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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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Stock equal to the Total Number of Shares
minus
the Number of Preferred Stock.
[O
PTIONAL
C
ONVERSION
:
In the event the Company does not consummate a Qualified Financingprior to [date], then at the election of the holder, the entire Investment
Amount shall convert into shares of the Company’s Common Stock at
the [Valuation Cap]/[valuation of $2,000,000].]
C
HANGE OF
C
ONTROL
:
 
If the Company consummates a change of control prior to a QualifiedFinancing, then the entire Investment Amount shall convert into shares
of the Company’s Common Stock at the Valuation Cap.
 [ALTERNATIVE: If the Company consummates a change of controlprior to a Qualified Financing, then, upon the election of the holder,either (i) the holder shall receive a payment equal to two times theInvestment Amount, or (ii) the entire Investment Amount shall convert
into shares of the Company’s Common Stock at the Valuation Cap.]
 
A
MENDMENT
:
The Convertible Securities may be amended with the consent of theCompany and holders holding a majority of the aggregate outstandingInvestment Amount of the Convertible Securities.
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