Galion Term Sheet Series A
Issuer:
(the "Company")

Founders:
(the "Founders")

Seed Investors
(together the “Seed Investors”), representing all pre-closing shareholders other than the Founders.

Series A Investors
(together the “Investors”), representing all investors in the Series A Round.
  1. Type of Security
    Series A ordinary shares (the “Series A”).
  2. Structure of Financing
    The Series A round will amount to an aggregate of 2,000,000 Euros in newly issued Series A based on a fully diluted pre-money valuation of 8,000,000 Euros, i.e., One Euro per share of Series A (the “Price”), allocated as follows (see Appendix A):
  3. Investors
  4. Closing Conditions
    1. satisfactory completion of confirmatory due diligence;
    2. negotiation of customary legal documentation in compliance with this term sheet (including a simplification of the Company’s by-laws, to the extent relevant);
    3. approval of the proposed investment/definitive agreements by the Investors’ respective investment committees or other competent bodies, if applicable;
    4. receipt by the Investors of anti-money laundering documents reasonably satisfactory to them;
    5. receipt of waiver of any existing pre-emptive rights and/or other necessary approvals and consents;
  5. Liquidation Preference
    In the event of a liquidation, dissolution, winding up, merger, sale or other disposition of all or substantially all of the assets of the Company in which the shareholders do not own a majority of the outstanding shares of the surviving entity for a price (or value) per Company share, the higher of 20% of the proceeds and par value shall first be distributed to all shareholders pro rata on an as-converted basis. Then, out of the remaining proceeds, the holders of the Series A shall be entitled to receive, in preference to all other shareholders, a per share amount equal to the Price (as adjusted for stock splits, combinations and anti-dilution adjustment) minus the amount received in the first distribution, plus any declared but unpaid dividends. Thereafter, the remaining proceeds (if any) shall be distributed pro rata to the holders of ordinary shares and Series A.
  6. Automatic Conversion
    The Series A shall automatically convert into ordinary shares upon the closing of a firmly underwritten public offering of shares of the Company with aggregate net proceeds to the Company based on a price per share at least equal to 5 times the Price (a “Qualifying IPO”).
  7. Optional Conversion
    Each holder of the Series A shall have the right to convert its shares at any time into ordinary shares. The conversion ratio shall be 1:1, subject to adjustment in the event of stock split or grouping.
  8. Anti-dilution
    One anti-dilution equity warrant (a “Ratchet Warrant”) will be attached to each Series A, entitling its holder to subscribe for a variable number of new Series A at par value in case a new round of financing shall be completed by the Company within 2 years of the Series A round at price below the Series A round, thereby obtaining an adjustment of the cost of such holder’s shares based on a customary broad based weighted average ratchet formula; provided that holders of Ratchet Warrants shall only be entitled to exercise them to the extent that they participate in the relevant down round pro rata.
  9. Redemption
    The Series A will not be redeemable consistent with applicable French law.
  10. Dividends
    The Series A shall be entitled to participate in any dividend distribution on a pro rata basis.
  11. Voting
    The Series A shall carry the same number of votes as the other shares of the Company issued and outstanding consistent with applicable French law, except that shares held by the same shareholders for at least two years following the closing shall enjoy double voting rights.
  12. Series A Majority Approval
    The consent of holders of at least 2/3 of the Series A voting as a separate class shall be required for any action which alters or amends any of the rights, preferences or privileges of the Series A.
  13. Shareholders' Agreement
    1. A shareholders’ agreement (the “Agreement”) will be entered into on the Closing date among the Founders, the Seed Investors owning more than 5% of the share capital and the Investors, for a term of 15 years renewable. The Agreement will replace and supersede in all respect any and all pre-existing shareholders agreements entered into between the shareholders of the Company. The Agreement shall automatically terminate upon the listing of the Company’s shares on a regulated market or a foreign stock exchange/ a Qualifying IPO.
    2. All other shareholders including Seed Investors owning less than 5% of the share capital and option holders (the "Minority Holders") shall sign with the parties to the Agreement (represented for this purpose by the Company) a separate, shorter shareholders’ agreement under which the Minority Holders shall have a full tag along right in case of transfer of more than 50% of the shares of the Company and, in return, shall be subject to all major obligations provided for in the Agreement. Also, the Minority Holders will agree in such short-form shareholders agreement to be bound by the terms of any lock-up obligation which the banks in charge of the IPO and the Board may reasonably see fit.
  14. Pre-emptive Rights
    The Founders for so long as they remain employed by the Company (the “Active Founders”) and the Investors shall have a pre-emptive right to purchase their pro rata share of any new securities of the Company other than securities issued to officers, employees, directors or consultants, shares issued for acquisitions or to strategic partners, in each case pursuant to plans or agreements approved by the Board.
  15. Lock Up
    No shares may be transferred by the Founders until the third anniversary of Closing, except for transfers by the Founders not exceeding 15% of their stake in the aggregate, Free Transfers, Leaver, Co-Sale and Drag Along situations.
  16. Right of First Refusal
    The Investors and the Active Founders will have a right of first refusal on any shares proposed to be transferred by any shareholder, with a right of oversubscription, except for transfers
    1. to an affiliate entity,
    2. to the Company,
    in all cases subject to customary limitations and provided that the Active Founders shall have priority over any shares proposed to be transferred by the Seed Investors or the Founders.
  17. Co-Sale
    1. In case of a change of control or sale to an industrial acquirer not approved by the Investors and Active Founders, all shareholders shall have a full tag-along right.
    2. The rights of first refusal and co-sale shall not apply to Free Transfers.
  18. Drag Along
    If a bona fide arms' length offer is made by any third party to acquire all of the shares in the Company, which is accepted by the holders of more than 75% of the shares of the Company, all shareholders shall be required to sell their shares on the same terms and conditions subject to the Liquidation Preference. In this case, the rights of first refusal shall not apply.
  19. Liquidity
    1. The Company and its shareholders will use their reasonable best efforts to achieve a sale of the Company or initial public offering of its shares on a recognized stock exchange (an “IPO”) on or before the 5th anniversary of Closing.
    2. If a liquidity event for the Series A has not been achieved by the sixth anniversary of Closing, the holders of a 2/3 majority of the Series A then outstanding (the “Investor Majority”) shall have the right, at any time following such date, to require the Board and shareholders of the Company to engage an internationally recognized investment bank in order to initiate a Qualifying IPO or sale of the Company; provided that (i) from the sixth anniversary of Closing all shareholders shall be required to sell their shares to any acquirer having made an offer for 100% of the share capital of the Company which is accepted by the holders of at least a 2/3 majority of the Series A and (ii) this clause shall not be subject to the Right of First Refusal.
  20. Information and Audit Rights
    1. Each Investor holding more than 5% of the shares shall be entitled to receive:
      1. annual audited accounts for each group company and on a consolidated basis, together with the related auditors’ report, within 4 months of the end of each year;
      2. semi-annual accounts for each group company within 45 days following the end of each semester;
      3. quarterly reporting within 45 days following the end of each quarter; and
      4. any change in the share capital or voting rights of the Company or any subsidiary thereof within 20 days of such change.
    2. Each Investor holding more than 5% of the shares shall also have the right, at its cost and subject to execution of a customary non-disclosure agreement, to visit the Company and inspect its books and records upon reasonable notice and during normal business hours.
  21. BOARD OF DIRECTORS
    1. Board Representation
      1. The Company shall be managed by a board of directors (the “Board”) of no more than 3 board members.
      2. Each Investor holding more than 15% of the shares shall have the right to appoint one Board member or one non-voting Board observer who shall initially be Eleanore Ellenbow.
    2. Board Meetings
      The Board will meet at least 2 times per quarter, at intervals not exceeding 2 months, with a minimum 8-day prior notice except in case of urgency.
    3. Board Decisions
      All Board decisions shall be made at a simple majority of the members present or represented except for Material Decisions listed in Appendix B which shall be subject to a qualified majority of the Board including at least 1 Investor director.
  22. Management Rights
    The Company will execute a standard management rights letter that will give holders of Series A rights to consult with management sufficient to meet their venture capital operating company requirements.
  23. Employee Stock Option Plan
    Following the new round, an incentive plan for existing and future managers and employees of the Company will be adopted. This plan will represent 10% of the Company’s capital on a fully diluted basis after Closing. Each stock option will allow its holder to subscribe for one ordinary share at a price at least equal to the Price conditioned upon continued employment and standard vesting terms: 25% after one year and the balance on a quarterly basis over the following three years.
  24. Employee Stock Option Plan
    Following the new round, an incentive plan for existing and future managers and employees of the Company will be adopted. This plan will represent 10% of the Company’s capital on a fully diluted basis after Closing. Each stock option will allow its holder to subscribe for one ordinary share at a price at least equal to the Price conditioned upon continued employment and standard vesting terms: 25% after one year and the balance on a quarterly basis over the following three years.
  25. Assignment of IP Rights
    The Closing shall be subject to the assignment of all intellectual property rights related to the business of the Company to the Company by the Founders or any entity controlled or owned by the Founders.
  26. Non-Compete/Exclusivity
    The Founders shall dedicate substantially all of their professional time to the Company for so long as they are in office and shall be bound by a customary 12-month non-compete obligation after that which may be waived by the Company and shall otherwise be compensated by monthly payments equal to 50% of their average monthly salary during their last 12 months of employment.
  27. Documentation
    Definitive agreements shall be drafted by counsel to the Company and shall include customary representations and warranties of the Founders who shall have the option to pay in cash or in shares of the Company and, in case of payment in shares, shall not be liable beyond the lesser of the investment amount and the value of their shares except in case of fraud. The documents other than corporate documents shall be in English.
  28. Exclusivity
    The Company and the Founders agree not to solicit or receive any funding from any investors other than the Investors for a period of 4 weeks from the date this term sheet is signed by the Company; provided that the Investors shall promptly inform the Company of their decision not to pursue their proposed investment in the Company, as the case may be, in which case such exclusivity period shall immediately lapse.
  29. Expenses
    Upon transaction completion, the Company shall pay the Investors’ external fees and expenses incurred in connection with the transaction not to exceed 30,000 Euros (before VAT) in the aggregate.
  30. Confidentiality
    The parties agree to treat this term sheet confidentially and will not distribute or disclose its existence or contents, except to their respective shareholders and professional advisors as reasonably required to complete the financing.
  31. Applicable Law
    This Summary of Terms and the definitive agreements shall be governed and construed in accordance with the laws of France. Any dispute arising therefrom or in connection therewith shall be submitted to the exclusive jurisdiction of the commercial courts of Paris, France.
Company
Acme Incorporated
("Company")
By:


______________
Name: Abigail Altima
Title: President
Date: _________________
Signed at: Boston, Massachusetts, United States of America


Founders


Series A Investors

Appendixes

Appendix A


Cap Table
Founders:
....

Seed Investors:
....

Investors

Appendix B


List of Material Decisions subject to qualified Board approval
  1. effecting a merger, consolidation, sale of all or substantially all of the assets, or other reorganization of the Company (or a subsidiary) in which control of the Company (or a subsidiary) is transferred to a third party,
  2. authorizing a liquidation or winding-up of the Company,
  3. any material amendment, alternation or repeal of the Company’s bylaws,
  4. creating or authorizing the creation of any security senior to or on parity with the Series A (including any convertible into or exercisable for such series) or reclassifying, altering or amending any existing security that is junior to or on parity with the Series A, if such reclassification, alteration or amendment would render such other security senior to or on parity with the Series A,
  5. distributing dividends,
  6. purchasing or redeeming any capital stock other than stock repurchased from former employees or consultants in connection with the cessation of their employment/services, at the lower of fair market value or cost,
  7. any increase in the number of shares issuable pursuant to the Company’s Stock Option Plan,
  8. authorizing any financial commitment not provided for in the budget and greater than 20% of remaining cash,
  9. creating or authorizing the creation of any debt security and/or other borrowings not provided for in the budget and greater than 100,000 Euros in aggregate,
  10. creating any subsidiary that is not a wholly-owned subsidiary,
  11. increase or decrease the size of the Board,
  12. any acquisition or disposition of assets (including but not limited to a majority or minority stake stake in another company) for value above 30% of remaining cash,
  13. any transfer or license of the Company's technology or intellectual property rights outside the ordinary course of business,
  14. undertaking an initial public offering or listing of Company shares,
  15. any transaction between the Company and any officer, director or affiliate of the Company other than entered into at arm’s length and in the ordinary course of business, or
  16. compensation or dismissal of each Founder.