This Term Sheet summarizes the principal terms of the Class A Share Financing of , a corporation incorporated under the [Business Corporations Act] (the “Corporation”). In consideration of the time and expense devoted and to be devoted by the Investors with respect to this investment, the No Shop/Confidentiality [and Counsel and Expenses] provisions of this Term Sheet shall be binding obligations of the Corporation whether or not the financing is consummated. No other legally binding obligations will be created until definitive agreements are executed and delivered by all parties. This Term Sheet is not a commitment to invest, and is conditioned on the completion of due diligence, legal review and documentation that is satisfactory to the Investors. This Term Sheet shall be governed in all respects by the laws of the State of [______________].

OFFERING TERMS
Closing Date:	or as soon as practicable following the Corporation’s acceptance of this Term Sheet and satisfaction of the Conditions to Closing (the “Closing”).
Currency:	[USD/CAD $] except as otherwise noted.
Investors:	[as well as other investors mutually agreed upon by Investors and the Corporation]
Amount Raised:	$
Security Offered:	Newly created Class A Shares (The "Class A ")
Price Per Share:	$ per share (based on the capitalization of the Corporation set forth below) (the “Original Purchase Price”).
Premoney Valuation:	The Original Purchase Price is based upon a fully-diluted premoney valuation of , including new options to be issued, and a fully diluted postmoney valuation of . The employee stock option pool will represent % of the fully diluted postmoney capitalization.
Capitalization:	The Corporation’s capital structure before and after the Closing is set forth on Exhibit A.
SHARE PROVISIONS
Dividends:
Liquidation Preference:	In the event of any liquidation, dissolution or winding up of the Corporation, the proceeds shall be paid as follows: An amalgamation or consolidation (other than one in which shareholders of the Corporation own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) and a sale, lease, transfer, exclusive license or other disposition of all or substantially all of the assets of the Corporation will be treated as a liquidation event (a “Deemed Liquidation Event”), thereby triggering payment of the liquidation preferences described above [unless the holders of [___]% of the Class A elect otherwise]. The Investors' entitlement to their liquidation preference shall not be abrogated or diminished if the consideration is subject to escrow in connection with a Deemed Liquidation Event.
Voting Rights:	The Class A shall vote together with the Common Shares on an as-converted basis, and not as a separate class, except (i) [so long as [insert fixed number, or %, or “any”] shares of Class A are outstanding,] the Class A as a class shall be entitled to elect [_______] [(_)] members of the Board (the “Class A Directors”), and (ii) as required by law. The Corporation’s Articles of Incorporation will provide, to the fullest extent permitted under the Canada Business Corporations Act, that the holder of Common Shares shall not vote as a separate class on any matter.
Protective Provisions:	[So long as [insert fixed number, or %, or “any”] shares of Class A are outstanding,] in addition to any other vote or approval required under the Corporation’s articles or by-laws, the Corporation will not, without the written consent of the holders of at least [__]% of the Corporation’s Class A, either directly or by amendment, amalgamation, consolidation, or otherwise: (i) liquidate, dissolve or wind up the affairs of the Corporation, or effect any amalgamation or consolidation or any other Deemed Liquidation Event; (ii) amend, alter, or repeal any provision of the articles or by-laws of the Corporation [in a manner adverse to the Class A; (iii) create or authorize the creation of or issue any other security convertible into or exercisable for any equity security, having rights, preferences or privileges senior to or on parity with the Class A, or increase the authorized number of shares of Class A; (iv) purchase or redeem or pay any dividend on any capital stock prior to the Class A , [other than stock repurchased from former employees or consultants in connection with the cessation of their employment/services, at the lower of fair market value or cost;] [other than as approved by the Board, including the approval of [_____] Class A Director(s)]; or (v) create or authorize the creation of any debt security [if the Corporation’s aggregate indebtedness would exceed $[____][other than equipment leases or bank lines of credit][unless such debt security has received the prior approval of the Board, including the approval of [________] Class A Director(s)]; (vi) create or hold capital stock in any subsidiary that is not a wholly-owned subsidiary or dispose of any subsidiary stock or all or substantially all of any subsidiary assets; [or (vii) increase or decrease the size of the Board of Directors].
Optional Conversion:	The Class A initially converts 1:1 to Common Shares at any time at option of holder, subject to adjustments for stock dividends, splits, combinations and similar events and as described below under “Anti-dilution Provisions.”
Anti-dilution Provisions:	In the event that the Corporation issues additional securities at a purchase price less than the current Class A conversion price, such conversion price shall be adjusted in accordance with the following formula: [Alternative 1: “Typical” weighted average: CP2 = CP1 * (A+B) / (A+C) CP2 = Class A Conversion Price in effect immediately after new issue CP1 = Class A Conversion Price in effect immediately prior to new issue A = Number of Common Shares deemed to be outstanding immediately prior to new issue (includes all outstanding Common Shares, all outstanding preferred shares on an as-converted basis, and all outstanding options on an as-exercised basis; and does not include any convertible securities converting into this round of financing) B = Aggregate consideration received by the Corporation with respect to the new issue divided by CP1 C = Number of shares issued in the subject transaction] [Alternative 2: Full-ratchet – the conversion price will be reduced to the price at which the new shares are issued.] [Alternative 3: No price-based anti-dilution protection.] The following issuances shall not trigger anti-dilution adjustment: (i) securities issuable upon conversion of any Class A, or as a dividend or distribution on the Class A; (ii) securities issued upon the conversion of any debenture, warrant, option, or other convertible security; (iii) Common Shares issuable upon a stock split, stock dividend, or any subdivision of Common Shares; and (iv) Common Shares (or options to purchase such Common Shares) issued or issuable to employees or directors of, or consultants to, the Corporation pursuant to any plan approved by the Board [including at least [_______] Class A Director(s)].
Mandatory Conversion:	Each Class A Share will automatically be converted into Common Shares at the then applicable conversion rate in the event of the closing of a [firm commitment] underwritten public offering with a price of [___] times the Original Purchase Price (subject to adjustments for stock dividends, splits, combinations and similar events) and [net/gross] proceeds to the Corporation of not less than $[_______] (a “QPO”), or (ii) upon the written consent of the holders of [__]% of the Class A.
[Pay-to-Play:]	[Unless the holders of [__]% of the Class A elect otherwise,] on any subsequent [down] round all [Major] Investors are required to purchase their proportionate share of the securities set aside by the Board for purchase by the [Major] Investors. All shares of Class Ad Shares of any [Major] Investor failing to do so will automatically [lose anti-dilution rights] [lose right to participate in future rounds] [convert to Common Shares and lose the right to a Board seat if applicable].]
Redemption Rights:	Unless prohibited by [the CBCA] governing distributions to shareholders, the Class A shall be redeemable at the option of holders of at least [__]% of the Class A commencing any time after [________] at a price equal to the Original Purchase Price [plus all accrued but unpaid dividends]. Redemption shall occur in three equal annual portions. Upon a redemption request from the holders of the required percentage of the Class A, all Class A Shares shall be redeemed [(except for any Class A holders who affirmatively opt-out)].
STOCK PURCHASE AGREEMENT
Representations and Warranties:	Standard representations and warranties by the Corporation. [Representations and warranties by Founders regarding technology ownership, etc.].
Conditions to Closing:	Standard conditions to Closing, which shall include, among other things, satisfactory completion of financial and legal due diligence, exemption of the issuance of shares from applicable securities laws, the filing of Articles of Amendment establishing the rights and preferences of the Class A, and an opinion of counsel to the Corporation.
Counsel and Expenses:	[Investor/Corporation] counsel to draft Closing documents. Corporation to pay all legal and administrative costs of the financing [at Closing], including reasonable fees (not to exceed $[_____]) and expenses of Investor counsel[, unless the transaction is not completed because the Investors withdraw their commitment without cause]. Corporation Counsel: [ ] Investor Counsel: [ ]
INVESTORS’ RIGHTS AGREEMENT
Registration Rights:
Registrable Securities:	All Common Shares issuable upon conversion of the Class A [and [any other Common Share held by the Investors] will be deemed “Registrable Securities.”
Demand Registration:	Upon earliest of (i) [three-five] years after the Closing; or (ii) [six] months following an initial public offering (“IPO”), persons holding [__]% of the Registrable Securities may request [one][two] (consummated) registrations by the Corporation of their shares. The aggregate offering price for such registration may not be less than $[5-15] million. A registration will count for this purpose only if (i) all Registrable Securities requested to be registered are registered, and (ii) it is closed, or withdrawn at the request of the Investors (other than as a result of a material adverse change to the Corporation).
Registration on Form S-3:	The holders of [10-30]% of the Registrable Securities will have the right to require the Corporation to register on Form S-3 (or equivalent for foreign issuers), if available for use by the Corporation, Registrable Securities for an aggregate offering price of at least $[1-5 million]. There will be no limit on the aggregate number of such Form S-3 registrations, provided that there are no more than [two] per year.
Piggyback Registration:	The holders of Registrable Securities will be entitled to “piggyback” registration rights on all registration statements of the Corporation, subject to the right, however, of the Corporation and its underwriters to reduce the number of shares proposed to be registered to a minimum of [20-30]% on a proportionate basis and to complete reduction on an IPO at the underwriter’s discretion. In all events, the shares to be registered by holders of Registrable Securities will be reduced only after all other shareholders’ shares are reduced.
Expenses:	The registration expenses (exclusive of stock transfer taxes, underwriting discounts and commissions) will be borne by the Corporation. The Corporation will also pay the reasonable fees and expenses[, not to exceed $______,] of one special counsel to represent all the participating shareholders.
Lock-up:	Investors shall agree in connection with the IPO, if requested by the managing underwriter, not to sell or transfer any shares of Common Shares of the Corporation [(including/excluding shares acquired in or following the IPO)] for a period of up to 180 days [plus up to an additional 18 days to the extent necessary to comply with applicable regulatory requirements] following the IPO (provided all directors and officers of the Corporation [and [1 to 5]% shareholders] agree to the same lock-up). [Such lock-up agreement shall provide that any discretionary waiver or termination of the restrictions of such agreements by the Corporation or representatives of the underwriters shall apply to Investors, proportionate, based on the number of shares held.
Termination:	Upon a Deemed Liquidation Event, [and/or] when all shares of an Investor are eligible to be sold without restriction under Rule 144 [and/or] the [____] anniversary of the IPO. No future registration rights may be granted without consent of the holders of a [majority] of the Registrable Securities unless subordinate to the Investor’s rights.
Management and Information Rights:	A Management Rights letter from the Corporation, in a form reasonably acceptable to the Investors, will be delivered prior to Closing to each Investor that requests one. Any [Major] Investor [(who is not a competitor)] will be granted access to Corporation facilities and personnel during normal business hours and with reasonable advance notification. The Corporation will deliver to such Major Investor (i) annual, quarterly, [and monthly] financial statements, and other information as determined by the Board; (ii) thirty days prior to the end of each fiscal year, a comprehensive operating budget forecasting the Corporation’s revenues, expenses, and cash position on a month-to-month basis for the upcoming fiscal year[; and (iii) promptly following the end of each quarter an up-to-date capitalization table. A “Major Investor” means any Investor who purchases at least $[______] of Class A.
Right to Participate Proportionately in Future Rounds:	All [Major] Investors shall have a proportionate right, based on their percentage equity ownership in the Corporation (assuming the conversion of all outstanding Preferred Shares into Common Shares and the exercise of all options outstanding under the Corporation’s stock plans), to participate in subsequent issuances of equity securities of the Corporation (excluding those issuances listed at the end of the “Anti-dilution Provisions” section of this Term Sheet. In addition, should any [Major] Investor choose not to purchase its full proportionate share, the remaining [Major] Investors shall have the right to purchase the remaining proportionate shares.
Matters Requiring Investor Director Approval:	[So long as the holders of Class A are entitled to elect a Class A Director, the Corporation will not, without Board approval, which approval must include the affirmative vote of [one/both] of the Class A Director(s): (i) make any loan or advance to, or own any stock or other securities of, any subsidiary or other corporation, partnership, or other entity unless it is wholly owned by the Corporation; (ii) make any loan or advance to any person, including, any employee or director, except advances and similar expenditures in the ordinary course of business or under the terms of a employee stock or option plan approved by the Board; (iii) guarantee, any indebtedness except for trade accounts of the Corporation or any subsidiary arising in the ordinary course of business; (iv) make any investment inconsistent with any investment policy approved by the Board; (v) incur any aggregate indebtedness in excess of $[_____] that is not already included in a Board-approved budget, other than trade credit incurred in the ordinary course of business; (vi) enter into or be a party to any transaction with any director, officer or employee of the Corporation or any “associate” (as defined in [the CBCA]) of any such person [except transactions resulting in payments to or by the Corporation in an amount less than $[60,000] per year], [or transactions made in the ordinary course of business and pursuant to reasonable requirements of the Corporation’s business and upon fair and reasonable terms that are approved by a majority of the Board]; (vii) hire, fire, or change the compensation of the executive officers, including approving any option grants; (viii) change the principal business of the Corporation, enter new lines of business, or exit the current line of business; (ix) sell, assign, license, pledge or encumber material technology or intellectual property, other than licenses granted in the ordinary course of business; or (x) enter into any corporate strategic relationship involving the payment contribution or assignment by the Corporation or to the Corporation of assets greater than [$100,000.00].
Non-Competition and Non-Solicitation Agreements:	Each Founder and key employee will enter into a [one] year non-competition and non-solicitation agreement in a form reasonably acceptable to the Investors.
Non-Disclosure and Developments Agreement:	Each current and former Founder, employee and consultant will enter into a non-disclosure and proprietary rights assignment agreement in a form reasonably acceptable to the Investors.
Board Matters:	[Each Board Committee shall include at least one Class A Director.] The Board shall meet at least [monthly][quarterly], unless otherwise agreed by a vote of the majority of Directors. The Corporation will bind D&O insurance with a carrier and in an amount satisfactory to the Board. The Corporation will enter into Indemnification Agreement with each Class A Director [and affiliated funds] in form acceptable to such director. In the event the Corporation combines with another entity and is not the surviving corporation, or transfers all of its assets, proper provisions shall be made so that successors of the Corporation assume the Corporation’s obligations with respect to indemnification of Directors.
Employee Stock Options:	All employee options to vest as follows: [25%] after one year, with remaining vesting monthly over next [36] months. Immediately prior to the investment, shares will be added to the option pool creating an total option pool of shares.
Key Person Insurance:	Corporation to acquire life insurance on Founders [name each Founder] in an amount satisfactory to the Board. Proceeds payable to the Corporation.
RIGHT OF FIRST REFUSAL/CO-SALE AGREEMENT
Right of First Refusal/Right of Co-Sale (Take-Me-Along):	Corporation first and Investors second (to the extent assigned by the Board,) will have a right of first refusal with respect to any shares of the Corporation proposed to be transferred by Founders [and future employees holding greater than [1]% of Corporation's Common Shares (assuming conversion of Preferred Shares and whether then held or subject to the exercise of options)], with a right of oversubscription for Investors of shares unsubscribed by the other Investors. Before any such person may sell Common Shares, he will give the Investors an opportunity to participate in such sale on a basis proportionate to the amount of securities held by the seller and those held by the participating Investors.
VOTING AGREEMENT
Board of Directors:	At the initial Closing, the Board of Directors ("Board") shall consist of [______] members comprised of (i) [name] as [the representative designated by [____], as the lead Investor, (ii) [name] as the representative designated by the remaining Investors, (iii) [name] as the representative designated by the Founders, (iv) the person then serving as the Chief Executive Officer of the Corporation, and (v) [___] person(s) who are not employed by the Corporation and who are mutually acceptable [to the Founders and Investors][to the other directors].
[Drag Along:	Holders of Preferred Shares and the Founders [and all future holders of greater than [1]% of Common Shares (assuming conversion of Preferred Shares and whether then held or subject to the exercise of options)] shall be required to enter into an agreement with the Investors that provides that such shareholders will vote their shares in favor of a Deemed Liquidation Event or transaction in which 50% or more of the voting power of the Corporation is transferred and which is approved by [the Board] [and the holders of ____% of the outstanding shares of Preferred Shares, on an as-converted basis (the “Electing Holders”)], so long as the liability of each shareholder in such transaction is several (and not joint) and does not exceed the shareholder's proportionate portion of any claim and the consideration to be paid to the shareholders in such transaction will be allocated as if the consideration were the proceeds to be distributed to the Corporation's shareholders in a liquidation under the Corporation's then-current Articles of Incorporation.]
[Sale Rights:	Upon written notice to the Corporation from the Electing Holders, the Corporation shall initiate a process intended to result in a sale of the Corporation.]
OTHER MATTERS
Founders’ Shares:	All Founders to own stock outright subject to the Corporation's right to buyback at cost. Buyback right for [__]% for first [12 months] after Closing; thereafter, right lapses in equal [monthly] increments over following [__] months. [Existing Preferred Shares: The terms set forth above for the Class [_] Preferred Shares are subject to a review of the rights, preferences and restrictions for the existing Preferred Shares. Any changes necessary to conform the existing Preferred Shares to this term sheet will be made at the Closing.]
No Shop/Confidentiality:	The Corporation agrees to work in good faith expeditiously towards a closing. The Corporation and the Founders agree that they will not, for a period of [______] weeks from the date these terms are accepted, take any action to solicit, initiate, encourage or assist the submission of any proposal, negotiation or offer from any person or entity other than the Investors relating to the sale or issuance, of any of the capital stock of the Corporation [or the acquisition, sale, lease, license or other disposition of the Corporation or any material part of the stock or assets of the Corporation] and shall notify the Investors promptly of any inquiries by any third parties in regards to the foregoing. [In the event that the Corporation breaches this no-shop obligation and, prior to [________], closes any of the above-referenced transactions [without providing the Investors the opportunity to invest on the same terms as the other parties to such transaction], then the Corporation shall pay to the Investors $[_______] upon the closing of any such transaction as liquidated damages.] The Corporation will not disclose the terms of this Term Sheet to any person other than officers, members of the Board and the Corporation’s accountants and legal counsel and other potential Investors acceptable to [_________], as lead Investor, without the written consent of the Investors.
Expiration:	This Term Sheet expires on [_______ __, 20__] if not accepted by the Corporation by that date.

EXECUTED THIS [__] DAY OF [_________],20[___].

______________________________	______________________________
[Name]	[Name]
[Lead Investor]	President and CEO,

PRE FINANCING CAPITALIZATION:

Shareholder:	Common Shares:	Fully Diluted Shares Outstanding:	Fully Diluted (%):
Total:

POST FINANCING CAPITALIZATION:

Shareholder:	Common Shares:	Series A Shares:	Fully Diluted Shares Outstanding:	Fully Diluted (%):
Reserved for Option Pool
Total: