Term Sheet Analysis

1

Legal Documents

Key Legal Documents in the Deal

• Documents reflect the negotiated terms set forth in the approved term sheet

• Documents include: – Investment agreement (Preferred Stock Purchase

Agreement)

– Board resolutions (for required amendments to the charter)

– Stockholder, employment, confidentiality, warrants, legal opinions

2

Legal Documents - Specifics

• Investment agreement – Key/material terms of the financing

– Reps and warranties • Organization in good standing, corporate

authority, capitalization, financials

• Legal, trade secrets, and government approvals

• No defaults/accuracy of statements

• Conditions to closing

• Affirmative and negative covenants

• Remedies for breach

Legal Documents – Specifics

• Corporate charter amendment

• Stockholder agreement

• Employment agreement

• Confidentiality agreement

• Contingent proxy (rare)

• Registration rights (often included in investment agreement)

• Other

3

Summary

• Legal documents reflect the agreed upon terms of the financing set forth in the term sheet

• Normally, drafted by investors’ lawyers, but can be drafted by company and reviewed by investors’ lawyers

• Important to retain legal counsel for review