TermSheet detailed.docx

TermSheet detailed.docx

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TermSheetdetailed

TERMSHEET

PreliminaryNotes

ThisTermSheetmapstotheNVCAmodeldocuments,andforconveniencetheprovisionsaregroupedaccordingtotheparticularmodeldocumentinwhichtheymaybefound.AlthoughthisTermSheetisperhapssomewhatlongerthana"typical"VCTermSheet,theaimistoprovidealevelofdetailthatmakestheTermSheetusefulasbotharoadmapforthedocumentdraftersandasareferencesourceforthebusinesspeopletoquicklyfinddealtermswithoutthenecessityofhavingtoconsultthelegaldocuments（assumingofcoursetherehavebeennochangestothematerialdealtermspriortoexecutionofthefinaldocuments）.

TERMSHEET

FORSERIESAPREFERREDSTOCKFINANCINGOF

[InsertCompanyName],INC.

[__,200_]

ThisTermSheetsummarizestheprincipaltermsoftheSeriesAPreferredStockFinancingof[___________],Inc.,a[Delaware]corporation（the“Company”）.InconsiderationofthetimeandexpensedevotedandtobedevotedbytheInvestorswithrespecttothisinvestment,theNoShop/ConfidentialityandCounselandExpensesprovisionsofthisTermSheetshallbebindingobligationsoftheCompanywhetherornotthefinancingisconsummated.Nootherlegallybindingobligationswillbecreateduntildefinitiveagreementsareexecutedanddeliveredbyallparties.ThisTermSheetisnotacommitmenttoinvest,andisconditionedonthecompletionofduediligence,legalreviewanddocumentationthatissatisfactorytotheInvestors.ThisTermSheetshallbegovernedinallrespectsbythelawsofthe[StateofDelaware].

OfferingTerms

ClosingDate:

AssoonaspracticablefollowingtheCompany’sacceptanceofthisTermSheetandsatisfactionoftheConditionstoClosing（the“Closing”）.[provideformultipleclosingsifapplicable]

Investors:

InvestorNo.1:

[_______]shares（[__]%）,$[_________]

InvestorNo.2:

[_______]shares（[__]%）,$[_________]

[aswellotherinvestorsmutuallyagreeduponbyInvestorsandtheCompany]

AmountRaised:

$[________],[including$[________]fromtheconversionofprincipal[andinterest]onbridgenotes].

PricePerShare:

$[________]pershare（basedonthecapitalizationoftheCompanysetforthbelow）（the“OriginalPurchasePrice”）.

Pre-MoneyValuation:

TheOriginalPurchasePriceisbaseduponafully-dilutedpre-moneyvaluationof$[_____]andafullydilutedpost-moneyvaluationof$[______]（includinganemployeepoolrepresenting[__]%ofthefullydilutedpost-moneycapitalization）.

Capitalization:

TheCompany’scapitalstructurebeforeandaftertheClosingissetforthbelow:

Pre-Financing

Post-Financing

Security

#ofShares

%

#ofShares

%

Common–Founders

Common–EmployeeStockPool

Issued

Unissued

[Common–Warrants]

SeriesAPreferred

Total

CHARTER

Dividends:

[Alternative1:

DividendswillbepaidontheSeriesAPreferredonanasconvertedbasiswhen,as,andifpaidontheCommonStock]

[Alternative2:

Non-cumulativedividendswillbepaidontheSeriesAPreferredinanamountequalto$[_____]pershareofSeriesAPreferredwhenandifdeclaredbytheBoard.]

[Alternative3:

TheSeriesAPreferredwillcarryanannual[__]%cumulativedividend[compoundedannually],payableuponaliquidationorredemption.Foranyotherdividendsordistributions,participationwithCommonStockonanas-convertedbasis.]

LiquidationPreference:

Intheeventofanyliquidation,dissolutionorwindingupoftheCompany,theproceedsshallbepaidasfollows:

[Alternative1（non-participatingPreferredStock）:

Firstpay[one]timestheOriginalPurchasePrice[plusaccrueddividends][plusdeclaredandunpaiddividends]oneachshareofSeries APreferred.ThebalanceofanyproceedsshallbedistributedtoholdersofCommonStock.]

[Alternative2（fullparticipatingPreferredStock）:

Firstpay[one]timestheOriginalPurchasePrice[plusaccrueddividends][plusdeclaredandunpaiddividends]oneachshareofSeries APreferred.Thereafter,theSeries APreferredparticipateswiththeCommonStockonanas-convertedbasis.]

[Alternative3（caponPreferredStockparticipationrights）:

Firstpay[one]timestheOriginalPurchasePrice[plusaccrueddividends][plusdeclaredandunpaiddividends]oneachshareofSeries APreferred.Thereafter,Series APreferredparticipateswithCommonStockonanas-convertedbasisuntiltheholdersofSeries APreferredreceiveanaggregateof[_____]timestheOriginalPurchasePrice.]

Amergerorconsolidation（otherthanoneinwhichstockholdersoftheCompanyownamajoritybyvotingpoweroftheoutstandingsharesofthesurvivingoracquiringcorporation）andasale,lease,transferorotherdispositionofallorsubstantiallyalloftheassetsoftheCompanywillbetreatedasaliquidationevent（a“DeemedLiquidationEvent”）,therebytriggeringpaymentoftheliquidationpreferencesdescribedabove[unlesstheholdersof[___]%oftheSeriesAPreferredelectotherwise].

VotingRights:

TheSeriesAPreferredStockshallvotetogetherwiththeCommonStockonanas-convertedbasis,andnotasaseparateclass,except（i）theSeriesAPreferredasaclassshallbeentitledtoelect[_______][（_）]membersoftheBoard（the“SeriesADirectors”）,（ii）asprovidedunder“ProtectiveProvisions”belowor（iii）asrequiredbylaw.TheCompany’sCertificateofIncorporationwillprovidethatthenumberofauthorizedsharesofCommonStockmaybeincreasedordecreasedwiththeapprovalofamajorityofthePreferredandCommonStock,votingtogetherasasingleclass,andwithoutaseparateclassvotebytheCommonStock.

ProtectiveProvisions:

Solongas[insertfixednumber,or%,or“any”]sharesofSeriesAPreferredareoutstanding,theCompanywillnot,withoutthewrittenconsentoftheholdersofatleast[__]%oftheCompany’sSeriesAPreferred,eitherdirectlyorbyamendment,merger,consolidation,orotherwise:

（i）liquidate,dissolveorwinduptheaffairsoftheCompany,oreffectanyDeemedLiquidationEvent;（ii） amend,alter,orrepealanyprovisionoftheCertificateofIncorporationorBylaws[inamanneradversetotheSeriesAPreferred];（iii） createorauthorizethecreationoforissueanyothersecurityconvertibleintoorexercisableforanyequitysecurity,havingrights,preferencesorprivilegesseniortooronparitywiththeSeriesAPreferred,orincreasetheauthorizednumberofsharesofSeriesAPreferred;（iv）purchaseorredeemorpayanydividendonanycapitalstockpriortotheSeriesAPreferred,[otherthanstockrepurchasedfromformeremployeesorconsultantsinconnectionwiththecessationoftheiremployment/services,attheloweroffairmarketvalueorcost;][otherthanasapprovedbytheBoard,includingtheapprovalof[_____]SeriesADirector（s）];or（v） createorauthorizethecreationofanydebtsecurity[iftheCompany’saggregateindebtednesswouldexceed$[____][otherthanequipmentleasesorbanklinesofcredit][otherthandebtwithnoequityfeature][unlesssuchdebtsecurityhasreceivedthepriorapprovaloftheBoardofDirectors,includingtheapprovalof[________]SeriesADirector（s）];（vi） increaseordecreasethesizeoftheBoardofDirectors.

OptionalConversion:

TheSeriesAPreferredinitiallyconverts1:

1toCommonStockatanytimeatoptionofholder,subjecttoadjustmentsforstockdividends,splits,combinationsandsimilareventsandasdescribedbelowunder“Anti-dilutionProvisions.”

Anti-dilutionProvisions:

IntheeventthattheCompanyissuesadditionalsecuritiesatapurchasepricelessthanthecurrentSeriesAPreferredconversionprice,suchconversionpriceshallbeadjustedinaccordancewiththefollowingformula:

[Alternative1:

“Typical”weightedaverage:

CP2=CP1*（A+B）/（A+C）

CP2=NewSeriesAConversionPrice

CP1=SeriesAConversionPriceineffectimmediatelypriortonewissue

A=NumberofsharesofCommonStockdeemedtobeoutstandingimmediatelypriortonewissue（includesallsharesofoutstandingcommonstock,allsharesofoutstandingpreferredstockonanas-convertedbasis,andalloutstandingoptionsonanas-exercisedbasis;anddoesnotincludeanyconvertiblesecuritiesconvertingintothisroundoffinancing）

B=AggregateconsiderationreceivedbytheCorporationwithrespecttothenewissuedividedbyCP1

C=Numberofsharesofstockissuedinthesubjecttransaction]

[Alternative2:

Full-ratchet–theconversionpricewillbereducedtothepriceatwhichthenewsharesareissued.]

[Alternative3:

Noprice-basedanti-dilutionprotection.]

Thefollowingissuancesshallnottriggeranti-dilutionadjustment:

（i） securitiesissuableuponconversionofanyoftheSeriesAPreferred,orasadividendordistributionontheSeriesAPreferred;（ii） securitiesissuedupontheconversionofanydebenture,warrant,option,orotherconvertiblesecurity;（iii） CommonStockissuableuponastocksplit,stockdividend,oranysubdivisionofsharesofCommonStock;and（iv） sharesofCommonStock（oroptionstopurchasesuchsharesofCommonStock）issuedorissuabletoemployeesordirectorsof,orconsultantsto,theCompanypursuanttoanyplanapprovedbytheCompany’sBoardofDirectors[includingatleast[_______]SeriesADirector（s）][（v） sharesofCommonStockissuedorissuabletobanks,equipmentlessorspursuanttoadebtfinancing,equipmentleasingorrealpropertyleasingtransactionapprovedbytheBoardofDirectorsoftheCorporation[,includingatleast[_______]SeriesADirector（s）].

MandatoryConversion:

EachshareofSeriesAPreferredwillautomaticallybeconvertedintoCommonStockatthethenapplicableconversionrateintheeventof