Question

BUSINESS FUNDING

Covenants analyses (lockup, permitted transfer, staging technique, Stock options, callable and puttable securities, puttable security, tag-along right, drag-along right, right of first refusal, exit ratchet)

Answer 1

Answer:

1) lock-up

· a covenant b/w the capitalist and existing shareholders that forbids each existing shareholders and PEIs from merchandising for a particular metal

2) permitted transfer

· permitted transfer: this is often a form of a lot of subtle locks up. it's associate degree agreement b/w the capitalist and existing shareholders that prohibits each existing shareholders and PEIs from merchandising w/o the approval of the opposite.

3) staging technique

· the injection of capital happens in installments, w/ a monetary target to be met before successive installment takes place. this agreement helps make sure that the cash isn't wasted on unprofitable prospects

4) Stock option plan

· associate degree possibility is given to the mgmt of the VCB to shop for stocks at a positive stock worth. the supply generates commitment to making worth

5) callable and puttable securities

· the supplying of securities within which the designer has the correct to sell the stocks to the present shareholders (puttable) and also the existing shareholders have the correct to shop for the stocks from the designer (callable). in each case, the chosen theme will be: Yankee or European (i.e. while not or with a piece of selected information to exercise the right) and single or combined (i.e. solely owed or puttable or owed and puttable together)

6) tag-along rights

· a written agreement obligation wont to shield the minority personal equity capitalist. just in case the bulk shareholders sell the stake, then the designer has the correct to follow the dealings and sell its minority stake on constant conditions and to the constant client that's shopping for the bulk stake

7) drag-along rights

· a written agreement obligation wont to shield a majority designer. with this agreement, just in case the designer sells the stake it's the correct to raise the shareholders to sell their stake at constant conditions and to the constant client.

8) right of initial refusal

· a provision by that the designer will avoid the shareholders merchandising their stake to unwanted shareholders. during this case, the designer needs to purchase the stake of the merchandising shareholders at constant conditions offered by the potential client

9) Exit Ratchet

· a provision by that the "remaining" investor has the correct to get a proportion of the financial gain account from the sale of the shares. this is applicable to the designer and to the businessperson.