The Renegades DART of Term Sheet Case

Jon Zemel Dian Guan Changjie LiuWei-Jie Kong Zihuan WeeBen Kenigsberg

Major Goals

Retain control of the company

Prevent dilution after venture capital

Satisfy investors’ interest

Major Redflags

Antidilution preferences

Drag along agreement

Payment of “cumulative” dividends

Special conditions for second closing

Liquidation preferences

Proposed Changes in Order of Priority

Adjust the Antidilution provision full ratchet adjustment ---> “pay per play” adjustment encourage future dilutive financing prevent unnecessary dilution of the founders

Eliminate the Drag along agreement clause future merger, sale of voting control or company assets

should be subject to voting of all the shareholders instead of Series A Preferred.

Payment of “cumulative” dividends cumulative - non-cumulative prevent adverse effects to the company’s cash flow

Proposed Changes in Order of Priority

Condition for second closing Eliminate some conditions for second closing OR Extend 9 month period to 18 month period

Liquidation preferences Negotiate for original purchase price + all accrued and unpaid dividends

Factors affecting the proposed changes

Infinite Wisdom: company growth and development Gandhi Ventures: maximizing shareholders’ benefit

E.g. Cumulative dividends, Drag-along agreement

Investors’ confidence in the CEO and management team Present market conditions Performance of the company’s product Retention of Des Cartes as the principal scientist

Conflict of Interests between the Company and VC