Setting The Deal

Athens 2015

Setting The Deal, Athens 2015

Setting the Deal

A typical Venture Capitalist might see over 200 companies per year and might participate in more

than 20 negotiations per year. On the other hand a typical entrepreneur most of the times has

never experienced such a negotiation before. In this event we shed light into the dark secrets of

Venture Capital and the term sheet negotiations.

What is the anti-dilution clause?

What are the pre-emptive and preference rights?

What are the incentives and thoughts in each side of the negotiating table?

Setting the Deal recreates a whole Venture Capital negotiation. An experienced Venture Capitalist

against a successful entrepreneur and his legal advisor are negotiating the terms of an early stage

financing deal. Before the negotiation process starts the attendees will be presented with the

main clauses of a term-sheet in order to be able to fully understand the motivation and strategy of

each side.

A must not miss event not only for the entrepreneurs who are currently in the process of raising a

financing round, but for everyone who is interested into diving deeper in the world of Venture

Capital.

Setting The Deal, Athens 2015

Program

19:00 Welcome / Introduction

19:05 – 19:35 Explanation of Basic Terms

19:35 – 20:40 Setting the Deal

on Valuation, Liquidation Rights, Vesting, Protective Provisions

20:40 – 20:55 Q&A

20:55 – 21:00 Wrap-up

Setting The Deal, Athens 2015

Roles

The Venture Capitalist

Spyros has been an active investor in Greek early stage

and growth companies since 1999 following a career in

telecom operations consulting. Prior to joining Odyssey

Venture Partners, Spyros established Oxygen Capital

NeoVentures, a growth capital fund and before that he

was an investment director and co-founder of NBGI

Ventures and an investment manager with Global

Finance. Spyros investments have included: InternetQ,

Information Dynamics, spitogatos.gr, Theta

Microelectronics, Forth Photonics and Zephyr

Communications among others. He is currently a

member of the board of the Hellenic Venture Capital

Association and has in the past served on the boards

and investment committees of several private

companies and funds.Spyros holds a Diploma in

Electrical Engineering from the University of Patras and

an MBA from Insead. The Entrepreneur

John is co-founder and CEO of Pollfish P.C. Pollfish is a

platform that provides brands a revolutionary way to

learn, communicate and interact with existing and

prospective customers. Passionate about platforms and

businesses that scale mainly focused on the mobile

domain. Prior to Pollfish, John was the co-founder of

Pajap.

Setting The Deal, Athens 2015

The lawyer

Nayia is the founder and managing attorney of the Nayia

Antoniou & Associates law office that is based in Kolonaki at

Athens, Greece. Focused on Company & Commercial matters,

advising on company establishment, corporate governance,

internet law and the entry into all type of commercial contracts,

including shareholder, terms of use, privacy policy, term sheet,

convertible note, investment, intellectual property (IP) transfer,

IP licensing, agency, distribution, incoterms, franchise and

sports agreements. Representing clients in the registration of

trademarks, patents and competition law matters. Also advising

in particular on the legal framework within which foreign

companies operate in Greece. Providing preemptive legal

support in Greek or English.

The moderator

Nick is an Analyst at the Randstad Innovation Fund (RIF). RIF

is the Venture Capital arm of Randstad to invest in

innovative HR Technology companies. Before joining RIF,

Nick worked as an investment Analyst at Dutch Expansion

Capital (DEC) and as an Investment Manager at

Startupbootcamp HighTechXL, investing in and accelerating

high tech ventures. He studied Computer Engineering at the

University of Patras and holds an MSc in Finance and

Investments (cum laude) from Rotterdam School of

Management. Nick has also worked for Rockstart

Accelerator in Amsterdam.

Setting The Deal, Athens 2015

The Host

Demetrios is the Startups and Entrepreneurship Editor at

Startupper.gr and EMEA.gr. With a background in communications

and mass media, Demetrios is a senior edior at Delta Press, the

media company behind well-respected business news portal

EMEA.gr and the leading source of information on tech

entrepreneurship in Greece, Startupper.gr. He covers extensively

the startup, digital economy and venture capital markets of Greece.

Setting The Deal, Athens 2015

Term Sheet

Preliminary Note

This term sheet is created by using as a basis the model term sheet of NVCA, as can be found in http://www.nvca.org/index.php?option=com_content&view=article&id=108&Itemid=136. It maps to the NVCA Model Documents, and for convenience the provisions are grouped according to the particular Model Document in which they may be found.

This term sheet is created by Setting the Deal and is based on a hypothetical scenario. It is

not representative of the terms that any particular participant to the event would propose. It could

be perceived as an aggressive term-sheet and the reason for that is to facilitate the discussion and

negotiations during the Setting the Deal event.

TERM SHEET FOR SERIES A PREFERRED STOCK FINANCING OF

[HOME.CONNECT_] [MARCH 21, 2015]

This Term Sheet summarizes the principal terms of the Series A Preferred Stock Financing of

Home.connect_., a Greek corporation (the “Company”). In consideration of the time and expense

devoted and to be devoted by the Investors with respect to this investment, the No

Shop/Confidentiality provisions of this Term Sheet shall be binding obligations of the Company

whether or not the financing is consummated. No other legally binding obligations will be created

until definitive agreements are executed and delivered by all parties. This Term Sheet is not a

commitment to invest, and is conditioned on the completion of due diligence, legal review and

documentation that is satisfactory to the Investors. This Term Sheet shall be governed in all

respects by the laws of Hellenic Republic ].

Offering Terms

Closing Date: As soon as practicable following the Company’s acceptance of this

Term Sheet and satisfaction of the Conditions to Closing (the

“Closing”).

Investors: Investor No. 1: InvestorVentures. Shares 25%, €1,000,000

Amount Raised: €1,000,000

Pre-Money Valuation: The Original Purchase Price is based upon a fully-diluted pre-money

valuation of €3,000,000 and a fully-diluted post-money valuation of

€4,000,000 (including an employee pool representing 10% of the

fully-diluted post-money capitalization).

Capitalization: The Company’s capital structure before and after the Closing is set

forth on Exhibit A.

CHARTER

Dividends: The Series A Preferred will carry an annual 10% cumulative

dividend payable upon a liquidation or redemption. For any other

dividends or distributions, participation with Common Stock on an

as-converted basis.

Liquidation Preference:

In the event of any liquidation, dissolution or winding up of the

Company, the proceeds shall be paid as follows:

(full participating Preferred Stock): First pay two times the

Original Purchase Price plus accrued dividends on each share of

Series A Preferred. Thereafter, the Series A Preferred participates

with the Common Stock pro rata on an as-converted basis.

A merger or consolidation (other than one in which stockholders of

the Company own a majority by voting power of the outstanding

shares of the surviving or acquiring corporation) and a sale, lease,

transfer, exclusive license or other disposition of all or substantially

all of the assets of the Company will be treated as a liquidation event

(a “Deemed Liquidation Event”), thereby triggering payment of

the liquidation preferences described above unless the holders of

75% of the Series A Preferred elect otherwise.

Voting Rights: The Series A Preferred shall vote together with the Common Stock

on an as-converted basis, and not as a separate class, except (i) the

Series A Preferred as a class shall be entitled to elect one (1)

member of the Board (the “Series A Directors”), and (ii) as

required by law. The Company’s Certificate of Incorporation will

provide that the number of authorized shares of Common Stock may

be increased or decreased with the approval of a majority of the

Preferred and Common Stock, voting together as a single class, and

without a separate class vote by the Common Stock.

Protective Provisions: In addition to any other vote or approval required under the

Company’s Charter or Bylaws, the Company will not, without the

written consent of the holders of at least 75% of the Company’s

Series A Preferred, either directly or by amendment, merger,

consolidation, or otherwise:

(i) liquidate, dissolve or wind-up the affairs of the

Company, or effect any merger or consolidation or any

other Deemed Liquidation Event;

(ii) amend, alter, or repeal any provision of the Certificate of

Incorporation or;

(iii) create or authorize the creation of or issue any other security

convertible into or exercisable for any equity security,

having rights, preferences or privileges senior to or on

parity with the Series A Preferred, or increase the

authorized number of shares of Series A Preferred;

(iv) purchase or redeem or pay any dividend on any capital stock

prior to the Series A Preferred, or

(v) create or authorize the creation of any debt security other

than equipment leases or bank lines of credit

(vi) create or hold capital stock in any subsidiary that is not a

wholly-owned subsidiary or dispose of any subsidiary

stock or all or substantially all of any subsidiary assets; or

(vii) increase or decrease the size of the Board of Directors

Matters Requiring

Investor Director

Approval:

The prior written approval of both the Series A Directors will be

required to:

(i) make any loan or advance to, or own any stock or other

securities of, any subsidiary or other corporation,

partnership, or other entity unless it is wholly owned by

the Company;

(ii) make any loan or advance to any person, including, any

employee or director, except advances and similar

expenditures in the ordinary course of business or under

the terms of a employee stock or option plan approved by

the Board of Directors;

(iii) guarantee, any indebtedness except for trade accounts of the

Company or any subsidiary arising in the ordinary course

of business;

(iv) make any investment inconsistent with any investment policy

approved by the Board; (v) incur any aggregate

indebtedness in excess of €100,000 that is not already

included in a Board-approved budget, other than trade

credit incurred in the ordinary course of business;

(v) enter into or be a party to any transaction with any director,

officer or employee of the Company or any “associate”

(as defined in Rule 12b-2 promulgated under the

Exchange Act) of any such person except transactions

resulting in payments to or by the Company in an amount

less than €60,000 per year,

(vi) hire, fire, or change the compensation of the executive

officers, including approving any option grants;

(vii) change the principal business of the Company, enter new

lines of business, or exit the current line of business;

(viii) sell, assign, license, pledge or encumber material

technology or intellectual property, other than licenses

granted in the ordinary course of business; or

(ix) enter into any corporate strategic relationship involving the

payment contribution or assignment by the Company or

to the Company of assets greater than €100,000.00.

(x) Appoint or remove directors to/from the board of the

Company or any subsidiary companies.

Optional Conversion: The Series A Preferred initially converts 1:1 to Common Stock at

any time at option of holder, subject to adjustments for stock

dividends, splits, combinations and similar events and as described

below under “Anti-dilution Provisions.”

Anti-dilution Provisions: In the event that the Company issues additional securities at a

purchase price less than the current Series A Preferred conversion

price, then the conversion price will be reduced to the price at which

the new shares are issued.

[Pay-to-Play:

On any subsequent round all Investors are required to purchase their

pro rata share of the securities set aside by the Board for purchase by

the Investors. All shares of Series A Preferred of any Investor

failing to do so will automatically convert to Common Stock and

lose the right to a Board seat if applicable

STOCK PURCHASE AGREEMENT

Representations and

Warranties:

Standard representations and warranties by the Company.

Representations and warranties by Founders regarding technology

ownership.

Conditions to Closing: Standard conditions to Closing, which shall include, among other

things, satisfactory completion of financial and legal due diligence,

qualification of the shares under applicable laws and the filing of a

Certificate of Incorporation establishing the rights and preferences

of the Series A Preferred..

Counsel and Expenses: [Investor and company counsel to draft Closing documents.

Company to pay all legal and administrative costs of the financing at

Closing, including reasonable fees (not to exceed €20,000) and

expenses of Investor counsel

INVESTORS’ RIGHTS AGREEMENT

Management and Any Investor will be granted access to Company facilities and

Information Rights: personnel during normal business hours and with reasonable

advance notification. The Company will deliver to such Investor (i)

annual, quarterly, financial statements, and other information as

determined by the Board; (ii) thirty days prior to the end of each

fiscal year, a comprehensive operating budget forecasting the

Company’s revenues, expenses, and cash position on a month-to-

month basis for the upcoming fiscal year

Right to Participate Pro

Rata in Future Rounds:

All Investors shall have a pro rata right, based on their percentage

equity ownership in the Company (assuming the conversion of all

outstanding Preferred Stock into Common Stock and the exercise of

all options outstanding under the Company’s stock plans), to

participate in subsequent issuances of equity securities of the

Company (excluding those issuances listed at the end of the “Anti-

dilution Provisions” section of this Term Sheet. In addition, should

any [Major] Investor choose not to purchase its full pro rata share,

the remaining [Major] Investors shall have the right to purchase the

remaining pro rata shares.

(xi)

Non-Competition and

Non-Solicitation

Agreement

Each Founder and key employee will enter into a two year non-

competition and non-solicitation agreement in a form reasonably

acceptable to the Investors.

Non-Disclosure and

Developments Agreement:

Each current and former Founder, employee and consultant will

enter into a non-disclosure and proprietary rights assignment

agreement in a form reasonably acceptable to the Investors.

Board Matters: Each Board Committee shall include at least one Series A Director.

The Board of Directors shall meet at least quarterly, unless

otherwise agreed by a vote of the majority of Directors.

The Company will bind D&O insurance with a carrier and in an

amount satisfactory to the Board of Directors. Company to enter

into Indemnification Agreement with each Series A Director and

affiliated funds in form acceptable to such director. In the event the

Company merges with another entity and is not the surviving

corporation, or transfers all of its assets, proper provisions shall be

made so that successors of the Company assume the Company’s

obligations with respect to indemnification of Directors.

Vesting of Managers’

Shares:

100% of the shares directly or indirectly held by a Founder shall be

subject to a: reverse quarterly vesting over a period of four years

with a one year cliff, with a compensation in the amount of the

unvested shares; nominal value in case of a bad leaver event and in

the amount of the portion of the minimum of either the most recent

financing round or current market price in case of a good leaver

event.

"Good Leaver" means any employee shareholder who ceases to be

employed as a result of death or permanent incapacity, summary

dismissal when the dismissal is found to have been wrongful or

constructive, or whose contract of employment is terminated in

circumstances where he is not in breach of his contract. "Bad

Leaver" means any employee shareholder who is not a Good Leaver.

Key Person Insurance: Company to acquire life insurance on Founders in an amount

satisfactory to the Board. Proceeds payable to the Company.

RIGHT OF FIRST REFUSAL/CO-SALE AGREEMENT

Right of First Refusal/

Right of Co-Sale (Take-

Me-Along):

Company first and Investors second (to the extent assigned by the

Board of Directors,) will have a right of first refusal with respect to

any shares of capital stock of the Company proposed to be

transferred by Founders [and future employees holding greater than

[1]% of Company Common Stock (assuming conversion of

Preferred Stock and whether then held or subject to the exercise of

options)], with a right of oversubscription for Investors of shares

unsubscribed by the other Investors. Before any such person may

sell Common Stock, he will give the Investors an opportunity to

participate in such sale on a basis proportionate to the amount of

securities held by the seller and those held by the participating

Investors.1

VOTING AGREEMENT

Board of Directors: At the initial Closing, the Board shall consist of 5 members.

Drag Along: Holders of Preferred Stock and the Founders shall be required to

enter into an agreement with the Investors that provides that such

stockholders will vote their shares in favor of a Deemed Liquidation

Event or transaction in which 50% or more of the voting power of

the Company is transferred and which is approved by the holders of

75% of the outstanding shares of Preferred Stock, on an as-

converted basis (the “Electing Holders”).

Tag Along: Holders of Preferred Stock and the shall have a tag along right in

case any other shareholder wishes to sell or otherwise dispose of

1 Certain exceptions are typically negotiated, e.g., estate planning or de minimis transfers. Investors may also

seek ROFR rights with respect to transfers by investors, in order to be able to have some control over the composition of the investor group.

shares in the company.

OTHER MATTERS

No Shop/Confidentiality: The Company agrees to work in good faith expeditiously towards a

closing. The Company and the Founders agree that they will not,

for a period of 24 weeks from the date these terms are accepted, take

any action to solicit, initiate, encourage or assist the submission of

any proposal, negotiation or offer from any person or entity other

than the Investors relating to the sale or issuance, of any of the

capital stock of the Company or the acquisition, sale, lease, license

or other disposition of the Company or any material part of the stock

or assets of the Company and shall notify the Investors promptly of

any inquiries by any third parties in regards to the foregoing. [In the

event that the Company breaches this no-shop obligation and, closes

any of the above-referenced transactions without providing the

Investors the opportunity to invest on the same terms as the other

parties to such transaction, then the Company shall pay to the

Investors €300,000 upon the closing of any such transaction as

liquidated damages. The Company will not disclose the terms of

this Term Sheet to any person other than officers, members of the

Board of Directors and the Company’s accountants and attorneys

and other potential Investors acceptable to InvestorVentures as lead

Investor, without the written consent of the Investors.

Expiration: This Term Sheet expires on April 21, 2015 if not accepted by the

Company by that date.

EXECUTED THIS 21TH DAY OF MARCH 2015

[SIGNATURE BLOCKS]

EXHIBIT A

Pre and Post-Financing Capitalization

Pre-Financing Post-Financing

Security # of Shares % # of Shares %

Common – Founder 1 600 55,2% 600 35,9% Common – Founder 2 400 36,8% 400 23,9% Common – Angel Investor 87 8% 87 5,2% Common – Employee Stock Pool

0 0% 167 10%

Series A Preferred

0 0 417 25%

Total

1087 100% 1673 100%