TEMPLATE TERM SHEET

FOR ORDINARY SHARES

TERM SHEET
FOR ISSUE OF ORDINARY SHARES BY

[ ] LIMITED

(Company)

General notes: This term sheet applies if the investment is in ordinary shares. Refer to alternative
term sheets if preferred terms required or if the investment is structured as a loan convertible to
equity. The more optional provisions appear in italics and instructions appear in bold italics. Refer to
footnotes at the bottom of each page for comments on some of the optional provisions .

This document (Term Sheet) summarises the principal terms of a proposed investment in the
Company (Investment). This Term Sheet is not legally binding except for the terms stated in
part B of this Term Sheet and there will be no obligation to issue or subscribe for shares in the
Company until a binding investment agreement (Investment Agreement) is signed by the
parties.

PART A: INVESTMENT TERMS (non-binding)

Business: The [proposed] business of the Company relating to [describe

business] (Business).

Investment Amount: [Up to1] $ [ ]

[(subject to achievement of milestones)] (Investment Amount).

[Minimum Available The minimum amount available for investment by the Investors must
Investment: be $[ ]]2.

Investors: [Insert name(s) of Investor(s)] or [The persons identified in

Appendix 2 [and other members of the [ ] investment syndicate
who agree to participate in the Investment]3] [and NZVIF Investments
Limited (NZVIF)] (Investors).

Key People: [Insert names of founder(s)/key people] (Key People)4.

Pre-money valuation: The investment is based on a pre-financing valuation of $[ ].

Type of Shares: Ordinary shares (Shares).

Issue Price: $[ ] per Share.

Number of Shares: [Up to] [ ].

Capital Structure: The capitalisation of the Company immediately prior to investment

1 Words "up to " generally apply if investment is tranched and milestones or conditions apply for subsequent payments.
2 Applicable if investment is by a syndicate and either, indicative commitments are yet to be received for the full
Investment Amount or there is potential for some Investors to withdraw while others proceed (eg if they are not happy
with the outcome of due diligence etc).
3 Applicable for a syndicate investment where all of the participants are yet to be confirmed.
4 The term "Founders" is more common than "Key People", but latter term may be more accurate in indicating the people
and who are important who may not be limited to the original founders of the Company (see later provisions relating to

conditions precedent and restrictions on share transfers).

 TEMPLATE TERM SHEET
FOR ORDINARY SHARES

and after investment of the Investment Amount will be as set out in the
table in Appendix 1 (Capitalisation Table).

Conditions Precedent:  Due diligence being completed to the satisfaction of the

(for Investors' benefit) Investors.

 Agreement to a business plan which comprises an agreed

budget (Agreed Business Plan).

 [Agreement on milestones which must be achieved for

disbursement of post Completion Date tranches of the
Investment Amount (Milestones)].

 Final approval of each Investor's [board] [or] [Investment

Committee](as applicable).

 Completion of the Investment Agreement and all existing

holders of shares or options in the Company agreeing it
supersedes any existing agreements between them.

 Capitalisation of all outstanding loans [other than the loan(s)

of $ from [ ]] and that capitalisation resulting in the
pre-investment capitalisation shown in the Capitalisation
Table.

 Completion of employment or contractor agreements(s) with

the [Key People][or][[ ] and [ ]] on terms acceptable to the
Investors (and which include suitable non compete
covenants).

 All relevant officers, consultants and contractors (including

all Key People) assigning (in a form acceptable to the
Investors) all intellectual property linked to the Business or
proposed future business.

 Agreement on the identity of [insert number] [an]

[independent director[s] [and] [a chairman].

 Agreement on the parameters of an employee share option

plan for the key officers, employees and contractors of the
Company (including the Key People) to purchase up to [ %]
of the Company's post money capital (ESOP).

 Evidence that any third party consents or other

authorisations required to complete the investment have
been obtained.

 [Insert any other specific conditions precedent 5].

Anticipated Completion: [Insert date] or [5] Business Days after satisfaction of all conditions
Date: precedent in the Investment Agreement (actual settlement date being
referred to as Completion Date).

Disbursement of The Investment Amount will be subscribed for Shares [in one sum on
5 Consider other specific conditions precedent which should be specified (eg. members of investment syndicate making
commitments equivalent to at least the minimum required investment). However in this respect there is sufficient
protection for Investors in the general due diligence condition and the non-binding nature of Term Sheet.
 TEMPLATE TERM SHEET
FOR ORDINARY SHARES

Investment Amount: the Completion Date] [or] [in the instalments as specified in the
Agreed Business Plan (and applied solely to expenditure as specified
in the Agreed Business Plan or otherwise approved by the Investors)]
[or] [as follows:

 $ [ ] on the Completion Date;

 $ [ ] when [insert Milestone etc]]

[provided each instalment will be at the Investors' option if a Milestone

due by the relevant date has not been achieved]6.

Anti-dilution7: [Narrow-based weighted average]: The number of Shares held by

the Investors will be increased (by the issue of further shares at
nominal consideration to the Investors) on a narrow-based weighted
average basis if any new shares are issued [in the [X] years after
Completion] at a price less than the issue price for the Shares [(other
than pursuant to an approved ESOP)]

[Full ratchet]: The number of Shares held by the Investors will be

increased (by the issue of further shares at nominal consideration to
the Investors) on a full ratchet weighted average basis if any new
shares are issued [in the [X] years after Completion] at a price less
than the issue price for the Shares [(other than pursuant to an
approved ESOP)]

Board: The Board will initially consist of:

Chairperson [(no casting vote)]

Investor Director[s] []

Other Shareholders' Director[s] []

[Independent Director[s]] []

The Board will meet [monthly][bi-monthly][six weekly]

[The Chairman will be paid $[ ] per annum/meeting], [any independent

directors will be paid $[ ] per [annum/meeting] and] [the [Investor]
[other] directors will be paid $ [ ] per [annum/meeting]8 [but otherwise
attendance at Board meetings will not be remunerated].

[or]

[No Directors' fees will be paid [until at least [insert number] years
after the Completion Date] unless authorised by a special resolution of
Shareholders (75%);]

Protective Provisions: Prior approval of the Investor Director(s) is required for any of the
following in relation to the Company:

 [For a period of two years following Completion] issues of

6 Of the 3 variables, the latter 2 options which allow for tranching will usually be preferred with third option being most
preferred from Investors' perspective as payments are contingent on milestones.
7 Anti-dilution protection is standard. Full ratchet and narrow based weighted average options are given.
8 Usually the only directors fees will be (at most) a modest meeting fee to be paid to the Investor directors only.
 TEMPLATE TERM SHEET
FOR ORDINARY SHARES

Shares (including any IPO), options or any instruments

convertible to equity (other than issues already contemplated
by the Investment Agreement and any pro-rata rights
issues)9);

any transaction or arrangement likely to have the effect of the
Company acquiring rights or interests or incurring obligations
or liabilities not specifically identified in the Agreed Business
Plan, the value of which is greater than $[10,000];


approval of subsequent budgets and Business Plans or any
material amendments to or departures from the Agreed
Business Plan;

any borrowings, guarantees, indemnities or other contingent
commitments;

any change to accounting policies [or the auditor];

any change to Director appointment rights;

appointment of removal of the CEO, CFO or any other Key
Person [or any other employee].or

[determining the fair market value of shares being bought
back from a Key Person that is a bad leaver] 10
Prior approval of a special resolution of Shareholders (75%) is
required for the following:

 any Major Transaction or transaction involving the disposal

of a material proportion of the Company's assets;

 any significant change in the nature of the Company's

business (whether by acquisition or otherwise)

 any transaction between the Company and any holder of

securities, Director, officer or employee of the Company or
any Associate of any of them, unless that transaction has
been approved by a unanimous resolution of the Board
(including at least one Director who is not interested in the
transaction).

Financial Statements, Unaudited [monthly and] quarterly statements and [un]audited annual
Reporting: accounts, accompanied by reports covering all material aspects of the
Company's progress [in the case of the quarterly and annual
statements].

NZVIF Specific Clauses11 If NZVIF is an Investor the provisions set out in Appendix 3 will apply.

Pre-emptive rights and

9 May not be required in all situations ie. where the Investors have a right of refusal in respect of 100% of shares issued
and anti-dilution protection. Time limiting the veto right is also included as negotiable option.
10 Delete if Key People Vesting provisions are not included in the Term Sheet.
11
Delete this section if NZVIF is not an Investor.
 TEMPLATE TERM SHEET
FOR ORDINARY SHARES

Drag and Tag along12: In addition to usual pre-emptive rights:

 tag along rights will apply where Shareholder(s) wish to sell

more than [20%] of the Shares in the Company to a third
party and as between the Investors for any sale of Investor
Sharesordinary shares (so that the Shareholder(s) wishing
to sell must procure the buyer to make a binding offer to
other Shareholders who wish to sell on the same terms, on a
pro rata basis if the buyer does not wish to buy all of the
available Shares); and

 drag along rights will apply where Shareholder(s) wish to sell

more than [60%] of the Shares [including a majority of the
Investors' Shares]13 [or if the Investors wish to sell all of their
Shares,], to a third party (so that the Shareholders selling
their Shares may require the other Shareholders to sell all of
their Shares on the same terms).

[Key People Escrow] [Except with the consent of the Investor Directors the Key People are
not permitted to dispose of any Shares for a period of [3] years from
Completion Date, with the exception of:

 a sale in an IPO;
 a sale where a tag along or drag along right applies; or
 any other transaction approved by the Investors where the
Investors have the opportunity to sell on identical terms; or
 a transfer to their respective wholly owned and controlled
entities or to immediate family. ]

[Key People Vesting]: The shares held by the Key People will be subject to the following
provisions:

 [50]% of the Key Peoples' shares to vest over a [insert]

year period14; and
 the Company will have a right to buy back the shares of any
Key Person who is a 'bad leaver' at [50]% of fair market
value15.
[drafting note: delete either Key People Escrow or Key People
Vesting, as applicable]

Key Man Insurance: The Company will procure and maintain (for the Company's benefit),
and at least once annually review, key man life insurance policies in
such amounts and on such terms as the Board determines is prudent,
based on advice from a suitably qualified risk adviser, on the lives of
[the] [or] [each of the following] Key People:
12 Needs to be considered on a case by case basis. Depends on the relative shareholdings of founders, Investors and
other individual shareholdings.
13 The Investors may require this protection against being "dragged" by other shareholders. Consider if the Investors
should have the right to "drag" other shareholders for desired exit, irrespective of their percentage shareholding.
14 This means that if any of the Key People cease to be employed at any time while their shares are “unvested” the
Company will have the right to buyback those shares at a nominal price (e.g. total of $1). Its purpose is to ensure that
the Key People remains actively committed to the business for a certain period.
15 This allows the Company to buyback a Key Person’s shares if they commit fraud, an indictable criminal offence, breach
of restraint or confidentiality obligations or are otherwise terminated by the Company ‘with cause’.
 TEMPLATE TERM SHEET
FOR ORDINARY SHARES

Warranties: Without limiting usual warranties for similar investments as will be

contained in the Investment Agreement, the Company [and [Key
People]16 [or name warrantors] [(in the case of the individual
warrantors, to the best of their knowledge and belief] [after due and
careful enquiry] will warrant that (except as fully and fairly disclosed
with sufficient particularity in a disclosure schedule):

 all intellectual property and other rights necessary to pursue

the Business are the full legal, beneficial and unencumbered
property of the Company;

 the Company has no actual or contingent liabilities not

specified in the statement of financial position provided to the
Investors and such statement provides a true and fair view of
the Company's position; and

 all other information provided to the Investors is true,

accurate and complete in all material respects.

[The liability of [insert name(s) of individual warrantors] for any breach

of the warranties is limited to, in aggregate, [$50,000]17].

Transaction Fees Immediately following subscription of [the first tranche of] the
Investment Amount, the Company will pay a sum equivalent to [insert
number]% (plus GST) of the Investment Amount to [insert entity].
For the avoidance of doubt, the Investment Amount is the amount
actually paid to the Company by the Investor for the Shares.

[Other Key Terms: Insert other key terms as required e.g. will Investors have rights
relating to further capital raisings?]

PART B: LEGALLY BINDING TERMS

Exclusive Period: For a period of [60] days from the date of signing this Term Sheet,
(Exclusivity Period) none of the Company, its shareholders,
directors, officers, contractors or employees will conduct any
discussions whatsoever with any third party regarding any investment
in the Company, except as may be approved by the Investors in their
discretion.

Legal Costs: The Company will pay all legal and professional costs incurred by the
Investors relating to the Investment Agreement and related
documentation [up to a maximum of $[10,000]] plus GST, whether or
not an Investment Agreement is entered into.

The Company will pay its own legal and professional costs incurred by
it in relation to the Investment Agreement and related documentation,
which in any event will not exceed $[insert amount].

Confidentiality: The contents of this Term Sheet, and the fact that one has been
issued, may only be disclosed by the Company to its shareholders,
16 Warranties will generally be given by the Company and founders only, though there may be exceptions where it is
appropriate for key employees to give them as well. Needs to be considered on a case by case basis.
17 A dollar cap is usual if individuals are required to provide warranties alongside the Company.
 TEMPLATE TERM SHEET
FOR ORDINARY SHARES

directors and advisers or other person(s) approved by the Investors

(on a need to know basis).

[Investors' [ ]] represents [he/she] has authority to bind [insert relevant

Representative: Investors they represent] in respect of all matters relating to the
Investment]]18.

The parties respectively acknowledge the intended investment terms described in Part A and agree to
be bound by the terms in Part B.

SIGNED on behalf of the Investors [by the Investors' Representative]:

Name: …………………………………… Name: ……………………………………

Date: …………………………………… Date: ……………………………………

Signature ………………………………… Signature …………………………………

SIGNED on behalf of [insert name of Company] Limited by:

Director Director:
…………………………….. ……………………….........

Date: Date:
…………………………….. …………………………......

Signature Signature
…………………………….. ……………………………...

18
May be applicable for an investor syndicate.
 TEMPLATE TERM SHEET
FOR ORDINARY SHARES

APPENDIX 1
Capitalisation Table

Class of Pre-money (Term Post-money at Target

Security Sheet signing)
Shares %age Cash-in $ per Share %age
share
Shares
Founders [ ] [ ]% $[ ] [ ] [ ] [ ]
Investors Up to $[ ] [ ] Up to [ [ ]
]
Options
ESOP [ ] [ ] [ ] [ ]
Others? [ ] [ ] [ ] [ ]

Total 100% [$ ] 100%

fully-diluted
 APPENDIX 2
Committed Investors

Investor Amount
[insert investor details] $[insert amount]
[insert investor details] $[insert amount]
[insert investor details] $[insert amount]
[insert investor details] $[insert amount]
[insert investor details] $[insert amount]
 APPENDIX 3

NZVIF Specific Provisions

Investor Representative NZVIF may appoint an Investor Representative to exercise NZVIF's

rights under the Investment Agreement.

Prohibited Business The Company is an "eligible" company in terms of NZVIF's investment

mandate.

Investors' Co-Sale Rights Co-sale rights will apply such that an Investor (including NZVIF) may
only sell some or all of its Shares if each of the other Investors has
been offered an opportunity to sell the same proportion of their
respective Shares on the same terms and that offer has been
available for acceptance by the other Investors for at least 10
Business Days.
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