Glossary

“102 options” are a type of employee option plan available in Israel. The name refers to Section 102 of the Israeli Income Tax Ordinance (more accurately 102(b)(2)), which sets out the tax rules for employee share option plans. Under this provision, employees who are granted options may be eligible for tax benefits if certain conditions are met. These conditions include a holding period req...

A “102 trustee” is a person or entity appointed by an Israeli company to administer its employee share option plan in accordance with Section 102 of the Israeli Income Tax Ordinance. The trustee is responsible for managing the plan and ensuring compliance with the tax rules and other legal requirements. In particular, the trustee is responsible for holding the shares issued under the plan in t...

The “83(b) filing” is a form that is filed with the US Internal Revenue Service (IRS) by an employee or other service provider who has been granted restricted stock or other property that is subject to vesting. The filing is named after Section 83(b) of the US Internal Revenue Code, which governs the tax treatment of such property. By filing an 83(b) election, the employee is choosing to inclu...

  The “Advance Investment Agreement” (AIA) is a type of investment agreement used in venture capital transactions. This agreement is typically signed between the investor and the company, and outlines the terms and conditions of the investment. The AIA usually includes provisions related to the amount and structure of the investment, as well as representations and warranties made by th...

In the context of a venture capital transaction, a “basket” typically refers to a portion of the total consideration paid by the investor that is set aside for indemnification claims. Indemnification is a common provision in venture capital agreements that requires one party to compensate the other party for certain losses or liabilities that arise in connection with the transaction. A bask...

In Israel, a “breaching company” generally refers to a company that has violated certain provisions of the Israeli Companies Law or other applicable laws and regulations. Breaching companies may face legal consequences, including fines, penalties, or even criminal liability, depending on the nature and severity of the violation. The Registrar of Companies in Israel may also take action agai...

A Convertible Loan Agreement (CLA) is a legal document that outlines the terms and conditions of a loan that may be converted into equity at a later stage, typically during a subsequent funding round or a liquidity event such as an IPO or acquisition. The CLA establishes the terms of the loan, including the principal amount, interest rate, and repayment schedule, as well as the conditions under...

A Co-Sale/Tag-Along provision is a clause that can be included in a shareholder agreement or a stock purchase agreement that gives minority shareholders the right to join in a sale of shares of the company to a third party. The Co-Sale provision allows minority shareholders to sell their shares alongside the majority shareholder in the event of a sale of the company, while the Tag-Along provisi...

De-minimis is a legal term used to refer to a minimum threshold or an amount that is too small or trivial to be considered. In the context of legal agreements, such as mergers and acquisitions or purchase agreements, a de minimis clause or provision sets a threshold for the minimum amount of damages, losses, or claims that will trigger a party’s liability. For example, a de minimis provision ...

A distribution agreement is a legal contract between a supplier or manufacturer of goods or services and a distributor who agrees to distribute or sell the supplier’s goods or services. The distribution agreement sets out the terms and conditions of the arrangement between the parties, including the rights and obligations of each party, the pricing and payment terms, the scope and duration of th...

A drag-along provision is a contractual provision typically found in shareholder agreements or company bylaws that allows a majority shareholder or group of shareholders to force the remaining minority shareholders to sell their shares in a company under certain circumstances. In a drag-along provision, the majority shareholders have the right to “drag” the minority shareholders along with ...

Due diligence is the process of conducting a thorough investigation of a company or business before making an investment or entering into a contract with them. It involves examining all relevant financial, legal, and operational information to assess the risks and opportunities associated with the investment or transaction. Due diligence is typically conducted by potential investors, buyers, or le...

An Employee Share Option Plan (ESOP) is a type of employee benefit plan that provides employees with the right to purchase a certain number of shares in the company at a discounted price or at a fixed price in the future. ESOPs are commonly used by startups and other companies to incentivize employees and align their interests with those of the company. ESOPs can be structured in different ways, a...

An End User License Agreement (EULA) is a legal contract between a software application’s licensor (the entity that owns the software) and the end-user who is downloading, installing, or using the software. The EULA outlines the terms and conditions under which the end-user is permitted to use the software. It typically covers issues such as permitted uses, intellectual property rights, warra...

A Finder’s Agreement is a contract between a company and a third-party finder who assists the company in locating potential investors, clients, or other business opportunities. The agreement typically outlines the scope of the finder’s services, the compensation to be paid to the finder, and any other terms and conditions of the relationship between the parties. Finder’s Agreements are commo...

Free and Open-Source Software (FOSS) refers to software that is released under a license that allows users to use, modify, and distribute the software freely. This means that the source code of the software is available to the public, and users are free to modify the software to suit their needs. FOSS is often created and maintained by a community of developers who contribute to the project vol...

A Founders Agreement is a contract between the founders of a company that outlines the rights, responsibilities, and ownership of each founder. It typically covers issues such as the division of equity, decision-making processes, roles and responsibilities, intellectual property ownership, and dispute resolution mechanisms. The goal of a Founders Agreement is to prevent conflicts and ensure that a...

Fraud is an intentional deception or misrepresentation made by an individual or a group of individuals for personal gain or to cause harm to another party. In the context of business, fraud can take many forms, such as financial fraud, identity theft, and insider trading, among others. It is a serious offense that can lead to civil and criminal penalties. It is important for companies to have prop...

GAAP stands for Generally Accepted Accounting Principles. It is a set of accounting standards, guidelines, and procedures that are used to prepare and present financial statements. GAAP is used in the United States and many other countries to ensure that financial statements are prepared consistently and accurately, and can be understood by investors, creditors, and other stakeholders. Complian...

Gross negligence refers to a legal concept that describes an individual or organization’s reckless and careless behavior that results in harm or damage to others. In the context of business, gross negligence can include a company’s failure to take reasonable steps to prevent harm to customers, employees, or others affected by its operations. It is a more severe form of negligence than ordinary...

A guarantee is a promise or assurance that a certain outcome or condition will be met or fulfilled. In the context of business and finance, a guarantee is often used to provide security or assurance to another party, such as a lender or investor, that a certain obligation will be met. For example, a parent company may provide a guarantee to a subsidiary’s lender to ensure that the subsidiary ...

The Israel Innovation Authority (IAA) is a government agency that operates under the authority of the Israeli Ministry of Economy and Industry. Its mission is to support the development of Israel’s innovation ecosystem by providing funding and support to Israeli companies, entrepreneurs, and researchers. The IAA offers a wide range of programs and grants to support research and development in...

Indemnification refers to a contractual provision where one party agrees to compensate the other party for any losses, damages, or liabilities that may arise from a particular event or transaction. In the context of startup investments, indemnification clauses are often included in investment agreements to protect investors from losses resulting from the startup’s actions, such as breach of cont...

Information rights refer to the right of a shareholder or investor to access certain information about a company or investment. These rights are usually defined in shareholders’ agreements or investment contracts and may include access to financial statements, business plans, annual reports, and other relevant information. Information rights are important for investors as they allow them to m...

Inspection Rights refer to the right of an investor to inspect the books and records of a company they have invested in. These rights are usually included in the shareholders’ agreement, the articles of association, or other investment-related documents. Inspection rights are important for investors because they allow them to monitor the financial performance of the company they have invested...

An Investors’ Rights Agreement (IRA) is a legal document that outlines the rights and obligations of investors in a company. Typically, IRAs are entered into between a company and its investors (including venture capitalists, angel investors, and other equity holders) at the time of a financing round. The purpose of an IRA is to provide investors with certain rights, such as the right to rece...

The Internal Revenue Service (IRS) is the revenue service of the United States federal government responsible for collecting taxes and enforcing the Internal Revenue Code. It is a bureau of the Department of the Treasury and is responsible for administering and enforcing various tax laws, including income taxes, payroll taxes, estate and gift taxes, and excise taxes. The IRS is also responsible...

ISO stands for “incentive stock options,” which are a type of stock option offered to employees as a form of compensation. ISOs are granted with the intention of providing employees with a financial incentive to work hard and contribute to the company’s success. ISOs have tax advantages compared to other types of stock options, such as non-qualified stock options (NSOs). When an employee ...

The Israeli Tax Authority (ITA) is a governmental body responsible for enforcing tax laws in Israel. It operates under the supervision of the Ministry of Finance and is responsible for collecting taxes, conducting audits, and ensuring compliance with tax regulations. The ITA also provides guidance and assistance to taxpayers in understanding their tax obligations and preparing tax returns. In a...

A legal opinion is a written document prepared by a lawyer or law firm that provides an assessment of the legal risks and implications associated with a particular transaction, agreement, or legal issue. Typically, legal opinions are provided to clients to help them make informed decisions or to satisfy legal or regulatory requirements. A legal opinion will generally provide an analysis of the ...

A liability cap is a contractual provision that limits the amount of damages that a party can be held liable for in the event of a breach of contract or other legal claim. The purpose of a liability cap is to help manage risk and provide some certainty for both parties. For example, a company may agree to a liability cap with a vendor to limit the vendor’s exposure to damages if the vendor fails...

Mergers and acquisitions (M&A) refer to the consolidation of companies through various types of financial transactions, such as mergers, acquisitions, consolidations, tender offers, and asset purchases. These transactions involve two or more companies, with the goal of creating a larger, more competitive, and financially stable company. Mergers involve the combination of two companies into ...

A Material Transfer Agreement (MTA) is a legal contract that governs the transfer of tangible research materials between two organizations for research purposes. The agreement outlines the terms and conditions under which the materials can be transferred and used by the recipient organization. An MTA typically includes information such as the type and quantity of materials being transferred, th...

Maturity date is a term commonly used in financial agreements, such as loans, bonds, and other debt instruments, which refers to the date when the principal amount borrowed, plus any interest or fees, is due to be repaid in full. The maturity date is agreed upon by the lender and borrower at the time the loan or debt instrument is created. In addition to debt instruments, the concept of maturit...

Most Favored Nation (MFN) is a term used in international trade agreements to refer to a status granted by one country to another, whereby the receiving country is given the same trade advantages and tariff reductions that the granting country has given to any other country with which it has signed a trade agreement. In the context of startup investment, a MFN clause in an agreement may require...

A Management Rights Letter (MRL) is a document that outlines the rights and privileges of investors in a company. Specifically, it outlines the terms and conditions under which an investor may be entitled to nominate one or more individuals to the board of directors of the company, to receive information from a company or to inspect a company’s facilities and discuss with the management. MRLs...

A Mutual Non-Disclosure Agreement (MNDA) is a legally binding agreement between two or more parties that establishes confidentiality obligations on each party to protect proprietary or confidential information that is disclosed to the other parties during business discussions or negotiations. It is also known as a mutual confidentiality agreement or a bilateral non-disclosure agreement. The pur...

Negligence is a legal concept that refers to the failure of an individual or entity to exercise reasonable care and caution, resulting in harm or damage to another person or property. In order for negligence to be proven in court, four elements must be established: duty, breach of duty, causation, and damages. The concept of negligence is an important consideration in many legal contexts, includin...

A Non-Disclosure Agreement (NDA), also known as a confidentiality agreement (CA), is a legal contract between two or more parties that outlines confidential material, knowledge, or information that the parties wish to share with each other for certain purposes, but wish to restrict access to or by third parties. NDAs are often used in business contexts to protect sensitive information, such as ...

Non-qualified stock options (NSOs) are a type of stock option that is not eligible for favorable tax treatment. They are also referred to as non-statutory stock options. NSOs are typically offered as part of an employee compensation package, and they give employees the right to buy company stock at a predetermined price within a certain time frame. When an employee exercises an NSO, they are re...

An Officer Certificate is a document that is typically signed by one or more officers of a company to provide certification or confirmation of certain facts or events related to the company. The certificate can be used for a variety of purposes, such as to confirm the authority of the signatory to enter into a transaction, to confirm the accuracy of financial statements, or to confirm compliance w...

A PIIA, or Proprietary Information and Invention Assignment Agreement, is a legal document in which an employee or contractor agrees to keep confidential and assign ownership rights of any intellectual property they create during their employment or engagement to their employer or client. It is commonly used by startups and other companies to protect their intellectual property and ensure that ...

Preemptive rights and participation rights are provisions in shareholder agreements that allow existing shareholders to maintain their proportional ownership in a company by purchasing additional shares before they are offered to third parties. Preemptive rights give existing shareholders the right to purchase new shares before they are offered to third parties. This means that if a company wan...

A privacy policy is a legal document that informs users of a website, app, or service about how their personal information is collected, used, and shared. It outlines what types of personal data are collected, who has access to the data, how long it will be stored, and what measures are in place to protect it. In most jurisdictions, including the United States and the European Union, privacy po...

Protective provisions, also known as veto rights, are contractual clauses that give a certain group of shareholders, often the preferred shareholders or a group of investors, the right to block certain actions or decisions of the company’s board of directors or management. The purpose of these provisions is to protect the interests of the investors by providing them with a degree of control over...

Qualified Small Business Stock (QSBS) refers to stock issued by a qualified small business, as defined by the Internal Revenue Code. This type of stock is eligible for certain tax benefits, such as an exclusion of up to 100% of the gain from the sale or exchange of the QSBS held for more than five years. In order to qualify, the stock must meet specific requirements, including being issued by a...

Regulation D is a Securities and Exchange Commission (SEC) regulation that provides a safe harbor from the registration requirements of the Securities Act of 1933 for certain private placements of securities. This regulation defines the conditions under which a company can offer and sell securities without having to register those securities with the SEC. The primary goal of Regulation D is to ...

Representations and Warranties are a set of statements made by one party in a contract to assure the other party that certain facts or conditions are true and accurate. In a contract, the seller or the target company will typically make representations and warranties about various aspects of the business, such as its financial condition, legal compliance, ownership of assets, and intellectual prop...

A reseller agreement is a legal contract between a manufacturer or wholesaler of goods and a company or individual who sells those goods to end-users. It sets out the terms and conditions governing the relationship between the parties, including the products to be sold, pricing, payment terms, delivery, warranties, and obligations of each party. A reseller agreement typically outlines the oblig...

ROFR, or Right of First Refusal, is a contractual right granted to an individual or entity that provides them with the opportunity to purchase an asset, property, or investment before it is offered to others. In the context of business, a ROFR is commonly used in shareholder agreements, giving shareholders the right to purchase additional shares before they are offered to others. A ROFR can be ...

The Israeli Registrar of Companies (ROC) is a government office responsible for registering and supervising corporations and partnerships in Israel. The ROC operates under the authority of the Israeli Ministry of Justice and maintains a public registry of corporate information, including details about company directors, shareholders, and annual financial statements. The ROC plays an important role...

Software as a Service (SaaS) is a cloud-based software delivery model where software is made available to users through the internet, typically on a subscription basis. Instead of downloading and installing software on a local computer or server, SaaS applications are hosted and managed by a third-party provider who provides access to the software over the internet. SaaS is a popular delivery m...

A SAFE, or Simple Agreement for Future Equity, is a financial instrument used in early-stage investing. It is a type of convertible security that allows startups to raise funds quickly without having to determine a valuation upfront. In a SAFE, an investor provides funding to a company in exchange for the right to receive equity in the company at a future date, typically upon the occurrence of a s...

A SAFE (Simple Agreement for Future Equity) is an agreement between an investor and a company that allows the investor to invest money in the company in exchange for the right to receive equity in the future, typically in a future financing round or acquisition. A SAFE may include a valuation cap and discount to incentivize early investment. A valuation cap is a maximum price at which the SA...

The Securities and Exchange Commission (SEC) is a U.S. government agency responsible for regulating the securities markets and protecting investors. It was established in 1934 by the Securities Exchange Act, which gave the SEC broad authority to oversee all aspects of the securities industry, including the trading of stocks, bonds, and other securities. The SEC’s main goals are to ensure that...

Software license is a legal agreement that defines the terms and conditions under which a user can use a particular software program. It is a contract between the software publisher (licensor) and the user (licensee) that sets out the rights and restrictions associated with the use of the software. Software licenses typically include provisions such as the scope of permitted use, the number of ...

A Share Purchase Agreement (SPA) is a legal contract that governs the sale and purchase of shares in a company. It sets out the terms and conditions of the sale, including the price, the number of shares being sold, any conditions of the sale, representations and warranties made by the seller, and any post-closing obligations of the parties. The SPA is typically signed by the buyer and the sell...

A Stockholders Agreement (STA) is a contract between the shareholders of a company that outlines their rights, obligations, and restrictions related to their ownership of company stock. The agreement sets out the rules governing the relationship between the shareholders and the company, including voting rights, restrictions on the transfer of shares, and how to handle disputes among shareholders. ...

A Virtual Data Room (VDR) is a secure online repository used to store and share confidential information during the due diligence phase of a business transaction, such as a merger or acquisition, fundraising, or licensing deal. VDRs provide a centralized platform for buyers, sellers, and other parties involved in the transaction to access and review documents, exchange messages, and collaborate on...

Willful misconduct refers to intentional or deliberate behavior that is illegal, unethical, or in violation of a person’s duties or obligations. It generally involves an intentional act or omission that causes harm or damage to another party. Willful misconduct is often used in the context of contracts or employment agreements to describe behavior that is so egregious that it can result in termi...