/Docs/G/Lipshaw_EVCL_CmA/Demo/Acme-SeriesA-TermSheet2dr.md
  Source views: Source JSON(ish) on GitHub (VSCode)   Doc views: Document (&k=r00t): Visual Print Technical: OpenParameters Xray
Investor.List.N/1/2=

AltPrompt=

SecName=

{SecName=

Convert.Offering.OnANationalExchange.cl=

Convert.Offering.PriceMultiple.#=

Director.List.cl=

SeriesX/Preferred.cl=

Preferred.ElectDirectors.#=

Common.ElectDirectors.#=

Series_X_Preferred=

the_other_investors=

Preferred_and_Common=

at least______/any=

MajorAction.a majority_two-thirds=

MajorAction.pari_passu/senior=

MajorAction.Common/Common_or_Preferred=

MajorAction.TransferVotingPower.%=

Redeem.PreferredElect.%=

declared/accumulated=

Convert.DiscountForFailureToRedeem.1st.%=

Convert.DiscountForFailureToRedeem.Nth.%=

InformationRights.Threshold.#=

InformationRights.AnnualAudited.Delay.days=

InformationRights.QuarterlyAudited.Delay.days=

Preferred.Majority.%=

RegistrationDemand.Transfer.MinimumNumberOfShares.#=

real_estate=

a majority] [two-thirds] of the investors.
  • Drag-Along Rights:
    If investors holding __% of the outstanding Preferred Stock propose to transfer their shares to a third party or approve an acquisition of the Company, the other stockholders will be required to sell their shares to the third party, at the same price and upon identical terms and conditions as the investors, or to vote in favor of the acquisition of the Company. Each of the other stockholders will be required to: (1) make representations and warranties in connection with such transaction regarding (a) ownership and authority to sell the shares to be sold by it and (b) existence of any material violations as a result of such sale under any material agreement to which such stockholder is a party; (2) obtain any consents or approvals that can be obtained without significant expense; and (3) pay its pro rata share of expenses incurred in connection with the transaction.
  • Co-Sale Agreement
    The Company and the investors will enter into a Co-Sale Agreement with __________ and __________ (the "Founders"), [employees, officers, directors and consultants] that will include the following terms:
    1. Co-Sale Rights:
      The Founders[, employees and officers] may not sell, transfer or exchange their stock unless each investor has an opportunity to participate in the sale on a pro rata basis, subject to customary exceptions.
  • Stock Purchase Agreement
    The investment shall be made pursuant to a Stock Purchase Agreement that contains representations and warranties of the Company, covenants of the Company and conditions of closing, including an opinion of counsel for the Company.
    1. Representations &
      The agreement will include representations and warranties such as: organization and good standing; capitalization structure; due authorization; valid stock issuances; possession of all governmental consents; no adverse litigation; ownership of intellectual property; disclosure agreements with employees; assurances of full disclosure; good title to all assets; tax returns and complete corporate records; accuracy of financial statements; absence of adverse developments; material contracts; no conflicts; no environmental liabilities; no ERISA issues; and nonapplicability of the Investment Company Act.
    2. Closing Conditions:
      The closing of the sale of the Series A Preferred is subject to the following conditions precedent:
      1. completion of legal documentation satisfactory to the investors;
      2. [completion of due diligence satisfactory to the investors;]
      3. receipt of the requisite vote of the Existing Preferred to any required adjustments to which such shares of Existing Preferred are entitled to in connection with the sale and issuance of the Series A Preferred [and the Warrants]; and
      4. [receipt of a detailed budget satisfactory to the lead investor.
    3. Fees and Expenses:
      The Company will pay the reasonable fees and expenses of counsel to the lead investor [(not to exceed $__________)].
  • Optional Provisions
    1. Warrants:
      Any investor who purchases Series A Preferred [at the initial closing] shall receive a [five]-year warrant exercisable for a number of shares of [Common Stock] [Series A Preferred Stock] equal to [___]% of the principal dollar amount paid by such investor for its shares of Series A Preferred divided by the [fair market value per share of the Common Stock] [Purchase Price]. The exercise price will be $[0.001] [the fair market value of the Common Stock] [the Purchase Price] per share.][Exchange Offer: Each holder of existing preferred stock (the "Existing Preferred") shall have the right to exchange its Existing Preferred, in whole or in part, for Series A Preferred as follows: one share of Existing Preferred and $__________ for __________ shares of Series A Preferred].
    2. Stock Options:
      After the Closing, the Company will [reprice the stock option of the continuing employees] [provide for a six-month exchange offer, whereby continuing employee will be allowed to exchange their existing option for new options at a substantially lower exercise price.
    3. Stock Vesting:
      After the Closing, all equity securities issued to employees, officers, directors and consultants will be subject to vesting as follows: [25% to vest at the end of the first year following such issuance, with the remaining 75% to vest monthly over the next three years.] [All of] [___% of] the outstanding equity securities currently held by the Founders will become subject to monthly vesting over the [four] [two] years after the Closing.
    4. Right of First Refusal:
      The Company will have a right of first refusal on all transfers of Common Stock by Founders[, employees and officers], subject to customary exceptions. If the Company elects not to exercise its right, the Company will assign its right to the investors.
    5. Indemnification:
      The Certificate will limit liability of the Board and the Bylaws will require indemnification of the Board to the fullest extent permitted by applicable law.
    6. Finders:
      The Company and the investors shall each indemnify the other for any broker's or finder's fees for which either is responsible.
    7. Executive Search:
      The Company will use its best efforts to hire a [CEO/CFO] acceptable to the investors as soon as practicable following the Closing.
    8. Observation Rights:
      So long as an investor holds at least __________ shares, the investor will be entitled to have one representative present at each Board meeting.]
    9. Insurance:
      The Company will obtain and maintain key-person life insurance policies for each of the Founders in the amount of [$1 million]. The Company will obtain and maintain D&O insurance coverage for its directors and officers on terms reasonably satisfactory to the investors.
    10. Tag-Along Rights:
      If any investor proposes to transfer its shares to a third party, then each other investor shall have the right to participate in such sale by selling a pro rata number of shares on the same terms and conditions as the selling investor[; provided that each investor shall be permitted to transfer up to [10%] of its shares without triggering such right].
    11. Super-Majority Board Votes:
      The Company's Bylaws will be amended to provide that approval by an [80%] vote of the Board will be required to approve the following: merger or dissolution of the Company; the issuance, sale, purchase or redemption of securities of the Company; establishment of Board committees; certain sales of assets; restricted payments; declaration of dividends; filing of bankruptcy petition; approval of annual budget; guarantees of third-party obligations other than in the ordinary course of business; debt incurrence; certain major investment, capital expenditures, acquisitions or charitable donations; entry into a new line of business; creation of liens, mortgages or other encumbrances; surrender of property; institution, termination or settlement of litigation; election of senior executive officers; contracts or agreements not in the ordinary course of business; leasing of real or personal property; creation of executive compensation and employee benefit programs; adoption of any major policy changes regarding the manufacture or sale of products or services; modification of significant accounting policies; selection of independent accountants; change in domicile; any material financing; any transaction which would result in a change of control; adoption or material amendment of any equity-based compensation or similar plan; affiliate transactions; and change in the number of directors.
    12. Affirmative Covenants:
      The agreement will include other affirmative covenants of the Company such as: retention of independent accountants; maintenance of corporate existence and rights; compliance with laws, including, without limitation, environmental laws; performance of obligations; maintenance of properties in good repair; maintenance of appropriate and adequate insurance; insurance for and for and indemnification of directors; payment of taxes and other liabilities; notice of defaults, litigation and other adverse actions; and further assurances.
    13. Negative Covenants:
      The agreement will include negative covenants such as limitations on: incurrence of indebtedness; liens; issuance of equity securities by the Company or its subsidiaries; loans, investments and joint ventures; guarantees or other contingent obligations; restricted payments (including dividends, redemptions and repurchases of capital stock); fundamental changes (including limitations on mergers, acquisitions and asset sales); operating leases; sale-leaseback transactions; transactions with affiliates; dividend and other payment restrictions affecting subsidiaries; capital expenditures; lines of business; amendment of indebtedness and other material documents; and prepayment or repurchase of indebtedness.
    14. Management Rights:
      The Company will provide the investor with the right to substantially participate in, or substantially influence the conduct of, the management of the Company.
    15. Nonsolicitation:
      The Company will not solicit for employment or employ: (1) any person who is, or has been within the previous twelve months, an employee of [the lead investor] or its affiliates; [or (2) any member of the management team of any entity in which [the lead investor] has had an investment within the previous twelve months], without the prior written consent of [the lead investor].] By executing this term sheet, the Company agrees to keep each of the provisions herein, as well as the existence of this term sheet, confidential. [The Company further agrees that it will not, directly or indirectly, solicit, encourage or entertain proposals from or enter into negotiations with or furnish any information to any other person or entity regarding any alternative financing from parties other than the investors for a period of [30] days following execution of this term sheet.