To nitpick, I think Agarwal's wording about the liquidation preference gives the impression the term sheet implements what's called 'fully participating' preference, where even after collecting the preference amount, they also share in the remaining money.
IANAL, but I think the wording actually implies a 'non-participating' preference: series AA can take the preference amount, or convert to common and share pro-ratably with commons, but not both.
To picture the difference: take Agarwal's example of selling 10% for $10K. But then imagine the company is sold for only $110K. With fully-participating preferred, I believe the investor gets their $10K liquidation preference, then also 10% of the remaining money, for a total of $20K. With non-participating, they could take the $10K liquidation preference, but then they would share none of the rest with the common. Instead they will choose to convert to common and get 10% of the total, $11K. (Someone please correct me if I'm wrong.)