Term Sheet

TERM SHEET

By and between

1        TERM SHEET

The Term Sheet sets forth the intended key terms with respect to a contemplated equity investment by the Investor in the Company, by form of a subscription of new shares in a share capital increase (the «Investment»).

This Term Sheet does not constitute any legally binding obligations for Parties, save for the section «Binding Terms» below.

3        INVESTMENT AMOUNT

The size of contemplated Investment is [to be negotiated/ NOK [?]/ in the range of NOK [?] – [?]].

4        PRE MONEY VALUATION OF THE COMPANY

The equity value of the Company before the Investment is [set to NOK [?]/ in the range of [NOK [?]].

5        OPTION FOR SUBSEQUENT INVESTMENT

[Investor is open to add an option for a subsequent investment of [ NOK []]]

[Company can call for the investment at any time during [year]]

[Investor can elect to put the investment at the end of [year]]

[The investment will be made at a pre-money valuation of 10 x ARR]^[a]

6        OPTION POOL

An option pool should be established after the transaction to enable incentives for future employees. The number of options should equal [X%, often 10%] of the number of issued shares in the Company. The Investor shall not be protected by any anti-dilution provisions with respect to such plan.

7        EMPLOYEE OWNERSHIP

Investor would prefer a pre-investment redistribution of some of the founder shares to other employees through a sale of shares to allow for a broader ownership among employees.^[b]

8         SHAREHOLDERS’ AGREEMENT

The Parties shall negotiate a new shareholders’ agreement to replace the existing shareholders’ agreement, and to be entered into at the time of the Investment.  The shareholders’ agreement shall either:

A: Be the shareholder agreement as set forth in [LINK to Entrepedia shareholder agreement]

or

B:  The shareholders’ agreement shall contain customary rights and obligations for the Parties, as follows:

• Board representation: : The board shall consist of 3 – 7 members. Any shareholder holding more than 10% shares of the company can appoint 1 board member.
• Confidentiality, non-compete, IPR: The shareholders’ agreement shall contain customary provisions regarding confidentiality, non-compete and protection/ownership of Company IPR.
• Obligations for the Founders: The Founders will commit to continue full time employment with the Company for four years. In the event that the employment with the Company is terminated during the four years, the Founders are obligated to sell all or some of the shares owned by the Founder to the Company. This obligation will be reduced over time (reverse vesting) with 1/48 of the shares on a monthly basis. The purchase price shall be equal to the purchase price the Founder paid for the shares.
• Board approval and right of first refusal: Transfer of shares in the Company shall be subject to the approval by the board of directors, and a right of first refusal for all shareholders.
• Drag along: Should one or more shareholders who jointly own more than 50 % of the shares propose to transfer, in any transaction or series of transactions, all of their shares to an unrelated third party buyer, the selling shareholders have the right to require each of the other shareholders to sell all of their shares, at the same price and on the same terms and conditions as the selling Shareholders. The drag-along right is conditional upon the sale taking place on market terms and conditions.
• Tag along: In any transaction or series of transactions of Shares in the Company, each of the other shareholders shall have the right to sell a pro rata portion of its shares equal to the portion of shares such selling shareholders will sell, at the same price and on the same terms and conditions as the selling shareholders.

9        NEGOTIATION PERIOD

The negotiations based on these key terms shall be completed and the Investment and shareholders’ agreement contemplated in this Term Sheet executed by [date] unless agreed otherwise by all Parties. In absence of such agreement on continuation, the Term Sheet shall then expire save for the Binding Terms which shall remain valid and binding.

[During the negotiation period, the Investor shall have the exclusive right to discuss and negotiate the Investment described in this Term Sheet, and the Company and the Founders shall be obligated not to initiate such discussions or negotiations with other than the Investor.]

10        BINDING TERMS

1. This Term Sheet and the contents hereof are confidential and the Parties may disclose these terms only to their representatives, directors and legal or financial advisors and only to the extent required to further the purpose of the Term Sheet.

2. This Term Sheet is governed by Norwegian law, with Oslo District Court as legal venue.

11         SIGNATURE

This Agreement is signed in duplicate, with one for each Party.