The Book of Jargon®

Another term for Board Observer Rights.

Generally, a letter provided by a company to a prospective Employee setting forth the terms of the offer of employment being extend. Typical terms included in an Offer Letter include, salary, bonus terms (if any), whether Equity will be granted, and if so, whether Vesting will apply, vacation days and any other company policies that would apply.

The Employees who manage the day-to-day operation of the company and are elected by the Board. In Startups, the Founders are typically the first Officers of the company.

A type of Closing Certificates that may be required to be delivered at Closing, which is signed by an Officer of the company. The signing Officer certifies the accuracy of the company Bylaws and Board and Stockholder resolutions adopted in connection with the transaction and attached to the Officers Certificate or the continued accuracy of Representations and Warranties. In Startups, the Closing Certificates required in a Preferred Stock Financing are set forth in the Closing Conditions section of the Stock Purchase Agreement.

A legal opinion from lawyers on a discrete matter which will be relied on by another party (for Startups this is typically the Investor). A typical example of an Opinion Letter would be an opinion given as to whether a particular agreement is valid and enforceable in a particular jurisdiction or whether a particular party (typically the Issuer) has the capacity and authority to enter into certain agreements. In Startups an Opinion Letter is typically only seen in Preferred Stock Financings and the types of opinions that can be given are often very limited. Depending on a company’s Leverage, recently some Investors have been willing to forgo an Opinion Letter as a Closing Condition.

A contract issued by a company, typically pursuant to an Equity Incentive Plan, allowing the holder to acquire Stock of the company under certain circumstances (usually tied to Vesting over a period of continued employment) upon the payment to the company of the Exercise Price. For Startups, Option grants are a key means of attracting talent, incentivizing Employees and providing adequate compensation (when cash is tight).

Agreement that sets forth the terms and conditions of an Option, including, among other things, the number of Shares subject to the Option, the Exercise Price and the Vesting Schedule (if any).

The number of shares of Common Stock set aside and reserved for issuance under a company’s Equity Incentive Plan, which can be increased over time by amending the Equity Incentive Plan (an act requiring both Board and Stockholder consent).

Conversion of Preferred Stock at the Option of a Preferred Stockholder. Compare to Mandatory Conversion.

Typically refers to a corporation’s Charter and Bylaws.

Price at which Equity was originally issued, subject to adjustment upon the occurrence of certain events set forth in the Charter (such as Stock Splits, Dividends, Recapitalizations, etc.).

Shares of a company that are actually issued and outstanding as opposed to reserved for future issuance (such as a reserved Option Pool) or issuable pursuant to outstanding Options, Warrants or other Convertible Securities that have not yet been exercised.

The ability for holders of Preemptive Rights to purchase more than their specified Pro Rata Amount of Shares if other holders do not elect to purchase their entire Pro Rata Amount.