Peiyi Xu

UC San Diego

11/17/20

Draft an Investor Term Sheet

This draft term sheet is done by Harley Grandson, the CEO of Harley Grandson and Associates,
is to be used by Angel Alliance investors as a kick-off point for negotiating early-stage
negotiations. In this document, Angel Investor represents the AOA lead investor. Every party in
similar deals seek useful legal advice. The term sheet is not legally binding liability on
individuals or firm, except for the section labeled “Exclusivity.”

Company Name: Eureka, Incorporation.

Location:

Type of Entity: Washington State C Corporation

Type of Equity: Series A Preferred Stock

Size of Offering: $ 1000,000

Minimum to Close: $750, 000

Closing: When minimum value is attained

Valuation

Pre-money $ 2500000

Post-money $ 3500,000

Per share price 1.561

Investors: Include Angels Alliance's different approved investors operating their own account or
on behalf of other authorized investors, as expressed in SEC Rule 501 or both.
Investor Incentives. Investors who will have invested by the time the minimum value is attained
will be gain incentives, as shown below.
Warrants. A Warrant Coverage of 27%
Stock Options. Before financing, the corporation will raise the pool's authorized options to make
the total un-allotted options at least the percentage shown below.

Total un-allotted options 20% applied on post money

New options issued 300,000

Capitalization of Pre and Post Financing (Assume all shared were issued)

Pre-Financing Post-Financing
Type of Stock Number of % Fully Diluted Number of % Fully Diluted
shares shares
Common 1500,000 55% 1500000 33.9%
Granted Stock 250,000 9% 250000 5.7%
Options
Pre-financing
stock options
Avail 700,000 25% 700000 15.8%
New stock 300000 11% 300000 6.8%
options
Series A pfd 1,453,643 32.9%
stock
Warrants 220,436 5%
Total shares 2,750,000 100% 4424079 100%
Liquidation preference: Before any total amounts paid to any other class of equity holders,
Preferred series A will get an amount equitable (1x) purchase price of a share, on top of unpaid
and declared dividends in the event of
1. Company winding up, dissolution, or liquidation
 2. "Change in control." It will occur if our company consolidates or merges, causing a
change in the majority owners. In this case, the company stockholders do not hold the
majority voting power of the acquiring or surviving entity's outstanding shares.
3. A sale, transfer, lease, or any other company disposal of significant assets or all assets.
The sale, lease, or transfer proceedings will be distributed to preference and common
stockholders on a conversion basis.
Dividends: Dividends to be issued upon declaration and not on a cumulative basis. Series A
Preferred stockholders to get dividends if the Board declares, and the common stockholders are
in preference.
Voting Rights. Common stockholders and Series A Preferred stockholder shall vote on a
conversion basis to common stockholders and not as a different class except as described by
"Protective Provisions" below.
Board participation. The Series A Preferential majority holder shall be allowed to select one
Board of Directors member. Within 30 days of closing this financing, there will be five members
of the Board of Directors. One from Series A, 1 from the management, and 3 independents
confirmed by series A and common directors. The director selected by Series A stockholders will
be compensated through stock options on a standard basis.
D&O Insurance. Eureka incorporation shall provide insurance to officers' and directors' of at
least $1million before closing this financing.
Conversion Rights. Series A Preferred holders shall be entitled to convert at any time the
preference shares into Common Stock at a rate of 1:1, but it will depend on changes as shown
below.
Automatic Conversion. Preferential shares of series A will be automatically converted into
common stock at the ratio of 1:1 upon;
1. Written consent of majority holders of preferred outstanding stock.
2. Public offering of not less than $2500, 000, 000 closing that should be underwritten
firmly. The value should be before the payment of commissions and discounts of
underwriters.
Ant-dilution Rights. Broad-based weighted average. Preferential shares conversion will
depend on;
 A proportionate stock dividends and splits adjustments.
  Customary exclusions on an average weighted broad-based adjustment basis for stock
issued at a share price purchase and deducted the period's conversion price.
Founder's Stock Right of Repurchase: If a founder possesses higher than 2% of the post
financing equity common stock will be subject to the corporation’s repurchase at the lower limit
of
 The fair market value (FMV) at agreement or repurchase time.
 If no FMV that will have been defined and the founder quits the firm before the end of
the first four years after initial financing, the common stock's price will equal $0.02 per
share.
Protective Provisions:
The outstanding Series A Preferred majority holders' consent will need to:
(i) Amend the incorporation articles in a manner in which it will alter, modify, or revoke Series
A Preferred rights, restrictions or preferences to influence Series A Preferred adversely. It should
be noted that the issuance of the new preferred stock series above series A Preferred or pari
passu will not be considered to negatively impact preferential shares of Series A if the
preferences, rights, restrictions, and privileges of preferential shares of Series A are not
influenced.
(ii) Raise the authorized total number of Series A preferred by 10% and above.
(iii) Approve a corporation's merger or sale.
Drag along with rights. Once the corporation's Board of directors and the majority stockholders
of common and preferred confirm a transaction of change of control or a new security issuing,
every holder admits to
 Vote the holder's all shares in favor of such new security issuance or the transaction of
change of control.
 Exchange or sell all common stock shares of the holder pursuing such transaction's terms
and conditions.
Registration Rights. Series A Preferred holders shall qualify to get rights of registration pari
passu with and sign the same way as any other registration rights accorded to the company's
equity securities holders in the next round of Company financing.
Rights of First Offer: Keep proportionate share. Each investor who will buy at least $ 25,000
of Preferential Series A shall be entitled to the first offer, depending on particular restrictions, to
buy its pro-rata fraction of the company’s new securities offered, depending on standard
exclusions. The entitlement to the first offer will expire immediately before any of these
occurrences:
1. The corporation's primary public offering.
2. "Such time as the Company otherwise becomes subject to the reporting provisions of the
Securities and Exchange Act of 1934".
3. (ii) Changes in Control. If an investor does not exercise this right at any given
opportunity, it will expire.
Proprietary Information and Inventions Agreements. The corporation will make every
individual prior, presently, or in future engaged as a consultant or employed to enter into a
suitable invention and proprietary information agreement.
Information Rights.
The corporation will distribute the following to Angel investors.
1. Annual audited financial statements within 90 days after every financial year end.
2. Each quarterly financial statement that will not have been audited within 45 days after
each quarter's end and the same quarter's projected results through company budgets for
comparison purposes.
3. Monthly unaudited financial statements within 30 days after the every end month and
comparing those quarterly outcome with the company’s annual budgets estimated results.
4. The next financial year’s annual budget immediately following the Board’s approval.
Angel investors will have the normal right to inspect the corporation's assets, records, and
books upon notifying the company and at a reasonable time. The Company's
responsibility to provide such information and allow such inspection will be terminated
as soon as the Company completes an eligible IPO and will become subject to the
Securities Exchange Act of 1934 reporting provisions as amended or a change of control
closing.
Investor's Counsel: The firm consents to pay $ 5,000 (or $ 5,000 for every $ 1M, or part
thereof, raised) for investor counsel's costs to analyze this paper and warrant that the agreed
terms and the final agreement concur.
Due Diligence. This term sheet's contemplated transactions depend on the investor's
consummation of due diligence satisfactorily.
Letter Expiration: The letter will expire at 5 p.m., 15/12/2020, Pacific Time, unless it is
executed by the company and returns a faxed or an original copy to Angel investors by that
time.
Exclusivity: This memorandum terms’ acceptance date till the first occurrence of the following;
 Financing consummation
 Negotiation termination by Angel investors and Eureka Incorporation formally
 Eureka Incorporation will not initiate, solicit, or participate directly or indirectly in
negotiations with any individual, group, and firm other than the Angel Inventors,
regarding any form of financing or company sale without obtaining approval of Angel
Inventors.
Confidentiality: This term sheet is a confidential document and will only be used by the parties,
company advisors, and the management. The document's information should not be disclosed to
third parties or be utilized to steer a third-party negotiation without Angel investor and the
corporation's approval.
Not an Offer. The Term Sheet is not a purchase or sale offer of securities and it does not
completely describe the financing.
On Behalf of the Company: On Behalf of the Investors:

Name of Company Investor Group (if applicable)

Eureka Incorporation

Signature Signature

Name Name

Phone Phone

Email Email