of such void or unenforceable provision.
No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such non-breaching or non-defaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.
23.5 Expenses. Except as otherwise set forth in this Agreement or the Purchase Agreement, each party shall bear its own expenses and legal fees incurred in connection with the negotiation, execution, delivery, and performance of this Agreement and the transactions contemplated hereby.
23.6 No Employment Rights. Nothing contained in this Agreement shall be deemed to give any Stockholder, in such Stockholder’s capacity as a Stockholder, any right to be retained in the employ or service of the Company or any of its subsidiaries, or to interfere with the right of the Company or any of its subsidiaries to discharge any Stockholder at any time, with or without cause (subject to any employment agreement between such Stockholder and the Company).
23.7 Waiver of Conflicts. Each party to this Agreement acknowledges that [LAW FIRM NAME] ("Company Counsel") has acted as counsel to the Company in connection with the negotiation, preparation, and execution of this Agreement and the other Transaction Agreements and may continue to act as counsel to the Company in connection with the performance and enforcement of this Agreement. Each Investor and Key Holder hereby (a) acknowledges that Company Counsel has not acted as counsel to such Investor or Key Holder in connection with this Agreement, (b) agrees that Company Counsel may continue to act as counsel to the Company in connection with any dispute arising out of this Agreement, and (c) waives any conflict of interest arising from Company Counsel’s prior representation of the Company in connection with this Agreement.
23.8 Entire Agreement; Transaction Agreements. This Agreement, together with the other Transaction Agreements, the Restated Certificate, and the Bylaws, constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof and supersedes all prior and contemporaneous agreements, representations, and understandings, whether written or oral, with respect to such subject matter.
[Signature Pages Follow]
All notices, requests, consents, claims, demands, waivers, and other communications hereunder shall be in writing and shall be deemed to have been given: (a) when delivered by hand (with written confirmation of receipt); (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by email of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next business day if sent after normal business hours of the recipient; or (d) on the third (3rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid.
All notices to the Company shall be directed to the address set forth on the signature page hereof, Attention: Chief Executive Officer, with a copy (which shall not constitute notice) to [COMPANY COUNSEL NAME AND ADDRESS]. All notices to an Investor shall be directed to the address set forth on Exhibit A hereto or, in each case, to such other address or addresses as the party to whom the notice is to be given may have furnished to each other party in writing in accordance herewith.
Any party from time to time may change its address, email address, or other information for the purpose of notices to that party by giving written notice specifying such change to the other parties hereto.
Except as otherwise provided herein (including with respect to Registration Expenses), each party shall bear its own costs and expenses (including attorneys’ fees and expenses) incurred in connection with the negotiation, execution, and delivery of this Agreement and the transactions contemplated hereby. The Company shall pay the reasonable fees and expenses of one legal counsel to the Investors, in an aggregate amount not to exceed [DOLLAR AMOUNT], incurred in connection with the negotiation, execution, and delivery of this Agreement and the other agreements executed in connection with the Purchase Agreement.
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including PDF or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com), or other transmission method, and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.
Based on our analysis of voting agreements filed in S-1 registrations by VIDA Global, Ambiq Micro (Cooley LLP counsel), and EagleRock Land in 2025-2026, including CFIUS overlay provisions from the Kardigan IRA.
The intersection of CFIUS regulations and voting agreements has become a critical consideration for technology companies with foreign investors. Under the 2018 FIRRMA amendments, a Foreign Person obtaining a board seat or board observer role at a TID U.S. Business (Technology, Infrastructure, Data) can trigger a mandatory CFIUS filing requirement. The Kardigan IRA (September 2025) addresses this by defining “DPA Triggering Rights” to include “membership or observer rights on the Board of Directors of the Company” when held by a Foreign Person.
This creates a tension with the standard Voting Agreement structure, which typically gives preferred stockholders the contractual right to designate one or more board members. If a Foreign Person investor (or a fund with Foreign Person limited partners above the 10% threshold) designates a board member, that designation itself can constitute a covered transaction requiring CFIUS notification or approval.
Template Approach: The downloadable template includes a conditional restriction: if any Investor is or becomes a Foreign Person (as defined in 31 C.F.R. 800.224), that Investor’s board designation rights are subject to prior written approval by the Board (excluding the designee of such Foreign Person). The Board’s approval is conditioned on a determination that the designation would not trigger a mandatory CFIUS filing or, if it would trigger a filing, that the Company has obtained CFIUS clearance. This provision protects the Company from inadvertent CFIUS violations while preserving the Foreign Person investor’s economic rights (dividends, liquidation preference, conversion, etc.).
Practical Impact: This provision most commonly affects: (1) Chinese, Russian, and Middle Eastern sovereign wealth funds; (2) venture funds with significant LP commitments from foreign government entities; (3) strategic investors that are subsidiaries of foreign parent companies; and (4) SPVs or aggregation vehicles whose beneficial owners include Foreign Persons. Investors subject to this restriction typically negotiate for: board observer rights (without voting power) as a compromise, an obligation for the Company to cooperate in obtaining CFIUS clearance, and a sunset once the Company determines that it no longer qualifies as a TID U.S. Business.
Like the ROFR/Co-Sale Agreement, the Voting Agreement should terminate upon the Company becoming publicly traded, regardless of whether that occurs through a traditional IPO or a Direct Listing. The standard NVCA termination provision terminates the Voting Agreement upon the earlier of: (a) the closing of a Qualified IPO; (b) a Deemed Liquidation Event (acquisition or asset sale); or (c) written consent of the requisite holders.
The updated template adds Direct Listing as a fourth termination trigger: “(d) the effective date of a Direct Listing on a national securities exchange.” This ensures that all board composition requirements, voting obligations, and drag-along mechanics terminate when the Company becomes publicly traded via any path. Without this provision, a Direct Listing could leave the Voting Agreement in effect, creating a situation where private investors retain contractual board designation rights even after the Company is publicly traded and subject to public company governance requirements (including exchange listing standards for board independence).
Note that certain provisions may survive termination by their terms (such as indemnification obligations for actions taken during the agreement’s term), but the operative voting and board composition provisions should terminate cleanly upon any public listing event.
The drag-along provision is among the most heavily negotiated sections of a Voting Agreement. Based on our EDGAR benchmarking of 2025-2026 filings, the current market standard for Series A and later-stage deals includes several protections that were not common in earlier-generation templates:
1. Approval Threshold: The drag-along is triggered by approval of: (a) a majority of the outstanding Preferred Stock (voting as a single class on an as-converted basis); AND (b) a majority of the Common Stock (excluding shares held by investors who also hold Preferred). This dual-trigger approach (found in the VIDA Global and Ambiq Micro S-1 filings from 2026) prevents scenarios where either group can unilaterally force a sale over the other’s objection. Some agreements add a Board approval requirement as a third trigger.
2. Minimum Consideration Floor: In investor-protective agreements, the drag-along cannot be exercised unless the transaction consideration equals or exceeds a minimum per-share price (typically expressed as a multiple of the most recent financing price, e.g., “[1.5x][2x][3x] the Series [_] Original Issue Price”). This protects early-stage investors from being dragged into a fire-sale transaction that returns less than their liquidation preference. The template includes this as a bracketed optional provision.
3. Equal Treatment Covenant: All holders must receive the same form of consideration, or if different forms are available (cash vs. stock vs. mixed), each holder must be offered the choice. The consideration is distributed according to the Certificate of Incorporation’s liquidation preference waterfall. No holder may receive preferential side payments, advisory fees, or employment agreements with the acquirer that effectively increase their per-share consideration above what other holders receive.
4. Representation and Warranty Limitations: In a dragged transaction, minority holders who did not vote in favor should not be required to make extensive representations and warranties to the acquirer. The market standard (per Cooley GO and NVCA guidance) limits dragged holders’ representations to: (a) ownership of their shares and authority to transfer; (b) absence of liens on their shares; and (c) absence of conflicts. Dragged holders should not be required to make representations about the Company’s business, financials, or IP. The template includes this limitation.
5. Indemnification Cap: Dragged holders’ indemnification exposure should be capped at their pro rata share of any escrow or holdback, with no additional recourse. The template caps indemnification at the lesser of: (a) such holder’s pro rata share of the aggregate escrow amount; and (b) the net proceeds received by such holder. No dragged holder should face indemnification exposure exceeding the consideration they actually received.
This template is provided by Montague Law for informational purposes only and does not constitute legal advice. Consult a qualified attorney before using this document.