CONTROL AND FOUNDER DILUTION Clause Samples
The "Control and Founder Dilution" clause defines how the ownership percentage and decision-making power of the company's founders may change as new investors come on board or additional shares are issued. Typically, this clause outlines the circumstances under which founders' shares may be diluted, such as during fundraising rounds, and may specify protections like anti-dilution provisions or voting rights adjustments. Its core function is to balance the founders' ability to maintain meaningful control over the company while allowing for necessary capital raises, thereby addressing concerns about loss of influence and ownership as the company grows.
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CONTROL AND FOUNDER DILUTION. The Founders beneficially own approximately 69% of the outstanding voting shares. Accordingly the Founders are able to significantly influence the affairs of the Company, including the election of directors. On a fully diluted basis, which includes the reservation of Shares for issuance under the Company’s 2015 Equity Incentive Plan, issuance of the Conversion Securities upon conversion of the Notes and exercise of the warrants, the Founders would potentially control 40% or less of the Company. To maintain Founder control it is contemplated that the stockholder agreement among holders of the Company’s common stock, execution of which is a condition to the issuance of any Conversion Securities under the Notes, will contain voting provisions intended to preserve each Founder’s position as a member of the board of directors of the Company.