Convertible Note Term Sheet (Page 2 of 2) in pdf

respect to a Maturity Conversion shall be the Valuation Cap divided by the Company’s

fully diluted pre-money capitalization on the Maturity Date.

PrePayment

The principal and accrued interest may not be prepaid unless approved in writing by the

holders of a majority in interest of the Notes.

If the Company is merged with or otherwise acquired by another entity (an “Acquisition

Acquisition Event

Event”) prior to the Next Equity Financing, then at the option of the holders of a majority

in interest of the Notes, either (i) the Company shall repay the outstanding principal and

accrued interest on the Notes, plus a repayment premium of 200% of the original

principal amount of the Notes, or (ii) the Notes may be converted into Common Units of

the Company at a conversion price equal to the Valuation Cap divided by the

Company’s fully diluted pre-money capitalization immediately before the Acquisition

Event.

Lead Investor Rights

Information Rights

The Company will provide the Lead Investor with quarterly reports on its operations,

including financial statements and key performance indicators (KPIs) to be agreed upon

by the Company and the Lead Investor.

Option to Sell

Following a conversion of the Notes, the Lead Investor will have the option to sell at any

time its units of the Company back to the Company, at an aggregate purchase price of

USD $1.00.

Pro Rata Rights

The Lead Investor will have a pro rata right, but not an obligation, to participate in the

Next Equity Financing based on its percentage equity ownership after giving pro forma

effect to the conversion of the Notes in the Next Equity Financing.

The founders’ Common Units will vest as follows: after 12 months of service following

Founder Vesting

the initial closing, 25% will vest; the remainder will vest monthly over the following 36

months.

Additional Debt

The Company will agree not to incur any other indebtedness, including any other

convertible notes, without the prior written approval of the holders of a majority in

interest of the Notes.

Confidentiality

[Startup Name] and the Lead Investor will not, without the prior written consent of the

other party, disclose this term sheet or their discussions regarding the Notes to any third

party, except to the extent required by law.

This term sheet is non-binding and is intended solely as a summary of the terms that are currently proposed by

the parties. Except as set forth above under the caption “Confidentiality,” which is a legally binding paragraph, the parties

acknowledge that they neither intend to enter, nor have they entered, into any agreement to negotiate a definitive

agreement pursuant to this term sheet, and either party may, at any time prior to execution of such definitive agreement,

propose different terms from those summarized herein or unilaterally terminate all negotiations pursuant to this term sheet

without any liability whatsoever to the other party.

[STARTUP NAME]

CANARY FUND

By:

Name:

Title:

Title

Date:

Convertible Note Term Sheet Page 2

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