Expert answer:You Decide Case Study Questions

Answer & Explanation:ExerciseReview the sample term sheet . After examining the various provisions of the agreement, prepare a one- to two-page paper explaining: a) What should you be concerned about as an entrepreneur; b) What do you think the investors are concerned about; and c) What are both of you concerned about?Sample Term Sheet (1).docx You DecideThe Entrepreneurial ProcessReview theYou Decide transcript. You will create a 10–12-slide PowerPoint presentation that will describe the entire entrepreneurial process.You Decide TranscriptYou Decide Assignment Title:  The Entrepreneurial ProcessScenario SummaryYou have worked hard this semester learning about the process the entrepreneur takes to launcha new venture. In this assignment, you will be reviewing the first 6 weeks of this course to createan outline of this process.You work at a consulting company helping companies research, develop, and launch new ideas.The Vice President of Sales has asked you to create a document that highlights the entire processfrom idea generation to financing that will be used to help the sales team attract new clients. Youwill create a PowerPoint slideshow that outlines this process.Your Role/AssignmentYou are working for a consulting firm that helps new ventures launch. Your manager, KarlMecklenberg, has asked you to work with the sales team to develop a presentation slideshow thatwill highlight the steps taken in the development of a new venture. You will turn in a minimum of a12-page PowerPoint, complete with notes that describe this process.You have a meeting scheduled with Craig Morton, Vice President of Sales, who will describewhat the sales team requires for their presentation.ActivityAs an expert in entrepreneurship, you will outline the process that one goes through to launch anew business.As outlined in Week 2, you start with an idea and then assess its worth. Once you have anopportunity, you create a business model, develop a business plan, create a marketing strategy,develop a legal strategy, and assemble your team (Weeks 3–5). To finance this launch, you startwith seed money and eventually (if successful) reach out to angel investors or venture capitalists(Weeks 6 and 7).Be sure to highlight all of these areas and describe the process in each stage.Your presentation of 10–12 slides that including a cover page will be used to promote yourcompany as the right place to use to support entrepreneurial activity. The slideshow must be aprofessional presentation that is easy to read and follow. Use the notes section to describe eachslide in greater detail.To be successful, you should review each of the past weeks’ lectures and readings and bring inthese academic sources to support your process presentation.You are about to join a meeting with the Vice President of Sales, Craig Morton. Be sure to listento him as he describes his needs. Mr. Craig Morton, VicePresident, SalesHello, welcome to the company. I understand youare new here, but you come highly recommendedfrom your boss Karl. I am sure you will be veryhelpful for our department.As you know, our company assists entrepreneurs indeveloping ideas for potential ventures. Our salesteam works with various professional business clubsand often speaks to the groups about our servicesin order to attract new customers.In these meetings, my team describes what we doin great detail—from business plan development toassisting with acquiring funds. For the most part, thepresentation is outstanding, but it could beimproved, that is where you can help.We have received some feedback that while ourpresentation of services is well done, people felt itwould be a good idea (and help increase sales) ifwe could explain the overall entrepreneurial processfrom idea to funding in launching a new business.This improvement to our sales pitch would allow forus to highlight how we can help in each area andincrease the confidence of potential clients byshowing them the big picture first, before describingour individual consulting services.We would like you to develop a 10–12 pageslideshow that will describe the steps ofentrepreneurship, such as brainstorming an ideaand then assessing whether the idea is a trueopportunity. Then you could describe the secondstep an entrepreneur should take to develop astrategy and business plan; and then you coulddescribe the third step and so on…all the way tofinding investors for the new venture.Be sure to create a professional presentation that iseasy to read and is succinct. These are busypeople, so we want just the highlight of the processon the slides. And don’t forget to add notes in thePowerPoint that my sales team can read that describes what each slide should cover in detail.Thanks for your time…I look forward to thispresentation!End of Transcript
sample_term_sheet__1_.docx

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Sample Term Sheet is Below:
SAMPLE TERM SHEET –
FOR DISCUSSION PURPOSES ONLY
XYZ, INC.
SALE OF SERIES A CONVERTIBLE PREFERRED STOCK
TERM SHEET
Confidential
This term sheet summarizes the principal terms with respect to a potential private placement of equity
securities of XYZ, Inc. (the “Company”) by a group of investors (the “InvestorCo”). This term sheet is intended
solely as a basis for further discussion and is not intended to be and does not constitute a legally binding obligation
except as provided under “Confidentiality” below. No other legally binding obligations will be created, implied, or
inferred until a document in final form entitled “Stock Purchase Agreement,” is executed and delivered by all parties.
Without limiting the generality of the foregoing, it is the parties intent that, until that event, no agreement shall exist
among them and there shall be no obligations whatsoever based on such things as parol evidence, extended
negotiations, “handshakes,” oral understandings, or courses of conduct (including reliance and changes of position),
except as provided under “Confidentiality” below. The Company and the Investors are discussing a private
placement of shares of Series A Convertible Preferred Stock on the following terms:
Issuer:
XYZ, Inc. (the “Company”)
Investors/Amount of Investment: InvestorCo, or one or more designees of InvestorCo, and certain other investors to
be determined for an amount up to $
million with an initial closing of
$______. The Company and InvestorCo shall have the right to approve all
members of the investment syndicate and such approval shall not be unreasonably
withheld.
Type of Security:
Shares of the Company’s Series A Convertible Preferred Stock (“Series A Preferred
Stock”), convertible into shares of the Company’s Common Stock “Common”).
Upon conversion, but prior to a public sale, the Common into which the Series A
Preferred Stock has been converted will be referred to as Conversion Shares.”
(Assume no existing preferred.)
Number of Shares:
Up to _____ shares of Series A Preferred Stock
Founders:
________ and (“Founders”)
Price Per Share:
$
per share (“Original Purchase Price”).
Capitalization of the Company:
Current
Common
Convertible Debt (Common)
Convertible Debt (Series A Preferred)
Series A Preferred
Options
%
Post-Financing
%
%
%
%
%
%
%
%
%
%
%
%
%
Rights, Preferences, Privileges:
(1) Dividend Provisions: The holders of the Series A Preferred Stock will be
entitled to receive dividends at an annual rate of 8% of the then 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 Series A Preferred Stock (based on the number
of shares of Common into which the Series A Preferred Stock is convertible on the
date the dividend is declared). Dividends on Series A Preferred Stock will be in
preference to dividends paid on the Common. Dividends on the Series A Preferred
will be cumulative.
(2) Liquidation Preference:
In the event of any liquidation, dissolution or
winding up of the Company, the holders of Series A Preferred Stock will be
entitled to be paid as follows: First, the holders of the Series A Preferred Stock
shall 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 Series A Preferred but not paid. Second, the holders of Series A
Preferred Stock and the holders of Common will be entitled to receive pro rata, on
a pari passu basis with the Series A Preferred Stock being deemed to have been
converted to Common immediately prior to such liquidation, the remaining
amounts or assets to holders of capital stock of the Company, provided that the
holders of the Series A Preferred Stock shall not be entitled to receive pursuant
to this sentence an amount in excess of three times the Original Purchase Price.
The effectuation by the Company or third -party acquirors of a transaction or
series of transactions in which more than 50% 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 Series A Preferred will have the right to convert
Series A Preferred Stock, at the option of the holder, at any time, into shares of
Common. The total number of shares of Common into which Series A Preferred
may be converted initially will be determined by dividing the Liquidation
Preference by the conversion price. The initial conversion price will be the
Original Purchase Price. The conversion price will be subject to adjustment to
reflect stock dividends, stock splits and similar events and as provided in
paragraph (4) below. The Series A Stock will be automatically converted into
Common, at the then applicable conversion price, in the event of (a) an
underwritten public offering of shares of Common at a public offering price per
share that would value the Company at not less than $3.00 per share (subject to
adjustment) in an offering of not less than $10,000,000 or (b) the vote of the
holders of two -thirds of the outstanding Series A Preferred Stock.
(4) Antidilution Provisions: The conversion price of the Series A Preferred Stock
will be subject to adjustment (a) for stock dividends, stock splits, or similar
events, and (b) on a weighted average basis to prevent dilution in the event that
the Company issues additional shares at a purchase price less than the Original
Purchase Price, as adjusted hereunder. No adjustment to the conversion price
will occur for any issuance of additional shares at a purchase price in excess of
the Original Purchase Price, as adjusted hereunder. Conversion prices will not be
adjusted because of (a) conversion of Series A Preferred Stock, or (b) the issuance
and sale of, or the grant of options to purchase, 10% shares of Common pursuant
to the Company’s employee stock purchase or option plans (the “Reserved
Employee Shares”).
(5) Voting Rights : Except as provided by law and with respect to election of
Directors, a holder of Series A Preferred Stock will have the right to that number
of votes equal to the number of shares of Common issuable upon conversion of
its Series A Preferred Stock at the time the shares are voted. Election of Directors
will be as described under “Board Representation” below.
(6) Protective Provisions: Without the written consent of at least one Series A
Preferred Director, which consent will not be unreasonably withheld, conditioned
or delayed, the Company will not agree t o and the Board will not authorize any of
the following matters: (1) approval of the Company’s annual capital expenditure
budget; (2) approval of the Company’s annual performance budget; (3) incurrence
of any indebtedness in excess of $_____; (4) incurrence of any lien upon any
of its property or revenues in excess of $_____; (5) transactions with affiliates
of the Company, provided that an affiliate shall not include a subsidiary of the
Company, whether or not wholly -owned; (6) appointment or dismissal of the
Company’s Chief Executive Officer and any other member of senior management;
(7) approval of the Chief Executive Officer’s and each other member of senior
management’s respective employment arrangements; or (8) creation of a
subsidiary other than a wholly-owned subsidiary.
Written consent of the holders of fifty-one percent (51%) of the Series A Preferred
Stock will be required for: (1) authorization, creation and/or issuance of a senior
class or series of equity securities over the Series A Preferred Stock or a parity
class or series of equity securities; (2) amendments to the Certificate of
Incorporation or By -Laws of the Company; (3) an increase or decrease in the size
of the Board of Directors; (4) payment of dividends, or redemption or repurchase
of stock or stock options; (5) liquidation or dissolution of the Company or the
sale, lease or other disposal of all or substantially all of the Company’s assets;
and (6) any reorganization, consolidation or merger of the Company with another
entity in whic h more than 50% of the voting power of the Company is transferred.
Information and
Registration Rights:
(1) Information Rights : So long as an Investor holds Series A Preferred Stock (or
Conversion Shares), the Company will deliver to such Investor annual audited
and quarterly unaudited financial statements. So long as the Investor holds at
least 25% of the capital stock (in the form of Series A Preferred Stock or
Conversion Shares) held on the date of the Closing, the Company will timely
furnish each Investor with annual budgets after such budgets have been approved
by the Company’s Board of Directors.
(2) Demand Rights If, at any time after the earlier of the Company’s initial public
offering and the date three years from the purchase of the Series A Preferred
Stock (but not within 180 days of the effective date of a registration), investors
holding at least 25% of aggregate voting power of the Series A Preferred Stock
and Conversion Shares request that the Company file a Registration Statement
for at least 25% of the Common issued or issuable upon conversion of the Series
A Preferred Stock (or any lesser percentage if the aggregate offering price to the
public would exceed $5,000,000), the Company will use its best efforts to cause
such shares to be registered. The Company will not be obligated to effect more
than two registrations (other than on Form S-3) under these demand registration
right provisions.
(3) Piggyback Registration: The Investors will be entitled to “piggyback”
registration rights on registrations of the Company or on any demand registrations,
subject to the right of the Company and its underwriters, in view of market
conditions, to reduce or eliminate the number of shares of the Investors
proposed to be registered.
(5) Registration Expenses : All registration expenses (exclusive of underwriting
discounts and commissions and special counsel fees of a selling shareholder)
shall be borne by the Company.
(6) Other Registration Provisions: Other provisions will be contained in the
Investor Rights Agreement with respect to registration rights as are customary,
including the agreement by the holders of the Series A Preferred Stock (if
requested by the underwriter in connection with the initial public offering of
securities of the Company) not to sell any unregistered Common they hold for a
period of 180 days following the effective date of the Registration Statement of
such offering.
Board Representation:
The authorized number of directors of the Company will be fixed at
. The
Board of Directors (the “Board”) shall include: (i) at least two (2) representatives
designated by the Series A Preferred Stock
(each a “Series A Preferred
Director”); and (ii) three (3) representatives designated by the Founders (each a
Founder-Director). InvestorCo shall be entitled to elect one of the Series A
Preferred Directors in the event that InvestorCo (or its designees) purchases at
least $_____ of the Series A Preferred Stock.
Use of Proceeds:
The proceeds from the sale of the Series A Preferred will be used for working
capital.
Employment Relationships:
The Company has or will have prior to the closing employment agreements with
persons mutually agreed to by the Company and Investors (the “Management
Team”).
Drag-Along Rights:
In the event that one or more holders of the capital stock of the Company
holding more than 75% of the voting power of the capital stock of the Company
(with the Series A Preferred Stock voting on an as converted to Common basis)
accept an offer to sell all of their stock to a third party, and such sale is
conditioned upon the sale of all remaining capital stock of the Company to such
third party, all of the holders of the capital stock of the Company shall be
required to sell their stock in such transaction, on the same terms and conditions.
Right of First Refusal:
In the event that the Company offers equity securities (other than Reserved
Employee Shares, or upon conversion of outstanding Series A Preferred Stock,
or upon exercise of outstanding options or warrants, or in connection with an
acquisition or in a public offering), each Investor shall have a right of first refusal
to purchase a pro rata percentage of shares in the new offering, based on the
holder’s percentage ownership interest in the Company.
Tag-Along Rig hts:
In the event a Founder proposes to sell shares of the Company, each Investor
will be entitled to participate in such sale by selling the same percentage of his
stock as such Founder is selling of his stock.
Confidential Information and
Inventions Assignment
Agreement:
The Stock Purchase Agreement:
Each officer, director and key employee of the Company will enter into a
Confidential Information and Inventions Assignment Agreement in a form
reasonably acceptable to the Company and the Investors.
The purchase of the Series A Preferred, if consummated, will be made pursuant to
a Stock Purchase Agreement (with exhibits) drafted by counsel to the Company
and acceptable to the Investors. The Stock Purchase Agreement will contain,
among other things, representations and warranties of the Company, covenants
of the Company, and conditions to the obligations of the Investors.
Redemption:
If the Series A Preferred Stock has not been converted to Common before
December 31, 2012 he holders shall have the option to force the Company to
redeem the Series A Preferred Stock in three equal yearly installments beginning
March 1, 2013, the redemption amount shall be equal to the original Series A
Preferred Stock purchase price, plus any accrued but unpaid dividends.
Voting Agreement:
The Founders will enter into a voting agreement with the Investors to enforce
their obligations hereunder.
Conditions of Closing:
The closing for the purchase of the Series A Preferred will be conditioned upon:
(1) Completion of due diligence to the satisfaction of the Investors in their sole
discretion.
(2) Execution by the Company of a Stock Purchase Agreement and related
agreements satisfactory to the Investors in their sole discretion.
(3) Compliance by the Company with applicable securities laws.
(4) Opinion of counsel to the Company rendered to the Investors in form and
substance satisfactory to the Investors.
(5) Other material conditions, to be discussed.
(6) Such other conditions as are customary for transactions of this type.
(7) Execution by the Founders of a Voting Agreement.
Expenses:
The Company and the Investors will each bear their own legal and other expenses
with respect to the transaction (except that the Company will pay the fees and
expenses of (a) counsel to the Investors and (b) consultants to the Investors,
subject to a maximum aggregate amount for both (a) and (b) of
$______). The Investors shall be entitled review by their attorneys of material
agreements, at the Investors’ sole cost and expense, following the transaction;
provided, however, that the Company shall have no obligation to provide such
information to Investors if the Company reasonably determines that the
information contains confidential information of the Company.
Finders:
The Company and the Investors each will indemnify the other for any finder’s
fees for which that party is responsible.
Closing:
The initial closing of the sale of $
of Series A Preferred Stock, if all
conditions are met, is expected to occur on or before _____, 2012 he additional
Series A Preferred Stock may be sold by the Company on a rolling basis
thereafter.
Expiration of Proposal:
This Term Sheet will automatically expire, and be of no further force or effect,
if (1) the Investors have not received from the Company a copy of this letter
acknowledged and agreed to by the Company on or before 5:00 p.m.
Eastern Standard Time on ______, 2001 or (2) prior to any such receipt, the
Investors orally or in writing, give notice of withdrawal hereof. In addition,
the Proposal will expire if the Investors do not purchase the Series A
Preferred Stock for cash by
, 2012
Confidentiality:
The terms of the Proposal are confidential, and neither the contents of this
letter nor the details of the Proposal may be shown or disclosed by the
Company except to those individuals at the Company who have a need to
know as a result of being involved in the proposed transaction and, after
signing this Proposal, the Company may disclose the contents to other
individuals who have a need to know as a result of being involved in the
proposed transaction or to other individuals or entities for purposes of making
such individuals or entities “Investors” in the Company’s Series A Preferred
Stock.
Counsel to the Investors:______________________________________Phone:
Fax: Attn:
Counsel to the Company:
Emery
McDermott,
Will
&
THE FOREGOING SUMMARY SETS FORTH THE TERMS OF THIS LETTER OF INTENT, WHICH
TERMS ARE NON-BINDING EXCEPT FOR THE CONFIDENTIALITY PROVISIONS WHICH SHALL BE
BINDING AND SURVIVE EXECUTION OF THIS AGREEMENT.
Dated:
,_______ 2012
INVESTORCO
INC.
By:
______________________________
Name:
Title:
XYZ,
By: __________________________________
Name:
Title:
…
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