![This Memorandum of Terms and all of the Series AA financing documents on this website have been prepared by
Wilson Sonsini Goodrich & Rosati for informational purposes only and do not constitute advertising, a solicitation, or
legal advice. Transmission of such materials and information contained herein is not intended to create, and receipt
thereof does not constitute formation of, an attorney-client relationship. Internet subscribers and online readers should
not rely upon this information for any purpose without seeking legal advice from a licensed attorney in the readers state.
The information contained in this website is provided only as general information and may or may not reflect the most
current legal developments; accordingly, information on this website is not promised or guaranteed to be correct or
complete. Wilson Sonsini Goodrich & Rosati expressly disclaims all liability in respect to actions taken or not taken
based on any or all the contents of this website. Further, Wilson Sonsini Goodrich & Rosati does not necessarily
endorse, and is not responsible for, any third-party content that may be accessed through this website.
CONFIDENTIAL
[NAME OF ISSUER]
MEMORANDUM OF TERMS
This Memorandum of Terms represents only the current thinking of the parties with respect to certain of
the major issues relating to the proposed private offering and does not constitute a legally binding agreement.
This Memorandum of Terms does not constitute an offer to sell or a solicitation of an offer to buy securities in
any state where the offer or sale is not permitted.
THE OFFERING
Issuer: [__________], a Delaware corporation (the Company)
Securities: Series AA Preferred Stock (the Preferred)
Valuation of the Company: $[__________] pre-money
Amount of the offering: $[__________]
Number of shares: [__________] shares
Price per share: $[__________]
TERMS OF THE PREFERRED
Liquidation preference: In the event of a liquidation, dissolution or winding up of the
Company, the Preferred will have the right to receive the original
purchase price prior to any distribution to the common stock. The
remaining assets will be distributed pro rata to the holders of
common stock. A sale of all or substantially all of the Companys
assets or a merger or consolidation of the Company with any other
company will be treated as a liquidation of the Company.
Conversion: The Preferred may be converted at any time, at the option of the
holder, into shares of common stock. The conversion rate will
initially be 1:1, subject to customary adjustments.](https://image.slidesharecdn.com/aa-termsheet-130723181315-phpapp02/85/Aa-termsheet-1-320.jpg)
![Automatic conversion: Each share of Preferred will automatically convert into common
stock, at the then applicable conversion rate, upon (i) the closing of a
firmly underwritten public offering of common stock, or (ii) the
consent of the holders of at least a majority of the then outstanding
shares of Preferred.
General voting rights: Each share of Preferred will have the right to a number of votes
equal to the number of shares of common stock issuable upon
conversion of each such share of Preferred. The Preferred will vote
with the common stock on all matters except as specifically provided
herein or as otherwise required by law.
Protective provisions: So long as any of the Preferred is outstanding, consent of the holders
of at least 50% of the Preferred will be required for any action that:
(i) alters any provision of the certificate of incorporation if it would
adversely alter the rights, preferences, privileges or powers of the
Preferred; (ii) changes the authorized number of shares of Preferred;
or (iii) approves any merger, sale of assets or other corporate
reorganization or acquisition.
INVESTOR RIGHTS
Right to maintain
proportionate ownership: Each holder of at least [_________] shares of Preferred will have a
right to purchase its pro rata share of any offering of new securities
by the Company, subject to customary exceptions. The pro rata
share will be based on the ratio of (x) the number of shares of
Preferred held by such holder (on an as-converted basis) to (y) the
Companys fully-diluted capitalization (on an as-converted and as-
exercised basis). This right will terminate immediately prior to the
Companys initial public offering or five years after the financing.
Information rights: As soon as practicable, the Company will deliver to each holder of at
least [______] shares of Preferred, (i) unaudited annual financial
statements and (ii) unaudited quarterly financial statements. The
information rights will terminate upon an initial public offering.
Other Matters: Market stand-off. Holders of Preferred will agree not to effect any
transactions with respect to any of the Companys securities within
180 days following the Companys initial public offering, provided
that all officers, directors and 1% stockholders of the Company are
similarly bound.
(Signature page follows)
-2-](https://image.slidesharecdn.com/aa-termsheet-130723181315-phpapp02/85/Aa-termsheet-2-320.jpg)
![CONFIDENTIAL
This Memorandum of Terms may be executed in counterparts, which together will constitute one
document. Facsimile signatures shall have the same legal effect as original signatures.
[INSERT COMPANY NAME] [INSERT NAME OF INVESTOR]
Signature Signature
Print name Print name
Print title Print title
Date Date](https://image.slidesharecdn.com/aa-termsheet-130723181315-phpapp02/85/Aa-termsheet-3-320.jpg)
Aa termsheet
- 1. This Memorandum of Terms and all of the Series AA financing documents on this website have been prepared by Wilson Sonsini Goodrich & Rosati for informational purposes only and do not constitute advertising, a solicitation, or legal advice. Transmission of such materials and information contained herein is not intended to create, and receipt thereof does not constitute formation of, an attorney-client relationship. Internet subscribers and online readers should not rely upon this information for any purpose without seeking legal advice from a licensed attorney in the readers state. The information contained in this website is provided only as general information and may or may not reflect the most current legal developments; accordingly, information on this website is not promised or guaranteed to be correct or complete. Wilson Sonsini Goodrich & Rosati expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this website. Further, Wilson Sonsini Goodrich & Rosati does not necessarily endorse, and is not responsible for, any third-party content that may be accessed through this website. CONFIDENTIAL [NAME OF ISSUER] MEMORANDUM OF TERMS This Memorandum of Terms represents only the current thinking of the parties with respect to certain of the major issues relating to the proposed private offering and does not constitute a legally binding agreement. This Memorandum of Terms does not constitute an offer to sell or a solicitation of an offer to buy securities in any state where the offer or sale is not permitted. THE OFFERING Issuer: [__________], a Delaware corporation (the Company) Securities: Series AA Preferred Stock (the Preferred) Valuation of the Company: $[__________] pre-money Amount of the offering: $[__________] Number of shares: [__________] shares Price per share: $[__________] TERMS OF THE PREFERRED Liquidation preference: In the event of a liquidation, dissolution or winding up of the Company, the Preferred will have the right to receive the original purchase price prior to any distribution to the common stock. The remaining assets will be distributed pro rata to the holders of common stock. A sale of all or substantially all of the Companys assets or a merger or consolidation of the Company with any other company will be treated as a liquidation of the Company. Conversion: The Preferred may be converted at any time, at the option of the holder, into shares of common stock. The conversion rate will initially be 1:1, subject to customary adjustments.
- 2. Automatic conversion: Each share of Preferred will automatically convert into common stock, at the then applicable conversion rate, upon (i) the closing of a firmly underwritten public offering of common stock, or (ii) the consent of the holders of at least a majority of the then outstanding shares of Preferred. General voting rights: Each share of Preferred will have the right to a number of votes equal to the number of shares of common stock issuable upon conversion of each such share of Preferred. The Preferred will vote with the common stock on all matters except as specifically provided herein or as otherwise required by law. Protective provisions: So long as any of the Preferred is outstanding, consent of the holders of at least 50% of the Preferred will be required for any action that: (i) alters any provision of the certificate of incorporation if it would adversely alter the rights, preferences, privileges or powers of the Preferred; (ii) changes the authorized number of shares of Preferred; or (iii) approves any merger, sale of assets or other corporate reorganization or acquisition. INVESTOR RIGHTS Right to maintain proportionate ownership: Each holder of at least [_________] shares of Preferred will have a right to purchase its pro rata share of any offering of new securities by the Company, subject to customary exceptions. The pro rata share will be based on the ratio of (x) the number of shares of Preferred held by such holder (on an as-converted basis) to (y) the Companys fully-diluted capitalization (on an as-converted and as- exercised basis). This right will terminate immediately prior to the Companys initial public offering or five years after the financing. Information rights: As soon as practicable, the Company will deliver to each holder of at least [______] shares of Preferred, (i) unaudited annual financial statements and (ii) unaudited quarterly financial statements. The information rights will terminate upon an initial public offering. Other Matters: Market stand-off. Holders of Preferred will agree not to effect any transactions with respect to any of the Companys securities within 180 days following the Companys initial public offering, provided that all officers, directors and 1% stockholders of the Company are similarly bound. (Signature page follows) -2-
- 3. CONFIDENTIAL This Memorandum of Terms may be executed in counterparts, which together will constitute one document. Facsimile signatures shall have the same legal effect as original signatures. [INSERT COMPANY NAME] [INSERT NAME OF INVESTOR] Signature Signature Print name Print name Print title Print title Date Date