I want to learn more about Angel and VC Terms Sheets and general investing legal documents and thought that the YCombinator Term Sheet (found here http://ycombinator.com/seriesaa.html) would be a great place to start. Everything in there I understand and seems to make sense. But, I have one question:
In the Protective provisions section, it states:<p>"So long as any of the Preferred is outstanding, consent of the holders of at least 50% of the Preferred will be required for any action that:"...
"(iii) approves any merger, sale of assets or other corporate reorganization or acquisition"<p>Because Preferred stock can be converted to common stock at any time surely this means that the owners of Preferred stock can convert 99.9% of their Preferred stock to common stock, and keep the 0.1% of Preferred stock through all rounds of funding and have final say on all matters mentioned in (iii) above?<p>Is this done in practice, what am I missing? (and thanks in advanced)