Long Form Venture Capital Term Sheet

Amount of Investment:

$             

Valuation of the Company:

$              Pre-Money on a fully diluted basis

$              Post-Money on a fully diluted basis

Type of Security:

Shares of the Company's Series __ Preferred Stock ("Preferred"), convertible into shares of the Company's Common Stock ("Common").

Price Per Share:

$              ("Original Purchase Price").

Capitalization of the Company:

The current capitalization of the Company is set forth in Exhibit 1, and the capitalization of the Company after this proposed financing is set forth in Exhibit 2.

Rights,Preferences Privileges and Restrictions of Preferred Stock:

(1) Dividend Provisions:[Starting on January 1, 20__,] [T]he holders of the Preferred will be entitled to receive dividends [at the rate of __% of the Original Purchase Price] whenever funds are legally available and when and as declared by the Board.  No dividend shall be paid on the Common at a rate greater than the rate at which dividends are paid on Preferred (based on the number of shares of Common into which the Preferred is convertible on the date the dividend is declared).  Dividends on Preferred will be in preference to dividends paid on the Common.  Dividends on the Preferred will be noncumulative.

(2) Liquidation Preference:  In the event of any liquidation, dissolution or winding up of the Company, the holders of Preferred will be entitled to receive in preference to the holders of Common an amount ("Liquidation Preference") equal to the Original Purchase Price plus any dividends declared on the Preferred but not paid [and then to share with the holders of the Common in the remaining assets on an as-if-converted basis].  At the option of the holders of Preferred, the effectuation by the Company or third party acquirors of a transaction or series of transactions in which more than [50%] [80%] of the voting power of the Company is disposed of to a single person or group of affiliated persons or the consolidation or merger of the Company with or into any other corporation or corporations or the sale of all or substantially all of its assets shall be deemed to be a liquidation, dissolution or winding up for purposes of the liquidation preference.

(3) Conversion:  A holder of Preferred will have the right to convert Preferred, at the option of the holder, at any time, into shares of Common.  The total number of shares of Common into which Preferred may be converted initially will be determined by dividing the Original Purchase Price by the conversion price.  The initial conversion price will be the Original Purchase Price.  The conversion price will be the subject of adjustment to reflect stock dividends, stock splits and similar events and as provided in paragraph (5) below.

(4) Automatic Conversion:  The Preferred will be automatically converted into Common, at the then applicable conversion price, upon the closing of a sale of the Company's shares of Common Stock pursuant to a firm commitment underwritten public offering by the Company at a public offering price per share (prior to underwriter commissions and discounts) that is not less than $_____ in an offering greater than [$15 million].

(5) Antidilution Provisions:  The conversion price of the Preferred will be subject to adjustment (i) for stock dividends, stock splits, or similar events, and (ii) on a weighted average basis to prevent dilution in the event that the Company issues additional shares at a purchase price less than the applicable conversion price.  No adjustment to the conversion price will occur for any issuance of additional shares at a purchase price in excess of the current conversion price.  Conversion prices will not be adjusted because of (a) conversion of Preferred Stock, (b) the issuance and sale of, or the grant of options to purchase, ________ shares of Common pursuant to the Company's employee stock purchase or option plans (the "Reserved Employee Shares"), or (c) options or stock issued to equipment lessors and bank lenders.

(6) Voting Rights:  Except with respect to election of Directors, a holder of Preferred will have the right to that number of votes equal to the number of shares of Common issuable upon conversion of its Preferred at the time the shares are voted.  Election of Directors will be as described under "Board Representation" below.

(7) Protective Provisions:  [So long as there are at least ____ shares of Preferred outstanding,] consent of the holders of at least a majority of the outstanding Preferred will be required for any action which would: (i) amend or repeal any provision of, or add any provision to, the Company's [Articles] [Certificate] or Bylaws to change the rights of the Preferred, or increase or decrease the number of authorized shares of the Preferred; (ii) create any new series or class or shares having a preference or priority as to dividends or assets superior to or on a parity with that of the Preferred; (iii) create any bonds, notes or other obligations convertible into, exchangeable for or having option rights to purchase shares of stock with any preference or priority as to dividends or assets superior to or on a parity with that of the Preferred; (iv) reclassify any class or series of Common into shares with a preference or priority as to dividends or assets superior to or on a parity with that of the Preferred; (v) apply any of its assets to the redemption or acquisition of any shares of Common, except from employees, advisors, officers, directors, consultants and serviceproviders of the Company on terms approved by the Board; or (vi) agree to a merger, sale or consolidation of the Company with another entity or the effectuation of any transaction or series of related transactions in which more than [50%] [80%] of the voting power of the Company is disposed.

Redemption:

The Company shall redeem the Preferred in [three] equal annual installments commencing [six] years from the date of purchase by paying in cash an amount equal to the Original Purchase Price plus any declared but unpaid dividends [plus __% for each year the Preferred Stock is outstanding].  To the extent that the Company may not at any such date legally redeem such Preferred, such redemption will take place as soon as legally permitted.

Information and Registration Rights

(1) Registration Rights Agreement:  The information and registration rights provisions between the Company and....