Example Observer Agreement

THIS OBSERVER AGREEMENT (the “Agreement”) is entered into as of ________, 20__, by and between _____________ (“Observer”), and ____________, Inc., a [Delaware] corporation (the “Company”).

1.1 Observer Rights. As long as Observer owns at least ___% of the issued and outstanding common stock of the Company, the Company shall invite [a representative of Observer /_____________, an individual] to attend all meetings of its board of directors in a non-voting observer capacity and, in this respect, shall give such representative copies of all notices, minutes, consents, and other materials that it provides to its directors and at the same time it provides such materials to its directors; provided, however, that such representative 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 such representative from any meeting or portion thereof if access to such information or attendance at such meeting could adversely affect the attorney-client privilege between the Company and its counsel or result in disclosure of trade secrets or a conflict of interest, or if the Observer or its representative is a competitor of the Company.

1.2 Termination of Information and Observer Rights. The covenants set forth in Section 1.1 shall terminate and be of no further force or effect (i) immediately before the consummation of an underwritten public offering of the Company’s common stock, or (ii) when the Company first becomes subject to the periodic reporting requirements of Section 12(g) or 15(d) of the Exchange Act, or (iii) upon the liquidation or dissolution of the Company, whichever event occurs first.

1.3 Confidentiality. The Observer agrees that the Observer and its representative 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 1.3 by the Observer or its representative), (b) is or has been independently developed or conceived by the Observer without use of the Company’s confidential information, or (c) is or has been made known or disclosed to the Observer by a third party without a breach of any obligation of confidentiality such third party may have to the Company; provided, however, that an Observer may disclose confidential information (i) to its 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 securities from the Observer, if such prospective purchaser agrees to be bound by the provisions of this Section 1.3; (iii) to any existing or prospective affiliate, partner, member, stockholder, or wholly owned subsidiary of the Observer in the ordinary course of business, provided that the Observer 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, provided that the Observer promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

SECTION 2

MISCELLANEOUS

2.1 Miscellaneous. The Observer may not assign its rights under this Agreement. This Agreement shall be governed by and construed under the internal laws of the State of __________ as applied to agreements among __________ residents entered into and to be performed entirely within __________, without reference to principles of conflict of laws or choice of laws. 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. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Observer and the Company. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be enforceable in accordance with its terms.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.