Finance Homework - Basic Term Sheet

sample_term_sheet_1.pdf

Transfer Restrictions The Series A Units will not be registered securities, and the Company does not

expect to register the Series A Units. The Series A Units may not be transferred

except pursuant to an effective registration statement or if an exemption to

registration applies. Other than with respect to (i) transfers to a Permitted

Transferee (as defined below), or (ii) transfers approved by the Board of Managers

in its sole discretion, the Series A Units will not be transferrable except as

permitted by the Company’s operating agreement, which provides, among other

things, that the holders of Series A Units will be required to sell their Units in

connection with a sale of the Company approved by a majority of the Common

Units. A “Permitted Transferee” will include only a trust established by the

investor for the benefit of the investor’s immediate family, provided that the

investor is the trustee of such trust.

Documentation: Documents will be prepared by counsel to the Company and will include: (i) an

amended and restated operating agreement; and (ii) a unit subscription agreement.

Financial

Information:

Investors who have invested at least $200,000 (“Major Investors”) will receive

standard information and inspection rights.

Preemptive Right: Major Investors will have preemptive rights which will permit them to participate

on a pro rata basis in subsequent issuances of equity securities, subject to certain

exceptions.

Board of Managers: The Board of Managers is comprised of three (3) managers, one (1) of whom shall

be the Chief Executive Officer of the Company and two (2) of whom shall be

designated by the Common Units.

Expenses: Each prospective investor will bear his own costs in evaluating the Company and

an investment in the Company.

Binding Terms: Without the consent of Investors, the Company will not disclose these terms to

anyone other than officers, directors, key service providers, and other potential

Investors in this financing.

CONFIDENTIAL - DO NOT DISTRIBUTE

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