NON-­‐BINDING TERM SHEET This Term Sheet contains a summary of the terms and conditions, which are merely indicative, under which Portugal Capital Ventures – Sociedade de Capital de Risco, S.A. (hereinafter referred to as Portugal Ventures), in the capacity of the management body of a venture capital fund, is considering investing in the COMPANY identified below. This Term Sheet does not bind nor create any obligation whatsoever for Portugal Ventures to make any investment, which shall always be dependent upon the compliance with potential prior conditions and a final agreement between the parties as to the terms of the investment and their relationship as shareholders through the execution of an Investment Agreement and a Shareholders’ Agreement. 1. THE PARTIES 1. Promoters/Founders 2. Portugal Ventures 3. Other Shareholders/Investors 4. The COMPANY 2. The COMPANY 4. Investment •
Total investment from the Founders: € … (common shares) •
Total investment from Portugal Ventures: € … (Class A shares), in accordance with the financial plan and milestones as set forth in Schedule 1) •
Total investment from Other Investors: € … (Class A shares), in accordance with the financial plan and milestones as set forth in Schedule 1) •
Pre-­‐Money Valuation: € … •
Post-­‐Money Valuation: € … •
Final Cap Table: •
Cap Table evolution – Schedule 2 Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
The Founders applied to the Call for Entrepreneurship within the scope of the Ignition Program lead by Portugal Ventures that aims to provide venture capital investment for scientific and technological business projects that are currently at a stage of seed capital, having submitted an application for the development of the project called [...] as described in the scope of said application (the Project) Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
3. Project The [...] (COMPANY) is a [private/public] limited COMPANY [to be transformed into a public limited company], registered with the Commercial Registry of […] under individual registration and company taxpayer identification number […], and having its registered office at [...] 6. Prior Representations and Warranties 7. New Rounds of Investments •
The Founders undertake to transfer to the COMPANY, as gratuitous accessory payments of capital, on its incorporation date or simultaneously with the subscription of the Class A shares, any and all rights related to patents, utility models, copyrights, industrial designs and trademarks or any other processes in progress at the time of the incorporation of the COMPANY that fall within the aforementioned intellectual property rights which are directly connected to the Project and are necessary for its implementation and development •
Furthermore, the Founders and the COMPANY undertake to ensure that any intellectual property rights related to or arising from the Project shall always remain in the COMPANY’s possession, free of any liens or encumbrances •
On the date of the execution of the Investment Agreement, the Founders shall represent and warrant to the Class A shareholders, with regard to themselves, the Project and the COMPANY, being such representations and warranties deemed as automatically repeated upon any subscription of shares in any increase of the COMPANY’s share capital during the Initial Investment Period, and shall be jointly liable for any inaccuracies or errors of said representations and warranties •
Furthermore, the Founders shall also be jointly liable for the payment to the Class A shareholders, as compensation for the lower value of their subscribed shares in the COMPANY, of an amount equal to any and all debts and liabilities that the COMPANY may incur or the decrease of the value of any asset that the COMPANY holds, both arising or resulting from an act, fact or omission prior to the subscription of shares made by Portugal Ventures in the COMPANY, whether it be civil, commercial, labor, administrative, tax, criminal and misdemeanors or of any other in nature •
After the Initial Investment Period, the Founders and the COMPANY, in coordination with the Class A shareholders, shall endeavor to find one or more investors committed to providing additional funds to the COMPANY in new rounds of investment for the development of its activity, or to be available to purchase Class A shares, in either case under terms that shall be acceptable by 2/3 of the Class A shareholders •
In the event a New Round of Investment occurs, the Class A shareholders may decide to: a) Sell all or part of their shares, regardless of the category, with a pre-­‐
emption right over the other shareholders, as long as the new investors undertake to buy the shares of the COMPANY under a New Round of Investment, thus creating a liquidity event for the existing shareholders; b) Take part in the New Round of Investment under the same terms and conditions as the new investors, or c) Keep its position 8. Shareholders’ Agreement On the date of the execution of the Investment Agreement, upon the subscription of the Class A shares, all shareholders shall enter into a Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
5. Intellectual and Industrial property rights Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
Shareholders’ Agreement establishing the rules and provisions related to corporate governance, the obligation to provide periodic reports, the restrictions with regard to the transfer of shares, the special rights granted to Class A shares, and divestment 9. Corporate Bodies The management of the COMPANY shall be entrusted to the Board of Directors, which is responsible for defining and implementing the operational and financial management of the COMPANY subject, however, to the By-­‐Laws and the Shareholders’ Agreement, in particular with regard to matters that are mandatorily subject to deliberation at the Shareholders’ General Meeting 10. Shareholders’ General Meeting •
Composition: The Chairman of the Shareholders’ General Meeting shall be appointed by Portugal Ventures, and the Secretary shall be appointed by the Founders • Constitutive quorum: For deliberation on matters reserved for the Shareholders’ General Meeting (as listed below) or for the appointment of corporate bodies at least 2/3 of Class A shareholders must be present or represented • Deliberative quorum: Deliberation on the following matters (“matters reserved for the Shareholders’ General Meeting”) shall be considered approved only when 1/3 of Class A shareholders did not vote against such a resolution: Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
Changes to the attached rights of the Class A shares or to any rights attached to any other class of shares, including common shares, except when such changes occur in accordance with the Shareholders’ Agreement; (ii) Amendment to the COMPANY’s By-­‐Laws, merger, division, transformation or winding-­‐up of the COMPANY, or any changes to the COMPANY’s share capital, including any increase or decrease of the share capital and, in general, any matters for which the law requires a qualified majority approval; (iii) Waiver of the shareholders’ pre-­‐emption right in the increase of the share capital of the COMPANY; (iv) Subscription, recovery and remuneration of supplementary and accessory payments of capital; (v) Redemption and withdrawal of shares; (vi) Acquisition and disposal of own shares; (vii) Admission to quotation on a stock exchange of the COMPANY’s shares; (viii) Approval of the annual accounts of the COMPANY and distribution of profits; (ix) Any distribution of dividends, as well as the distribution of any other assets to shareholders; (x) Important changes to the COMPANY’s activities including the cessation of the activities pursued by the COMPANY, being considered as cessation of activity whenever the COMPANY has been pursuing an activity directly and alters it to being indirectly pursued; (xi) Subscription or holding shares or any other participation in other Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
(i)
For the appointment of the corporate bodies, a favorable vote from at least 2/3 of the Class A shareholders is required •
Composed of: Five members of which: •
two shall be appointed by the Founders •
one shall be appointed by Portugal Ventures •
one shall be appointed by the Other Shareholders •
the fifth shall be appointed through a list with several names submitted by the Founders; if an agreement is not reached, Portugal Ventures shall appoint this last member •
Constitutive quorum: For deliberation on matters reserved for the Board of Directors (as listed below), the Board may only convene if the Directors appointed by the Class A shareholders are present •
Deliberative quorum: Said matters shall only be deemed approved when at least four of the Board’s five members have voted favorably on them. To this extent, “matters reserved for the Board of Directors” are considered: (i) Approval of the COMPANY’s annual budget and business and investment plan; (ii) Acquisition, sale and encumbrance (including leasing) of tangible and intangible assets, when not included in the annual budget approved in accordance with this clause; (iii) Financial debt assumption and other indebtedness, when not included in the annual budget approved in accordance with this clause; (iv) Providing real and personal collaterals to any entity, including subsidiaries or those in a group relationship with the company, even if there is an interest behind providing such collateral, namely, creation of a mortgage or pledge or issuance of a bond or surety, as well as provide comfort letters; (v) Appointment of proxies for the practice of certain acts and categories of acts, except to appoint lawyers; (vi) Any proposals of amendments to the By-­‐Laws, including merger, division, transformation or winding-­‐up of the COMPANY, changes to the share capital of the COMPANY including any increase or decrease of the share capital, accessory and supplementary payments of capital and any decisions that require financial payments from the shareholders, namely Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
11. Board of Directors •
Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
companies, consortia or groups of companies or European economic interest groups; (xii) Allowing the Board of Directors to engage in a competing activity; (xiii) All resolutions proposed by the Board of Directors or pursuant to the terms of the By-­‐Laws or pursuant to the Shareholders’ Agreement, that must be submitted to the Shareholders’ General Meeting for deliberation; (xiv) Any use of agio obtained by the issuance of shares. •
shareholder loans, as well as the respective terms and conditions; (vii) Appointment of Directors by co-­‐optation; (viii) Dismissal or hiring of staff holding positions as Directors in the COMPANY and their respective remuneration packages; (ix) Any matters not included in the approved annual budget; (x) Subscription or holding shares or any other participation in other companies, consortia or groups of companies or European economic interest groups; (xi) Appointment of the COMPANY’s Chartered Account and amendments to the accounting practices of the COMPANY; (xii) Execution, amendments to or termination of any agreements or negotiations with shareholders or individuals or collective bodies with which a special relationship exists (as set forth in article 63, n. 4, of the Corporate Income Tax Code), or from which a conflict of interest may arise between the COMPANY’s interests and the interest of any shareholders or individual or collective bodies with which a special relationship exists; (xiii) Appointment of the corporate bodies of the COMPANY’s subsidiaries and the exercise the COMPANY’s share rights in other companies when the matters reserved for the Board of Directors or for the Shareholders’ General Meeting are at stake; (xiv) Matters reserved for the Board of Directors or for the Shareholders’ General Meeting with regard to companies in which the COMPANY may directly or indirectly hold a participation. Members of the board are required to be covered by a D&O liability insurance policy, to be paid by the COMPANY Composed of three members, one appointed by the Founders, another appointed by Portugal Ventures, and the other by the Other Shareholders, who will deliberate on the remuneration and benefits to be paid to the Board of Directors, the members of the Board of the Shareholders’ General Meeting, and to the Executives of the COMPANY 14. Reporting The COMPANY is obliged to periodically provide the shareholders with the COMPANY’s economic and financial statements, as well as to report on the compliance with the business plan and milestones of the Project, pursuant to the Shareholders’ Agreement, whose contents may be altered at the request of shareholders 15. Pre-­‐emption right on Increase of Share Capital Any share capital increase by means of cash contributions through the issuance of shares shall be subject to a pre-­‐emption right, except the one required to set up the investment during the Initial Investment Period as set forth in the Cap Table Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
13. Remuneration Committee Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
12. Statutory Auditor To be appointed by the Founders and subject to the approval of the Class A shareholders 16. Anti-­‐Dilution protection – “Narrow Based Weighted Average” Subsequent to the issuance of Class A shares (Q1), whenever the COMPANY wishes to issue any new shares or subscription rights or acquire shares (Q2), at an issue price per share (P2) lower than the Class A share subscription price (P1), there shall be an increase of the COMPANY’s share capital through the issuance of new Class A shares (QN) to be assigned to the Class A Shareholders in proportion to shares they hold in such class, by means of incorporation of the issuance premiums, accessory and supplementary capital loans or other available reserves, in order to ensure the Class A shareholders that there is no dilution of the value of their participation, ending in a final price per share (P) corresponding to the weighted average of the Class A share subscription price (P1) and subscription price per each new issuance share (P2), as follows: Final price: P = (P1xQ1 + P2xQ2) / (Q1 + Q2) Quantity of new Class A shares: QN = (P1xQ1) / P – Q1 17. Lock-­‐Up 18. Share transfer pre-­‐emption right •
Throughout the Shareholders’ Agreement’s lifetime, the shareholders may not transfer shares without the prior consent of at least 2/3 of the Class A shareholders •
For a period to be defined in the Shareholders’ Agreement, which shall not be more than 36 (thirty-­‐six) months from the execution of the Shareholders’ Agreement, the Class A shareholders undertake to not sell their shares without the prior consent of the Founders pursuant to the Shareholders’ Agreement •
In transferring common shares or their detachable rights, the price shall always be paid in cash and the Class A shareholders shall have a pre-­‐
emption right •
The Shareholders Agreement shall foresee the free transfer of shares (without the remaining shareholders having the possibility of exercising their pre-­‐emptive rights) between shareholders, shareholders and other entities/ companies controlled by said shareholders •
The Shareholders' Agreement shall foresee the free transfer of shares (without the remaining shareholders having the possibility of exercising their pre-­‐emptive rights), in the following cases: 19. Tag-­‐Along rights In the event that any shareholder wishes to sell the shares they hold in the COMPANY, they shall notify the others in order to sell the total number of shares held by them 20. Drag-­‐Along rights In the event that an offer from a third party to buy the COMPANY’s entire share capital is received, and said proposal has been approved by the shareholders that represent at least 51% of the COMPANY’s share capital, and Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
Between holders of common shares (Founders), in the specific context of implementing the vesting policy to be defined (call option and obligation to sell in the exit policy, with a 3-­‐year period, under terms to be agreed upon with the holders of Class A shares); (ii) In the implementation of the Stock Options plan. Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
(i)
22. Liquidation Preference •
Within 5 (five) years from the execution of the Shareholders’ Agreement and should a Liquidity Event not occur (as set forth below), 2/3 of the Class A shareholders may exercise a put option and, for that purpose, shall send a written notification to the Founders and other shareholders requesting a proposal to sell their participation in the COMPANY. Within 15 (fifteen) days upon receipt of the notice, the Founders and other shareholders shall be obliged to present such a proposal •
Should the proposal include an offer of an amount to be paid immediately in full and in cash, corresponding to at least three times the value of the total investment made by the Class A shareholders in accordance with the Investment Agreement, the Class A shareholders shall be obligated to sell to the bidder, who is obligated to purchase the Participation to be divested •
In the event that the proposal does not include the aforementioned amount, and that at least 2/3 of the Class A shareholders do not accept said offer, the COMPANY shall immediately appoint an independent entity, selected by Portugal Ventures, and grant an irrevocable mandate to said entity so that it may, in the shortest period of time and at the best market conditions, notably through a competitive process, sell all shares or the Class A shares, whichever allows to maximize the value to be received by such shareholders, in exchange for the sale of their shares •
In the event that through the aforementioned process the sale of Class A share participation does not occur, and as long as at least 2/3 of the Class A shareholders reach an agreement, the winding-­‐up and liquidation of the COMPANY may be decided •
A Liquidity Event shall be deemed as (i) the transfer of more than 50% of the COMPANY’s share capital (ii) merger, winding-­‐up or any other form of liquidation of the COMPANY or (iii) the admission to an official listing on the open market of the COMPANY’s shares, approved at the COMPANY’s Shareholders’ General Meeting, after a public distribution offering (or other similar operation) in which the COMPANY’s share capital is dispersed by the public •
In the event of a breach of the obligations hereunder and as long as at least 2/3 of the Class A shareholders reach an agreement, this divestment process may be triggered (i) In any Liquidity Event, (ii) in any transaction as set forth in the Shareholders’ Agreement that comprises Class A shares along with any others, or (iii) in the event of the COMPANY’s winding-­‐up or liquidation, the payment to be received or the assets to be shared shall be allocated among the Class A shareholders that shall be entitled to receive, in priority to other shareholders, the amount originally invested and, if applicable, the amount corresponding to the accessory and supplementary payments of capital or shareholder loans, the remaining assets being distributed ratably among all shareholders Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
21. Non-­‐binding put option and Mandate to sell Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
as long as 2/3 of the Class A shareholders are a part of the approved vote, the other shareholders shall be obligated to sell all their shares to the third party under the same terms and conditions offered, including price, payment conditions and collaterals 23. Non-­‐compete and exclusivity The Founders undertake to not pursue other professional activities and to not engage in activities that compete with the COMPANY, pursuant to the Shareholders’ Agreement 24. Stock Options Pool The Founders accept to allocate … COMPANY shares (as per the Final Cap Table) to establish a Stock Options Pool. The Stock Options Pool shall revert to key people (executive team, non-­‐executive directors, key employees, advisors and consultants) and its regulation shall be approved at the Shareholders’ General Meeting following a proposal from the Board of Directors. 25. Prior conditions •
•
26. Amendments 27. Signing of the Term Sheet 28. Closing date Obtaining the "Estatuto IAPMEI Inovação", if applicable, and the "Certificado PME" both issued by “IAPMEI – Instituto de Apoio às Pequenas e Médias Empresas e à Inovação” and further conditions applicable under the rules and provisions of “FINOVA-­‐ Fundo de Apoio ao Financiamento à Inovação”. (…) The conditions listed above may change upon amendments executed to the rules and regulations of the venture capital fund that will be the COMPANY’s shareholder or the rules and provisions applicable to FINOVA – Fundo de Apoio ao Financiamento à Inovação through funding from the European Regional Development Fund (ERDF) through the COMPETE / NSRF or POR Lisboa This proposal must be signed and returned within 1 (one) month from today, in other words, by ...-­‐...-­‐..., the date on which the Project shall be automatically archived, unless Portugal Ventures, at its sole discretion, agrees to extend the deadline by 15 (fifteen) days, following a legitimate request from the Founders, sent 7 days, at the most, prior to the initial deadline date. Once the initial deadline, or the extended deadline as stated in the aforementioned paragraph, has been reached, the Project shall be automatically archived by Portugal Ventures. As the Call for Entrepreneurship is part of the Ignition Program, a program designed specifically to enable the quick processing of Portugal Ventures' deal flow, especially when dealing with projects which are globally competitive, the Contracting Parties will do their best to conclude the eventual contractualization resulting from this Term Sheet by ...-­‐...-­‐.... (On behalf of Portugal Ventures) Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
(On behalf of the Founders) Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
(On behalf of the Other Investors) (On behalf of the Company)
Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128
Schedule 1 MILESTONES Schedule 2 Cap Table Disclaimer: This translation into English is for illustrative purposes only and has no binding force. Portugal Capital Ventures – Sociedade de Capital de Risco, S.A.
Porto (Sede)
Av. Dr. Antunes Guimarães, 103
4100-079 Porto
Tel.: (+351) 226 165 390
Fax.: (+351) 226 102 089
Lisboa
Edifício Arcis, Rua Ivone Silva, 6, 12º
1050-124 Lisboa
Tel.: (+351) 211 589 100
Fax.: (+351) 211 589 149
[email protected]
www.portugalventures.pt
Capital Social € 40.412.650 • Nº Matrícula CRC - NIPC 502 206 128