1) Suppose founders own 50% of company ZYG and VC's preferred stock shares are convertible at $1 per share. VC#1 has already put in $2M for 2M shares. In 18 months, an infusion of another $2M from VC#2 is needed priced at $0.50 per share (down round).

a) If there is no full ratchet, (i) what is ownership after new round of (i) VC#1, (ii) founders, (iii) VC#2?

b) What is ownership of three parties after full ratchet?

2) Suppose founders own 70% of company ING and VC's preferred stock shares are convertible at $1 per share. VC#1 has already put in $5M. In 12 months, an infusion of$1M from VC#2 who is given 1.5M shares.

a) What is ownership of three parties after full ratchet?

b) If the term sheet contains broad weighted average ratchet, what is the ownership of each party after second round?