Problem #1 (5 points):

What are the Founder/Company representations & warranties, explain why there is such a major potential liability risk associated with them for the Founders/Management Team, and what can be done to mitigate this risk?

Problem #2 (5 points each):

List two qualitative provisions or items contained within the Terms & Conditions that are normally viewed as beneficial for BOTH Founders AND New Investors on a post investment basis and briefly explain why.

Problem #3 (5 points):

Almost always early stage equity investors require the Company to create a Stock Option Pool, which typically ranges from 8% to 20% of the then outstanding ownership, and is reflected in the Capitalization Table. Normally when individual Stock Options are granted the Stock Option vest over time and/or performance metrics. What is a vesting schedule and explain why granted Stock Options normally contain some form of vesting schedule.

Problem #4 (10 points):

List five different Preferred Stock Protective Provisions and explain why investors typically insist upon the inclusion of such provisions within the negotiated Term Sheet and subsequent Stock Purchase Agreement.