TERM SHEETPreliminary NotesThis Term Sheet maps to the NVCA model documents, and for convenience the provisions are grouped according to the particular model document in which they may be found. Although this Term Sheet is perhaps somewhat longer than a "typical" VC Term Sheet, the aim is to provide a level of detail that makes the Term Sheet useful as both a road map for the document drafters and as a reference source for the business people to quickly find deal terms without the necessity of having to consult the legal documents (assuming of course there have been no changes to the material deal terms prior to execution of the final documents).TERM SHEETFOR SERIES A PREFERRED STOCK FINANCING OF[Insert Company Name], INC.[ __, 200_]This sample document is the work product of a coalition of attorneys who specialize inventure capital financings, working under the auspices of the NVCA. See the NVCA websitefor a list of the Working Group members. This document is intended to serve as a startingpoint only, and should be tailored to meet your specific requirements. This document shouldnot be construed as legal advice for any particular facts or circumstances. Note that thissample presents an array of (often mutually exclusive) options with respect to particular dealprovisions.TERM SHEETLast updated on January 7, 2004Preliminary NotesThis Term Sheet maps to the NVCA model documents, and for convenience the provisions aregrouped according to the particular model document in which they may be found. Although thisTerm Sheet is perhaps somewhat longer than a "typical" VC Term Sheet, the aim is to provide alevel of detail that makes the Term Sheet useful as both a road map for the document drafters andas a reference source for the business people to quickly find deal terms without the necessity ofhaving to consult the legal documents (assuming of course there have been no changes to thematerial deal terms prior to execution of the final documents).Last updated on January 7, 20042TERM SHEETFOR SERIES A PREFERRED STOCK FINANCING OF[INSERT COMPANY NAME], INC.[ __, 200_]This Term Sheet summarizes the principal terms of the Series A Preferred Stock Financing of[___________], Inc., a [Delaware] corporation (the “Company”). In consideration of the time andexpense devoted and to be devoted by the Investors with respect to this investment, the NoShop/Confidentiality and Counsel and Expenses provisions of this Term Sheet shall be bindingobligations of the Company whether or not the financing is consummated. No other legally bindingobligations will be created until definitive agreements are executed and delivered by all parties.This Term Sheet is not a commitment to invest, and is conditioned on the completion of duediligence, legal review and documentation that is satisfactory to the Investors. This Term Sheetshall be governed in all respects by the laws of the [State of Delaware].Offering TermsClosing Date: As soon as practicable following the Company’s acceptance of thisTerm Sheet and satisfaction of the Conditions to Closing (the“Closing”). [provide for multiple closings if applicable]Investors: Investor No. 1: [_______] shares ([__]%), $[_________]Investor No. 2: [_______] shares ([__]%), $[_________][as well other investors mutually agreed upon by Investors and the Company]Amount Raised: $[________], [including $[________] from the conversion of principal [and interest] on bridge notes].1Price Per Share: $[________] per share (based on the capitalization of the Company set forth below) (the “Original Purchase Price”).Pre-Money Valuation: The Original Purchase Price is based upon a fully-diluted pre-moneyvaluation of $[_____] and a fully-diluted post-money valuation of $[______] (including an employee pool representing [__]% of thefully-diluted post-money capitalization). Capitalization: The Company’s capital structure before and after the Closing is set forth below:Pre-Financing Post-Financing1 Modify this provision to account for staged investments or investments dependent on the achievement ofmilestones by the Company.Last updated on January 7, 20043Security# of Shares%# of Shares%Common – FoundersCommon – Employee Stock PoolIssuedUnissued[Common – Warrants]Series A Preferred TotalCHARTER2Dividends: [Alternative 1: Dividends will be paid on the Series A Preferred onan as-converted basis when, as, and if paid on the Common Stock] [Alternative 2: Non-cumulative dividends will be paid on the SeriesA Preferred in an amount equal to $[_____] per share of Series APreferred when and if declared by the Board.][Alternative 3: The Series A Preferred will carry an annual [__]%cumulative dividend [compounded annually], payable upon aliquidation or redemption. For any other dividends or distributions,participation with Common Stock on an as-converted basis.] 3 2 The Charter is a public document, filed with the [Delaware] Secretary of State, that establishes all of therights, preferences, privileges and restrictions of the Preferred Stock. Note that if the Preferred Stock does not haverights, preferences, and privileges materially superior to the Common Stock, then (after Closing) the Company cannotdefensibly grant Common Stock options priced at a discount to the Preferred Stock.3 In some cases, accrued and unpaid dividends are payable on conversion as well as upon a liquidationevent. Most typically, however, dividends are not paid if the preferred is converted. Another alternative is to give theCompany the option to pay accrued and unpaid dividends in cash or in common shares valued at fair market value. Thelatter are referred to as “PIK” (payment-in-kind) dividends.Last updated on January 7, 20044Liquidation Preference: In the event of any liquidation, dissolution or winding up of the Company, the proceeds shall be paid as follows:[Alternative 1 (non-participating Preferred Stock): First pay [one]times the Original Purchase Price [plus accrued dividends] [plusdeclared and unpaid dividends] on each share of Series A Preferred.The balance of any proceeds shall be distributed to holders ofCommon Stock.][Alternative 2 (full participating Preferred Stock): First pay [one]times the Original Purchase Price [plus accrued dividends] [plusdeclared and unpaid dividends] on each share of Series A
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