One of the requirements in a private offering is that the issuer have a “pre-existing substantive relationship” with its investor. Once exhausting contacts with local or regional venture capital firms and angel investor groups, relatively few entrepreneurs seeking equity investments have adequate personal contacts with wealthy people who can provide sufficient money to meet the capital needs of the entrepreneur’s business. For those who don’t, one option is to engage an intermediary or “placement agent” to assist them in the process of finding potential investors. If a placement agent of an issuer has a pre-existing substantive relationship with an investor, that relationship generally extends to the issuer for purposes of avoiding the advertising restriction imposed on companies in private offerings. A placement agent usually refers to a person or firm that is a registered broker-dealer, but sometimes also includes “finders.”

Broker-Dealers vs. Finders

Broker-dealers are regulated professionals or firms that have passed a series of exams and have gone through a lengthy registration process that includes interviews. Finders, on the other hand, are not generally regulated. According to federal law, a broker-dealer is “any person engaged in the business of effecting transactions in securities for the account of others.”

For purposes of this article, the key language is “in the business of effecting transactions.” A finder is someone not in “the business of effecting transactions.” Rather, finders infrequently bring investors and companies together, but that’s all they can do. By law, a finder is not permitted to pitch for the company, develop deal terms, or negotiate for or represent the investor or the company.

There are likely many finders out there who actually perform the services of a broker-dealer, but have failed to register as one because of either ignorance or the time and cost that it takes to become registered. However, it is a violation of federal and most state securities laws to fail to register if a person or firm is engaging in conduct that constitutes broker-dealer activities. A violation of one of those laws can bring fines, investment rescission, penalties, headaches, and in egregious situations, imprisonment.

Some states place significant restrictions on performing any “finder-related” activities, and take away common blue sky transaction exemptions if an issuer compensates a finder as part of a sale of securities to the particular state’s residents. Moreover, there are regulatory issues of giving transaction-based compensation to finders (e.g., an 8% finder’s fee), which often times is exactly what the company and finder want to do.

Because of these and other regulatory issues and various limitations associated with using finders, it is usually better to work with a broker-dealer rather than a finder. However, there are many more finders that are willing to work with early-stage companies than there are broker-dealers willing to do so.

Selecting a Placement Agent

You may ask, “how does one find a placement agent?” Entrepreneurs can talk with their lawyers, accountants, or other entrepreneurs about their experiences with various placement agents in their area. Generally speaking, for smaller transactions (e.g., under $5 million), placement agents will typically operate on a regional basis (rather than national).

When selecting a placement agent, there are many things to consider. Probably the most important consideration is trust. By using a placement agent, you are putting a lot of faith in an individual or firm. The reverse is true as well from the placement agent’s perspective in that their reputation is affected by the companies with which they work. Below are some other considerations:

• Experience generally as a placement agent
• Experience and success with companies in similar industries raising comparable amounts of money.
• Reputation
• Knowledge and experience with securities laws
• For broker-dealers, good written policies and procedures
• For finders, the impact of using a finder on state Blue Sky exemptions, and potential legal issues with using the particular finder
• Pre-existing substantive relationships with prospective accredited investors

Placement Agent Contracts

Contracts with placement agents vary significantly. At the extremes, I have seen handshake deals, which I strongly advise against, and I have seen 25-page agreements. Below is a list of areas that are commonly negotiated in arrangements with placement agents:

• Exclusivity
• Duration
• Compensation amount and type (e.g., retainer/monthly fee versus a transaction-based fee)
• Events that give rise to compensation
• Ability to terminate and effect of termination
• The duration of the “tail” post-termination
• Additional services
• Indemnity
• Representations, warranties, and covenants
• Use of affiliates to assist in process

Once a company decides to engage a placement agent, finding the right one(s) under the right terms are essential. The placement agent may not only affect the success of your offering, but the placement agent may also affect (positively or negatively) the reputation of you and your company, expose you to securities law liability and sanctions, and bind you to a long-term, comprehensive, and expensive set of services.

So, if you decide to work with one or more placement agents, choose carefully.

As outlined in the Overview of the Private Offering Process, when raising equity capital, one of the first things a company should do is prepare a business plan. Good business plans typically include a long-term capitalization strategy. The business plan often forms the centerpiece of the private placement memorandum (PPM), the disclosure document that is typically circulated to investors. When putting together a PPM, the goal is to create both a complete synopsis of the company’s current situation and an accurate summary of the company’s plans for the future.

With a good business plan in hand, people preparing the PPM often turn to “due diligence” and corporate “clean up.” As it relates to private offerings, due diligence is the investigation that ensures that the company-related information and summaries included in the PPM are accurate and complete.

It is not uncommon that during the due diligence process, issues are uncovered that either should have been addressed earlier but weren’t or that need to be completed or addressed prior to the company issuing securities to outside investors. Remedying those items is often referred to as corporate clean up.

The Due Diligence Process

While the due diligence process conducted by venture capital firms is often more detailed than that conducted by angel investors, one should expect at least a base level of due diligence from both groups. Virtually all venture capital firms and most angel investor groups have a formal due diligence process in which they request in writing certain information and access to particular documentation. Here’s a sample put together for angel groups. According to a study sponsored by the Kauffman Foundation in 2007, the median duration of actual due diligence work conducted by angel investors in their large sample was roughly 20 hours per investment. Interestingly, the same study found that the those angel investor groups who spent more than the 20 hours had a 5.9x return on their investment, while those who spent less than the median 20 hours had only a 1.1x return. Regardless of the actual duration of the diligence conducted by groups you may work with, the point that is imperative to get your “house in order” before opening the company up to outside scrutiny.

As part of your disclosures in the PPM, it is essential to accurately summarize all “material” facts concerning the company. A fact is material if a reasonable investor would consider it important in determining whether to purchase the securities that the company is selling. In other words, you need to include all relevant facts that an investor might consider important in making his or her investment decision.

The due diligence process for an individual company should be designed to capture those material facts. The areas that are subject to the due diligence investigation vary from company to company, but often include the following:

• Organizational documents (e.g., charter documents)
• Cap Table and Shareholder and option/warrant holder lists
• Copies of agreements that affect equity holders (e.g., shareholder agreements, voting agreements, investor rights agreements)
• Financial statements
• Summaries of litigation or threatened litigation
• Governmental licenses and filings (including patent applications)
• Biographical summaries of officers and directors
• Material contracts
• Any conflict of interest transactions or arrangements involving the company and its current owners (including their affiliates)

The PPM should include summaries and descriptions of not only the items listed above and the business plan, but also anything else that may be material to a prospective investor’s investment decision.

Government agencies (such as the NASD) have frequently commented that there can be no definitive list of items to be described in the disclosure documents. For example, a company that is seeking funding to support clinical trials should likely also include a summary of additional funding that the company will need after the current financing in order to get the drug or product through all phases of the clinical trials. A software company that is reliant on the adoption of certain third party technologies probably should include details about that technology. In essence, every company is different and each due diligence process must be customized based on the nature of the offering and peculiarities of the company and the industry in which it operates.

Conducting corporate clean-up

Early-stage companies typically spend much of their financial and human resources on product or technology development and attracting and retaining talent. Whether it is because of lack of time, money, or experience, companies often fail to keep up with many tasks that may prove to be important to the success of the company.

What usually occurs is that during the due diligence process, areas that need clean up are revealed. If you think your company is good shape, consider these questions:

• Have your key employees signed appropriate nondisclosure, assignment of inventions, and noncompete agreements?
• Have you granted stock options or issued restricted stock to your key employees (perhaps as previously promised or alluded to) and if so, have you complied with the tax code section 409A requirements on valuations?
• Are your shareholder and director meeting minutes up to date and in compliance with statutory and organizational document requirements?
• Have all previous stock issuances and significant agreements been properly authorized in the board meeting minutes?
• Have you filed applicable patent applications (or at least provisional patent applications)?
• Do you have any agreements or arrangements with others that should be reduced to writing?

These and other matters need to be remedied or addressed before the private offering.

The other form of corporate clean-up prepares the company for its planned structure following the financing. For example, a company’s articles of incorporation and bylaws may need to be amended to reflect changes from the company being owned and run by a small group of founders to one in which there will be a significant number of outside investors. This is especially true if you plan to offer a type of security in the private offering that has not been previously authorized (such as a new series of preferred stock).

Also, sometimes a company will try to complete certain transactions or enter into agreements with one or more “household-name” companies in order to validate the company’s product or technology prior to the offering.

Conducting a thorough due diligence and corporate clean up are essential when offering securities. Doing both creates the foundation for a solid PPM: one that both provides a prospective investor with an accurate picture of the company and limits the liability exposure of the company and its officers and directors.

From brand new start-ups to eighty-year old Fortune 500 companies, most companies, even publicly traded ones, raise equity capital through private placements of securities.

A private placement, sometimes referred to as a private offering, is a sale of restricted securities by an issuer pursuant to an exemption from the registration requirements of the Securities Act of 1933. Frequently, the exemption falls under the safe harbor provisions of Regulation D (or Reg D, for short).

Generally speaking, restricted securities are ineligible for resale into the public market until certain conditions have been met. To sell restricted securities, either a resale registration statement must be filed with the Securities and Exchange Commission and declared effective, or resale must be permitted pursuant to an exemption or under an applicable rule, such as Rule 144.

As most experienced entrepreneurs know, raising significant amounts of equity capital for an early-stage company is rarely easy. The uninitiated often believe that all they need is an introduction to a couple of wealthy investors, an hour or two in a room with them to show them the wonders of their great idea or product, and out will come the checkbooks.

This rarely (if ever) happens. Selling equity securities is a deliberate process. While every private offering or sale by a company of its securities is somewhat different, the ramifications for a misstep sometimes leads not only to an unsuccessful offering but can lead to personal liability of the promoters of the offering.

Personal liability is imposed not only for malicious fraudulent conduct, but could apply, for example, when the company issuing securities cannot comply with an order to rescind a sale to an investor because the company failed to comply with the private-offering legal requirements or omitted to state a material fact to the investors concerning the company. Again, it does not require intentional misconduct or deceipt. This is why it is important to do the process right. Not only will doing the process right limit personal liability exposure, but your offering will likely be more professional and attractive to investors.

Below is the general sequence of events in a private offering of securities:

• Prepare business plan, including an executive summary and a long term capitalization plan
• Conduct organizational “clean up” and “due diligence”
• Obtain necessary company authorizations
• Decide whether to use a placement agent and if so, identify, contact, interview, and select placement agent(s)
• Negotiate agreement with placement agent(s), if applicable
• Define parameters, procedures, contingencies, timing, and geographic scope of offering
• Conduct initial blue sky (or state securities law) research
• Identify investor qualification standards (e.g., accredited, sophisticated, state residency requirements)
• Prepare offering terms or term sheet
• Prepare offering agreements and documents (e.g., subscription or purchase agreement, investor questionnaire, shareholder agreement, charter amendment)
• Prepare the private placement memorandum (PPM)
• Identify prospective investors
• Select desired offering exemption
• Set up monitoring mechanism for PPMs
• Identify printer and forward PPM for copying
• Obtain applicable investor introductions and conduct initial investor presentations
• Circulate the PPM to interested prospective investors
• Close the transaction
• Make necessary federal and state filings
• Issue stock certificates

The list above describes how the process typically works, but sometimes tasks are eliminated or abbreviated, the order changes, or other tasks are added, such as obtaining a legal opinion, amending articles or bylaws, preparing an investor rights agreement, qualifying for the state angel investor tax credit program, etc.  In coming weeks, we’ll cover a number of these steps in more detail.

With increasing frequency, companies are considering a change in their form of entity.  The reasons for the change vary considerably: sometimes companies are underwhelmed by the tax benefits of being a limited liability company and are overwhelmed by its complexities (international tax withholding issues, multi-state K-1’s, profits interests management, phantom income, and employee education regarding equity-based incentives), while other times companies are frustrated by the restrictions on S corporations and desire the flexibility that limited liability companies afford.  In other cases still, institutional investors may require a certain form of entity (e.g., a C corporation), while other investors (e.g., active angel investors) are looking to take advantage of pass through losses. 

Today, most states make it fairly easy to change the type of entity or even to change the state of organization of the entity.  It is important to keep in mind though that while the mechanics of converting to a new entity from a legal perspective are not typically too complex, the related tax issues can be incredibly intricate, especially for an organization with a long operating history and a complex capitalization structure.  While in many situations converting to a different type of entity will be tax-free, that will not always be the case.  Your tax advisor and accountants should be consulted early in the process when considering a change in entity form.  Assuming a change in structure is justified and the tax issues are manageable, this article focuses on the mechanics of converting from one type of entity to another.  

While there are variations among the states, there are generally two ways to change your type of entity from a legal perspective: merging with and into another entity of a different type and effectuating a conversion.  The method selected, as well as some of the finer details associated with the particular method selected, is often driven by tax considerations.

Change of Entity Form Through Merger

The more traditional way to change the form of an organization is through a merger.  Sometimes people refer to this as a cross-species merger.  A merger enables two or more entities to combine into a single entity.  The surviving entity can be recently created just to effectuate the change in entity form or it can have an operating history. The surviving entity typically files with the applicable state a plan of merger and a statement that the plan was approved in accordance with applicable law.  In most states, the plan of merger identifies the parties to the merger, the surviving entity, and the manner and basis of converting equity interests in each entity into interests in the surviving entity.  The plan of merger also includes any applicable amendments to governing documents (e.g., articles) for the surviving entity.  

After the merger, only the surviving entity continues to exist and it is responsible for all liabilities of each business entity that is a party to the merger.  Subject to certain exceptions and filing requirements, title to assets automatically vests with the surviving business entity.

Change of Entity Form Through Conversion

Within the last decade, most states have adopted statutes that allow organizations to convert their form of entity by just filing the applicable conversion documentation.  For example, in Wisconsin, a business that desires to convert to another type of legal entity must submit to the Department of Financial Institutions a certificate of conversion with a plan of conversion and a statement that the plan was approved in accordance with the laws applicable to the pre-converted entity. 

Similar to a plan of merger, most states require that a plan of conversion include the name, form of business entity and jurisdiction governing the entity both before and after the conversion.  In addition, the post-conversion articles of incorporation or other charter document is an attachment to the plan of conversion.  Some states however require a separate filing for the charter document.  Like with a plan of merger, the plan of conversion must also include the terms and conditions of the conversion and the manner and basis of converting the ownership interests in the old entity to the ownership interests in the new entity. 

Upon conversion, the new entity continues to be subject to the liabilities incurred prior to the conversion.  If a business owner had any personal liability by reason of the owner’s position in the entity (such as the general partner of a limited partnership), such liability will continue, but only to the extent accrued prior to the conversion.  The new entity continues to be vested with title to all its properties, subject to modest exceptions and certain filing requirements.  Any legal proceeding pending against the old entity will be continued against the new entity.  

Conducting Due Diligence When Changing Your Form of Entity

Despite the fact that the legal filing requirements for cross-species mergers and conversions are rather straight forward and mechanical, there are a number of due diligence issues that should be considered prior to making the change in entity form.  For example, in contracts, a merger is sometimes treated as an assignment of a contract from one entity to another and many contracts prohibit such assignments without prior consent.  Businesses should review all their material contracts and consider seeking consent for assignment where necessary.  Trademark and patent filings in the U.S. Patent and Trademark Office (USPTO) will need to be updated to reflect new company names in a conversion.  Mergers are treated as an assignment that also needs to be recorded with the USPTO.  Likewise, regulatory approvals, permits and licenses may need to be updated.  Because a conversion, rather than a merger, involves only a single entity, many consider that general contract anti-assignment provisions do not apply to conversions unless conversions are specifically addressed and prohibited.  In either case, however, there is frequently a company name change that may need to be reflected on a variety of documents. 

In addition to third party contracts and government filings and licenses, there are a number of organizational documents that may need to be created as a result of the merger or conversion.  For example, if an entity changes from a limited liability company to a corporation, many of the provisions from the organization’s operating agreement prior to the cross-species merger or conversion will be incorporated into a combination of the new corporation’s bylaws and perhaps a separate shareholders agreement, investor rights agreement or voting agreement.  Some of these organizational-related documents can be adopted wholesale with no or modest changes.  Others, however, will need considerable changes or even termination because of statutory requirements, efficiency, or custom.  

Conclusion

While it would be convenient to have all the facts up front prior to choosing an entity’s form when creating it, even the most diligent and seasoned entrepreneurs experience change in facts or laws that necessitate changing the organization’s form of entity.  With proper planning and involvement of your attorney and accountant, the process of converting your form of entity is usually manageable.  In the end, like with most things, the decision often becomes a cost-benefit analysis.

I am pleased to report that Sara Berman Jensen recently joined AlphaTech Counsel, S.C.  I am excited about this change and wanted to share a little about Sara. 

Sara has over sixteen years of experience in contract, corporate and tax law.  She spent five years working at Michael Best, which is where she and I first worked together.  After graduating from Michael Best, she worked in-house at Promega for almost ten years.  Sara is a great fit at AlphaTech as not only is she an excellent practitioner, she understands the needs of emerging companies and is well-versed in helping executives to balance important legal and business issues.

Sara has quickly stepped in and is already actively engaged under our on-call corporate counsel service with a few of our clients.  She is also beginning to look at the contracting process for another client.

I am genuinely thrilled about Sara Jensen coming on board.  Here is more information about Sara, including her bio: http://alphatechcounsel.com/jensen-bio.html

Several companies we are working with are currently preparing for investor presentations.  This post covers a number of best practices for presenting to investors, whether they be angel, venture capital, or strategic investors.

Identify your Objectives for the Investor Presentation

Many companies try to accomplish too much with their initial investor presentation.  Rarely do term sheets get prepared after the first presentation, let alone checks, unless it is a modest sum of money from an angel investor who is already inclined to invest.  So what is a good objective for an initial investor presentation?  In most cases, a good objective is merely to get to the next stage of the investor’s evaluation process. In some situations, the next stage could be a second presentation to a broader audience or a different group within a strategic investor’s organization.  In other cases, it could be to start a formal due diligence process.  Try to identify the prospective investor’s evaluation process prior to the initial meeting to help shape your objective for the presentation.

Know your Investor Audience

As is true for most presentations, your investor presentation should be tailored to your audience.  Prior to the meeting, try to identify who from the investor’s organization will be present during the meeting.  If it is going to be primarily business/finance people (as opposed to technical/scientific), you can expect the questions and discussions to center around their areas of focus and expertise.  Also, see if you can identify who in the room is the ultimate decision maker, gate keeper, or influencer who can enable you to get to the next stage in the evaluation process.  Adjust your presentation accordingly.

Adhere to the Investor’s Rules and Be Respectful of your Audience’s Time

Sometimes, investor groups or forums have particular rules about presentations.  They can limit companies, for example, to a certain number of slides, certain types of slides, or a specified presentation duration.  Adhere to their rules.  If you have a one-hour meeting with a VC or strategic investor, don’t bring a 50-minute slide deck to the meeting (more on this in a bit).  Unless going over the agreed upon time slot is driven by investor questions or two-way discussions, don’t be guilty of holding the investor audience hostage by continuing on with a presentation that seems to never end; a long presentation won’t make your case for investment more compelling. 

Presentation Format and Investor Slide Deck Composition

Assuming you have identified your objectives for the presentation, you know your audience and the restrictions you are under for the presentation, what should the presentation look like?  Usually, the presentation is given by one or two members of the management team (e.g., the CEO and CSO/CTO or CFO).  The appropriate number of slides of an initial one-hour meeting is somewhere between 15 and 25 and should take no longer than fifteen to twenty minutes to present, without interruption. And yes, I know it’s not easy to do and I know it can be a time consuming process to get the presentation that short and succinct.  If the investor is interested, you will have no problem taking the entire hour.  If the investor is not interested, well, everyone can spend the balance of the hour answering emails.

The breakdown of the slides typically works something like this:

• Speaker introduction and the investment that you are looking for  (1 Slide)
• Company introduction and “elevator pitch” (1-2 Slide)
• Identify market(s) and current market problems/opportunities (2-3 Slides)
• Company solutions and product(s) to address market opportunities (2-6 Slides)
• Current development status of solution/product line (1-2 Slides)
• Competition (1-3 Slides)
• Marketing and distribution/regulatory approval process (1-3 Slides)
• Revenue model(s) and financial history and projections (1-3 Slides)
• Use of funds (1 Slide)
• Management team (1-2 Slides)
• Anticipated Exit and Timing (1 Slide)
• Recap the 2-3 main points and state the investor “call to action” (1 Slide)

Of course, there can be variations to this format.  For example, a presentation to a potential strategic investor technical team should include less on market opportunities and more on product and technology.

Many times, the initial presentation is the first opportunity that an investor has to evaluate you, which for most early stage angel and VC investors is more important than your product or technology. Presumably, if a prospective investor has read your executive summary/business plan and wants a presentation, you’ve passed the initial screen and the investor is already at least somewhat interested in your company.  So, it’s important to remember that you are not only selling them your product/technology, but also you and your management team.

Backup Slides for Investor Questions and Areas of Focus

It is generally a good idea to prepare backup slides to address the key questions that you anticipate or areas that you are likely to be asked to elaborate on if the investor is interested.  This goes back to knowing your audience.  You may also want to develop a system to figure out how to access particular backup slides so that you are not fumbling through the PowerPoint while the investor has to wait.

Miscellaneous Best Practices for Investor Presentations

Finally, here are some miscellaneous nuggets to consider, based on the investor presentations I’ve seen over the years:

• Coordinate in advance the audiovisual requirements (who is going to have/bring what)
• Have a backup plan (e.g., hard copy of slides)
• Use the PowerPoint slides as a guide to the discussion, not as cue cards
• Maintain eye contact with your audience, not the screen
• Let your passion and excitement about your business show through
• Do not say that your company does not have competition or any other naive faux pas
• Walk the fine line between exuding confidence, but not appearing overconfident
• Address any 800 pound guerillas positively in the presentation rather than waiting for the inevitable questions and what could be construed as defensive responses
• Avoid eye charts (e.g., detailed spreadsheets, elaborate process or flowchart diagrams); more text does not yield a more compelling case for investment
• Similarly, convey no more than 2-3 points per slide, with font no smaller than 24 pt
• If possible, use a good mix of images and text
• And lastly, rehearse, rehearse, rehearse

An increasing number of traditional software and hardware companies are accepting the idea that software as a service (SaaS) is here to stay for some time. In September, Oracle announced that it was significantly increasing its on-line, subscription-based software tools available for middle market companies. Salesforce.com and Cisco announced last week a partnership that brings together Salesforce.com’s online customer service software with Cisco’s IP telephony. The service, called “Customer Interaction Cloud,” is designed to provide a complete, cloud-based customer service offering for small to medium sized businesses. Even Dell, with its recent acquisition of Perot Systems, has signaled an interest in expanding its presence in the SaaS space. From a customer’s standpoint, SaaS generally offers quick deployment, low upfront cost, easy management and scalability.

Legal Difference Between Traditional Software Licenses and SaaS Agreements

Before delving into the SaaS market, it is important for traditional software companies (whether that be off-the-shelf product companies or customized software developers) to understand the differences between a typical software license or software development agreement and a SaaS agreement. At a fundamental level, what is being conveyed in a software license or software development agreement is different than a SaaS agreement. A software license or development agreement typically grants either a limited or exclusive right to use the software. In some cases, they include an assignment or transfer of the actual code from the developer to the purchaser of the software. A SaaS agreement, on the other hand, typically grants only a limited right to use a “service,” with no rights to the underlying software.

Key elements of a SaaS Agreement

With the legal difference between the two business models in mind, as well as the practical differences (web based offering versus an on-site thick client or server-based offering), below are some highlights of the provisions of a typical SaaS agreement:

Subscription for a Service.

Typically, SaaS agreements provide for a subscription to a service for a specified period of time. Many states give this structure more favorable sales tax treatment over traditional shrink-wrap software license agreements.

Performance and Up-Time Guaranties.

Most SaaS agreements address at least a base level of performance and functionality requirements of the service. For more sophisticated SaaS offerings, it is common to see Service Level Agreements (SLAs). The SLAs typically address issues like site and application downtime limits, support response times, and system response times.

Privacy and Security.

SaaS agreements usually address privacy and security issues as the SaaS provider typically holds its customers’ sensitive data. SaaS vendors generally provide some base level of assurances of privacy and security, even in low price SaaS offerings. For the large and more sophisticated offerings or where there are unique confidentiality concerns, the privacy and security provisions in the SaaS agreement can be very detailed. For example, many public companies require that a SaaS vendor’s systems and offerings be compliant with Statement on Auditing Standards No. 70 (SAS 70), which is a rigorous audit standard for controls on accuracy and security.

Data Backups and Data Porting.

In most sophisticated SaaS offerings, the SaaS agreement should address data backup, redundancy, and disaster recovery. Similarly, many customers of sophisticated SaaS offerings will want assurances on the ability to move the customer’s data either to an internal system or another vendor.

Renewals, Termination, Fees and Payment Terms.

Having a continuing relationship requires that the SaaS agreement address items like automatic renewals, termination (who has the ability to terminate upon how much notice), fees (when and how often charged and for what and the ability to change), and payment terms.

Obviously, there are other provisions as well, such as warranty disclaimers, indemnification, limitation on liabilities, export laws, etc. How much these terms vary from traditional software licenses or development agreements are dependent upon the particular SaaS offerings.