NOTE PURCHASE AGREEMENT THIS NOTE PURCHASE AGREEMENT (this Purchase Agreement ) is dated as of [ ], 2014, by and among [COMPANY NAME], a Delaware corporation (the Company ), and each person (each an Investor, and collectively the Investor ) executing a counterpart investor data sheet and signature page to this Purchase Agreement (the Data Sheet/Signature Page ). WHEREAS, the Company desires to raise up to $[ ] from one or more Investors pursuant to the issuance of Notes (as defined below), proceeds of which will be used to fund the Company s working capital needs as a bridge to the Company s initial Preferred Stock financing. WHEREAS, each of the Investors intends to loan the Company the amount set forth on such Investor s Data Sheet/Signature Page; WHEREAS, the Company and the Investors anticipate that there may be future Investors, each of which by signing a Data Sheet/Signature Page to this Purchase Agreement shall become an Investor and a party hereto; and WHEREAS, the parties hereto wish to provide for the sale and issuance of such Notes in return for such consideration. NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, and other good and valuable consideration the receipt and sufficiency of which is hereby acknowledged, the undersigned parties hereby agree as follows: 1. Certain Definitions. For the purposes of this Purchase Agreement and the Notes, the following terms shall be defined as follows: 1.1 Agreed Discount shall mean [ ] percent ([ ]%). 1.2 Agreed Cap shall mean [ ]Million Dollars ($[ ]). 1.3 Equity Securities shall mean the Company s first series of Preferred Stock (whether called Series A Preferred Stock, Series Seed Preferred Stock or by some other name) that is issued and sold to investors in a Qualified Equity Financing. 1.4 Equity Securities Price shall mean the cash price per share of the Equity Securities paid by purchasers in the Qualified Equity Financing. 1.5 Equity Securities Conversion Price shall be equal to the Equity Securities Price discounted by the Agreed Discount. 1.6 Qualified Equity Financing shall mean the first transaction in which the Company shall sell and issue Equity Securities. 1.7 Investment Amount shall mean the dollar amount committed by a given Investor and set forth on such Investor s Data Sheet/Signature Page. Pillsbury Winthrop Shaw Pittman LLP, 2014- -1-
1.8 Majority in Interest shall mean one or more Investors holding more than fifty percent (50%) of the outstanding aggregate principal amount of the Notes. 1.9 Note shall mean a convertible promissory note in the form attached hereto as Exhibit A. 1.10 Securities shall mean the Note purchased by an Investor pursuant to this Purchase Agreement, and the securities into which the Note may be converted. 1.11 Securities Act shall mean the Securities Act of 1933, as amended. 2. Amount and Terms of the Notes. 2.1 Notes. Upon execution and delivery of this Purchase Agreement, each Investor agrees to remit the Investment Amount set forth on such Investor s Data Sheet/Signature Page by check or wire transfer. Upon receipt of funds from an Investor, the Company shall issue and sell to such Investor a Note with a principal amount equal to one hundred percent (100%) of such Investor s Investment Amount. Each Investor shall be bound by the provisions of the Note issued to it. 2.2 Subsequent Sales of Notes. The Company may sell and issue additional Notes to future Investors as it shall select, provided, however, that the aggregate Investment Amount of all Notes issued hereunder shall not exceed $[ ] (which ceiling may be increased by the written agreement of the Company and a Majority in Interest). By executing a Data Sheet/Signature Page to this Purchase Agreement, any such future Investor shall become a party to this Purchase Agreement and shall have the rights and obligations of an Investor hereunder. 2.3 Closings. The initial closing (the Initial Closing ) hereunder will be held at the offices of Pillsbury Winthrop Shaw Pittman LLP, 2550 Hanover Street, Palo Alto, California 94304 at 10:00 A.M. Pacific Time on the date hereof or at such other place and time as may be designated by the Company. One or more subsequent closings (each a Subsequent Closing ) may occur at such locations and as of such dates and times as the Company and the Investors participating in each such Subsequent Closing may mutually agree. At the Initial Closing and each Subsequent Closing, each participating Investor shall deliver such Investor s Investment Amount and Data Sheet/Signature Page to this Purchase Agreement to the Company, and the Company shall deliver to each participating Investor one or more executed Notes dated as of such closing. 3. Representations of the Investors. As a condition to the Company s sale and delivery of the Note to the Investors, each Investor by executing this Purchase Agreement represents and warrants that: 3.1 Purchase Entirely for Own Account. The Securities will be acquired for investment for Investor s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part thereof, and the Investor has no present intention of selling, granting any participation in, or otherwise distributing the same. The Investor does not have any contract, undertaking, agreement or arrangement with any person to sell, transfer or grant -2-
participation in any of the Securities to such person or to any third person. The Investor has full power and authority to enter into this Purchase Agreement. 3.2 Investment Experience. The Investor is an investor in securities of companies in the development stage and acknowledges that it is able to fend for itself and bear the economic risk of this investment, including the complete loss thereof and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment in the Note. 3.3 Accredited Investor. The Investor is an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act, as presently in effect. 3.4 Restricted Securities. The Investor understands that the Securities it is purchasing are characterized as restricted securities under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering, and that, under such laws and applicable regulations, such Securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, the Investor is familiar with Rule 144, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. The Investor understands Rule 144 is not currently available for the sale of the Securities and may never be so available. 3.5 Foreign Investors. If the Investor is not a United States person (as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), such Investor hereby represents that it has satisfied itself as to the full observance of the laws of its jurisdiction in connection with any invitation to subscribe for the Securities or any use of this Purchase Agreement, including (a) the legal requirements within its jurisdiction for the purchase of the Securities, (b) any foreign exchange restrictions applicable to such purchase, (c) any governmental or other consents that may need to be obtained, and (d) the income tax and other tax consequences, if any, that may be relevant to the purchase, holding, redemption, sale, or transfer of the Securities. Such Investor s subscription and payment for and continued beneficial ownership of the Securities, will not violate any applicable securities or other laws of the Investor s jurisdiction. The funds used to purchase the Securities do not violate the anti-money laundering provisions of the Money Laundering Control Act of 1986 or the Bank Secrecy Act of 1970, as amended by the USA Patriot Act of 2001. 3.6 Disclosure of Information. The Investor represents that it believes it has received all the information that it considers material in determining whether to purchase the Securities. The Investor further represents that it has had an opportunity to ask questions of and receive answers from the Company regarding the terms and conditions of the offering of the Securities and the business, properties, prospects and financial condition of the Company. 4. Miscellaneous. 4.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Purchase Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Purchase Agreement, express or implied, is intended to confer upon any party other than the parties hereto (or their -3-
respective successors and assigns) any rights, remedies, obligations, or liabilities under or by reason of this Purchase Agreement, except as expressly provided in this Purchase Agreement. 4.2 Governing Law. This Purchase Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflict of laws. 4.3 Counterparts. This Purchase Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 4.4 Titles and Subtitles. The titles and subtitles used in this Purchase Agreement are used for convenience only and are not to be considered in construing or interpreting this Purchase Agreement. 4.5 Notices. Unless otherwise provided, any notice required or permitted under this Purchase Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified or upon deposit with the United States Post Office, by registered or certified mail, postage prepaid and addressed to such party at the address set forth below, or at such other address as such party may designate by ten (10) days advance written notice to the other parties. If to the Company: With a copy to: Riaz Karamali, Esq. Pillsbury Winthrop Shaw Pittman LLP 2550 Hanover Street Palo Alto, CA 94304-1115 If to an Investor: At the addresses shown on such Investor s Data Sheet/Signature Page. 4.6 Finder s Fee. (a) Each party represents that it neither is nor will be obligated for any finder s fee or commission in connection with this transaction. Each Investor agrees to indemnify and to hold harmless the Company and every other Investor from any liability for any commission or compensation in the nature of a finder s fee (and the costs and expenses of defending against such liability or asserted liability) for which such Investor or any of its officers, partners, employees or representatives is responsible. -4-
(b) The Company agrees to indemnify and hold harmless each Investor from any liability for any commission or compensation in the nature of a finder s fee (and the costs and expenses of defending against such liability or asserted liability) for which the Company or any of its officers, employees, or representatives is responsible. 4.7 Expenses; Attorney s Fees. Each party to this Purchase Agreement shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Purchase Agreement and all related documents. If any action at law or in equity is necessary to enforce or interpret the terms of this Purchase Agreement, the prevailing party shall be entitled to reasonable attorneys fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled. 4.8 Entire Agreement. This Purchase Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof, and supersede all prior communications and understandings between the parties, including without limitation any term sheets, letters of intent and email communications with respect to such subjects. 4.9 Amendments and Waivers. This Purchase Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof and thereof. Any term of this Purchase Agreement may be amended and the observance of any term of this Purchase Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Investors representing a Majority in Interest and the Company. Upon the written consent of the Investors representing a Majority in Interest and the Company, the terms of the Notes may also be amended, provided, however, that such amendments shall apply to all Notes issued under this Purchase Agreement. Any waiver or amendment effected in accordance with this Section shall be binding upon each Investor and holder of any Securities purchased under this Purchase Agreement at the time outstanding (including securities into which such Securities have been converted) and each future Investor and holder of all such Securities and the Company. 4.10 Effect of Amendment or Waiver. Each Investor acknowledges that by the operation of Section 4.9 hereof, Investors representing a Majority in Interest will have the right and power to diminish or eliminate all rights of such Investor under this Purchase Agreement and the Notes. 4.11 Severability. If one or more provisions of this Purchase Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Purchase Agreement and the balance of the Purchase Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 4.12 Exculpation Among Investors. Each Investor acknowledges that it is not relying upon any person or entity, other than the Company and its representatives, in making its investment or decision to invest in the Company. Each Investor agrees that no Investor nor the respective controlling persons, officers, directors, partners, members, agents, or employees of -5-
any Investor shall be liable to any other Investor for any action heretofore or hereafter taken or omitted to be taken by any of them in connection with the purchase of the Securities. -6-
Investor Name: Social Security / Tax I.D. No. Investor Address: NOTE PURCHASE AGREEMENT INVESTOR DATA SHEET AND SIGNATURE PAGE Primary Telephone: Alternate Telephone: Primary E-Mail: Alternate E-Mail: Investment Amount: $ Submission Date : The undersigned Investor has reviewed the foregoing Purchase Agreement and all exhibits hereto and hereby executes this Investor Data Sheet and Signature Page with the intention of become a party to the Purchase Agreement, it being understood that this investment is subject to acceptance by the Company in its sole discretion. INVESTOR: (signature) (printed name) NOTE: COMPANY SIGNATURE BLOCK BELOW TO BE EXECUTED ONLY AFTER INVESTOR QUESTIONNAIRE AND DATA SHEET BY BEEN REVIEWED BY COUNSEL AND INVESTMENT AMOUNT HAS BEEN RECEIVED The foregoing Investor Data Sheet and Signature Page is hereby confirmed and accepted effective, 2014. THE COMPANY: [COMPANY NAME] a Delaware corporation By: Name: Title:
EXHIBIT A THIS CONVERTIBLE PROMISSORY NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT. CONVERTIBLE PROMISSORY NOTE $[ ] [ ], 2014 FOR VALUE RECEIVED, [COMPANY NAME], a Delaware corporation (the Company ), hereby promises to pay to the order of [ ] (the Investor ), the principal sum of [ ] Dollars ($[ ]), together with interest thereon. This Convertible Promissory Note (the Note ) shall bear simple interest at a rate of [ ] percent ([ ]%) per annum, accrued quarterly in arrears. This Note is issued pursuant to the terms of that certain Note Purchase Agreement dated [ ], 2014 (the Purchase Agreement ), and is one of a group of Notes of like tenor. Capitalized terms not elsewhere defined herein shall have the meanings set forth in the Purchase Agreement. 1. Payments. 1.1 Subject to the conversion provisions of Section 2, the entire outstanding balance of this Note (the principal amount together with all accrued and unpaid interest thereon) shall be due and payable on [ ], 201[_] (the Maturity Date ). The Company shall have no right to prepay all or any part of the principal balance of this Note, any interest thereon or any other sums payable hereunder without the written consent of Investors representing a Majority in Interest. All payments shall be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the Investor may from time to time designate in writing to the Company. Except as specifically set forth in the Purchase Agreement or this Note, all Notes outstanding under the Purchase Agreement shall rank equally without preference or priority of any kind with respect to one another, and all payments with respect to any of the Notes that have not been converted shall be applied ratably in proportion to the Investment Amounts represented thereby. 1.2 So long as this Note is outstanding, the Company shall notify the Investor in writing at least fifteen (15) days prior to the closing of a Change of Control (as defined below). On the closing of a Change of Control prior to conversion of the outstanding balance pursuant to Section 2 of this Note, the outstanding balance of this Note, at the option of the Investors representing a Majority in Interest, will either: (a) immediately become due and payable in full, together with all accrued interest; or (b) convert into the Company s Common Stock at a conversion price per share assuming a fully-diluted pre-money valuation equal to the Agreed Cap. As used herein, the term Change of Control shall mean the sale, conveyance or A-1
other disposition of all or substantially all of the Company s property or business or the Company s merger with or into or consolidation with any other corporation, limited liability company or other entity (other than a wholly owned subsidiary of the Company), provided that the term Change of Control shall not include: a merger of the Company effected exclusively for the purpose of changing the domicile of the Company, an equity financing in which the Company is the surviving corporation, or a transaction in which the stockholders of the Company immediately prior to the transaction own 50% or more of the voting power of the surviving corporation following the transaction. 2. Automatic Conversion. 2.1 Upon the initial closing of the sale of the Company s Equity Securities in a Qualified Equity Financing, the entire outstanding balance of this Note shall be subject to automatic conversion into that number of shares of the Company s Equity Securities calculated by dividing (x) the outstanding balance on the Note, by (y) an amount equal to the lesser of (A) the Equity Securities Conversion Price, or (B) the price per share calculated by assuming a fullydiluted pre-money valuation equal to the Agreed Cap. At the Company s election, the issuance of such shares of the Company s Equity Securities upon conversion of this Note shall be contingent upon execution and delivery by the Investor of all necessary documents entered into by other purchasers of the Equity Securities, including without limitation a definitive purchase agreement and related documents. 2.2 A Majority in Interest may elect to have the entire outstanding balance of this Note and all other Notes issued under the Purchase Agreement convert on or after the Maturity Date into the Company's Common Stock at a conversion price per share assuming a fully-diluted pre-money valuation equal to the Agreed Cap, by delivering to the Company written notice of such conversion election (the Conversion Notice ) at any time beginning on the day that is 30 days prior to the Maturity Date. Such conversion of all Notes issued under the Purchase Agreement in accordance with the terms of the preceding sentence shall take place 30 days after delivery of the Conversion Notice. 3. This Note shall be governed by and construed in accordance with the laws of the State of Delaware without regard to principles of conflict of laws. 4. The Company hereby agrees, subject only to any limitation imposed by applicable law, to pay all expenses, including reasonable attorneys fees and legal expenses, incurred by the Investor in endeavoring to collect any amounts payable hereunder which are not paid when due, whether by declaration or otherwise. 5. One or more Investors representing a Majority in Interest may amend or waive the observance of any provision of all then outstanding Notes on behalf of all Investors, with the consent of the Company, but without the consent of the Investor. 6. The indebtedness represented by this Note is unsecured and subordinate in right of payment to all current and future indebtedness of the Company to banks and other financial institutions. 7. The Company hereby expressly waives presentment, demand for payment, A-2
dishonor, notice of dishonor, protest, notice of protest and any other formality. [COMPANY NAME] a Delaware corporation By: Name: Title: A-3