casemark/investors-rights-agreement

Investors' Rights Agreement

Draft a market-standard, internally consistent IRA tied to the financing closing. All defined terms must align with the SPA and Charter.

Prerequisites

Gather before drafting:

• Transaction docs — SPA, Charter, Voting Agreement, ROFR/Co-Sale, cap table, closing schedule
• Party data — legal names, jurisdictions, notice addresses, signature authority
• Deal economics — share classes, price, amounts, investor thresholds
• Negotiated terms — thresholds, timing, delays, cutback priority, termination triggers
• Governing law + forum — selected state and venue
• Investor-specific items — ERISA management rights, observer rights, side letters

Core Workflow

1. Schedules and Parties

• Company legal name + jurisdiction (from Charter)
• Schedule A (Investors): name, address, series/shares, original purchase price
• Schedule B (Founders): name, address, shares/class
• Effective date = closing date (match SPA)

2. Definitions

Align all to SPA/Charter. Required minimums:

Registrable Securities (with exclusions), Holder, Initiating Holders, Major Investor threshold, New Securities, Excluded Securities, Deemed Liquidation Event (from Charter), Form S-3 / Register / Registration Statement (if used).

3. Registration Rights

Key levers — fill from deal terms:

| Topic | Default Range | Variable | |---|---|---| | Demand threshold | 25–40% of Registrable Securities | {{DemandPct}} | | Demand count | 1–2 | {{DemandCount}} | | Demand minimum | $5–10M offering size | {{DemandMin}} | | Delay right | up to 90 days / 12 months | {{DelayLimit}} | | Piggyback notice | 10–20 business days | {{PiggybackNotice}} | | Cutback priority | 1) non-Company/non-Holder → 2) Company → 3) Holders pro rata | {{CutbackOrder}} | | Form S-3 threshold | 10–30% | {{S3Pct}} | | S-3 minimum | $1–5M | {{S3Min}} | | S-3 frequency | 1–2 per 12 months | {{S3Count}} |

Piggyback exclusions: Form S-4 (M&A), Form S-8 (employee plans), reorganizations/splits, plus SPA-agreed exclusions.

4. Registration Procedures

Company obligations: prepare/file registration statement + amendments, provide filings/prospectus to Holders, blue sky qualification, legal opinions + comfort letters, exchange listing, underwriting agreement if applicable, maintain effectiveness through distribution.

Holder obligations: provide filing info, comply with prospectus delivery, execute custody/lock-up (≤ 180 days typical), execute POA for filings.

Indemnification: Company indemnifies Holders for misstatements/omissions except Holder-furnished info. Holders indemnify Company for Holder-furnished info. Contribution applies if indemnity unavailable.

5. Expenses

• Company pays (Registration Expenses): SEC/blue sky fees, printing, Company counsel, auditors, listing, transfer agent; one selling-holder counsel if agreed
• Holders pay pro rata (Selling Expenses): underwriting discounts, commissions, brokerage, holder-specific counsel, transfer taxes

6. Information Rights

Major Investor deliverables (if negotiated):

• Annual audited FS — 90–120 days after FY end
• Quarterly unaudited FS — 45 days after quarter end
• Annual budget — 30 days after FY start
• Monthly statements — 30 days after month end

Confidentiality: investment monitoring only; standard exceptions (public, third-party, independent, legal compulsion); competitive-sensitivity withholding with notice.

7. Management Rights

Include if needed for ERISA VC operating company qualification.

• Reasonable facility/records access with notice
• Board observer rights if no seat; periodic management meetings
• Advisory only — no fiduciary duty or control; privilege/conflict carve-outs

8. Pro Rata (ROFO) Rights

Process: Company notice 20–30 days pre-issuance → investor election 15–20 days → oversubscription pro rata → Company sells unsubscribed on no-better terms within 90–120 days.

New Securities: any equity or equity-linked (convertibles, warrants, options).

Excluded Securities (align to SPA): equity plan issuances, board-approved M&A/strategic (incl. preferred director), public offerings, existing conversions/exercises, debt/lease financings, sponsored research/strategic collaborations, other negotiated exclusions.

9. Termination Matrix

| Right | Terminates Upon | |---|---| | Registration | IPO + 5–7 years; Rule 144 free sale; deemed liquidation | | Information | IPO; loss of Major Investor status; deemed liquidation | | Management | IPO; loss of Major Investor status | | Pro rata | IPO (or post-IPO sunset); loss of Major Investor status; deemed liquidation |

If citing SEC Rule 144 or Rule 415, confirm current accuracy. [VERIFY]

10. Miscellaneous

• Governing law + exclusive forum
• Jury trial waiver (if selected; make conspicuous)
• Amendments: Company + required % of Registrable Securities; class consent for adverse changes
• Waivers: written only; no implied waivers
• Assignment: Company restricted; Holders may assign to affiliates/qualified transferees with joinder
• Notices: methods, deemed receipt timing, update requirement
• Severability and reformation
• Counterparts + electronic signatures (E-SIGN compliant)
• Entire agreement clause tied to transaction documents

Pitfalls and Checks

• Match all defined terms to SPA/Charter — never invent new definitions
• Keep thresholds, timing windows, and sunset periods consistent across all transaction docs
• Reconcile schedules to cap table and closing schedule totals
• Use U.S. securities law terminology consistently (Securities Act, registration statement, prospectus)
• Do not add arbitration unless expressly required by deal terms
• Flag any legal citation uncertainty with [VERIFY]
• Confirm board-approval or preferred-director consent requirements for exclusions