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are the final contracts that document the outcome of the negotiations between the entrepreneur and the investor and result in company funding. In a typical financing of debt and equity, the financing agreements might consist of a stock purchase agreement, a registration rights agreement, an investors rights agreement, a shareholders agreement, a loan agreement, a note or debenture, a charter amendment to create the security being sold and the stock certificates issued to the investor. The stock purchase agreement alone might be thirty pages with thirty or more pages of exhibits detailing many pertinent facts about the company and its business. The provisions of a stock purchase agreement typically identify the amount of funding and the conditions under which funds are released. They spell out the types of securities the investor receives and any special shareholder rights he has negotiated for. Financing agreements also contain provisions that govern the ongoing relationship of the investor and management. Many contain penalties if the company’s results do not meet expectations. Because of their breadth and the far-reaching effects their provisions can have on a company and its continued viability, financing agreements should be reviewed carefully. Each provision should be considered for its long-term impact as well as its short-term benefits. See: Affirmative Covenants, Boilerplate, Closing, Convertible Securities, Debentures, Investment Reps, Investor Rights Agreements, K.I.S.S., Lawyers, Letters of Intent, Management Agreements, Promissory Notes, Negative Covenants, Negotiation, Operating Covenants, Registration Rights, Reps and Warranties, Shareholders’ Agreements, Structure, Venture Capital Deal Structures. |
