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Company Name & Openfund
 Indicative Memorandum of Terms for Seed Financing



1.    Conditions
1.1   Compatibility with Openfund II structural requirements (Company already or to be
      incorporated and operating in Greece, ICT focus, early-stage).
1.2   Agreement on a full Shareholders Agreement, Articles of Association and Business
      Plan. The main terms of the SHA and/or AA are as described in the following clauses.


2.    Corporate form
2.1   A Greek IKE to be or already established (IKE = Ιδιωτική Κεφαλαιουχική Εταιρία).
2.2   Founders and Investors shall be shareholders in the IKE (‘Investors’ meaning
      collectively the Fund and Other Investors).
2.3   Any pre-existing foreign company shall become a wholly owned subsidiary of the IKE.


3.    Founders Warranties
3.1   Any pre-existing company has complied with all legal and tax requirements.
3.2   Standard warranties shall apply with respect to the existing company (regarding,
      indicatively, assets and liabilities, encumbrances, intellectual property, trademarks
      etc.).
3.3   The Founders undertake the obligation to indemnify either the Investors or the
      Company to the full extent of any "claim amount" resulting from any breach of the
      Warranties.


4.    Investors participation
4.1   The Fund shall invest the amount of €{…} and it shall hold pro-rata shareholding in the
      Company, calculated on the basis of a pre-money valuation of €{…}.
4.2   The Investors' stake will be in the form of a special class of Shares (µερίδια).


5.    Liquidation Preference
5.1   In the event of liquidation of the company, the proceeds of liquidation shall be
      distributed first to the Investors, up to the full amount of their capital contribution plus a
      preferred return of 6% per annum.
5.2   In the event of change of control resulting from the sale of Company Shares, the
      Investors shall have the priority right to sell their full stake and receive the full amount
      of their capital contribution plus a preferred return of 6% per annum. Change of control
      refers to a sale of Shares after which the Founders will not have a combined majority
      stake in the Company.


6.    Management
6.1   Founders shall commit to work full time and exclusively for the company for the next
      {…} year(s).



                                                1
6.2   Founders shall not compete with the Company for as long as they hold shares and 2
      years after they cease to do so.
6.3   Founders shall not solicit employees or former employees of the Company to work in
      other businesses for as long as they hold shares and 6 months after they cease to do
      so.
6.4   A penal clause of €{…} will apply in case of breach of Clause 6.2 & 6.3.
6.5   If a Founder leaves on his own accord within the next 3 years, then he will forfeit a
      proportion of up to 75% of his company stake. This proportion shall be calculated
      linearly based on the time elapsed until his departure over the three year period. The
      shares forfeited shall be placed in an option pool for managers and employees.
6.6   Founders, in their capacity as managers, undertake the obligation to execute on a best
      effort basis the business plan of the Company, as it shall be appended to the SHA and
      as amended subsequently from time to time after consultation with the Fund's
      representatives.


7.    Governance
7.1    The consent in writing of the Fund's representative will be required for the following
       items:
7.1.1      increase or decrease of the Company's capital or any other change of the
           Company's shareholding structure.
7.1.2      merger or liquidation of the Company.
7.1.3      acquiring or making any investment in another company or business or
           incorporating any subsidiary.
7.1.4      sale, lease or other disposition or encumbering of assets outside the ordinary
           course of business.
7.1.5      entering into or amending or guaranteeing any credit or loan agreement or debt
           facility in excess of €{…} or combined facilities in excess of €{…} annually.
7.1.6      any deviation from the jointly defined business purpose of the Company.
7.1.7      amendments to the Company’s Articles of Association.
7.1.8      appointment or removal of auditors.
7.1.9      entering into or varying any contract or arrangement (whether legally binding or
           not) with any Founder or with any associate of a Founder.
7.1.10     entering into any material contract or arrangement outside the ordinary course of
           its business.
7.1.11     distribution of dividends.


8.    Information rights
8.1   The Fund’s representatives shall have read access at any time to Company's bank
      statements, accounting ledgers, analytics tools and other such reports that the
      Company employs for internal purposes to monitor the performance of its products &
      services.
8.2   Investors shall receive quarterly quantitative reports containing a set of finance &
      business metrics to be agreed.
8.3   Investors shall receive bi-annual updates of the business and financial projections.


9.    Meetings & consultation
9.1   Monthly meetings of Founders with the Fund representatives to discuss key business
      issues.




                                             2
9.2   Amendments to the Business plan, action plans and financial forecasts will be
      discussed between the Management of the Company and the Fund’s representatives
      on a consultation basis. The Fund’s representatives shall not have formal decision
      making powers on such issues, except to the extent that they include terms under 7.1
      above.


10. Preemptive rights
10.1 Fund's consent required for any transfer of shares of the Founders during the first three
     years after this agreement.
10.2 All shareholders shall have a right of first refusal in any transfer of shares.
10.3 Priority tag along right for Investors.
10.4 Provided there is no substantial capital increase within the next 3 years, the Fund shall
     have a drag along right on all of the Shares of the Company from then on. Substantial
     capital increase shall refer to a round of at least €{...}. In drag along cases the
     liquidation preference shall not apply. Founders will receive a 6-month advance notice
     before the invocation of the drag along right, with pre-emption right on the sale of the
     Investors Shares. (Clause 10.4 does not apply to pre-seed deals.)


11. Option pool
11.1 An option pool of {…}% of total Shares of the Company shall be carved out of the
     Founders’ shares as soon as practicable after execution of this agreement.


12. Miscellaneous
12.1 The contents of this term sheet and any future agreement shall remain confidential.
12.2 Founders undertake not to negotiate with any alternative group of investors for an
     investment in the Company for a period of six weeks from today by which time the
     parties intend to have executed a SHA.
12.3 Founders shall notify the Fund promptly of any inquiries by any third parties in regards
     to an investment in the Company.
12.4 Subject to completion of the deal, all transaction costs (legal, accounting, tax, etc.) will
     be borne by the Company.




                                               3

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Openfund Term Sheet Template

  • 1. Company Name & Openfund Indicative Memorandum of Terms for Seed Financing 1. Conditions 1.1 Compatibility with Openfund II structural requirements (Company already or to be incorporated and operating in Greece, ICT focus, early-stage). 1.2 Agreement on a full Shareholders Agreement, Articles of Association and Business Plan. The main terms of the SHA and/or AA are as described in the following clauses. 2. Corporate form 2.1 A Greek IKE to be or already established (IKE = Ιδιωτική Κεφαλαιουχική Εταιρία). 2.2 Founders and Investors shall be shareholders in the IKE (‘Investors’ meaning collectively the Fund and Other Investors). 2.3 Any pre-existing foreign company shall become a wholly owned subsidiary of the IKE. 3. Founders Warranties 3.1 Any pre-existing company has complied with all legal and tax requirements. 3.2 Standard warranties shall apply with respect to the existing company (regarding, indicatively, assets and liabilities, encumbrances, intellectual property, trademarks etc.). 3.3 The Founders undertake the obligation to indemnify either the Investors or the Company to the full extent of any "claim amount" resulting from any breach of the Warranties. 4. Investors participation 4.1 The Fund shall invest the amount of €{…} and it shall hold pro-rata shareholding in the Company, calculated on the basis of a pre-money valuation of €{…}. 4.2 The Investors' stake will be in the form of a special class of Shares (µερίδια). 5. Liquidation Preference 5.1 In the event of liquidation of the company, the proceeds of liquidation shall be distributed first to the Investors, up to the full amount of their capital contribution plus a preferred return of 6% per annum. 5.2 In the event of change of control resulting from the sale of Company Shares, the Investors shall have the priority right to sell their full stake and receive the full amount of their capital contribution plus a preferred return of 6% per annum. Change of control refers to a sale of Shares after which the Founders will not have a combined majority stake in the Company. 6. Management 6.1 Founders shall commit to work full time and exclusively for the company for the next {…} year(s). 1
  • 2. 6.2 Founders shall not compete with the Company for as long as they hold shares and 2 years after they cease to do so. 6.3 Founders shall not solicit employees or former employees of the Company to work in other businesses for as long as they hold shares and 6 months after they cease to do so. 6.4 A penal clause of €{…} will apply in case of breach of Clause 6.2 & 6.3. 6.5 If a Founder leaves on his own accord within the next 3 years, then he will forfeit a proportion of up to 75% of his company stake. This proportion shall be calculated linearly based on the time elapsed until his departure over the three year period. The shares forfeited shall be placed in an option pool for managers and employees. 6.6 Founders, in their capacity as managers, undertake the obligation to execute on a best effort basis the business plan of the Company, as it shall be appended to the SHA and as amended subsequently from time to time after consultation with the Fund's representatives. 7. Governance 7.1 The consent in writing of the Fund's representative will be required for the following items: 7.1.1 increase or decrease of the Company's capital or any other change of the Company's shareholding structure. 7.1.2 merger or liquidation of the Company. 7.1.3 acquiring or making any investment in another company or business or incorporating any subsidiary. 7.1.4 sale, lease or other disposition or encumbering of assets outside the ordinary course of business. 7.1.5 entering into or amending or guaranteeing any credit or loan agreement or debt facility in excess of €{…} or combined facilities in excess of €{…} annually. 7.1.6 any deviation from the jointly defined business purpose of the Company. 7.1.7 amendments to the Company’s Articles of Association. 7.1.8 appointment or removal of auditors. 7.1.9 entering into or varying any contract or arrangement (whether legally binding or not) with any Founder or with any associate of a Founder. 7.1.10 entering into any material contract or arrangement outside the ordinary course of its business. 7.1.11 distribution of dividends. 8. Information rights 8.1 The Fund’s representatives shall have read access at any time to Company's bank statements, accounting ledgers, analytics tools and other such reports that the Company employs for internal purposes to monitor the performance of its products & services. 8.2 Investors shall receive quarterly quantitative reports containing a set of finance & business metrics to be agreed. 8.3 Investors shall receive bi-annual updates of the business and financial projections. 9. Meetings & consultation 9.1 Monthly meetings of Founders with the Fund representatives to discuss key business issues. 2
  • 3. 9.2 Amendments to the Business plan, action plans and financial forecasts will be discussed between the Management of the Company and the Fund’s representatives on a consultation basis. The Fund’s representatives shall not have formal decision making powers on such issues, except to the extent that they include terms under 7.1 above. 10. Preemptive rights 10.1 Fund's consent required for any transfer of shares of the Founders during the first three years after this agreement. 10.2 All shareholders shall have a right of first refusal in any transfer of shares. 10.3 Priority tag along right for Investors. 10.4 Provided there is no substantial capital increase within the next 3 years, the Fund shall have a drag along right on all of the Shares of the Company from then on. Substantial capital increase shall refer to a round of at least €{...}. In drag along cases the liquidation preference shall not apply. Founders will receive a 6-month advance notice before the invocation of the drag along right, with pre-emption right on the sale of the Investors Shares. (Clause 10.4 does not apply to pre-seed deals.) 11. Option pool 11.1 An option pool of {…}% of total Shares of the Company shall be carved out of the Founders’ shares as soon as practicable after execution of this agreement. 12. Miscellaneous 12.1 The contents of this term sheet and any future agreement shall remain confidential. 12.2 Founders undertake not to negotiate with any alternative group of investors for an investment in the Company for a period of six weeks from today by which time the parties intend to have executed a SHA. 12.3 Founders shall notify the Fund promptly of any inquiries by any third parties in regards to an investment in the Company. 12.4 Subject to completion of the deal, all transaction costs (legal, accounting, tax, etc.) will be borne by the Company. 3