For Issuance of Series Seed Preferred Shares
[_________] (the “Company”).
Up to [EUR/US$] [________] in newly issued Series Seed Shares (“Seed Shares”) at a fully diluted pre-money valuation of [EUR/US$] [________], including an unallocated employee share option plan of at least [10%] of the post-money capitalization, and assuming any outstanding convertible loans have been converted prior to this financing and the Company has no debt. Point Nine Capital (the “Lead Investor”, or “PNC”) will invest [EUR/US$] [________] so that it holds at least [___]% post financing on a fully diluted basis. Up to [EUR/US$] [________] ([___]% of the post-money capitalization) to be allocated to other investors as jointly agreed by the Lead Investor and the Company (the Lead Investor and the further investors hereinafter collectively referred to as the “Investors”).
The parties aim to close the investment within 30 days after signing of this term sheet.
Upon a liquidation, dissolution, winding up, merger, acquisition, sale, exclusive license or other disposal of substantially all of the assets or a majority of the shares of the Company or a sale of the majority of the Founder Shares (a “Change of Control”), all holders of Seed Shares shall receive, on a pari passu basis, the higher of: (a) one times the original purchase price for the respective Seed Shares; or (b) the amount they would receive if all shareholders received their pro rata share of such assets or proceeds (“1x non-participating liquidation preference”).
Seed Shares shall be entitled to a broad-based weighted average adjustment in the event that the Company issues additional equity securities at a price less than the original issue price. Standard exceptions apply (esp. ESOP issuances and stock splits).
Approval of majority of Seed Shares (“Seed Majority”) required for important measures including: (i) adversely alter the rights of the Seed Shares (ii) change the authorized number of shares or issue any new shares beyond those anticipated by this investment (iii) create any new class or series senior to or on parity with the Seed Shares (iv) increase the number of shares reserved for issuance to employees and consultants, whether under the ESOP or otherwise (v) redeem shares (excluding ESOP-related common shares repurchased upon termination of an officer, employee, director, or consultant) (vi) pay or declare dividends or distributions to shareholders (vii) change the delegation rights to the advisory board (viii) effect a Change of Control (ix) amend the Articles of the Company (x) purchase or sell shares in another company (xi) effect any transaction between the Company and the Founders or their relatives and affiliates (xii) assume debt or effect a transaction outside the ordinary course in excess of [EUR/US$] [_____].
Investors will receive monthly reporting including financial information and non-financial KPIs.
Investors will have the right to participate on a pro rata basis in subsequent issuances of equity securities (including derivatives, e.g. convertible loans).
Two board members elected by holders of a majority of common shares, one elected by the majority of the Seed Shares (“Seed Majority”). Lead Investor may appoint a board observer if not represented on the board.
Right of First Refusal
Shareholders shall have a right of first refusal (“RoFR”) on transfers of any shares of the Company and a pro rata right to participate on identical terms in transfers where the RoFR has not been exercised (subject to customary permitted transfers, including transfers by Investors to affiliated funds).
If a Seed Majority and a majority of the common shares wish to accept an offer to sell all of their shares to a third party or enter into another Change of Control event, all other shareholders shall be required to sell their shares on the same terms and conditions or to consent to the transaction, subject to the liquidation preference of the Seed Shares.
Founders shall enter into customary confidentiality, non-compete, non-solicitation and IP transfer agreements. Each Founder shall not sell more than 10% of his common shares without approval of the Seed Majority.
75% of the Shares held by the Founders (the “Vesting Shares”) will be subject to reverse vesting over 48 months (linear monthly vesting). 100% vesting acceleration upon the consummation of a Change of Control and dismissal by the purchaser without cause (i.e. double trigger acceleration). Upon termination of the/a Founder’s employment he/she shall offer for sale to the Company (with a secondary purchase option for the holders of Seed Shares) any unvested shares at nominal value.
Documentation and Warranties:
Except for the section entitled “Exclusivity/Confidentiality” this term sheet does not constitute a legally binding obligation. Definitive agreements to be drafted by counsel to the Company and to include customary representations and warranties of the Company (capped at the investment amount) and jurisdiction-specific terms where required.
PNC will be advised by its inhouse legal counsel at no costs to the Company. Should PNC require external legal advice, the Company shall reimburse reasonable expenses of up to a maximum of [EUR 10,000].
For a period of 30 days, the Company shall not solicit offers from other parties for any financing other than this financing. Without the consent of Investors, the Company shall not disclose these terms to anyone other than officers, directors, key service providers, and other potential investors in this financing.
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Point Nine Capital
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