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Form of Convertible Security Term Sheet

Form of Convertible Security Term Sheet

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Published by Yoichiro Taku
Form of Convertible Security Term Sheet as an alternative to convertible debt
Form of Convertible Security Term Sheet as an alternative to convertible debt

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Categories:Business/Law
Published by: Yoichiro Taku on Aug 30, 2012
Copyright:Attribution Non-commercial

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06/03/2014

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This sample Summary of Terms has been prepared by Wilson Sonsini Goodrich & Rosati for informational purposesonly and does not constitute advertising, a solicitation, or legal advice. Neither the transmission of this sample Summaryof Terms nor the transmission of any information contained in this website is intended to create, and receipt hereof orthereof does not constitute formation of, an attorney-client relationship. This sample Summary of Terms was drafted forcompanies incorporated in Delaware with principal executive offices in California for use with California purchasers thatqualify under applicable state and federal securities laws. Internet subscribers and online readers should not rely uponthis sample Summary of Terms or the information contained in this website for any purpose without seeking legal advice
from a licensed attorney in the reader’s state.
 The information contained in this website is provided only as general information and may or may not reflect the mostcurrent legal developments; accordingly, information on this website is not promised or guaranteed to be correct orcomplete. Wilson Sonsini Goodrich & Rosati expressly disclaims all liability in respect to actions taken or not takenbased on any or all the contents of this website. Further, Wilson Sonsini Goodrich & Rosati does not necessarilyendorse, and is not responsible for, any third-party content that may be accessed through this website.
Document1
 
CONVERTIBLE SECURITY FINANCINGSUMMARY OF TERMS
I
SSUER 
:
 
[Name] (the “
Company
”).
 
T
YPE OF
S
ECURITY
:
 
Up to $[Amount] worth of convertible securities (the “
Convertible
 
Securities
”).
 
T
ARGET
C
LOSING
D
ATE
:
[Date].
 M
INIMUM
I
NVESTMENT
:
$[25,000] per investor.
Q
UALIFIED
F
INANCING
:
Preferred Stock financing of at least $[1,000,000].
 C
ONVERSION
P
RICE
:
Lower of [80]% of the price per share paid by other purchasers in theQualified Financing or a $[4,000,000] valuation cap (obtained by
dividing $[4,000,000] by the Company’s fully
-diluted capitalization)
(the “
Valuation Cap
”).
 A
UTOMATIC
C
ONVERSION
:
In the event the Company consummates a Qualified Financing prior toa change of control, the amount invested by an Investor for the
 purchase of such Investor’s Convertible Securities (the
InvestmentAmount
”) shall automatically convert into shares of the Company’s
Preferred Stock sold in the Qualified Financing and Common Stock atthe Conversion Price. The total number of shares of Preferred Stock and Common Stock that a holder of Convertible Securities shall beentitled upon conversion of such Convertible Securities shall bedetermined by dividing (i) the Investment Amount by (ii) theConversion P
rice (the “
Total Number of Shares
”). The Total
Number of Shares shall consist of (i) that number of Preferred Stock obtained by dividing (a) the Investment Amount by (b) the price pershare paid by other purchasers in the Qualified Financing (the
Number of Preferred Stock
”) and (ii) that number of Common

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