43North LLC, a New York limited liability company (hereinafter “43North”) is undertaking a business venture competition subject to the following terms and conditions (the “Competition”). Submission of an application in the Competition constitutes a legally binding agreement between the applicant and 43North according to the terms, conditions, and covenants contained herein.
The purpose of the Competition is to be part of an overall program aimed at systematically generating more start-up enterprises in Western New York by (i) facilitating applied research and development and enhancing mentoring and other supports for aspiring entrepreneurs, (ii) supporting early-stage firm growth and (iii) attracting more venture funding. This Competition will award a total of up to $5 million in prizes, with a single top award of $1 million. It will attract entrepreneurs from around the world to compete for prizes that will turn startup companies with high growth potential into funded enterprises in our region. The campaign will have three features: the Competition (described herein), an “incubator/accelerator” facility located in Western New York, and facilitation of investment in winners of the competition.
Nature of Businesses
The Competition focuses on applicants that intend to become operating companies. All applicants must be seeking outside equity capital in addition to the money to be awarded in the Competition.
The following businesses are not eligible for the Competition:
(1) retail businesses with brick and mortar storefronts,
(2) residential real property business,
(3) investment vehicles that invest in the securities of other entities,
(4) sports venues,
(5) gaming and gambling businesses,
(6) places of overnight accommodation,
(7) past 43North cash-prize winners,
(8) entertainment-related establishments, and
(9) single-purpose entertainment or event productions (e.g. movies, albums, concerts). For this purpose, “retail business” means a business that is primarily engaged in making retail sales of goods or services to customers who personally visit such facilities to obtain goods or services. In addition, generally excluded are the following: buy-outs, roll-ups, real estate syndications, tax shelters and franchise-based outlets.
Equity Investment Awards, Benefits and Conditions
Award Amounts and Additional Benefits.
43North will make up to the following equity investment awards (an “Award”) to the winners of the Competition:
All Award recipients will receive: (a) access to our business acceleration facility located in Western New York, (b) mentorship from experienced entrepreneurs and (c) exposure to sponsors and stakeholders.
Recipients will receive their equity investment in staged payments, payable as engagement metrics are met throughout 2021.
Equity Interest to be issued to 43North.
As a condition of the Award, Recipients must issue to 43North a purchase right (a “Warrant”) that enables 43North to purchase from the recipient a number of the most senior equity securities of recipient that is equal to 5% of the fully diluted outstanding equity of the recipient at the time the Warrant is exercised. The Warrant will remain in effect for a period of ten (10) years following the effective date of the Warrant. The purchase price at the time of exercise will be the nominal amount of $100.00. For clarity, 43North would have the right to purchase a 5% interest in each recipient for $100.00 at any time during the ten (10) years following the date of the Warrant. 43North may assign its rights under the Warrant or any equity security issued under the Warrant to an agency or instrumentality of the State of New York, or to any not-for-profit entity that us substantially funded by the State of New York.
Warrant Exercise; Conversion Base
The Warrant shall be exercisable for a period of ten (10) years from the date of the issuance specified above (the “Exercise Period”). During the Exercise Period, the Holder shall have the right, to be exercised at any time and from time to time and in the sole discretion of the Holder, to purchase from the Company the number of Warrant Shares that is equal to the product of multiplying the Warrant Coverage Percentage, times the total capital stock or equivalent equity interest of the Company issued and outstanding on the date of exercise, computed on a fully diluted basis (the “Company Equity”), assuming, among other things, that all Company Equity that could be issued pursuant to the terms of any other stock option plan, convertible security, or any other document or agreement that could result in the issuance of additional Company Equity have been issued (the “Conversion Base”). In the event that this Warrant is exercised in connection with an equity financing of the Company, the Conversion Base shall be determined as of the time of the closing of such equity financing.
If, during the term of the Warrant, an Awardee undertakes an equity financing in which the Awardee receives investments in excess of $3 million or more and the Awardee’s pre-money valuation for such equity financing is $10 million dollars or more (a “Qualified Round”), the Awardee may compel exercise of the Warrant. In the event of a Qualified Round, the Warrant will convert into the most senior class of equity security issued or to be issued in connection with the financing. For clarity, a Qualified Round only includes equity financings. Debt financing, convertible debt financing or any other form of financing where no valuation of the Awardee is ascribed as part of the investment shall not be considered a Qualified Round.
As a condition of any distribution of an Award, Awardee shall materially locate its operations in New York State by locating its Key Officers and a majority of its staff within thirty (30) miles of the New York State Power Authority’s (“NYPA”) Robert M. Moses Power Project, as specified in the Terms and Conditions, or as otherwise explicitly agreed to in writing with 43North. “Key Officers” shall mean those individuals determined by 43North in its sole and absolute discretion, and generally include CEO/CTO, COO, CFO and/or Awardee’s founders. Awardee shall headquarter its business at the 43North incubator location and operate in accordance with the Target Milestones (as hereinafter defined) at such location for a period of twelve (12) consecutive months. Operation in the 43North incubator shall be evidenced by regular and routine use of incubator space dedicated to Awardee. Absence by all of the Awardee’s “Key Officers” from the 43North incubator for any period of time longer than two consecutive calendar weeks shall be considered breach of the relocation requirement unless explicitly agreed to in writing by 43North.
Eligibility and Applications
To be eligible, applications must be submitted via 43North’s website, apply.43North.org, following all protocols described on the website. All applications must be submitted in English.
Review of Applications
Review of applications will occur in three rounds before being invited to participate in Finals during 43North Week.
Applicants must fill out, complete and submit a written application, including uploaded business documentation, via the 43North website. In the first round, 43North working in collaboration with its panels of judges (the “Committee”) will select promising applications from the pool of applicants as of on a rolling basis, but no later than September 12, 2020. Such selections shall be made in the sole and absolute discretion of 43North working with the Committee. 43North shall be entitled to begin conducting background checks during the first round on applicants who are identified as semifinalists and may request the consent of applicants for these checks.
The semifinal round will follow the first round of judging. In the semifinal round 43North, working with the Committee, will invite such applicants as it selects to engage in further conversation regarding their application, possibly including video conference pitches and interviews and provide such further information as the Committee requests. 43North shall be entitled to conduct background checks on applicants who reach this round of review and may request the consent of applicants for these checks. Competition semifinalists will be selected by 43North, in collaboration with the Committee, in its sole and absolute discretion.
All applicants selected for the semifinals will be subject to the due diligence of 43North. In order to progress through due diligence, applicants must commit: (a) to provide all necessary agreements and consents necessary for 43North to complete its due diligence review, (b) to personally attend the Finals ceremonies in Buffalo, New York and (c) execute a binding agreement with 43North in which, among other things, they commit to the terms and conditions of receiving an equity investment award, regardless of the amount of the award.
Finalists will send two members of their leadership to attend 43North Week in Buffalo, New York. Selection of the finalists will be determined and made public by November 2020.
Confidentiality and Intellectual Property
Access to the applications is granted to 43North (including its officers, managers, members, consultants and agents) and the Committee (collectively, the “Reviewing Parties”). 43North offers no guarantee of confidentiality, either explicit or implicit, in connection with any data or information presented or discussed by applicants. The Reviewing Parties will not agree to or sign non-disclosure agreements in connection with any application or applicant. Applicants requiring non-disclosure agreements should not participate.
Before submitting their applications, 43North urges applicants to confirm with appropriate advisors or legal counsel that any intellectual property described therein is legally held or licensed by the applicant, is non-infringing and appropriately protected. Applicants should be prepared to provide reasonable back-up documentation for these statements, if requested by 43North.
The authors of each applicant submission will retain all copyrights to the contents of their submission, provided that the Reviewing Parties may make photocopies, photographs, and video and/or audio recordings of any data or information divulged, presented, or discussed by any applicant throughout that applicant’s participation in the Competition. By entering the Competition, applicants agree to grant a license to 43North and the Reviewing Parties to use such materials without restriction and to conduct such due diligence as the Reviewing Parties determine is necessary or desirable for purposes of evaluating the application and carrying out the Competition as described herein.
In addition, the Reviewing Parties will have the right to publicly post certain information about accepted applicants and their applications in the public areas of the Reviewing Parties’ websites, including, but not limited to, name and category of business, logo, and an abstract. The Reviewing Parties will also have the right to use the content of applicants’ applications for research and other not-for-profit purposes.
Applicant Representations and Covenants
By submitting an application, applicants represent and warrant that:
43North does not discriminate against any applicant on the basis of race, color, creed, ethnicity, gender, disability, age, sexual orientation, gender expression, military status or marital status.
43North reserves the right to modify these Terms and Conditions in its sole discretion. In the event of a modification, all applicants will be notified.
Domestic and Non-United States applicants are encouraged to apply. Non-United States applicants are responsible for obtaining any necessary visas and related immigration papers to attend final events of the Competition in Buffalo, New York and to satisfy the appearance requirements and the Relocation Requirements should they receive an Award. 43North may provide assistance with respect to United States visa requirements but cannot render legal advice to applicants and award recipients.
Waiver and Severability
43North may waive any term or condition herein at its sole discretion. Such waiver will not be deemed a waiver of any other term or condition, whether similar or different. If any term or condition herein is invalid or unenforceable, that provision will be construed, limited, modified or, if necessary, severed, to the extent necessary to eliminate its invalidity or unenforceability, and the other provisions will remain in full force and effect.
These terms and conditions shall be governed and construed in accordance with the laws of the United States of America and the State of New York, without regard to conflicts of law provisions. Exclusive venue for any litigation arising from the Competition or these Terms and Conditions shall be the State or Federal courts located in Erie County, New York.