Term Sheet for Alliance of Angels

Bridge Financing

This Term Sheet is for use by Alliance of Angels members in negotiating bridge financing deals. Each
party should seek appropriate legal counsel before finalizing any Term Sheet or investment documents.
This Term Sheet does not create a legally binding obligation on any person or entity.

Issuer <<Issuer Name>> (the “Issuer” or “Company”)

Location <<Issuer Address>>
Type of Entity <<State of Incorporation>> <<Entity Type>>
Convertible Promissory Notes (each a “Note” and together the “Notes”). The
Security Notes shall be unsecured general obligations of the Issuer, substantially in the
form attached hereto as Annex A.

Up to a total of <<$XXXXXX>>, with a minimum individual investment amount

Amount of Financing of $25,000 (unless a lower minimum investment amount is approved by the
Issuer).

Various members of the Alliance of Angels, who are Accredited Investors acting
Purchasers on their own account, and/or other Accredited Investors only (as defined in
SEC Rule 501).
Interest Rate Eight percent (8.0%) per annum compounded annually (365-day basis).

Maturity Date 12 months from the date of issuance

No Prepayment The Issuer may not pre-pay the Note in whole or in part without the Holder’s
prior written consent.
At Maturity, Holder may either elect to (1) extend the Maturity Date with
Voluntary Conversion interest accruing thereafter at the Default Rate, or (2) convert the outstanding
principal amount plus accrued and unpaid interest under the Note into a
at the Maturity Date
number of shares of the Issuer’s Common or Preferred Stock equal to the
quotient obtained by dividing (i) the outstanding principal amount plus any
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 accrued and unpaid interest by (ii) the Voluntary Conversion Price (as defined
below).

If convertible into Common Stock, the Quotient obtained by dividing (i) [PRE-
Voluntary Conversion MONEY VALUATION ] by (ii) the number of the Issuer’s fully-diluted shares, or if
Price convertible into Preferred Stock, the Original Issue Price of the class or series
of such stock.
In the event of a Qualified Financing (as defined below), the outstanding
Principal Amount and accrued interest under the Notes will automatically
convert into shares of the same series of Preferred Stock as is issued in the
Qualified Financing at a conversion price equal to the lesser of:
Automatic Conversion (i) the price per share paid in the Qualified Financing, multiplied by the
upon a Qualified applicable Conversion Percentage; or
Financing (ii) the price obtained by dividing the (a) [ VALUATION CAP ] by (b) the
Issuer’s fully-diluted number of shares, calculated immediately prior to
the initial closing of the Qualified Financing.
The Valuation Cap is subject to increase to the extent Notes are issued after six
months from the date of issuance of the first Note.
The Conversion Percentage shall initially be eighty percent (80%) on the date
Conversion of issuance of the Note and shall decrease one percent (1%) per month for
Percentage each month the Note is outstanding after the sixth month, until reaching a
Conversion Percentage of seventy percent (70%).
A preferred stock financing after the Note’s date of issuance with at least
$500,000 of new invested capital (excluding the Notes and any other
Qualified Financing outstanding debt securities, including convertible debt securities, issued by the
Issuer) or a preferred stock financing of a lesser amount if approved in writing
by the holders of Notes owning together two-thirds or more of the aggregate
principal amount of the Notes (the “Majority Holders”).
Immediately prior to the closing of a merger, share exchange, consolidation,
acquisition of all or substantially all of the assets or stock, reorganization or
liquidation of the Issuer that results in the stockholders of the Issuer
immediately prior to such transaction owning less than 50% of the voting
capital stock of the Issuer (or its successor or parent corporation) immediately
Acquisition after the transaction or, in the case of a sale of assets or liquidation, the Issuer
owning after the transaction less than substantially all of the assets owned by
the Issuer prior to the transaction (other than an issuance of equity securities
for the primary purpose of raising capital) [or any other event that constitutes
a “Deemed Liquidation Event” under the Company’s articles/certificate of
incorporation] (an "Acquisition") that occurs prior to the payment in full or
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 conversion of the Note, the Note holder may elect to either:
(i) convert the outstanding principal amount and accrued interest into
shares of Company stock at a conversion price per share equal to the
Voluntary Conversion Price (calculated immediately prior to the closing
of the Acquisition); or
(ii) accelerate the Maturity Date to the date of closing of the Acquisition
transaction and thereupon the Issuer shall be obligated to pay holder an
amount equal to 2x the outstanding principal amount in full satisfaction
of its obligations.

If the Issuer suffers an Event of Default (as defined below), the Holder may
declare the Notes in default and immediately due and payable in full upon
written notice to the Issuer. From that date forward, the Note will bear
interest at a rate of the lower of (i) the sum of the Interest Rate plus twelve
percent (12%) per annum or (ii) the highest rate allowed by applicable law,
until paid in full or converted.
An Event of Default will occur if the Issuer:
(i) fails to pay when due any principal or interest payment on the due
date hereunder, and such payment shall not have been made within
Default
five (5) days of the Issuer's receipt of the Holder's written notice to the
Issuer of such failure to pay;
(ii) materially breaches any other covenant contained in this Note
and such failure continues for fifteen (15) days after the Issuer
receives written notice of such material breach from the Holder;
(iii) voluntarily files for bankruptcy protection or makes a general
assignment for the benefit of creditors; or
(iv) is the subject of an involuntary bankruptcy petition and
such petition is not dismissed within sixty (60) days.

Company will deliver to Holder all information provided to stockholders of the

Company in their capacity as such and, upon Holder’s request, any information
a stockholder of the Company would be entitled to receive by law or under the
charter documents of the Company. So long as the Note is outstanding, the
Company will deliver to such holder
(a) annual unaudited financial statements within sixty (60) days
Information Rights
following year-end and annual audited statements, if any, within
ten (10) days of completion; and
(b) quarterly unaudited financial statements within thirty (30)
days following quarter-end.
All information rights shall terminate when the Note is paid in full or
converted. All Noteholders would agree to customary confidentiality

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 provisions for any such information.

The Company will covenant and agree that it is a “qualified small business
corporation” for purposes of Section 1202 of the Internal Revenue Code and
Company Agreements the rules and regulations thereunder (a “QSBC”) and that that the shares
issuable on conversion are eligible for the gain exclusion provided by Section
1202 if the holding period and other requirements are met by the investor.

The Notes will be governed and construed in accordance with the laws of the
State of Washington. The exclusive jurisdiction and venue for any dispute
Governing Law
arising from this Term Sheet or the Notes will be the state and federal courts in
King County, Washington.
Each party shall be responsible for its own costs and expenses incurred in
Expenses
connection with the transactions contemplated hereby.
This Term Sheet is not a complete description of the financing and does not
Not an Offer
constitute either an offer to sell or an offer to purchase securities.

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 ANNEX A

FORM OF CONVERTIBLE PROMISSORY NOTE

Alliance of Angels Term Sheet for Bridge Financing

Draft of June 26, 2013