New Mexico Term Sheet - Royalty Payment Convertible Note

• Category: Corporations - Startup - Venture Financing Process
• State: Multi-State
• Control #: US-ENTREP-0049-1
• Format: Word; Rich Text

Description

This Term Sheet summarizes the principal terms with respect to a potential private placement of equity securities of a "Company") by a group of investors ("Investors") led by a Venture Fund. This Term Sheet is intended solely as a basis for further discussion and is not intended to be and does not constitute a legally binding obligation except as provided under "Confidentiality," "Exclusivity", and "Expenses" below. No other legally binding obligation will be created, implied or inferred until a document in final form entitled "Stock Purchase Agreement" is executed and delivered by all parties. Without limiting the generality of the foregoing, it is the parties intent that, until that event, no agreement shall exist among them and there shall be no obligations whatsoever based on such things as parol evidence, extended negotiations, "handshakes," oral understandings, courses of conduct (including reliance and changes of position), except as provided under "Confidentiality," "Exclusivity", and "Expenses" below.

A New Mexico Term Sheet — Royalty Payment Convertible Note is a legally binding document that outlines the terms and conditions of an investment agreement between a company and an investor. This type of note is specific to the state of New Mexico and incorporates unique regulations and provisions applicable in the state. The term sheet defines the terms under which the investor provides funding to the company in exchange for a convertible note. A convertible note is a debt instrument that can be converted into equity at a later date. However, the distinguishing feature of a New Mexico Term Sheet — Royalty Payment Convertible Note is the inclusion of royalty payments. In addition to the standard terms for a convertible note, this type of term sheet includes provisions for royalty payments, wherein the company agrees to pay a percentage of its future revenues or profits to the investor. This offers the investor an additional avenue for potential returns on investment. Different types or variations of New Mexico Term Sheet — Royalty Payment Convertible Notes may include: 1. Standard Royalty Payment Convertible Note: This variation follows the typical structure of a convertible note but includes provisions for royalty payments in addition to the conversion into equity. 2. Capped Royalty Payment Convertible Note: This type of note limits the total amount that the investor can receive in royalty payments, regardless of the company's revenue or profit growth. Once the capped amount is reached, the royalty payments cease. 3. Discounted Royalty Payment Convertible Note: Here, the royalty payments are calculated at a discounted rate compared to the company's actual revenue or profits. This discounted rate could be determined by factors such as the stage of the company's growth or industry benchmarks. 4. Fixed-Term Royalty Payment Convertible Note: In this variation, the royalty payments are set to a fixed duration, after which they no longer apply. For example, the investor may be entitled to royalty payments for a specific number of years or until the invested amount is fully recovered. It is important for both the company and the investor to thoroughly review and negotiate the terms in a New Mexico Term Sheet — Royalty Payment Convertible Note. Consulting legal professionals experienced in New Mexico business laws is advisable to ensure compliance with state regulations and to protect the interests of both parties involved.