Attached files
| file | filename |
|---|---|
| 8-K - Intellect Neurosciences, Inc. | v205948_8k.htm |
December
7, 2010
PROPOSAL FOR INVESTMENT OF
$500,000
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Investor:
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Certain
stockholders of Intellect Neurosciences, Inc. (the “Company”), as set
forth on the signature page hereof (collectively, the
“Investor”).
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The
Investment:
The
Notes:
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The
Investor, as set forth on Schedule A hereto, shall purchase $500,000
principal amount of convertible notes of the Company (the “Notes”) for a
purchase price of $500,000, due upon execution of this term
sheet.
The
Notes shall have a three-year maturity and shall bear interest at the rate
of 14% per annum, due at the maturity of the Notes. Principal
and accrued interest on the Notes shall be convertible into common stock
of the Company at an initial conversion price of $.0025 per share, subject
to customary anti-dilution protection in the case of stock dividends,
stock splits, reverse splits, reorganizations and recapitalizations and
subject to full ratchet protection in the case of any sale of common stock
or common stock equivalents by the Company at a price less than the then
effective conversion price of the Notes.
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Lock-Up:
Warrants:
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The
Investor shall agree not to sell any common stock of the Company on the
open market for six months after the Investment is funded.
The
Company shall grant the Investor five-year warrants (the “Warrants”) to
purchase common stock of the Company at an initial exercise price of
$.0025 per share with an aggregate exercise price equal to the amount of
the Investment,. Such Warrants shall have a cashless exercise
feature and shall provide customary anti-dilution protection in the case
of stock dividends, stock splits, reverse splits, recapitalizations and
reorganizations and shall be subject to full ratchet protection in the
case of any sale of common stock or common stock equivalents by the
Company at a price less than the then effective exercise
price.
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Additional
Stock:
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Upon
funding of the Investment, the Company shall, as additional consideration
for the Investment and for the adjustment to the promissory notes
described below, issue shares of Preferred Stock, as described below (the
“Preferred Stock”), to the Investor. The Preferred Stock shall
have an initial aggregate liquidation preference equal to $10
million.
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Terms
of the Preferred Stock:
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The
Preferred Stock shall rank pari passu with any other preferred stock of
the Company outstanding and senior to any subsequently issued preferred
stock with respect to liquidation and dividends. The Preferred
Stock shall pay dividends of ten percent per annum, which shall be fully
cumulative. The liquidation preference of the Preferred Stock
shall equal the initial liquidation preference amount, as set forth above,
plus any accrued but unpaid dividends. The Preferred Stock
shall not be redeemable except, at the option of the holder, the Preferred
Stock shall be redeemed at its liquidation preference amount in the case
of extraordinary corporate transactions, such as mergers, consolidations,
recapitalizations and sales of substantially all of the Company’s
assets. The Preferred Stock shall provide that, in the case of
such extraordinary transactions, if the holder does elect to cause the
redemption of the Preferred Stock, the successor corporation shall be
required to assume the obligation to pay the redemption amount, and if the
holder elects not to cause the redemption of the Preferred Stock, the
successor corporation shall be required to provide securities having
substantially the same rights to the holders of the Preferred Stock as
they had prior to any such transaction. The Preferred Stock, up
to its full liquidation value, shall be convertible into common stock of
the Company at an initial conversion price of $.0025 per share, subject to
customary anti-dilution protection in the case of stock dividends, stock
splits and reverse splits, and subject to full ratchet protection in the
case of any sale of common stock or common stock equivalents by the
Company at a price less than the then effective conversion price of the
Preferred Stock.
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Adjustment
to Certain Promissory Notes of the Company:
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The
Investor holds certain convertible promissory notes of the Company having
an original maturity of three years from their issuance. The
Investor agrees that the maturity of these notes shall be adjusted to five
years from the execution of this term sheet.
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Option
to Purchase Additional Notes:
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The
Company shall grant the Investor the option, for nine months following the
Investment and pro rata to the commitment amounts set forth on Schedule A
hereto, to purchase up to $500,000 additional principal amount of Notes on
the same terms as the Investment, including the right to receive Warrants
and Preferred Stock incident thereto.
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Additional
Covenants of the Company:
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The
Company agrees to effect a one for fifty reverse stock split of its common
stock, as previously authorized by the Company’s stockholders, within 6
months after the execution of this term sheet. The Company shall also
agree not to issue any debt instruments for borrowed money without the
consent of the Investor, as determined by the majority in interest
thereof. The Company acknowledges that its common stock is not
a security registered pursuant to Section 12(b) or Section 12(g) of the
Securities Exchange Act of 1934, as
amended.
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Documentation:
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The
parties shall work in good faith to complete mutually acceptable final
documentation of these transactions. Notwithstanding the
foregoing, this term sheet shall be binding upon the parties upon
execution.
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Fees:
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The
Company shall pay $20,000 in legal fees to counsel for the Investor,
payable upon the funding of the
Investment.
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This Term
Sheet shall be binding upon execution by all the parties.
| INVESTOR: | COMPANY: | ||||
| INTELLECT NEUROSCIENCES, INC. | |||||
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By:/s/
Elliot Maza
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| Name |
Title:
CFO
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| By: | |||||
| Name: | |||||
| Title | |||||