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CONFIDENTIAL NON-BINDING TERM SHEET
Issuer: [COMPANY]. (“[XXXX]” and or the “Company”)
Ticker Symbol: Bulletin Board: [XXXX]
Net Amount: Up to $00,000,000 U.S. Dollars (the “Financing”)
Investors: Select Institutional and Accredited Investors (the “Investors” or “Holders”)
Securities: Series A Senior Secured Convertible Debenture (the “Debenture” or
"Convertible Debenture"), Series A5 Warrant, Series B4 Warrant, & Series
C3 Warrant.
Shares Issued & Outstanding: Common stock, $0.001 par value, 000,000,000 shares authorized,
000,000,000 shares issued and outstanding as of [DATE]. Series C
Preferred Stock, $0.001 par value, 00,000,000 shares authorized,
000,000,000 issued and outstanding at [DATE]; Treasury stock, 000,000
shares of common stock at [DATE].
Original Issue Discount 00%. A separate OID Note shall be issued to each Investor for the OID.
This OID Note shall not yield a coupon and shall not entitle the Holder to
warrant rights. All other provisions related to the Debentures shall be
attributable to these OID Notes. Face value of debentures issued to include
the OID for a net amount issuance of up to $00,000,000
Closing Date: On or before 6:00 PM EST, Friday, [DATE] (the “Closing”).
Stated Value: $000,000 per Convertible Debenture (“Stated Value)
Maturity: Twenty-four (24) Months (“Maturity Time Frame”)
Market Price: The Market Price shall be defined as the ten (10) volume weighted average
trading closing prices of the Company’s common stock for the ten (10)
trading days preceding the ex-coupon and/or ex-amortization date.
Fixed Conversion Price: At the option of the holder, Debentures may be converted into shares of
common stock lessor of .000 or at eighty five (00%) of the five (5) day
volume weighted average trading price prior to Closing (the “Fixed
Conversion Price”).
Amortization Option: Beginning four (4) months from closing, the Convertible Debenture shall
amortize one twentieth (1/20th) of the Investor’s initial investment into the
Company in any given month in either cash or stock at the option of the
company up to twenty times over the life of the Convertible Debenture.
Should the Company elect to satisfy the Amortization option with stock,
the Company must give the Investors twenty (20) days prior written notice
and such payments shall be satisfied with registered common stock at a
twenty percent (00%) discount to the Market Price. Investors shall have the
right to defer amortization payments to a later amortization date in any
given month.
Warrants: Series A5 Warrants:
The Investors shall be issued common stock purchase warrants (the “Series
A5 Warrants”) in an amount equal to _____________ percent (0%) of the
number of common shares underlying the Debenture based on the Fixed
Conversion Price. The Series A5 Warrants shall have a term of five (5)
years from the closing date and shall have an exercise price equal to $.000.
Series B4 Warrants:
The Investors shall be issued common stock purchase warrants (the “Series
B4 Warrants”) in an amount equal to _________ percent (00%) of the
number of common shares underlying the Debenture based on the Fixed
Conversion Price. The Series B4 Warrants shall have a term of four (4)
years from the effective date and shall have an exercise price equal to $.00.
Series C3 Warrants:
The Investors shall be issued common stock purchase warrants (the “Series
C3 Warrants”) in an amount equal to one hundred percent (100%) of the
number of common shares underlying the Debentures at the time of
Closing. The Series C3 Warrants shall have a term of three (3) years from
the effective date and shall have an exercise price of $.000.
Registration: The Company shall file a Registration Statement on Form SB-2 (or an
alternative available form if the Company is not eligible to file a Form SB-
2) covering the Common Shares underlying the Debenture and the Warrant
Shares no later than forty five (45) days after the Closing, and use its best
efforts to have the Registration Statement declared effective within ninety
(90) days after the Closing (or within one hundred twenty (120) days after
the Closing if the Registration Statement receives a “full review” from the
Securities and Exchange Commission).
Liquidated Damages: The Registration Statement must be filed within forty five (45) days. In the
event the Registration Statement has not been declared effective within one
hundred twenty (120) days of the Closing (or within one hundred fifty
(150) days of the Closing if the Registration Statement receives a “full
review” from the Securities and Exchange Commission), the Company
shall pay to the Investors liquidated damages equal to 1% of the amount
invested and shall pay to the Investors liquidated damages equal to 1% of
the amount invested for each subsequent 30-day period.
Right of First Offer: For any equity or equity linked private financing consummated within 12
months after the Closing, the holders of the Debenture shall have a pro-rata
right to purchase all or part of the private financing. The Investors shall
have ten (10) trading days to respond to a signed and accepted term sheet
by the company. A carve out of this provision will be granted to the Issuer
for the issuance of stock for situations involving strategic partnerships,
acquisition candidates and public offerings.
Most Favored Nations Exchange: As long as they hold the notes the right is there, if the Company
consummates a private equity or equity-linked financing (the “New
Financing”), the Investors may exchange any remaining Debentures at their
Stated Value for the securities in the New Financing.
Full Ratchet Price Protection: The Conversion Price of the Debenture shall be subject to adjustment for
issuances of Equity or Equity Linked Financings (other than issuances
related to this Financing) at a purchase price of less than the Conversion
Price or Exercise Price, such that the conversion price or exercise price
shall be adjusted using full ratchet price based price protection on such new
issuances subject to customary adjustments such that the Conversion Price
of the Debenture and the Exercise Price of the Warrants shall be fully
adjusted down to that future common stock or conversion price as price-
based anti-dilution. No adjustments shall be made for any stock issuances
(carve-outs) that the Company makes in the normal course of business
operations.
Change of Control: In the event of a change of control transaction (third p