Short Form Venture Capital Term Sheet

Company:

[ABC Inc.] (the “Company”)

Amount:

[$5,000,000]

Type of Security:

Series B Convertible Preferred Stock

Number of Shares:

[1,000,000]

Price per Share:

[$5.00] (the “Original Purchase Price”). The Original Purchase Price represents a fully-diluted pre-money valuation of [$50] million.

Investors:

[SD Venture Fund] and its affiliated funds (collectively referred to as the “Investors”)

Anticipated Closing Date:

____________________

Pari Passu:

Except as set forth below, the Series B Preferred Stock (the “Preferred”) will be treated as pari passu with the Series A Preferred of the Company (the “Prior Preferred” with the Preferred and Prior Preferred collectively referred to as the “Series Preferred”).

Dividends:

The holders of the Preferred shall be entitled to receive out of legally available funds, dividends at a rate of [8%] of the Original Purchase Price per annum, payable when, as and if declared by the Board of Directors. Dividends shall not be cumulative.

Liquidation Preference:

In the event of any liquidation, dissolution or winding up of the Company, the holders of the Series Preferred shall be entitled to receive in preference to the Common Stock (the “Common”) an amount payable in cash equal to the Original Purchase Price for the Preferred and the original purchase price for the Prior Preferred plus declared and unpaid dividends (the “Liquidation Preference”). After the payment of the Liquidation Preference to the holders of the Series Preferred, the remaining assets shall be distributed ratably to the holders of the Common and the Series Preferred (assuming the conversion of all Preferred Stock).

A merger, reorganization or other acquisition type transaction in which control of the Company or all or substantially all of its assets is transferred will be treated by holders of the Series Preferred as a liquidation....