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Equity Investment Term Sheets > Equity Investment Term Sheets - Pg. 67

Financing a Game Development Venture Note 67 NOTE Tax and securities law maymake it necessary to create aseparate class for investors. Note TIP As with a publishing contract,"price" is only one small issueand what looks like a great dealcan be hollowed out by otherterms of the contract. Get yourlawyer involved ASAP in anyinvestment discussion. · Type of Offering. What is the amount and type (preferred stock? convertible preferred?) of securities being offered? For the first round of institutional financing, this may be called "Series A Convertible Preferred Stock" or "Series A Preferred." · Valuation/Capitalization of Company. How much is your company worth, before and after fi- nancing? What percentage of the company is represented by the Series A investment? How many shares/options/other securities are outstanding? Sometimes the parties will attach a cap table that shows the breakdown of stock ownership before and after the round. · Dividends. Dividends are cash distributions paid out to shareholders. Different classes of se- curities may have different rights to receive dividends. The Series A Preferred may or may not receive the same dividend payments as the common stock shareholders. The investor may ask for the right to receive a set annual dividend that is only payable if the company liquidates (if you're thinking this sounds a lot like an interest rate, you're right). Dividend rules are usually established in the incorporation documents. · Optional Redemption. The investors will want the option to force the company at some point in the future to buy the investor's shares. The customary requested price equals the original