Assume you have $8 million invested in the start up of your company and 4 years effort with no paycheck or profit. You just received the following information on your term sheet and this is your first attempt at Venture Capital Investment. What do you think ?

You are Purchasing 313,393 shares of series A convertible preferred stock from the company for $1,500,000

Cumulative dividends will accrue at annual rate of 8% and paid annually

Two board electors will be elected by series A preferred stock and have right to vote

Preferred stock will represent 20% of the company

Voting: Except with respect to election of directors, each holder of Series A Preferred Stock will have the right to that number of votes equal to the number of shares of Cormmon Stock issuable upon conversion of its Series A Preferred Stock. lative preferred dividends will accrue from the date of issuance at an annual rate of 8%, andwill be payable annually, beginning on the third anniversary of the initial closing. in Company completes a Qualified Public Offefing (as defined below) prior to the third anniversary of the initial closing. No dividends may be paid on the Common Stock so long as any Series A Pre shares of Series A Preferred Stock. Such dividends will be forgiven if the Stock remains outstanding. An amount equai to the greater of ( the original purchase price plus 10% compounded annually and (ii) the amount that would be paid on an as-converted basis. The holders of Series A Preferred Stock may also elect to treat a consolidation or merger of the Company or sale of all or substantially all of its assets as a liquidation or winding up for purposes of the liquidation preference. Conversion: The Series A Preferred Stock wil be convertible into Common Stock at any time, in whoie or in part, at the election of the holder. In addition, the Series A Preferred Stock will automaticaily convert into Common Stock upon(i) a rights offering or subscription offering (as described below). (i) a firm commitment underwritten public offering of Common Stock at an aggregate public offering price of not less than $35,000,000 (together with a rights offering or a subscription offering, a "Qualified Public Offering") or (ii) the vote of hoiders of at least two- thirds of the Series A Preferred Stock. PA-ESP's investment will be protected by means of an anti-3. dilution provision which adjusts the conversion ratio of the Series A Preferred Stock on a weighted average basis upon any issuance by the Company of Common Stock (or securities ) convertible into common stock), other than the Company's employee option plan, at a price lower than PA-ESP's original purchase pnice. Consent of the hoiders of at least a majority of the outstanding shares of Series A Preferred Stock will be required for any action which (i) alters or changes the nghts. preferences or privileges of the Series A Preferred Stock, (i) increases the authorized number of shares of Series A Preferred Stock, (ii) creates any new class of shares having preference over or being on a parity with the Series A Preferred Stock, or (iv) invoives sale by the Company of a substantial portion of its assets, any mecger of the Company with another entity, or any amendment of the Company's articles of incorporation. PA-ESP will have the first right to purchase all additional securities proposed to be issued by the Company for fund-raising purposes. This right will expire upon a Qualified Public Offering or, with respect to a particular issuance of securities, if such right is not exercised and