The RenegadesTerm sheet analysis

Guan Dian

Chang Jie

Ben Kenigsberg

Wei-Jie Kong

Zihuan Wee

Jon Zemel

As lawyers of InfiniteWisdom, Inc., our main considerations for the analysis of the term sheet are:

• Our client are InfiniteWisdom, Inc. and the welfare of the client are our utmost priority

• We want to retain as much control of the company and prevent dilution as possible after venture capital – for both first and subsequent rounds

• Satisfactory investors’ protection in their investment

Major red flags

1.Antidilution preferences

2.Drag along agreement

3.Payment of “cumulative” dividends

4.Special conditions for second closing

5.Liquidation preferences

Proposed changes to term sheet; In order of priority

1. Adjust the Antidilution provision• Instead of a full ratchet adjustment, we would like to have a “pay per

play” adjustment instead. This would encourage future dilutive financing and prevent unnecessary dilution of the founders

2. Eliminate the Drag along agreement clause• We would like to subject future acquisitions of the company to the

voting of all the shareholders instead of just hinging on the recommendation of the preferred shareholders

3. Payment of “cumulative” dividends• We would like to have non-cumulative dividends rather than

cumulative. This would prevent adverse effects to the company’s cash flow, allowing InfiniteWisdom, Inc. to remain competitive in the market

3. Special conditions for second closing• We would like to eliminate the conditions for second closing. Securing the

$10 million in capital is imperative for the meeting of the milestones themselves.

• If total elimination is not possible, we propose a extended period of 18 months rather than 9 months

4. Liquidation preferences• A straight liquidation preference of 2 times is a little steep, we would

negotiate for 1.5 times instead• Rather than a straight liquidation preference of two times for the investor,

a capped liquidation preference could be used instead – a straight liquidation at the Original Purchase price followed by distribution to preferred and common stockholders pro rata until the preferred stock holders receive $1.50 per share

Factors that will affect the changes that we seek

• Investors’ confidence in the CEO and management team of InfiniteWisdom, Inc.

• Present market conditions

• Performance of the company’s product

• Retention of Des Cartes as the principal scientist