Equity Protection Term Sheet

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I. Introduction

This Equity Protection Term Sheet ("Term Sheet") is entered into as of [Date], between [Your Company Name] ("Company") and the undersigned investors ("Investors"), collectively referred to as the "Parties." This Term Sheet outlines the terms and conditions governing the protection of Investors' equity stake in certain circumstances, including but not limited to down-round financing or a decrease in the Company's valuation.

II. Definitions

For this Term Sheet, the following definitions shall apply:

• "Equity Stake": refers to the ownership percentage of Investors in the Company.

• "Down-round Financing": denotes a subsequent financing round in which the valuation of the Company is lower than the valuation of the previous round.

• "Change in Control": signifies any transaction or series of transactions resulting in a change of more than fifty percent (50%) of the voting power of the Company.

• "Liquidation": denotes the winding up and dissolution of the Company, whether voluntary or involuntary.

III. Equity Protection Mechanisms

The Parties agree to the following mechanisms to protect the value of Investors' Equity Stake:

• Down-round Protection: In the event of a down-round financing, whereby the valuation of the Company is lower than the valuation of the previous financing round, Investors shall be entitled to receive additional equity to maintain their ownership percentage. The specific terms and conditions of such equity issuance shall be detailed in a separate agreement.

• Change in Control Protection: If there is a Change in Control of the Company, Investors shall have the right to either receive a cash payment equal to the fair market value of their Equity Stake or convert their Equity Stake into equity in the acquiring entity, subject to the terms negotiated with the acquiring entity.

• Liquidation Preference: In the event of the liquidation of the Company, Investors shall have the right to receive preferential treatment over holders of common stock, whereby they shall receive their initial investment amount plus any accrued dividends or interest before any distributions are made to common stockholders.

IV. Termination

This Term Sheet shall terminate upon the execution of a definitive agreement between the Parties incorporating the terms outlined herein or upon written agreement of the Parties.

V. Governing Law

This Term Sheet shall be governed by and construed by the laws of the [Jurisdiction], without regard to its conflicts of laws provisions.

VI. Execution

This Term Sheet may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument.

By signing below, the Parties acknowledge their agreement to the terms and conditions outlined in this Equity Protection Term Sheet.

[Your Company Name]

[Your Name]

[Your Title]

[Date Signed]

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