IN [NAME OF CORPORATION] /
AND STRATEGIC ALLIANCE
This term sheet summarizes the principal terms with respect to a potential private placement of equity securities of [NAME OF CORPORATION] (the “Company”) by [NAME OF INVESTOR] (“Investor”) and related strategic alliance. This term sheet is intended solely as a basis for further discussion and is not intended to be and does not constitute a legally binding obligation. No legally binding obligations will be created, implied, or inferred until a document in final form entitled “Series Stock Purchase Agreement,” is executed and delivered by all parties. Without limiting the generality of the foregoing, it is the parties intent that, until that event, no agreement shall exist among them and there shall be no obligations whatsoever based on such things as parol evidence, extended negotiations, “handshakes,” oral understandings, or courses of conduct (including reliance and changes of position). / The Company and the Investor are discussing a private placement of shares of Preferred Stock on the following terms: Amount of Investment:$[N] /
Valuation of the Company:$[N] Pre Money / on a fully diluted basis $[N] Post Money on a fully diluted basis
Type of Security:Shares of the Company’s Series Preferred Stock (“Preferred”), convertible into shares of the Company’s Common Stock (“Common”).
Price Per Share:$[N] (“Original Purchase Price”).
Capitalization of the Company:The current capitalization of the Company is set forth in Exhibit 1, and the capitalization of the Company after this proposed financing is set forth in Exhibit 2. / Rights, Preferences, Privileges and Restrictions of Preferred Stock:(1) Dividend Provisions: [Starting on [DATE]], the holders of the Preferred will be entitled to receive dividends [at the rate of [N]% of the Original Purchase Price] whenever funds are legally available and when and as declared by the Board. No dividend shall be paid on the Common at a rate greater than the rate at which dividends are paid on Preferred (based on the number of shares of Common into which the Preferred is convertible on the date the dividend is declared). Dividends on Preferred will be in preference to dividends paid on the Common. Dividends on the Preferred will be noncumulative. /
(2) Liquidation Preference: In the event of any liquidation, dissolution or winding up of the Company, the holders of Preferred will be entitled to receive in preference to the holders of Common / an amount (“Liquidation Preference”) equal to the Original Purchase Price plus any dividends declared on the Preferred but not paid [and then to share with the holders of the Common in the remaining assets on an as if converted basis]. / At the option of the holders of Preferred, the effectuation by the Company or third party acquirers of a transaction or series of transactions in which more than [50%/ 80%] of the voting power of the Company is disposed of to a single person or group of affiliated persons or the consolidation or merger of the Company with or into any other corporation or corporations or the sale of all or substantially all of its assets shall be deemed to be a liquidation, dissolution or winding up for purposes of the liquidation preference.
(3) Conversion: A holder of Preferred will have the right to convert Preferred, at the option of the holder, at any time, into shares of Common. The total number of shares of Common into which Preferred may be converted initially will be determined by dividing the Original Purchase Price by the conversion price. The initial conversion price will be the Original Purchase Price. The conversion price will be the subject of adjustment to reflect stock dividends, stock splits and similar events and as provided in paragraph (5) below.
(4) Automatic Conversion: / The Preferred will be automatically converted into Common, at the then applicable conversion price, upon...