SAFE Term Sheet - Black Ambition HBCU Prize

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 Opportunity, Inc. (“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, the fiscal sponsor for Black Ambition. PolicyLink may assign the SAFE or the securities into which the SAFE converts to Black Ambition or any other charitable organization at any time. 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]. In accordance with the Black Ambition prize award guidelines, 50 percent of the Black Ambition prize award, 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”).

Amount to Raise

The Company may raise up to $500,000 from Investors under SAFEs, including the Black Ambition SAFE Investment Amount. The Company may increase the amount raised with the approval of Investors holding a majority-in-interest of the SAFEs.

Valuation Floor

$4,000,000[2]

Valuation Cap

$10,000,000[3]

Discount Rate

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 expire and terminate 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 lesser of: (i) eighty five percent (85%) of the price per share paid by the purchasers of such equity securities in the Equity Financing; or (ii) the price equal to the quotient of the Valuation Cap divided by the aggregate number of outstanding shares of the Company’s capital stock as of immediately after the initial closing of the Equity Financing (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, the Investor will, at its option, either (i) receive a cash payment equal to the Investment Amount or (ii) automatically receive from the Company a number of shares of common stock equal to the Investment Amount divided by the quotient of (x) the Valuation Cap divided by (y) the aggregate number of outstanding shares of the Company’s capital stock immediately prior to such conversion (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 immeditately prior to the Change of Control closing.

Equity Treatment of SAFE:

The Investment Amount, including the entire Black Ambition prize award structured as the Black Ambition 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 means that the post-money valuation at which the SAFEs may convert into equity in a 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.

[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.