Term Sheet for Investor Process

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I. Overview

This Term Sheet outlines the preliminary terms and conditions under which [Investor Name] (“Investor”) intends to invest in [Your Company Name] (“Company”). This document serves as a non-binding agreement that precedes the execution of a comprehensive investment agreement. It is intended to facilitate further negotiations and due diligence before formalizing the investment.

II. Investment Details

The following list outlines the primary conditions that will govern and regulate the terms of the investment:

• Amount of Investment: $2,000,000

• Form of Investment: Equity

• Valuation of the Company (pre-money): $8,000,000

• Proposed Closing Date: May 31, 2050

• Use of Proceeds: The investment will primarily be used to fund marketing initiatives aimed at expanding market reach, hiring key personnel to strengthen product development, and optimizing operational efficiency to support anticipated growth.

III. Conditions Precedent to Investment

The completion of the proposed investment is subject to the fulfillment of certain conditions which include, but are not limited to, the following:

1. Completion of satisfactory due diligence by [Investor Name]: The investor will conduct a thorough assessment of the company's financial, operational, and legal aspects to ensure the investment aligns with their criteria and expectations.

2. Negotiation and execution of definitive legal documents: Both parties will finalize and sign legally binding agreements, such as the Investment Agreement, Shareholders’ Agreement, and any other necessary documentation, outlining the terms and conditions of the investment and the ongoing relationship.

3. Approval of the investment by [Your Company Name]’s Board of Directors: The company's board of directors will review and approve the investment terms and related agreements to formalize the investment process and ensure alignment with the company's strategic goals.

4. Compliance with applicable regulatory requirements: The investment process will adhere to relevant laws, regulations, and compliance standards governing investments in the industry or jurisdiction, including obtaining necessary regulatory approvals as required.

IV. Governance

Upon the completion of the investment, the governance structure of [Your Company Name] will be adjusted to reflect the input and oversight from [Investor Name]:

• Board Composition: The board of directors will be expanded to include two representatives designated by [Investor Name], bringing the total board size to seven members, with three designated as independent directors.

• Voting Rights and Key Decisions: [Investor Name] will hold Class A voting shares with voting rights on critical issues such as mergers and corporate changes, requiring at least a 75% supermajority vote from both Class A and B shareholders for approval.

• Reporting Requirements: [Your Company Name] will deliver quarterly financial reports within 30 days post-quarter and bi-annual operational updates. An independent annual audit report will be submitted within 90 days of the fiscal year-end.

V. Representations and Warranties

Both parties will make standard representations and warranties in the final agreement. These are designed to assert the accuracy of statements upon which the investment decision has been based, thereby protecting both parties. Typical representations and warranties cover areas such as:

• Accuracy of Financial Statements: The company confirms that its financial statements accurately reflect its financial status and performance as of the stated dates.

• Compliance with Laws and Regulations: The company confirms that it has operated and continues to operate in compliance with all applicable laws, regulations, and legal requirements relevant to its business operations, products, and services.

• Dutiful Operation of Business Activities: The company confirms that it conducts its operations normally, maintaining regular inventory, customer, supplier, and employee relations, and will continue to do so.

VI. Confidentiality

Both parties agree to maintain the utmost confidentiality regarding all negotiations and documents associated with the prospective investment mentioned in this Term Sheet. They shall neither disclose nor utilize any confidential information beyond the confines of this agreement without prior written permission from the other party unless legally mandated.

VII. Exclusivity

For a period of [Exclusivity Period], [Your Company Name] agrees not to engage in any discussions, negotiations, or accept any offers from other potential investors regarding an investment of a similar nature to that proposed by [Investor Name]. This exclusivity will facilitate focused and effective negotiations to finalize the investment.

VIII. Termination

This Term Sheet, while setting out the preliminary terms of the proposed investment, is non-binding except concerning confidentiality, exclusivity, and any other provisions specified as binding. Either party may terminate negotiations at any time, for any reason, upon written notice to the other party.

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