Latest Side Letter Changes
by Joe · 21 things on Twos
- These are the changes made to the side letter that we sent over after our lawyers had reviewed it/given us a clean copy.
- Deal terms breakdown
- SAFE: $200,000 on a $5.5M post-money valuation cap with no discount
- Option: Additional $1M at a $16M post-money valuation
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- ✓ Removed the 2 year expiration of the option to invest an additional $1M.
- ✓ The only expiration of the option is now $1.5M in external capital raised
- Board seat takes effect when they invest a total of $1M in Twos (aka when they exercise $800k of the $1M option)
- Major investor rights take effect when they invest a total of $1M in Twos
- Preemptive rights
- Information rights
- Rights of first refusal and co-sale
- Registration rights
- "and on the same basis as any other investors in such equity financing, without regard to any otherwise applicable minimum share ownership requirements"
- The board seat will survive an equity financing, the threshold amount is invested, and the investor does not otherwise have the right to designate a director pursuant to the definitive documents relating to the equity financing
- Liquidation preference comes BEFORE the holders of other preferred stock
- "The Option's stock liquidation preference will be the senior to all other classes or series of the company's capital stock"
- Or at least pari passu with that of other preferred stock
- ✓ "Should any other investor with pro-rata rights choose not to purchase its full pro rata share, then TBV shall have the right to purchase the remaining pro rata shares"
- Drag along rights put back in the contract
- When 50% of the voting power decides to sell, and the board of directors approves, then everyone has to sell.