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What is a “Piggyback Registration” clause?..

A “piggyback” registration rights clause entitles investors to offer their shares in the company to buyers if an offering has already been initiated by the company or another investor. In this manner, some of the shares sold in an IPO or secondary offering will be shares owned by existing shareholders rather than completely comprised of newly issued shares. Such clauses often include “cutbacks” or limitations on the right (e.g. existing investors piggyback offering may be cut back to zero if there is insufficient market demand).
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Can You Shop Around a Term Sheet?..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
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Confidentiality and Other Important Clauses in a Term Sheet..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Confidentiality and Other Important Clauses in a Term Sheet..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Blog Bite: Can a Non-binding Letter of Intent Ever Trump the Existence of a Definitive Agreement?..

In some cases, a letter of intent is enforced instead of the terms of the “Definitive agreement” clause. This article posted on our partner site Mondaq.com explains the recent judgment of the Superior Court of Québec, Ihag-Holding, a.g. v. Intrawest Corporation, in this particular case, there was a drafting error overlooked by all parties which would have resulted in an unreasonable commercial transaction, if not remedied. Overall, it highlights the importance of careful drafting and that the goal is not to negotiate the letter of intent as one would a definitive agreement but rather to recognize that non-binding does not equate to without consequence.
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Blog Bite: Can a Non-binding Letter of Intent Ever Trump the Existence of a Definitive Agreement?..

In some cases, a letter of intent is enforced instead of the terms of the “Definitive agreement” clause. This article posted on our partner site Mondaq.com explains the recent judgment of the Superior Court of Québec, Ihag-Holding, a.g. v. Intrawest Corporation, in this particular case, there was a drafting error overlooked by all parties which would have resulted in an unreasonable commercial transaction, if not remedied. Overall, it highlights the importance of careful drafting and that the goal is not to negotiate the letter of intent as one would a definitive agreement but rather to recognize that non-binding does not equate to without consequence.
Read more...

Representations and warranties are no substitute for due diligence in an asset or share purchase agreement..

After a term sheet in an asset or share purchase deal is signed, the parties will usually commence “due diligence”. This article posted on our partner site Mondaq.com explains what is anticipated to occur during the due diligence process, and also describes the issues that might arise for the purchase and issuer of shares, should there be inaccuracies in the disclosure that are not discovered during “due diligence” either through failure by the acquirer to ask, or failure by the issuer to provide such details. This article also discusses the the use of a “satisfaction of the purchaser of due diligence clause” by an issue that can be used to mitigate potential liability.
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How Do I Conduct Due Diligence in a Share Purchase M&A?..

After a term sheet in an asset or share purchase deal is signed, the parties will usually commence “due diligence”. This article posted on our partner site Mondaq.com explains what is anticipated to occur during the due diligence process, and also describes the issues that might arise for the purchase and issuer of shares, should there be inaccuracies in the disclosure that are not discovered during “due diligence” either through failure by the acquirer to ask, or failure by the issuer to provide such details. This article also discusses the the use of a “satisfaction of the purchaser of due diligence clause” by an issue that can be used to mitigate potential liability.
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Blog Bite: When is a Letter of Intent Binding?..

This article posted on our partner site Mondaq.com highlights how important it is for parties to clearly state their intentions when drafting a letter of intent (LOI). Parties may intend for an LOI to be an enforceable agreement or non-binding, “agreement to agree”. The author explains that when considering if a LOI is binding the courts consider two key factors. First, does the LOI contain all essential information relating to the transaction or does it refer to future negotiations about significant terms of the deal? Second, did the parties intend to be bound, understanding that the definitive agreement would mirror the terms outlined in the LOI, or intend to suspend all legal obligations until establishing a final agreement? When preparing a non binding LOI parties should explicitly state the non-binding intent of the LOI (or of specific previsions). Further to this, parties should avoid using contractual language and refer to the document as an LOI, term sheet, or agreement to agree.
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Binding Clauses in a Term Sheet..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Binding (or non-binding) Nature of Term Sheets: Entering into a Term Sheet is Hard Enough, Getting Out of One Can Be Even Harder...

As a company entering into a possible investment, when accepting an investor term sheet, consider the provisions relating to termination of that term sheet. There’s nothing worse than being stuck in an unlimited holding pattern while trying to raise funds.
Read more...

What is the Difference Between a Contract and a Memorandum of Understanding?..

Although a memorandum of understanding can offer an alternative way to create relationships, it is important to consider how this agreement differs from formal contracts. As this post explains, poor drafting of a memorandum of understanding can cause significant legal issues.
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Blog Bite: Mergers & Acquisitions – What are the Legal Obligations of a Non-binding Letter of Intent?..

Recent cases in Canada and the US have indicated that courts are willing to enforce a duty of good faith even in the context of a non-binding Letter of Intent or Term Sheet.
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Anti-Dilution Clause May Prevent Company from Issuing Additional Shares..

The representation that the company may issue additional shares in the future means that the company may dilute the shares of the subscriber at will. A subscriber who does not wish to give the issuer the ability to dilute their shareholding may require that anti-dilution provisions to be included in the subscription agreement.
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More on the Binding/Non-binding Clauses In a Term Sheet/LOI..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Blog Bite: Letters of Intent – Binding or Non-Binding?..

Illustrates how a letter of intent (LOI) can be interpreted as either binding, or non-binding on both parties. To avoid drafting a legally binding LOI the parties should consider three central points. First, the LOI should explicitly state that LOI is not indented to be legally binding and should avoid the use of contractual language (e.g. “this agreement”, “upon acceptance”, or “it is agreed”). Second, the LOI should clearly state that it is not the entire agreement and that a final, definitive agreement with all the relevant terms will be drafted at a later point. Third, until a final agreement has been reached the parties should ensure that their conduct before, during, and after the LOI does not imply an intention to be bound.
Read more...

Blog Bite: Can a Non-binding Letter of Intent Ever Trump the Existence of a Definitive Agreement?..

In some cases, a letter of intent is enforced instead of the terms of the “Definitive agreement” clause. This article posted on our partner site Mondaq.com explains the recent judgment of the Superior Court of Québec, Ihag-Holding, a.g. v. Intrawest Corporation, in this particular case, there was a drafting error overlooked by all parties which would have resulted in an unreasonable commercial transaction, if not remedied. Overall, it highlights the importance of careful drafting and that the goal is not to negotiate the letter of intent as one would a definitive agreement but rather to recognize that non-binding does not equate to without consequence.
Read more...

Blog Bite: Mergers & Acquisitions – What are the Legal Obligations of a Non-binding Letter of Intent?..

Recent cases in Canada and the US have indicated that courts are willing to enforce a duty of good faith even in the context of a non-binding Letter of Intent or Term Sheet.
Read more...

Blog Bite: Can a Non-binding Letter of Intent Ever Trump the Existence of a Definitive Agreement?..

In some cases, a letter of intent is enforced instead of the terms of the “Definitive agreement” clause. This article posted on our partner site Mondaq.com explains the recent judgment of the Superior Court of Québec, Ihag-Holding, a.g. v. Intrawest Corporation, in this particular case, there was a drafting error overlooked by all parties which would have resulted in an unreasonable commercial transaction, if not remedied. Overall, it highlights the importance of careful drafting and that the goal is not to negotiate the letter of intent as one would a definitive agreement but rather to recognize that non-binding does not equate to without consequence.
Read more...

How Do I Conduct Due Diligence in a Share Purchase M&A?..

After a term sheet in an asset or share purchase deal is signed, the parties will usually commence “due diligence”. This article posted on our partner site Mondaq.com explains what is anticipated to occur during the due diligence process, and also describes the issues that might arise for the purchase and issuer of shares, should there be inaccuracies in the disclosure that are not discovered during “due diligence” either through failure by the acquirer to ask, or failure by the issuer to provide such details. This article also discusses the the use of a “satisfaction of the purchaser of due diligence clause” by an issue that can be used to mitigate potential liability.
Read more...

Representations and warranties are no substitute for due diligence in an asset or share purchase agreement..

After a term sheet in an asset or share purchase deal is signed, the parties will usually commence “due diligence”. This article posted on our partner site Mondaq.com explains what is anticipated to occur during the due diligence process, and also describes the issues that might arise for the purchase and issuer of shares, should there be inaccuracies in the disclosure that are not discovered during “due diligence” either through failure by the acquirer to ask, or failure by the issuer to provide such details. This article also discusses the the use of a “satisfaction of the purchaser of due diligence clause” by an issue that can be used to mitigate potential liability.
Read more...

Anti-Dilution Clause May Prevent Company from Issuing Additional Shares..

The representation that the company may issue additional shares in the future means that the company may dilute the shares of the subscriber at will. A subscriber who does not wish to give the issuer the ability to dilute their shareholding may require that anti-dilution provisions to be included in the subscription agreement.
Read more...

More on the Binding/Non-binding Clauses In a Term Sheet/LOI..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Binding (or non-binding) Nature of Term Sheets: Entering into a Term Sheet is Hard Enough, Getting Out of One Can Be Even Harder...

As a company entering into a possible investment, when accepting an investor term sheet, consider the provisions relating to termination of that term sheet. There’s nothing worse than being stuck in an unlimited holding pattern while trying to raise funds.
Read more...

What is the Difference Between a Contract and a Memorandum of Understanding?..

Although a memorandum of understanding can offer an alternative way to create relationships, it is important to consider how this agreement differs from formal contracts. As this post explains, poor drafting of a memorandum of understanding can cause significant legal issues.
Read more...

Blog Bite: Letters of Intent – Binding or Non-Binding?..

Illustrates how a letter of intent (LOI) can be interpreted as either binding, or non-binding on both parties. To avoid drafting a legally binding LOI the parties should consider three central points. First, the LOI should explicitly state that LOI is not indented to be legally binding and should avoid the use of contractual language (e.g. “this agreement”, “upon acceptance”, or “it is agreed”). Second, the LOI should clearly state that it is not the entire agreement and that a final, definitive agreement with all the relevant terms will be drafted at a later point. Third, until a final agreement has been reached the parties should ensure that their conduct before, during, and after the LOI does not imply an intention to be bound.
Read more...

Blog Bite: When is a Letter of Intent Binding?..

This article posted on our partner site Mondaq.com highlights how important it is for parties to clearly state their intentions when drafting a letter of intent (LOI). Parties may intend for an LOI to be an enforceable agreement or non-binding, “agreement to agree”. The author explains that when considering if a LOI is binding the courts consider two key factors. First, does the LOI contain all essential information relating to the transaction or does it refer to future negotiations about significant terms of the deal? Second, did the parties intend to be bound, understanding that the definitive agreement would mirror the terms outlined in the LOI, or intend to suspend all legal obligations until establishing a final agreement? When preparing a non binding LOI parties should explicitly state the non-binding intent of the LOI (or of specific previsions). Further to this, parties should avoid using contractual language and refer to the document as an LOI, term sheet, or agreement to agree.
Read more...

Can You Shop Around a Term Sheet?..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Confidentiality and Other Important Clauses in a Term Sheet..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Confidentiality and Other Important Clauses in a Term Sheet..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
Read more...

Binding Clauses in a Term Sheet..

Negotiating a contract can be a messy process. Parties often need to engage in several rounds of back-and-forth negotiation to find a mutually satisfactory deal, and many details are not settled until the agreement is in the final stages of drafting. Businesses often use a letter of intent (LOI) in these interim stages, especially in particular kinds of transactions, to create an environment conducive to faster and safer negotiation. However, to do this, it may be smart for some terms to be binding. We’ll explore some common binding terms that you might want to include in your own LOI.
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[Insert]...

[Insert]
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Pro Forma Capitalization Table...

Pro Forma Capitalization Table
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If not accepted by the Company by [Insert date] at [5:00 p.m.], Pacific Time, the offer contained in...

If not accepted by the Company by [Insert date] at [5:00 p.m.], Pacific Time, the offer contained in this term sheet will expire.
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This Term Sheet is only a statement of our present intentions and is not a binding contract, commitm...

This Term Sheet is only a statement of our present intentions and is not a binding contract, commitment or agreement, with the exception of the Legal Fees and Expenses and Exclusivity provisions above. This Term Sheet shall be superseded in full by any definitive agreement the parties may enter into with respect to an investment in the Company. If the parties do not enter into an agreement with respect to an investment in the Company, the Legal Fees and Expenses and Exclusivity provisions shall remain in full force and effect and be enforceable by specific performance.
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25. Exclusivity: Until the [•] day after execution of this Term Sheet, unless approved in writing ...

25. Exclusivity: Until the [•] day after execution of this Term Sheet, unless approved in writing by the Angels, the Company and each member of the Company (i) shall deal exclusively with the Angels in connection with the issue or sale of any equity or debt securities or assets of the Company or any merger or consolidation involving the Company, (ii) shall not disclose the terms of this term sheet to any third party, (iii) shall not solicit, or engage others to solicit offers for the purchase or acquisition of any material license or equity or debt securities or assets of the Company or for any merger or consolidation involving the Company, (iv) shall not negotiate with or enter into any agreements or understandings with respect to any such transactions and (v) shall promptly inform the Angels of any such solicitation or offer.
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24. Legal Fees and Expenses: The Company and Investors will pay their own legal fees and expenses; p...

24. Legal Fees and Expenses: The Company and Investors will pay their own legal fees and expenses; provided that the Company shall pay the reasonable fees and expenses of special counsel to the Angels up to a maximum of [•].
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23.4. [Other]...

23.4. [Other]
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23.3. Aggregate of $[•] invested in initial closing. Any subsequent closings must occur within [90...

23.3. Aggregate of $[•] invested in initial closing. Any subsequent closings must occur within [90] days of the initial Series A closing
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23.2. Satisfactory completion of due diligence by the Investors....

23.2. Satisfactory completion of due diligence by the Investors.
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23.1. Completion of legal documentation satisfactory to the prospective Investors....

23.1. Completion of legal documentation satisfactory to the prospective Investors.
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23. Conditions Precedent to Financing: Consummation of the financing on the part of Investors is sub...

23. Conditions Precedent to Financing: Consummation of the financing on the part of Investors is subject to the following conditions precedent:
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21. First Refusal and Co-Sale Agreement: First the Company and then the Major Investors will have a ...

21. First Refusal and Co-Sale Agreement: First the Company and then the Major Investors will have a right of first refusal to purchase shares of stock proposed to be transferred by the Founders or specified members of management, excluding transfers for estate planning. The Company and Major Investors may purchase some or all of the available shares. To the extent that the right of first refusal is not exercised by the Company and/or the Major Investors then the Major Investors shall each have a right to participate on a pro rata basis (based on relative holdings of Preferred Stock) in any proposed transfers of shares by the Founders. This right will terminate on a Qualified IPO or Company sale.
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19. Drag-Along Right: In the event that [majority] of the Company’s outstanding Preferred Stoc...

19. Drag-Along Right: In the event that [majority] of the Company’s outstanding Preferred Stock propose to sell their securities to a third party (whether pursuant to a merger, stock sale or similar transaction), all remaining stockholders of the Company shall approve the transaction and be required to transfer their securities on the same terms.
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18. Employee Pool: The Company’s unallocated employee option pool shall be [•]% (on a post f...

18. Employee Pool: The Company’s unallocated employee option pool shall be [•]% (on a post financing basis).
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