Confidential — Non-Binding (except as set forth in “No-Shop / Confidentiality” and “Expenses” below)
This term sheet (the “Term Sheet”) summarizes the principal terms of a proposed Series A Preferred Stock financing of Galaxy Holdings, a TX LLC (the “Company”), by (the “Lead Investor”) and other investors (together with the Lead Investor, the “Investors”). This Term Sheet is dated .
| Term | Description |
|---|---|
| Securities | Shares of Series A Preferred Stock (the “Series A Preferred”). |
| Pre-Money Valuation | |
| Amount Raised | , of which from the Lead Investor. |
| Price Per Share | (the “Original Purchase Price”), based on the pre-money valuation and the Company’s fully diluted capitalization including the option pool below. |
| Option Pool | The fully diluted capitalization includes an available employee option pool equal to of the post-Closing capitalization. |
| Liquidation Preference | of the Original Purchase Price plus declared and unpaid dividends, non-participating; thereafter the Series A Preferred participates with Common on an as-converted basis only if converted. |
| Dividends | non-cumulative dividends payable when and if declared by the Board. |
| Conversion | Convertible into Common Stock at any time at the holder’s option; automatic conversion on a qualified IPO or by vote of the requisite holders. |
| Anti-Dilution | Broad-based weighted-average adjustment to the conversion price on issuances below the Original Purchase Price, subject to customary carve-outs. |
| Closing | On or about , subject to definitive documentation and conditions. |
At the Closing, the Board will consist of directors, comprising: director(s) designated by the Lead Investor, director(s) designated by the Founders/holders of Common Stock, and independent director(s) mutually agreed by the Common and Preferred directors.
For so long as at least of the originally issued Series A Preferred remains outstanding, the consent of the holders of a majority of the Series A Preferred will be required for the Company to, among other things: (a) alter the rights of the Series A Preferred; (b) increase or decrease the authorized shares of Preferred or Common; (c) create any senior or pari passu security; (d) effect a liquidation, dissolution, or Change of Control; (e) pay or declare dividends; (f) redeem or repurchase shares (other than customary vesting repurchases); or (g) increase the size of the Board.
The Investors will receive customary registration rights, information rights, and pro rata rights to participate in future financings, as set forth in an Investors’ Rights Agreement. The Investors will also receive a right of first refusal and co-sale rights with respect to Founder transfers, and the parties will enter into a Voting Agreement governing Board composition and drag-along.
Founder shares will be subject to vesting over four (4) years with a one-year cliff (or as otherwise agreed). All employees and consultants will execute confidential information and invention assignment agreements.
For a period of days following the execution of this Term Sheet (the “No-Shop Period”), the Company and its officers and directors will not solicit, encourage, or accept any offers for the purchase or acquisition of equity or assets of the Company, or provide information to any party in connection with such a transaction. The Company will notify the Lead Investor promptly of any such inquiry. The terms of this Term Sheet are confidential. This section and the Expenses section are legally binding; the remainder of this Term Sheet is non-binding and subject to definitive documentation.
At the Closing, the Company will reimburse the reasonable, documented legal fees and expenses of the Lead Investor up to . If the financing is not consummated, each party bears its own expenses, except as the parties otherwise agree in writing.
This Term Sheet and the definitive agreements will be governed by the laws of the State of TX.
By: Michael Yuan
Title: General Manager
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