SAFE Term Sheet.

Black Ambition SAFE Term Sheet

This term sheet (this “Term Sheet”) summarizes the principal terms of the simple agreement for future equity (“SAFE”) financing (the “Financing”) of the Company (as defined below) as part of your Black Ambition (“Black Ambition”) prize award. This Term Sheet is for discussion purposes only and is not binding on the Company or Black Ambition or its affiliates until definitive documentation has been agreed to and executed by such parties. Capitalized terms not defined in the Term Sheet shall have the meaning ascribed to them in the form of SAFE attached hereto as Exhibit A.

Issuer:

[COMPANY NAME]1, a [STATE OF INCORPORATION] [corporation/limited liability company] (the “Company”). If the Company is not currently organized as a corporation, the Company agrees as condition to accepting its Black Ambition prize award to incorporate a corporate entity form at or prior to the Equity Financing referred to below.

Investors:

The Company will issue the Black Ambition SAFE to PolicyLink, as fiscal sponsor for Black Ambition. PolicyLink may assign the SAFE or the securities into which the SAFE converts to Black Ambition, any other charitable organization, or any other entity who directly or indirectly, controls, is controlled by or is under common control with Investor, including, without limitation, any general partner, managing member, officer or director of PolicyLink, or any venture capital fund now or hereafter existing which is controlled by one or more general partners or managing members of, or shares the same management company with, PolicyLink; and provided, further, that the Company may assign this instrument in whole, without the consent of PolicyLink, in connection with a reincorporation to change the Company’s domicile. The Company may issue SAFEs on substantially similar terms to other purchasers (together with PolicyLink, the “Investors”).

Black Ambition prize:

The Company has been awarded a Black Ambition prize equal to [INSERT AMOUNT OF AWARD] (the “Prize Amount”). In accordance with the Black Ambition prize award guidelines, fifty percent (50%) of the Prize Amount, up to a maximum of $250,000 shall be considered the “Investment Amount” in the SAFE.

Documentation:

Each Investor will receive a SAFE in substantially the form attached hereto as Exhibit A (each a “SAFE” and collectively, the “SAFEs”).

Valuation Floor

$4,000,0002

Valuation Cap

$10,000,0003

Discount Percentage

15%4

Closings:

The Company may issue the SAFEs to the Investors in one or more closings on such dates as determined by the Company and the Investors participating in such closing.

Definitive Agreement:

In addition to the issuance of the SAFE to PolicyLink as part of the Black Ambition prize award, the Company may sell SAFEs to Investors pursuant to a subscription agreement containing customary representations and warranties of the Company and the Investors.

Termination:

The SAFEs will terminate (without relieving the Company of any obligations arising from a prior breach of or non-compliance with the SAFE) upon (i) the issuance of stock to the Investor upon the occurrence of an Equity Financing (as defined below) or upon the occurrence of a Liquidity Event (as defined below); or (ii) the payment, or setting aside for payment, of amounts due to the Investor in connection with a Liquidity Event.

Equity Financing:

If the Company closes a transaction or series of transactions pursuant to which the Company issues and sells preferred stock at a fixed pre-money or post-money valuation (“Preferred Stock”), then the conversion to Preferred Stock is automatic, at a conversion price per share equal to the greater of: (1) the Investment Amount divided by the price per share of the Preferred Stock; or (2) the Investment Amount divided by the lesser of (i) the SAFE Price or (ii) the price per share of the Preferred Stock sold in the Equity Financing multiplied by the Discount Rate (the “Discount Price”); provided, however, that the number of shares of Preferred Stock shall not exceed (x) the Investment Amount divided by (y) the price per share which shall equal (i) the Valuation Floor (ii) divided by the Company Capitalization (assuming full conversion or exercise of all convertible and exercisable securities then outstanding, including the SAFEs issued pursuant to this Term Sheet).

Liquidity Event:

If the Company undergoes a Change of Control or an Initial Public Offering prior to an Equity Financing, PolicyLink will, at its option, either (i) receive a cash payment equal to the Prize Amount or (ii) receive from the Company a number of shares of Common Stock equal to the Investment Amount divided by the Liquidity Price (assuming full conversion or exercise of all convertible and exercisable securities then outstanding other than the SAFEs issued pursuant to this Term Sheet then outstanding) issued immediately prior to, or concurrent with, the consummation of the Liquidity Event.

If there are not enough funds from the Liquidity Event to pay PolicyLink the Prize Amount and holders of other SAFEs their respective Investment Amount (collectively, the “Cash-Out Investors”) in full, then all of the Company’s available funds will be distributed pro rata (i.e., equal priority) among the Cash-Out Investors in proportion to their Investment Amounts.

Dissolution Event

If the Company undergoes (i) a voluntary termination of operations, (ii) a general assignment for the benefit of the Company’s creditors or (iii) any other liquidation, dissolution or winding up of the Company (excluding a Liquidity Event), whether voluntary or involuntary prior to the expiration or termination of PolicyLink’s SAFE, then the Company will pay an amount equal to the Investment Amount, due and payable to the Investor immediately prior to, or concurrent with, the closing of the Dissolution Event.

Equity Treatment of SAFE:

The entire Prize Amount is a Black Ambition mission-related investment. Thus, the entire Prize Amount will be considered an investment for equity interests in the Company pursuant to the terms of the SAFE, will be considered as general equity interests in the Company.

Fees and Expenses:

The Company, PolicyLink and each other Investor will bear its own fees and expenses incurred with respect to the transactions contemplated by this Term Sheet.


1 Note: The Company is the entity receiving the award

2 Note: If an Equity Financing takes place at a post-money valuation below the Valuation Floor, the calculation of the SAFE conversion shall be calculated as if the Equity Financing valuation equalled the Equity Floor.

3 Note: The post-money valuation at which the SAFEs may convert into equity in an Equity Financing is capped at $10,000,000. This cap ensures that the Investors will own at least a certain amount of the Company upon conversion of the SAFEs, subject to proportional dilution in future equity financings.

4 Note: When SAFEs convert at the Equity Financing, they will convert at a price per share that is 85% of the price the new investors in the Equity Financing pay for their shares of Preferred Stock. This is a benefit to the Investors for having invested in the Company at an earlier stage.