If a Company goes public in an IPO, a lock-up provision prevents stockholders from selling their shares for an agreed time period. This is designed to prevent an immediate drop in share value shortly after a Company goes public, during the time when the underwriters actively support the price of the stock.
The standard lock-up period is 180 days after the IPO.
Term Sheet Language: Investors shall agree in connection with the IPO, if requested by the managing underwriter, not to sell or transfer any shares of Common Stock of the Company held immediately before the effective date of the IPO for a period of up to 180 days following the IPO (provided all directors and officers of the Company [and [1 – 5]% stockholders] agree to the same lock-up). [Such lock-up agreement shall provide that any discretionary waiver or termination of the restrictions of such agreements by the Company or representatives of the underwriters shall apply to Investors, pro rata, based on the number of shares held.