IMMERSIVE TECH, INC.

Transcription

1 MEMORANDUM OF TERMS FOR THE PRIVATE PLACEMENT OF SERIES SEED PREFERRED STOCK OF IMMERSIVE TECH, INC. THIS TERM SHEET SUMMARIZES THE PRINCIPAL TERMS OF THE PROPOSED FINANCING (THE "FINANCING") OF IMMERSIVE TECH, INC., A DELAWARE CORPORATION (THE "COMPANY"). THIS TERM SHEET IS FOR DISCUSSION PURPOSES ONLY; THERE IS NO OBLIGATION ON THE PART OF ANY NEGOTIATING PARTY UNTIL A DEFINITIVE STOCK PURCHASE AGREEMENT IS SIGNED BY ALL PARTIES. THE TRANSACTIONS CONTEMPLATED BY THIS TERM SHEET ARE SUBJECT TO THE SATISFACTORY COMPLETION OF DUE DILIGENCE. THIS TERM SHEET DOES NOT CONSTITUTE EITHER AN OFFER TO SELL OR AN OFFER TO PURCHASE SECURITIES. Amount to be Raised: Up to $5,000,000. Type of Security: Series SEED Preferred Stock of the Company (the "Series SEED Preferred"). Purchase Price: The purchase price of the Series SEED Preferred shall be $2.00 per share. Post-Closing Capitalization: Closing Date: Rights, Preferences and Restrictions of Preferred Stock: The post-closing capitalization shall be as set forth on Exhibit A hereto. The closing of the sale of the Series SEED Preferred (the "Closing") is targeted for July 1, Dividends: The holders of Series SEED Preferred will be entitled to receive noncumulative dividends in preference to the holders of Common Stock at an annual rate of 5% of the purchase price per share from legally available funds and when, as and if declared by the Board of Directors. Liquidation Preference: In the event of any liquidation, dissolution or winding up of the Company, the holders of Series SEED Preferred will be entitled to receive a 1x nonparticipating preference. A sale, conveyance or other disposition of all or substantially all of the assets, property or business of the Company, or a merger or consolidation with or into any other corporation (collectively, an "Acquisition" of the Company), other than (i) a consolidation with a wholly-owned subsidiary of the Company, (ii) a merger effected exclusively to change the domicile of the Company or (iii) an equity financing in which the Company is

2 the surviving corporation, will be deemed to be a liquidation for purposes of the liquidation preference. Redemption: The Series SEED Preferred Stock shall not be mandatorily redeemable. Voluntary Conversion: Each holder of Series SEED Preferred will have the right, at the option of the holder at any time, to convert shares of Series SEED Preferred into shares of Common Stock at an initial conversion ratio of one-to-one. Automatic Conversion: The Series SEED Preferred will be automatically converted into Common Stock, at the then applicable conversion ratio, in the event of either (i) the election of holders of a majority of the then outstanding Preferred Stock, voting together as a class, or (ii) the closing of a firm commitment underwritten initial public offering of the Company s Common Stock pursuant to a Registration Statement under the Securities Act of 1933 (a "Qualified IPO"). Antidilution: In the event that the Company issues additional securities other than Exempt Securities (as defined below) at a purchase price less than the current Series SEED Preferred conversion price, such conversion price shall be adjusted in accordance with an industry standard, broad-based weighted average formula. The conversion price of the Series SEED Preferred will be subject to proportional adjustment for stock splits, stock dividends and the like. Voting Rights: Each holder of a share of Series SEED Preferred will be entitled to that number of votes on all matters presented to holders of voting capital stock equal to the number of shares of Common Stock then issuable upon conversion of such share of Series SEED Preferred. Protective Provisions: Without the approval of the holders of at least a majority of the then outstanding shares of Preferred Stock, the Company will not (i) take any action that alters or changes the rights, preferences or privileges of the Series SEED Preferred Stock so as to adversely affect such shares or (ii) increases the authorized number of shares of Series SEED Preferred. Registration Rights: Registrable Securities: All shares of Common Stock issuable upon conversion of the Preferred Stock shall be deemed "Registrable Securities." Demand Registration: Beginning on the 7th anniversary of -2-

3 the Closing, or six months after the IPO, whichever is earlier, 2 demand registrations of at least $5,000,000 each, upon initiation by holders of a majority of the outstanding Registrable Securities. Piggyback Registration Rights: Unlimited piggyback registration rights, subject to pro rata cutback to a minimum of 20% of the offering (complete cutbacks on the IPO) at the underwriter s discretion. Registration on Form S-3: The holders of at least 51% of the Registrable Securities will have the right to require the Company to register on Form S-3, if available for use by the Company, shares of Registrable Securities for an aggregate offering price of at least $1,000,000. The Company will not be obligated to effect more than two S-3 registration statements in any twelve month period. Registration Expenses: Registration expenses (exclusive of underwriting discounts and commissions, stock transfer taxes and fees of counsel to the selling security holders) will be borne by the Company for all demand, piggyback and S-3 registrations. The Company will also pay the reasonable fees and expenses of one special counsel to the selling security holders, not to exceed $30,000. Assignment of Registration Rights: The registration rights may be transferred to a transferee who acquires at least 50% of the transferor s aggregate Registrable Securities originally acquired from the Company (or all of such transferring holder s shares, if less), provided that the Company is given prompt notice of the transfer and the transferee agrees to be bound by the terms and conditions of the Investors Rights Agreement. Transfer of registration rights to a partner or affiliate of the transferee will be without restrictions as to minimum shareholdings. -3-

4 Lock-up Agreement: If so requested by the Company or the underwriters in connection with the initial public offering of the Company s securities registered under the Securities Act of 1933, as amended, holders shall not sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any securities of the Company however or whenever acquired (except for those being registered) without the prior written consent of the Company or such underwriters, as the case may be, for 180 days from the effective date of the registration statement and holders shall execute an agreement reflecting the foregoing as may be requested by the underwriters at the time of such offering. Termination of Registration Rights: The registration obligations of the Company will terminate on the earlier of (i) two years after the IPO, (ii) with respect to any holder of registration rights, at such time as all Registrable Securities of such holder may be sold within a three-month period pursuant to Rule 144 or (iii) upon an Acquisition of the Company. Information Rights: Right of First Offer: So long as a holder of Series SEED Preferred continues to hold at least 250,000 shares of Series SEED Preferred or Common Stock issued upon conversion of Series SEED Preferred, the Company will deliver to such holder annual financial statements as well as an annual budget. The obligation of the Company to furnish such information will terminate at such time as the Company (i) consummates an IPO, (ii) becomes subject to the reporting provisions of the Securities Exchange Act of 1934, as amended, or (iii) upon an Acquisition of the Company. Each holder of at least 250,000 shares of the Series SEED Preferred will have the right in the event the Company proposes to offer equity securities to any person, other than the carveouts described below, to purchase that portion of such equity securities equal to (i) the number of shares of Common Stock issued or issuable upon conversion of the Series SEED Preferred held by each holder of Series SEED Preferred divided by (ii) all of the Company s Common Stock then outstanding or issuable upon exercise of options or warrants (on a fully-diluted basis) or conversion of Preferred Stock. Such equity securities shall be purchased within 15 days from notice by the Company and on the same terms as they are purchased by other third party purchasers of the equity securities. Such right of first offer will terminate upon an IPO or upon the acquisition of the Company. The right of first offer shall not be applicable with respect to any covered investor and any subsequent securities -4-

5 issuance, if (i) at the time of such subsequent securities issuance, such investor is not an accredited investor, and (ii) such subsequent securities issuance is otherwise being offered only to accredited investors. The carve-outs to the right of first offer include (the "Exempt Securities"): (i) (ii) (iii) (iv) (v) (vi) (vii) the issuance of securities pursuant to stock splits, stock dividends, or similar transactions; the issuance of securities pursuant to currently outstanding options, warrants, convertible notes, or other rights to acquire securities of the Company; the issuance of Common Stock (or options therefore) to employees, consultants, officers or directors of the Company pursuant to stock option plans or restricted stock plans or agreements approved by the Board (including options granted prior to the Financing); the issuance of common stock in a Qualified IPO; the issuance of Common Stock upon conversion of Preferred Stock; the issuance of securities to banks, equipment lessors or other financial institutions, or to real property lessors, pursuant to a debt financing, equipment leasing or real property leasing transaction; the issuance of securities in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships; (viii) the issuance of securities to suppliers or third party service providers in connection with the provision of goods or services; (ix) (x) the issuance of securities as acquisition consideration pursuant to the acquisition of another corporation by the Corporation by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement; and the issuance of Common Stock in any other transaction in which exemption from the right of first offer provisions is approved by the affirmative vote of at least a majority of the then-outstanding -5-

6 shares of Preferred Stock. Drag Along Right: Purchase Agreement: Subject to customary exceptions, if (a) the holders of at least a majority of the Common Stock, (b) the holders of at least a majority of the Preferred Stock, and (c) the Company s Board of Directors approve a sale of the Company (whether structured as a merger, asset sale or stock sale), the Founders and the Investors will agree to approve the proposed sale. The sale of the Series SEED Preferred will be made pursuant to a stock purchase agreement reasonably acceptable to the Company and the investors, which agreement will contain, among other things, appropriate representations and warranties of the Company and the investors, covenants of the Company reflecting the provisions set forth in this term sheet and appropriate conditions to closing which will include, among other things, qualification of the shares to be sold under applicable Blue Sky laws, and the filing of the Amended and Restated Charter. [Signature Page Follows] -6-

7 The parties have executed this term sheet as of the dates set forth below. THE COMPANY: IMMERSIVE TECH, INC. By: Erik Maltais Chief Executive Officer Address: 5700 Memorial Highway Suite 108 Tampa, Florida Dated: THE INVESTOR: By: (Signature) Name: Title: Address: Dated:

8 Exhibit A Post-Closing Capitalization Securities Shares % Class A Common Stock 760, % Class F Common Stock 8,000, % Series SEED Preferred Stock - Investors 2,500, % Series SEED Preferred Stock - SAFE Conversion 250, % Warrants - Class A Common Stock 91, % Option Pool - Allocated 160, % Option Pool - Reserve 840, % 12,601, %