This Term Sheet summarizes the principal terms of the v_field_security_name Financing of v_field_company_name, a v_field_org_state v_field_entity_type (the “Company”). In consideration of the time and expense devoted and to be devoted by the Investors with respect to this investment v_field_no_shop_applicability, the No Shop/Confidentiality and other consideration set forth herein, provisions of this Term Sheet shall be binding obligations of the Company whether or not the financing is consummated. No other legally binding obligations will be created until definitive agreements are executed and delivered by all parties. This Term Sheet is not a commitment to invest, and is conditioned on the completion of due diligence, legal review and documentation that is satisfactory to the Investors. This Term Sheet shall be governed in all respects by the laws of the State of v_field_governing_law_state.
As soon as practicable following the Company’s acceptance of this Term Sheet and satisfaction of the Conditions to Closing (the “Closing”). v_field_subsequent_closing_applicability Amounts not sold at the initial closing may be sold for a period of v_field_subsequent_closing_long_stop_months months following the initial closing.
v_field_investor_hashes
v_field_other_mutual_investors_applicability as well other investors mutually agreed upon by Investors and the Company
v_field_financing_amount v_field_bridge_conversion_applicability, including v_field_bridge_conversion_amount from the conversion of principal v_field_bridge_conversion_include_interest and interest on bridge notes.
v_field_financing_price_per_share per share (based on the capitalization of the Company set forth below) (the “Original Purchase Price”).
The Original Purchase Price is based upon a fully-diluted pre-money valuation of v_field_pre_money_valuation and a fully diluted post-money valuation of v_field_post_money_valuation (including an employee pool representing v_field_option_pool_available_perc of the fully diluted post-money capitalization).
The Company’s capital structure before and after the Closing is set forth on Exhibit A.
Dividends will be paid on the v_field_security_name on an as converted basis when, as, and if paid on the Common Stock.
v_field_dividend_pref_applicability v_field_dividend_cumulative_applicability The v_field_security_name will carry an annual v_field_dividend_amount_per_share cumulative dividend payable upon a liquidation or redemption. For any other dividends or distributions, participation with Common Stock on an as-converted basis.
v_field_dividend_pref_applicability v_field_dividend_non_cumulative_applicability Non-cumulative dividends will be paid on the v_field_security_name in an amount equal to v_field_dividend_amount_per_share per share of v_field_security_name when and if declared by the Board.
In the event of any liquidation, dissolution or winding up of the Company, the proceeds shall be paid as follows: v_field_non_participating_liq_pref_applicability First pay v_field_liq_pref_multiple times the Original Purchase Price v_field_dividend_cumulative_applicability plus accrued dividends plus declared and unpaid dividends on each share of v_field_security_name (or, if greater, the amount that the v_field_security_name would receive on an as-converted basis). The balance of any proceeds shall be distributed pro rata to holders of Common Stock. v_field_full_participating_liq_pref_applicability First pay v_field_liq_pref_multiple times the Original Purchase Price v_field_dividend_cumulative_applicability plus accrued dividends plus declared and unpaid dividends on each share of v_field_security_name. Thereafter, the v_field_security_name participates with the Common Stock pro rata on an as-converted basis. v_field_capped_participating_liq_pref_applicability First pay v_field_liq_pref_multiple times the Original Purchase Price v_field_dividend_cumulative_applicability plus accrued dividends plus declared and unpaid dividends on each share of v_field_security_name. Thereafter, v_field_security_name participates with Common Stock pro rata on an as-converted basis until the holders of v_field_security_name receive an aggregate of v_field_participation_aggregate_cap_multiple times the Original Purchase Price (including the amount paid pursuant to the preceding sentence).
A merger or consolidation (other than one in which stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) and a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Company will be treated as a liquidation event (a “Deemed Liquidation Event”), thereby triggering payment of the liquidation preferences described above unless the holders of v_field_deemed_liq_event_waiver_perc of the v_field_security_name elect otherwise. v_field_liq_pref_escrow_non_abrogation_applicability The Investors' entitlement to their liquidation preference shall not be abrogated or diminished in the event part of the consideration is subject to escrow in connection with a Deemed Liquidation Event.
The v_field_security_name shall vote together with the Common Stock on an as-converted basis, and not as a separate class, except (i) v_field_board_rights_retention_threshold_applicability so long as v_field_board_rights_retention_threshold_perc of the v_field_security_name is outstanding, the v_field_security_name as a class shall be entitled to elect v_field_num_investor_board_seats members of the Board (the “Financing Board Delegation”), and (ii) as required by law. The Company’s Certificate of Incorporation will provide that the number of authorized shares of Common Stock may be increased or decreased with the approval of a majority of the Preferred and Common Stock, voting together as a single class, and without a separate class vote by the Common Stock.
v_field_protective_provisions_retention_threshold_applicability So long as v_field_protective_provisions_retention_threshold_perc of the v_field_security_name is outstanding, in addition to any other vote or approval required under the Company’s Charter or Bylaws, the Company will not, without the written consent of the holders of at least v_field_protective_provisions_waiver_perc of the Company’s v_field_security_name, either directly or by amendment, merger, consolidation, or otherwise:
- v_field_protective_provision_liquidate_applicability liquidate, dissolve or wind up the affairs of the Company, or effect any merger or consolidation or any other Deemed Liquidation Event;
- v_field_protective_provision_charter_amend_applicability amend, alter, or repeal any provision of the Certificate of Incorporation or Bylaws v_field_protective_provision_charter_amend_adverse_limitation_applicability in a manner adverse to the v_field_security_name;
- v_field_protective_provision_issue_security_applicability create or authorize the creation of or issue any other security convertible into or exercisable for any equity security, having rights, preferences or privileges senior to v_field_protective_provision_issue_security_parity_applicability or on parity with the v_field_security_name, or increase the authorized number of shares of v_field_security_name;
- v_field_protective_provision_pay_security_applicability purchase or redeem or pay any dividend on any capital stock prior to the v_field_security_name, other than stock repurchased from former employees or consultants in connection with the cessation of their employment/services, at the lower of fair market value or cost v_field_protective_provision_issue_security_board_waiver_applicability or other than as approved by the Board, including the approval of v_field_protective_provision_issue_security_board_waiver_threshold of the Financing Board Delegation;
- v_field_protective_provision_issue_debt_applicability create or authorize the creation of any debt security v_field_protective_provision_issue_debt_threshold_applicability if the Company’s aggregate indebtedness would exceed v_field_protective_provision_issue_debt_threshold v_field_protective_provision_issue_debt_equipment_lease_exception_applicability other than equipment leases or bank lines of credit v_field_protective_provision_issue_debt_board_waiver_applicability unless such debt security has received the prior approval of the Board of Directors, including the approval of v_field_protective_provision_issue_debt_board_waiver_threshold of the Financing Board Delegation;
- v_field_protective_provision_subsidiary_dealings_applicability create or hold capital stock in any subsidiary that is not a wholly-owned subsidiary or dispose of any subsidiary stock or all or substantially all of any subsidiary assets;
- v_field_protective_provision_change_board_size_applicability increase or decrease the size of the Board of Directors.
The v_field_security_name initially converts 1:1 to Common Stock at any time at option of holder, subject to adjustments for stock dividends, splits, combinations and similar events and as described below under “Anti-dilution Provisions.”
v_field_price_based_anti_dilution_applicability In the event that the Company issues additional securities at a purchase price less than the current v_field_security_name conversion price, such conversion price shall be adjusted in accordance with the v_field_price_based_anti_dilution_basis formula. v_field_price_based_anti_dilution_applicability No price-based anti-dilution protection.
v_field_price_based_anti_dilution_applicability The following issuances shall not trigger anti-dilution adjustment (if any): (i) securities issuable upon conversion of any of the v_field_security_name, or as a dividend or distribution on the v_field_security_name; (ii) securities issued upon the conversion of any debenture, warrant, option, or other convertible security; (iii) Common Stock issuable upon a stock split, stock dividend, or any subdivision of shares of Common Stock; and (iv) shares of Common Stock (or options to purchase such shares of Common Stock) issued or issuable to employees or directors of, or consultants to, the Company pursuant to any plan approved by the Company’s Board of Directors v_field_price_based_anti_dilution_employee_issue_exception_board_waiver_applicability including v_field_price_based_anti_dilution_employee_issue_exception_board_waiver_threshold of the Financing Board Delegation.
Each share of v_field_security_name will automatically be converted into Common Stock at the then applicable conversion rate in the event of the closing of a firm commitment underwritten public offering with a price of v_field_qpo_return_multiple_threshold times the Original Purchase Price (subject to adjustments for stock dividends, splits, combinations and similar events) and gross proceeds to the Company of not less than v_field_qpo_company_proceeds_threshold (a “QPO”), or (ii) upon the written consent of the holders of v_field_mandatory_conversion_vote_threshold_perc of the v_field_security_name.
v_field_pay_to_play_applicability v_field_pay_to_play_waiver_applicability Unless the holders of v_field_pay_to_play_waiver_perc of the v_field_security_name elect otherwise, on any subsequent v_field_pay_to_play_down_limitation_applicability down round all v_field_pay_to_play_major_investor_limitation_applicability Major Investors (“Pay-to-Play Investors”) are required to purchase their pro rata share of the securities set aside by the Board for purchase by the Pay-to-Play Investors. All shares of v_field_security_name of any Pay-to-Play Investor failing to do so will automatically: v_field_pay_to_play_anti_dilution_loss_applicability lose anti-dilution rights v_field_pay_to_play_preemptive_right_loss_applicability lose right to participate in future rounds v_field_pay_to_play_preemptive_forced_conversion_applicability convert to Common Stock and lose the right to a Board seat if applicable.
v_field_redemption_applicability Unless prohibited by Delaware law governing distributions to stockholders, the v_field_security_name shall be redeemable at the option of holders of at least v_field_redemption_vote_trigger_perc of the v_field_security_name commencing any time after v_field_redemption_years_delay years at a price equal to the Original Purchase Price v_field_dividend_cumulative_applicability plus all accrued but unpaid dividends. Redemption shall occur in three equal annual portions. Upon a redemption request from the holders of the required percentage of the v_field_security_name, all v_field_security_name shares shall be redeemed v_field_redemption_opt_out_applicability (except for any holders of v_field_security_name who affirmatively opt-out).
Standard representations and warranties by the Company. v_field_founder_reps_applicability Representations and warranties by Founders regarding technology ownership, etc.
Standard conditions to Closing, which shall include, among other things, satisfactory completion of financial and legal due diligence, qualification of the shares under applicable Blue Sky laws, the filing of a Certificate of Incorporation establishing the rights and preferences of the v_field_security_name, v_field_legal_opinion_applicability and an opinion of counsel to the Company.
v_field_drafting_counsel counsel to draft Closing documents. v_field_closing_expense_reimbursement_applicability Company to pay all legal and administrative costs of the financing at Closing, including reasonable fees (not to exceed v_field_closing_legal_expense_reimbursement_cap) and expenses of Investor counsel.
v_field_company_counsel_contact
v_field_investor_counsel_contact
v_field_reg_rights_applicability
All shares of Common Stock issuable upon conversion of the v_field_security_name v_field_reg_rights_investor_common_stock_inclusion_applicability and any other Common Stock held by the Investors will be deemed “Registrable Securities.”
Upon earliest of v_field_reg_rights_time_trigger_applicability (i) v_field_reg_rights_time_trigger_years years after the Closing; or (ii) v_field_reg_rights_post_ipo_trigger_months months following an initial public offering (“IPO”), persons holding v_field_reg_rights_demand_vote_threshold_perc of the Registrable Securities may request v_field_reg_rights_demand_number (consummated) registration(s) by the Company of their shares. The aggregate offering price for such registration may not be less than v_field_reg_rights_demand_offering_minimum_limitation_amount. A registration will count for this purpose only if (i) all Registrable Securities requested to be registered are registered, and (ii) it is closed, or withdrawn at the request of the Investors (other than as a result of a material adverse change to the Company).
The holders of v_field_reg_rights_s3_vote_threshold_perc of the Registrable Securities will have the right to require the Company to register on Form S-3/F-3 (as applicable), if available for use by the Company, Registrable Securities for an aggregate offering price of at least v_field_reg_rights_s3_offering_minimum_limitation_amount. There will be no limit on the aggregate number of such Form S-3/F-3 registrations, provided that there are no more than v_field_reg_rights_s3_annual_limitation_number per year.
The holders of Registrable Securities will be entitled to “piggyback” registration rights on all registration statements of the Company, subject to the right, however, of the Company and its underwriters to reduce the number of shares proposed to be registered to a minimum of v_field_reg_rights_piggyback_min_inclusion_perc on a pro rata basis and to complete reduction on an IPO at the underwriter’s discretion. In all events, the shares to be registered by holders of Registrable Securities will be reduced only after all other stockholders’ shares are reduced.
The registration expenses (exclusive of stock transfer taxes, underwriting discounts and commissions will be borne by the Company. The Company will also pay the reasonable fees and expenses, not to exceed v_field_reg_rights_investor_expense_reimbursement_cap, of one special counsel to represent all the participating stockholders.
Investors shall agree in connection with the IPO, if requested by the managing underwriter, not to sell or transfer any shares of Common Stock of the Company (including shares acquired in or following the IPO) for a period of up to 180 days plus up to an additional 18 days to the extent necessary to comply with applicable regulatory requirements following the IPO (provided all directors and officers of the Company and v_field_reg_rights_lock_up_stockholder_subjectivity_limitation_perc stockholders agree to the same lock-up). Such lock-up agreement shall provide that any discretionary waiver or termination of the restrictions of such agreements by the Company or representatives of the underwriters shall apply to Investors, pro rata, based on the number of shares held.
Upon a Deemed Liquidation Event, or when all shares of an Investor are eligible to be sold without restriction under Rule 144 v_field_reg_rights_time_based_termination_applicability or the v_field_reg_rights_time_based_termination_years anniversary of the IPO.
v_field_reg_rights_extension_waiver_threshold_applicability No future registration rights may be granted without consent of the holders of a v_field_reg_rights_extension_waiver_threshold_perc of the Registrable Securities unless subordinate to the Investor’s rights.
v_field_mgmt_rights_letter_applicability A Management Rights letter from the Company, in a form reasonably acceptable to the Investors, will be delivered prior to Closing to each Investor that requests one.
Any v_field_info_rights_major_investor_applicability Major Investor (“Info Rights Investor”) v_field_info_rights_non_competitor_limitation_applicability (who is not a competitor) will be granted access to Company facilities and personnel during normal business hours and with reasonable advance notification. The Company will deliver to such Info Rights Investor (i) annual, quarterly, v_field_info_rights_monthly_financials_applicability and monthly financial statements, and other information as determined by the Board; (ii) thirty days prior to the end of each fiscal year, a comprehensive operating budget forecasting the Company’s revenues, expenses, and cash position on a month-to-month basis for the upcoming fiscal year; v_field_info_rights_quarterly_cap_table_applicability and (iii) promptly following the end of each quarter an up-to-date capitalization table. A “Major Investor” means any Investor who purchases at least v_field_major_investor_dollar_threshold of v_field_security_name.
All v_field_preemptive_rights_major_investor_limitation_applicability Major Investors (“Preemptive Rights Investors”) shall have a pro rata right, based on their percentage equity ownership in the Company (assuming the conversion of all outstanding Preferred Stock into Common Stock and the exercise of all options outstanding under the Company’s stock plans), to participate in subsequent issuances of equity securities of the Company (excluding those issuances listed at the end of the “Anti-dilution Provisions” section of this Term Sheet. v_field_preemptive_rights_gobble_up_applicability In addition, should any Preemptive Rights Investor choose not to purchase its full pro rata share, the remaining Preemptive Rights Investors shall have the right to purchase the remaining pro rata shares.
v_field_board_vetoes_applicability So long as the holders of v_field_security_name are entitled to elect the Financing Board Delegation, the Company will not, without Board approval v_field_investor_directors_veto_applicability, which approval must include the affirmative vote of v_field_investor_directors_veto_waiver_threshold of the Financing Board Delegation:
- v_field_board_vetoes_intercompany_financing_applicability make any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Company;
- v_field_board_vetoes_lend_applicability make any loan or advance to any person, including, any employee or director, except advances and similar expenditures in the ordinary course of business or under the terms of a employee stock or option plan approved by the Board of Directors;
- v_field_board_vetoes_guarantee_applicability guarantee, any indebtedness except for trade accounts of the Company or any subsidiary arising in the ordinary course of business;
- v_field_board_vetoes_invest_applicability make any investment inconsistent with any investment policy approved by the Board;
- v_field_board_vetoes_borrow_applicability incur any aggregate indebtedness in excess of v_field_board_vetoes_borrow_dollar_threshold that is not already included in a Board-approved budget, other than trade credit incurred in the ordinary course of business;
- v_field_board_vetoes_related_party_transaction_applicability enter into or be a party to any transaction with any director, officer or employee of the Company or any “associate” (as defined in Rule 12b-2 promulgated under the Exchange Act) of any such person except transactions resulting in payments to or by the Company in an amount less than v_field_board_vetoes_related_party_transaction_threshold per year, or transactions made in the ordinary course of business and pursuant to reasonable requirements of the Company’s business and upon fair and reasonable terms that are approved by a majority of the Board of Directors;
- v_field_board_vetoes_change_senior_team_applicability hire, fire, or change the compensation of the executive officers, including approving any option grants;
- v_field_board_change_business_applicability change the principal business of the Company, enter new lines of business, or exit the current line of business;
- v_field_board_vetoes_transfer_material_property_applicability sell, assign, license, pledge or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business;
- v_field_board_vetoes_strategic_transactions_applicability enter into any corporate strategic relationship involving the payment contribution or assignment by the Company or to the Company of assets greater than v_field_board_vetoes_strategic_transactions_dollar_threshold.
v_field_noncompete_nonsolicit_applicability Each Founder and key employee will enter into a one year v_field_noncompete_applicability non-competition and non-solicitation agreement in a form reasonably acceptable to the Investors.
v_field_nda_piia_applicability Each current and former Founder, employee and consultant will enter into a non-disclosure and proprietary rights assignment agreement in a form reasonably acceptable to the Investors.
v_field_board_committee_investor_director_inclusion_applicability Each Board Committee shall include at least one director from the Financing Board Delegation.
The Board of Directors shall meet at least v_field_board_min_periodic_meeting, unless otherwise agreed by a vote of the majority of Directors.
v_field_do_insurance_applicability The Company will bind D&O insurance with a carrier and in an amount satisfactory to the Board of Directors.
Company to enter into Indemnification Agreement with each member of the Financing Board Delegation and affiliated funds in form acceptable to such director. In the event the Company merges with another entity and is not the surviving corporation, or transfers all of its assets, proper provisions shall be made so that successors of the Company assume the Company’s obligations with respect to indemnification of Directors or sufficient tail-insurance policy coverage is obtained.
v_field_employee_option_required_vesting_schedule_applicability All employee options to vest as follows: v_field_employee_option_required_vesting_schedule.
v_field_employee_option_pool_increase_applicability Immediately prior to the v_field_security_name investment, sufficient shares will be added to the option pool to create an unallocated option pool of v_field_employee_option_pool_increase_total_unallocated_perc of the Company's fully diluted capitalization following Closing.
v_field_key_person_insurance_applicability Company to acquire life insurance on Founders v_field_key_person_insurance_named_founders in an amount satisfactory to the Board and payable to the Company.
rofr_co_sale_applicability Company first and Investors second (to the extent assigned by the Board of Directors) will have a right of first refusal with respect to any shares of capital stock of the Company proposed to be transferred by Founders v_field_rofr_co_sale_other_employees_applicability and future employees holding greater than v_field_rofr_co_sale_other_employees_threshold_perc of Company Common Stock (assuming conversion of Preferred Stock and whether then held or subject to the exercise of options), with a right of oversubscription for Investors of shares unsubscribed by the other Investors. Before any such person may sell Common Stock, he/she will give the Investors an opportunity to participate in such sale on a basis proportionate to the amount of securities held by the seller and those held by the participating Investors.
At the initial Closing, the Board shall consist of v_field_board_total_seats members comprised as follows:
- v_field_num_investor_board_seats designated by the Investors v_field_investor_director_seat_further_breakdown who shall initially be v_field_investor_director_names
- v_field_num_founder_board_seats designated by the Founders v_field_founder_director_seat_further_breakdown who shall initially be v_field_founder_director_names
- v_field_other_directors_detail
v_field_drag_applicability Holders of Preferred Stock and the Founders and all future holders of greater than v_field_drag_other_inclusion_threshold_perc of Common Stock (assuming conversion of Preferred Stock and whether then held or subject to the exercise of options) shall be required to enter into an agreement with the Investors that provides that such stockholders will vote their shares in favor of a Deemed Liquidation Event or transaction in which 50% or more of the voting power of the Company is transferred and which is approved by the Board of Directors v_field_drag_preferred_stock_vote_applicability and the holders of v_field_drag_preferred_stock_vote_threshold_perc of the outstanding shares of Preferred Stock, on an as-converted basis, v_field_drag_common_stock_vote_applicability and the holders of v_field_drag_common_stock_vote_threshold_perc of the outstanding shares of Common Stock not issued or issuable upon conversion of Preferred Stock (the “Electing Holders”), so long as the liability of each stockholder in such transaction is several (and not joint) and does not exceed the stockholder's pro rata portion of any claim and the consideration to be paid to the stockholders in such transaction will be allocated as if the consideration were the proceeds to be distributed to the Company's stockholders in a liquidation under the Company's then-current Certificate of Incorporation.
v_field_sale_process_applicability Upon written notice to the Company from the Electing Holders, the Company shall initiate a process intended to result in a sale of the Company.
All Founders to own stock outright subject to Company right to buyback at cost. v_field_founder_vest_applicability Buyback right for v_field_founder_revest_cliff_perc for first v_field_founder_revest_cliff_months months v_field_founder_revest_applicability after Closing; thereafter, right lapses in equal monthly increments over following v_field_founder_revest_remaining_months months.
v_field_renegotiate_existing_preferred_applicability The terms set forth above for the v_field_security_name are subject to a review of the rights, preferences and restrictions for the existing Preferred Stock. Any changes necessary to conform the existing Preferred Stock to this term sheet will be made at the Closing.
v_field_no_shop_applicability The Company agrees to work in good faith expeditiously towards a closing. The Company and the Founders agree that they will not, for a period of v_field_no_shop_weeks weeks from the date these terms are accepted, take any action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer from any person or entity other than the Investors relating to the sale or issuance, of any of the capital stock of the Company v_field_no_shop_sale_inclusion_applicability or the acquisition, sale, lease, license or other disposition of the Company or any material part of the stock or assets of the Company and shall notify the Investors promptly of any inquiries by any third parties in regards to the foregoing. v_field_break_up_fee_applicability In the event that the Company breaches this no-shop obligation and, prior to v_field_break_up_fee_long_stop_date_or_event, closes any of the above-referenced transactions without providing the Investors the opportunity to invest on the same terms as the other parties to such transaction, then the Company shall pay to the Investors v_field_break_up_fee_amount upon the closing of any such transaction as liquidated damages. v_field_confidentiality_applicability The Company will not disclose the terms of this Term Sheet to any person other than officers, members of the Board of Directors and the Company’s accountants and attorneys and other potential Investors acceptable to v_field_lead_investor, as lead Investor, without the written consent of the Investors.
This Term Sheet expires on v_field_expiration_date if not accepted by the Company by that date.
v_signature_page
EXECUTED THIS v_field_agmt_date_sentence.
v_signature_blocks
v_exhibit_page
v_field_financing_model