Summary Term Sheet for Preferred Shares

This Term Sheet summarizes the principal terms proposed for an investment in preferred shares of [Your Company Name]. This document serves as a foundation for negotiation between [Your Company Name] and potential investors such as [Investor Name] or venture capital firms. The terms set forth below are not exhaustive and are meant to serve as a starting point for further discussions. Please consult legal and financial advisors before finalizing any investment terms.

I. Offer Overview

The following outlines the key components of the investment offer for [Investor Name] into [Your Company Name]:

• Company Valuation: Pre-money valuation at [Valuation Amount], to be further negotiated based on due diligence findings.

• Investment Amount: [Investor Name] proposes to invest [Investment Amount] in exchange for preferred shares.

• Share Price: The price per share is proposed at [Price per Share].

II. Investor Rights

Investors in preferred shares will be entitled to a variety of rights designed to protect their investment and influence ongoing company operations.

These rights include:

1. Voting Rights: Preferred shareholders will have [Specify Voting Rights], which typically includes voting on major corporate decisions.

2. Liquidation Preference: In the event of liquidation, preferred shareholders will receive capital return before common shareholders at [Specify Multiplier] times their original investment amount.

3. Dividend Rights: Annual dividends will be issued at a rate of [Specify Dividend Rate] payable when declared by the Board of Directors.

III. Conversion Rights

Preferred shares will include conversion rights which allow investors to convert their preferred shares into common shares under certain conditions.

The specifics of these rights are as follows:

1. Conversion Ratio: Preferred shares may be converted to common shares at a ratio of [Specify Conversion Ratio], subject to adjustments for stock splits, dividends, and similar events.

2. Conversion Trigger: Conversion can be triggered by specific events such as an IPO, a change of control, or at the discretion of the shareholder after [Specify time].

IV. Anti-Dilution Protection

Anti-dilution provisions are designed to safeguard the investment of preferred shareholders in the event of a down-round financing:

1. Type of Protection: [Specify Type of Anti-Dilution Protection] (broad-based weighted average is common), which adjusts the conversion price to minimize dilution effects.

2. Specific Terms: These provisions can be customized based on negotiation between [Your Company Name] and [Investor Name].

V. Conditions to Closing

Finalization and closure of the investment are subject to certain customary conditions:

• Due Diligence: Completion of a satisfactory due diligence review by [Investor Name].

• Legal Documentation: Execution of definitive agreements including an Investment Agreement, Shareholders' Agreement, and any other necessary legal documents.

• Regulatory Approvals: Receipt of any necessary regulatory approvals.

This Term Sheet is intended solely as a basis for further discussion and is not intended to be and does not constitute a legally binding obligation. No other obligations will be imposed on either party unless a final agreement is executed and delivered by all parties involved.

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