These Series AA Financing Documents are intended for a simple initial financing round. They provide for:
- A 1x non-participating liquidation preference: when the company is liquidated or sold, the investors have to choose between getting their money back or sharing in the company’s proceeds with the other stockholders.
- The right to name one director
- A right of first refusal on future offerings
- Rights to periodic financial statements
- A veto right over sales of the Company
These documents are based on the Series AA Financing Documents published by the Y Combinator, a Silicon Valley incubator, and were originally created by Wilson Sonsini Goodrich & Rosati, a prominent law firm based in Palo Alto**. The Y Combinator folks have graciously allowed me to post these revised versions here, but neither they, nor Wilson Sonsini, had any part in any of the modifications from the original versions and, obviously, do not endorse them in any way.
I’ve made a few changes to the version at the Y Combinator site including, most significantly, modifying them for North Carolina corporations. While venture-backed entities often will end up being Delaware corporations, there are advantages to starting off life in North Carolina and converting later if need be. (See the series of blog posts on this site comparing the relative advantages of North Carolina and Delaware.)
The forms are as follows:
- A Term Sheet describing the main terms of the financing
- Amended and Restated Articles of Information
- A Stock Purchase Agreement
- An Investor Rights Agreement
- A Board Consent
- A Shareholder Consent
It would be an exceptionally bad idea for anybody to use these documents without first engaging an attorney with experience in startup equity financings. Among other things, the documents may not be correct, complete or up-to-date. They may not be appropriate for that person’s situation. And, further, it can be quite dangerous to use form documents without understanding the law and reasoning behind them.
**Please note that I removed a disclaimer which Wilson Sonsini inserted in the original versions of the documents–since the documents have been modified, part of it didn’t make sense any more, and I didn’t want to edit their disclaimer, so I just pulled it out entirely. The disclaimer was as follows, with the name of the document changing between documents:
This Series AA Preferred Stock Purchase Agreement 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 reader’s 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.