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Presents DART of Mock Term Sheet Case

Presents DART of Mock Term Sheet Case. Major Red Flags. 1.Conditions to receive second tranche of financing: Term: Developing a product capable of entering human clinical trials in US within 6 months from date of in-license

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Presents DART of Mock Term Sheet Case

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  1. Presents DART of Mock Term Sheet Case

  2. Major Red Flags 1.Conditions to receive second tranche of financing: Term: • Developing a product capable of entering human clinical trials in US within 6 months from date of in-license • Achieving conditions precedent to the disbursement of the second tranche of financing within 9 months. Reasons: • Life-science/biotech industry requires a long time for R&D and licensing of a product • InfiniteWisdom is still an early stage start-up, which means it requires more time for R&D 2. Dividends: Term: • Requiring cumulative dividends at the rate of 8% Reasons: • Cumulative dividends would adversely affect company’s cash flow and put it at a competitive disadvantage

  3. Major Red Flags 3. Antidilution Provisions Term: • The conversion price is adjusted to half of the then-current conversion price if Company does not recognize revenue of at least $2 million by December 2007 • The conversion price of the preferred stock will be subject to a full ratchet adjustment Reasons: • Generating $2 million is very difficult for an early stage biotech company • Potential to change company share structure tremendously. 4. Rights of First Refusal Term: • Investors holding 200,000 shares of Registrable Securities having the right if Company proposes to offer equity securities to any person to purchase their pro rata portion of such shares. Reasons: • Legally, so long as the investor holds at least 5% of the Company’s outstanding Capital, such rights are given to those Major Investors.

  4. Negotiation

  5. Factors for change terms Factor that will affect whether or not negotiations can be done: • Company valuation: The higher the company valuation is, greater is the chance to get the changes done • Financing Environment NVCA report • Negotiation skills, knowledge of the lawyer: Good negotiation skills, and knowledge of the lawyer plays an important role in making the points clear and achieving the goal of the company. • Principle scientist DesCartes

  6. Conflict of Interest • Liquidation Preference The holders of the Series A Preferred shall be entitled to receive in preference to the holders of the Common Stock a per share amount equal to two (2) times the Original Purchase Price, plus any accrued but unpaid dividends ( the Liquidation preference). • Employee Option Pool Upon the Closing of this financing there will be 6,500,000 shares of issued and outstanding Common Stock held by the founders and an additional 13,500,000 shares of Common Stock.

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