This Term Sheet has been prepared for angel investments made at an early stage by the Angel Fund. The terms have been simplified to match the stage of investment and are offered for consideration and acceptance.

Offer of Investment

The Fund will purchase, together with any syndicated investors, (collectively the Investors), common shares (the Shares) at a price of $* per Share. The total round for all Investors will be $* of which the Fund will invest $* to acquire a total of * Shares. So long as the Investors hold their Shares and until a liquidity event, they shall have the right to exchange them for the same kind and class of securities issued by the Company (the New Securities) in any follow on financings should such New Securities have rights superior to the Shares. The Investment will be made pursuant to an Investment Agreement made between the Investors, the Company and certain of its principals (the Principals). The capital structure on closing will be as described in the attached Share Register.

Board of Directors

The Fund believes that early stage investments need strong mentoring and governance provided by a high quality, engaged Board. On the completion of the investment, the Board will be comprised as follows:

• a total of five members, being the CEO, one nominee of the Fund and three nominees independent of management that the Company and the Fund agree on; and
• each director must have made a meaningful investment in the Company.

Share and Option Vesting

The Fund believes that it is important that the Principals’ interests align with the Investors. In this regard the parties agree that all stock options and all nominally priced previously issued shares will vest on the following basis:

• 50% of the shares will vest daily and linearly over a three year period; and
• the other 50% will not vest unless and until there is a sale of the Company.

All share and option vesting will accelerate on a sale of the Company. An Escrow Agreement will be entered into to provide for the vesting.

Liquidity Event

To ensure that a return can be provided to all of the Company’s shareholders when an opportunity presents itself to sell the Company, the Fund will require a drag-along right be added to the Company’s constating documents to allow the holders of 51% of the issued shares of the Company to cause the sale of all of the shares of the Company.

Reporting to Shareholders

The company will send a CEO Update monthly to all shareholders. Financial statements are also available upon request.

Investor Rights

Investors have the right of first refusal to participate in future financings.

Any changes to the capital structure, new shares, options or debt requires the approval of the majority of the investors in this round.

General

The Company will pay the legal costs of the Fund not to exceed $6,500, plus taxes and disbursements thereon. The Company will keep confidential this Term Sheet and all discussions with the Fund for a period of two years.

Binding Nature

This Term Sheet will terminate on *[date], unless terminated earlier by the Fund. The Company will not seek alternate financing unless and until this Term Sheet has terminated or been terminated by the Fund. The confidentiality provisions will survive termination of this Term Sheet. Acknowledged and agreed to by the Company and by the Fund this * day of *, 200* by: [Signatures]