TheFunded Founder Institute – Plain Preferred Term Sheet

[NAME OF ISSUER]

MEMORANDUM OF TERMS1

[INSERT DATE]

This Memorandum of Terms represents only the current thinking of the parties with respect to certain
of the major issues relating to the proposed private offering and does not constitute a legally binding
agreement. This Memorandum of Terms does not constitute an offer to sell or a solicitation of an offer to buy
securities in any state where the offer or sale is not permitted.

THE OFFERING

Issuer: [__________], a [Delaware] corporation (the “Company”)

Securities: Series A Preferred Stock (the “Preferred”)

Valuation of the Company: $[__________] pre-money

Amount of the offering: $[__________]

Number of shares: [__________] shares

Price per share: $[__________]

Investor(s): [__________] or its affiliated entities and other investors acceptable

to the Company.

Capitalization: See attached capitalization table for the Company’s pre-financing

capitalization and pro forma capitalization.

Anticipated closing date: Initial closing on or before [__________], with additional closings
within 120 days.

TERMS OF THE PREFERRED

Dividends: Non-cumulative dividends at an annual rate of 8% of original

Preferred price (if declared by board).

Liquidation preference: 1x liquidation preference, non-participating.

1
This sample Memorandum of Terms was designed to be used in conjunction with standard Founder
Institute charter documents, which include Class A Common Stock and Class F Common Stock. This sample
Memorandum of Terms will need to be appropriately customized for each end-user’s application, including but not
limited to replacing references to “Class A Common Stock” and “Class F Common Stock” to “Common Stock,” if
appropriate.
 TheFunded Founder Institute – Plain Preferred Term Sheet

Redemption rights: None.

Conversion: 1:1 conversion to Class A Common Stock (subject to anti-dilution

adjustments) at any time at the option of the holder. Automatic
conversion upon (i) closing of a firmly underwritten public offering,
or (ii) consent of at least 50% of the outstanding Preferred.
Anti-dilution: Broad based weighted average, subject to customary exceptions,
including shares issued in connection with: (i) plans, agreements or
similar arrangements for employees, consultants or directors
approved by the board; (ii) a registered public offering; (iii) an
acquisition or joint venture approved by the board; (iv) debt
financing or commercial transactions approved by the board; (v) a
settlement approved by the board; (vi) sponsored research,
collaboration, technology license, development, OEM, marketing or
similar arrangements or strategic partnerships approved by the board;
and (vii) the provision of goods or services pursuant to transactions
approved by the board.

Voting rights: General: Preferred will vote (on an as-converted basis) with the
Common Stock, except as provided herein or required by law.

Directors: So long as [__________] shares2 of the Preferred are

outstanding (i) the Preferred will be entitled to elect one director; (ii)
the Class F Common Stock will be entitled to elect the Class F
Director (as defined in the Company’s certificate of incorporation);
and (iii) the remaining director(s) will be elected by the Preferred
and Class F Common Stock voting together.

Protective provisions: So long as [__________] shares3 of the Preferred are outstanding,

consent of at least 50% of the then-outstanding Preferred will be
required to (i) alter the certificate of incorporation if it would
adversely alter the rights of the Preferred; (ii) change the authorized
number of Preferred Stock; (iii) authorize or issue any senior or pari
passu security; (iv) approve a merger, asset sale or other corporate
reorganization or acquisition; (v) repurchase Common Stock, other
than upon termination of a consultant, director or employee; (vi)
declare or pay any dividend or distribution on the Preferred Stock or
Common Stock; or (vii) liquidate or dissolve.

2
Equal to 25% of the aggregate number of Preferred shares issued in the financing.
3
Equal to 25% of the aggregate number of Preferred shares issued in the financing.
 TheFunded Founder Institute – Plain Preferred Term Sheet
INVESTOR RIGHTS
Information rights:
Registration rights:
Preemptive rights:
Right of first refusal
and co-sale agreement:
Voting agreement:
Holders of Preferred will receive unaudited annual and quarterly
financials and annual business plan until an IPO or change of
control.
Demand registration: Two demand rights after the earlier of (i) five
years following the financing or (ii) 180 days following the IPO.
“Piggyback” registration: Customary “piggyback” rights on
Company registrations, subject to underwriter cutback.
S-3 rights: Two per year (if available), with minimum offering price
requirement of $1,000,000.
Termination: These rights expire on the earlier of (i) the date on
which all shares may be sold by the holder under Rule 144 during
any 90-day period or (ii) three years after an IPO.
Market stand-off: 180 days after an IPO with booster shot.
Holders of Preferred will have a right to purchase pro rata share of
any offering of new securities by the Company, subject to customary
exceptions. Pro rata share will be determined based on the
Company’s fully-diluted capitalization (on an as-converted and as-
exercised basis). Right will terminate on an IPO or change of control.
The Company will have a right of first refusal on transfer of
Company shares by [insert name of Founder(s)] (the “Founders”).
If the Company does not exercise this right, holders of Preferred will
have a right of first refusal and a co-sale right, subject to customary
exceptions.
Customary voting agreement including provisions agreeing to elect
the following individuals to the board (i) one representative
designated by [____________] (the “Preferred Director”); (ii) one
representative designated by the holders of Class F Common Stock
as the Class F Director; and (iii) one representative mutually
agreeable to the Preferred Director and the Class F Director.
 TheFunded Founder Institute – Plain Preferred Term Sheet

OTHER MATTERS

Option pool: The number of shares of Class A Common Stock reserved for
issuance under the Company’s equity incentive plan will be
increased to a new total of [_________] shares.4

Founder Vesting: Upon a Change of Control, all then-unvested shares of Class F

Common Stock purchased by each Founder shall immediately vest
and become exercisable.

A “Change of Control” shall mean (i) the acquisition of the Com-

pany by another entity by means of any transaction or series of re-
lated transactions (including, without limitation, any reorganization,
merger or consolidation or stock transfer, but excluding any such
transaction effected primarily for the purpose of changing the domi-
cile of the Company), unless the Company’s stockholders of record
immediately prior to such transaction or series of related transactions
hold, immediately after such transaction or series of related transac-
tions, at least 50% of the voting power of the surviving or acquiring
entity (provided that the sale by the Company of its securities for the
purposes of raising additional funds shall not constitute a Change of
Control hereunder); or (ii) a sale of all or substantially all of the as-
sets of the Company.

Expiration date: These terms are valid until, and will expire on, [___________].5

(Signature page follows)

4
Total number of shares reserved under the option pool to be no greater than 20% of the fully-diluted capitalization
of the Company post-money.
5
30 days after the date first set forth above.
 TheFunded Founder Institute – Plain Preferred Term Sheet

This Memorandum of Terms may be executed in counterparts, which together will constitute one
document. Facsimile signatures shall have the same legal effect as original signatures.

[INSERT COMPANY NAME] [INSERT NAME OF INVESTOR]

Signature Signature

Print name Print name

Print title Print title

Date Date

TheFunded Founder Institute - Notice

This sample Memorandum of Terms has been prepared by Wilson Sonsini Goodrich & Rosati for informational
purposes only and does not constitute advertising, a solicitation, or legal advice. Neither the transmission of this sample
Memorandum of Terms nor the transmission of any information contained in this website is intended to create, and
receipt hereof or thereof does not constitute formation of, an attorney-client relationship. Internet subscribers and online
readers should not rely upon this sample Memorandum of Terms or the information contained in this website for any
purpose without seeking legal advice from a licensed attorney in the reader’s state.

The information contained in this website is provided only as general information and may or may not reflect
the most current legal developments; accordingly, information on this website is not promised or guaranteed to be correct
or complete. Wilson Sonsini Goodrich & Rosati expressly disclaims all liability in respect to actions taken or not taken
based on any or all the contents of this website. Further, Wilson Sonsini Goodrich & Rosati does not necessarily
endorse, and is not responsible for, any third-party content that may be accessed through this website.
TheFunded Founder Institute – Plain Preferred Term Sheet

EXHIBIT: CAPITALIZATION TABLE