Triblr.com by Vlad Stan

Today, I’m presenting the last part of the series of articles about the legal VC terms.

Restriction on Sales
This term sheet provision states that the company has a right of first refusal on all transfers of common stock, which if not exercised by the company will be transferred to the investors.

Proprietary Information and Inventions Agreement
Refers to the fact that every founder, employer and consultant should sign an intellectual property transfer agreement with the company trying to get VC funding.

Co-Sale Agreement
It means that the founders may not sell, transfer or exchange their shares unless each Investor has an opportunity to participate in the sale on a pro-rata basis. This only matters until the IPO.

Founders Activities
This means your funding VC wants you to be spending 100% (actually 120%) of your time and attention on the company. If you are working on other companies, but not disclosing this, you have violated the terms of the agreement and you don’t want that before even starting. There are some exceptions to this previsions, but they are very rare.

No Shop Agreement  (also Unilateral or Serial Monogamy)
It is a provision that commits the entrepreneur not to look for other VCs while negotiating with another. In Brad Feld’s words, “At some level, the no shop agreement reinforces the handshake that says “ok – let’s get a deal done – no more fooling around looking for a better/different one.”

Indemnification
It is a provision that states that the company will indemnify board members and investors for any claims brought against them by any third party (including any other shareholder of the Company) as a result of the financing.

Assignment
The assignment provision allows venture funds to transfer shares between funds and make distributions to their investors.

Read, also, the first and the second part of the article.