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Amount of Financing:
$X John Smith Proceeds to be used for the purposes of achieving agreed upon milestones and general corporate purposes.
Expected Closing: Types of Investment:
On or before September 15, 2009 Convertible Debt represented by promissory notes (the “Notes”); a vote of the majority of principal amount of Notes will control decisions requiring a consent, request or vote of Note holders; 7.0 % compounded monthly (A/360). Two years following the issuance of the Notes, provided however, Note holders, by vote, may extend the Maturity Date to a date no later than 36 months after the issuance of the Note without the Company’s consent. Principal and accrued interest is due and payable in a single installment at Maturity. None, without the consent of the Company and the Note holders. Optional conversion for principal amount and accrued interest: i) In a next round of equity financing (the “Next Equity Round”), at or greater than $500,000, each Note Holder may elect to convert its Notes, into the same class or series of shares that are issued in the Next Equity Round and the number of shares of stock to be issued will be determined by dividing the aggregate principal amount and accrued interest on the Notes by the “Conversion Price”. The “Conversion Price” will be at a 10% discount to the price per share paid by investors in the Next Equity Round Financing if the financing occurs within 6 months after issuance of the Notes. The discount will then increase by 5% every three (3) months until sooner of the Next Equity Round, or the discount reaches 30%. ii) If neither the Next Equity Round nor a change in control or IPO has occurred prior to the Maturity Date, then upon maturity the Note holdersshall each have the option to convert to participating preferred stock (with 1X liquidation preference and weighted average anti-dilution protection) based on a $1.5 million pre-money valuation, on a fully diluted basis. iii) If prior to the Maturity Date (as may be extended) and prior to conversion pursuant to section (i) above (a) the Company has signed a
Payment of Principal and Interest: Prepayment: Optional Conversion:
on a fully diluted basis. In addition. provided. (ii) quarterly compiled statements within 45 days after each quarterly ended period.letter of intent or definitive agreement contemplating a change of control of the Company or (b) the Company has filed a registration statement with the Securities and Exchange Commission contemplating an IPO to be underwritten by a nationally recognized investment bank. The investment documents shall be governed by NY law. Company to pay fees and expenses of transaction counsel for the Note holders in an amount not to exceed $3. Indemnification and Governing law: The Company will indemnify the Investors for any claims brought against the Investors by any third party (including any other shareholder of the Company) as a result of this financing. Reporting Requirements: The Company shall deliver to the Note holders annual performance reports (as agreed to by the Note holders) and annual unaudited financial information for a period of 3 years from repayment or liquidation. Expiration and Counsel Fees: These terms will expire 90 days after the first investment.5 million premoney valuation equity in the Company. then the Note holders shall each have the option to convert immediately prior to such change of control or IPO to participating preferred stock (with 1X liquidation preference) in either event equal to equity in the Company. upon prior request of the Note holders: (i) annual audited financial statements within one hundred and twenty (120) days after each fiscal year end. on a fully diluted basis. COMPANY: INVESTORS: . (iv) an annual budget no later than thirty (30) days before the beginning of each fiscal year as approved by the Board of Directors. that if such change of control or IPO has not occurred prior to six months after the Maturity Date and is not then pending. the Company will deliver.000. then the Note holders shall have the option to convert their Notes to convertible participating preferred stock (with 1X liquidation preference and weighted average anti-dilution protection) based on a $1. however. The third member shall be selected by the Company from among non-employee investors and research sponsors. Two member of the Board shall be selected from among Company officers. Board Representation: The Board of Directors shall consist of three members. All of the financial reports will be provided in a form and format acceptable to the investors.
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