Full Ratchet Side Letter Agreement

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Full Ratchet Side Letter Agreement

For your convenience, this template document is available as a Google Doc to make it easier to copy and edit. All material here is provided for illustration only; please read the disclaimer before use.

Letter Agreement

[Investor]

Re: Anti-Dilution Protection

Dear Sir or Madam:

This letter will confirm our agreement that pursuant to and effective as of your purchase of __________ shares of common stock of __________, Inc., a [Delaware] corporation (the β€œCompany”) for the total amount of $__________, you (the β€œInvestor”) shall be entitled to the following contractual rights:

  1. If within [two (2)] years after the date of this Agreement, the Company sells shares in a transaction whose primary purpose is to raise capital for the Company at a price per share less than [$0.__] (as adjusted for any dividends, stock splits, or similar events) (whatever that price per share, the β€œLower Price”), the Company will issue additional shares of common stock to the Investor until the total number of shares of common stock owned by the Investor equals that number of shares of common stock the Investor would have received had he/she originally purchased all of their shares at the Lower Price.

  2. The foregoing paragraph does not apply to:

    (a) Shares of stock issuable upon exercise of any options, warrants or rights to purchase any securities of the Company outstanding as of the date of this Agreement

    (b) Shares of stock issued in connection with any stock split or stock dividend or recapitalization

    (c) Shares of stock (or options, warrants or rights therefore) granted or issued hereafter to employees, officers, directors, contractors, consultants, or advisors to, the Company or any subsidiary of the Company pursuant to incentive agreements, stock purchase or stock option plans, stock bonuses or awards, warrants, contracts, or other arrangements that are approved by the Company’s board of directors

    (d) Any other shares of stock (and/or options or warrants therefor) issued or issuable primarily for other than equity financing purposes and approved by the board, and

    (e) Shares of stock issued or issuable by the Company to the public pursuant to a registration statement filed under the Securities Act.

  3. The rights described herein shall terminate and be of no further force or effect upon (a) two [(2)] years after the date of this Agreement, (b) such time as no shares of the Company’s stock are held by the Investor or its affiliates; (c) the consummation of the sale of the Company’s securities pursuant to a registration statement filed by the Company under the Securities Act of 1933, as amended, in connection with the firm commitment underwritten offering of its securities to the general public, or (d) the consummation of a merger or consolidation of the Company that is effected (i) for independent business reasons unrelated to extinguishing such rights and (ii) for purposes other than (A) the reincorporation of the Company in a different state or (B) the formation of a holding company that will be owned exclusively by the Company’s stockholders and will hold all of the outstanding shares of capital stock of the Company’s successor. The confidentiality obligations referenced herein will survive any such termination.

[signature blocks omitted]

Example Minutes of a Meeting of a Board of Directors

For your convenience, this template document is available as a Google Doc to make it easier to copy and edit. All material here is provided for illustration only; please read the disclaimer before use.

MINUTES OF MEETING OF THE BOARD OF DIRECTORS OF

_____________, INC.

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