The “Liquidation Waterfall” refers to how proceeds are allocated following a Liquidity Event. Each class of a company’s debt and equity holders occupies a specific tier of the Liquidation Waterfall. The full payout rights of each tier must be satisfied before the next tier is entitled to receive any proceeds from the Liquidity Event. Normally, debt holders occupy the first tiers in the Liquidation Waterfall, followed by the holders of Preferred Stock and then the holders of Common Stock. The specific payout rights for each class of stock participating in the Liquidation Waterfall are negotiated and documented as part of the corresponding Liquidation Preference for such class of stock.