Preferred Stock Financing Term Sheet

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I. Overview of Agreement

This Term Sheet outlines the principal terms and conditions proposed for an investment in preferred stock by the [Investor Name] ("Investor") in [Your Company Name] ("Company"). This document serves as a non-binding agreement, except for the confidentiality and exclusivity terms herein, intended to precede a detailed legal documentation process. It is intended to provide a framework for the investment arrangement.

The purpose of this Term Sheet is to provide a clear and concise summary of the key terms of the investment, ensuring that both parties understand the fundamental aspects of the arrangement before proceeding to more detailed negotiations and documentation.

II. Parties

1. Issuer: [Your Company Name]

2. Investor: [Investor Name]

III. Key Terms of the Investment

A. Amount and Type of Investment

The Investor agrees to purchase preferred stock in the Company under the following conditions:

• Total Investment Amount: [Investment Amount]

• Type of Stock: Series [Series] Preferred Stock

B. Valuation

The pre-money valuation of the Company and the price per share are agreed upon as follows:

• Pre-Money Valuation: [Pre-Money Valuation]

• Price per Share: [Price per Share]

C. Dividend Provisions

Dividends on the preferred stock are provided under the terms below to incentivize the investors:

• Dividend Rate: [Dividend Rate]%

• Payment Frequency: [Annual/Semi-Annual/Quarterly]

D. Liquidation Preferences

In the event of any liquidation, dissolution, or winding up of the Company, the holders of the Series [Series] Preferred Stock will be entitled to be paid out of the assets of the Company available for distribution to shareholders before any payment shall be made to holders of common stock.

• Liquidation Preference Multiple: [Liquidation Preference Multiples]

E. Conversion Rights

Preferred stockholders will have the right to convert their preferred stock into common stock of the Company under the following terms:

• Conversion Ratio: [Conversion Ratio], subject to standard adjustment mechanisms

• Conversion at the option of the holder at any time after the date of issuance

F. Protective Provisions

Investors will be granted certain rights to protect their investment, including, but not limited to:

• Voting Rights on major corporate decisions, including the sale of the Company, increases in authorized shares, and amendments to the Company’s charter or bylaws

• Right of First Refusal to purchase any new shares issued by the Company

• Anti-dilution provisions to protect investors from dilution in subsequent financing rounds

IV. Conditions Precedent to Financing

Before the closing of the financing, the Company must satisfy certain conditions, which include, but are not limited to:

• Completion of satisfactory due diligence by the Investor

• Negotiation and execution of definitive agreements based upon this Term Sheet

• Obtaining necessary approvals from the Board of Directors and shareholders of the Company

V. Confidentiality

This Term Sheet and the information contained herein are to be kept confidential and are provided to the parties solely for this transaction. No party may disclose the contents of this Term Sheet or the fact of its existence, except to their advisors and agents who need to know such information and who agree to be bound by this confidentiality obligation.

VI. Governing Law and Dispute Resolution

A. Governing Law:

Any dispute arising out of or relating to this Term Sheet or the investment agreement entered into between the Investor and the Company shall be governed by and construed by the laws of [Jurisdiction], without regard to its conflict of law principles.

B. Dispute Resolution:

• Negotiation: In the event of any dispute, claim, or controversy arising out of or relating to this Term Sheet or the investment agreement, the parties shall first attempt to resolve the matter amicably through good faith negotiations.

• Mediation: If the dispute cannot be resolved through negotiation within [Negotiation Period] days of written notice from one party to the other describing the dispute, then the parties agree to submit the dispute to non-binding mediation administered by a mutually agreed-upon mediator.

• Arbitration: If the dispute remains unresolved after mediation, the parties agree that any controversy or claim arising out of or relating to this Term Sheet or the investment agreement, or the breach thereof, shall be settled by arbitration administered by the [Arbitration Institution] by its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.

VII. Exclusivity

The Company agrees that for a period of [Exclusivity Period] from the date of this Term Sheet, it will not solicit, initiate, encourage, or entertain offers from other parties concerning the sale of share capital or similar transactions, to ensure a focused negotiation period with the Investor.

VIII. Miscellaneous

This Term Sheet is non-binding, except for the confidentiality and exclusivity provisions, and is intended as a proposal only, subject to the execution of definitive agreements. This Term Sheet shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation, or sale would be unlawful.

Both parties acknowledge that this Term Sheet is only a preliminary indication of terms and conditions for discussions and does not impose any legal obligations on either party except as otherwise stated in this Term Sheet.

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