THIS NOTE AND THE SECURITIES ISSUABLE UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, AND MAY NOT BE OFFERED, SOLD, OR TRANSFERRED ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION.
| Principal Amount | Issue Date | ||
|---|---|---|---|
| Interest Rate | per annum (simple) | Maturity Date |
FOR VALUE RECEIVED, Galaxy Holdings, a TX LLC (the “Company”), promises to pay to or its registered assigns (the “Holder”) the principal sum of , together with simple interest accruing at per annum on the unpaid principal balance, on the terms set forth below.
Interest accrues from the Issue Date on the outstanding principal balance at the rate stated above, computed on the basis of a 365-day year for the actual number of days elapsed. Interest is payable at the time the principal becomes due (whether at the Maturity Date, by conversion, or by acceleration).
Unless earlier converted under Section 3, the entire outstanding principal balance and all accrued and unpaid interest are due and payable on the Maturity Date of , or, if requested by the Holder, the Holder may elect to convert the outstanding balance into Conversion Stock under Section 3(c).
(a) Automatic Conversion on Qualified Financing. If, before the Maturity Date, the Company issues and sells shares of its preferred stock in a single transaction or series of related transactions resulting in gross proceeds to the Company of at least (a “Qualified Financing”), then the outstanding principal and accrued interest under this Note will automatically convert into shares of the preferred stock issued in the Qualified Financing at the Conversion Price.
(b) Conversion Price. The “Conversion Price” means the lesser of (i) the price per share equal to the Valuation Cap of divided by the Company’s fully diluted capitalization immediately prior to the Qualified Financing, and (ii) the price per share paid by the other investors in the Qualified Financing multiplied by the Discount Rate of .
(c) Optional Conversion at Maturity / Non-Qualified Financing. If a financing that is not a Qualified Financing occurs, or if the Note remains outstanding at the Maturity Date, the Holder may elect to convert the outstanding balance into shares of the Company’s preferred stock (or, if none, Common Stock) at the Conversion Price defined above, treating the Valuation Cap as the operative price where no qualifying per-share price exists.
(d) Change of Control. If the Company consummates a Change of Control before this Note converts or is repaid, the Holder will receive, at its election, either (i) repayment of the outstanding principal plus accrued interest, or (ii) a payment equal to two (2) times the outstanding principal plus accrued interest, in each case immediately prior to closing.
(e) Mechanics. No fractional shares will be issued; any fraction will be paid in cash. Upon conversion, the Holder will surrender this Note and execute the Qualified Financing transaction documents on the same terms as the other purchasers, with appropriate variations.
The Company may not prepay this Note in whole or in part without the prior written consent of the Holder. Any permitted prepayment will be applied first to accrued and unpaid interest and then to principal.
Each of the following is an “Event of Default”: (a) the Company fails to pay any amount due under this Note within ten (10) days after it becomes due; (b) the Company breaches any material covenant and fails to cure within thirty (30) days after written notice; or (c) the Company makes a general assignment for the benefit of creditors, files or has filed against it a petition in bankruptcy or insolvency, or is the subject of a proceeding for dissolution or liquidation that is not dismissed within sixty (60) days. Upon an Event of Default, the Holder may, by written notice, declare all outstanding principal and accrued interest immediately due and payable.
The Company is duly organized, validly existing, and in good standing under the laws of TX and has the corporate power and authority to issue and perform this Note. The Holder is an accredited investor within the meaning of Rule 501 of Regulation D and is acquiring this Note for its own account for investment and not with a view to distribution.
This Note is governed by the laws of the State of TX, without regard to conflict-of-law principles. Any amendment or waiver requires the written consent of the Company and the Holder. This Note may be executed in counterparts, including by electronic signature.
By: Michael Yuan
Title: General Manager
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