Enterprise Ireland Investment Process - The Legal Element

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In May 2007 Enterprise Ireland (in conjunction with the Irish Software Association) gave a morning workshop on their investment process with the focus on making it clearer how it works.

This is one of two presentations from the workshop which I have scanned in.

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Enterprise Ireland Investment Process - The Legal Element

  1. 1. -1 -.2.i = :=----. dflffilll'" El InvestmentProcess- TheLegal Element v TransforminglrishIndunry2008-2010
  2. 2. .--..-' e,llffillJ'" MENTEGORIESOFINVEST EIOnlyInvestments No CompanyValuation StandardElAgreement MatchingFundingRequirement Co-lnvestments Valuationset by ProfessionalInvestor - GenerallyCo-lnvestorsAgreementusedElseek similarterms - Co-lnvestorsfulfil MatchingFundingRequirement TransforminglrishIndustry2008-2010
  3. 3. ENTERPRISE IRELAND LY INVESTMENTSIN - CumulativeConvertibleRedeemablePreference Shares "ccRP" Cumulative- Dividendsaccumulateyearon year (reducedto 3o/oon validationof expenditure) Convertible- Capableof conversionintoa class Redeemable- Re-purchaseby the companyout reservesor the proceedsof a freshissueafter5 at rate of 8o/o of ordinaryshare of distributable years Preference- PriorityRightsin relationto dividends,repaymentor capitaland redemption NonVoting- No rightto voteat meetingsof the Company TransforminglrishIndustry2008-2010
  4. 4. ENTERPRISE IRELAND forshares sharesto - theprice beissued E SUBSCRIPTIONAND HAREHOLDERSAGREEMENT Providesforsubscription andnumberandclassof Governstherelationshipbetweentheparties goingforward Thefollowingare Subscriptionand thecoretermsintheEl Share ShareholdersAgreement Transformin.Jlrishl.rdustry2008-2010
  5. 5. ENTERPRISE IRELAND RMATIONRIGHTS AnnualAuditedandQuarterlyManagementAccounts Infoon Sales,ExportsandEmployment Any inforequiredto validateexpenditure i.e.SubscriptionMoniesusedto implementBusinessPlan. Onceexpenditurehasbeenvalidatedthecouponwillbe reducedfrom8%to 3oh ReasonableAccessRightsto validateexpenditure Transfolminglrishlndustry2008-2010
  6. 6. ENTERPRISE IRELAND SACTIONS - Contains13RestrictedTransactions mainlycovering: EligibleActivity Furtherissueof Shares Changesto M&A's ChargeoverAssetsincludinglP ChangeRightsattachingShares TransforminolrishIndustry2008-2010
  7. 7. --1"---" ENTERPRISE IRELAND IONBREACH Rightof Eltoseek8%couponandearly redemptionintheeventthata companybreach anyof 3 specificRestrictedTransactions - CeasetocarryonEligbleActivity - lssuefurtherShares ChangeMemorandum& Articles 21 dayCurePeriodto a breach lowcompanyto rectify Tr.rnsforminqlrishIncJustrv2008-2010
  8. 8. ENTERPRISE IRELAND REHOLDERDISPOS " El'sConsentRightoverthetransferof sharesbytheShareholders - Justification- investinginteamaswellas company - InformEl atanearlystageofanypotential consentmattersto allowtimeto review documentation.Elteamarecommittedto meetingclients'deadlines. TransforminolrishIndustrv2008-2010
  9. 9. ENTERPRISE IRELAND RANTIES - Statementof Factatthetimeofcompletionofthe investment - StatementssetoutinAgreementandrelatemainlytotitle andcapacitytotheshares,anyongoinglitigation, BusinessPlanhonestlyanddiligentlypreparedetc. Anyexceptionstothesestatementscanbehighlightedin a DisclosureLetterwhichwillthenbesubmittedto El alongsidetheWarrantiesandtogethertheywillrepresent thetruepositionofthecompanyatthedateof completion - Warrantors- CompanynotindividualsaswithmanyVC Agreementsthereforenotpersonallyliable. TransforminqirishIndustrv2008-2010
  10. 10. ENTERPRISE IRELAND - Convertibleontheoccurrenceofa fundinground byfinancialortradeinvestorthatat leastmatches thesizeof El'sinvestment - ConvertibleintotheNewSharesbeingissuedat thatround - Convertibleat discounttothepriceoftheNew Sharesthatincreasesfrom15o/oafteryear1to 55%inyear5 ' SecondConversionOptionat4 years11 months ,,,jn[q"9;d[n9ry.,$hUaresata 55%discounttoFair VERSION Value
  11. 11. ENTERPRISE IRELAND PLETIONPROCESS ' 8 weektargetturnaroundtime - DraftShareholdersAgreementissuedto companyandadvisers - Negotiations- largelynon-negotiable,limited amendmentsmadeto provideforcompany specificissues - Pre-CompletionRequirementsmetand CompletionDocumentationfurnished ' ChequeandExecutedAgreementreleasedto r*'GOf,HpOilV"o 2oo8-zo1o
  12. 12. COMP ENTERPRISE IRELAND ShareSubscriptionand ShareholdersAgreement executedby all partiesthereto Articles of Association- Gonstitutionof the Company,amendedto providefor the rights attaching to the CCRP's Tax ClearanceGertificate ShareCapitalCertificate Solicitors Gertificate ShareGertificate Gonfirmationof MatchingFundingand any other conditionsimposedby the InvestmentCommittee. Transforminql!'ishlnclustrv2008-2010
  13. 13. e/fl[IlTiJ'" - Valuationset by professionalInvestor - GenerallyGo-lnvestorsAgreementusedElseek similarterms Co-lnvestorsfulfil MatchingFundingRequirement TransformingtrishIn6ig511y200g-2010

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