What are the definitive agreements for a Preferred Stock financing?

There are five primary documents executed in connection with most U.S. preferred stock financings:

1. Certificate/Articles of Incorporation (or “Charter”): The charter sets out the fundamental rights and privileges associated with each class and series of stock. Key provisions include a description of the voting rights of the Preferred Stock, the amount of the liquidation priority and preference of each class and series of stock, and “antidilution provisions” for the company’s preferred stock.
2. Preferred Stock Purchase Agreement (“SPA”): This is the contract between the Company and the new investors for the sale of new shares of Preferred Stock. Key provisions include representations and warranties from the company relating to capitalization, IP, employment matters, financials, key contracts, active litigation matters, and other areas that might be important to the company's ability to succeed going forward. The investors will rely on the correctness of these representations and warranties in making their investment.
3. Investors’ Rights Agreement (“IRA”): This is a contract among the company, the company’s key common stockholders and the investors that sets forth some basic investor rights. Key provisions include standard “registration rights” which include rights to demand an IPO and follow-on offerings under certain circumstances, information rights for certain investors, including quarterly and annual financial reports and a right of first offer/pro rata right for certain investors with respect to future issuances of the company’s securities.
4. Voting Agreement: This is a contract among the company, the company’s key holders and the investors that requires the company’s stockholders to vote their shares in a certain way with respect to the company’s board of directors and certain other matters, including a sale of the company.
5. Right of First Refusal & Co-Sale Agreement (“ROFR”): This is a contract among the company, the key holders, and the certain investors. This agreement protects the investors by placing limits on the key holders' ability to sell their shares to third parties.

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