Senior Secured Convertible Debenture Term Sheet

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Senior Secured Convertible Debenture Term Sheet Powered By Docstoc
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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
				
DOCUMENT INFO
Description: A term sheet is a bullet-point document outlining the material terms and conditions of a business agreement. After a Term Sheet has been "executed", it guides legal counsel in the preparation of a proposed "final agreement". It then guides, but is not necessarily binding, as the signatories negotiate, usually with legal counsel, the final terms of their agreement. Term sheets are very similar to "letters of intent" (LOI) in that they are both preliminary, mostly non-binding documents meant to record two or more parties' intentions to enter into a future agreement based on specified (but incomplete or preliminary) terms. The difference between the two is slight and mostly a matter of style: an LOI is typically written in letter form and focuses on the parties intentions; a term sheet skips most of the formalities and lists deal terms in bullet-point or similar format. There is an implication that an LOI only refers to the final form. A term sheet may be a proposal, not an agreed-to document.
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